FY15 Key Financial Highlights
Before Significant Items1
After Significant Items1
Note: This announcement contains certain non-IFRS measures that Woolworths believes are relevant and appropriate to understanding its business. Refer to Appendix One for further information.
Woolworths Limited (Woolworths) Chief Executive Officer, Grant O’Brien said: “Woolworths today reported net profit after tax of $2.45 billion before significant items1 for FY15. In a year of clear challenges and structural change, we have delivered sales and profit1 in line with the prior year, albeit below our expectations.
“Woolworths’ financial performance is largely determined by its Australian Food, Liquor and Petrol business which in FY15 delivered an increase in earnings before interest and tax of 2.1% on the prior year reflecting subdued sales growth in the second half.
“The market environment has changed dramatically with stronger competition and significant shifts in customers’ shopping behaviour. Woolworths is evolving and innovating to meet these challenges and finding new ways to delight our customers.”
Woolworths Food Group Managing Director, Brad Banducci, said: “We are resetting our Food business to ensure a sustainable competitive position and maintain strong returns to shareholders. We enjoy significant advantages in scale, network, supply chain and a proven ability to extract operating efficiencies. However, a more competitive environment will result in lower margins as we invest to improve all aspects of the customer experience, notwithstanding gathering momentum in operating efficiencies.
“In May I outlined the Australian Supermarket Customer 1st Strategy. We have made a strong start to our three year journey of regaining sales momentum. Our new leadership team is in place and they are delivering on our commitment not to be beaten on price, enhancing the shopping experience, improving the fruit and vegetable offer, increasing the effectiveness of our communication and, most importantly, embedding a culture which has customers at the heart of every decision.
“We have invested more than $200 million in price in H2’15 and this has continued into H1’16. In a comparison of almost 9,000 items to Coles using Nielsen Homescan (an independently verifiable source) over Q4'15, Woolworths was cheaper.
“Our reinvestment into team hours in FY15 and FY16 is resulting in improved availability and customer service and a better fruit and vegetable offer, and is also translating into improving customer feedback measures, including Net Promoter Score. Whilst Australian Food and Liquor comparable sales in July and August declined 0.9% for the first eight weeks of the year, we are confident that our investment will lead to improved sales momentum. However, given the scale and timing of the changes we are making we expect it will take time for sales to respond to our initiatives,” Mr Banducci said.
Liquor continued to perform well and extended its leadership in a flat market across all of its formats on price, offer, convenience and innovation.
Countdown Supermarkets delivered a strong second half performance with improved sales and profit momentum.
The General Merchandise result has continued to be adversely impacted by our BIG W business transformation, the clearance of unproductive inventory, and systems implementation issues arising from the transition to our new merchandising system in the second half of the year which impacted stock availability. Stock availability issues and inventory clearance have continued to impact Q1’16 with comparable sales declining 8.9% for the first eight weeks of the year. We continue to target an improvement in profitability in FY16 but will require improved sales momentum over the key Christmas trading period.
Hotels delivered an improved sales performance with positive sales momentum in the second half. As expected, earnings were impacted by the additional Victorian gaming tax which came into effect in May 2014 as well as the divestment of a portfolio of freehold hotel sites in October. Excluding these, earnings before interest and tax were up on the prior year.
In Home Improvement, we now have approximately 20% of our Masters stores in the new format with the average sales per store more than 30% higher than the original format stores. We will refit three stores in NSW in H1’16 and will open fewer new stores in FY16, focusing on key metropolitan markets, as previously announced.
We reinforced our position as Australia’s leading online retailer with online sales increasing 15.6% to $1.42 billion in FY15 across Food, Liquor and General Merchandise.
Following our Investor Day in May we have made good progress in our transition to our Lean Retail Model with cost savings tracking ahead of our stated targets of more than $500m. However, FY16 will bear the impact of our decisive response to the competitive environment to meet our value commitment to customers with our investments in price, service and experience exceeding cost reductions in this period. We are committed to making the right long term decisions for our customers and shareholders.
Woolworths Limited Chairman, Ralph Waters, said: “The Board has announced a final dividend of 72 cents per share taking FY15 dividends to 139 cents per share, a 1.5% increase on the prior year. There is an intense focus on restoring Woolworths to a sustainable growth path. I am convinced that shareholders will be rewarded and our decisions will result in a better and stronger Woolworths.”