FY15 Half Year 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 Chief Executive Officer, Grant O’Brien said: “Woolworths Limited today reported growth in net profit after tax before significant items1 of 4.7% for the first half of FY15.
“In Australian Food, Liquor and Petrol, earnings before interest and tax increased 7.3% on the prior half year. The sales momentum in October and November showed improvement, however trading in December was subdued and this trend continued into January.
“Cost savings have enabled us to continue to invest in lower prices. In Australian Supermarkets, customers benefited from lower average prices as reflected by deflation of 1.8% for the half year.
“We have created a new leadership team and structure in our Supermarkets business following the resignation of Tjeerd Jegen, with Brad Banducci appointed as Managing Director, Australian Food and Liquor. Dave Chambers has been appointed Director, Woolworths Supermarkets, reporting to Brad. Brad will maintain leadership of the Woolworths Liquor Group until a new appointment has been made. “Liquor continues to perform well and is the clear market leader across its formats on price, offer, convenience and innovation.
“In Petrol, as announced during the half, we have made changes to our agreement with Caltex which enable us to focus our efforts on our operated sites and deliver further improvements to our convenience offer.
“Countdown Supermarkets continued to deliver profit growth despite price deflation and ongoing subdued grocery market conditions in New Zealand.
“As previously advised, the General Merchandise result has continued to be impacted by our ongoing BIG W business transformation. A key part of this transformation is to accelerate the alignment of our inventory to our customer strategy. A provision of $148.2 million ($103.7 million after tax) has been raised primarily to facilitate this.
“Hotel 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 was in line with the prior year.
“Home Improvement continues to deliver against the plan announced in August, focused on a new store format, range improvements and a revised store roll out plan. December store openings in Adelaide and Brisbane featuring elements of the new format are delivering encouraging early results.
“Online sales increased more than 20% on the previous half year and were $1.4 billion in calendar 2014. We continue to lead the market in innovation, having launched ‘Dan Murphy’s Connections’ and the ‘Simply Collect’ partnership with eBay.
“During the half we accelerated cost reduction initiatives and are driving greater efficiency through the early stages of Mercury 2. Implementing further cost reduction initiatives across the business will be a key focus for the second half of FY15 and beyond.
“A strategic review of Australian Supermarkets performance confirmed the considerable opportunities for performance improvement, future growth and the need for continued disciplined investment in value for customers to maintain our market leadership and drive sales momentum.
“While there is a clear path to meet the guidance provided of net profit after tax of 4-7% in FY15, we have decided to provide ourselves with additional flexibility to make the necessary investments to deliver on our long term plans and the associated shareholder value creation. These investments will impact second half FY15 results and as a result we are amending guidance.
“In addition, in line with industry practice, we will ensure a fully informed market by reference to analyst consensus rather than providing specific guidance. At present the range of analyst net profit after tax growth forecasts for FY15 is 1.8-6.6%. Factoring in the investment initiatives now planned, our current expectations are that growth in FY15 net profit after tax before significant items1 will be towards the lower end of this range.
“The investment in Australian Supermarkets will span all aspects of the customer offer and will be funded in part by a pipeline of cost savings in excess of $500 million, which we are currently building. We will provide further details of our plans at the Investor Strategy Day which is being scheduled for May 6 in Sydney.”
Woolworths Limited Chairman, Ralph Waters, said: “The Board has announced a half year dividend of 67 cents per share, up from 65 cents in the prior year and I am confident that the actions announced today to protect our market leading position will deliver sustainable returns for both customers and shareholders into the future."