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22 February 2017

HALF-YEAR PROFIT AND DIVIDEND ANNOUNCEMENT FOR THE
27 WEEKS ENDED 1 JANUARY 2017

Continued progress in Food transformation

HY17 Sales growth in Australian Food of 2.8% (comparable sales: 1.9%)
NPAT from Continuing Operations of $785.7 million, down 16.7%
Basic EPS from Continuing Operations of 61.3c, down 18.0%
Group NPAT of $725.3 million
Dividend Per Share of 34c, down 22.7%

Solid progress on key priorities:

  • Continued momentum in Australian Food:
    • Comparable sales growth of 1.9% in HY17 and 3.1% in Q2’17
    • Voice of Customer, Voice of Team and Voice of Supplier all showing improvement
    • Good progress in store renewal with 26 completed in HY17 and 41 Front End upgrades
  • Strong performance from Endeavour Drinks in a competitive market
  • Material investments in team training and development and new key hires - Chief Information Officer, Chief People Officer and Managing Director, Woolworths Supermarkets
  • Partnership with BP announced, including sale of Fuel business with proceeds to be used predominantly to strengthen the balance sheet
  • Closure of Masters stores complete, with over 1,600 team members redeployed elsewhere in the Group

More to do:

  • BIG W still a work-in-progress
  • Improving our end-to-end “ways-of-working” to unlock productivity improvements
  • Building on our improving team and supplier engagement

HY17 KEY FINANCIAL HIGHLIGHTS

$ million

HY17

(27 weeks)

HY16

(27 weeks)

Change

 

Continuing Operations

 

 

 

Sales

29,059

28,315

2.6%

Earnings Before Interest and Tax (EBIT)

1,301.3

1,522.8

 (14.5) %

NPAT attributable to shareholders of Woolworths

785.7

943.6

 (16.7) %

Basic Earnings Per Share (EPS) – cents

61.3

74.8

(18.0) %

Group

 

 

 

NPAT/(NLAT) attributable to shareholders of Woolworths

725.3

(972.7)

174.6%

Dividend Per Share – cents

34

44

(22.7)%

 

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. 

Brad Banducci, Woolworths CEO, said: “We’ve made good progress on our five key group priorities during the half. Particularly pleasing was the improvement in sales momentum in Australian Food, especially in the second quarter. This is on the back of strong Voice of Customer (VOC) scores and is underpinned by continued growth in customer transactions and, more recently, items per basket. This momentum gives us confidence that, while we still have a lot to do, we are on the right track. Endeavour Drinks Group, New Zealand Food and ALH Hotels also all delivered solid sales growth in the second quarter.

“A further highlight was the progress we have made on our team front, with a 35%* improvement in keeping our team safe, pleasing improvements in Voice of Team (VOT) scores, especially ‘would you recommend Woolworths as a place to shop’ and material progress in addressing the gender pay gap as part of our recent Woolworths Group Corporate Responsibility Strategy 2020. We also announced the appointment of a new Chief Information Officer, Chief People Officer and Managing Director, Woolworths Supermarkets.

“Sales momentum improved over the half for Australian Food with comparable sales in December the strongest for the year driven by strong comparable transaction growth and an improvement in items per basket. EBIT declined 13.9% on last year primarily impacted by the reinstatement of team incentive payments, team training and higher depreciation from our renewal and IT investments.

Endeavour Drinks Group (EDG) delivered sales growth of 4.0% for the half in a very competitive market. All retail formats delivered positive comparable sales growth with strong double digit growth from Dan Murphy’s online. Good cost control, despite the price investment, resulted in a 3.1% increase in EBIT for the half.

“In New Zealand dollars, New Zealand Food sales increased by 1.6% (2.8% excluding bulk gift card sales in the prior year). Earnings were below last year primarily due to our strategy of investing in team hours, costs of our new loyalty alliance with AA Smartfuel and uninsured losses related to the November earthquake.

BIG W reported a loss before interest and tax of $27.2 million in HY17 which includes a non-cash charge of $35.3 million. Trading EBIT declined 88.9% to $8.1 million and was impacted by lower comparable sales (-6.3%) during the half. The non-cash charge reflects asset impairment and an increase in our onerous lease provision and is based on management’s current forecasts and assumptions. We are currently reviewing the BIG W strategic plan and this will be completed in the next few months.

Hotels earnings increased by 3.1% during the half driven by a 3.4% increase in sales with Bars and Accommodation the strongest performing categories.

“We also announced our Fuel, Convenience and Rewards partnership with BP on 28 December. Once completed, customers will have more fuel redemption options and increased ability to earn Woolworths Rewards points and we will have an opportunity to partner with BP in rolling out a new Metro@BP concept. The proceeds from the sale of our Fuel business will be used primarily to strengthen our balance sheet.

“While we expect trading conditions to remain competitive for the remainder of FY17, we are focused on building the sales momentum we have achieved over the last six months as we work to restore sustainable growth in Australian Food. We note, however, that the second half will also be a period of continued investment in improving the store experience, depreciation from our renewal and IT investments and higher team incentive payments. 

“I would like to thank all of our team members for the hard work and passion they showed in the first half, especially in the critical Christmas trading period,” Mr Banducci said.

Woolworths Chairman, Gordon Cairns, said: “The Board remains committed to disciplined capital management and a solid investment grade credit rating. I am pleased to report that the strong cash conversion achieved during the first half has contributed to a significant reduction in net debt compared to the prior year with the sale of the Fuel business to further strengthen our balance sheet once completed. The Board has announced an interim dividend of 34 cents per share, a 22.7% decrease on the prior year with the interim payout ratio consistent with prior periods. A 1.5% discount will continue to be offered on the Dividend Reinvestment Plan (DRP).”

* Improvement in Total Recordable Injury Frequency Rate on a rolling 12 month basis

 

 

 

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