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Woolworths posts $1.2bn loss, cuts dividend

Nicholas Grove  |  25 Aug 2016Text size  Decrease  Increase  |  

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The retail major registers a $1.2-billion statutory loss for fiscal 2016 and slashes its full-year dividend following a year characterised by "unprecedented change".


Woolworths' (ASX: WOW) net profit from ongoing operations and before one-off items for fiscal 2016 fell 39.2 per cent to $1.558 billion, following a year of "unprecedented change" for the retail giant.

Earnings per share (EPS) from continuing operations were down 39.5 per cent to 123.3 cents a share, Woolworths said in a statement to the ASX on Thursday.

Both underlying net profit and EPS were slightly below Morningstar's expectations.

Net profit from ongoing operations after significant items fell 64.4 per cent to $803.5 million.

On a statutory basis, the total group net loss after tax including discontinued operations stood at just over $1.2 billion.

Woolworths declared a final dividend per share of 33 cents, a fall of 54.2 per cent on the prior year.

This brought the full-year dividend to 77 cents a share, down 44.6 per cent on the previous year and below Morningstar's forecast of 90 cents.

The final dividend will be paid on 7 October 2016 to shareholders on record as of 9 September 2016.

"Fiscal 2016 was a year of unprecedented change for Woolworths. The decisions we have taken and investments we have made have had a material impact on our fiscal 2016 results but have been necessary to begin the rebuilding of Woolworths," Group CEO Brad Banducci said.

"We are seeing early signs of progress as we work to restore our competitiveness and improve our culture in Australian Food.

"We have also addressed significant issues facing the group with the decision to exit home improvement and decisive action taken on BIG W to reposition the business."

On Tuesday, Woolworths announced three transactions as part of its planned exit from the home improvement sector.

The Home, Timber and Hardware business has been sold to Metcash (ASX: MTS) for $165 million, it was announced.

In addition, Hydrox--the joint venture company owned by Woolworths and the US-based Lowe's that controls all of Woolworths' hardware operations--has received an underwritten recovery on inventory from the Masters hardware stores from divestment specialist Great American Group.

And, subject to Lowe's consent, Home Consortium has proposed to purchase the Masters properties through acquisition of 100 per cent of the shares in Hydrox.

Home Consortium is a consortium made up of aged care provider Aurrum, the Spotlight Group and Chemist Warehouse.

All Masters stores will cease trading on or before 11 December 2016, Woolworths said.

Woolworths expects to net approximately $500 million from its home improvement exit, after wind-down costs and prior to any shareholder payments.

While not providing any profit guidance, Banducci expects trading conditions to remain "highly competitive" in fiscal 2017.

However, he is confident Woolworths has a "clear plan and set of priorities" and is encouraged by some early signs of momentum seen at the end of fiscal 2016.

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Nicholas Grove is a Morningstar journalist.

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