Woolworths loses $1.2 bn, slashes dividend 54 pc

Sue Mitchell
Aug 25 2016
AFR
Woolworths plunged $1.2 billion into the red in 2016, reporting its first loss as a listed company, after slashing the value of assets by $4 billion and reporting weaker earnings from supermarkets, BIG W and hotels.
Excluding net impairment charges and restructuring costs of $1.9 billion, underlying net profit fell 64.4 per cent to $803.5 million, falling well short of consensus forecasts around $1.5 billion and compared with an underlying net profit of $2.45 billion in 2015.
Earnings before interest and tax before one-off items fell 37.4 per cent to $2.34 billion, compared with consensus forecasts around $2.43 billion.
Woolworths slashed its final dividend by 54 per cent, from 72¢ to 33¢ a share, payable October 7, taking the full year payout to 77¢ compared with $1.39.
The worse than expected results reflected new chief executive Brad Banducci’s initial efforts to reverse declining sales in supermarkets, turn around BIG W and put an end to massive losses in home improvement.
Woolworths has booked more than $4 billion in writedowns and restructuring costs and invested about $1 billion into reducing grocery prices and improving service in stores since Mr Banducci took charge of the supermarkets business almost 18 month ago and was appointed chief executive in February.
Last month Mr Banducci outlined plans to close stores, curtail new store development, sell off assets, starting with online retailer EziBuy, and cut head office staff by another 10 per cent while shifting about 1000 staff into Woolworths’ divisions.
On Wednesday Woolworths ruled a line under its disastrous $3.3 billion seven-year foray into home improvement, selling Home Timber and Hardware to Metcash, 82 Masters stores and sites to a consortium of retail and property investors, and Masters’ inventory to GA Australia, the local arm of auction house Great American Group.
The three-way deal raised $1.5 billion, but after wind-up cost the net proceeds will be $500 million – a fraction of the $3.3 billion Woolworths and its former partner Lowe’s have invested since unveiling the joint venture in August 2009.
This amount will be reduced even further after Woolworths pays out Lowe’s for its 33 per cent share of the business.The pair have struggled to agree on value despite the protracted auction the the involvement of three independent experts.
“The final outcome is still not clear but we assume Lowe’s will receive at least one third of the $500 million net proceeds. This would leave Woolworths with a maximum of $228 million net proceeds,” said Deutsche Bank analyst Michael Simotas.
Woolworths will also take on 12 other leasehold sites and will acquire three free hold sites for $105 million, subject to Lowes approval.
The company has shed more than $20 billion or 40 per cent of its market value in the past two years and Mr Banducci has made it clear the journey to recovery will be expensive and lengthy.
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