A cautious thumbs down from investors to Woolworths 2018-19 profit which turned out to be like so many other results this year – lacklustre and a little unconvincing.
Woolworths said yesterday it lifted net profit 7.2% in 2018-19 to $1.75 billion, thanks to a solid performance in its core supermarkets business more than offset another (forecast) weak showing from its Big W department store chain and weaker than expected contribution from it’s about to be spun off liquor division, Endeavour Drinks.
Woolworths will pay a fully franked final dividend of 57 cents, up from 50 cents a year ago bringing the full-year dividend to 102 cents, up from 93 cents a share in 2017-18.
The board obviously didn’t listen to Treasurer Frydenberg’s appeal earlier this week to business not to lift dividends or do buybacks or one-off payments instead of spending money on new investment.
Woolies said that comparable sales in its Australian supermarkets’ division rose 3.1% in the year to June from 2017-18.
Overall, Woolworths’ revenue was up 5.35 to $60 billion, in line with consensus estimates with topline sales in the supermarkets business up 5.3% to $39.6 billion.
When taking into account significant items of a $1.1 billion gain from the sale of its petrol business to EG Group and a $371 million impairment for Big W, Woolworths’ group Woolies statutory after-tax profit was $2.7 billion, up 54.3%.
But Endeavour Drinks, which includes BWS and Dan Murphy’s, saw sales rise 2.3%, but earnings before interest and tax (EBIT) dropped 8.2% to $8.65 billion due to declining volumes and a “subdued” trading environment.
The company confirmed yesterday the sale of Endeavour would go ahead in 2020, but provided no further details. That is expected later this year.
The slide in earnings raised eyebrows among analysts and some investors who wonder if the drinks business is in good enough shape to be spun off or sold.
Big W, the discount department store also suffered another drop in profit in the year to June, with a loss of $85 million, in line with guidance the company provided earlier in the year.
Comparable sales were up 5.35%.
Woolworths chief executive Brad Banducci said he was pleased with the progress the company made during the year.
“In F20, we expect the uncertain consumer environment and input cost pressures to remain as well as an impact from new enterprise agreements. However, we are well placed to respond to these challenges and are excited about what we can achieve together in F20,” he said in yesterday’s statement.
Woolies shares ended up 0.5% at $36.38 after falling in early trading in the immediate aftermath of the result’s release.
