It wasn’t the most startling of results from Woolworths (WOW) this morning – more like one of fair to average quality with some good spots, and a couple of blemishes.
Earnings after tax but before significant items rose 6% to $1.32 billion, resulting in a 4.9% increase in interim dividend to 65 cents a share.
The results came out before the market opened and the shares jumped 30c at the start to a high of $36.72, before some second thoughts emerged and they soon dipped 2% to $35.70 and were trading just above that level at 11am.
WOW 1Y – Another Solid Result From Woolies
The profit was better than expected by many analysts because of the solid growth from its food and liquor division in Australia (the core business), its hotels and pubs operations and its supermarket chain in New Zealand (thanks to the rise in the value of the Kiwi dollar, and the fall in the value of the Aussie).
The gains out weighted negatives expected in the hardware adventure (which happened) and a dip in returns from the Big W chain (which also happened).
As a result, Woolies said it was now looking to boost full year earnings by 5% to 7% per cent for the 2013-14 financial year, slightly better than the earlier guidance range of 5% to 7% profit growth.
On the face of it, that’s a very solid performance, but there were those blackspots which reduced the quality of the result – the fall in earnings at its Big W merchandise chain and more losses for its Masters hardware chain.
Masters’ loss of $71.9 million was worse than some analysts had expected. It was up $2 million from the first half of 2012-13.
Big W’s earnings before interest and tax slipped to $120.5 million from $129.5 million.
WOW Results Video
Woolworths said its first half profit was up 14.5% to $1.32 billion, or up 6% on continuing operations and before significant items.
The company had previously announced sales revenue of $31.8 billion for the first half, up 3.8%.
The retailer’s Australian food and liquor operations again reported a 6.7% lift in earnings before interest and tax to $1.766 billion.
New Zealand supermarkets also did well, with a 9.7% rise in earnings to $136.8 million.
Its hotels division saw sales grow by 3.8 per cent to $788 million as earnings jumped 16.4% to 16.4 $163.9 million.
Woolworths CEO, Grant O’Brien said in this morning’s statement:
“We are pleased to report a solid profit result for the first half of financial year 2014, with net profit after tax from continuing operations before significant items up 6.0% on the previous half year.
“Our focus over the last two years has been to commence the transformation of our business. This result clearly demonstrates the progress we are making against each of our four Strategic Priorities.
“We have delivered 6.8% EBIT growth in our Australian Food and Liquor business, consistent with our priority to ‘extend our leadership in Food and Liquor’, which has been achieved in a highly competitive marketplace.
“We have continued our leadership in price and range, delivering more than $400 million in savings to customers predominantly through our ‘More Savings Every Day’ program," he said.
WOW – HY14 Analyst Presentation
