Woolies resumes dividends, slashes debt and returns to healthy position
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WOOLWORTHS (Woolies) resumed dividend payments during the 52 weeks ended June 2021 after the sale of its Australian properties boosted cash flows and led to a significant slashing of net debt.
Woolies declared a surprise 66 cents a share final dividend with a proposed payment in respect of Woolworths South Africa, representing a 25.8 percent decline from the prior year's 89c per share.
Chief executive Roy Bagattini said yesterday that declaring the dividend was a positive move despite the effects of the Covid-19 pandemic.
“We have paid our debt by more than 90 percent and we are in a very healthy position as a business, the healthiest position we have been in for many many years and that gives us the capacity to reward our shareholders,” said Bagattini.
Woolies said given the prevailing market uncertainty and lingering impact of Covid-19, the dividend would be resumed at a payout ratio of 60 percent relative to a normalised payout ratio of 70 percent pre-Covid-19.
Woolies, which had parked dividend payouts amid Covid-19 uncertainty, said it would consider recommencing the Country Road Group dividend next February and an appropriate longer term group payout ratio would be revisited once conditions have stabilised.
The group generated A$120 million and A$504.4m (R1.3 billion) in net proceeds from the sale of its Bourke Street Mens and Elizabeth Street properties in David Jones which were used to repay debt and generated profits on sale of A$23.8m and A$19m, respectively.
Group net debt was slashed by 91 percent to R1.1bn from R11.6bn in 2020.
Woolies was not spared from last month's civil unrest in Kwazulu-Natal and parts of Gauteng, saying level 4 restrictions further dampened already-weak consumer confidence, which was expected to limit discretionary spend.
Financial highlights included the 9.7 percent increase in group turnover and concession sales to R85.9bn compared with R78bn in 2020. Earnings per share was 435.1c a share compared with 58.2c per share for the prior year.
The food business continued its market share growth trajectory with turnover and concession sales for the current year growing by 6.9 percent, and by 5.7 percent in comparable stores.
Bagattini said Woolies would continue to strengthen its position as a leading food retailer and was committed to investing R750m in price over next two to three years, citing that the initial R250m investment was yielding positive returns.
“We are the market leader in this space and you always have a target on your back. There have been various attempts to gain share by competitors. We are focused on what we need to continue to raise the bar.
“We will defend the territory we have vociferously with every tooth and nail. We are the most innovative in the market. In the last year we brought 2 000 innovative products to market, no one else can do that,” said Bagattini.
The Fashion Beauty and Home Business recorded a 3.5 percent increase in revenue and by 4.2 percent in comparable stores, while David Jones' turnover was 2.3 percent higher and by 0.9 percent in comparable stores.
As part of the reset of the business, the group said it was focused on restoring the underlying health of the Fashion Beauty and Home business and had taken a decision to reduce costs by entering into value accretive deals with landlords to reduce the David Jones' footprint by a further 50 000m². Woolies shares closed 1.81 percent higher at R60.07 on the JSE yesterday.