Trans-Tasman grocery giant Woolworths recovered from the "hiccup" caused by industrial action in the first half of the year, with the New Zealand division posting earnings of $178.2 million for the year ended June 24.
At a group level, Woolworths reported a 27.5 per cent rise in net profit, to A$1.3 billion. Earnings before interest and tax rose 22.6 per centto A$2.11 billion. A final dividend of 39c a share was declared, bringing the total dividend for the year to 74c a share, up 25.4 per cent on the previous year.
Woolworths entered New Zealand in late 2005 through the $2.6 billion acquisition of Progressive Enterprises, which owns Foodtown, Countdown and Woolworths.
It faced a tough induction to the New Zealand market, with prolonged industrial action in the first quarter of the financial year, when about 600 staff were locked out after disputes over pay parity and collective employment agreements. Chief executive Michael Luscombe described the industrial dispute as a hiccup and said the New Zealand business had recovered from the disruption. "Our operation levels, all the metrics in the business, have returned to normal post the industrial action that we had in quarter one," he said yesterday.
The New Zealand results were very pleasing, and the business was well positioned for growth. Sales for the year hit $4.5 billion. Meaningful comparisons with the previous full year were not possible, as the New Zealand results were included in Woolworths' accounts only from November 2005.
Mr Luscombe said the results from the second half of the 2007 fiscal year, which exclude the impact of the industrial action, provided a clearer picture of how Woolworths was performing in New Zealand. Sales in that half were up 4.8 per cent, and earnings before interest and tax were up 12.6 per cent.
The outlook for the 2008 fiscal year was positive. "I'm happy to say that our experience in the first few weeks of 2008 financial year has maintained the growth that we had in the latter part of the year." He said Woolworths was a long way into its plan to reposition the business in New Zealand. Changes so far include the introduction of a Home Brand suite of products, integrating systems in line with Australian operations and changing buying systems. "We've improved the buying terms in New Zealand and we've invested that money into much lower prices and better value for the New Zealand consumer".
The first New Zealand store using the Woolworths system would be online before Christmas, with the introduction of other systems-integrated stores to follow. "This and many other initiatives are putting the NZ business in a great position for future growth."
Woolworths is still pursuing a general merchandise presence in New Zealand. It has appealed against a Commerce Commission decision denying its application to have the right to bid for The Warehouse. Mr Luscombe said a date of October 23 had been set to hear the appeal. He said that depending on what happened with The Warehouse, as well as the general merchandise asset of rival Coles - which Woolworths is also interested in - the group may look at returning some money to shareholders next year.
He forecast continued profit growth for the 2008 year. "Net profit for fiscal 2008 is expected to grow in the range of 19 to 23 per cent."
