Woolworths posted a loss of $972.7 million in the first half of the financial year, its first for more than 20 years, driven by a massive $1.9 billion write down in the value of the troubled Masters hardware business.
The main business also was weaker with sales dropping 1.4% to $32 billion. And Australian food and liquor sales were flat at $22.34 billion, up just 0.7% over the six months.
The company decided on a $3.25 billion pre-tax ($1.898 billion post tax) impairment on the hardware business which has been losing about $200 million a year. The latest half year results show the losses widening to $125 million for the six months.
Stripping out the writedowns, underlying profit was still down by one-third to $925.8 million.
Brad Banducci, who today was appointed as the new CEO of the supermarket group, says this result reflects the impact of significant change in the business.
“The reported earnings result is also heavily impacted by the decision taken to exit the Home Improvement business (Masters) and the subsequent provision for the impairment of assets, lease liabilities and other exit costs,” he says.
The process to value the share of the Masters business held by Lowe’s, the US retailer which owns one-third, is underway. Lowe’s yesterday wrote down the value of its one-third investment in Masters by more than half to $US530 million.
Woolworths will need to buy Lowe’s share before disposing of what’s left of the business.
Banducci says sale process has started and is expected to continue into the 2017 financial year.
“Looking forward, we expect trading conditions to remain competitive as we continue on the journey of rebuilding Woolworths,” Banducci says.
An interim dividend of 44 cents a share, a 34.3% decrease but in line with the historical payout ratio, was declared.
The results in detail: