South Africa’s Woolworths Sees H1 Profit Drop, Resumes Dividend

South Africa's Woolworths Sees H1 Profit Drop, Resumes Dividend

Woolworths Holdings has resumed its interim dividend despite reporting a 35.6% slump in half-year profit, as the South African retailer was badly affected by civil unrest at home and extended coronavirus lockdowns in Australia.

The retailer also forecast annual turnover of 15 billion-16 billion rand (€930 million billion) by its 2024 financial year, up from 12.9 billion rand (€750 million), in its South African fashion, beauty and home business, and margins in that business up 48% from 45.5%.

Divisional Performance

In food, its largest revenue generator business, it has a 46 billion rand (€2.7 billion) target, up from 38.3 billion (€2.2 billion) rand, with margins seen more than 24% from the current 24.5%.

In its Australian fashion unit, Country Road Group, it forecast sales of 1.2 billion Australian dollars (€790 million), up from 1 billion Australian dollars (€650 million).

Woolworths declared an interim dividend of 80.5 cents a share, after a two-year hiatus.

The retailer also repatriated about 1 billion rand (€58 million) from its Australian upmarket department chain David Jones to South Africa through a special dividend, which it will use to reduce its debt at home, Group Chief Executive Roy Bagattini told analysts.

David Jones ended the half-year period to 26 December with a net cash position of 347 million Australian dollars.

Overall Performance

Overall, Woolworths said headline earnings per share (HEPS), the main profit measure in South Africa, fell to 168.2 cents in the 26 weeks ended 26 December, while earnings before interest and taxes fell 18.2% to 3.2 billion rand (€190 million ).

Group turnover dipped 1% to 39.2 billion rand (€2.3 billion), while online sales grew 22.4%, contributing 13.7% to the group’s total turnover and concession sales for the period.

The David Jones Food business is starting to shape up after management closed a number of stores, restrategized the business and set up partnerships, Bagattini told Reuters.

“That’s really moved us from a 15 million Australian dollar loss to potentially now a break even, certainly within this current year,” Bagattini added.

Woolworths said global supply chain disruptions and high freight costs continue to pose a risk to both the cost and supply of product. It projected food inflation of 4% and 6% inflation in fashion, beauty and home.

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