AAP Finance

Coles pays out despite FY earnings fall

By AAP Newswire

Supermarket giant Coles has surprised investors with a special dividend despite an 8.1 per cent fall in full-year earnings following its demerger from Wesfarmers.

Retail earnings dropped to $1.32 billion as modest sales growth from supermarkets and liquor stacked up against falls from fuel and convenience, plus the costs of restructuring following November's spin-off and listing.

Statutory profit for the 12 months to June 30, which included earnings from Kmart, Officeworks and Target prior to separation, dropped 9.1 per cent to $1.43 billion.

But investors were seemingly cheered by the announcement of a 24 cent final dividend and 11.5 cent special dividend, pushing up Coles' shares by as much as 4.5 per cent.

Statutory revenue was down 1.7 per cent to $38.4 billion but chief executive Steven Cain said Coles had made a solid start to its four-year transformation program.

Coles made a $145.8 million provision for redundancies and lease exit costs as it got to work overhauling its supply chain.

"It has been a year of substantial change for Coles following the successful demerger and ASX listing," Mr Cain said.

"Consumer behaviours are changing faster than ever, we are heading into the most competitive period in Coles' history, and there are significant industry-wide cost headwinds."

Mr Cain said he expected full-year 2020 earnings growth to remain subdued.

Coles reported comparable sales growth of 2.7 per cent for its supermarkets to $1.2 billion, while liquor sales grew 1.2 per cent on a comparable basis.

Combined comparable food and liquor sales grew 1.1 per cent in the group's final year under Wesfarmers' wing.

The Little Shop and Fresh Stikeez novelty giveaways had created strong customer engagement but Mr Cain admitted rival Woolworths' Ooshies scheme had created significant competition.

Chief financial officer Leah Weckert said the primary driver of the earnings decline was lower fuel volumes through its Express service stations.

In February, Coles entered into a new agreement with petrol partner Viva Energy to forgo its retail fuel margin and instead receiving a one-off payment of $137 million.

Coles' online business was profitable for the first time in its 20-year history, while the company said it was well on the way to meeting a 10 per cent target of renewable energy use following its commitment to help build three solar power plants in regional NSW.

Coles shares were still 3.63 per cent higher at $13.72 at 1255 AEST.

COLES' FY19 RESULTS

* Total revenue down 1.7pct to $38.4b

* Profit down 9.1pct to $1.43b

* Fully franked final dividend of 24.0 cents plus a special dividend of 11.5 cents.