Woolworths Group manages its capital structure with the objective of enhancing long-term shareholder value through optimising its weighted average cost of capital while retaining financial flexibility to invest in its business in a manner consistent with its key priorities. The Group remains committed to a solid investment grade credit rating7 and a number of actions can be undertaken to support the credit profile, including the sale of non-core assets, further working capital initiatives and adjusting its growth capital expenditure and property leasing profile.
In April 2016, the Company introduced a 1.5% discount on the dividend reinvestment plan (“DRP”) and removed the participation limit. This has continued during FY17 and the participation rate for the October 2016 final and April 2017 interim DRPs was approximately 37%. The October 2016 DRP was partially underwritten to 50%, the proceeds of which were used predominantly to replace the Woolworths Notes II and the balance to allow for accelerated investment in the store renewal program. The discount and uncapped participation will remain in place for the October 2017 final dividend.
The Company will seek to return capital to shareholders when that is consistent with its long-term capital structure objectives and where it will enhance shareholder value.
FINANCING TRANSACTIONS DURING FY17
Maturities
The five-year non-call period for the A$700 million Woolworths Notes II ended on 24 November 2016. Pursuant to a replacement capital covenant, the Notes were refinanced by a combination of surplus cash, debt and equity. Eligible equity assigned to the redemption was raised via the DRP during the interim and final FY16 dividends.
US$300 million (approximately A$381 million) in US notes matured in April 2017. This was repaid with existing bank facilities previously established for this purpose.
New transactions
In November 2016, Woolworths Group executed a A$700 million syndicated bank loan facility comprising a three-year and four‑year revolving tranche of A$320 million and A$200 million respectively, and a four-year term loan tranche of US$140 million.
In May 2017, the Group pre-financed it’s A$400 million bank guarantee facility which matures in November 2017 and upsized it to A$500 million. This facility is for the purpose of Woolworths Group meeting its WorkCover obligations as a ‘self-insurer’ by issuing bank guarantees in favour of Australian WorkCover authorities and is underpinned by the international surety market. The original facility was finalised in 2014 for a three-year commitment to November 2017 and is currently fully drawn. The new facility may be drawn at any time up to November 2017, and will expire in three years following initial drawing. It is currently undrawn.
UPCOMING REFINANCING
Woolworths Group has no upcoming refinancings during FY18.
n.c. Not comparable
n.m. Not meaningful
- There were no significant items recognised in FY17.
In FY16, total significant items of $4,013.7 million before tax ($2,627.8 million after tax attributable to equity holders of the parent entity) were recognised. Details of these costs have been provided in Note 1.4 of the Financial Report. Where noted, profit and loss items have been adjusted to reflect these significant items. - In line with the classification of Petrol as a discontinued operation, the financial performance and operating metrics previously disclosed under ‘Australian Food and Petrol’ has been split to disclose Australian Food separately from Petrol in this announcement. Funds employed and ROFE have also been separately presented for Endeavour Drinks.
- Return on funds employed (ROFE) is calculated as EBIT before significant items for the previous 12 months as a percentage of average (opening, mid and closing) funds employed. This methodology has been adopted for FY17 and FY16. In previous reporting periods, ROFE was calculated as EBIT before significant items for the reporting period as a percentage of average (opening and closing) funds employed. Lease adjusted ROFE adjusts funds employed for the present value of future lease obligations and EBIT for the implied interest on those obligations.
- Growth for New Zealand Food is quoted in New Zealand dollars.
- Operating cash flow as a percentage of group net profit after tax before depreciation and amortisation.
- Group earnings before interest, tax, depreciation, amortisation and rent (EBITDAR) divided by rent and interest costs. Rent and interest costs include capitalised interest but exclude foreign exchange gains/losses and dividend income.
- The credit ratings referred to in this document have been issued by a credit rating agency which holds an Australian Financial Services Licence with an authorisation to issue credit ratings to wholesale clients only. The credit ratings in this document are published for the benefit of Woolworths Group’s debt providers.