Woolies in break-up calls after retail rally
A break-up of Woolworths appeared to be on the cards today when the High Street chain said its long-struggling retail arm was back in the black.
Woolworths has slashed it's dividend.
The return to profitability of the heavily criticised stores is likely to prompt calls from investors such as Unity for decisive corporate activity to return cash.
Unity, the investment house backed by Icelandic group Baugur, has a 10% stake and has been pressing for a break-up for some time.
Woolies boss Trevor Bish-Jones has always argued that such a move made no sense until both arms of the business were on the right track.
Today he conceded that it could be on the agenda in two years' time, although shareholders may not want to give him that long.
'I have always said you couldn't contemplate a break-up until you have both businesses profitable in a sustainable way. We have made a very good step forward and in a couple of years it can become a debate,' he said.
Sales across the group rose 8.5% to £2.97bn in the year to February, taking profits up 30% at £28.3m.
The retail arm contributed profit of £3.4m compared with a loss of £12.9m a year ago, a result that came thanks to tough cost controls and better exploitation of the 821-strong property portfolio.
City analysts sometimes argue that the profits from the properties are not 'real', a stance that the company rejects. 'We will always make profit on the properties,' said Bish-Jones.
DVD business 2entertain had an excellent year, with sales climbing 23% to £240m. Big sellers included films featuring Top Gear's Jeremy Clarkson and Planet Earth. 2entertain is a joint venture with the BBC which could be sold before long, perhaps raising £200m.
The wholesale entertainment and publishing arm is also booming.
Debts more than doubled to £246m, a concern to analysts and investors. The shares slipped ¼p, or 2%, to 11½p.
Asked about the retail environment of late, he replied: 'It is very difficult to call because Easter was so early it is not comparable to last year. It is certainly tough out there for consumers, but we feel reasonably comfortable.'
The pressure on the industry is the most intense since the Thatcher-recession of the early 1990s. Smaller firms are going into administration at an alarming rate and even the major players are finding margins squeezed.
Dividend slashed
Already beleaguered Woolies shareholders were expecting the dividend to be hacked back - but not by this much. The final payout of 0.17p a share is down from 1.34p a year ago as the company desperately looks to preserve cash.
Chairman Richard North said the move 'provides a base from which to grow' but hard-pressed investors are unlikely to see it that way. The total payment for this year is 0.6p a share, down from 1.77p.
Retail investors can expect more of the same from elsewhere on the High Street. B&Q owner Kingfisher last week halved its dividend payments. Electricals group DSG International is expected to follow suit.
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