NZ shopping list yields gold for Foodland

By ELLEN READ AND AGENCIES

Record profits from its New Zealand stores helped to send shares in Australian grocery group Foodland Associated soaring to an all-time high of A$20.10 ($23.41) yesterday.

The result was boosted by a series of acquisitions that the Perth-based company made over the past year - including Woolworths New Zealand - which increased its supermarket numbers from 95 to 224.

Announcing a 73 per cent leap in annual net profit to A$102.4 million ($119.1 million), Foodland managing director Trevor Coates said the Woolworths buy was "on track to achieve its expected synergy benefits".

In June Foodland bought New Zealand's Woolworths supermarket group for $690 million. It also owns the Farmers department store chain in New Zealand. The Woolworths chain is being merged into Foodland's Progressive Enterprises, which includes Foodtown, Countdown and 3 Guys.

"Following the appointment of the various management teams to oversee the combined business, the merging and consolidation of all the central service departments is progressing well," Coates said.

Foodland was considering new supply chain options and was already working to align the businesses' information technology platforms, he said.

"The rationalisation of the various store brands is now a priority and combined advertising for the Woolworths and Foodtown banners has already been implemented."

The record profit, which was for the 53 weeks to August 4, included a five-week contribution from Woolworths.

New Zealand operations' annual profit (before borrowing costs and tax) was A$120.9 million, up from the previous year's A$78.1 million.

Of this, Farmers contributed A$42.2 million, up 64.2 per cent.

Profits from supermarket operations in New Zealand, boosted by the Woolworths buy, rose 79.5 per cent to A$65.7 million from A$36.6 million.

Australian operations made an annual profit (before borrowing costs and tax) of A$90.1 million, up from a previous A$74 million.

The 2001-02 result was achieved on a 27.2 per cent lift in revenue to A$4.91 billion.

Revenue from New Zealand operations - again lifted by the Woolworths buy - was A$2.768 billion, up 16 per cent from A$2.390 billion.

Australian revenue was A$2.137 billion, up from A$1.462 billion.

Coates said New Zealand's economy had stood up well to turbulence overseas.

"The economy has been stronger in the last year than it has been probably for five or six years.

"That has shown through in consumer confidence and consumer spending which has certainly helped our department-store business.

"[But] the economy has probably peaked and will slow. We're watching it closely, but we don't see anything happening dramatically in any market place unless there is some fundamental activity somewhere in the world that would spark a general decline in confidence in worldwide markets and flow on to Australia and New Zealand."

The company declared a 41.5Ac fully franked final dividend, compared with 29.5Ac the previous year, bringing the year's total dividends to 75Ac, up 35.1 per cent.

Earnings per share before amortisation and unusual items rose to 123.6Ac from the previous year's 89Ac.

Foodland said its original division posted an 11.1 per cent increase in annual sales to A$1.23 billion, helped by strong demand for its franchise banner groups Dewsons, SupaValu and Foodland.

As well, its Food Services sales rose 35 per cent to A$47 million, despite reduced tourism.

Foodland said its expanded Action supermarket division reported a 106.9 per cent increase in sales to A$1.08 billion, delivering an earnings before interest, tax and amortisation margin of 3 per cent.

The company said its West Australian Action network continued to be a strong contributor, with three new stores set to be open over the next year.

The battle over Woolworths, which has about a fifth of the market, began 15 months ago when Progressive applied for Commerce Commission clearance to buy the business from Hong Kong's Dairy Farm International.

Foodstuffs, New Zealand's largest supermarket operator, challenged the commission's approval through the courts.

After a long battle, the purchase went through and Foodland's existing New Zealand supermarket group, Progressive Enterprises, added Woolworths, Big Fresh and Price Chopper brands to its stable.

With 40 per cent market share the expanded group competes with Foodstuffs which, through its Pak'N Save, New World and Write Price stores, has 55 per cent of the market.