​Woolworths' transformation project puts dent in FY15 earnings

Woolworths reported it spent part of AU$425.9 million on its total transformation project during the 2015 financial year, which resulted in total group net profit after tax dropping by 12.5 percent.

Supermarket giant Woolworths has reported that after making significant investments into its transformation projects, financial results for the year was slightly down for the period ending 30 June, 2015.

The company reported that it spent part of AU$425.9 million on its total transformation project during the full year, which included AU$199.1 million before tax on resources and professional services costs associated with business transformation programs, accelerated depreciation of assets no longer in use, and inventory provisioning due to changes in strategy.

Another AU$43 million was put towards redundancy costs, which Woolworths said was primarily associated with restructuring initiatives across corporate-wide support functions, supply chain, and non-customer facing positions.

As a result, Woolworths reported that total group net profit after tax was down 12.5 percent to AU$2.15 billion. But total group net profit after before significant items was AU$2.45 billion, in line with the prior year. Similarly, total group earnings before interest and tax (EBIT) dropped 12 percent to AU$3.32 billion, while total group EBIT before significant items was only down 0.7 percent to AU$3.75 billion. Sales, on the other hand, only fell 0.2 percent from the previous year to AU$60.7 billion.

Woolworths also reinforced that it continued to remain as the country's leading online grocery retailer, experiencing sales growth greater than 20 percent in FY15.

In New Zealand, Woolworths said its Countdown.co.nz business cemented its position as New Zealand's leading online grocery retailer with another double digit sales increase.

During the year, Woolworths also began its three year journey on its Australian Super Customer 1st strategy. Earlier in May, the company said it was going to leverage customer data sets to make decisions across its entire business as part of a new three-year strategy. It believed that putting focus on what its customers would help restore sales momentum.

Woolworths also made a return to the prepaid mobile market with the launch of Woolworths Connect. The return came after Woolworths signed a deal with Telstra to resell 3G mobiles under its own brand.

Woolworths head of telco Jason Hair informed ZDNet at the time that the decision behind the return, after a two-year hiatus, was because it sees potential value in the market.

"The prepaid mobile market is very complex, and they [customers] wanted us to demystify that and bring great value products that are simple and straightforward, with simple and straightforward plans and inclusions together on a great network," he said.