Woolworths has completed the sale of its petrol business to EG Group and will return the proceeds via a buyback.
The buyback will be off market and return $1.7 billion to shareholders, Woolworths says. The offer period will open on April 16.
Woolworths Group Chair Gordon Cairns says the group remains focused on maximising shareholder value.
“We’ve considered a number of capital return options,” he said. “And we believe an off-market buyback is the best option for the company and shareholders, and will result in a significant franking credit release.
“The buyback complements dividends of $1.4 billion already paid to shareholders this financial year through the F18 final and special dividends, and the F19 interim dividend. Following the buyback, the Woolworths Group balance sheet will remain strong and allow sufficient flexibility for future growth.”
The buyback will be open to eligible shareholders in Australia and New Zealand. There are further details in a separate ASX announcement.
Woolworths predicts that the sale of its petrol business will bring in a $1.1 billion gain after tax. The company will record the gain as a significant item in the F19 results, it says.
30 BIG W stores to close
Following its network review, Woolworths Group has identified about 30 BIG W stores for closure over the next three years. It will also close two distribution centres when their leases end.
The company says the cost of exiting these sites will result in a P&L charge of about $270 million. Most of this sum will relate to lease and other store exit costs. The review also identified about $100 million of non-cash asset impairments.
In total, Woolworths expects to record the one-off pre-tax charge of about $370 million as a significant item in the F19 result.
Woolworths Group CEO Brad Banducci said: “As foreshadowed at our half-year 2019 results, while the recovery in trading for BIG W is encouraging and there remains further opportunity for improvement, the speed of conversion to earnings improvement is taking longer than planned.
“We understand the impact that the store and distribution-centre closures will have on our team. We’ll endeavour to provide affected team members with alternative employment options within the Woolworths Group where possible.
“This decision will lead to a more robust and sustainable store and DC network that better reflects the rapidly changing retail environment. It will accelerate our turnaround plan through a more profitable store network, simplifying current business processes, improving stock flow and lowering inventory.”