Capital Management

Woolworths introduced a 1.5% discount on the Dividend Reinvestment Plan (DRP) in April and removed the participation limit. This resulted in an increase in the participation rate to 31% for the interim dividend. Woolworths will retain a 1.5% discount on the final dividend with no participation limit. Woolworths also intends to partially underwrite the final dividend to 50% with the proceeds to be used predominantly to replace Woolworths Notes II and the balance to allow for accelerated investment in its store renewal program.

Woolworths is committed to a solid investment grade credit rating 1 and a number of actions can be undertaken to support the credit profile including the sale of non-core assets, accelerating working capital initiatives and adjusting its growth capital expenditure and property leasing profile. We are actively considering all options to enhance shareholder value in our portfolio businesses.

Dividends

The Board continues to target an after tax dividend payout ratio of 70%, subject to trading performance.

The Board has approved a final dividend per share of 33c, a decrease of 54.2% on the prior year.

The payment of the April 2016 and October 2016 dividends will return $1.0 billion and $0.4 billion in franking credits to shareholders. Woolworths expects that after these events, there will be approximately $2.3 billion of franking credits available for future distribution.

Upcoming refinancing

Woolworths has approximately AUD 381 million equivalent of US144A debt maturing in the second half of FY17. This refinancing requirement has been pre-funded by additional bank facilities totalling $2.0 billion with tenors of three and five and a half years, established in April 2016. This was partially utilised to repay other debt which matured during FY16.

The five‑year non-call period for the AUD 700 million Woolworths Notes II ends on 24 November 2016. Pursuant to a replacement capital covenant, the Notes may be refinanced by a hybrid containing similar characteristics (50% S&P equity credit) or a combination of debt and equity in equal proportions. As described above, the equity component of the Notes will be satisfied by the shares issued under the DRP.

  1. 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’ debt providers.