Foodland fate rests with court

Australia's Federal Court will consider tomorrow whether New Zealand's biggest grocer will fall into the fold of Australian giant Woolworths.

In May, Woolworths teamed up with grocery wholesaler Metcash Trading in a A$3.3 billion ($3.6 billion) deal to acquire the New Zealand and Australian operations of Foodland.

Metcash will get Foodland's 60 Australian supermarkets and Woolworths will get New Zealand's Progressive Enterprises with its Countdown, Foodtown and Woolworths brands, plus 22 Australian supermarkets.

Foodland's board has recommended the deal, which will be put to Foodland shareholders in October.

Yesterday, Foodland reported a 33 per cent decline in annual net profit of A$95.3 million ($105.4 million) for the year ended July 31. It said the results were influenced by A$19.6 million in costs associated with the demerger and transfer schemes under way.

Excluding these one-off costs and unusual items reported in 2004, net profit was 7.8 per cent higher at A$113.7 million.

The company's New Zealand supermarkets reported record results despite competitive trading conditions. Their sales were up 8.5 per cent this year to A$3.6 billion.

Total group revenue for the year ended July 31 fell 1.5 per cent to A$6.73 billion.

The company did not declare a final dividend. The board has said it does not intend to declare any dividends prior to scheme meetings to be held later this year.

In the prior corresponding period, Foodland declared a partly franked final dividend of 43Ac a share.

Foodland said its Franchise & Supply Australia business lifted second-half earnings by 13.4 per cent while Progressive Supermarkets lifted earnings 8.6 per cent.

Franchise & Supply New Zealand increased full-year earnings by 16.8 per cent.

Western Australian Action supermarkets reported a A$3.7 million drop in earnings due to a competitive trading environment.