Slide 1: Results Presentation Half Year ended 11 January 2004
Results Presentation Half Year ended 11 January 2004 Roger Corbett Chief Executive Officer Tom Pockett Chief Financial Officer 23 February 2004 1 Woolworths Limited
Slide 2: Profit After Tax (After Wins)
PROFIT AFTER TAX (AFTER WINS) 420 397.8 390 360 349.6 13.8% 330 $ Million 295.5 300 18.3% 270 237.7 240 24.3% 211.7 210 12.3% 180 18.9% 150 HY 2000 HY 2001 HY 2002 HY 2003 HY 2004 2 Woolworths Limited
Slide 3: Earnings Per Share Before Goodwill
EARNINGS PER SHARE BEFORE GOODWILL 45 40.41 40 34.54 17.0% 35 29.56 Cents 30 16.8% 25 22.75 29.9% 20 18.67 21.9% 15 19.0% 10 HY 2000 HY 2001 HY 2002 HY 2003 HY 2004 EBIT GROWS FASTER THAN SALES - ASSISTED BY COST REDUCTIONS EPS GROWS FASTER THAN EBIT - ASSISTED BY CAPITAL MANAGEMENT 3 Woolworths Lim
Slide 4: Sales
SALES 18 Upper single digit growth % 15.0 15 14.1 12.8 12 11.2 $ billions 10.3 9 6 3 2000 2001 2002 2003 2004 Increase on previous year + 9.5% + 9.2% + 13.4% + 10.9% + 6.4% FIRST HALF 2004 SALES FROM CONTINUING OPERATIONS WERE UP 7.6% 4 Woolworths Limited
Slide 5: Sales Summary
SALES SUMMARY HY03 HY04 $m $m Inc Supermarkets and Liquor 11,217 11,860 5.7% Petrol 834 1,069 28.2% Total Supermarkets 12,051 12,929 7.3% BIG W 1,437 1,559 8.5% Consumer Electronics 435 487 12.0% Total General Merchandise 1,872 2,046 9.3% Continuing operations 13,923 14,975 7.6% Wholesale 215 74 -65
Slide 6: CODB / Sales
CODB / SALES 24 Costs = The Key Enabler Down Down 328 pts in 22.87 % 49 pts in 5 half 23 HYO4 years 21.91% 22 21.62 % % 21.31% 21 20.82 % 20 19 2000 2001 2002 2003 2004 Cost 1.23% x $10.3 b 2.19% x $11.2 b 2.48% x $12.8 b 2.79% x 14.1 b 3.28% x 15.0 b Reduction $127 m $245 m $317 m $393 m $492 m = $
Slide 7: Gross Profit Margin
GROSS PROFIT MARGIN Margin 1.21% x $10.3 b 2.10% x $11.2 b 2.21% x $12.8 b 2.44% x $14.1 b 2.66% x $15.0 b Reduction $125 m $235 m $283 m $344 m $399 m = $1,386m 27 26.35 % Down 22 pts in HY04 26 Down 266 pts in 5 half years 25.46 % 25.35 % % 25.12 % 25 24.90 % 24 2000 2001 2002 2003 2004 7 Woolwort
Slide 8: CODB / Sales (Excl Wholesale)
CODB / SALES (EXCL WHOLESALE) 24 Costs = The Key Enabler 23.40 % Down 361 Down 63pts pts in 5 in HYO4 23 half years 22.36 % 22.10 % 22 21.48 % % 21 20.85 % 20 19 2000 2001 2002 2003 2004 Cost 1.06% x $9.9 b 2.10% x $10.9 b 2.36% x $12.3 b 2.98% x 13.9 b 3.61% x 15.0 b Reduction $105 m $229 m $290 m
Slide 9: Gross Profit Margin (Excl Wholesale)
GROSS PROFIT MARGIN (EXCL WHOLESALE) Margin 1.02% x $9.9 b 2.02% x $10.9 b 2.12% x $12.3 b 2.67% x $13.9 b 3.09% x $15.0 b Reduction $101 m $220 m $261 m $371 m $464 m = $1,417m 28 Down 42pts in HY04 27.01% 27 Down 309 26.01% 25.91 % pts in 5 half % 26 years 25.36 % 24.94 % 25 24 2000 2001 2002 2003
Slide 10: EBIT
EBIT 700 Double digit growth % assisted by cost reductions 613.8 539.7 500 475.3 $ millions 399.6 358.3 300 100 2000 2001 2002 2003 2004 Inc on LYR + 10.2% + 11.5% + 18.9% + 13.5% + 13.7% 10 Woolworths Limited
Slide 11: EBIT Margin
EBIT MARGIN Margin has increased an average of 15 bps per period over the last 4 half years 4.20 4.08 % 4.00 3.81 % 3.80 3.73 % % 3.60 3.55 % 3.48 % 3.40 3.20 2000 2001 2002 2003 2004 11 Woolworths Limited
Slide 12: EBIT Summary
EBIT SUMMARY Jan-03 Jan-04 Change Before After Before After Before After Goodwill Goodwill Goodwill Goodwill Goodwill Goodwill $M $M $M $M Food and Liquor 464.3 451.5 527.5 514.8 13.6% 14.0% Petrol 11.9 11.9 10.5 10.5 -11.8% -11.8% Total Supermarkets 476.2 463.4 538.0 525.3 13.0% 13.4% BIG W 86.0 86
Slide 13: Total Supermarkets Incl Petrol
TOTAL SUPERMARKETS INCL PETROL HY03 HY04 CHANGE Sales ($mil) 12,051.0 12,929.0 7.3 % Gross Margin (%) 24.47 24.16 -0.31 %pts Cost of Doing Business (%) 20.62 20.10 -0.52 %pts EBIT to Sales (%) 3.85 4.06 0.21 %pts EBIT (after goodwill) ($mil) 463.4 525.3 13.4 % EBIT (before goodwill) ($mil) 476.2 538
Slide 14: Supermarkets
SUPERMARKETS Strong profit growth built on solid sales growth and significant cost reductions • Supermarket sales grew 7.3% (5.7% excluding Petrol) for the half • Comparable store sales grew 3.3%. Q1 was 2.8% strengthening in Q2 to 3.8% • Second quarter inflation was up about 0.5% on the first quart
Slide 15: Liquor
LIQUOR All liquor operations (Dan Murphy’s, BWS, First Estate and attached liquor) recorded strong growth in revenue and earnings in a competitive market • Dan Murphy‘s continued to expand with 2 stores opened in NSW (total of 8 stores in NSW/ACT), its first store opened in Queensland and 1 store op
Slide 16: Petrol
PETROL Our petrol division, strengthened by our alliance with Caltex, continues to be a good supplemental offer with petrol sites conveniently located near our Supermarkets • Petrol sales increased by 28.2% for the half • Strong volume growth in comparable sites continues to fractionalise costs • EB
Slide 17: BIG W
BIG W HY03 HY04 CHANGE Sales ($mil) 1,437.0 1,559.0 8.5 % Gross Margin (%) 30.31 29.39 -0.92 %pts Cost of Doing Business (%) 24.33 23.37 -0.96 %pts EBIT to Sales (%) 5.98 6.02 0.04 %pts EBIT (after goodwill) ($mil) 86.0 93.8 9.1 % EBIT (before goodwill) ($mil) 86.0 93.8 9.1 % Funds employed ($mil) 2
Slide 18: BIG W
BIG W Everyday Low Price (EDLP) offering built on ongoing cost reductions is a key driver of continuing strong growth in sales and earnings • High single digit sales growth (+8.5%) in a competitive market • Comparable store sales increased 4.2% in line with FY03 growth (Q1: 5.0%; Q2: 3.6%) • In Q2,
Slide 19: Consumer Electronics
CONSUMER ELECTRONICS HY03 HY04 CHANGE Sales ($mil) 435.0 487.0 12.0 % Gross Margin (%) 33.59 31.46 -2.13 %pts Cost of Doing Business (%) 28.94 26.35 -2.59 %pts EBIT to Sales (%) 4.65 5.11 0.46 %pts EBIT (after goodwill) ($mil) 20.3 24.9 22.7 % EBIT (before goodwill) ($mil) 22.5 27.1 20.4 % Funds emp
Slide 20: Consumer Electronics
CONSUMER ELECTRONICS Attractive product ranges at competitive prices drive double digit revenue and earnings growth • Continued solid progress rebuilding this business in line with plan • Sales grew 12.0%, with comparable store sales up 10.0% for the half year • Digital Cameras and Home Entertainmen
Slide 21: Shareholder Payouts
SHAREHOLDER PAYOUTS Franking credits given to Total $3,064m shareholders at applicable tax 1000 rates Total $1,080m 940 Share buy-backs and 791 other capital 800 management Buy- $ millions Buy- 633 back initiatives remain back under continual 600 548 534 review Buy- back 400 349 346 354 Dividend Buy
Slide 22: Dividends Per Share
DIVIDENDS PER SHARE INTERIM 24 21 20 18 16.7% 16 15 Cents 20.0% 12 12 10 25.0% 20.0% 8 25.0% 4 HY 2000 HY 2001 HY 2002 HY 2003 HY 2004 22 Woolworths Limited
Slide 23: Balance Sheet
BALANCE SHEET 2003 2004 $million $million Inventory 2,064.1 2,042.7 Down $21m on last year despite 7.6% increase in sales Trade Payables (1,919.2) (2,032.4) from continuing operations Net investment in inventory 144.9 10.3 Receivables 486.1 490.0 Days creditors remained unchanged at 42 days Other cr
Slide 24: Capital Management
CAPITAL MANAGEMENT Prudent capital management continues to be an important strategy for Woolworths • Approximately 12.7 million shares were repurchased on market during the half year, returning approximately $140 million to shareholders • S&P rating has remained unchanged at A- • Fixed charge cover
Slide 25: Cash Flow Half Year
CASH FLOW HALF YEAR HY01 HY02 HY03 HY04 $m $m $m $m EBITDA 556.6 649.9 737.4 814.3 Interest paid (including cost of Income notes) (42.2) (52.7) (44.5) (51.3) Taxation paid (117.9) (134.3) (165.1) (188.8) 396.5 462.9 527.8 574.2 Net reduction (increase) in working capital (1) (48.6) 243.6 (2) (206.2)
Slide 26: Days Stock on Hand (Half Year)
DAYS STOCK ON HAND (HALF YEAR) 3 day reduction Supermarkets inventory Consumer Electronics inventory 5% below last year despite sales growing at 12% 46 44.6 BIG W inventory days in line with 44 43.0 42.9 last year Anticipate full year reduction of 42 2 to 3 days 40 38.2 Days Reduction 38 of 2.8 days
Slide 27: Return on Equity
(1) RETURN ON EQUITY 40 29.6 30 26.6 (2) 20.0 21.5 % 20 13.7 10 0 2000 2001 2002 2003 2004 ROE INCREASES 8.1%PTS DUE TO SHARE BUY-BACKS AND GROWTH IN EARNINGS (1) Based on closing Shareholders funds (2) Decline in ROE in HY03 due to the effect of changes in Australian Accounting Standards. 27 Woolwo
Slide 28: Return on Funds Employed (Half Year)
(1) RETURN ON FUNDS EMPLOYED (HALF YEAR) 30% 24.59% 24% 21.40% 21.40% 20.10% 18% 14.10% % 12% 6% 0% 2000 2001 2002 2003 2004 ROFE increases 3.19%pts due to a decrease in funds employed underpinned by a reduction in inventory and double digit growth in EBIT. (1) This measures the pre-tax return on fu
Slide 29: Progress to Date
PROGRESS TO DATE HY00 HY01 HY02 HY03 HY04 Sales will grow in the upper single digits (1) supported by bolt on acquisitions 9.5% 9.2% 13.4% 10.9% 6.4% EBIT will outperform sales growth driven by cost savings 10.2% 11.5% 18.9% 13.5% 13.7% EPS will outperform EBIT growth assisted by capital management
Slide 30: Caltex Alliance
CALTEX ALLIANCE • Woolworths’ existing petrol canopies (298 at 11 January 2004) remain outside the alliance with no change in reporting. Woolworths can expand these as required with no restrictions • Approximately 130 plus Caltex sites to be converted to co-branded alliance sites with 36 sites alrea
Slide 31: Future Growth: Continued Balanced Focus
FUTURE GROWTH CONTINUED BALANCED FOCUS Focus Areas Result Continuing Growth Upper single digit sales growth Upper Improved customer offer Single Digit Lower prices Sales Bolt-on acquisitions Growth Cost Reductions Project Refresh I continues (The Enabler) Project Refresh II delivers Low Double Digit
Slide 32: Growth
GROWTH Considerable opportunities for ongoing growth in both revenues and earnings Continuing opportunity to grow market share • Market share of Food, Liquor & Grocery (FLG) remains below 30% and still low by world standards Defined plans to continue space roll out • Adding 15 - 25 new supermarkets
Slide 33: Growth
GROWTH Considerable opportunities for ongoing growth in both revenues and earnings New range and formats • New format rollouts (eg. smaller BIG Ws in country towns) • New categories across supermarkets and general merchandise eg. pharmacy Continued focus on improved in-store execution and service •
Slide 34: Project Refresh
PROJECT REFRESH Overview • “Refresh” level 1* initiatives over the past 4 years (to the end of FY03) underpin a reduction in CODB of 2.40% of sales, giving cumulative savings of $1.76 billion. • Savings over the next five years expected to be no less than 1% of annual sales ie 20+ bp’s per annum. •
Slide 35: Project Refresh
PROJECT REFRESH Cumulative savings $6.9 billion over 9 years Level III - Development 24.5% Level II - Logistics 24.10% 18.75% Level14.10% I - Reorganisation 2.68% / line items 99 00 01 02 03 04 05 06 07 08 35 Woolworths Limited
Slide 36: Project Refresh: Savings
PROJECT REFRESH 9 year cum savings = $6.9b Savings in years F04 to F08 = $5.2b 3.40% of sales 1,500 1397 Additional 20 bps pa of sales to 3.4% cumulative 1199 Level II P.A. Savings $ millions 1,200 1025 Increasingly logistics driven Cum savings in FY00 to FY03 = $1.76 874 900 2.4% of sales 740 632 6
Slide 37: Supply Chain Initiatives - Status
SUPPLY CHAIN INITIATIVES - STATUS PROGRESS ON TRACK Replenishment • Integration of StockSmart and AutoStockR to provide end- to-end replenishment functionality StockSMART • System development & implementation complete (DC forecast based • DC stock level KPI targets achieved inventory • Store service
Slide 38: Supply Chain Initiatives - Status
SUPPLY CHAIN INITIATIVES - STATUS One Touch Roll • Roll Cages are being successfully introduced into stores across Cages WA • Rollout across Australia over the next 18 to 24 months Distribution Centres • Plan to consolidate 31 Supermarket DC’s to 9 Regional and 2 National DC sites • Purchased land f
Slide 39: Current Trading
CURRENT TRADING Post Christmas: • Food and Liquor sales trends reported in the second quarter continue. • Trading in General Merchandise very strong. 39 Woolworths Limited
Slide 40: Guidance F04
GUIDANCE F04 Sales • Full year sales growth in upper single digits Earnings • Bottom end of range increased by 1c at first half sales announcement • Anticipate earnings per share before goodwill will be in a range between 68 cps and 70 cps, a growth rate between 12% and 15% • EPS after goodwill is e
Slide 41: Appendices
Appendices 41 Woolworths Limited
Slide 42: Vital Signs
VITAL SIGNS HY03 HY04 Fixed charges cover X 2.55 2.59 (Covenant more than x 1.75) Days inventory (to cost of sales) Days 38.2 35.4 (Anticipate about 2 to 3 days better than last year at year end) Days creditors (to sales) Days 42.0 42.1 Return on Funds Employed (pre tax) ROFE % 21.4 24.6 Due to fund
Slide 43: Capital Expenditure
CAPITAL EXPENDITURE As per below HY04 F04 F05 F06 F07 F08 Actual Forecast Forecast Forecast Forecast Forecast (1) (3) New Stores / acquisitions 62 126 140 135 138 140 Store Refurbs/Extensions 112 219 238 235 240 240 Stay in Business 49 89 61 65 68 68 IT - Other 19 78 64 71 75 80 IT - Supply chain Le