Slide 1: ASX cover letter: Full Year Results Presentations
WOOLWORTHS LIMFFED A.B.N 88000 014 675 23 August 2004 The Manager, Companies Australian Stock Exchange Limited Company Announcements Office Exchange Centre Level 6 20 Bridge Street SYDNEY NSW 2000 Dear Sir/Madam, Re: Woolworths Limited Full Year Results Presentations | attach copy of materials relea
Slide 2: Results Presentation Year Ended 27 June 2004
WOOLWORTHS: LIMITED : Results Presentation | . "Year-Ended 27 June 2004 23 AUGUST 2004
Slide 3: Sales up 6.7% from continuing operations
Sales up 6.7% from continuing operations Total sales for this year compared with last year up 6.1% to $27,934m Earnings before interest, taxation, depreciation and amortisation (EBITDA) up 9.6% to $1,472.7m Earnings before Interest and Taxation (EBIT) up 12.6% to $1,065.1m Net operating profit after
Slide 4: Sales from continuing operations up 6.7%
$ billions ™ NO NO W a oOo ao oo —_ a o& 20.9 Increase 52 week basis # Includes extra week * 2002 sales ex Franklins grew 10.1% on a 52 week basis 2001 + 10.0% 2004 SALES FROM CONTINUING OPERATIONS WERE UP 6.7% 2004 + 17.0% #* + 14.9% orths L
Slide 5: Sales by division
FY03 FY04 Change $m $m % Food and Liquor 21,039 ‘” 21,998 “ 4.6% Petrol 1,711 2,195 28.3% Total Supermarkets 22,750 24,193 6.3% BIG W 2,500 2,718 8.7% Consumer Electronics 791 886 12.0% Total General Merchandise 3,291 3,604 9.5% Continuing Operations 26,041 27,797 6.7% Wholesale 280 137 -51.1% Group
Slide 6: Costs: the key enabler
i Down 45pts in FY04 23 + 22.22 22 + ° 21.55 Cumulative %o 21.10 Reductions 21 + $2,470m* 20 - 19 T T T 2000* 2001 2002 2003 2004 Reduction $163m + $362m + $517m + $632m + $796m = # Adjusted to exclude WST COSTS = THE KEY ENABLER * Base year 1999
Slide 7: Costs: the key enabler
i 24 - Down =r) ) in FY04 ‘ 23 - 22.68 22.32 } Cumulative 22 - 21.66 ¢ Reductions % 21.12 2am 21-5 20 - 19 T T T T 2000° 2001 2002 2003 2004 Reduction $141m + $343m + $486m + $707m + $906m = # Adjusted to exclude WST * Base year 1999 COSTS = THE KEY ENABLER Ww orths Limited
Slide 8: Lowering the cost of living increase
27 - Down 4 23pts in 26 25.60 FY04 25.24 25.14 % 25 5 f cumulative \ | Reductions | $1,953m* / 24 4 er 23 T T T 2000 # 2001 2002 2003 2004 Reduction $127m + $299m + $438m + $497m Ad ated to exclude WST LOWERING THE COST OF LIVING INCREASE
Slide 9: Lowering the cost of living increase
Ha GTMATI HTT TTT tii TTHtiiittt iii 275 Down 34pts in 25.80 FYO4 25.29 % 25 + 24 5 23 2000° 2001 2002 2003 2004 Reduction $104m + $283m + $415m + $590m + $726m = Teoreyear i009 LOWERING THE COST OF LIVING INCREASE 8 worths Limited
Slide 10: EBIT from continuing operations up
Fj Tww—_—___=_;_ inhi 1,065 » 800 - 707 5 622 = 600 - A 400 - 200 - 0 T : T T - T 2000* 2001 2002 2003 2004 Year + 15.4% + 13.7% + 17.8% + 13.6% + 12.6% 2004 EBIT FROM CONTINUING OPERATIONS WERE UP 12.4% # Adjusted to exclude WST * Includes extra week Woolworths Limited
Slide 11: EBIT margins
mn | aon | EBIT MARGI | MNCL FY0O0 FY01 FY02 FY03 FY04 4.25 - H1 H2 Yr Hi H2 Yr H1 H2 Yr H1 H2 Yr Hi H2 Yr 4.00 + 3.75 4 3.50 + y, 3.254 3.00 + 2.75 - 2.50 + 2.25 - 2.00 EBIT MARGINS HAVE THICKENED OVER THE 2004 YEAR BY 22pts # Includes extra week rths Limited
Slide 12: EBIT by division
Food & Liquor Petrol Total Supermarkets BIG W Consumer Electronics Total General Merchandise Total Trading Result Property Central overheads Continuing operations Wholesale Group EBIT Bi; i fii ii hi FY03 Change Before After Before After Goodwill Goodwill Goodwill Goodwill $m $m 848.2 825.1 13.8% 14
Slide 13: Supermarkets results
FY03 FY04 Change Sales ($ mil) 22,749.5 24,192.5 +6.3% Gross Margin (%) 24.39 24.11 -0.28%pts Cost of Doing Business (%) 20.63 20.14 -0.49%pts EBIT to Sales (%) 3.76 3.97 +0.21%pts EBIT before goodwill ($ mil) 878.1 984.2 +12.1% EBIT after goodwill ($ mil) 855.0 960.3 +12.3% Funds Employed ($ mil) 1
Slide 14: Supermarkets: Food and Liquor sales
i i li * Supermarket sales (including petrol) rose 6.3% with Food and Liquor sales growing 4.6%. This was in line with expectations in the face of a competitor's new petrol offer * Comparable (like for like) sales for Food and Liquor grew 2.7% with rates in June, July and August showing an increase
Slide 15: Supermarkets: EBIT and store openings
( i li: ! F tu « EBIT grew faster than sales at 12.3%, underpinned by cost savings with CODB falling by 49 basis points *« Opened 18 new Supermarkets * Food and Liquor trading area increased by 3.1% (within our target range), most of which was in the last quarter of FY04 « Woolworths has 28.4% of th
Slide 16: Liquor
| | ih tac Woolworths has brought significantly greater price competition to this sector with customers benefiting from lower prices. All liquor operations recorded strong growth in revenue and earnings in a competitive market Total liquor sales for the year (including MGW) exceeded $2.1b and we are
Slide 17: Petrol
DIR PT Our Petrol division, strengthened by our alliance with Caltex, continues to be a good supplemental offer with petrol sites conveniently located near our supermarkets a=] Petrol sales of $2.2b, up 28.3% on last year EBIT was down on last year mainly due to the high levels of pump price competi
Slide 18: BIG W results
E HT FY03 Change Sales ($ mil) 2,500.3 +8.7% Gross Margin (%) 30.88 -0.63%pts Cost of Doing Business (%) 26.73 -0.75%pts EBIT to Sales (%) 4.15 +0.13%pts EBIT* ($ mil) 103.7 412.1% Funds Employed ($ mil) 269.5 +20.9% Average ROFE (%) 36.5 +2. 5%pts * No purchased goodwill in BIG W 17 Woolworths Limi
Slide 19: BIG W: Everyday Low Prices
Everyday Low Prices (EDLP) offering, built on ongoing cost reductions, is a key driver of continued strong growth in sales and earnings * High single digit sales growth of 8.7% in a competitive market with total sales exceeding $2.7b * Comparable store sales growth was 5.3% for the year (4.2% in FY0
Slide 20: Consumer Electronics results
Sales ($ mil) Gross Margin (%) Cost of Doing Business (%) EBIT to Sales (%) EBIT before goodwill ($ mil) EBIT after goodwill ($ mil) Funds Employed ($ mil) Average ROFE (%) Change +12.0% -2.0%pts -2.3%pts +0.3%pts +17.0% +19.2% -10.1% +4.0%pts Woolworths Limited
Slide 21: Consumer Electronics: double digit growth
i) fi i fi uy Double digit sales and earnings growth in a very competitive market + Business progressing extremely well and is reflected by a 12% sales increase and a 19.2% increase in EBIT after goodwill * Strong double digit comparable (like for like) sales growth achieved 10.1% (first half 10.1%,
Slide 22: NPAT from continuing operations
cA 687.8 650 - 609.5 550 - 523.2 450 - 428.0 $ millions 400 364.0 2000 2001 2002" 2003 2004 NPAT FROM CONTINUING OPERATIONS (EXCL. WHOLESALE) INCREASED 12.6% * 53 weeks worths Limited
Slide 23: Earnings per share
il it il 80 - 70 - 60 - 50 - 41.0 Cents 40> 32.9 30 20 10 60.7 70.1 2000 2001 2002 2003 2004 EBIT GROWS FASTER THAN SALES - ASSISTED BY COST REDUCTIONS EPS GROWS FASTER THAN EBIT - ASSISTED BY WORKING CAPITAL AND CAPITAL MANAGEMENT Woolworths Limited
Slide 24: Payout to shareholders over 5 years
i | Be $ millions a fom] ©o 1 2000 2001 2002 2003 2004 PROFIT GROWTH, COUPLED WITH BALANCE SHEET MANAGEMENT, DELIVERED $3,312M PAYOUT TO SHAREHOLDERS OVER 5 YEARS worths Limited
Slide 25: Dividend pay-out ratio
ND‘ Onn I) Vin I) lui I wT 30 - Cents 23 2000 2001 2002 2003 2004 DIVIDEND PAY-OUT RATIO OF 66.8% CONSISTENT WITH THE PREVIOUS 4 YEARS Woolworths Limited
Slide 26: Funds employed and working capital
‘a ‘a | lll lll lll CCC CIN N¢ i tu uy 2003 2004 $million $million Inventory 1,843.1 1,847.0 Only increased $3.9m despite 6.7% increase in sales. Represents Trade Payables (2,078.9) (2,176.3) reduction of 2.0 days stock on hand Net investment in inventory (235.8) (329.3) Receivables 543.1 423.0 Days
Slide 27: Days inventory reduction
Days 35 - 40.8 37.3 34.1 2000 2001 2002 2003 Reduction of 2 days 32.1 2004 12.6 DAY REDUCTION SINCE 1999 HAS RESULTED IN A $725M CASHFLOW BENEFIT Woolworths Limited
Slide 28: Cash flow
Ly i iB li, EBITDA Net interest paid (incl. cost of Income notes) Taxation paid Net reduction in working capital Other non cash items Total cash provided by operating activities Payments for the purchase of businesses ~ other Payments for purchase of investments Payments for new stores, refurbishmen
Slide 29: Capital management and buy-backs
i Over the past 5 years $3.3b, comprising off and on-market buy backs and dividends, have been returned to shareholders « During FY04 12.7 million shares repurchased at a cost of approximately $141m « Franking credits available for distribution as at the end of FY04 amounted to $404m « Our capital m
Slide 30: Funds employed
| 2,400 5 2,359.4 2,161.5 2,157.7 2,117.6 $ millions 1999 2000 2001 2002 2003 2004 FUNDS EMPLOYED DOWN $3.8M IN FY04 MAINLY DUE TO AN INCREASE IN NEGATIVE WORKING CAPITAL OFFSET BY AN INCREASE IN CAPEX SPEND OVER FIVE YEARS FUNDS EMPLOYED DECREASED 8.5% ON SALES UP 59.4% Woolworths Limited
Slide 31: Return on funds employed
52% - 48% + 44% 42.8% 40% - 38.1% % 36% 4 35.0% 32% 7 29.1% 28% 24% 20% 2000 2001 2002 2003 2004 ROFE INCREASED FROM 42.8% LAST YEAR TO 49.3% DUE MAINLY TO STRONG EBIT GROWTH UP 12.6% ON LAST YEAR (1) Based on average of opening and closing funds employed worths Limited
Slide 32: Return on equity
55 50 45 40 35 30 25 20 15 10 % 28.9 ee TTT AE 48.1 49.3 51.0 43.2 2000 2001 2002 2003 2004 AVERAGE ROE HAS INCREASED 1.7%PTS DUE TO THE SHARE BUY BACK AND GROWTH IN EARNINGS (1) Based on average of opening and closing Shareholders funds 31 worths Limited
Slide 33: Performance against stated goals
In comparison with our FY01 Fyo2 Fyo2" FY03 regularly expressed Normalised goals Achieved Sates will grow in the upper single digits 410.1% +17.0% 414.9% +7.6% | assisted by bolt-on : acquisitions EBIT will outperform sales growth assisted by +13.7% +17.8% 415.7% +13.6% cost savings EPS will outperf
Slide 34: Focus areas
i ) p I) / a NT Focus Areas Continuing Growth High single digit sales growth Improved customer offer Lower prices Bolt-on acquisitions mimi Cost Reductions Project Refresh | tinues (The Enabler) roject Refresh | continue Project Refresh || deliveries Capital & Balance Efficient Balance Sheet Sheet M
Slide 35: Opportunities for ongoing growth
eS Considerable opportunities for ongoing growth in both revenues and earnings Continuing opportunity to grow market share + Woolworths’ market share of Food, Liquor & Grocery (FLG) remains below 30% and still low by world standards + Independent grocers and specialty food stores hold just under 50%
Slide 36: Opportunities for ongoing growth (continued)
i ic Considerable opportunities for ongoing growth in both revenues and earnings New range and formats + New format rollouts (eg. smaller BIG Ws to country towns) + New categories across supermarkets and general merchandise, in particular petrol, liquor, electronics and hotels + Focusing on further
Slide 37: Refresh overview
Overview « “Refresh” level 1* initiatives over the past 5 years underpin a reduction in CODB of 2.85% of sales, giving cumulative savings of $2.5b (based on our 1999 cost structure) * Targeting further “Refresh” savings to underpin a CODB reduction of 20bps per annum over the next five years. * Thes
Slide 38: Level I - Reorganisation / line items
Level | - Reorganisation / line items Woolworths Limited
Slide 39: Cumulative savings
9 year cum savings = $6.9b Savings in years F05 to F08 = $4.4b 1 gs00 a: Additional 20 bps pa of sales to 3.65% cumulative 2 Level Il 1336 Increasingly logistics driven 1181 Level | Mainly line items. and reorganisation PA Savings $ millions 00 01 02 03 04 05 O06 O7 O8 Woolworths Limited
Slide 40: Supply chain strategy development
| +B: “RE it The Supply Chain Strategy was developed by examining the logistics features of leading global retailers and evaluated to determine Woolworths’ optimum solution | mA * Leading retailers were studied to identify best practice opportunities « This led to the consideration of the following
Slide 41: Supply chain strategy objectives
i Mm 'R SH. |-F ! i il wai NT The Supply Chain strategy is a whole of business transformation delivering value to our customers. The objectives of the Supply Chain Strategy are: * Store friendly, utilising one touch principles * Cold Chain and Fresh Food quality focus + Demand driven integrated end-
Slide 42: Replenishment Program
MMMM NINN | | | hi Replenishment Program Acc AA The foundation of our supply chain lies in our ability to forecast and order stock in line with customer demand while maintaining just enough stock in our warehouses and our vendor warehouses to supply this demand. Achievements * AutostockR fully imple
Slide 43: One Touch Stores Program
will iii | | iw One Touch Stores Program is underway in the following areas: « Roll Cages — units that enable stock to be pre-packed at the DC and delivered directly to store for efficient and safer shelf-filling practices * Shelf-Ready Trays — improve efficiencies with multiple items being transfer
Slide 44: Distribution Centre Program
wll iii [ li Distribution Centre (DC) Program Our plan is to consolidate 31 Supermarket DCs to 9 Regional and 2 National DC sites of significantly larger size and scale. Achievements The majority of DCs are well underway as dedicated projects with locations secured and initial commissioning schedule
Slide 45: Transport Program
will iii | | iw Transport Program By improving the control of primary and secondary freight Woolworths is seeking to leverage synergies and deliver stock to all stores consistent with customer demand: TT UUUOOTEE_Ewaw TATA KNTTNTNiONTTic ¢ Primary Freight is the conversion of supplier delivered prod
Slide 46: Vendor Collaboration Program
Twn An Vendor Collaboration Program Woolworths values its relationship with its suppliers and aims to work with them to improve efficiencies across the supply chain. We will do this through collaboration with our vendors, sharing information and requesting feedback. Achievements *« Workshops have be
Slide 47: The first seven weeks
The first seven weeks show: * Overall sales growth in upper single digits 6.7% * Food and Liquor comparabie sales in June, July and August (to date) have seen a very pleasing change in trend in comparison to the fourth quarter of FY04 * Since the end of the year, comparable sales for Food and Liquor
Slide 48: FY05 outlook
TTT Sales + For FY05 we will continue to limit sales guidance to the expectation that sales will continue to grow in the upper single digits Earnings + For FYOS5, we anticipate that Net Profit after Tax (NPAT) will increase in the range of 10% to 15% + The Board has decided to revisit capital manage
Slide 49: Appendices
Appendices
Slide 50: Key metrics and future guidance
yl Imi «ch Annual change 2004 2000 2001 2002 2003 2004 |Average| Future Guidance $27.9 bil [Sales % Chg +8.6% +10.0% +14.9% 49.6% 46.1% +9.8%| High single digit growth 708 Supermarket stores # +26 +18 +73 +18 +14 +30/ 15-25 pa io over 800 111 BIG W stores # +2 +3 +6 +8 +7 +5| 6-10 pa to over 150 359
Slide 51: Financial ratios and credit rating
H (Covenant more Fixed charges cover xX 2.50 than x 1.75) Days inventory (to cost of sales) Days 34.1 Days creditors (to sales) Days 45.2 Return on Funds Employed (pre tax) ROFE % 42.8 Return on Total Equity % 33.4 Return to Noteholders (pre tax) % 6.9 Return on Shareholders Equity (post tax) % 49.3
Slide 52: Fixed charges cover
I i" ii 2000 2001 2002 2003 EBIT 621.6 706.6 832.7 945.7 D&A 288.8 309.8 351.0 398.3 EBITDAR 1,457.1 16164 1888.7 2,102.7 Interest 33.6 25.0 57.6 41.2 WINs contingent coupon 26.1 477 39.8 41.1 Rent - base 439.4 497.3 569.9 620.2 Rent - turnover contingent 107.3 76.9 794 771 Rent - store fitout - 25.
Slide 53: Capex forecast
T IT CGGCGS..l( (Ii ( ( ( ( (i itt FOS F06 FO7 Fo8 Foo Forecast Forecast Forecast Forecast Forecast New Stores/Acquisitions 1647) 151 142 140 145 Store Refurbs/Extensions 201° 245 230 235 240 Stay in Business 85 78 78 81 83 IT- Other 86 72 85 100 105 IT- Supply Chain 36% 55 17 15 410 Supply Chain -
Slide 54: Slide 54