Woolworths Holdings Limited · JSE:WHL
Woolworths — Corporate Update (November 2004)
23 slides from Woolworths's corporate update, November 2004
Slide 1: Investor briefing: securitisation of card book and share repurchase
investor briefing: securitisation of card book and share repurchase november november
Slide 2: Overview
overview The purpose of this presentation is to: • Provide an overview of the Woolworths securitisation • Provide a summary of the mechanism Woolworths has selected to effect the distribution of surplus capital to shareholders • Set out the way forward
Slide 3: Current capital structure is inefficient and reduces ROE
The current capital structure of Woolworths is inefficient and has resulted in a reduction in Woolworths’ ROE • Although Woolworths’ retail ROE is above those of retail benchmarks, the current ROE of financial services is below its industry standards and this has had the effect of reducing the overa
Slide 4: Comparison of retail competitors' ROE
Comparison of retail competitors’ ROE Comparison of the ROE of the Woolworths' retail operations versus that of Pick'n Pay, Truworths, Foschini and Woolworths consolidated 60% 53.4% 52.0% 50% 46.4% 44.8% 43.0% 42.6% 42.3% 40% 36.6% 40% 35.63% 30.6% 33.1% 30% 31.0% 29.4% 26.9% 26.3% 24.9% 25.7% 25.7%
Slide 5: Securitisation is backed by Woolworths' retail credit portfolio
The securitisation is backed by Woolworths’ retail credit portfolio The securitisation incorporates: • A Receivables Backed Note Programme initially of up to c. R3 billion • The receivables comprise the revolving retail receivables generated on the Woolworths in-store card product • The current stor
Slide 6: Structure of the securitisation
Structure of the securitisation Owner Trust Excess Spread Proceeds from Collections Note Issue Woolworths Sale The Issuer Investors of receivables Quarterly payments Subordinated Loan Hedge Liquidity Facility Usury-Jibar Swap Counterparty * The structure will be consolidated in terms of AC 133 and A
Slide 7: Class A notes will be rated AAA by Moody's
The Class A notes issued will have a credit rating of AAA, as rated by Moody’s Investor Services Indicative terms of the notes: Class A Aaa.za 80 – 90% Debtors Class B A1 – Baa2 (if required) Subordinated 10 - 20% loan Tenor: • Scheduled maturity – As per tenor of each note issued, indicatively 2 –
Slide 8: Book profitability and subordinated loan create credit enhancement
The profitability of the book together with the subordinated loan creates credit enhancement Excess spread • The Issuer’s basis risk exposure will be hedged through a Usury for Jibar + [12%] Swap. • Excess spread • Interest earned - Jibar + [12%] • Cost of funding - Jibar + [1%] (incl costs) • Exces
Slide 9: Early amortisation triggers enhance protection of noteholders
Early amortisation triggers enhance protection of the noteholders Early amortisation triggers • Charge offs - [3] times current level • Payment rate - reduces by [50%] • Attrition - receivables as a % of assets < [75%] • Principal deficiency - assets<liabilities for 3 continuous months • Corporate r
Slide 10: Securitisation is backed by Woolworths' retail credit portfolio
The securitisation is backed by Woolworths’ retail credit portfolio Balanced distribution across age groups, geographical bands and balance bands… Age distribution Distribution of Balance Bands >59 <26 <500 <1000 <1500 <59 <31 >5000 <2000 <52 <34 <3000 <47 <37 <5000 <43 <40 Geographical Distribution
Slide 11: High quality receivables portfolio that is tightly managed
Woolworths has a high quality receivables portfolio that is tightly managed Effective yield of the portfolio Charge off rates Effective Yield relative to Usury Rates 3 Month Moving Average Charge Off 10% 38% 36% 9% 34% 8% 32% 7% 30% 6% 28% 5% 26% 4% 24% 3% 22% 20% 2% 18% 1% 16% 0% S e 99 S e 00 4 Ja
Slide 12: Spreads on AAA notes range between 33 and 50 basis points
The spread on AAA notes range between 33 and 50 basis points depending on the tenor of the note Domestic spreads on AAA South African Capital Market securitisation issuance Pricing 80 Indicative spreads: 70 60 •2 years - 33 – 38 bps CARD1 50 •3 years - 40 – 45 bps Bps CARDA2 CAR1A 40 THE1A THE4A1 TH
Slide 13: Securitisation expected to create R1 billion surplus capital
It is expected that the securitisation will result in capital surplus to operational requirements of R1 billion R1 billion in surplus capital: • Woolworths has not identified any significant attractive investment opportunities and has decided to distribute the surplus capital to shareholders. • Shou
Slide 14: Share repurchase has negligible effect on HEPS and share price
The share repurchase will have a negligible effect on HEPS and the share price given the current consensus forecast… The following assumptions have been used when calculating the financial effects depicted below: • An operative date of the cash distribution of 1 January 2005 • A repurchase price of
Slide 15: ROE will improve considerably
However ROE will improve considerably ROE 40% 35.8% 35% 34.4% 29.5% 30% ROE 25.7% 26.8% 23.7% 27.1% 27.1% 25% 25.7% 23.7% 20% 15% 2003A 2004A 2005F 2006F 2007F Base case ROE ROE ignoring once off effect of STC
Slide 16: Pro-forma balance sheet effect (group)
Pro-forma balance sheet effect of the securitisation and the share repurchase WHL group Before After securitisation securitisation and share and share Balance sheet as at 30 June 2004 (R'millions) repurchase repurchase Property, plant and equipment, investments, deferred tax, loans and goodwill 1 62
Slide 17: Pro-forma balance sheet effect (financial services)
Pro-forma balance sheet effect of the securitisation and the share repurchase Financial Services Before After securitisation securitisation and share and share Balance sheet as at 30 June 2004 (R'millions) repurchase repurchase Property, plant and equipment, investments, deferred tax, loans and good
Slide 18: Pro-forma income statement effect (group)
Pro-forma income statement effect of the securitisation and the share repurchase WHL group Before After securitisation securitisation and share and share repurchase repurchase Operating results Operating profit before interest and exceptional items 1 062 1 062 Interest paid 109 191 Profit after inte
Slide 19: Pro-forma income statement effect (financial services)
Pro-forma income statement effect of the securitisation and the share repurchase Financial Services Before After securitisation securitisation and share and share repurchase repurchase Operating results Revenue 647.3 647.3 Operating costs 330.9 330.9 Operating profit before interest paid 316.4 316.4
Slide 20: Share repurchase requires 75% shareholder support
The share repurchase requires the support of 75% of the shareholders present or represented at the scheme meeting Timing • It is the intention of Woolworths that the proposed distribution of surplus capital to shareholders will take place in the first quarter of 2005. Pricing of • The proposed repur
Slide 21: Rationale for the scheme
Rationale • In terms of the scheme, all shareholders will participate for the on a pro rata basis in the proposed share repurchase. scheme • There is a present value benefit to Woolworths of utilising the share premium in advance through the proposed share repurchase as opposed to Woolworths’ curren
Slide 22: Shares repurchased and way forward
Shares • The Woolworths shares repurchased will be cancelled repurchased and restored to the status of authorised ordinary shares in the ordinary share capital of Woolworths. Way • The securitisation is still subject to completion of the forward rating process and legal documentation. • The note iss
Slide 23: Questions
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