Woolworths Holdings Limited · JSE:WHL
Woolworths — Investor Presentation (December 2019)
23 slides from Woolworths's investor presentation, Dec 5, 2019
Slide 1: Impact of IFRS 16 on Financial Reporting
WO O LWO R T H S H O L D I N G S L I M I T E D Impact of IFRS 16 on Financial Reporting Reeza Isaacs – Group Finance Director 5 December 2019
Slide 2: IFRS 16 Agenda
IFRS 16 AGENDA Introduction Our transition approach & key principles Lease portfolio & discount rates Impact on financial statements & key metrics Closing 2 2
Slide 3: Introduction
INTRODUCTION 3
Slide 4: Key Messages
KEY MESSAGES Effective beginning of 2020 financial year (1 July 2019) • June 2019 annual results reported on an IAS 17 basis • First published results on an IFRS 16 basis will be our 2020 interim results presented on 20 February 2020 Significant impact on our financial reporting: • Balance sheet: Ri
Slide 5: Balance Sheet
BALANCE SHEET ALIGNS THE REPORTING OF LEASED ROU asset and Lease liability is brought A ASSETS TO OWNED ASSETS onto the balance sheet: Asset and liability profile • The Lease liability is raised at the present value of future lease payments • At lease inception the ROU asset equals the Lease liabili
Slide 6: Income Statement
INCOME STATEMENT Over the full lease term, the total charge IFRS 16 changes the expense characteristics to the income statement is the same under and recognition pattern of the leased asset IAS 17 and IFRS 16 The straight-line operating lease expense (IAS 17) is replaced with: • Depreciation of ROU
Slide 7: Our Transition Approach & Key Principles
OUR TRANSITION APPROACH & KEY PRINCIPLES
Slide 8: Our Transition Approach
OUR TRANSITION APPROACH We have adopted the modified retrospective approach • Comparative amounts are not restated. Opening retained earnings is adjusted on Day 1 (1 July 2019). Pro-forma results for FY20, excluding IFRS 16 adjustments, will be presented to enable comparability to FY19 • We have opt
Slide 9: Key Principles
KEY PRINCIPLES Under the standard there are certain key considerations that one has to take into account when establishing the Lease liability. These include classification of leases, lease terms and discount rates • Lease commitments have been established after undertaking an extensive exercise eva
Slide 10: Lease Portfolio & Discount Rates
LEASE PORTFOLIO & DISCOUNT RATES 6
Slide 11: Group Lease Portfolio
GROUP LEASE PORTFOLIO Group WSA DJ CRG Number of leases 1 068 492 69 507 Average remaining lease term (years) 8.7 7.4 11.2 3.3 Average remaining lease term with no options (years) 6.7 3.7 9.6 2.7 Weighted average remaining lease term (years) 12.8 8.5 16.5 8.1 Weighted average remaining lease term wi
Slide 12: Discount Rates
DISCOUNT RATES Discount rate Woolworths 9.5% David Jones 4.5% Country Road Group 4.3% Discount rates are not implicit in our leases and is therefore based on incremental borrowing rates, taking into account: • Lease term • Base rates and margins – per country • The Group’s specific debt profile The
Slide 13: Group Lease Portfolio: Lease Liability Maturity Profile
GROUP LEASE PORTFOLIO Lease liability maturity profile The Group portfolio consists of 1 068 leases Rm with a weighted average remaining lease 10 000 term of 13 years 8 000 As a Group, we are on average 45% into NPV of Lease liability the lease term, and 35% on a weighted 6 000 average basis 4 000 T
Slide 14: Impact on Financial Statements & Key Metrics
IMPACT ON FINANCIAL STATEMENTS & KEY METRICS 9
Slide 15: Day 1 – Group Balance Sheet
DAY 1 – GROUP BALANCE SHEET 2019 Day 1 2020 Closing Adjustment Opening Rm Rm Rm ASSETS The modified retrospective approach requires Non-current assets 24 032 20 889 44 921 an adjustment to opening retained earnings Right-of-use asset – 19 739 19 739 on 1 July 2019 (Day 1) Deferred tax 1 522 1 202 2
Slide 16: Net Assets
NET ASSETS Rm Present value of ROU 35 000 asset R21 303 million 1 265 1 564 30 000 19 739 25 000 20 000 15 000 10 000 615 9 443 6 416 5 000 26 210 – Net assets Derecognise Recognise Lease Deferred Recognise Net assets before IAS 17 ROU asset adjustment tax ‘new’ Lease after IFRS 16 IFRS 16 operating
Slide 17: FY19 Income Statement
FY19 INCOME STATEMENT 2019 2019 Report IFRS 16 After Rm Rm Rm Revenue 73 788 – 73 788 Turnover and concession sales 78 335 – 78 335 Concession sales (6 578) – (6 578) Turnover 71 757 – 71 757 Cost of sales 44 284 – 44 284 Gross profit 27 473 – 27 473 Other revenue 1 956 – 1 956 Expenses 24 079 (1 06
Slide 18: FY19 aPBT Adjustment
FY19 aPBT ADJUSTMENT Rm 10 000 8 000 3 591 6 000 2 531 4 601 4 123 4 000 1 538 2 000 0 aPBT Derecognise: Recognise: Recognise: aPBT before IFRS 16 Smoothed rental Depreciation Finance cost after IFRS 16 Increase Decrease Key assumptions: new stores opened during the period are included from inceptio
Slide 19: FY2019 Impact on Key Metrics
FY2019 IMPACT ON KEY METRICS Before After IFRS 16 Change IFRS 16 INCOME STATEMENT EBIT Rbn 5.4 1.0 6.4 Rent is replaced with depreciation of a lesser amount which increases operating margin Operating margin % 7.5 1.4% 8.9 Interest is recognised which, together aPAT Rbn 3.4 (0.3) 3.1 with depreciatio
Slide 20: Closing
CLOSING
Slide 21: Looking Ahead
LOOKING AHEAD FY20 Interim results (February 2020) • FY19 reported on an IAS 17 basis • Opening balance sheet restated to include Day 1 adjustments • FY20 interim results to be presented on a post IFRS 16 and a pro-forma pre-IFRS 16 basis to enable comparability FY20 Full-year results (August 2020)
Slide 22: Recap of Key Messages
RECAP OF KEY MESSAGES Effective beginning of 2020 financial year (1 July 2019) • June 2019 annual results reported on an IAS 17 basis • First published results on an IFRS 16 basis will be our 2020 interim results presented on 20 February 2020 Significant impact on our financial reporting: • Balance
Slide 23: Questions?
QUESTIONS? THANK YOU
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