Woolworths Group Ltd · ASX:WOW
Woolworths — Debt Investor Presentation (May 2006)
47 slides from Woolworths's debt investor presentation, May 1, 2006
Slide 1: Woolworths Limited Roadshow Presentation cover letter
WOOLWORTHS LIMITED A.B.N 88 000 014 675 1 May 2006 The Manager, Australian Stock Exchange Limited Companies Announcements Office Level 4 20 Bridge Street SYDNEY NSW 2000 Dear Sir, RE: WOOLWORTHS LIMITED - Roadshow Presentation Attached is a copy of the Woolworths Limited Roadshow Presentation to be
Slide 2: Roadshow Presentation - A$600m Woolworths Notes
Slide 3: Woolworths Notes offer summary
il | Ol Woolworths Limited . Security: A$ Woolworths Notes which are Perpetual Non-Call 5 subordinated, cumulative, unsecured notes (no covenants) . Offer Size: Up to A$600 million, which will be used to finance the redemption of existing WINs . Distributions: Unfranked, floating rate, quarterly . M
Slide 4: Investment highlights
q yh IN ih il * Solid financial * Significant cash flow generation * Strong depth of management * Clear growth strategy *« Leading market positions with well recognised brand names * Product and regional revenue diversity * —Non-cyclical business * In excess of 85% of EBIT derived from the non- disc
Slide 5: Woolworths - Business Overview
Woolworths - Business Overview citigroup) 46 UBS 4 Woolworths Limited
Slide 6: Listing, market capitalisation and history
i) (( CO — Listed on the Australian Stock Exchange in 1993 at A$2.45 per share (symbol: WOW) — Market capitalisation of A$21.8 billion as at 28 April 2006, top ten Australian company — Long and proud history as an Australian retailer * Began as variety store in 1924 * Pioneered Australian supermarke
Slide 7: Australia's largest food, liquor and grocery retailer
Australia’s largest food, liquor and grocery retailer * Over 2,700 retail locations * Over 170,000 employees * Annual sales in excess of A$31 billion * Sales growth averaged 10% and EBITA growth 15% over past five years Operates four primary divisions: + Supermarkets Group — includes supermarkets, p
Slide 8: Group and Results Overview
Group and Results Overview citigroup) 46 UBS 7 Woolworths Limited
Slide 9: Half year result highlights
al ® ‘a | + Excellent result for Woolworths with sales up 18.4%, and strengthening second quarter comparable store sales, EBIT up 31.5% and NPAT up 22.1%. + The result reflects: - Proven ability to concentrate on the needs of our customers, whilst undertaking significant operational changes and acqu
Slide 10: Historical Sales Performance
Historical Sales Performance 35) 31.4 4 27.9 30 oA 26.3 =e 5 2 4 < a a c a > a 2002 2003 2004 2005 2006 A-GAAP A-GAAP A-GAAP A-GAAP A-IFRS Year Increase 417.0%) +7 6% +6.1% +12.2% 52 Week Basis 414.9% +9.6% | First Half Second Half (1) Includes extra week, and 2002 sales ex-Franklins grew 10.1% on a
Slide 11: Historical EBIT Performance
Historical EBIT Performance 1400 > 1,283.0 1200 5 1,065.1 945.7 = 1000" 932.7 E a x Ee a Wu Me 2002 2003 2004 2005 2006 A-GAAP A-GAAP A-GAAP A-GAAP AAFRS Year Increase +47 BH +13,6% +12.6% +20.5% (1 First Half! Second Half (1) Includes extra week citigroup) 46 UBS 40 Woolworths Limited
Slide 12: EBIT Margin
_EBIT MARGIN 473 4.75 4 4.50 4 4.25 4 aos 4.00 4 3.75 + 3.50 4 3.25 | 3.00 | 2.75 | 2.50 | 2.25 | 2.00 4.29 3.84 Percentage FY02 FY03 FY04 FY05 HY06 H1 H2 Yr H1 H2 Yr H1 H2 Yr H1 H2 Yr H1 A-GAAP A-GAAP A-GAAP A-GAAP A-IFRS EBIT MARGINS HAVE INCREASED OVER THE 2005 YEAR BY 27pts (1) Includes Foodland
Slide 13: NPAT performance
80 700] 600) A$ Million 2002 2003 2004 2005 2006 A-GAAP A-GAAP_ ss A-GAAP)— A-GAAP— ALIFRS +22.2%') +16.5% +12.8% +14.9% El First Half] Second Hailf (1) Includes extra week {2) Includes Foodland {NZ} and 20 Australian ex-FAL store results from 2 November 2005, and ALH retail, MGW retail and BMG reta
Slide 14: Targeted CODB reduction continues to be achieved
We i | ON mt | Our targeted CODB reduction of 20 basis points continues to be achieved 23% 7 after excluding Petrol and Hotels oy. { Down 16pts | / 22% | innyos | 21.31% % 21% 20.82% s, 20.259 20.22% %o 20.09% 20% + 19% ; ; ; HY 2002 HY 2003 HY 2004 HY 2005 HY 2005 HY 2006 A-GAAP A-IFRS A-IFRS Reduc
Slide 15: Gross Profit Margin
“GROSS PR RGIN | Sanne LENOVO esl Continued shelf price reductions offset by improved buying and shrinkage along with the benefit flowing from the mt oy _ 26% reduction of direct store deliveries vee 25.35% ° : 25.12% Down 274 ge pts in 7 half 25% + 24.82% years 24.51% 24.51% % 24% + 23% r 1 1 1 r H
Slide 16: Cash flow
| I HY05 A-IFRS $m EBITDA 881.4 +31.0 Net reduction in working capital and other operating cash flows 64.9 946.3 +43.8 Interest paid (including cost of WINs) (62.1) +82.4 Taxation Paid (201.8) +13.6 Total cash provided by operating activities 682.4 +49.2 Payments in relation to the Distribution Cent
Slide 17: Days stock on hand reduction
44 - 42.9 | Reduction | of 2.2 days 38.2 37.3 7 Days 36.3" HY 2002 HY 2003 HY 2004 = HY 2005 HY 2005 HY2006 10.9 days reduction over past 7 half years equals $800m cash flow benefit (1) Last year as reported — Proforma exciuding ALH and adjusted to 28 weeks. {2} Based on 27 weeks with values for the
Slide 18: Sales, EBIT and EPS growth objectives
a) (2) Hy02 Sales will grow in the upper single digits supported by bolt on acquisitions. 13.4% EBIT will outperform sales growth driven by cost savings. 18.9% EPS will outperform EBIT growth assisted by capital management.) 27.4% citigroup) 46 UBS 17 HY03 10.9% 13.5% 16.3% HY04 6.4% 13.7% 17.6% HY0
Slide 19: Refresh levels of initiatives
Ov) eta 20% — Level | — Reorganisation / line items (1999) nw Ne TIO} | i fl + Eliminate State-based structure * Streamlined management * Supplier relations — Level Il — Logistics (2003) * Automatic inventory replenishment « Warehouse management systems + Warehouse rationalisation + Primary and seco
Slide 20: Refresh overview and cost savings
AAA Overview “Refresh” level 1 initiatives since 1999 underpin a reduction in CODB of 3.78% of sales, giving cumulative savings of $3.6 billion to the end of FY05 (based on our 1999 cost structure). We are on track to deliver a further $1.3 billion in savings in FY06. Targeting further “Refresh” sav
Slide 21: Level I - Reorganisation / line items
if Level | - Reorganisation / line items 99 00 01 02 O03 04 O05 O06 O07 O08 O9 citigroup) 46 UBS 20 Woolworths Limited
Slide 22: Refresh savings by year
1,600 + PA Savings $ millions 04 citigroup) 21 1,200 + 800 + 400 5 MN 9 year cumulative savings = $8.0 billion Savings in years FY06 to F08 = $4.4b 1633 1456 Level Il i ah is 1 WIM) ove | s&s || ai ‘OBS FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 Woolworths Limited
Slide 23: Refresh supply chain progress
'HREFRESH? A * Significant progress has been made to date as we move toward the completion phase. * The technology required to support our new supply chain is critical to its success and was complex in its design. We have now passed the high risk stage of our IT rollout with far better results than
Slide 24: Regional distribution centre rollout
) in in TO TTw_ innit i li lit i ued + Rollout of our new DC network well underway with 4 new RDCs being operational this financial year: - Perth was completed ahead of schedule and is now fully operational. This site forms the “blueprint” for our future RDC transitions. Adelaide RDC is now fully op
Slide 25: FY06 outlook and guidance
( + For FY06 we expect that sales growth including Foodland and Taverner to be in the range of 15% to 20%. Earnings + For FY06, we anticipate that NPAT (excluding Foodland and Taverner) will increase in the lower double digits (10% to 15%). Furthermore we expect that Foodland and Taverner will add b
Slide 26: Capital Structure
Capital Structure citigroup) 46 UBS 25 Woolworths Limited
Slide 27: Capital management and debt transactions
i : i hh mi mh SAMA LO UA * Woolworths currently sets its capital structure with the objective of maintaining credit ratings of A- from Standard and Poor's and A3 from Moody’s Investor Services. * Three significant debt transactions were undertaken since June 2005: - Medium Term Notes of A$300 milli
Slide 28: Credit strength and financial ratios
ll Kr . | jh sin aidan I) iain al lhl j History of improved working capital driven by reduced days stock on hand Strong cash flow generation Maintenance of strong financial ratios, in particular Fixed Charge Cover: 2001 2002 2003 2004 2005 HY2006 2.40x 2.35x 2.50x 2.52x 2.47x 2.64x Commitment to mai
Slide 29: Healthy balance sheet reflects strong credit profile
iY Woolworths’ healthy balance sheet reflects the firm’s strong credit profile and commitment to financial discipline AIFRS Ag$m as at 1 January 2006 2006H1 Cash (706.5) Tota! borrowings 4,128.3 Shareholders’ Equit 4,053.6 Total Capitalisation TATSA As at 30 June 2002 2003 2004 2005 Net Debt/Net Deb
Slide 30: Woolworths Notes Offer
Woolworths Notes Offer citigroup) 46 UBS 29 Woolworths Limited
Slide 31: Woolworths Notes key features
in IA Security Woolworths Notes are perpetual, unsecured, subordinated, curnulative notes. Maturity Woolworths Notes have no fixed maturity or repayrnent date. Distribution Payments Distributions are unfranked and quarierly, deferrable at the discretion of Woolworths’ Directors for a period of up to
Slide 32: Offer structure
Eligible WINs Holder Offer for existing WINs Holders (closes Fri 5 May) Broker Firm offer to syndicate (closes 9am Tue 9 May) Institutional Investor Offer (closes 3pm Tue 9 May) citigroup) 46 UBS 34 Joint Bookrunners (Citigroup, UBS) Joint Lead Managers (Citigroup, UBS, Merrill Lynch) Co-Managers (C
Slide 33: Bookbuild margin relative to comparable hybrids
i fh 0 « Bookbuild range will be announced on Monday 8" May * Margin will be a minimum of 110 bps 180 ml ?|N i 160 | i 4 Fairfax SPS (BBB/BB+) 140 | Orica SPS (BBB+/BBB-) @ WOWHB¥ (A-/ BBB) 120 | Margin (bps) 100 : (i FUELS (BBB+/EBB.) i LEIGA (BEBH/BBB-} * WW PERLSI (AA-/A-) fi MAZPA (BBB-/BBE-) ig
Slide 34: Key dates
| i Vv A Lodgement of Prospectus with ASIC 3 April 2006 Record date for WINs Holders to participate in the Eligible WINs Holder Offer 414 April 2006 Opening date of the Eligible WINs Holder Offer 13 April 2006 Closing date of the Eligible WINs Holder Offer 5 May 2006 Bookbuild 8-9 May 2006 Announcem
Slide 35: Contacts
| ONT + Woolworths Limited — Tom Pockett CFO (02) 8885 1028 — Asrar Rahman Group Treasurer (02) 8885 1107 — Peter Horton Company Secretary & General Counsel (02) 8885 3680 + Citigroup Global Markets Australia Pty Limited — Fraser Todd Citigroup (02) 8225 4692 — Rhonda Rowland — Citigroup (02) 8225 6
Slide 36: | | oii UROL
/ “a | | oii UROL citigroup) 46 UBS 35 Woolworths Limited
Slide 37: Appendices
Appendices citigroup) 46 UBS 36 Woolworths Limited
Slide 38: Maturity Profile of Existing Debt Facilities
| 2 RITY | vont Maturity Profile of Existing Debt Facilities Total A$5.586 Bn 4,00 BOD Po ---- nnn nnn nnn nn nn nnn nn nn nn nnn nnn nn nn nn nn nn nn nn nn nn nnn nnn nn nn nn nnn nnn nnn nen n nn cerns ne eee 200 700 600 ASM 500 400 300 200 100 2007 2008 2008 2040 2041 2012 2013 2014 2018 2016 20
Slide 39: Woolworths Notes terms summary
IA iil AAA ik Issuer Woolworths Limited (Woolworths}. Security Remarketable, floating rate, unsecured, subordinated notes (Woolworths Notes). Term Perpetual, non-redeemable prior to the First Remarketing Date except in limited circumstances (refer to Issuer and Holder Redemption sections below). Fac
Slide 40: Distribution payment and deferral terms
ot ua UR EUR Distribution Payment Dates | 15 March, 15 June, 15 September, 15 December and the date of redemption of a particular Woolworths Note. Deferral of Distributions Woolworths has the right to defer any Distribution payment (Unpaid Distribution Amount), at its absolute discretion, for a peri
Slide 41: Remarketing process
ot ua UR EUR Remarketing Process Prior to a Remarketing Date, Woolworths may conduct a Remarketing Process to determine a new Margin, and may propose that certain other terms be adjusted Holders may respond to a Remarketing Process as follows: + Step-Up Response: cease holding the Woolworths Notes i
Slide 42: Successful remarketing and redemption terms
A “Dd Successful Remarketing | A Remarketing Process where a Remarketing Margin is set following provision by Holders of: Process + Hold Responses (for the avoidance of doubt, this does not include Holders who are deemed to have given a Hold Response by not responding); or + Bid Responses equal fo,
Slide 43: Replacement capital covenant
IA iil AT i ik Replacement Capital Woolworths and a trustee will enter a Trust Deed, expressed also to be a deed poll, in which Covenant Woolworths covenants in favour of the holders of unsecured, rated debt of Woolworths (excluding the Woolworths Notes) that it will not redeem the Woolworths Notes
Slide 44: Resale, further debt and participation terms
i LAN lth i E Resale Woolworths may procure the sale of Woolworths Notes held by Exiting Holders following a Successful Remarketing Process. In relation to each Woolworths Note being Resold, Woolworths must procure the payment to the selling Holder of net proceeds of sale at least equal to the Redem
Slide 45: Supermarkets division half year results
| TM ld Australian and NZ supermarket division sales for the half year increased 12% and 4.3% respectively over the previous comparable period Overall food inflation in Australia and NZ remained below 2.0% in the half During the half year, 9 new Supermarkets along with 20 ex-FAL Australian stores we
Slide 46: Liquor, petrol and BIG W half year results
D1} | I) lk : hsb ah Mi INS HALF YEAR Liquor + Comparable store sales in all our businesses were strong + Dan Murphy’s continued to expand with 8 stores opened in the half, bringing total number of stores to 43 + Group liquor sales for the half year {including ALH/MGW/BMG} were $1.6 billion + Antici
Slide 47: EBIT by division
| | ml TS HY05 HY05 Change EBIT (Smillion) A-GAAP AJFRS A-IFRS Before After Goodwill Goodwill Food and Liquor 564.07 551.07) 553.1 423.1% Petrol 22.2 22.2 22.2 +0.9% Supermarkets Division §86.2 §73.2 §75.3 +22.3% BIG W 100.6 100.6 100.6 +3.9% Consumer Electronics 31.5 29.4 31.2 +18.3% General Mercha