Woolworths Group Ltd · ASX:WOW
Woolworths — H1 F22 Earnings Presentation
50 slides from Woolworths's earnings presentation, Feb 23, 2022
Slide 1: Half-Year Results Presentation ASX announcement
23 February 2022 ASX Market Announcements Office Australian Securities Exchange 20 Bridge Street Sydney NSW 2000 Half-Year Results Presentation Attached for release to the market is the Half-Year Results Presentation for the period ended 2 January 2022. Authorised by: Kate Eastoe, Group Company Secr
Slide 2: Woolworths Group Half-Year Results 2022
Woolworths Group Half-Year Results 2022 1 Woolworths Group Group Half-Year Results 2022
Slide 3: Woolworths Group Purpose
Woolworths Group Half-Year Results 2022 2 Woolworths Group Purpose What we mean by ‘We’ What we mean by ‘Better’ It all starts with ‘We’ – all of Consistently innovating to us working together lead and exceed expectations We create What we mean by ‘Together’ Valuing that we are better better experie
Slide 4: Contents
Contents H22 Group Summary and Progress 4 Brad Banducci Group Financial Results and Capital Management 15 Stephen Harrison Business Performance Update 29 Outlook 44 Brad Banducci
Slide 5: First Half of F22 summary
Woolworths Group Half-Year Results 2022 4 First Half of F22 summary Challenging half with material disruption due to COVID; unwavering focus on customers, team and community Solid sales growth for the half with strong Christmas trade; EBIT impacted by COVID costs and BIG W store closures Good progre
Slide 6: Focus on keeping customers and team safe in rapidly evolving environment
Woolworths Group Half-Year Results 2022 5 Focus on keeping customers and team safe in rapidly evolving environment July Jan August September October Nov/Dec 2021 2022 Introduction of Split shifts and smart Increase in team Rapid antigen testing Trading restrictions Govt. double dose trading restrict
Slide 7: COVID impacting end-to-end supply chain
Woolworths Group Half-Year Results 2022 6 COVID impacting end-to-end supply chain Manufacturing and suppliers Challenges in sourcing ingredients, packaging and pallets Disruptions and delays to Distribution Outbound Stores and inbound sea freight; shipping centres eCommerce container shortage and pr
Slide 8: Stock flow across our network has been impacted by supply challenges
Woolworths Group Half-Year Results 2022 7 Stock flow across our network has been impacted by supply challenges 100 90 80 70 % 60 50 40 July Aug Sep Oct Nov Dec Jan Feb March April May June DC Outbound Service Level1 F22 F21 F20 1 Percentage of DC cartons issued to stores in comparison to ordered car
Slide 9: Strong Christmas trading despite COVID disruption
Woolworths Group Half-Year Results 2022 8 Strong Christmas trading despite COVID disruption 149m Strong Christmas trade in Australian Food Maintained market share and strong overall +3.6% customer advocacy cartons moved in December 21 +2m on Dec 20 Dec total sales vs. LY Achieved Group Severity Rate
Slide 10: Continued progress on strategic agenda
Woolworths Group Half-Year Results 2022 9 Continued progress on strategic agenda 1 Better together for a better tomorrow 2 Connect our customer experience for good food and more everyday • First Nations Advisory Board established • 653 Woolworths Supermarkets now offering Direct to boot, material in
Slide 11: Continued progress on strategic agenda
Woolworths Group Half-Year Results 2022 10 Continued progress on strategic agenda 3 Reimagine our Food retail proposition 4 Activate Everyday for our customers • Completed 28 Renewals in Australia and New Zealand despite COVID • Continued increase in Everyday Rewards members and scan rates with 13.3
Slide 12: Continued progress on strategic agenda
Woolworths Group Half-Year Results 2022 11 Continued progress on strategic agenda 5 Grow Food into B2B channels 6 Evolve our stores, supply chain and business platforms for the future • New segment, Australian B2B, to reflect changing shape of the Group • Record volumes at MSRDC in H1 • Solid perfor
Slide 13: Progress against Sustainability goals
Woolworths Group Half-Year Results 2022 12 Progress against Sustainability goals People Planet Product Make a positive change to the Ensure we leave the environment Have a positive impact on people future of our people, our partners better off for future generations and the planet through the and ou
Slide 14: Woolworths Group food and everyday needs ecosystem
Woolworths Group Half-Year Results 2022 13 Woolworths Group food and everyday needs ecosystem 2 1 B2B Food B2C Food Our cornerstone retail food B2C Food B2B Food Expanding food into new customer businesses, famous for good Stores eCom Products B2B Intl. Wholesale segments, channels food, prices and
Slide 15: Contents
Contents H22 Group Summary and Progress 4 Brad Banducci Group Financial Results and Capital Management 15 Stephen Harrison Group financial results COVID costs Key balance sheet metrics Capital management framework Cash flow summary Capital expenditure Capital management Primary Connect transformatio
Slide 16: Financial Results and Capital Management
Woolworths Group Half-Year Results 2022 15 Financial Results and Capital Management
Slide 17: H22 results summary
Woolworths Group Half-Year Results 2022 16 H22 results summary $ MILLION H22 H21 CHANGE (27 WEEKS) (27 WEEKS) Continuing operations before significant items Sales 31,894 29,535 8.0% EBIT 1,382 1,554 (11.0)% NPAT attributable to equity holders of the parent entity 795 850 (6.5)% Basic EPS (cents) 64.
Slide 18: Two-year sales growth strong across the Group
Woolworths Group Half-Year Results 2022 17 Two-year sales growth strong across the Group Australian Food comparable sales New Zealand Food comparable sales TY LY TY LY 13.4% 13.9% 14% 10.5% 11.8% 14% 9.1% 9.0% 7.3% 8% 6.0% Growth 8% Growth 2.7% 2% 5.8% 0.8% 1.9% 2% -4% -0.5% -4.2% -4% -2.5% -10% -7.
Slide 19: Group EBIT decline reflecting challenging operating environment
Woolworths Group Half-Year Results 2022 18 Group EBIT decline reflecting challenging operating environment H22 H21 $ MILLION CHANGE 2-YR CAGR (27 WEEKS) (27 WEEKS) Before significant items Australian Food 1,217 1,317 (7.6)% 2.6% Australian B2B 18 9 107.0% New Zealand Food (AUD) 191 181 5.9% 4.4% New
Slide 20: Group COVID costs 0.7% of sales through H1
Woolworths Group Half-Year Results 2022 19 Group COVID costs 0.7% of sales through H1; indirect COVID costs materially higher than prior year H1’22 Q2’22 Q1’22 H2’21 Q4’21 Q3’21 H1’21 $ MILLION (27 WEEKS) (13 WEEKS) (14 WEEKS) (25 WEEKS) (12 WEEKS) (13 WEEKS) (27 WEEKS) Cleaning and PPE 40 18 22 25
Slide 21: Lower average inventory days due to strong sales; ROFE impacted by lower EBIT
Woolworths Group Half-Year Results 2022 20 Lower average inventory days due to strong sales; ROFE impacted by lower EBIT Average inventory days1 Normalised ROFE2 Days Percentage (%) Continuing operations Continuing operations Group Group 40.3 40.5 17.0 16.8 38.9 38.3 37.1 37.3 15.1 35.8 14.4 14.1 33
Slide 22: Woolworths Group capital management framework
Woolworths Group Half-Year Results 2022 21 Woolworths Group capital management framework One of Australia’s Leading market Growth opportunities Defensive Strong cash flow from leading and most position in Food & in eCom and characteristics AUS and NZ Investment proposition trusted brands Everyday Ne
Slide 23: Cash flow funding investment and shareholder returns
Woolworths Group Half-Year Results 2022 22 Cash flow funding investment and shareholder returns $ MILLION H22 H21 CHANGE (27 WEEKS) (27 WEEKS) EBITDA – continuing operations EBITDA – continuing operations 2,454 2,608 (6.0)% declined by 6.0% impacted by COVID challenges. EBITDA – discontinued EBITDA
Slide 24: Continuing operations working capital benefit of $122m
Woolworths Group Half-Year Results 2022 23 Continuing operations working capital benefit of $122m $ MILLION H22 H21 CHANGE (27 WEEKS) (27 WEEKS) Higher inventory due to Working capital and non-cash movements elevated trading and to mitigate Working capital and non-cash – continuing operations supply
Slide 25: Higher operating capex investment in supply chain and eCom
Woolworths Group Half-Year Results 2022 24 Higher operating capex investment in supply chain and eCom Group capex (continuing operations) $ MILLION H22 H21 Sustaining capex 587 515 Growth capex 235 215 Operating capex 822 730 F22 operating capex Property development 313 155 expected to be ~$2b Gross
Slide 26: Dividend payout ratio in line with H21
Woolworths Group Half-Year Results 2022 25 Dividend payout ratio in line with H21 39 cps interim dividend $3.2b to be returned to shareholders • Interim dividend of 39 cps, marginally below H21 of 40 cps in F22 (excluding Endeavour Group), Dividends (cents per share) Shareholder cash distributions p
Slide 27: Strong funding profile with substantial available liquidity
Woolworths Group Half-Year Results 2022 26 Strong funding profile with substantial available liquidity Debt maturity profile ($m)1 1,400 1,200 A solid investment-grade 1,000 credit rating 800 600 S&P: BBB (stable outlook)3 Moody’s: Baa2 (stable outlook)3 400 There is currently significant 200 headro
Slide 28: Good progress on Primary Connect transformation
Woolworths Group Half-Year Results 2022 27 Good progress on Primary Connect transformation despite challenges during the half Now operational Heathwood Chilled & Frozen DC, Qld Melbourne South Regional DC Palmerston North DC, NZ New manual chiller and freezer facility Averaging record 2.2m cartons p
Slide 29: Contents
Contents H22 Group Summary and Progress 4 Brad Banducci Group Financial Results and Capital Management 15 Stephen Harrison Business Performance Update 29 Outlook 44 Brad Banducci
Slide 30: Woolworths Group Half-Year Results 2022
Woolworths Group Half-Year Results 2022 29
Slide 31: Australian Food
Woolworths Group Half-Year Results 2022 30 Australian Food H22 H21 (27 WEEKS) (27 WEEKS) CHANGE H22 FINANCIAL METRICS Total sales ($m) 23,780 22,988 3.4% EBITDA ($m) 2,054 2,096 (2.0)% EBIT ($m) 1,217 1,317 (7.6)% Gross margin (%) 30.2 29.5 79 bps CODB (%) 25.1 23.7 140 bps EBIT to sales (%) 5.1 5.7
Slide 32: Progress against F22 priorities
Woolworths Group Half-Year Results 2022 31 Progress against F22 priorities Bring a little good to everyone, everyday Transform core propositions for changed customer needs Strong customer A better sustainable tomorrow Reimagined brand as Everyday and personalised value Tailored range Transforming E2
Slide 33: Format and Development highlights
Woolworths Group Half-Year Results 2022 32 Format and Development highlights Opened 9 (net) new Expanded Pick up stores and completed with 24 (net) new Direct 27 Renewals in to boot enabled stores, Woolworths with a total of 653 Direct to Supermarkets and boot stores Metro Food Stores, bringing tota
Slide 34: WooliesX H22 highlights
Woolworths Group Half-Year Results 2022 33 WooliesX H22 highlights Digital & Media eCom & Fulfilment Loyalty & FinTech Front door to Woolies Easy shopping when and where you want it Seamless experiences to enjoy a little more, every day Weekly visits Pick up penetration of across web and app 39.2% f
Slide 35: Australian B2B
Woolworths Group Half-Year Results 2022 34 Australian B2B
Slide 36: New operating segment - Australian B2B
Woolworths Group Half-Year Results 2022 35 New operating segment - Australian B2B B2B Food PFD Food Services Woolworths International Woolworths at Work Australian Grocery One of Australia’s leading International export business, A B2B procurement solution Wholesalers (AGW) food service suppliers ex
Slide 37: Australian B2B
Woolworths Group Half-Year Results 2022 36 Australian B2B H22 H21 (27 WEEKS) (27 WEEKS) CHANGE H22 FINANCIAL METRICS Sales ($m) B2B Food 1,426 299 376.6% B2B Supply Chain (PC3) 553 332 66.5% Total Australian B2B 1,979 631 213.4% EBITDA ($m) 69 29 145.2% EBIT ($m) 18 9 107.0% EBIT to sales (%) 0.9 1.
Slide 38: Woolworths Group Half-Year Results 2022
Woolworths Group Half-Year Results 2022 37
Slide 39: New Zealand Food
Woolworths Group Half-Year Results 2022 38 New Zealand Food NZD H22 H21 (27 WEEKS) (27 WEEKS) CHANGE H22 FINANCIAL METRICS Total sales ($m) 4,027 3,717 8.3% EBITDA ($m) 353 333 6.4% EBIT ($m) 200 194 3.3% Gross margin (%) 25.2 25.0 16 bps CODB (%) 20.2 19.8 41 bps EBIT to sales (%) 5.0 5.2 (24) bps
Slide 40: New Zealand Food H22 highlights
Woolworths Group Half-Year Results 2022 39 New Zealand Food H22 highlights Better everyday for a Digital, eCom and Foundations for the future better tomorrow innovation Ongoing COVID response H22 eCom sales growth of 22.6% New Palmerston North DC opened Team-led Mental Health Appeal Record Q2 eCom p
Slide 41: Woolworths Group Half-Year Results 2022
Woolworths Group Half-Year Results 2022 40
Slide 42: BIG W
Woolworths Group Half-Year Results 2022 41 BIG W H22 H21 (27 WEEKS) (27 WEEKS) CHANGE H22 FINANCIAL METRICS Total sales ($m) 2,348 2,581 (9.0)% EBITDA ($m) 122 224 (45.0)% EBIT ($m) 25 133 (81.2)% Gross margin (%) 32.9 33.7 (83) bps CODB (%) 31.8 28.6 326 bps EBIT to sales (%) 1.1 5.1 (408) bps Sale
Slide 43: BIG W highlights
Woolworths Group Half-Year Results 2022 42 BIG W highlights Making progress on our four key strategic priorities in H22 Good progress in building Turbocharging digital Continuing to simplify our Continuing to demonstrate real core foundations to unlock experience, upholding a safe offer to align wit
Slide 44: Contents
Contents H22 Group Summary and Progress 4 Brad Banducci Group Financial Results and Capital Management 15 Stephen Harrison Business Performance Update 29 Outlook 44 Brad Banducci
Slide 45: H2 F22 Outlook
Woolworths Group Half-Year Results 2022 44 H2 F22 Outlook Ongoing challenges from Omicron in H2 but strong Australian Food sales of ~5% in first 7 weeks (2-yr CAGR: ~6%) Inflation expected to continue to trend upwards; shelf prices up 2-3% on prior year in H2 to date BIG W sales down ~4% (2-yr CAGR:
Slide 46: Woolworths Group Half-Year Results 2022
Woolworths Group Half-Year Results 2022 45
Slide 47: Glossary
Woolworths Group Half-Year Results 2022 46 Glossary AGW Australian Grocery Wholesalers Cash realisation ratio Operating cash flow as a percentage of Group net profit after tax before depreciation and amortisation Comparable sales Measure of sales which excludes stores that have been opened or closed
Slide 48: Glossary continued
Woolworths Group Half-Year Results 2022 47 Glossary continued n.m. Not meaningful PC3 Primary Connect third-party logistics Pick up A service which enables collection of online shopping orders in-store or at select locations PPE Personal protective equipment RDC Regional distribution centre Renewals
Slide 49: Glossary continued
Woolworths Group Half-Year Results 2022 48 Glossary continued VOC NPS VOC NPS is based on feedback from Woolworths Rewards members. VOC NPS is the number of promoters (score of nine or 10) less the number of detractors (score of six or below) Voice of Supplier (VOS) A survey of a broad spectrum of s
Slide 50: Disclaimer
Woolworths Group Half-Year Results 2022 49 Disclaimer This presentation contains summary information about Woolworths Group Limited (Woolworths Group) and its activities current as at the date of this presentation. It is sourced from and should be read in conjunction with Woolworths’ other periodic