Woolworths Holdings Limited · JSE:WHL
Woolworths — FY2018 Earnings Presentation
63 slides from Woolworths's earnings presentation, August 2018
Slide 1: Preliminary Audited Group Results for the 52 Weeks Ended 24 June 2018
WOOLWORTHS HOLDINGS LIMITED PRELIMINARY AUDITED GROUP RESULTS FOR THE 52 WEEKS ENDED 24 JUNE 2018 AND CASH DIVIDEND DECLARATION
Slide 2: 2018 Annual Results
WOOLWORT HS HOL DI NG S L I M I T E D 2018 Annual Results 1 WHL 1 / 2018
Slide 3: Presentation Outline
WOOLWORTHS HOLDINGS LIMITED FINAL RESULTS 2018 ANALYST PRESENTATION PRESENTATION OUTLINE 01 / Review of the year 02 / Financial review 03 / Strategy update 04 / Outlook 2
Slide 4: Review of the Year
REVIEW OF THE YEAR Ian Moir WHL 3 / 2018
Slide 5: Group Performance
WOOLWORTHS HOLDINGS LIMITED FINAL RESULTS 2018 ANALYST PRESENTATION GROUP PERFORMANCE • Cyclical challenges and structural changes continued • Extremely tough trading conditions in both markets • Poor product execution in Clothing in Woolworths • Continued market-leading sales growth in Woolworths F
Slide 6: South African Macro Environment
SOUTH AFRICAN MACRO ENVIRONMENT Real annual GDP growth % 6% 5% 4% • A turbulent year with political uncertainty 3% 2% 1% and low economic growth impacting 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 consumer confidence in H1 • Improved economic outlook and political -1%
Slide 7: Woolworths Fashion, Beauty and Home performance
WOOLWORTHS HOLDINGS LIMITED FINAL RESULTS 2018 ANALYST PRESENTATION • Sales 1.5% lower, with comparable sales 4.1% lower, price movement of 0.8%, and 2.5% net new space • Poor brand and product execution in clothing, particularly in womenswear • Improved womenswear ranges delivered in H2, but overal
Slide 8: Woolworths Food performance
• Consistent growth ahead of market for the past 8 years • Sales up 8.4%, with comparable sales up 4.8% and 3.5% net new space • Price movement of 3.2%, 2.1% in H2 • Positive volume growth of 1.6% in comparable stores, 2.2% in H2 • Strong online sales growth, up 17.6% on LY • Gross profit margin dec
Slide 9: Market Share
WOOLWORTHS HOLDINGS LIMITED FINAL RESULTS 2018 ANALYST PRESENTATION MARKET SHARE Woolworths vs market growth (3mma) 14% 12 12% 10 10% 8 8% 6 6% 4 4% 2% 2 0% 0 Sept 17 May 18 Nov 17 Mar 18 Aug 17 Dec 17 Oct 17 Apr 18 Feb 18 Jan 18 Jun 18 Jun 17 Jul 17 Woolworths weighted price movement CPI (Food & No
Slide 10: Australian Macro Environment
AUSTRALIAN MACRO ENVIRONMENT Real annual GDP growth % % 5 4.5 4 3.5 3 • Despite low interest rates and strong job growth, consumer spending remained 2.5 2 1.5 1 0.5 depressed by high levels of indebtedness, 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 a cooling housing mar
Slide 11: David Jones performance
WOOLWORTHS HOLDINGS LIMITED FINAL RESULTS 2018 ANALYST PRESENTATION • A significantly disruptive and difficult year, with major disruption from transformational initiatives and tough economic conditions • Total sales 0.9% lower, with comparable sales 0.4% lower • Sales improved progressively from mi
Slide 12: Country Road Group performance
• Sales up 1.7%, comparable sales 1.8% lower (excluding Politix acquired in November 2016) • Strong performance from Witchery, Mimco and Politix offset by poor performance in Country Road • Gross profit margin up 2.5% to 62.8% due to strong focus on full-priced sales and good inventory management •
Slide 13: Financial Review
WOOLWORTHS HOLDINGS LIMITED FINAL RESULTS 2018 ANALYST PRESENTATION FINANCIAL REVIEW Reeza Isaacs
Slide 14: Financial Overview
FINANCIAL OVERVIEW Adjusted profit HEPS – before tax HEPS Adjusted diluted Turnover and -13.8% to R4.8 billion -17.7% to 346.3 cps -12.8% to 364.1 cps concession sales +1.6% to R75.2 billion EPS at Total dividend ROE* -369.5 -23.6% 18.0% cps to 239.0 cps from 20.8% * DJ asset impairment added back W
Slide 15: Group Income Statement
WOOLWORTHS HOLDINGS LIMITED FINAL RESULTS 2018 ANALYST PRESENTATION GROUP INCOME STATEMENT Good performance from Food and WFS; further decline in FBH Jun 2018 Jun 2017 % Rm Rm change Improved H2 sales growth; costs and Woolworths Fashion, Beauty disruption of various transformational and Home 1 707
Slide 16: Fashion, Beauty and Home Income Statement
FASHION, BEAUTY AND HOME INCOME STATEMENT Jun 2018 Jun 2017 % Rm Rm change Comp store sales down 4.1%; price Turnover 13 687 13 894 (1.5) movement 0.8%; womenswear and Edition still in recovery Cost of sales 7 297 7 244 0.7 Gross profit 6 390 6 650 (3.9) 120 bps lower; higher levels of markdowns and
Slide 17: Woolworths Food Income Statement
WOOLWORTHS HOLDINGS LIMITED FINAL RESULTS 2018 ANALYST PRESENTATION INCOME STATEMENT Jun 2018 Jun 2017 % Rm Rm change Turnover and concession sales 30 019 27 688 8.4 Strong volume growth; comp store sales Concession sales (687) (613) 12.1 up 4.8%, with price movement of 3.2% Turnover – own buy 29 33
Slide 18: Woolworths Financial Services Income Statement
Jun 2018 Jun 2017 % Rm Rm change Book growth driven by Credit Card Average financial services assets 10 659 10 194 4.6 portfolio growth % % Income Statement to book to book Interest income 2 166 20.3 2 123 20.8 2.0 Interest paid 640 6.0 633 6.2 1.1 Lower net yield due to 2 repo rate adjustments Net
Slide 19: Book Performance
WOOLWORTHS HOLDINGS LIMITED FINAL RESULTS 2018 ANALYST PRESENTATION BOOK PERFORMANCE 12 12% 10 716 9 743 9 990 10 320 10 10% 8 821 8 8% 6.3% 6 5.7% 6% 5.4% 5.2% 4.8% 4 4% 2 1 930 1 914 1 834 1 779 1 745 2% 0 0% Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 Gross book value (Rm) Total active accounts (000’s) Im
Slide 20: David Jones Income Statement
INCOME STATEMENT Jun 2018 Jun 2017 % Full year comp sales down 0.4%; H2 sales A$m A$m Change up 2.2% and 2.7% in comp stores; online Turnover and concession sales 2 212 2 214 (0.1) up 21.4% Concession sales (763) (750) 1.7 Turnover – own buy 1 449 1 464 (1.0) Cost of sales 829 832 (0.4) Gross profit
Slide 21: Country Road Group Income Statement
WOOLWORTHS HOLDINGS LIMITED FINAL RESULTS 2018 ANALYST PRESENTATION INCOME STATEMENT Jun 2018 Jun 2017 % A$m A$m change Turnover 1 074 1 056 1.7 Comp sales down 1.8% impacted by CR womenswear; online up 20.8% Cost of sales 400 419 (4.5) Up 250 bps from higher full-priced sales Gross profit 674 637 5
Slide 22: Net Finance and Other Costs
NET FINANCE AND OTHER COSTS Jun 2018 Jun 2017 Capital Rate* Rm Rm Reduction in gearing and decrease in SA ZAR long-term debt R9.4bn 8.88% 870 935 base rates and margins AUD long-term debt A$431m 4.48% 183 197 Average debt marginally higher; lower Net finance costs 1 053 1 132 average base rates and
Slide 23: Group Balance Sheet
WOOLWORTHS HOLDINGS LIMITED FINAL RESULTS 2018 ANALYST PRESENTATION GROUP BALANCE SHEET Constant Jun 2018 Jun 2017 % currency Rm Rm change % change Assets Property, plant and equipment 13 959 13 846 0.8 (0.7) Intangible assets 13 410 19 595 (31.6) (32.7) Decrease due to impairment of DJ assets Inves
Slide 24: Net Gearing
NET GEARING Jun Jun 2018 2017 WHL Net debt (Rm) (11 837) (11 538) Liquidity remains strong with significant Interest-bearing term debt (13 715) (13 325) unutilised committed facilities Net cash and cash equivalents 1 878 1 787 Unutilised committed facilities – Group 10 216 11 033 Net debt to EBITDA
Slide 25: Capital Expenditure
WOOLWORTHS HOLDINGS LIMITED FINAL RESULTS 2018 ANALYST PRESENTATION CAPITAL EXPENDITURE Spend Forecast R2 626m (Jun 2017: R2 591m) FY19: R3 358m Significant strategic Rm Rm capex in FY18 and FY19. Post FY20, 3 000 3 500 R3 358m normalised annual Group capex to be in 3 000 the region of R2.7bn 2 500
Slide 26: Cash Generation for the 52 Weeks Ended 24 June 2018
CASH GENERATION FOR THE 52 WEEKS ENDED 24 JUNE 2018 Rm 7 371 325 7 500 (305) 6 500 (1 181) 5 500 (1 037) 4 500 3 588 3 500 (1 585) 2 500 (1 004) 1 500 500 (500) (2 782) (198) Cash Working JV Net finance Taxation Mainte- Free cash Expansion Dividends Increase inflow capital dividend costs and nance f
Slide 27: Free Cash Flow and Dividends
WOOLWORTHS HOLDINGS LIMITED FINAL RESULTS 2018 ANALYST PRESENTATION FREE CASH FLOW AND DIVIDENDS Jun 2016 Jun 2017 Jun 2018 Rm Rm Rm Free cash flow pre working capital and capital expenditure 6 276 5 356 5 288 Working capital movements (311) (615) (305) Cash generated by operations 5 965 4 741 4 983
Slide 28: Earnings and Distribution
EARNINGS AND DISTRIBUTION cents times 500 1.45 1.45 1.45 1.45 1.5 1.34 455.6 420.9 400 1.2 369.7 348.6 346.3 313.0 313.0 300 0.9 240.0 247.0 239.0 200 0.6 100 0.3 – – Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 HEPS* DPS** Distribution cover * HEPS based on weighted average number of shares ** DPS based on c
Slide 29: Strategy Update
WOOLWORTHS HOLDINGS LIMITED FINAL RESULTS 2018 ANALYST PRESENTATION STRATEGY UPDATE Ian Moir
Slide 30: Fix the Fashion offer
• Fix the Fashion offer • Balance clearly-segmented sub-brands with the Woolworths brand to ensure each customer segment has the right brand and the right offer • Better management oversight and improved disciplines in the design review process and critical path management • Ensure every brand is un
Slide 31: Woolworths Food strategy
WOOLWORTHS HOLDINGS LIMITED FINAL RESULTS 2018 ANALYST PRESENTATION • Absolute focus on delivering ‘the difference’ through best-in-class, innovative product with uncompromising quality and provenance • Strengthen the value perception to make Woolworths more affordable, with ongoing price investment
Slide 32: David Jones strategy: transformation completed, cost control
• Major transformational initiatives now completed including introduction of new systems, new online platform, repositioned Food business and re-located head office • Optimise new merchandise planning and finance systems, allowing for better planning, assortment and buying decisions • Enhance the di
Slide 33: David Jones: Elizabeth Street refurbishment and private label
WOOLWORTHS HOLDINGS LIMITED FINAL RESULTS 2018 ANALYST PRESENTATION • Refurbish Elizabeth Street store by investing A$200m and a further A$200m from concession partners to create a world-class department store – due for completion in FY2019 • Luxury ‘Shoe Heaven’ floor and immersive children’s world
Slide 34: Department Store Exclusivity
– DEPARTMENT STORE EXCLUSIVITY • The key to future department store success is through brand exclusivity and private label • Exclusivity provides brand differentiation and builds brand equity, by creating a compelling assortment by curating a desirable and exclusive offer • We already have key exclu
Slide 35: Country Road Group strategy
WOOLWORTHS HOLDINGS LIMITED FINAL RESULTS 2018 ANALYST PRESENTATION • Continue to implement customer-led strategies and clear visions for each brand, informed by customer segmentation • Refresh Country Road brand vision and product direction, particularly in womenswear • Continue to drive full-price
Slide 36: Outlook
04 OUTLOOK Ian Moir WHL 35 / 2018
Slide 37: Outlook
WOOLWORTHS HOLDINGS LIMITED FINAL RESULTS 2018 ANALYST PRESENTATION OUTLOOK South Africa • Despite lower interest rates and muted inflation, consumer spending expected to remain constrained • Price movement in H1 expected to be 3% for Food and 5% for Fashion, Beauty and Home Australia • Growth and c
Slide 38: Trading for the First Seven Weeks
TRADING FOR THE FIRST SEVEN WEEKS FY2019 First 7 weeks FY2018 sales H2 sales growth growth -1.7% -2.9% +7.6% +7.5% +3.7% +2.2% +2.1% -1.7% WHL 37 / 2018
Slide 39: Medium-Term Targets
WOOLWORTHS HOLDINGS LIMITED FINAL RESULTS 2018 ANALYST PRESENTATION MEDIUM-TERM TARGETS FY2021 OPERATING PROFIT MARGIN 14% – 16% 7% * 6% – 8% 12% RETURN ON EQUITY 27.5% * Department store operating profit as a percentage of turnover and concession sales
Slide 40: Additional Info
ADDITIONAL INFO
Slide 41: Trading Space
WOOLWORTHS HOLDINGS LIMITED FINAL RESULTS 2018 ANALYST PRESENTATION TRADING SPACE Projected Projected Projected Jun 2018 Jun 2017 % Jun 2019 % Jun 2020 % Jun 2021 % 000m2 000m2 change 000m2 change 000m2 change 000m2 change Woolworths Fashion, Beauty and Home 479 468 2.5 486 1.5 488 0.4 494 1.2 South
Slide 42: Projected Trading Space Additions/Reductions
PROJECTED TRADING SPACE ADDITIONS/REDUCTIONS Woolworths Fashion, Country Beauty Woolworths David Road 000m 2 and Home Food Jones Group Jun 2018 479 249 474 125 Additions 10 9 14 2 Reductions (3) (1) (2) (7) Jun 2019 486 257 486 120 Additions 5 9 13 2 Reductions (3) – (11) (3) Jun 2020 488 266 488 11
Slide 43: Store Locations
WOOLWORTHS HOLDINGS LIMITED FINAL RESULTS 2018 ANALYST PRESENTATION STORE LOCATIONS Projected Projected Projected Jun 2018 Jun 2017 Growth Jun 2019 Growth Jun 2020 Growth Jun 2021 Growth Woolworths Fashion, Beauty and Home 282 282 – 286 4 286 – 291 5 South Africa 218 217 1 218 – 219 1 220 1 Rest of
Slide 44: Contribution to Sales
CONTRIBUTION TO SALES % of sales spent on Woolworths cards Jun 2018 Jun 2017 Fashion, Beauty and Home 21.4% 21.2% Food 9.1% 9.7% Aggregate Woolworths card contribution 13.1% 13.8% Credit card 2.2% 1.9% Aggregate Woolworths card and credit card contribution 15.1% 15.6% WHL 43 / 2018
Slide 45: David Jones Income Statement (in Rands)
WOOLWORTHS HOLDINGS LIMITED FINAL RESULTS 2018 ANALYST PRESENTATION INCOME STATEMENT (IN RANDS) Jun 2018 Jun 2017 % Rm Rm change Turnover and concession sales 22 074 22 725 (2.9) Concession sales (7 619) (7 695) (1.0) Turnover – own buy 14 455 15 030 (3.8) Cost of sales 8 249 8 524 (3.2) Gross profi
Slide 46: David Jones Balance Sheet
BALANCE SHEET Jun 2018 Jun 2017 % A$m A$m change Assets Property, plant and equipment 838 849 (1.3) Goodwill and brands 568 1 246 (54.4) Intangible assets 93 66 40.9 Inventories 275 224 22.8 Trade and other receivables, tax and deferred tax 75 185 (59.5) Cash and cash equivalents 37 18 >100 Total as
Slide 47: Country Road Group Income Statement (in Rands)
WOOLWORTHS HOLDINGS LIMITED FINAL RESULTS 2018 ANALYST PRESENTATION INCOME STATEMENT (IN RANDS) Jun 2018 Jun 2017 % Rm Rm change Turnover 10 689 10 815 (1.2) Cost of sales 3 977 4 295 (7.4) Gross profit 6 712 6 520 2.9 Other revenue 50 43 16.3 Expenses 5 730 5 576 2.8 Store costs 4 102 3 973 3.2 Oth
Slide 48: Country Road Group Balance Sheet
BALANCE SHEET* Jun 2018 Jun 2017 % A$m A$m change Assets Property, plant and equipment 148 158 (6.3) Intangible assets 372 376 (1.1) Inventories 119 128 (7.0) Trade and other receivables, tax and deferred tax 84 71 18.3 Cash and cash equivalents 38 44 (13.6) Total assets 761 777 (2.1) Non-current an
Slide 49: Disclaimer
WOOLWORTHS HOLDINGS LIMITED FINAL RESULTS 2018 ANALYST PRESENTATION DISCLAIMER Shareholders are advised that the information in this presentation has not been reviewed and reported on by Woolworths Holdings’ external auditors and it does not constitute a profit forecast. Woolworths Holdings has acte
Slide 50: Preliminary Audited Group Results for the 52 Weeks Ended 24 June 2018
WOOLWORTHS HOLDINGS LIMITED PRELIMINARY AUDITED GROUP RESULTS FOR THE 52 WEEKS ENDED 24 JUNE 2018 AND CASH DIVIDEND DECLARATION WHL 49 / 2018
Slide 51: Commentary
COMMENTARY 2018 has been a difficult year. Significant costs and disruption After a difficult first half, sales increased by 2.2% and by 2.7% from transformation initiatives in David Jones and poor in comparable stores in the second half. Full year sales were performance in our fashion business in S
Slide 52: Changes to the Board of Directors and Dividend Declaration
We have now also reduced our cost base by A$25 million CHANGES TO THE BOARD OF DIRECTORS across Australia, largely through a restructure that took place As previously announced on the JSE Stock Exchange News in June. Service, the following changes to the Board of Directors Trading for the first seve
Slide 53: Group Statement of Comprehensive Income
GROUP STATEMENT OF COMPREHENSIVE INCOME Restated* 52 weeks 52 weeks to 24 Jun to 25 Jun 2018 2017 % Notes Rm Rm change Revenue 70 572 69 230 1.9 Turnover and concession sales 75 232 74 052 1.6 Concession sales (6 640) (6 862) (3.2) Turnover 68 592 67 190 2.1 Cost of sales 41 700 40 518 2.9 Gross pro
Slide 54: Group Statement of Financial Position
GROUP STATEMENT OF FINANCIAL POSITION At 24 Jun At 25 Jun 2018 2017 Notes Rm Rm ASSETS Non-current assets 28 650 34 706 Property, plant and equipment 3 13 959 13 846 Intangible assets 3 13 410 19 595 Investment in joint ventures 978 1 015 Fair value lease adjustment 59 65 Other loans 56 42 Derivativ
Slide 55: Group Statement of Cash Flows
GROUP STATEMENT OF CASH FLOWS 52 weeks 52 weeks to 24 Jun to 25 Jun 2018 2017 Notes Rm Rm Cash flow from operating activities Cash inflow from trading 7 371 8 177 Working capital movements (305) (615) Cash generated by operating activities 7 066 7 562 Investment income received 71 96 Finance costs p
Slide 56: Group Statement of Changes in Equity
GROUP STATEMENT OF CHANGES IN EQUITY Total Total Share- Non- 52 weeks Share- Non- 52 weeks holders of controlling to 24 Jun holders of controlling to 25 Jun the parent interests 2018 the parent interests 2017 Notes Rm Rm Rm Rm Rm Rm Shareholders’ interest at the beginning of the year 19 038 28 19 06
Slide 57: Segmental Analysis
SEGMENTAL ANALYSIS Restated 52 weeks 52 weeks to 24 Jun to 25 Jun 2018 2017 % Notes Rm Rm change REVENUE Turnover 68 592 67 190 2.1 Woolworths Fashion, Beauty and Home 13 687 13 894 (1.5) Woolworths Food 29 332 27 075 8.3 Woolworths Logistics 429 376 14.1 David Jones 14 455 15 030 (3.8) Country Road
Slide 58: Notes
NOTES 1. STATEMENT OF COMPLIANCE AND BASIS OF PREPARATION The preliminary Group Annual Financial Statements have been prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and interpretations adopted
Slide 59: Notes (continued)
NOTES (CONTINUED) 6. ACCOUNTING POLICIES The adoption of certain new standards, which became effective in the current year, has resulted in minor changes to accounting policies and disclosure, none of which have a material impact on the financial position or performance of the Group. STANDARDS ISSUE
Slide 60: Pro Forma Financial Information
9. PRO FORMA FINANCIAL INFORMATION Adjusted headline earnings and constant currency information presented in these preliminary Group Annual Financial Statements constitute pro forma financial information. 2018 2017 % Rm Rm change 9.1 Adjusted headline earnings Headline earnings 3 327 4 045 (17.8) Ad
Slide 61: Notes (continued)
NOTES (CONTINUED) 11. RELATED-PARTY TRANSACTIONS The Group entered into related-party transactions, the substance of which is disclosed in the Group’s 2018 Annual Financial Statements. Intragroup adjustments relate to the sale of concession goods between segments and supply chain distribution adjust
Slide 62: Directorate and Statutory Information
DIRECTORATE AND STATUTORY INFORMATION NON-EXECUTIVE DIRECTORS REGISTERED ADDRESS Simon Susman (Chairman), Patrick Allaway (Australian), Woolworths House, 93 Longmarket Street Zarina Bassa, Tom Boardman (Lead Independent Director), Cape Town, 8001 Hubert Brody, Andrew Higginson (British), PO Box 680,
Slide 63: Results Highlights Summary
Turnover and Adjusted diluted headline concession sales earnings per share +1.6% to R75.2 billion -12.8% to 364.1 cps Headline earnings per share Earnings per share -17.7% to 346.3 cps -165.2%to -369.5 cps Total dividend per share Return on equity* -23.6% to 239.0 cps 18.0% from 20.8% *DJ asset impa