Woolworths Holdings Limited · JSE:WHL
Woolworths — FY2006 Earnings Presentation
52 slides from Woolworths's earnings presentation, August 2006
Slide 1: Investment Analyst Presentation August 2006
Slide 2: A year of change and growth
woolworths holdings limited a year of change and growth • Revenue up 16.6% to R15.1bn • Operating profit up 21.0% to R1.5bn • Operating profit margin widening from 9.5% to 9.8% • HEPS up 17.4% to 105 cps • HEPS pre-STC up 22.9% to 109.9cps • Effective tax rate including STC of 32.8% (June 05: 27.8%*
Slide 3: Change and growth
woolworths holdings limited change and growth • Managing change m units Total volumes 55.0 – systems and capacity • implementation of merchandise management systems • back office systems in stores 50.0 • distribution centre extensions – people 45.0 • re-structure clothing • improving capacity • Mana
Slide 4: Trading environment
woolworths holdings limited trading environment • Consumer confidence peaked • Slowing sales growth trend – clothing • No slow-down in food growth • Rand weakness • Rising inflation • Interest rate hike • Changing legislative environment in financial services
Slide 5: Income statement
woolworths holdings limited results income statement June 2006 June 2005 % Chg Rm Rm Revenue 15,143.0 12,988.9 16.6% Turnover 14,208.0 12,220.7 16.3% Cost of sales 9,340.4 8,027.1 16.4% Gross profit 4,867.6 4,193.6 16.1% Other revenue 935.0 768.2 21.7% Expenses 4,312.3 3,730.5 15.6% Operating profit
Slide 6: Expense analysis
woolworths holdings limited results expense analysis R269.9m R679.1m R1,699.6m R1,663.7m R4,312.3m 20.0% 18.3% 15.0% 16.4% 15.6% 10.0% 11.4% 5.0% 6.1% 0.0% Depreciation Occupancy Employment Other Total
Slide 7: HEPS graph and distribution cover
woolworths holdings limited results HEPS graph and distribution cover 160.0 2.5 2.1 140.0 2 1.9 2 1.7 120.0 1.7 100.0 105.0 1.5 80.0 89.4 75.5 1 60.0 61.1 63.0 40.0 54.0 42.4 0.5 38.5 20.0 29.0 20.0 0.0 0 2002 2003 2004 2005 2006 *HEPS DPS *Distribution Cover Compound HEPS growth: 30% (5 years) * Pr
Slide 8: HEPS comparability
woolworths holdings limited results HEPS comparability June 2006 June 2005 % Chg Rm Rm Comparable headline earnings Actual headline earnings 834.8 759.0 10.0% add: non-comparable interest after tax 51.8 14.7 add: non-comparable STC 39.4 - Comparable headline earnings 926.0 773.7 19.7% Comparable HEP
Slide 9: Balance sheet
woolworths holdings limited results balance sheet June 2006 June 2005 % Chg Rm Rm Assets Property, plant and equipment 1,597.7 1,304.0 22.5% Investment property 109.0 72.2 51.0% Export partnerships 71.6 79.3 -9.7% Goodwill 23.0 - Inventories 841.4 683.0 23.2% Financial services assets 4,455.0 3,644.
Slide 10: Cash flow
woolworths holdings limited results cash flow June 2006 June 2005 Rm Rm Cash inflow from trading 1,059.3 996.5 Net interest received 517.5 488.1 Working capital movements 191.0 -228.4 Increase in borrowings 653.7 1,434.4 2,421.5 2,690.6 Utilised by : Tax paid 475.4 314.6 Distribution paid 474.2 384.
Slide 11: Cash flow (cont.)
woolworths holdings limited results cash flow (cont.) Growth in financial services assets: Capex spend: R882.2m (June 05: R722.0m) R638.1m (June 05: R385.9m) R 1,000.0 R 1,000.0 R 800.0 R 166.7 R 800.0 R 155.5 R 600.0 R 302.5 R 600.0 R 196.8 R 139.5 R 400.0 R 400.0 R 7.4 R 154.4 R 142.8 R 200.0 R 42
Slide 12: Return on equity / WACC
woolworths holdings limited results return on equity / wacc 40.0% 35.0% 30.0% 25.0% 20.0% 17.5% 16.3% 13.8% 13.8% 15.0% 11.3% 11.8% 10.0% 5.0% 12.3% 18.3% 24.7% 27.4% 31.2% 34.8% 0.0% Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06
Slide 13: Income statement (excluding financial services)
woolworths retail results income statement (excluding financial services) June 2006 June 2005 % Chg Rm Rm Revenue 13,286.9 11,288.4 17.7% Turnover 13,213.8 11,227.0 17.7% Cost of sales 8,885.9 7,558.4 17.6% Gross profit 4,327.9 3,668.6 18.0% O ther revenue 73.1 61.4 19.1% Expenses 3,331.9 2,871.3 16
Slide 14: Turnover analysis
woolworths retail results turnover analysis June 2006 June 2005 % Chg Rm Rm Clothing & home 6,012.2 5,349.5 12.4% Corporate (retail) 5,255.3 4,710.0 11.6% Franchise (wholesale) - local 567.6 473.8 19.8% Franchise (wholesale) - international 189.3 165.7 14.2% Foods 6,941.5 5,666.0 22.5% Corporate (re
Slide 15: Balance sheet (excluding financial services)
woolworths retail results balance sheet (excluding financial services) June 2006 June 2005* % Chg Rm Rm Assets Property, plant and equipment, investments deferred tax, loans and goodwill 2,127.5 1,689.5 25.9% Inventory 707.9 563.0 25.7% Accounts receivable 618.9 528.9 17.0% Cash 332.2 163.5 103.2% 3
Slide 16: Financial services income statement
woolworths financial services results income statement June 2006 June 2005 % Chg Rm % to Book Rm % to Book Income 941.4 23.6% 773.9 23.2% 21.6% Interest received 754.5 18.9% 626.8 18.6% 20.4% Other Income - external 108.0 2.7% 78.6 2.4% 37.4% Other Income - internal 78.9 2.0% 68.5 2.1% 15.2% Expense
Slide 17: Financial services balance sheet
woolworths financial services results balance sheet June 2006 June 2005* % Chg Rm Rm Assets Plant and equipment, deferred tax, loans and accounts receivable 189.1 203.3 -7.0% Financial services assets 4,455.0 3,644.1 22.3% 4,644.1 3,847.4 20.7% Equity and liabilities Shareholders funds 975.1 992.3 -
Slide 18: Credit statistics
woolworths financial services results credit statistics June 2006 June 2005 Store card sales as a % of total sales 32.1% 33.7% Average yield 23.6% 23.2% Weighted average usury rate 20.0% 20.3% Average cost of funds 7.7% 7.8% Total gross books 4,667.6 3,785.4 Total provisions (212.6) (141.3) Net book
Slide 19: Country Road income statement (A$)
country road results income statement (A$) June 2006 June 2005* % Chg A$m A$m Revenue 207.7 211.2 -1.7% Turnover 205.1 208.5 -1.6% Retail 164.0 151.6 8.2% Wholesale 41.1 56.9 -27.8% Cost of sales 94.9 99.6 -4.7% Gross profit 110.2 108.9 1.2% Other revenue 2.6 2.7 -3.7% Expenses 108.7 107.6 1.0% Oper
Slide 20: Country Road balance sheet (A$)
country road results balance sheet (A$) June 2006 June 2005 % Chg A$m A$m Assets Property, plant and equipment 27.8 27.2 2.2% Trademarks** 11.2 11.2 0.0% Inventory 24.5 23.1 6.1% Accounts receivable 14.4 11.6 24.1% Cash 6.8 11.9 -42.9% 84.7 85.0 -0.4% Equity and liabilities Shareholders funds 54.0 5
Slide 21: Woolworths retail divisional and operational review
woolworths retail divisional and operational review
Slide 22: Design-led, technology focus and strategic sourcing
design-led, technology focus and strategic sourcing
Slide 23: Clothing and home performance: turnover and growth
clothing and home performance turnover and growth 35.0% 7,000 6,012 30.0% 5,350 6,000 4,792 25.0% 4,280 5,000 3,834 20.0% 4,000 15.0% 17.7% 3,000 10.0% 12.4% 12.0% 12.4% 2,000 11.6% 11.6% 10.2% 9.0% 8.2% 5.0% 8.3% 1,000 0.0% 0 2002 2003 2004 2005 2006 Comparable growth Sales growth Turnover • sales
Slide 24: Clothing performance: RLC market share
clothing performance rlc market share • Market share to June 06 – 12 month moving average • this year 15.1% • last year 15.6% – 3 month moving average • this year 16.0% • last year 16.4%
Slide 25: Clothing and home: year 2 process implementation
clothing and home performance year 2: process implementation • Womenswear – good growth continues Market share performance – consistent taste-levels meeting customer requirements June 06 June 05 • Lingerie womenswear Î Ð – performance impacted by limited availability – innovation coming through with
Slide 26: Clothing and home: year 3 consistency of implementation
clothing and home year 3: consistency of implementation • Design-led buying – consistent LSM 9 & 10 taste level, accessible to LSM 6-8 fashion 20% – technical innovation – focus on menswear key • Strategic sourcing and value – imports / local supplier opportunities 80% – pricing architecture and vol
Slide 27: Clothing and home strategy
clothing and home strategy • W Collection – growing faster than basic range driving cross-shop • Beauty launch – driving the cross- shop – launch of branded products - initial rollout to 8 stores – re-developed private-label offering on a natural platform – completing our customers’ shop
Slide 28: Growth through the good food journey and convenience
growth through the good food journey and convenience
Slide 29: Food performance: turnover and growth
food performance turnover and growth 40.0% R 6,942 R 8,000 35.0% R 7,000 R 5,666 30.0% R 6,000 R 4,747 25.0% 28.7% R 3,981 R 5,000 R 3,302 20.0% 22.5% R 4,000 20.6% 18.6% 19.2% 19.4% 15.0% R 3,000 14.7% 10.0% 11.9% R 2,000 11.4% 5.0% 7.8% R 1,000 0.0% R0 2002 2003 2004 2005 2006 Comparable growth Sa
Slide 30: Food performance: RLC market share
food performance rlc market share RLC Food Market Share: 8.6% 12mma • Market share to June 2006 – 12 month moving average 8.1% • this year 8.5% • last year 8.0% 7.6% – 3 month moving average • this year 8.7% • last year 8.0% 7.1% 6.6% Jul 04 Jun 05 Jun 06
Slide 31: Food strategy: continued growth
food strategy continued growth • Widening the gap – the good food journey – continued product innovation with over 1000 new lines launched per year • 1st fresh baby food launch in South Africa – ongoing focus on improved taste, flavour, authenticity, health and functionality – sharper pricing
Slide 32: Food strategy: convenience
food strategy continued growth • Convenience – store rollout with over 132 food stores in next 3 years • stand alone food stores • Engen Food Stops – reinforcing the main shop concept • aggressive pricing on basics • branded products steadily expanding – 6.6 % (June 05: 6.5%) – availability a key fo
Slide 33: Customer growth and loyalty
customer growth and loyalty
Slide 34: Woolworths store card (gross book)
financial services performance woolworths store card (gross book) million 3,500 15.3 % 3,000 18.8 R 3,109 % 2,500 29.1 R 2,696 % 2,000 23.3 R 2,269 17.4 % 14.5 1,500 % R 1,758 8.2% % 2.5% 7.6% R 1,426 4.2% 1,393 1,000 1,217 1,046 1,125 1,020 500 0 J une 02 J une 03 J une 04 J une 05 J une 06 Gros s
Slide 35: Personal loans (gross book)
financial services performance personal loans (gross book) million 1,000 21.8 % 900 R 930 25.6 800 % 700 26.9 R 763 % 600 25.4 R 608 500 % 33.0 R 479 400 % R 382 300 200 18.7 15.7 15.0 31.3 21.6 % % % 100 % % 169 127 147 88 107 0 J une 02 J une 03 J une 04 J une 05 J une 06 Gros s B ook Va lue (R 'm
Slide 36: Visa card (gross book)
financial services performance visa card (gross book) million 700 92.9 % 600 R 629 500 400 74.8 % 300 R 326 59.7 200 82.5 % 63.3 >100 % R 187 58.0 % 100.0 47.8 47.1 100 % % 129 % R 117 % % R 64 23 34 79 50 0 J une 02 J une 03 J une 04 J une 05 J une 06 Gros s B ook Va lue (R 'm) Number of Cus tomers
Slide 37: Net bad debt (including recoveries)
financial services performance net bad debt (including recoveries) 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 5.5% 5.1% 5.1% 4.0% 4.6% 3.8% 3.0% 3.0% 3.1% 2.0% 2.8% 2.5% 2.3% 2.0% 1.7% 1.8% 2.0% 1.0% 1.6% 0.0% J une 02 J une 03 J une 04 J une 05 J une 06 Woolworths ca rd P ers ona l Loa ns Vis a • tighter credi
Slide 38: Financial services strategy: customer growth and infrastructure
financial services strategy customer growth and infrastructure • Continued focus on customer growth – prospecting and growth • store card to target LSM 6-8 (relatively un-banked) • personal loans to target store card customer • Visa to target upper half of customer base – grow non-interest revenue –
Slide 39: Aggressive store rollout
selling aggressive store rollout
Slide 40: Selling: trading space
selling trading space as at Projected June 06 June 05 % Chg June 07 % Chg m2 m2 m2 Total Footage 422,367 389,645 8.4% 448,136 6.1% Clothing & home 321,602 302,259 6.4% 333,925 3.8% Corporate 235,308 221,053 6.4% Franchise - SA 53,125 47,296 12.3% Franchise - International 33,169 33,910 -2.2% Food 97
Slide 41: Selling: number of stores
selling number of stores Projected June 06 June 05 Store June 07 Store no no growth no growth Stores 309 269 40 366 57 Corporate 173 149 25 207 34 Full line 93 84 9 100 Clothing & home 6 5 1 6 Food 74 60 14 101 Franchise - SA 71 69 2 79 8 Franchise - Engen 13 5 8 28 15 Franchise - International 52 5
Slide 42: Systems development and capacity
systems development and capacity
Slide 43: Operations: systems development and capacity
operations systems development and capacity • Year four of major systems development • Two intense years of implementation • Minimising disruption = a simpler and more flexible business
Slide 44: Operations: development and capacity
operations development and capacity • Supply chain – reduction in food distribution costs despite volume and capital growth – managing increased import component • Growth – invested in all 3 distribution centres • expanded Cape and KZN distribution centres • Midrand DC on track • total investment ov
Slide 45: | FUTURE
| FUTURE y,|| EXTENSION NEWLANDS CRICKET A: f
Slide 46: Be eo
Be eo me hte ert ee iy Ty
Slide 47: Country Road retail-only model
country road retail-only model
Slide 48: Country Road performance: strategy on track
country road performance strategy on track • Retail sales up 8.1% • strong second half performance, ahead of the market • comparable store sales growth up 7.3% • retail apparel volume growth of 27.4% • reduced levels of promotional Volume performance activity 30.0% 27.1% 24.9% 25.0% 20.0% • Wholesal
Slide 49: Country Road strategy: retail-only
country road strategy retail-only • Move to retail-only model – concession-based business – exit of existing wholesale arrangement with Myer – reduction in complexity – control of brand and pricing – 70 new “stores”
Slide 50: Strategy & prospects
strategy & prospects ae TT —- gi wee FO) ' ESS
Slide 51: Strategy and prospects
strategy and prospects • A tighter trading environment • Drive top-line performance – cross-shop potential • clothing and home taste and value proposition • food accessible to clothing customer • financial service leverage • launch of beauty – convenience • store rollout • availability • Sweating th
Slide 52: Slide 52