Woolworths Holdings Limited · JSE:WHL
Woolworths — Debt Investor Presentation (September 2017)
40 slides from Woolworths's debt investor presentation, September 2017
Slide 1: Woolworths Holdings Limited DMTN Launch September 2017
WOOLWORTHS HOLDINGS LIMITED DMTN LAUNCH SEPTEMBER 2017 Reeza Isaacs, Ian Thompson and Ralph Buddle * To be read in conjunction with Equity Analyst packs 1
Slide 2: Content
CONTENT 01 / Introduction & background 04 / Financial overview 02 / Strategic overview 05 / Credit 03 / Governance & policy 06 / Planned issuance 2
Slide 3: Introduction & Background
01 INTRODUCTION & BACKGROUND 3
Slide 4: Introduction
INTRODUCTION • David Jones and minority interest of Country Road were acquired in 2014 • Balance sheet was restructured at the time, including debt in South Africa and Australia • Gearing has reduced since that time • Debt is now being refinanced on an ongoing basis • Listed programme increases the
Slide 5: WHL at a Glance – Diversified Earnings Base
WHL AT A GLANCE – DIVERSIFIED EARNINGS BASE Operating profit by geography Turnover by segment 14.6% 18.7% 66 % 34 % 28.6% 38.1% Woolworths Clothing & GM Woolworths Food* David Jones* Country Road Group Operating profit by category Operating profit by segment Woolworths Financial Services** 14.7% 32.
Slide 6: Background – 86 Year Long History in South Africa
BACKGROUND – 86 YEAR LONG HISTORY IN SOUTH AFRICA TH E FI RST W O O LW O R T H S H O L D I N G S W O O LW O R T H S S TO R E LIMITED LISTED ON THE OPENED IN CAPE JOHAN N ESBURG SECURITIES TOW N . F O U N D E D BY E X C H A N G E ( J S E ) A S S E PA R AT E MAX SONNENBERG E N T I T Y F R O M W O O LT
Slide 7: WHL at a Glance – Operating Businesses
WHL AT A GLANCE – OPERATING BUSINESSES Woolworths Holdings Limited (Listed on the JSE) Based in South Africa and trading in 11 more sub-Saharan African countries GROUP 7
Slide 8: Strategic Overview
Q2 STRATEGIC, OVERVIEW.
Slide 9: Strategic Pillars
STRATEGIC PILLARS WE REMAIN FOCUSED ON EXECUTING OUR CLEARLY DEFINED STRATEGIES BASED ON SIX COMMON GROUP FOCUSES build st ronger become a M O R E P R O F I TA B L E BIG FOOD BUSI N ESS C U S T O M E R R E L AT I O N S H I P S WITH A DIFFERENCE drive towards SYN ERGI ES AN D EFFICI ENCI ES C O N N E
Slide 10: Governance & Policy
03 GOVERNANCE & POLICY 10
Slide 11: Board Members and Reporting Structure
BOARD MEMBERS AND REPORTING STRUCTURE 11
Slide 12: Board Member and Reporting Structure – Executive Committee
BOARD MEMBER AND REPORTING STRUCTURE WHL – EXECUTIVE COMMITTEE IAN MOIR (58) REEZA ISAACS (48) ZYDA RYLANDS (52) (Australian) Executive Director and Executive Director and Executive Director and Group Finance Director Chief Executive Officer – Woolworths South Africa Group Chief Executive Officer SA
Slide 13: Board Member and Reporting Structure – Banking Experience
BOARD MEMBER AND REPORTING STRUCTURE WHL – BANKING EXPERIENCE PATRICK ALLAWAY (56) ZARINA BASSA (53) TOM BOARDMAN (67) (Australian) (South African) (South African) Independent Non-Executive Independent Non-Executive Independent Non-Executive Director Director Director Lead Independent Director • Mem
Slide 14: Governance – Group Governance Framework
GOVERNANCE – GROUP GOVERNANCE FRAMEWORK WHL SHAREHOLDERS WHL BOARD NOMINATIONS AUDIT SOCIAL & ETHICS REMUNERATION SUSTAINABILITY RISK & COMPLIANCE COMMITTEE COMMITTEE COMMITTEE COMMITTEE COMMITTEE COMMITTEE W O O LW O R T H S S A D AV I D J O N E S C O U N T RY ROA D BOARD BOARD GROU P BOARD SUBSIDI
Slide 15: Treasury Structure and Policy
TREASURY STRUCTURE AND POLICY TREASURY GOVERNANCE STRUCTURE TREASURY POLICY AND OPERATIONS Policies and procedures Treasury policies and procedures as proposed by the Treasury AUDIT Committee are reviewed and approved at the Audit Committee, COMMITTEE which are in turn approved by the Board. • The p
Slide 16: Financial Policy
FINANCIAL POLICY CLEAR FINANCIAL TARGETS AND COVENANT SETTING ATTEST TO WHL’S CONSERVATIVE FINANCIAL AND TREASURY POLICY Leverage • WHL has a prudent internal covenant policy that defines thresholds in terms of gearing levels. The thresholds define a target level, an internal stress level where acti
Slide 17: Financial Policy
FINANCIAL POLICY CLEAR FINANCIAL TARGETS AND COVENANT SETTING ATTEST TO WHL’S CONSERVATIVE FINANCIAL AND TREASURY POLICY Interest rate • Interest-bearing borrowings are hedged at a minimum of 25%. At June approximately 56% of interest rates risk on long-term debt is hedged in both South Africa and A
Slide 18: Financial Policy
FINANCIAL POLICY CLEAR FINANCIAL TARGETS AND COVENANT SETTING ATTEST TO WHL’S CONSERVATIVE FINANCIAL AND TREASURY POLICY Dividends • Current dividend cover policy is 1.45 times and is incorporated in the capex sizing and projected gearing • The dividend remains a large bi-annual cash flow and is a s
Slide 19: Financial Review
04 FINANCIAL REVIEW 19
Slide 20: Financial Overview
FINANCIAL OVERVIEW Adjusted profit before tax EPS HEPS Turnover and concession sales -8.3 to R5.5 billion % +24.8 to 566.7 cps % -7.6 to 420.9 cps % +3.0 % to R74.3 billion HEPS – Total dividend Adjusted diluted maintained at ROE -7.9 to 417.7 cps % 313.0 20.8 cps from 25.6% % 20
Slide 21: Group Income Statement
GROUP INCOME STATEMENT Cost Focus There was a significant focus on costs across the Group, to reduce the impact Jun 2017 Jun 2016 % of slowing sales and margin pressure; no Rm Rm change incentives paid this year Woolworths Clothing & GM 2 168 2 306 (6.0) Overall profitability maintained despite Wool
Slide 22: Net Finance and Other Costs
NET FINANCE AND OTHER COSTS Jun 2017 Jun 2016 Capital Rate* Rm Rm ZAR long-term debt R9.9bn 9.29% 935 903 Higher due to increase in SA base rates AUD long-term debt A$350m 3.78% 197 283 Lower due to proceeds on sale of Market Net finance costs 1 132 1 186 Street; partially offset by Politix acquisit
Slide 23: Group Balance Sheet
GROUP BALANCE SHEET Jun 2017 Jun 2016 % Rm Rm change Assets Property, plant and equipment and investment properties 13 846 17 451 (20.7) Sale of Market Street; new stores and transformation projects Intangible assets 19 595 21 136 (7.3) Investments in JVs and associate 1 015 978 3.8 Impacted by spac
Slide 24: Net Gearing
NET GEARING WHL SA Australia Rm Rm A$m Interest bearing debt (13 325) (9 881) (352) SA funding sources wider than banks and beyond original Cash and cash equivalents 1 787 1 180 62 syndication (30% non banks) Net debt June 2017 (11 538) (8 701) (290) Australian debt all bank funded (expanded to non-
Slide 25: Summarised Group Statement of Cash Flows
SUMMARISED GROUP STATEMENT OF CASH FLOWS 52 weeks 52 weeks to 25 June to 26 June 2017 2016 Rm Rm Cash flow from operating activities Cash inflow from trading 8 177 8 940 Working capital movements (615) (311) Cash generated by operating activities 7 562 8 629 Net finance cost (1 120) (1128) Tax paid
Slide 26: Cash Generation for the 52 Weeks Ended 25 June 2017
CASH GENERATION FOR THE 52 WEEKS ENDED 25 JUNE 2017 Rm Includes spend on DJ Includes new stores, 9 000 Value Chain and finance investment in SC 8 177 systems upgrade capacity, DJ Food 8 000 327 3 677 7 000 (615) 6 000 (1 257) 5 000 (1 701) 4 000 3 505 (3 015) 525 3 000 (1 426) 2 855 (1 126) 2 000 (7
Slide 27: Capital Expenditure, Depreciation and Amortisation
CAPITAL EXPENDITURE DEPRECIATION AND AMORTISATION CAPEX % Rm R2 591m (Jun 2016: R2 871m) Jun 2017 Jun 2016 change 4 800 Woolworths (Rm) 904 848 7 A$49m David Jones (A$m) 63 61 3 4 200 Country Road Group (A$m) 37 32 16 3 600 Total Group (Rm) 1 935 1 825 6 A$207m 3 000 A$49m A$34m 2 400 Higher FY2018
Slide 28: Retail Outlook
RETAIL OUTLOOK • Retail is in the midst of cyclical and structural change in both geographies • Cyclical change – Continued pressure on growth and consumer confidence • Structural change – Competition and promotional activity continues to intensify – Rapid technological development – Shifting custom
Slide 29: Credit
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Slide 30: Group Structure – Covenant Groups
GROUP STRUCTURE – COVENANT GROUPS Woolworths Holdings Limited (Listed on the JSE) Based in South Africa and trading in 11 more sub-Saharan African countries W O O LW O R T H S AFRICAN F I N A N C I A L S E RV I C E S # ENTITIES (50% – JV) GROUP South African covenant group Australian covenant group
Slide 31: Credit Metrics
CREDIT METRICS Group Jun 2017 Jun 2016 Net debt to EBITDA 1.4 1.6 Group covenants are used internally only Net interest cover 7.3 7.6 Debt to Equity 0.6 0.7 South African Covenant Group Jun 2017 Jun 2016 Net debt to EBITDA 1.4 1.7 SA covenant group are aligned with existing bank debt Net interest co
Slide 32: Issuer and Guarantor Combined Income Statement
ISSUER AND GUARANTOR COMBINED INCOME STATEMENT Jun 17 Jun 16 % Rm Rm change Woolworths Holdings Ltd operating profit – dividends received from subsidiaries 3 288 2 944 11.7 Woolworths (Pty) Ltd operating profit 4 569 4 347 5.1 Woolworths Holdings Ltd dividends received from Woolworths (Pty) Ltd (2 2
Slide 33: Issuer and Guarantor Balance Sheets
ISSUER AND GUARANTOR BALANCE SHEETS Issuer Guarantor WHL Company WW (Pty) Ltd Jun 2017 Jun 2016 Jun 2017 Jun 2016 Rm Rm Rm Rm Assets Property, plant and equipment and investment properties – – 3 399 3 085 Intangible assets – – 953 942 Investments in subsidiaries and treasury shares 21 528 21 445 3 1
Slide 34: Maturity Profiles of Long-Term Debt
MATURITY PROFILES OF LONG-TERM DEBT Rm South Africa 4 500 4 000 FY18 Q1 tranche has been repaid after year-end 3 500 3 000 Sources of funding will increase significantly with Domestic 2 500 Medium Term Note programme 2 000 1 500 61% of debt is hedged using an interest rate swap 1 000 Proposed issuan
Slide 35: Credit – Other Credit Metrics
CREDIT – OTHER CREDIT METRICS Debt levels Sources of funding (SA only – AUS is bank debt only) Jun 2017 Jun 2016 Capital Rate* Rm Rm ZAR denominated debt R9.9bn 9.28% 9 882 9 943 2 954 6 946 30% 70% AUD denominated debt $350m 3.78% 3 443 5 975 13 325 15 918 * Partially hedged all-in rate including a
Slide 36: Background – Key Credit Highlights
BACKGROUND – KEY CREDIT HIGHLIGHTS Management strength • Diverse board with extensive retail experience in South Africa, Australia, and the UK • Strong executive management team • Commitment to good corporate citizenship Performance • Consistency of earnings growth, operating margin of 9.2%, strong
Slide 37: Planned Issuance
06 PLANNED ISSUANCE 37
Slide 38: Key Features
KEY FEATURES Issuer Woolworths Holdings Ltd Guarantor Woolworths (Pty) Ltd Programme Type Domestic Medium Term Note Programme Programme Size ZAR10bn Negative Pledge For so long as any Tranche of the Senior Notes remains outstanding, the Issuer undertakes not to, and shall procure that the Guarantor
Slide 39: Indicative Issuance Terms
INDICATIVE ISSUANCE TERMS Issuer Woolworths Holdings Ltd Guarantor Woolworths (Pty) Ltd Programme ZAR Indicative target ZAR500m issue size Indicative tenor 3-year Interest profile Floating rate Ranking Senior Auction process Dutch Auction Proposed auction date 5 October 2017 39
Slide 40: Indicative Timeline
INDICATIVE TIMELINE Indicative Date 18 – 20 September 2017 Investor roadshow 26 September 2017 Term sheet with price guidance released to investors 5 October 2017 Proposed Auction Date 10 October 2017 Settlement Date (t+3) 40
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