Woolworths Group Ltd · ASX:WOW
Woolworths — H1 2017 Earnings Presentation
40 slides from Woolworths's earnings presentation, Feb 22, 2017
Slide 1: Company Results Half-Year 2017
For personal use only Company Results HALF-YEAR 2017 22 February 2017 Woolworths Limited ABN 88 000 014 675
Slide 2: Agenda
Agenda For personal use only Key highlights Brad Banducci Progress on our five key priorities – Building a customer and store-led culture and team – Generating sustainable sales momentum in Food – Evolving our Drinks business to provide even more value and convenience to customers – Empowering our p
Slide 3: Progress on our five key priorities
Progress on our five key priorities 1 For personal use only 3 CUSTOMER AND STORE-LED CULTURE AND TEAM 2 EVOLVING OUR DRINKS BUSINESS 5 4 • New Australian Food • 8 (net) new Dan BECOMING A LEAN purpose Murphy’s stores RETAILER • “Woolies Welcome” GENERATING • Strong Dan Murphy’s • SAP Merchandising e
Slide 4: Agenda
Agenda For personal use only Key highlights Brad Banducci Progress on our five key priorities Financial Results David Marr – Results – Half-Year 2017 – Group EBIT – Key Balance Sheet metrics – Cash Flow Summary – Capital Expenditure – Capital Management Business Update Business Leaders Outlook Brad
Slide 5: Financial Results
For personal use only Results Financial
Slide 6: Results – Half-Year 2017
Results – Half-Year 2017 For personal use only Continuing Operations Total Group Change Change Sales $29.1 bn 2.6% $32.3 bn 1.1% Earnings Before $1,301.3 m (14.5)% $1,257.8 m 170.2% Interest and Tax (EBIT) Net Profit After Tax attributable $785.7 m (16.7)% $725.3 m 174.6% to shareholders of Woolwort
Slide 7: Group EBIT
Group EBIT For personal use only $m HY17 HY16 Change Continuing Operations Australian Food 811.6 942.6 (13.9)% Endeavour Drinks Group 302.3 293.3 3.1% New Zealand Food (AUD) 154.9 151.3 2.4% New Zealand Food (NZD) 163.0 170.6 (4.5)% BIG W (27.2) 72.9 (137.3)% Hotels 139.3 135.1 3.1% Central Overhead
Slide 8: Key Balance Sheet metrics
Key Balance Sheet metrics ROFE1 (rolling 12 months) Average Inventory days Before Significant Items2 For personal use only Days Percentage Continuing Operations Continuing Operations Group Group 40.7 40.6 40.6 41.6 40.4 20.77 27.37 22.63 20.09 39.4 38.5 39.0 38.2 35.3 HY13 HY14 HY15 HY16 HY17 HY16 H
Slide 9: Cash Flow Summary
Cash Flow Summary For personal use only $m HY17 HY16 Change Operating Activities before Interest and Tax 2,757.6 2,022.2 36.4% Interest and Tax (561.9) (769.5) (27.0)% Operating Activities 2,195.7 1,252.7 75.3% Investing Activities (386.4) (599.1) (35.5)% Financing Activities - 107.9 Free cash flow
Slide 10: Capital Expenditure
Capital Expenditure $m HY17 HY16 Continuing Operations For personal use only Operating Capex 637 586 Property Development 103 238 Gross Capex 740 824 Property Sales (162) (254) Net Capex 578 570 Discontinued Operations - Home Improvement (6) 103 Discontinued Operations - Petrol 14 22 Group Net Capex
Slide 11: Capital Management
Capital Management Debt and credit rating For personal use only • Remain committed to solid investment grade credit rating • Net Repayable Debt of $1.5bn – significantly down on HY16 and FY16 • Fixed Charge Coverage Ratio of 2.4x Dividend and DRP • Half-year dividend of 34 cents per share – consiste
Slide 12: Agenda
Agenda For personal use only Key highlights Brad Banducci Progress on our five key priorities Financial Results David Marr Business Update Business Leaders – Australian Food – Endeavour Drinks Group – New Zealand Food – BIG W Outlook Brad Banducci 12
Slide 13: Business Update
For personal use only Update Business
Slide 14: Woolworths The fresh food people
For personal use only ¢_ @) Woolworths The fresh food people
Slide 15: Australian Food
Australian Food For personal use only HY17 HY16 Change Sales ($m) 18,713 18,195 2.8% EBIT ($m) 811.6 942.6 (13.9)% Gross Margin (%) 27.88 27.38 50 bps Cost of Doing Business (%) 23.54 22.20 134 bps EBIT to Sales (%) 4.34 5.18 (84) bps Sales Per Square Metre ($) 15,927 16,251 (2.0)% ROFE1 (%) 151.8 1
Slide 16: Our strategy is focused on getting customers to put us first
Our strategy is focused on getting our customers to put us 1st For personal use only 6 Customer 1st Team and Culture Create the future 5 Step-change store renewal program Deliver on core Good prices, Great Best fresh customer offer 2 right range 3 service 4 Fix the basics 1 Solid and efficient busin
Slide 17: Progress highlights
Progress highlights Create the future • Our purpose ‘We bring a little good to everyone, every day’ embedded across our team For personal use only • Customer 1st Team and Culture building. VOC for team attitude of 86 & Voice of Team improving • Over 1,100 support team members worked in stores in the
Slide 18: Customer 1st strategy driving growth in customer satisfaction
Customer 1st strategy driving growth in customer satisfaction, particularly in-store experience For personal use only Overall Customer Satisfaction Product Availability % customers satisfied, 6 or 7 out of 7 % customers satisfied, 6 or 7 out of 7 80 79 74 71 68 76 67 75 75 Q3 Q4 Q1 Q2 70 68 Queue Wa
Slide 19: Sales momentum continues, with growth in visits and items/basket
Sales momentum continues, with growth in visits and more recently items/basket For personal use only Total Sales Comp Transaction growth % year on year % year on year 2.5 2.7 1.5 0.3 Q3 Q4 Q1 Q2 4.0 1.7 0.0 Comp Items per basket growth (0.3) % year on year Q3’16 Q4’16 Q1’17 Q2’17 0.8 (1.9) (1.9) (2.
Slide 20: Our team is living our purpose and customers experience more reasons to Pick Woolies
Our team is living our purpose and our customers are experiencing more reasons to Pick Woolies For personal use only 20
Slide 21: We continued to deliver value by lowering shelf prices
We continued to deliver value to our customers by lowering shelf prices For personal use only Always and Prices Dropped SKUs Number of SKUs Aug-16 Sep-16 Nov-16 Dec-16 Dec-15 May-16 Jul-16 Oct-16 Jan-16 Apr-16 Jun-16 Feb-16 Mar-16 ‘Woolworths is great. The fruit and veg 'Grocery items easy to find,
Slide 22: Strong customer response to high quality, good value fresh fruit and veg
Strong customer response to our focus on delivering high quality, good value fresh fruit and veg For personal use only Key Initiatives Customer Responses 1. Focus on quality and freshness • Coaching store teams on handling fruit and veg ‘I recently shopped at your store • Introduced ‘Store Quality A
Slide 23: Renewal stores are step-changing our customer experience
Renewal stores are step-changing our customer experience with early progress positive For personal use only Renewal progress Key figures • 26 Renewal stores completed in HY17 • Renewal Overall Satisfaction VOC +9%pts • 41 Front End upgrades completed • Customers that “believe that the store is bette
Slide 24: Our FY17 business priorities
Our FY17 business priorities For personal use only 6 Create the future 6 Create a winning proposition by Customer 1st listening to our customers and Team and Culture transforming our business A great retail team putting our Customers 1st. store-by-store Step-change store renewal program 5 Renewed st
Slide 25: Endeavour Drinks Group
W\!! | “yy, if S Ze = S = = %, S Y ‘ TT ENDEAVOUR DRINKS GROUP
Slide 26: Endeavour Drinks Group
Endeavour Drinks Group HY17 HY16 Change For personal use only Sales ($m) 4,319 4,152 4.0% EBIT ($m) 302.3 293.3 3.1% Gross Margin (%) 23.08 23.43 (35) bps Cost of Doing Business (%) 16.08 16.37 (29) bps EBIT to Sales (%) 7.00 7.06 (6) bps Sales Per Square Metre ($) 17,987 18,004 (0.1)% ROFE1 (%) 16.
Slide 27: Continues to deliver solid sales growth in a highly competitive market
Continues to deliver solid sales growth in a highly competitive market For personal use only HY17 Progress FY17 Focus • Industry leading NPS in Dan Murphy’s and strong NPS • Continuing to drive growth ahead of the market scores maintained in BWS • 27 new stores: 13 (net) Dan Murphy’s and 14 (net) •
Slide 28: Maintained leadership through new stores, refurbishments and new formats
Maintained leadership through new stores, refurbishments and new formats For personal use only HY17 Progress FY17 Focus New format 8 (net) new stores Building a greater destination Offer greater seamless “Dan Murphy’s Cellar” 4 Refurbishments offer through greater customer experience for collaborati
Slide 29: Investment in value and customer service for stronger differentiation
Investment in value and customer service for stronger differentiation For personal use only HY17 Progress FY17 Focus Strong sales and profit results Solid comp growth despite Continuing to build insights and Optimising the partnership with from intensified focus on competitive environment momentum t
Slide 30: For personal use only
For personal use only
Slide 31: New Zealand Food
New Zealand Food NZ$ HY17 HY16 Change For personal use only Sales ($m) 3,227 3,176 1.6% EBIT ($m) 163.0 170.6 (4.5)% Gross Margin (%) 23.81 23.51 30 bps Cost of Doing Business (%) 18.76 18.14 62 bps EBIT to Sales (%) 5.05 5.37 (32) bps Sales Per Square Metre ($) 15,058 15,120 (0.4)% ROFE1 (%) 10.09
Slide 32: Investing in price, service and fresh food driving customer perception improvement
Investing in price, service and fresh food driving customer perception improvement For personal use only HY17 Progress FY17 Focus Customers and team Continued to lower prices Improve pricing for Strengthen fresh food Net Promoter customers proposition Up 10 pts Score vs H1’16 Customer Price percepti
Slide 33: For personal use only
For personal use only
Slide 34: Portfolio Businesses: BIG W
PORTFOLIO BUSINESSES BIG W HY17 HY16 Change For personal use only Sales ($m) 2,050 2,187 (6.3)% Trading EBIT ($m) 8.1 72.9 (88.9)% Impairment and Onerous Lease charges ($m) (35.3) - n.c Reported (LBIT)/EBIT ($m) (27.2) 72.9 (137.3)% Trading Gross Margin (%) 31.52 33.02 (150) bps Trading Cost of Doin
Slide 35: Portfolio Businesses: BIG W update
PORTFOLIO BUSINESSES BIG W HY17 Update FY17 Focus For personal use only • Disappointing progress in the first half • Implementing the first stages of BIG W strategic plan • David Walker appointed Acting CEO, BIG W in • Continuing to rationalise our range with in-house November design increasingly pr
Slide 36: Outlook
For personal use only Outlook
Slide 37: Outlook
Outlook For personal use only • The focus of the Woolworths Group for H2’17 remains on our five key priorities, and with the exception of BIG W, we expect to see further progress in the second half. However, we still have a long way to go… • In the second half we will continue to invest in improving
Slide 38: Notes
Notes For personal use only 1. Return on funds employed (ROFE) is calculated as EBIT before significant items for the previous 12 months as a percentage of average (opening, mid and closing) funds employed. This methodology has been adopted for HY17 and HY16. In previous reporting periods, ROFE was
Slide 39: For personal use only
For personal use only
Slide 40: Disclaimer
Disclaimer This presentation contains summary information about Woolworths Limited (Woolworths) and its activities and is current as at For personal use only the date of this presentation. It should be read in conjunction with Woolworths’ other periodic and continuous disclosure announcements filed