Woolworths Group Ltd · ASX:WOW
Woolworths — H1 FY2014 Earnings Presentation
51 slides from Woolworths's earnings presentation, Dec 7, 2017
Slide 1: Company Results Half Year Ended 5 January 2014
Slide 2: Group Performance and Strategic Priorities agenda
Grant O'Brien Group Performance and Strategic Priorities Tjeerd Jegen Australian Supermarkets and Petrol Brad Banducci Woolworths Liquor Group Dave Chambers New Zealand Supermarkets Karen Bozic General Merchandise Matt Tyson Home Improvement David Marr Group Financial Performance Grant O'Brien Outlo
Slide 3: Total Group Continuing Operations Before Significant Items
Continuing Operations Total Group Before Significant Items1 Sales $31.8b 3.8% $31.8b 6.0% EBIT $2,048.0m 11.3% $2,048.0m 5.9% NPAT $1,321.7m 14.5% $1,321.7m 6.0% EPS 106.1¢ 13.4% 106.1¢ 4.9% DPS 65¢ 4.8% ROFE 14.9% 87 bps2 1. There were no significant items in HY14. Significant i
Slide 4: Group EBIT by segment
$ million HY13 HY14 Change Australian Food and Liquor 1,583.9 1,692.1 6.8% Petrol 71.0 74.0 4.2% Australian Food, Liquor and Petrol 1,654.9 1,766.1 6.7% New Zealand Supermarkets (NZD) 162.3 164.4 1.3% New Zealand Supermarkets 124.7 136.8 9.7% General Merchandise 129.5 120.5 (6.9)% Hotels 140.8 163.9
Slide 5: Strategic priorities: maximise shareholder value
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Slide 6: Strategic priorities progress: Australian Food, Liquor, NZ
• Improving comparable • Improved • Fresh market share • Increased access to • Early stages of sales performance and communication of our growing faster than our market leading transforming our EBIT growth value credentials Grocery bricks & mortar offer Countdown business • Increased market • ‘More
Slide 7: Strategic priorities progress: Petrol, Hotels, General Merchandise
• Commenced the transformation of • Industry leading hotel and gaming • Expanding availability of diesel, our customer offer charter reinforcing our commitment premium fuels and fast flow pumps • Reprioritising categories of greatest to responsible service of gaming • Maximising our merchandise offe
Slide 8: Multi-option and Home Improvement progress
• Online sales exceeded $1b for the 2013 calendar year, • 38 Masters stores trading at the end of the half ahead of our FY14 target • On track to have 49 stores trading by year end • Market leading online food offers in Australia and New • Refreshed Home Timber and Hardware company stores Zealand de
Slide 9: Enablers: supply chain, systems, loyalty, people
• Detailed planning has • Delivering on our ‘cost out’ • Everyday Rewards loyalty • Continued focus on blending commenced for our next ambitions across our membership up to 7.5m and the best local and generation supply chain businesses Onecard members up to international talent at all levels capabil
Slide 10: Australian Supermarkets and Petrol
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Slide 11: Australian Supermarkets
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Slide 12: Australian Food and Liquor and Petrol results
• Food & Liquor HY14 comparable sales growth was Sales – Food & Liquor ($m) 20,488 21,477 4.8% 3.0% with increased momentum in Q2 delivering comparable sales growth of 3.4% – Petrol ($m) 3,393 3,665 8.0% • Successful Christmas trading period driven by our leading positions in price and range – Total
Slide 13: First choice for fresh food
1. First choice for fresh food • Continued to improve the quality of our Fresh offer, with enhancements to our supply chain • In line with our strategy to be first choice for fresh food, our Fresh market share is growing faster than Grocery • Jamie Oliver partnership focusing on affordable fresh foo
Slide 14: Unbeatable value
2. Unbeatable value • Improved the communication of our value credentials through 'More Savings Every Day' • As our key value platform, 'More Savings Every Day' delivered savings of $400m+ to customers over the half, through 3 clear and simple ways • Reinforced our price leadership among full range
Slide 15: Customer insights transforming our business
3. Customer insights transforming our business • Increase in Everyday Rewards members to 7.5m (up 11% on HY13) with strong growth in card scan rates • Together with Quantium, we are working closely with suppliers to leverage our Everyday Rewards data to deliver insights and better decisions across p
Slide 16: Innovative new offers
4. Innovative new offers • A permanent 'Gold' range now launched setting a new high standard for own brand products in quality, innovation and taste • Roll out of new in-store offers including – ‘Healthy Lunchbox’ (104 stores) – ‘Food to Go’ sandwiches and salads (127 stores) – Fresh barista coffee
Slide 17: Multi-option offering customers more flexibility
5.Multi-option offering customers more flexibility • The number of unique visitors to our online site has more than doubled during the half • We deliver 3m+ items to customers each week, with home delivery now available to more than 95% of Australian households • Expanded Click & Collect network to
Slide 18: Petrol results
• Sales increased by 8.0% driven by higher average fuel sell prices and pleasing growth in merchandise sales • Competitor activity focused on increased fuel discounts which impacted our fuel volumes • EBIT increased 4.2% to $74.0m through – The continuing shift towards premium unleaded and diesel fu
Slide 19: Petrol strategic priorities
1. Provide customers with a compelling fuel offer • Continued investment in forecourt improvements, providing customers with better access to diesel, premium fuels and fast flow pumps • During the half, signage at 32 sites were rebranded and 52 canopies and forecourts refreshed 2. Accelerate merchan
Slide 20: Woolworths Liquor Group
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Slide 21: Liquor sales by half year
$ billion Comments • Strong result for the half year HY10 3.1 with good sales growth across all three channels – Dan Murphy’s (Destination), BWS HY11 3.2 (Convenience) and The Wine Quarter (Online) highlighting the relevance of each of our HY12 3.6 offerings • Growth in the Wine category was a key h
Slide 22: Liquor customer segments and channels
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Slide 23: Evolve Dan Murphy's; develop BWS
1. Continue to evolve Dan Murphy’s • Australia’s premier liquor destination continues to grow, opening 6 stores in HY14, with total stores now 181 • Extended our multi-option leadership through – Launch of Australia's favourite liquor App, with photo recognition technology – Extra delivery options -
Slide 24: Pinnacle Liquor and The Wine Quarter
3. Increase own and exclusive brand penetration through Pinnacle Liquor • Pinnacle Liquor continues to grow as our own and exclusive product and brand marketing arm • New and innovative products launched during the half with a pleasing customer response 4. Leadership in Digital and Direct via The Wi
Slide 25: Hotels results
• Trading conditions are a challenge at present, especially in Bars and Gaming. Sales ($m) 759 788 3.8% Our Food offer remains a focus and we are seeing solid results as we concentrate on providing value meals in a family friendly EBIT ($m) 140.8 163.9 16.4% setting • Gross margin increase was assis
Slide 26: Hotels strategic priorities
1. To be Australia’s most responsible operator of local pubs • Commenced the introduction of voluntary pre-commitment functionality on all gaming machines ahead of any planned state legislation, allowing customers to monitor their play and set time or spend limits • Industry leading hotel and gaming
Slide 27: NZ Supermarkets
Slide 28: NZ Supermarkets results
• HY14 comparable sales 0.7%2, with the Q2 result the strongest sales growth seen in 18 months Before Significant Items1 • Continued growth in market share, customer numbers and items sold reflecting the relevance Sales ($m) 2,944 3,020 2.6% of our offer and success of promotional activity • Gross m
Slide 29: Customer value, local sourcing, multi-option
1. Customer value and innovative offers • Customers have responded well to the launch of ‘Price Lockdown’, supported by strong in-store communication • Produce sales growth outperformed overall growth with our focused grower program, supported by strong in-store execution, maximising seasonal sales
Slide 30: Supply chain and network growth
4. Supply chain • Efficiencies continue from the reconfigured national and regional DC operations structure, with costs as a percentage of sales (in NZD) decreasing by 6 bps in HY14 • In-store product availability remained strong during the half 5. Grow Countdown and franchise network • 2 Countdown
Slide 31: General Merchandise
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Slide 32: General Merchandise results
• Sales growth was 0.2% for HY14, impacted by the timing of the Toy Sale and the business transformation as anticipated Sales ($m) 2,447 2,452 0.2% • Trading conditions continue to be challenging EBIT ($m) 129.5 120.5 (6.9)% with strong competition, ongoing price deflation (HY14 4.1%) and increased
Slide 33: Transforming our business for the future
1. Transforming our business for the future • Commenced our transformation of BIG W, focusing on categories of high customer importance which will provide medium to long-term profitable growth • Hardgoods transformation will encompass significant change as we rationalise and make way for new and exp
Slide 34: Brands that win on value; multi-option
2. Strong growth in brands that win on value everyday • Pleasing growth in Apparel with strong results delivered through exclusive brands such as 'Peter Morrissey' and the 'Michelle Bridges' and 'Guy Leech' active wear ranges • Our new 'Lee Cooper' range is showing pleasing early results • Home depa
Slide 35: Home Improvement
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Slide 36: Home Improvement results
• Our Masters network continues to grow strongly, with 38 stores trading at HY14 • Masters sales up 49.4%, with stores now having traded on average, for 15 months • Masters EBIT loss of $71.9m for the half year • We remain focused on executing our plan to achieve breakeven in Masters during FY16 by
Slide 37: Improve sales performance; enhance in-store offer
1. Improve sales performance • Frequency of return customer visits increased through tailored offers • Strong trading in Kitchens, Appliances and Gardening demonstrates the appeal of our differentiated offer • Australia’s Best New Online Retailer at the 2013 ORIAs • Focus on trade and serious DIY cu
Slide 38: Cost efficiencies and Masters rollout
3. Continue to drive cost efficiencies • Significant progress in reducing days stock on hand in Masters through supply chain improvements and inventory management • Pleasing results from cost saving initiatives in stores • Commenced the expansion of our Home Timber and Hardware DC in NSW which will
Slide 39: Group Financial Performance
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Slide 40: Balance sheet
Change $ million FY13 HY13 HY14 HY14/HY13 CONTINUING OPERATIONS • Inventory increase was primarily driven by new store Inventory 4,205.4 4,498.9 4,779.8 6.2% openings, in particular 33 Australian Supermarkets (net) and 13 Masters stores since HY13 and increased direct Trade Payables (4,080.0) (5,363
Slide 41: Average inventory days
Number of Days Comments HY10 31.6 • Average inventory increased by 2.9 days driven by – Masters store roll out 31.5 – Increased bulk wine HY11 holdings in our Liquor business – Increased direct global HY12 32.11 32.6 sourcing • Excluding Home Improvement and incremental global sourced inventory, ave
Slide 42: Cash flow
• Cash from Operating Activities before Interest and Tax decreased 4.1% on the prior half year, $ million HY13 HY14 Change impacted by the timing of creditor payments EBITDA – Total 2,328.5 2,570.8 10.4% relative to the reporting dates. Excluding this, Net (increase) in inventory (890.6) (511.2) the
Slide 43: Dividends and share buy backs
$ billion Comments • In HY14, we have Interim dividend continued to grow Final dividend 2.2 2.2 dividend payments to Buy back 0.7 0.5 shareholders In-specie distribution • Payout ratio in line with 1.7 HY13 1.6 • No share buy back activity 0.3 0.9 anticipated in the second 0.9 0.8 half of FY14 1.3 0
Slide 44: Return on funds employed
Percentage Comments • ROFE from continuing HY10 17.7 operations before significant items decreased 87 bps to 14.9% driven by – The impact of differences HY11 16.7 in the timing of creditor payments relative to the reporting dates HY12 15.4 – The continuing investment in our Home Improvement business
Slide 45: Outlook
• Woolworths remains well positioned in its market segments and has a strong and sustainable business model • We previously provided guidance for FY14 net profit after tax from continuing operations to grow in the range of 4% - 7% (on a normalised 52 week basis excluding significant items) • Whilst
Slide 46: Appendix
Slide 47: 45
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Slide 48: Gross profit margin
Percentage Comments • Gross profit as a percentage of sales from continuing operations HY10 25.94% increased 9 bps on the prior year reflecting – Improvements in buying HY11 26.18% – More effective promotional activity – Growth in exclusive brand 26.33% ranges HY12 – Positive changes in sales mix •
Slide 49: Cost of doing business
Percentage Comments • CODB as a percentage of sales from HY10 19.65% continuing operations before significant items increased 10 bps on the prior half year, to 20.61% • Excluding non-comparable HY11 19.71% additional net costs following the SCA transaction and the Home Improvement business which rem
Slide 50: Capex and store numbers
New Stores1 Refurbs HY13 HY14 $ million Actual Actual Store numbers HY13 HY14 HY13 HY14 New Stores 140 104 Australian Supermarkets 17 26 42 13 Refurbishments 2361 179 Liquor 41 22 23 24 Growth Capex 376 283 NZ Supermarkets 4 2 2 1 Supply Chain, IT, Multi-option and Stay in Business 128 214 Petrol 8
Slide 51: Capex forecast FY14
Previous Current 2012 2013 2014 $ million – 2014 Fcst Fcst Var $ million – Full Year Actual Actual Fcst New Stores 250 276 26 New Stores 346 300 276 Refurbishments 472 427 (45) Refurbishments 268 478 427 Growth Capex 722 703 (19) Growth Capex 614 778 703 Supply Chain, IT, Multi-option and Supply Cha