Woolworths Holdings Limited · JSE:WHL
Woolworths — H1 2016 Earnings Presentation
64 slides from Woolworths's earnings presentation, February 2016
Slide 1: Woolworths Holdings Limited 2016 Interim Results
’16 WOOLWORTHS HOLDINGS LIMITED / 2016 INTER IM R ESULTS WHL / 1
Slide 2: Presentation Outline
PRESENTATION OUTLINE REVIEW OF THE PERIOD FINANCIAL REVIEW STRATEGIC FOCUS OUTLOOK WHL / 2
Slide 3: Review of the Period
REVIEW O F TH E PERI O D IAN MO I R WHL / 3
Slide 4: Building a Leading Southern Hemisphere Retailer
BUILDING A LEADING SOUTHERN HEMISPHERE RETAILER With Woolworths, David Jones and Country Road Group we have a strong position across the southern hemisphere through • Common seasonality • Using scale and global sourcing opportunities to deliver more competitive pricing for our customers • Building o
Slide 5: Diversified Earnings Base
DIVERSIFIED EARNINGS BASE OPERATING PROFIT BY SEGMENT (Rm) OPERATING 43% Australasia PROFIT BY GEOGRAPHY 57% Africa H1 2016 H1 2015 3% 22% OPERATING Group Clothing & GM PROFIT WFS* BY CATEGORY Food H1 2014 75% - 500 1000 1500 2000 2500 3000 3500 4000 4500 Woolworths Woolworths Food** Woolworths Clot
Slide 6: Group Performance
GROUP PERFORMANCE • Much improved performance in Clothing • Another above market performance from Food • Good performance from WFS continues • David Jones delivering well ahead of expectations • Country Road Group ahead of market despite underperformance of Country Road womenswear • Turnover and con
Slide 7: Woolworths Clothing & GM performance
• Clothing sales in South Africa (including Country Road Group brands) up 11.7%, with comparable sales up 8.0% – Good performance by all divisions and brands – Good turnaround in kidswear due to improved value and design • Grew market share in highly competitive market • Gross profit margin increase
Slide 8: Woolworths Food performance
• Strong performance well ahead of the market, with total sales up 12.1% (up 11.7% excluding concession sales) and comparable sales up 5.8% • Growth ahead of the market continues • Gross profit margin increased from 25.2% to 25.4% due to more profitable promotions • O perating margin increased from
Slide 9: Food Turnover Growth
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 8 FOOD TURNOVER GROWTH Food - Woolworths Woolworths vsvs market market growthgrowth (3mma) (3mma) 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 4 5 4 5 4 5 5 5 4 5 5 15 14 15 15 5 4 5 +1 +1 +1 +1 l +1 l +1 +1 +1 +1 r+1 +1 +1 +1 +1 n+ c+ c+ n+ ar ct ct ov ov ay
Slide 10: David Jones performance
• Total sales up 11.2%*, including concession sales, with comparable sales increasing 9.7%* – Growth well ahead of the market – Online sales up 48% to 3.5% of sales • Gross profit margin of 41.6%* – Impacted by weaker A$ and lower intake margin • Contribution to profit across the Group up 19% • Busi
Slide 11: Country Road Group performance
• Total turnover up 11.9%, well above market growth – Strong, profitable growth in David Jones concession business – Comparable sales in Australasia up 0.1% – 16.0% increase in space – Underperformance of core Country Road womenswear business – Online sales up 28% to 11.6% of sales • Gross profit ma
Slide 12: Financial Review
FINANCIAL REVIEW REEZA ISAACS WHL / 12
Slide 13: Still Some Complexity in the Numbers
STILL SOME COMPLEXITY IN THE NUMBERS • David Jones in current period for 6 months vs 5 months in prior period • David Jones acquisition debt in place for 5 months in prior period, but higher interest charge due to the equity bridge in place for 2 months • CRG minority interest for 2 months last year
Slide 14: Financial Overview
FINANCIAL OVERVIEW Group turnover and concession sales Up 17.1% to R35.5bn – excluding David Jones Up 12.3% Adjusted profit before tax Up 16.5% to R3.4bn HEPS – Diluted Up 30.8% to 251.7 cps HEPS – Adjusted diluted Up 3.9% to 250.8 cps Interim dividend Up 37.8% to 133.0 cps – scrip dividend option o
Slide 15: Group Income Statement
GROUP INCOME STATEMENT WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW REEZA ISAACS 14 GROUP INCOME STATEMENT Dec 2015 Dec 2014 % Rm Rm change Woolworths Clothing & GM 1 255 1 095 14.6 Woolworths Food 855 728 17.4 WFS (50% of PAT) 129 119 8.4 Woolworths 2 239 1 942 15.3 David Jones 1 090 1 022 6.7
Slide 16: Group Income Statement Commentary
GROUP INCOME STATEMENT COMMENTARY Adjustments Dec 2015 Dec 2014 Unrealised FX gains 21 36 DJ and CRG transactions and related costs (8) (585) Adjustments 13 (549) Effective tax rate - Prior year impacted by non-deductible costs WHL / 16
Slide 17: Woolworths Clothing & GM Income Statement
INCOME STATEMENT WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW REEZA ISAACS 15 WOOLWORTHS CLOTHING & GM INCOME STATEMENT Total Comp Price Dec 2015 Dec 2014 % stores move Rm Rm change Clothing (incl CRG SA) 11.7% 8.0% 6.6% Turnover 6 994 6 218 12.5 C&GM (excl CRG SA, Cost of sales 3 632 3 278 10.8
Slide 18: Income Statement Commentary
INCOME STATEMENT COMMENTARY Turnover Comp Price Total stores move Clothing (including CRG SA) 11.7% 8.0% 6.6% C&GM (excl CRG SA, incl 50% PSV) 12.5% 7.9% 6.9% Gross profit - Better promotions, improved markdown performance, and inclusion of PSV Expenses - Impacted by PSV, marketing and BEEESOS costs
Slide 19: Woolworths Food Income Statement
INCOME STATEMENT WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW REEZA ISAACS 16 WOOLWORTHS FOOD INCOME STATEMENT Dec 2015 Dec 2014 % Rm Rm change Total Comp Price Turnover and concession sales 12 376 11 041 12.1 stores move 12.1% 5.8% 5.7% Concession sales (274) (205) 33.7 Turnover – own buy 12 10
Slide 20: Income Statement Commentary
INCOME STATEMENT COMMENTARY Turnover and concession sales Comp Price Total stores move 12.1% 5.8% 5.7% Gross profit - own buy - More profitable promotions, offset by lower sweet sales Store costs - Impacted by new space WHL / 20
Slide 21: Woolworths Expenses
EXPENSES WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW REEZA ISAACS 17 WOOLWORTHS EXPENSES Dec 2015 Dec 2014 % Rm Rm change Store costs 2 989 2 654 12.6 Benefit of lower card commissions and Base 2 047 1 973 3.8 improved staff scheduling New stores 942 681 Other operating costs 1 402 1 250 12.2 I
Slide 22: Expenses Commentary
EXPENSES COMMENTARY Base store costs - Benefit of lower card commissions and improved staff scheduling Other operating costs - Impact of PSV, marketing and BEEESOS costs WHL / 22
Slide 23: WFS Income Statement
INCOME STATEMENT WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW REEZA ISAACS 18 WFS INCOME STATEMENT Consolidated pro-forma Dec 2015 % to Dec 2014 % to % income statement Rm book Rm book change Interest income 958 19.4 838 18.7 14.3 Portfolio book growth and Interest paid 274 5.5 243 5.4 12.8 marg
Slide 24: Income Statement Commentary
INCOME STATEMENT COMMENTARY Net interest income - Portfolio book growth and margin gains on interest rate increases Impairment charge - Improvement in portfolio book offset by increase in debt counselling inflows Operating costs - WRewards and NCAA implementation costs Average financial services ass
Slide 25: WFS Book Performance
BOOK PERFORMANCE WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW REEZA ISAACS 19 WFS BOOK PERFORMANCE 9 938 10 000 9 221 10% 8 359 8 000 7 344 8% 6 558 6 000 6% 4.8% 4.8% 4.3% 4 000 3.0% 2.7% 4% 1 863 1 885 1 926 1 918 1 888 2 000 2% - 0% Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 Gross book value (Rm) Tot
Slide 26: David Jones Income Statement
INCOME STATEMENT WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW REEZA ISAACS 20 DAVID JONES INCOME STATEMENT 6 months 5 months* Dec 2015 Dec 2014 A$m A$m Sales growth of 11.2%, with Turnover and concession sales 1 149 890 comparable stores up 9.7% Concession sales (391) (273) Includes high clearan
Slide 27: Income Statement Commentary
INCOME STATEMENT COMMENTARY Turnover and concession sales - Sales growth of 11.2%, with comparable stores up 9.7% Gross profit – own buy - Includes high clearance month of July, and lower intake margin on A$ weakness Concession and other revenue - Change in concession/own buy mix and service model,
Slide 28: David Jones Income Statement
INCOME STATEMENT WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW REEZA ISAACS 21 DAVID JONES INCOME STATEMENT 6 months Full vertical* Dec 2015 6 months A$m Dec 2015 A$m Turnover and concession sales 1 149 1 155 Concession sales (391) Turnover – own buy 758 Cost of sales 404 Gross profit – own buy 3
Slide 29: Income Statement Commentary
INCOME STATEMENT COMMENTARY Gross profit margin Operating profit margin - Positive gross profit and operating profit margin leverage for the Group from higher margins and expense leverage WHL / 29
Slide 30: Country Road Group Income Statement
INCOME STATEMENT WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW REEZA ISAACS 22 COUNTRY ROAD GROUP INCOME STATEMENT Dec 2015 Dec 2014 % A$m A$m change Above market growth, comparable sales up 0.1% in Turnover 516 461 11.9 Australasia Cost of sales 201 174 15.5 Increased markdowns in Country Gross
Slide 31: Income Statement Commentary
INCOME STATEMENT COMMENTARY Turnover - Above market growth, comparable sales up 0.1% in Australasia Gross profit - Increased markdowns in Country Road womenswear Store costs - Impact of 16.0% new space WHL / 31
Slide 32: Finance and Other Costs
FINANCE AND OTHER COSTS WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW REEZA ISAACS 23 TREASURY Dec 2015 Dec 2014 Capital Rate** Rm Rm ZAR senior debt* R10bn 8.91% 443 365 AUD senior debt* $497m 4.42% 115 110 Short-term facilities 36 194 Equity bridge - 134 Net finance costs 594 803 Less: non-recu
Slide 33: Balance Sheet
BALANCE SHEET WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW REEZA ISAACS 24 BALANCE SHEET Constant Dec 2015 Dec 2014 % currency Rm Rm change % change Assets Property, plant and equipment and New stores and project costs investment properties 16 986 13 758 23.5 7.7 Intangible assets 18 505 16 562
Slide 34: Balance Sheet Commentary
BALANCE SHEET COMMENTARY Property, plant and equipment and investment properties - New stores and project costs Inventories - Impacted by space growth, inflation, PSV and lower sell through in CRG Cash Borrowings - Net gearing in constant currency has improved WHL / 34
Slide 35: Cash Generation
CASH GENERATION FOR SIX MONTHS FROMFINANCIAL JUNE 2015 WHL REVIEW REEZA ISAACS 25 WOOLWORTHS HOLDINGS LIMITED CASH GENERATION Rm For six months from June 2015 6 000 5 208 5 000 (102) (592) 4 000 (962) 3 000 2 000 (1 432) 1 000 531 (1 442) (25) (122) - Cash flow Working Finance Taxation Net Dividends
Slide 36: Capital Expenditure and Depreciation
CAPITAL WHLWHL EXPENDITURE WOOLWORTHSWOOLWORTHS HOLDINGS LIMITED HOLDINGS LIMITED DEPRECIATION FINANCIAL REVIEW FINANCIAL REEZAREVIEW ISAACS 26 REEZA ISAACS 26 CAPITALCAPITAL EXPENDITURE EXPENDITURE DEPRECIATION DEPRECIATION Capex (Rm)Capex (Rm) R1 305m (Dec 2014: R1 305m R1 325m) (Dec 2014: R1 325m
Slide 37: Earnings and Distribution
EARNINGS AND DISTRIBUTION WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW REEZA ISAACS 27 EARNINGS AND DISTRIBUTION cents times 1.9 1.9 1.9 1.9 280 1.8 2.0 253.5 240 1.6 200 194.1 183.6 156.7 1.2 160 129.5 133.0 120 0.8 96.4 96.5 82.1 80 71.6 0.4 40 - - Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 HEPS* DPS*
Slide 38: Guidance
GUIDANCE WHL / 38
Slide 39: Group Guidance
GROUP • Deterioration in global outlook; impact on SA and Australian economies and consumer • Our response – appropriate review of costs and capex • Trading in the first 6 weeks of the second half has been in line with that of the first half Shareholders are advised that this information has not bee
Slide 40: Woolworths Guidance
• Clothing & GM price movement expected to be 8 – 9% for FY2016 • Food price movement expected to be 6 – 7% for FY2016 • Full year space growth: 5.0% in Clothing & GM; 9.8% in Food • Gross profit margins to be broadly maintained in Clothing; will be some price investment in Food • WFS book growth an
Slide 41: David Jones Guidance
• Above market sales growth expected to continue – up against a strong second half last year • Transformation to gain traction – will impact expenses and capex in H2 • Expecting improved sales performance from Country Road womenswear • Mimco to roll out in 11 Myer stores in Q3 • Continued focus on c
Slide 42: Group Continued
GROUP CONTINUED • Taxation - effective tax rate of 28% in SA and 30% in Australia • Capex for FY2016 – R2.0bn in South Africa – A$100m in David Jones – A$56m in Country Road Group Shareholders are advised that this information has not been reviewed and reported on by the group’s external auditors an
Slide 43: Strategic Focus
STRATEGIC FOCUS IAN MOIR WHL / 43
Slide 44: Strategy Update
STRATEGY UPDATE • Group Focus – Stronger, more profitable customer relationships – Towards total retail – Drive synergies and efficiencies – Embed sustainability throughout the business • Woolworths • David Jones • Country Road Group WHL / 44
Slide 45: Group Focus: Stronger, more profitable customer relationships
GROUP FOCUS 1 Stronger, more profitable customer relationships • Customer insights and data will drive and inform all our business decisions which will shift us from being a customer centric business to a customer driven group WHL / 45
Slide 46: Group Focus: Towards total retail
GROUP FOCUS 2 Towards total retail • I ncreased focus on the customer and integrated, customer-focused technology to move from a channel to total retail experience • Building single view of customer, enabling customers to be recognised and rewarded in real time, with delivery of personalised, seamle
Slide 47: Group Focus: Drive synergies and efficiencies
GROUP FOCUS 3 Drive synergies and efficiencies • D rive scale benefits across the southern hemisphere • Improved distribution capacity • Leverage real estate in Australia WHL / 47
Slide 48: Group Focus: Embed sustainability
GROUP FOCUS 4 Embed sustainability throughout the business • D riving a consistent, group-wide Good Business Journey strategy with the objective of being the most sustainable retailer in the southern hemisphere WHL / 48
Slide 49: Woolworths Clothing: leading fashion retailer
• Be a leading fashion retailer in the southern hemisphere – Attract younger, more modern, black customers while maintaining our older, very loyal, more classic customer – Lead the market in quality and range – Strengthen value perceptions – Continue to build fashion credibility WHL / 49
Slide 50: Woolworths Food: big food business with a difference
• Become a big food business with a difference – Continue to complete the shop – Improve our value perception by investing in price – Maintain our food authority credentials • Continue to expand into Africa • Transform the WFS customer experience – E nhanced by alignment with WRewards programme in O
Slide 51: David Jones strategy: customer relationships and fashion
• Build stronger, more profitable customer relationships – Introduction of Customer Relationship Management (CRM) programme • Be a leading fashion retailer in the southern hemisphere – Focus on our brand and customer – Improvement in merchandise – Implement integrated planning system – O ptimise sto
Slide 52: David Jones: enhance food offer and experience
• Enhance the food offer and in-store experience – Stabilise the current business – Build for scale • Continue to enhance the online performance to > 10% sales of total sales and transform profitability • Consolidation of David Jones CBD flagship stores, focusing on Sydney in 2016 • Rental benefits
Slide 53: Country Road Group: leading fashion retailer
• Be a leading fashion retailer in the southern hemisphere – Drive and grow four clearly differentiated brands – Increased focus on design – Refocus on core business, specifically Country Road womenswear •Refine product to reflect customer feedback with strong seasonal direction • Define and standar
Slide 54: Country Road Group: customer experience and channels
• Further refinement of the customer experience • O ptimise channel mix by reviewing our store network and optimising the online fulfilment model • Drive efficiencies from the transition to the new Melbourne-based omni-channel fulfilment centre WHL / 54
Slide 55: Outlook
OUT IAN MO I R WHL / 55 LOOK
Slide 56: Outlook
WHL OUTLOOK WOOLWORTHS HOLDINGS LIMITED OUTLOOK IAN MOIR 39 OUTLOOK • South African economy likely to become more constrained ! South African economy likely to become more constrained WHL• Australian economy and retail environment to remain tough in the WOOLWORTHS HOLDINGS LIMITED OUTLOOK IAN MOIR 3
Slide 57: Additional Info
INFO ADDITIO NAL WHL / 57
Slide 58: Trading Space
TRADING SPACE WHL WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 43 TRADING SPACE Projected Projected Projected Dec 2015 Dec 2014 % Jun 2016 % Jun 2017 % Jun 2018 % 000m2 000m2 change 000m2 change* 000m2 change 000m2 change Woolworths Clothing & GM 450 425 5.9 462 5.0 478 3.5 506 5.9 South Afric
Slide 59: Store Locations
STORE LOCATIONS WHL WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 44 STORE LOCATIONS Projected Projected Projected Dec 2015 Dec 2014 Growth Jun 2016 Growth* Jun 2017 Growth Jun 2018 Growth Woolworths Clothing & GM 282 267 15 285 6 291 6 302 11 South Africa 217 205 12 219 5 221 2 229 8 Rest of A
Slide 60: WFS Contribution to Sales
CONTRIBUTION ADDITIONAL TO SALES WHL WOOLWORTHS HOLDINGS LIMITED INFORMATION 45 WFS CONTRIBUTION TO SALES % of sales spent on Woolworths cards Dec 2015 Dec 2014 Clothing & GM 23.5% 24.7% Food 10.6% 11.5% Aggregate Woolworths card contribution 15.4% 16.5% Credit card 1.4% 1.3% Aggregate Woolworths an
Slide 61: David Jones Income Statement (in Rands)
INCOME STATEMENT (IN RANDS) WHL WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 46 DAVID JONES INCOME STATEMENT (IN RANDS) 6 months 5 months Dec 2015 Dec 2014 Rm Rm Turnover and concession sales 11 427 8 619 Concession sales (3 877) (2 655) Turnover – own buy 7 550 5 964 Cost of sales 4 006 3 027
Slide 62: David Jones Balance Sheet
BALANCE SHEET WHL WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 47 DAVID JONES BALANCE SHEET Dec 2015 Dec 2014 % A$m A$m change Assets Property, plant and equipment 1 028 994 3.4 Goodwill and brands 1 344 1 407 (4.5) Intangible assets 21 28 (25.0) Inventories 229 185 23.8 Accounts receivable, t
Slide 63: Country Road Group Income Statement (in Rands)
INCOME STATEMENTADDITIONAL (IN RANDS) WHL WOOLWORTHS HOLDINGS LIMITED INFORMATION 48 COUNTRY ROAD GROUP INCOME STATEMENT (IN RANDS) Dec 2015 Dec 2014 % Rm Rm change Turnover 5 117 4 487 14.0 Cost of sales 1 991 1 698 17.3 Gross profit 3 126 2 789 12.1 Other revenue 17 14 21.4 Expenses 2 511 2 248 11
Slide 64: Country Road Group Balance Sheet
BALANCE SHEET WHL WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 49 COUNTRY ROAD GROUP BALANCE SHEET Dec 2015 Dec 2014 % A$m A$m change Assets Property, plant and equipment 174 130 33.8 Intangible assets 136 136 - Inventories 133 113 17.7 Accounts receivable, tax and deferred tax 68 55 23.6 Cash