Slide 1: Company Results HY Ended 1 January 2012
Company Results HY Ended 1 January 2012 Grant O'Brien Managing Director and Chief Executive Officer
Slide 2: Agenda
AGENDA GROUP STRATEGIC PRIORITIES PROGRESS AGAINST STRATEGIC PRIORITIES BUSINESS UNIT RESULTS FINANCIAL PERFORMANCE 1 1
Slide 3: Group Strategic Priorities
GROUP STRATEGIC PRIORITIES 2 2
Slide 4: Our Ambition
OUR AMBITION WOOLWORTHS LIMITED IS AUSTRALIA'S LEADING RETAIL GROUP, CREATING A CUSTOMER-DRIVEN FUTURE OF INNOVATION AND GROWTH BRANDS FOR OUR MULTIPLE REASONS EVERYDAY CUSTOMER OPTIONS TO SHOP NEEDS Range Service Value Convenience 3 3
Slide 5: Building on Our Success
BUILDING ON OUR SUCCESS OUR OBJECTIVE IS A RENEWED FOCUS ON INNOVATING FOR OUR CUSTOMERS AND OPTIMISE THE BUSINESS FOR OUR SHAREHOLDERS TO ACHIEVE GROWTH AND PERFORMANCE IMPROVEMENT FROM A STRONG AND STABLE BASE GP / CODB / EBIT Margin Rate $m Baselined: FY99 = 100 30% 700 We drove down COGS and mad
Slide 6: Strategic Priorities for Future Growth
STRATEGIC PRIORITIES FOR FUTURE GROWTH • Re-establish marketing supremacy around value and growth EXTEND AND DEFEND • Unlock sales growth for a tougher consumer and competitive environment 1 LEADERSHIP IN • Accelerate our leadership in Fresh Food FOOD AND LIQUOR • Extend leadership in liquor • Conti
Slide 7: Progress Against Strategic Priorities
PROGRESS AGAINST STRATEGIC PRIORITIES 6 6
Slide 8: Extend and Defend Leadership in Food and Liquor
1 EXTEND AND DEFEND LEADERSHIP STRATEGIC PROGRESS GOOD INITIAL START – IN FOOD AND LIQUOR MUCH MORE TO DO Tjeerd Jegen making Space growth improvements Excellent momentum in New Zealand transformation excellent progress with continuing, further liquor continues with further delivering strong results
Slide 9: Act on Our Portfolio to Maximise Shareholder Value
2 ACT ON OUR PORTFOLIO TO MAXIMISE STRATEGIC PROGRESS GOOD INITIAL START – SHAREHOLDER VALUE MUCH MORE TO DO Accelerated the review of Dick Smith, culminating in a Initial steps taken to improve BIG W’s value perception with sharper decision to restructure and divest the business. Sale entry price p
Slide 10: Maintain Our Track Record of Building New Growth
3 MAINTAIN OUR TRACK RECORD OF STRATEGIC PROGRESS GOOD INITIAL START – BUILDING NEW GROWTH MUCH MORE TO DO Strong multi-option Launch of Door Buster, 118% increase in total 9 Masters stores Acquisition of 12 Hotels growth with strategy Supermarkets mobile online sales for the currently open and from
Slide 11: Put in Place the Enablers for a New Era of Growth
4 PUT IN PLACE THE ENABLERS FOR A STRATEGIC PROGRESS GOOD INITIAL START – NEW ERA OF GROWTH MUCH MORE TO DO Latest supply chain initiative, Data driven "Category Lab" Cost savings resulting from Focused on assembling a world Hoxton Park DC, about to go is proving to be a growing Quantum initiatives
Slide 12: Business Unit Results
BUSINESS UNIT RESULTS 11 11
Slide 13: Results — Half Year 2012
RESULTS — HALF YEAR 2012 Continuing Total Group Before Total Group After Operations CE Provision1 CE Provision HY12 HY12 HY12 Sales – Group $28.9b 5.2% $29.7b 5.0% $29.7b 5.0% EBITDA $2,282.5m 4.1% $2,314.2m 3.9% $2,014.2m 9.6% EBIT $1,825.9m 3.3% $1,845.4m 3.3% $1,545.4m 13.5% NPA
Slide 14: Supermarkets
Supermarkets Tjeerd Jegen Managing Director Australian Supermarkets & Petrol 13
Slide 15: Australian Food, Liquor & Petrol
AUSTRALIAN FOOD, LIQUOR & PETROL HY11 HY12 Change • Sales up 5.9%, EBIT up 6.3% Sales – Food & Liquor ($m) 18,772 19,571 4.3% • Comparable Food and Liquor sales up – Petrol ($m) 2,945 3,434 16.6% 1.5% – Total ($m) 21,717 23,005 5.9% • Average prices index was in deflation Gross margin (%) 24.80 24.8
Slide 16: Growth in Supermarkets — Our New Vision
GROWTH IN SUPERMARKETS — OUR NEW VISION 15 15
Slide 17: Best Retail Talent and Best Resources
BEST RETAIL TALENT AND BEST RESOURCES WORLD CLASS TEAM • Strong local talent now blending with globally experienced new recruits to create depth of expertise and breadth of experience • Average length of tenure of senior team is 15 years WITH THE BEST RESOURCES • 4 month marketing review process nea
Slide 18: First Choice for Fresh Food
FIRST CHOICE FOR FRESH FOOD AUSTRALIA'S FRESH FOOD PEOPLE • Innovations in Fresh Food have continued, with positive sales momentum, led by Bakery, Deli and Meat INDUSTRY LEADING SUPPLY CHAIN • Approximately half a day removed from Produce end to end supply chain in the last 6 months – good progress
Slide 19: First Choice for Fresh Food — MSA Beef
FIRST CHOICE FOR FRESH FOOD — MSA BEEF A UNIQUE MODEL • First National Australian Supermarket to receive MSA accreditation • Sourcing livestock for over 20 years direct from Australian farmers • Unique end to end sourcing model with full control of meat quality at every step CUSTOMER APPROVED • Cust
Slide 20: Unbeatable Value
UNBEATABLE VALUE GREAT PROGRESS ON OUR VALUE CONTRACT WITH CUSTOMERS • Roll out of new store-wide price ticketing clearly highlighting value • Strong customer response to seasonal value offers – Lamb leg coupons – Christmas ham offer CONTINUED IMPROVEMENTS IN REDUCING COGS JUST STARTING TO FLOW THRO
Slide 21: Customer Led
CUSTOMER LED POWER OF INSIGHTS • Extensive progress on "Category Lab" reviews with 6 dedicated teams – a growing and powerful capability • Completion of category deep dives on over 20% of sales base or 35 key categories in last 6 months • Started weekly ‘Customer Talkback’ focus groups in stores to
Slide 22: Exciting New Offers — Brands
EXCITING NEW OFFERS — BRANDS CUSTOMERS APPRECIATE CHOICE • Our depth and breadth of range is appreciated by our customers • Proprietary brands remain the most important offer in longlife complemented by a strong Own Brand range GROWING CATEGORY VALUE WITH BRANDS • Together with our branded suppliers
Slide 23: Exciting New Offers — Own Brands
EXCITING NEW OFFERS — OWN BRANDS CONTINUED SUCCESS FOR MACRO • Macro now our fastest growing segment. Creating a new ‘Food that is good for you’ category with new opportunities for branded players to enter • Fastest growth of Macro is in Fresh Foods where our Free Range Poultry products have gained
Slide 24: Shopping Tailored for Our Customers
SHOPPING TAILORED FOR OUR CUSTOMERS MOBILE… …TO ONLINE • 1.5m customers have downloaded • New online shopping platform was Australia's most subscribed shopping app launched November 2011 • Upgraded mobile app launched 2 weeks • Enhanced features and benefits include ago which now connects to online
Slide 25: Petrol
PETROL A STRONG RESULT • Sales were $3.4b, up 16.6%. Merchandise (non-fuel) up 9.4% • Comparable sales (dollars) increased by 13.7% reflecting higher fuel prices • Volumes increased 2.5% for the half • National average fuel prices were 140.8 cpl for the half year, up from 124.0 cpl at HY11 • Market
Slide 26: Woolworths Liquor Group
Woolworths Liquor Group Steve Greentree Director Woolworths Liquor Group 25
Slide 27: Liquor
LIQUOR CONTINUED MOMENTUM • Group Liquor sales $3.6b (HY11: $3.2b) • The Liquor group experienced another half of strong growth across all brands, gaining further market share, despite increased competitor activity LEADERSHIP IN MULTI-OPTION • The acquisition of the Cellarmasters Group, has provided
Slide 28: Hotels
HOTELS • Sales increased 3.9% with gaming HY11 HY12 Change comparable sales up 1.3% Sales ($m) 612 636 3.9% • Result reflects the strong sales across Gross margin (%) 81.60 81.47 (13) bps both food and bar offerings CODB (%) 63.32 63.20 (12) bps • There continues to be a change in sales EBIT to sale
Slide 29: Liquor & Hotels — Imperatives to Drive Growth
LIQUOR & HOTELS — 7 IMPERATIVES TO DRIVE GROWTH 1 GROW NETWORK • Opened 14 Dan Murphy's and 32 BWS stores, totalling 1,302 liquor outlets at the end of HY12 • Compass Group acquisition added 12 hotels to the network. Laundy, subject to regulatory approval, will represent an additional 31 hotels and
Slide 30: NZ Supermarkets
NZ Supermarkets Dave Chambers Managing Director PEL 29
Slide 31: New Zealand Supermarkets
NEW ZEALAND SUPERMARKETS NZ$ HY11 HY12 Change Sales ($m) 2,795 2,879 3.0% • Sales up 3.0%, Trading EBIT up 9.2% Gross margin (%) 22.41 23.02 61 bps • Comparable sales up 4.5% CODB (%) 17.44 17.75 31 bps • Largest retail brand by turnover in New Zealand sustained by growth in market EBIT to sales (%)
Slide 32: New Zealand Supermarkets Strategic Priorities
NEW ZEALAND SUPERMARKETS 1 SINGLE BRAND • Last Foodtown and Woolworths stores rebranded just before Christmas GROW 2 COUNTDOWN NETWORK • 2 further new stores opened in January 2012 including the first Countdown Metro store in the Auckland CBD 3 LARGER, MODERN • Replacement, extension and refurbishme
Slide 33: BIG W
BIG W Julie Coates Director BIG W 32
Slide 34: BIG W
BIG W HY11 HY12 Change Sales ($m) 2,392 2,362 (1.3)% • Sales down 1.3%, EBIT down 4.3%. EBIT in Q2 Gross margin (%) 29.52 30.37 85 bps grew positively CODB (%) 24.29 25.31 102 bps • Comparable sales down 2.8%, prior year EBIT to sales (%) 5.23 5.06 (17) bps down 4.2% EBIT ($m) 125.0 119.6 (4.3)% • P
Slide 35: BIG W — Strategic Priorities: Win on Value
BIG W — STRATEGIC PRIORITIES 1 WIN ON VALUE EVERYDAY • Successful launch of Emerson brand, on-trend product at an entry level price point • "Get it For Less" marketing campaign effectively communicates our price leadership position • Successful launch of BIG W's "Smart Value" range to appeal to pric
Slide 36: BIG W — Strategic Priorities: Store Footprint and Multi-option
BIG W — STRATEGIC PRIORITIES 2 CONTINUE TO GROW STORE FOOTPRINT • Delivered 4 new stores in the half, further 3 to open in second half • Strong property pipeline to deliver up to 35 stores in the next 5 years • 69% of stores now have the new livery 3 LEAD IN MULTI-OPTION • Extended leadership with e
Slide 37: BIG W — Strategic Priorities: Supply Chain and Sourcing
BIG W — STRATEGIC PRIORITIES 4 EXPLOIT BENEFITS OF SUPPLY CHAIN OVERHAUL • DC in Hoxton Park about to go operational • Continued investment in enhanced supply chain systems 5 STEP UP GLOBAL SOURCING • 85 bps increase in gross margin influenced by increase in global sourcing volumes 36 36
Slide 38: Home Improvement
Home Improvement 37
Slide 39: Home Improvement
HOME IMPROVEMENT • 7 stores opened this half with 8 more planned to open next half • Of the 150 sites we plan to secure over 5 years, there are over 100 sites in the pipeline • 18 stores currently under construction • DC in Hoppers Crossing, VIC has capacity to service at least 40 stores • DC in Hox
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Slide 41: Discontinued Operations: Consumer Electronics — Australia and NZ
DISCONTINUED OPERATIONS CONSUMER ELECTRONICS — AUSTRALIA AND NZ A$ HY11 HY12 Change • Acceleration of restructure with a view to divesting the business in a staged and Sales ($m) 868 873 0.6% considered process Gross margin (%) 26.01 24.71 (130) bps • Provision of $300m taken in HY12 CODB (%) 23.71
Slide 42: Productivity
PRODUCTIVITY 41 41
Slide 43: Cost Focus — The Next Phase
COST FOCUS — THE NEXT PHASE LEVERAGING GROUP QUANTUM SCALE AND BEST PRACTICE OVER THE NEXT 5 YEARS DIRECT ABOVE PROCUREMENT SUSTAINABILITY GLOBAL STORE NOT FOR COST SOURCING COSTS RESALE SAVINGS • HY12 51% growth • New procurement • $55.7m invested in • Significant focus on • Target double spend str
Slide 44: Logistics Costs as a % to Sales Continuing to Reduce
LOGISTICS COSTS AS A % TO SALES CONTINUING TO REDUCE AUSTRALIAN FOOD AND LIQUOR: FY06-FY16 • World class food and liquor supply chain CREATING LEVERAGING capability to realise group benefits CAPABILITIES CAPABILITIES • Best practice transport system includes 40% 105 inbound volume handled by Woolwor
Slide 45: Financial Performance
FINANCIAL PERFORMANCE 44 44
Slide 46: Balance Sheet
BALANCE SHEET Inventory balances are up 14.4%, driven by start up of our Masters business, Cellarmasters acquisition, additional overseas sourcing and incremental liquor inventory from new DC structure. Excluding the impact of these items, average inventory days are 30.8 days, down from 31.4 HY11 da
Slide 47: Average Inventory Days for Continuing Operations
AVERAGE INVENTORY DAYS FOR CONTINUING OPERATIONS INVENTORY DAYS INCREASED 1.2 DAYS. WHEN WE EXCLUDE THE IMPACT OF INCREMENTAL IMPORTED INVENTORY, ADDITIONAL INVENTORY ASSOCIATED WITH CELLARMASTERS AND HOME IMPROVEMENT, INVENTORY DAYS DECREASED BY 0.6 DAYS Number of Days HY08 30.3 HY09 30.2 Our targe
Slide 48: Cash Flow
CASH FLOW $m HY11 HY12 Change Net inventory purchases for the commencement EBITDA – Total Group 2,227.3 2,314.2 3.9% of the Masters business Net decrease / (increase) in net investment in Masters inventory - (42.6) Net decrease / (increase) in investment in overseas indent inventory 13.5 (20.1) High
Slide 49: Shareholder Payouts
SHAREHOLDER PAYOUTS FRANKING CREDITS AVAILABLE FOR DISTRIBUTION (AFTER THE INTERIM DIVIDEND) = $1.4b $ million Dividend Buy-Back 2,191 1,749 704 Profit growth, 325 coupled with balance sheet 1,487 1,424 management, 1,280 will have 941 1,121 delivered over 894 $11b payout to 534 604 shareholders 693
Slide 50: Capital Management
CAPITAL MANAGEMENT CAPITAL STRUCTURE OBJECTIVE TO ENHANCE SHAREHOLDER VALUE THROUGH OPTIMISING WEIGHTED AVERAGE COST OF CAPITAL WHILST RETAINING FLEXIBILITY TO PURSUE GROWTH AND CAPITAL MANAGEMENT OPPORTUNITIES • In October 2011, executed a A$1.2b syndicated revolving bank loan facility in two tranc
Slide 51: Return on Funds Employed
RETURN ON FUNDS EMPLOYED1 Percentage Comments • Decrease reflects investment HY08 17.85 in the start up phase of the Masters business and the acquisition of Cellarmasters • Excluding the impact of these, HY09 17.51 return on funds employed decreased 32 bps • ROFE is being adversely impacted by the p
Slide 52: Outlook
OUTLOOK • We anticipate trading will continue to be subdued over the remainder of the year as a result of the prevailing external conditions • As noted previously, Woolworths plans for future growth, through expansion into the circa $40b Home Improvement market. We anticipate start up costs for Mast
Slide 53: Recap
RECAP AMBITION Woolworths Limited is Australia's leading retail group, creating a customer-driven future of innovation and growth STRATEGY EXTEND AND ACT ON OUR MAINTAIN PUT IN PLACE DEFEND PORTFOLIO TO OUR TRACK THE ENABLERS 1 LEADERSHIP IN 2 MAXIMISE 3 RECORD OF 4 FOR A FOOD AND SHAREHOLDER BUILDI
Slide 54: Company Results HY Ended January 2012
Company Results HY Ended 1 January 2012 Grant O'Brien Managing Director and Chief Executive Officer
Slide 55: Appendices
APPENDICES 54 54
Slide 56: Profit After Tax from Continuing Operations — Up 3.2%
PROFIT AFTER TAX FROM CONTINUING OPERATIONS — UP 3.2% $ million HY08 29.1% 860.8 HY09 11.6% 960.8 HY10 11.6% 1,072.3 HY11 7.0% 1,147.6 HY12 3.2% 1,184.3 55 55
Slide 57: EBIT from Continuing Operations — Up 3.3%
EBIT FROM CONTINUING OPERATIONS — UP 3.3% EBIT GROWTH UNDERPINNED BY SOLID GROWTH IN AUSTRALIAN FOOD AND LIQUOR $ million Total Group EBIT HY08 19.4% 20.5% from Continuing Operations Australian Food HY09 16.6% 11.4% and Liquor EBIT HY10 11.4% 11.1% HY11 8.1% 7.2% HY12 6.3% 3.3% 0 500 1,000 1,500 2,0
Slide 58: CODB / Sales from Continuing Operations
CODB / SALES FROM CONTINUING OPERATIONS INCREASED BY 26 BPS BUT HAS BEEN WELL CONTROLLED IN DOLLAR TERMS IN A CHALLENGING TRADING PERIOD WITH SIGNIFICANT SELLING PRICE DEFLATION Percentage Comments • Reflects HY08 19.76% – Investment in Masters – First year impact of the Cellarmasters acquisition HY
Slide 59: Gross Profit Margin from Continuing Operations
GROSS PROFIT MARGIN FROM CONTINUING OPERATIONS INCREASE OF 15 BPS DUE TO THE BENEFITS OF GLOBAL DIRECT SOURCING, IMPROVED SHRINKAGE RATES, MOVING TO DISTRIBUTION CENTRE DELIVERY IN LIQUOR AND INCREASING SALES OF EXCLUSIVE BRAND PRODUCTS Percentage Total GP Margin HY08 24.03% 25.50% from Continuing O
Slide 60: Return on Equity Before Consumer Electronics Provision
RETURN ON EQUITY1 BEFORE CONSUMER ELECTRONICS PROVISION Percentage HY08 14.97 HY09 15.08 HY10 14.63 HY11 16.05 HY12 14.62 1. Based on closing Shareholders Funds 59 59
Slide 61: Dividends per Share — Interim
DIVIDENDS PER SHARE — INTERIM THE INCREASE IN DIVIDENDS PER SHARE EXCEEDED EARNINGS GROWTH Cents HY08 25.7% 44 HY09 9.1% 48 HY10 10.4% 53 HY11 7.5% 57 HY12 3.5% 59 60 60
Slide 62: Half Year Total Group Sales of $29.7b — Up 5.0%
HALF YEAR TOTAL GROUP SALES OF $29.7b — UP 5.0% — UP 3.7 % EXCLUDING PETROL Half Year $m HY11 HY12 Increase Comp Sales Australian Food and Liquor 18,772 19,571 4.3% 1.5% New Zealand Supermarkets (AUD) 2,183 2,244 2.8% 4.5%1 Petrol (dollars) 2,945 3,434 16.6% 13.7% Petrol (litres) 2,542 2,605 2.5% (0
Slide 63: Group EBIT from Continuing Operations — Up 3.3%
GROUP EBIT FROM CONTINUING OPERATIONS — UP 3.3% $m HY11 HY12 Change Australian Food and Liquor 1,404.8 1,493.5 6.3% New Zealand Supermarkets (NZD) 134.3 149.1 11.0% New Zealand Supermarkets (AUD) 108.6 118.5 9.1% Petrol 63.4 67.4 6.3% Supermarkets Division 1,576.8 1,679.4 6.5% BIG W 125.0 119.6 (4.3
Slide 64: Earnings per Share — Excluding Consumer Electronics Provision Up 3.3%
EARNINGS PER SHARE — EXCLUDING CONSUMER ELECTRONICS PROVISION UP 3.3% Cents HY08 25.9% 74.06 EPS for the Group was 79.39. HY09 9.3% 80.93 Excluding the Consumer Electronics HY10 10.0% 89.05 provision EPS was up 3.3% on the prior year HY11 6.9% 95.20 to 98.38 HY12 16.6% 79.39 3.3% 98.38 63 63
Slide 65: Capital Expenditure — Half Year
CAPITAL EXPENDITURE — HALF YEAR New Stores1 Refurbs HY11 HY12 Store numbers 2012 2011 2012 2011 $m Actual Actual New Stores 164 174 Australian Supermarkets2 25 12 49 41 Refurbishments 309 184 Liquor 46 41 12 31 Growth Capex 473 358 PEL - NZ Supermarkets 4 8 4 13 Stay in Business 106 138 Petrol 10 9
Slide 66: Capital Expenditure — Full Year
CAPITAL EXPENDITURE — FULL YEAR Current Previous 2010 2011 2012 $m – 2012 Fcst Fcst Var $m – Full Year Actual Actual Fcst New Stores 393 303 90 New Stores 225 288 393 Refurbishments 297 454 (157) Refurbishments 622 492 297 Growth Capex 690 757 (67) Growth Capex 847 780 690 Stay in Business 248 314 (
Slide 67: Capital Expenditure — Notes
CAPITAL EXPENDITURE — NOTES • Reflects the continued rollout of new stores across all our brands. Capital spend increased in HY12 as a New Stores result of more new stores being completed (112: HY12 vs 84: HY11). The full year forecast increase is mainly driven by a continuation of this trend into t
Slide 68: Supply Chain
SUPPLY CHAIN DEVELOPED WORLD CLASS FOOD AND LIQUOR SUPPLY CHAIN DELIVERING A STEP CHANGE IN OUR COSTS AND SERVICE LOGISTICS PERFORMANCE BEST PRACTICE - TRANSPORT 2006-2011 • 40% OF INBOUND VOLUME HANDLED BY WOOLWORTHS CARTONS HANDLED + 45% PRIMARY FREIGHT – reducing trucks to DC's by 1,500 per week