Slide 1: Company Results Full Year 2016
For personal use only COMPANY RESULTS FULL YEAR 2016 25 August 2016 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: Key highlights
Key highlights For personal use only • Significant investment in Australian Food to get Customers to put us 1st - Customers are noticing and starting to act on the changes • New Woolworths Group operating model implemented to drive further accountability into the business - 500 roles will be permane
Slide 4: Progress on our five key priorities
Progress on our five key priorities For personal use only 1 CUSTOMER AND 3 5 STORE-LED CULTURE EVOLVING OUR DRINKS 2 BECOMING A LEAN AND TEAM BUSINESS RETAILER 4 • Customer and store • 11 new Dan Murphy’s stores • Merchandising platform KPI’s in incentive now stable plans • Dan Murphy’s model contin
Slide 5: Agenda
Agenda For personal use only Key highlights Brad Banducci Progress on our five key priorities Financial Results David Marr – Results – Full Year 2016 – Group EBIT – Significant Items recognised in FY16 – Key Balance Sheet metrics – Cash Flow Summary – Capital Expenditure – Capital Management Busines
Slide 6: Financial Results
For personal use only RESULTS FINANCIAL
Slide 7: Results – Full Year 2016
Results – Full Year 2016 For personal use only Continuing Operations Total Group Total Group Before Significant Items1 Before Significant Items1 Sales $58.1 bn (1.2)% $60.2 bn (0.8)% $60.2 bn (0.8)% Earnings Before $2,563.8 m (35.5)% $2,345.0 m (37.4)% $(1,668.7) m (150.2)% Interest and Tax Net Prof
Slide 8: Group EBIT
Group EBIT For personal use only $m FY16 FY15 Change Continuing Operations (Before Significant Items1) Australian Food and Petrol 1,759.8 2,970.2 (40.8)% Endeavour Drinks Group 483.8 469.6 3.0% Australian Food, Petrol and Endeavour Drinks Group 2,243.6 3,439.8 (34.8)% New Zealand Supermarkets (AUD)
Slide 9: Significant Items recognised in FY16
Significant Items1 recognised in FY16 For personal use only Continuing Operations $m Operating model and strategic changes (155) Store network optimisation and property rationalisation (344) General Merchandise impairment (460) EBIT impact (959) NPAT impact attributable to shareholders of Woolworths
Slide 10: Key Balance Sheet metrics
Key Balance Sheet metrics ROFE Average Inventory days Before Significant Items1 For personal use only Before Significant Items1 Days Percentage Excluding Home Improvement Excluding Home Improvement Group Group 41.2 40.4 33.0 32.6 38.3 36.4 27.8 28.0 27.0 38.0 33.8 25.7 35.8 34.8 22.2 34.2 32.6 18.5
Slide 11: Cash Flow summary
Cash Flow summary For personal use only $m FY16 FY15 Change Cash Flow Operating Activities before interest and tax 3,495.3 4,711.1 (25.8)% Operating Activities 2,357.5 3,345.1 (29.5)% Investing Activities (1,266.7) (1,333.9) (5.0)% Financing Activities 107.9 162.5 (33.6)% Free cash flow before divid
Slide 12: Capital Expenditure
Capital Expenditure $m FY16 FY15 For personal use only Continuing Operationsa Operating Capex 1,484 1,443 Property Development 414 429 Gross Capex 1,898 1,872 Property Sales (678) (200) Net Capex 1,220 1,672 Discontinued Operations - Home Improvement 106 292 Group Net Capexa 1,326 1,964 Operating Ca
Slide 13: Capital Management
Capital Management Dividend and DRP For personal use only • Full year dividend of 77 cents per share representing payout ratio of 70% of Group NPAT before Significant Items1 • Intention to underwrite DRP to 50% primarily to fund the upcoming refinancing of Woolworths Notes II Debt and credit rating
Slide 14: Agenda
Agenda For personal use only Key highlights Brad Banducci Progress on our five key priorities Financial Results David Marr Business Update Business Leaders – Australian Food – Endeavour Drinks Group – Countdown – BIGW – Capital Management Outlook Brad Banducci 14
Slide 15: Business Update
For personal use only UPDATE BUSINESS
Slide 16: Woolworths
@ Woolworths Ajuo esn feuossed JOS
Slide 17: Australian Food and Petrol
Australian Food and Petrol For personal use only FY16 FY15 Change Before Significant Items1 Sales ($m) Food 34,798 34,881 (0.2)% Petrol2 4,612 5,632 (18.1)% Food and Petrol 39,410 40,513 (2.7)% EBIT ($m) 1,759.8 2,970.2 (40.8)% Gross Margin (%) 25.37 26.19 (82) bps Cost of Doing Business (%) 20.90 1
Slide 18: Customers are beginning to respond to our improving offer
Customers are beginning to respond to our improving offer For personal use only Overall Customer Satisfaction Transactions growth % customers satisfied, 6 or 7 out of 7 % year on year 80 3.4 75 2.3 2.1 75 0.5 69 69 70 68 Q1 Q2 Q3 Q4 65 Items growth 60 % year on year 55 0.9 0.0 0.2 50 -0.3 Q1 Q2 Q3 Q
Slide 19: Our strategy is focused on having customers put us 1st
Our strategy is focused on having customers put us 1st 6 For personal use only 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 business foun
Slide 20: Progress highlights
Progress highlights • Customer 1st culture brought to life in store through the Voice of the Customer program Create the future • ‘Woolies Welcome’ store-induction for all new support team members For personal use only • New performance scorecards issued to all stores • 6 Renewal stores opened in Ju
Slide 21: We are still working on fixing IT basics
We are still working on fixing IT basics FIX THE BASICS For personal use only Store Hardware Support: open store hardware failures • Stabilised SAP implementation with positive (open incident count) momentum • Improved IT support to stores: upgraded RF guns and printers; more responsive support desk
Slide 22: We have listened to our customers and evolved our Rewards program
We have listened to our customers and evolved our FIX THE BASICS Rewards program For personal use only $1 SPENT = 1 POINT AUTOMATICALLY GET $10 OR SAVE FOR CHRISTMAS OFF YOUR SHOPPING OR CONVERT TO QANTAS POINTS EARN ON EVERY DOLLAR $10 = 870 QANTAS POINTS 22
Slide 23: We are delivering lower shelf prices for our customers
CORE CUSTOMER OFFER We are delivering lower shelf prices for our customers Always and Prices Dropped SKUs For personal use only Number of SKUs Jul-15 Jun-15 Aug-15 Sep-15 Jan-16 May-16 Jun-16 Oct-15 Dec-15 Apr-16 Nov-15 Mar-16 Feb-16 23
Slide 24: Customers tell us our biggest improvement is in service
CORE CUSTOMER OFFER Customers tell us our biggest improvement is in service For personal use only Woolworths Supermarkets Voice of the Customer % of customers satisfied, 6 or 7 out of 7 Queue wait times Self Checkout Trolleys/Baskets Team attitude Ease of Use +8 +5 +3 +2 86 85 85 85 82 85 83 85 83 7
Slide 25: Our new Own Brand offer is resonating with customers
CORE CUSTOMER OFFER Our new Own Brand offer is resonating with customers For personal use only 25
Slide 26: Strong customer response to latest renewal stores
CREATE THE FUTURE Strong customer response to latest 6 renewal stores For personal use only “What I meant is wow what an improvement – love artisan bread in bakery, well signed, wide aisles, cool sushi take away and cafe – great addition for shoppers” “The staff seem to be trained much better at bei
Slide 27: Our FY17 business priorities
Our FY17 business priorities 6 For personal use only Create the future 6 Create a winning proposition Customer 1st by listening to our customers Team and Culture and transforming out business A great retail team putting our Customers 1st. store-by-store Step-change store renewal program 5 Renewed st
Slide 28: FY17 initiatives
FY17 initiatives For personal use only • Ongoing focus on building our Customer 1st Team and Culture Create the future • Our purpose: ‘We bring a little good to everyone every day’ • Material investment in training our store and buying teams • All support team members working in stores • 80+ renewal
Slide 29: Endeavour Drinks Group
\II / Wy Zs S = = S = —~ = — = => Zs TZ, Y NS ayy ENDEAVOUR DRINKS GROUP
Slide 30: Endeavour Drinks Group
Endeavour Drinks Group For personal use only FY16 FY15 Change Before Significant Items1 Sales ($m) 7,589 7,251 4.7% EBIT ($m) 483.8 469.6 3.0% Gross Margin (%) 23.41 22.98 43 bps Cost of Doing Business (%) 17.03 16.50 53 bps EBIT to Sales (%) 6.38 6.48 (10) bps Sales Per Square Metre ($) 17,943 17,8
Slide 31: Endeavour Drinks delivered strong sales growth in a highly competitive market
Endeavour Drinks delivered strong sales growth in a highly competitive market For personal use only FY16 Highlights • Strong growth at +4.7% outpacing market growth • Beer and Spirits outgrew Wine • 43 (net) new stores opened throughout Australia (32 BWS and 11 Dan Murphy’s) 1,486 Stores • Strong do
Slide 32: Dan Murphy's maintained its leadership through new stores and digital expansion
Dan Murphy’s maintained its leadership through new stores and digital expansion For personal use only FY16 Highlights FY17 Focus 11 new stores Digital penetration Enhanced customer Network investment opened in FY16 continued to grow experience through refurbishments My Dan Murphy’s members Catalogue
Slide 33: Investment in value and customer service for stronger differentiation
Investment in value and customer service for stronger differentiation For personal use only FY16 Highlights FY17 Focus Improved value Achieved strong NPS and Continued focus on Continued network and perception through launch Voice of Customer Rating delivering value via format investment of Super Sa
Slide 34: For personal use only
For personal use only
Slide 35: New Zealand Food
New Zealand Food For personal use only NZD FY16 FY15 Change Before Significant Items1 Sales ($m) 6,101 5,878 3.8% EBIT ($m) 313.9 326.0 (3.7)% Gross Margin (%) 23.58 23.50 8 bps Cost of Doing Business (%) 18.44 17.95 49 bps EBIT to Sales (%) 5.14 5.55 (41) bps Funds Employed ($m) 2,906.4 3,080.7 (5.
Slide 36: New Zealand Food FY16 Highlights and FY17 Focus
New Zealand Food FY16 Highlights and FY17 Focus For personal use only FY16 Highlights FY17 Focus Continued to lower prices Network expansion Deliver better prices: Demonstrate love for food: ~ 3,000 products at low prices every day Continue to extend our Further improve freshness of 8 new 2 replacem
Slide 37: For personal use only
For personal use only
Slide 38: BIGW
PORTFOLIO BUSINESSES BIGW For personal use only FY16 FY15 Change Before Significant Items1 Sales ($m) 3,820 3,929 (2.8)% EBIT ($m) (14.9) 111.7 (113.3)% Gross Margin (%) 31.69 33.79 (210) bps Cost of Doing Business (%) 32.08 30.95 113 bps EBIT to Sales (%) (0.39) 2.84 (323) bps Funds Employed ($m) 5
Slide 39: Our vision is clear
Our vision is clear For personal use only Helping all Australians LIVE BIG FOR LESS • Strong value heritage with customers since 1964 • First steps • Consistent and profitable growth to deliver the plan • End to end control of the business • A distinctive and defensible customer position • Widest ra
Slide 40: Our strategy is simple
Our strategy is simple For personal use only Develop one team Reduce costs Refresh stores Improve processes Develop Update product cohesive brand offering 40
Slide 41: Develop one team
Develop one team For personal use only • Bring in house all functions under BIGW • Simplify reporting lines and integrate fresh talent with existing team • Introduce incentives to drive accountability • Maintain highest safety results in industry • Make design team central to product development pro
Slide 42: Refresh stores
Refresh stores For personal use only • De-clutter stores for easier navigation • Refresh VM in stores for more consistent and modernised BIGW • Trial of a variety of refurbishment ideas in subset of stores to understand capital return and customer response • Detail improvement plans for relatively s
Slide 43: Update product offering
Update product offering For personal use only • Reduce range from >70,000 SKUs today but still retain widest choice and best brands • Consolidate >40 Own Brands today to fewer, stronger brands • Recruit new design and buying leadership • Simplify pricing in store for easier customer navigation • Inc
Slide 44: Develop cohesive brand
Develop cohesive brand For personal use only • Bring in house all marketing agency work to build cohesive BIGW voice and internal team skill and speed • Increase digital marketing mix and online sales • Drive BIGW email database • Revamp catalogues • Integrate marketing, online and design functions
Slide 45: Reduce costs, Improve processes
Reduce costs, Improve processes For personal use only • Remove layer of senior management and unnecessary costs via direct control of all functions • Set productivity targets based on detailed mapping of all core processes in store and support office • Shifting service level to peak times when custo
Slide 46: First Six Months
First Six Months For personal use only • Refreshed executive team Develop • Recruited new buying, design and online leadership One Team • Brought into BIGW from Group: 3 x DCs, 3 x Asian sourcing offices (consolidated to 2 offices), property, legal, online, procurement, store maintenance and custome
Slide 47: FY17 priorities
FY17 priorities For personal use only FY17 represents an exciting year for BIGW with much change • H1 focused on clearing inventory, reducing product range and completing restructure of business for end to end control • From H2 – New product/brand consolidation flowing through business • Continue go
Slide 48: Agenda
Agenda For personal use only Key highlights Brad Banducci Progress on our five key priorities Financial Results David Marr Business Update Business Leaders Outlook Brad Banducci - Home Improvement exit update - Outlook 48
Slide 49: Outlook
For personal use only OUTLOOK
Slide 50: Home Improvement exit update
Home Improvement exit update For personal use only • 3 transactions to sell Home Improvement for estimated gross cash proceeds of ~$1.5 billion and ~$500 million after wind-down costs (prior to Lowe’s share of proceeds) • Masters will cease trading on or before 11 December 2016 - We are committed to
Slide 51: Outlook
Outlook For personal use only The focus of the Woolworths Group in FY17 will continue to be on our five key priorities We expect the market environment to remain competitive in the year ahead but also expect to see continued progress in our turnaround following a year of significant investment in FY
Slide 52: For personal use only
For personal use only 52
Slide 53: Notes
Notes For personal use only 1. Significant Items in FY16 represent costs of $4,013.7m (before tax) or 2,627.8m (after tax and non controlling interests) resulting from the write down of the Home Improvement business and certain significant expenses incurred outside the ordinary course of our trading
Slide 54: Disclaimer
Disclaimer This presentation contains summary information about Woolworths Limited (Woolworths) and its activities current as at the date of this For personal use only presentation. It should be read in conjunction with Woolworths’ other periodic and continuous disclosure announcements filed with th