Woolworths Holdings Limited · JSE:WHL
Woolworths — FY2012 Earnings Presentation
58 slides from Woolworths's earnings presentation, August 2012
Slide 1: Annual Results for the Year Ended June 2012
ANNUAL RESULTS FOR\ THE YEAR ENDED JUNE 2012
Slide 2: Economic Overview
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 2 ECONOMIC OVERVIEW = South Africa - Sluggish economy - Competitive retail environment - Consumer confidence fragile - Inflation down into target range - 50 bps cut in interest rates * Australia - Two-speed economy - Tough and extremely competitive
Slide 3: Review of the Period
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 3 REVIEW OF THE PERIOD * Turnover up 11.8%, with stronger performance in H2 * Continued GP margin gain in Woolworths * Woolworths operating profit margin up from 8.7% to 10.0% * Tight cost management " Strong profit performance = HEPS +24.4% = ROE u
Slide 4: Woolworths - Clothing & GM
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 4 WOOLWORTHS - CLOTHING & GM * Clothing in South Africa lincluding Country Road) up 12.6%, with comparable sales up 5.9% - H2sales up 13.0%, with comparable sales up 7.2% - Benefit from more direct sourcing and shorter merchandise cycle = Market sha
Slide 5: Clothing & Footwear Turnover Growth
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 5 CLOTHING & FOOTWEAR TURNOVER GROWTH Clothing & footwear - Woolworths vs market growth (3mma - Jun 2012 adjusted") I a oe re eae SX WF WO ae SX PF WT SF ye ae Y e= Woolworths growth —=Market growth Source: RLC oe | ne tte woe PY Jbinitled by'3 rote
Slide 6: Woolworths - Food
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 6 WOOLWORTHS - FOOD * Strong performance, with total sales up 11.9% = Growth ahead of the market on 3mma, 6mma and 12mma basis "Supermarket strategy working well - Very good growth in long-life, especially in groceries *" Improved availability, redu
Slide 7: Food Turnover Growth
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 7 FOOD TURNOVER GROWTH Food - Woolworths vs market growth 16% 14% 12% 10% 8% 6% 4% 2% 0% (= Woolworths price movement ly-on-y) jm CPI [Food & Non-alcoholic Beverages) ty-on-y) =Woolworths sales growth ly-on-y) ——Growth in Nielsen Defined Basket ty-o
Slide 8: Woolworths - Stores
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 8 WOOLWORTHS - STORES "Comparable store sales growth at 7.0%, with 7.6% comparable growth in H2 "Conversion of franchise stores completed and highly profitable R530m additional revenue generated in 2012, adding R119m PBT 59 stores converted, 16 will
Slide 9: Country Road
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 9 COUNTRY ROAD "Difficult trading in Australia * Strong performance of brands in SA = Total turnover down 2.1% - Comparable sales in Australia down 6.6% "Gross profit margin up from 59.3% to 59.7% - Good inventory management and lower markdowns * Ti
Slide 10: Financial Services
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 10 FINANCIAL SERVICES * Closing book growth of 8.3% "Quality of book remains very good *» Impairments remained low at 1.9% =" Operating profit of the JV down 2.0% = ROE above target at 23.1%
Slide 11: Financial Review
NORMAN THOMSON FINANCIAL REVIEW
Slide 12: Financial Overview
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 12 FINANCIAL OVERVIEW «Group turnover up 11.8% to R28.6 billion "Profit before tax up 24.5% to R2.9 billion " Headline earnings per share up 24.4% to 267.3 cps * Diluted headline earnings per share up 24.2% to 260.6 cps « ROE increased
Slide 13: Group Income Statement
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 13 GROUP INCOME STATEMENT Jun 2011 % Rm change Woolworths 1965 28.4 Clothing & GM 1318 25.0 Food 647 35.5 Country Road 162 6.2 Financial Services JV lafter tax) 129 3.1 Treasury 50 (18.0) Profit before tax 2306 24.5 Tax 659 23.1 Profit
Slide 14: Group Income Statement Commentary
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 14 GROUP INCOME STATEMENT COMMENTARY
Slide 15: Woolworths Income Statement
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 15 WOOLWORTHS INCOME STATEMENT Jun 2011 % Rm change Turnover 22 609 11.6 Cost of sales 15 475 10.2 Gross profit 7 134— 14.6 Other revenue 103 1.9 Expenses 5 279 91 Store costs 3 193 16.8 Other operating costs 1910 0.2 Unrealised forex
Slide 16: Woolworths Income Statement Commentary
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 16 WOOLWORTHS INCOME STATEMENT COMMENTARY
Slide 17: Woolworths Segmental Performance
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 17 WOOLWORTHS SEGMENTAL PERFORMANCE Gross profit margin Operating profit margin Jun 2011 Jun 2011 % % Clothing & GM* Food 4.8 Woolworths* * Operating profit margin excludes unrealised gains/losses on FECs
Slide 18: Country Road Income Statement
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 18 COUNTRY ROAD INCOME STATEMENT jun asm changé Turnover 428 (2.1) Cost of sales 174 (2.9) Gross profit 254 (1.6) Other revenue 4 - Expenses 234 (0.9) Store costs 181 0.1) Other operating costs 53 - Operating profit 24 (8.3) Gross prof
Slide 19: Country Road Income Statement Commentary
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 19 COUNTRY ROAD INCOME STATEMENT COMMENTARY
Slide 20: Financial Services Income Statement
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 20 FINANCIAL SERVICES INCOME STATEMENT Consolidated pro forma %to Jun2011 %to % income statement book Rm book change Interest income 176 1 092 18.0 4A Interest paid 5.2 333 5.5 15 Net interest income 12.4 759 12.5 5.7 Impairment charge
Slide 21: Financial Services Income Statement Commentary
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 21 FINANCIAL SERVICES INCOME STATEMENT COMMENTARY
Slide 22: Financial Services Book Performance
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 22 FINANCIAL SERVICES BOOK PERFORMANCE 6 872 7 000 8% 6 242 6 000 5000 6% 4.000 A% 3.000 2.000 ow 1 000 - 4 | 0% Jun 09 Jun 10 Jun 11 Jun 12 I Gross book value (Rm) Total active accounts (000's) ~~~ Impairment charge (%)
Slide 23: Balance Sheet
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 23 BALANCE SHEET Jun 2011 % Rm _ change Assets Property, plant and equipment, intangible assets and loans 3 026 22.3 Investment in JVs and associate 624 6.9 Inventories 1 892 VAI Accounts receivable and deferred tax ] 230 70 Net cash 1
Slide 24: Cash Flow Movement
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 24 R3 428m 3450 - as 3150 (R104m) {Ra gm} | | 2 850 (R356m) 2550 ~ 2250 ~ (R615m) 1950 - 1 650 1350 - 1050 4 750 - (R1 313m) | | 450 (R494m) 150 ~ 150) (R656m) Cash flow Working Finance Taxation Net Dividends Franchise Share buy from c
Slide 25: Capital Expenditure
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 25 CAPITAL EXPENDITURE Capex (Rm) R1 309m Wun 2011: R904m) Depreciation Jun 2011 Rm Woolworths 397 Country Road 92 Total group 489 Jun 2012 Jun 2011
Slide 26: Uplift from Franchise Conversions
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 26 UPLIFT FROM FRANCHISE CONVERSIONS = Investment in franchise acquisitions of R580m to date = IRR of approximately 18% lincluding the impact of working capital investment) = FY2012 PBT net impact of shift from franchise to corporate b
Slide 27: Space Growth - Clothing & GM
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 27 SPACE GROWTH -— CLOTHING & GM Net space growth - FY2013 3.8% -FY2014 —- 10.0% Additional store - FY2015 11.4% No. of new footage (m2) stores (net) 42 000 42 36 000 36 30.000 | | 30 24 000 | | 24 18 000 | 18 12000 | | 12 6 000 6 (6 0
Slide 28: Space Growth - Food
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 28 SPACE GROWTH - FOOD Net space growth -FY2013 9.3% -FY2014 9.7% Additional store -FY201I5 55.2% No. of new footage (m2) stores (net) 22 000 22 18 000 | } 18 14000 | 4 10 000 10 6000 | | 6 2 000 2 (2 000) 4 } (2) (6 000) (6) June 1] J
Slide 29: Return on Equity
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 29 RETURN ON EQUITY 50% 14.6% 46.4% 39.4% 40% 30% 275% 26.3% 20% 48% 13.3% 13.6% 13.2% 13.2% a —s a Pt P| 10% 0% . Jun 08 Jun 09 Jun 10 Jun 11 Jun 12 * June 2011 and June 2012 exclude unrealised gains/losses on FECs
Slide 30: Earnings and Distribution
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 30 EARNINGS AND DISTRIBUTION 2008 2009 2010 2011 2012 * Cover normalised for STC impact is 1.45 times
Slide 31: Guidance
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 31 GUIDANCE Woolworths sales growth expected to be in line with FY2012 - Excluding impact of additional trading week " Woolworths space growth planned for FY2013 - 3.8% growth in Clothing & GM space - 9.3% growth in Food space "Food in
Slide 32: Guidance Continued
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 32 GUIDANCE CONTINUED * Financial Services - Impairments will start to increase as book grows - Expect book growth to continue "Taxation lower due to full year impact of STC saving - Effective tax rate of 28% = Capex (group) - FY2013 R
Slide 33: Guidance Continued
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 33 GUIDANCE CONTINUED " Acquisition of Witchery Group - R1.5 billion investment - 50% cash, 50% borrowings - c.4% uplift in HEPS (on a FY2012 pro forma basis) - Country Road to go from 7% to 12% of group profit Shareholders are advised
Slide 34: Strategic Focus
IAN MOIR STRATEGIC. Fa ——_
Slide 35: Strategic Focus
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 35 STRATEGIC FOCUS " Food " Clothing & GM » Simplify the business » Loyalty » Africa =" Country Road
Slide 36: Clothing & GM
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 36 CLOTHING & GM * Building fashion credibility - Shorter merchandise cycle —- 6 weeks taken out in FY2012 and more to come - More fashionable items with more frequent injections of newness since November 2011 - Modern, Re: and Studio perform
Slide 37: Clothing & GM Continued
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 37 CLOTHING & GM CONTINUED "Improved sourcing and speed to market Direct partnerships with centres of excellence globally Local partnership trading flexibility and value Improved “open to buy” management, stock flow and productivity Leveragin
Slide 38: Food
WH L WOOLWORTHS HOLDINGS LIMITED FOOD STRATEGIC FOCUS IAN MOIR 38 = More share of the wallet *" Drive main shop - More items - More often "Improved customer shopping experience - Tastings - Counters - Demos
Slide 39: Food Continued
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 39 FOOD CONTINUED "Supermarket with a difference - Bigger stores - Bigger pack sizes - New categories - More dominant long-life and grocery range - Clothing and Home into Food
Slide 40: Simplify the Business
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 40 SIMPLIFY THE BUSINESS "More focus on cost of doing business and commitment to get it down - Focus on underperforming stores continues " Process simplification Design and buying process Franchise conversion Implementation of Tradestream in
Slide 41: Loyalty
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 41 LOYALTY "Loyalty strategy remains a key focus » WRewards continues to outperform expectations " More Woolies cardholders {doubled our target) * Tracking more of our revenue: 61% up from 50% at June 2011, including cash (70% up from 61% at
Slide 42: Africa
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 42 AFRICA « Africa remains a good long term investment: Good forecast real GDP growth Over 1 billion people, 50% of whom are under 20 years old Increasing political stability and sound economic policies New resource reserves being discovered
Slide 43: Africa Continued
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 43 AFRICA CONTINUED » We now have 61 stores in Africa "Eight new stores are planned for this financial year *" Sourcing appropriate real estate at reasonable rentals remains a challenge «Investing in converting from franchise to corporate mod
Slide 44: Country Road Acquisition
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 44 COUNTRY ROAD ACQUISITION = Country Road has agreed to acquire the Witchery Group from Gresham Private Equity for an enterprise value of A$172m = The Witchery Group comprises the Witchery and Mimco brands = Acquisition price represents c.5x
Slide 45: Country Road Continued: Strategic and Financial Rationale
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 45 COUNTRY ROAD CONTINUED STRATEGIC AND FINANCIAL RATIONALE "Creates one of Australia’s largest speciality fashion retailers with leading complementary brands and a market leading position in the mid to upper tier of specialty fashion = Provi
Slide 46: Outlook
IAN MOIR OUTLOOK
Slide 47: Outlook
WH L WOOLWORTHS HOLDINGS LIMITED OUTLOOK IAN MOIR 47 OUTLOOK "South African economy to hold steady "Expect the upper income consumer to remain resilient " First 6 weeks of sales are encouraging in both Clothing and Food « Australian economy showing signs of improvement « Stronger trading in Country
Slide 48: Medium-Term Targets
WH L WOOLWORTHS HOLDINGS LIMITED OUTLOOK IAN MOIR 48 MEDIUM-TERM TARGETS Achieved in FY2012 Woolworths Clothing & GM Operating profit margin 16.7%* Food Operating profit margin 5.8% Country Road Operating profit margin 5.3% Financial Services ROE 23.1% * Excluding unrealised forex gains
Slide 49: Additional Information
ADDITIONAL INFORMATION
Slide 50: Group Income Statement
WH L WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 50 GROUP INCOME STATEMENT Turnover Cost of sales Gross profit Other revenue Expenses Operating profit Investment income Finance costs Profit before earnings from JVs and assoc Earnings from WFS Earnings from JVs and associate Profit before tax
Slide 51: Woolworths Turnover Analysis
WH L WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 51 WOOLWORTHS TURNOVER ANALYSIS % Clothing & GM Corporate (retail) Franchise (wholesale) — local Franchise (wholesale) — international Food Corporate (retail) Franchise (wholesale) — local Franchise (wholesale) — international Logistics Jun 201
Slide 52: Clothing & GM Income Statement
WH L WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 52 CLOTHING & GM INCOME STATEMENT Jun 2011 % Rm change Turnover 8 591 11.6 Cost of sales 4840 99 Gross profit "3 751- 13.7 Other revenue 25 (16.0) Expenses 2 462 73 Store costs 1 397 19.8 Other operating costs 1 065 (9.2) Operating profit 1314
Slide 53: Food Income Statement
WH L WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 53 FOOD INCOME STATEMENT Turnover Cost of sales Gross profit Other revenue Expenses Store costs Other operating costs Operating profit Gross profit margin - on turnover Operating profit margin - on turnover Jun 2011 % Rm change 13 535 1.9 10 23
Slide 54: Trading Space
WH L WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 54 TRADING SPACE Projected Projected Projected Jun 2012 Jun 2011 % Jun 2013 % Jun2014 % Jun 2015 % m2 m2 change m2 change m2 change m2 change Woolworths 551434 532 287 3.6 581422 5.4 639 250 9.9 699 961 9.5 Clothing & GM 387 660 374 636 3.5 402
Slide 55: Store Numbers
WH L WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 55 STORE NUMBERS Projected Projected Projected Jun 2011 Growth Jun 2013 Growth Jun2014 Growth Jun2015 Growth Woolworths 438 10 468 20 502 34 532 30 Corporate 293 37 332 2 345 13 355 10 Franchise - SA 52 (35) 17 - 17 - 17 - Franchise - Engen 43
Slide 56: Financial Services Contribution to Sales
WH L WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 56 FINANCIAL SERVICES CONTRIBUTION TO SALES % of sales spent on Woolworths cards Jun 2011 Clothing & GM 27.9% Food 14.7% Aggregate 20.4%
Slide 57: Country Road Balance Sheet
WH L WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 57 COUNTRY ROAD BALANCE SHEET Assets Property, plant and equipment Trademarks * Inventories Accounts receivable and deferred tax Cash Equity and liabilities Shareholders’ funds Accounts payable and provisions Period-end exchange rate (R/A$) * E
Slide 58: Country Road Income Statement (in Rands)
WH L WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 58 COUNTRY ROAD INCOME STATEMENT (IN RANDS) Jun 2011 % Rm change Turnover 2973 13.5 Cost of sales 1 208 12.7 Gross profit 1765 13.9 Other revenue 26 11.5 Expenses 1 624 14.8 Store costs 1 254 14.4 Other operating costs 370 15.9 Operating profit