Woolworths Group Ltd · ASX:WOW
Woolworths — FY2018 Earnings Presentation
47 slides from Woolworths's earnings presentation, 2018
Slide 1: Company Results Full Year 2018
Company Results FULL YEAR 2018
Slide 2: Contents
CONTENTS KEY HIGHLIGHTS AND PROGRESS 3 Brad Banducci FINANCIAL RESULTS 7 David Marr BUSINESS UPDATE 16 OUTLOOK 41 Brad Banducci Woolworths Group Limited ABN 88 000 014 675 WOOLWORTHS GROUP RESULTS FY18 2
Slide 3: Key Highlights
Key Highlights • Customer 1st Team 1st Culture delivering further improvements across Voice of Customer, Voice of Team and Voice of Supplier scores • Strong sales and EBIT growth driven by Australian Food with Group sales from continuing operations up 3.4%, and EBIT up 9.5% despite ongoing reinvestm
Slide 4: Woolworths Group FY18 priorities
Woolworths Group FY18 priorities 6 CUSTOMER 1ST Create competitive TEAM 1ST CULTURE advantage across Woolworths Group CONNECTED, PERSONALISED AND CONVENIENT 5 SHOPPING EXPERIENCES Create differentiated TRANSFORM EVOLVE CREATE VALUE customer propositions 2 AUS AND 3 OUR DRINKS 4 IN OUR NZ FOOD BUSINE
Slide 5: Progress against our key priorities
Progress against our key priorities Customer 1st Team 1st Connected, personalised Transforming Australian culture and convenient shopping and New Zealand Food experiences • Australian Food continued improvement in • New Purpose, Ways-of-Working and • Pick up available at >2,900 stores including cust
Slide 6: Contents
CONTENTS KEY HIGHLIGHTS AND PROGRESS 3 Brad Banducci FINANCIAL RESULTS 7 David Marr Group financial results 8 Key balance sheet metrics 10 Cash flow summary 11 Capital expenditure 12 Capital management 13 Impact of new lease standard 14 BUSINESS UPDATE 16 OUTLOOK 41 Brad Banducci WOOLWORTHS GROUP RE
Slide 7: Financial Results
Financial Results WOOLWORTHS GROUP RESULTS FY18 7
Slide 8: FY18 results – strong earnings leading to improved returns
FY18 results – strong earnings leading to improved returns CONTINUING OPERATIONS TOTAL GROUP Change Change Sales 56.7bn 3.4% 61.5bn 1.9% EBIT 2,548m 9.5% 2,743m 3.8% NPAT attributable to Woolworths 1,605m 12.9% 1,724m 12.5% Group shareholders Earnings per share (basic) 123.4¢ 11.4% 132.6¢ 11.1% Divi
Slide 9: Strong Group EBIT improvement underpinned by Australian Food
Strong Group EBIT improvement underpinned by Australian Food $m FY18 FY17 Change Continuing operations Australian Food 1,757 1,603 9.6% Endeavour Drinks 516 503 2.8% New Zealand Food 262 292 (10.4)% New Zealand Food (NZD) 284 309 (8.2)% BIG W (110) (151) (26.9)% Hotels 259 233 11.1% Central overhead
Slide 10: Key balance sheet metrics continuing to improve
Key balance sheet metrics continuing to improve AVERAGE INVENTORY DAYS ROFE Days Percentage Continuing operations Continuing operations Group Continuing operations – lease-adjusted 41.3 40.8 40.4 40.0 39.9 24.1 22.3 39.3 39.0 38.3 37.6 13.1 14.0 36.0 FY14 FY15 FY16 FY17 FY18 FY17 FY18 Average invent
Slide 11: Cash realisation and free cash flow remain strong
Cash realisation and free cash flow remain strong CASH FLOW SUMMARY $m FY18 FY17 Change Operating activities before interest and tax 3,775 4,024 (6.2)% Interest and tax (845) (902) (6.4)% Operating activities 2,930 3,122 (6.1)% Investing activities (1,510) (1,431) 5.5% Free cash flow before dividend
Slide 12: Operating capex at low end of FY18 forecast
Operating capex at low end of FY18 forecast and driven by planned investments in Renewals, IT and Digital $m FY18 FY17 Continuing operations Operating capex 1,691 1,583 Property development 245 258 Gross capex 1,936 1,841 Property sales (90) (273) Net capex 1,846 1,568 Discontinued operations – Home
Slide 13: Disciplined capital management reflecting improved financial performance
Disciplined capital management reflecting improved financial performance Interim Final Special Payout ratio (ex special) - RHS Dividend reinvestment plan: Announced in February that % Cents 120 72 110 DRP discount of 1.5% will not apply to FY18 final dividend 70 100 10 or for foreseeable future 90 6
Slide 14: Preliminary impact of new lease accounting standard
Preliminary impact of new lease accounting standard • AASB 16 brings majority of leases onto balance sheet. The The actual impact of applying the Group will initially apply AASB 16 on 1 July 2019 standard in FY20 will depend on: • Well advanced for full implementation of standard in FY20 • Future ec
Slide 15: Contents
CONTENTS KEY HIGHLIGHTS AND PROGRESS 3 Brad Banducci FINANCIAL RESULTS 7 David Marr BUSINESS UPDATE 16 Australian Food 17 Endeavour Drinks 26 New Zealand Food 30 BIG W 33 Hotels 38 OUTLOOK 41 Brad Banducci WOOLWORTHS GROUP RESULTS FY18 15
Slide 16: Business Update
Business Update WOOLWORTHS GROUP RESULTS FY18 16
Slide 17: WOOLWORTHS GROUP RESULTS FY18
WOOLWORTHS GROUP RESULTS FY18 17
Slide 18: Australian Food
Australian Food FY18 FY17 CHANGE Sales ($m) 37,379 35,836 4.3% EBITDA ($m) 2,430 2,221 9.4% EBIT 1,757 1,603 9.6% Gross margin (%) 29.1 28.5 63bps Cost of doing business (%) 24.4 24.0 41bps EBIT to sales (%) 4.7 4.5 23bps Sales per square metre ($) 16,435 15,974 2.9% ROFE (%) 170.7 166.1 4.6pts WOOL
Slide 19: Australian Food FY18 priorities
Australian Food FY18 priorities 6 CUSTOMER 1ST TEAM 1ST CULTURE Scale-up the future ACCELERATE RENEWAL AND EXTEND 5 APPROACH TO ONLINE AND METRO Extend core PRICES I TRUST CONSISTENTLY FAMOUS customer offer 2 ON PRODUCTS 3 GREAT SHOPPING 4 FOR FRESH I WANT EXPERIENCE Excel on the basics E2E PROCESSE
Slide 20: Progress highlights
Progress highlights • Overall Customer Satisfaction (including Online) in June increasing 4pts to 81% and June store-controllable Create the future VOC of 84%, up 4pts from the prior year • 80 Renewals (including 11 new stores) and 54 Upgrades. Opened net 7 new Woolworths supermarkets and 6 Metros (
Slide 21: Customer highlights
Customer highlights OVERALL SATISFACTION – STORE & ONLINE STORE-CONTROLLABLE VOC % customers satisfied, 6 or 7 out of 7 % customers satisfied, 6 or 7 out of 7 +4 +4 90 90 81 84 77 80 0 0 June-17 June-18 June-17 June-18 EASE OF PICK UP FRUIT & VEGETABLES PRODUCT AVAILABILITY % customers satisfied, 6
Slide 22: Sales highlights
Sales highlights AUSTRALIAN FOOD SALES COMP TRANSACTION GROWTH (% year on year) (% year on year) 4.6 4.4 4.1 3.6 Q1 Q2 Q3* Q4* 5.1 FY18 4.7 4.2 3.1 COMP ITEMS PER BASKET GROWTH (% year on year) Q1 Q2 Q3* Q4* 1.4 FY18 0.6 1.0 0.0 Comp Q1 Q2 Q3* Q4* Sales (%) 4.9 5.0 4.0* 3.1* FY18 * Adjusted for the
Slide 23: Renewal highlights
Renewal highlights RENEWAL PROGRESS FY18 was the second year of our Renewal program, with a third of our fleet now complete 177 139 Renewals Upgrades completed since completed since program launch program launch Marrickville Metro and Plumpton were the latest steps in our program with double-digit g
Slide 24: WooliesX highlights
WooliesX highlights eCom business grew by 30% Invested in new in FY18 driven by strong digital and data growth in Pick up talent at 407 Elizabeth Street Improved our eCom VOC Customer Hub (+6pts) and NPS (+15pts): brought in-house Significant improvement in Pick to deliver consistent up metrics and
Slide 25: Australian Food FY19 priorities
Australian Food FY19 priorities 6 Customer 1st Brand,Team and Culture Innovate our customer and team experience Connected, Personalised and 5 Ultra Convenient Shopping Experiences Differentiate core Good Prices Engaging Famous for customer offer 2 and Localised 3 Store 4 Fresh Every Range Experience
Slide 26: WOOLWORTHS GROUP RESULTS FY18
WOOLWORTHS GROUP RESULTS FY18 26
Slide 27: Endeavour Drinks
Endeavour Drinks FY18 FY17 Change Sales ($m) 8,271 7,913 4.5% EBITDA ($m) 603 588 2.7% EBIT ($m) 516 503 2.8% Gross margin (%) 23.1 23.1 2bps Cost of doing business (%) 16.9 16.7 13bps EBIT to sales (%) 6.2 6.4 (11)bps Sales per square metre ($) 18,155 17,917 1.3% ROFE (%) 17.1 16.9 15bps WOOLWORTHS
Slide 28: BWS highlights
BWS highlights FY18 HIGHLIGHTS FY19 FOCUS 18 18 net new store openings Continued innovation and rollout of bringing total store network 1,316 store format renewals program stores across the store network Improving convenience proposition Completion of Marrickville to customers through continued roll
Slide 29: Dan Murphy's highlights
Dan Murphy’s highlights FY18 HIGHLIGHTS FY19 FOCUS Record high of 3m My Dan Launched new Improving Localised Increase 73 for VOC NPS Murphy’s Website platform convenience via ranging in knowledgeable score members 30 May 2018 Delivery and Pick stores service in stores up propositions 8 8 new store O
Slide 30: WOOLWORTHS GROUP RESULTS FY18
WOOLWORTHS GROUP RESULTS FY18 30
Slide 31: New Zealand Food
New Zealand Food FY18 FY17 Change Sales ($m) 6,396 6,188 3.4% EBITDA ($m) 411 427 (3.6)% EBIT ($m) 284 309 (8.2)% Gross margin (%) 24.2 24.2 (1)bps Cost of doing business (%) 19.7 19.2 56bps EBIT to sales (%) 4.4 5.0 (56)bps Sales per square metre ($) 15,531 15,046 3.2% ROFE (%) 9.5% 10.5% (100)bps
Slide 32: New Zealand Food highlights
New Zealand Food highlights FY18 HIGHLIGHTS FY19 FOCUS Stronger core sales Accelerating double- momentum digit online growth Build Customer 1st Bring new brand Team 1st Culture platform to life 3.4% Comparable sales growth Fruit & Vegetables focus Low prices and Fresh, healthy Drive further online a
Slide 33: WOOLWORTHS GROUP RESULTS FY18
WOOLWORTHS GROUP RESULTS FY18 33
Slide 34: BIG W
BIG W FY18 FY17 Change Sales ($m) 3,566 3,542 0.7% LBITDA ($m) (30) (72) (57.3)% LBIT ($m) (110) (151) (26.9)% Gross margin (%) 31.7 31.3 43 bps Cost of doing business (%) 34.8 35.6 (74) bps LBIT to sales (%) (3.1) (4.2) 117bps Sales per square metre ($) 3,369 3,345 0.7% ROFE (%) (23.3) (31.6) 8.3pt
Slide 35: BIG W highlights
BIG W highlights FY18 HIGHLIGHTS FY19 FOCUS • 81% of customers satisfied with their Embed our brand Purpose into 1 in-store experience in June our ways of working • Prices now down on over 4,500 key value lines 2 Continue to focus on regaining customer trust • Rollout of 13 Customer 1st Ranges and o
Slide 36: BIG W FY19 priorities
BIG W FY19 priorities WOOLWORTHS GROUP RESULTS FY18 36
Slide 37: BIG W Purpose
BIG W Purpose A team and customer-first culture requires alignment around a common purpose In FY19, the focus will be on engaging and unifying the team around the purpose Making purpose real for our team is defining three pillars: REAL SOLUTIONS Making the experience simple and enjoyable for our tea
Slide 38: WOOLWORTHS GROUP RESULTS FY18
WOOLWORTHS GROUP RESULTS FY18 38
Slide 39: ALH Hotels
ALH Hotels FY18 FY17 Change Sales ($m) 1,612 1,553 3.7% EBIT ($m) 259 233 11.1% Gross margin (%) 84.2 83.1 107 bps Cost of doing business (%) 68.1 68.1 - EBIT to sales (%) 16.1 15.0 107 bps WOOLWORTHS GROUP RESULTS FY18 39
Slide 40: Contents
CONTENTS KEY HIGHLIGHTS AND PROGRESS 3 Brad Banducci FINANCIAL RESULTS 7 David Marr BUSINESS UPDATE 16 OUTLOOK 41 Brad Banducci FY19 priorities 41 Outlook 42 WOOLWORTHS GROUP RESULTS FY18 40
Slide 41: Woolworths Group FY19 priorities
Woolworths Group FY19 priorities 6 Customer 1st Build growth Team 1st Culture platforms for the future Connected, Personalised and Convenient 5 Shopping Experiences Create Differentiate our Accelerate Innovation in our Unlock Value in differentiation in all 2 Food Customer 3 4 Drinks Business our Po
Slide 42: Outlook
Outlook • We remain energised by the many opportunities to continue to transform our business • In Australian Food, comparable sales in the first seven weeks of Q1’19 slowed to 1.3% as customers adjusted to the phasing-out of single-use plastic bags, a competitor continuity program, meat and fruit a
Slide 43: Woolworths Group Purpose and Ways-of-Working
Woolworths Group Purpose and Ways-of-Working Our Ways-of- Working Our How we work Purpose Why we exist Our Values Who we are WOOLWORTHS GROUP RESULTS FY18 43
Slide 44: Thank you
Thank you WOOLWORTHS GROUP RESULTS FY18 44
Slide 45: Glossary
Glossary Cash realisation ratio Operating cash flow as a percentage of group net profit after tax before depreciation and amortisation Comparable sales Measure of sales which excludes stores that have been opened or closed in the last 12 months and demonstrable impact on existing stores from store d
Slide 46: Glossary
Glossary Other non-IFRS measures used in describing the business performance include: • Earnings before interest, tax, depreciation and amortisation (EBITDA) • Earnings before interest, tax, depreciation, amortisation and rent (EBITDAR) • Cash flow from operating activities before interest and tax •
Slide 47: Disclaimer
Disclaimer This presentation contains summary information about Woolworths Group Limited (Woolworths Group) and its activities current as at the date of this presentation. It should be read in conjunction with Woolworths’ other periodic and continuous disclosure announcements filed with the Australi