Woolworths Group Ltd · ASX:WOW
Woolworths — H1 2007 Earnings Presentation
49 slides from Woolworths's earnings presentation, Feb 27, 2007
Slide 1: Woolworths Limited half year results ASX cover letter
WOoLWORTHS LIMITED A.B.N. 88 006 014 675 27 February 2007 The Manager Companies Australian Stock Exchange Company Announcements Office Level 4 20 Bridge Street Sydney NSW 2000 Dear Sir, Re: WOOLWORTHS LIMITED HALF YEAR RESULTS PRESENTATION AND INTERIM DIVIDEND ANNOUNCEMENT. Attached is a copy of mat
Slide 2: Company Results Half Year Ended 31 December 2006
WOOLWORTHS LIMITED Michael Luscombe Chief Executive Officer Tom Pockett Company Results Finance Director Half Year Ended 31 December 2006
Slide 3: Highlights For The First Half
Highlights For The First Half Strong result based ona solid platform: with sales | up 15.9%, and strengthening second quarter comparable store sales, EBIT. up az) O% and NPAT up 28. 1%. ; . The result reflects: —.-.The positive momentum in. the Woolworths’ business = Proven ability. to concentrate o
Slide 4: Sales — continuing strong sales growth
Sales — continuing strong sales growth 24.05 21.04 18.0.4 15.0.4 "12.0 4 9.0 6.0.5 3.0.- + HY2003 ~HY2004.-. HY2005.-—~—-HY2006 HY2007 ‘Includes ALH for 2 months. : faciudes FAL (NZ) business and. 20 Austrakan ex-FAL store results from 2 November. 2005, and ALH Fetal, MGW reall and BMG retail. Sales
Slide 5: EBIT up 21% growing faster than sales
‘EBIT- “up 21% growing , faster than sales 4,200.07 _ 4145.6 4,000.0 4 n c 2 Ss. hia ~~ 200.0 HY2003 -HY2004 HY2005 _HY2006.°- HY2007 ‘includes ALH for 2 months. 4 facludes FAL (NZ) business and 20 Australian ex-FAL store results from 2 November. 2005, and ALH Fetal, MGW reall and BMG retail. ‘Tesul
Slide 6: EBIT Margin
EBIT Margin | 5.30 5 a ] 5.19% Margin has increased an average of 27bps per period over the last 5 half years. EBIT margin excluding Hotels for EAU the half year 2007 is 4.81%, an increase : a of 41bps, underpinned by Supermarkets. 4.73% 4.70 + J : cone 4.40 4.26% ae 4.08% 4,10 5 - 3.81% 3.80 4 3.50
Slide 7: Profit After Tax — up 28.1%
- Profit After Tax — up 28.1% 500.0 + 450.0.5 : 5 = * 400.0. “gee 300.04 250.0 349.6 18.3% HY2003. -- HY2004.«——sHY2005.-—-: HY2006 HY2007 ‘includes ALH for 2 months. facludes FAL (NZ) business and 20 Australian ex-FAL store results from 2 November. 2005, and ALH Fetal, MGW reall and BMG retail. ‘Te
Slide 8: Earnings Per Share — up 16.6%
Earnings Per Share—up 16.6% =~ gg cS gag 554 . 50] ; 45.4 ese 40.41 M345 | 46.1% 40; . 7.5% 35 3484 20 | 25 | 20 | 45 | 10. 0) 50.46 Cents ©. 17.0% 16.8% ~HY2003-——-HY2004.——=sHY2005 ~——=sHY2006.-——«HY2007 “REFLECTS STRENTHENING OF OUR BALANCE SHEET DURING A PERIOD OF MAJOR ACQUISITIONS, - | : : : -
Slide 9: Cost of Doing Business reduction
Pxeigeed Our targeted CODB reduction of 20 basis points continues to be : achieved when the distorting impacts of Petrol and Hotels are excluded. CODB was also affected by $20m in supply chain transition costs and industrial action in New Zealand. . : Down 21.31% : ~ Pown 7pts f=: 129pts in 5 ae in
Slide 10: Gross Profit Margin
Gross Profit Margin Sees A As expected Gross margin has improved reflecting Up 39pts in : 26 0; improved buying, shrinkage, the success of our private megane label offering and the benefit flowing from the reduction of direct store deliveries. Up 20pts : : oe ; excluding 25.12% 25.0 | 24.90% 24.82%
Slide 11: Sales Summary
Sales Summary $ Millions - : ; BYOB Increase. . . - . wa, . : } a, Australian Food and Liquor 43,160". 9.0 New Zealand Supermarkets. ~. 779 155.3 Petrol , vs 13.8 . Total Supermarkets | ~ BIG W ; ~ Consumer Electronics. — Total General Merchandise Hotels . Continuing operations Wholesale Division :
Slide 12: EBIT Summary
EBIT Summary — -$ Millions oan | . . Change ‘Australian Food and Liquor . 647, : 29.4% New Zealand Supermarkets ~. : 0 ~ 103.8% - Petrol - one “ AN 87.1% “Supermarkets Division BIG W Consumer Electronics General Merchandise Division Hotels Total Trading Result Property Income Central Overheads - Con
Slide 13: Total Supermarkets
Total: Supermarkets. " ncluding Liquor, Petrol & New Zealand) a ~HYO6 Change “Sales($M) 18, 144.2 416.7% = Gross. Margin (%). nny ae +0.41 %pis >> Wf Cost of Doing Business (%) 18.36 0.27%pts ae oa — EBITtosales(%) 4.86 +0,67%pts “EBIT.($ million) 708.4 434.8% Funds Employed ($ million) =. 4,370.1 4
Slide 14: Australian Supermarkets
Australian Supermarkets (Including Liquor & Petrol) Strong result reflecting strong business momentum ~ HY06 : Change. Sales ($m) a5 385.4 49.7% Gross Margin(%) 22,78 +0.52%pts Cost of Doing Business (%) - 20 00. 18.43 -0.34%pts EBIT to sales (%) 4.35 40,86%pts EBIT($milion) = 89.4 +31.3% Funds Empl
Slide 15: Supermarkets - Australian Food & Liquor
Supermarkets - — - Australian Food & Liquor. Strong result reflecting strong business momentum. Australian Food & Liquor sales up 9. 0%. Comparable sales up 5.7% This result reflects continued and enhanced focus on the.customer with a total offer oft range, freshness, quality, competitive pricing, c
Slide 16: Liquor
Liquor Our Dan Murphy’ Ss, ‘BWS and Attached Liquor stores have provided | customers with excellent value for money, supported by innovative merchandising and in store execution. * Allour liquor operations have produced strong growth in total sales, comparable sales and profits. : +... Group liquor
Slide 17: Petrol
Petrol — ~ Good supplemental offer with petrol sites conveniently located near — our Supermarkets. Strong half year result with modest lift.in margins. Petrol sales of $2. 5-bn increased by 13.8% for the halt. EBIT was up 87.1% to. $44.9m. EBIT growth reflects volume growth through new and existing
Slide 18: New Zealand Supermarkets
New Zealand Supermarkets = ITED. ~HYO7. HYO7 . $AUD-— $NZD_ << “Sales Sa 4989.4 2,326.5 i Gross Margin (%) ae ~ 21.63% 21.63% an “Cost of doing business (%) — 18.15% “18.15% J = Trading EBIT ($ million) 744. 87.0 i> ‘Less intercompany charges (8 million) - —— - (5.1) (5.9) . 5 Reported EBIT ($millio
Slide 19: New Zealand Supermarkets
New Zealand Supermarkets The half year.incurred a ‘one-off negative impact from industrial action i in the first quarter. It was. pleasing toseea return to. normal.operating levels i in the second quarter with comparative. store sales up 3.8%. (18! quarter: flat). : : ‘Food inflation was approximate
Slide 20: BIG W
BIGW Solid result ~ with positive signs evident ~ : : oo AYO6 “Change Sales ($ million) 4,796.4. +7.6% Gross margin (%) ae : 29.48 -0.47%pts- - Cost of Doing Business (%) 23.66 -0.21%pts EBIT to sales (%) - 5 gp -0.26%pts EBIT ($ million) 104.5 43.0% | “Funds Employed ($ million) --—=—-360.2 AM
Slide 21: BIG W
BIG Ww * : “Comparable store sales for the half year. were 0.6%, with an improved second quarter of 1. 1%. This positive trend has continued and strengthened into January.and February. “Our current focus is about understanding what our customer really wants. We remain focused “on a number of merchan
Slide 22: Consumer Electronics — Australia & NZ
~ Consumer Electronics — Australia & NZ" | im 2 Well positioned to take full advantage of technology developments. — ‘ml ree Change > ra Sales .($.million) 9.0% _] Gross margin (%) -1.59%pts mm Cost of Doing Business (%) a4 65%pts an EBIT-to sales (%) +0.06%pts ad _EBIT ($ million) 103% O _ Funds Em
Slide 23: Consumer Electronics — Australia & NZ
Consumer Electronics — Australia & NZ fiz Well positioned to take full advantage of technology developments. - oe ‘Sales for the half year reached $698 million a 9.0% | increase on last half year. . * Comparable store ‘sale increased by 7.0% / +. EBIT growth was. strong at 10.3%, exceeding sales gro
Slide 24: Consumer Electronics — India
Consumer Electronics — India . Our business venture with Tata opened it's first store.in India .in October under the “Croma” . brand. The store is performing in line with expectations. As part of this venture, Woolworths. Limited provides buying, wholesale, supply chain and general consulting servic
Slide 25: Hotels
Hotels Result demonstrates well rounded nature of the business. “HY06 2 Change Sales ($ million) 405.9 +33.0% “Gross margin(%) : 82.85 “40.25%p1s Cost of Doing Business (%) - 62.84 -0.02%pts EBIT tosales(%) 20.0 +0.27%pts EBIT ($ million) ere +34.9% es) ‘Includes Taverner.hotel sales results forthe
Slide 26: Hotels
Hotels ad - Result demonstrates well rounded nature of the business. Sales up 33.0% reflecting growth in the existing business and the inclusion of Taverner Group from 6 February 2006. Comparable sales increased 3.7% during the half year which i isa good result considering the impact. of smoking ban
Slide 27: Dividends Per Share - Interim
Dividends Per Share = Interim os Cents 365 32.4 28 24g 20 16 4 42-4 18.0 20.0% 24.0 16.7% 24.0 14.3% 28.0 16.7% ITED 35.0 ILWORTHS LE HY2003 HY2004 HY2005 ~HY2006 : HY2007 < Dividend payout ratio of 60.60% marginally up on previous year. Lg
Slide 28: Balance Sheet
Balance Sheet '$ Millions Inventory Net investment in inventory down a further $97m Average inventory down 1 day : wo Net investment in inventory Days. creditors, have increased slightly to 43.4 days. -Recgivables. . “TT ™®. Receivables increased due fo the balance. of the sale Other creditors”. og
Slide 29: Capital Management
* “interim and final dividends payable in.the calendar years 2005 and.2006 was subscribed for --employee option plans. “--strategies. and ratings targets. | Capital Management | Woolworths currently sets its capital structure with the objective of maintaining its credit ratings of A- from Standards.
Slide 30: Cash Flow Half Year
Cash Flow Half Year Sree $m $m > ; SCEBITDA 20 “a 4154.8 4AAd 1% Net interest paid : ns °(443.3) De (129.9) : Taxation paid. : ; (229.2) >. 4252.1) a ° ; we ; 812.3 1,059.1 : Working capital and other items.” 205.6 350.4...) . Total.cash provided by operating activities “ . - 1,017.9 ; o 1,409.5] .+
Slide 31: Average Inventory Days (Half Year)
: Average Inventory Days (Half Year) | : 429 Reflects conversion to reporting average inventory. 40. Reduction of ; Reduction of 1 day is good result given 1.0 day increased overseas buying activities, : some dual stocking required during our transition to our new DCs and the shift from direct store
Slide 32: Return On Equity (Half Year)
Return On Equity (1) (Halt Year) 40% 5 29.619 : 9.61% 28.09% 21.53%" @. 13.74% ® a) s £ = o 2 o o HY2003.-—- HY2004.-——s#HY2005..-- HY2006.~—~-HY2007 Based on closing Shareholders funds. . Decline in ROE in HY03 due fo the effect of changes in Australian Accounting Standards. Decline in ROE is due t
Slide 33: Return On Funds Employed (Half Year)
| | Return On Funds Employed () (Half Year) 30% 4 24% 4 oO . B. 18% | a ; < on : 15.07% - oO lt (3) 8 12.44% 2 12% 4 6% 7 0% It 1 “HY2003 -- HY2004 HY2005 -.-HY2006 -°.-HY2007. ‘This measures the pre-tax return on funds employed regardless of how they are financed. Decline in ROFE in ihe HY. statuto
Slide 34: Four Year Report Card
Four Year Report Card | HY04--HYO5 ~—-HY06. | : . “0 AIFRS > A-IFRS Sales will growin the upper single digits supported by ; ; “bolt on acquisitions..- 6. ; 7.0%. 18.4% EBIT will outperform sales growth driven by: cost savings. 43. 11.8% 31.5% _EPS will outperform EBIT ‘growth assisted by capital ;
Slide 35: Growth: Key messages
Growth. _Key messages o Woolworths is. focussed on continuing to lay the foundations for long term sustainable, profitable growth. Ls The significant initiatives undertaken to date will continue to provide an excellent platform. The. majority of the benefits from these initiatives will be realised p
Slide 36: Key messages
Key messages “+ Our focus is on driving our core business, leveraging all our advantages Including our new | supply chain across.all the. Woolworths businesses. . Woolworths has the. ability to.continue to grow organically in its core businesses with clear plans for space roll out, site.refurbishmen
Slide 37: Guidance FY07
Guidance FY07 For FYO7 we anticipate that overall sales growth to be in.the range of 8% to 12%. (unchanged). -Earnings - Net profit after tax for FY07 is expected to grow in the range of 20% to 24% (an increase from the. previously stated guidance of 16% to 21%). : . : We also anticipate that EBIT w
Slide 38: Woolworths Limited Company Results
WOOLWORTHS LIMITED Company Results Half Year Ended 31 December 2006
Slide 39: Capital Expenditure
Capital Expenditure Pre-Existing Businesses. - New Stores - Stayin Business | Refurbishments Supply Chain - Mercury New Businesses Hotels - Acquisitions . Hotels - Other. Supermarkets (NZ) Normal and On-Going CAPEX Distribution Centres (net of sales) - Property Developments (net of sales) NET CAPEX
Slide 40: Franking credits available for shareholder payouts
Franking credits available for ‘Shareholder Payouts Sear the inter vidond) 1000 7 800.+ 600 + 0 c 2 £ w~ 400 5 . : Dividen: 407 “200 4 FY1999 FY2000 FY2001 FY2002. FY2003_FY2004 FY2005 FY2006 HY2007 Profit growth, coupled with balance sheet management, delivered payout to shareholders since 1999.
Slide 41: Growth: Project Refresh and acquisitions
Growth Project Refresh — Lower.costs.a key enabler ~ Stage 1: underpinned cost savings to date, pre-requisite for stage 2..- Stage 2: our new logistics program provides us with a significant strategic advantage which will underpin. our ability to reduce costs over the next 5 years (minimum 20_bps pa
Slide 42: Growth: space roll out
Growth Defined plans to continue space roll out : : “+. Adding 15-25 new supermarkets each year. and expanding existing : stores (greater than 3% p.a.).0 . Supported by) +. Adding 6-10 BIG W stores each year (6% to 8% space rollout p.a.). detailed plans for | : the next three to. me .Adding up to 15
Slide 43: Growth: focus on the customer
Growth | Continued and growing focus on the customer. + Woolworths will enhance its focus on improving in-store execution, ranging, stock availability “and customer service. “Grow new international initiatives India consumer.electronics. . Overseas direct sourcing initiatives ~ Hong Kong, India Leve
Slide 44: Project Refresh Overview
Project Refresh _ Overview “+ Project Refresh since its commencement in 1999.has concentrated.on a number of initiatives ov ineluding a. major. business. restructuring program as well as.numerous successful cost. reduction programs. : : oe Over the past seven years to the end of FY06 Project Refresh
Slide 45: Project Refresh
Project Refresh _ | Cumulative savings $9.3 billion over 9 . years | Level Il - Development 99 00 01 02 03 «04 ~«(05«(06:«(07: «(08 «(09 WOOLWORTHS LIMITED.
Slide 46: Project Refresh cumulative savings
Proj ect Refresh _ a | 9 year cumulative savings = $9.3 billion 2,072 Excludes Hotels. o ; $5.3 billion / 1,662 — : : 4,197 1,200 Qo . < 796 % 800) 632. oO a 4004 os] 163 “> FY0O FY01..FY02 .FY03 . FY04FY05.FY06" FY07“ FY08® . Level Il increasingly logistics driven - Level | ] Mainly line items and
Slide 47: Refresh Level II
Refresh Level II +”: Our current focus remains on our.end-to-end supply chain improvement. ~«. Woolworths has completed a substantial proportion of the.end-to-end supply chain > improvement program in Supermarkets. Many of the key elemenis of the program are fully os operational and completely integ
Slide 48: Refresh Level II Continued
| Refresh Level II Continued +o. The. majority of the distribution centre network has been.completed and is fully operational. Supermarket DCs.will be reduced from 31 DCs to 9 Regional Distribution centres (RDCs) and 2 National Distribution centres (NDCs). To date.6 RDCs and.2 NDCs are fully. operat
Slide 49: Refresh Level II Continued
Refresh Level II Continued 2 +The intellectual property we have developed in our.supply. chain teams, IT:systems and DCs. is now being applied to other businesses in Woolworths. These include the New, Zealand Supermarkets, business and our. liquor businesses, Further we are also-pursuing ° : opportu