Woolworths Group Ltd · ASX:WOW
Woolworths — FY2014 Earnings Presentation
46 slides from Woolworths's earnings presentation, Aug 29, 2014
Slide 1: Company Results Full Year Ended 29 June 2014
Slide 2: Agenda and presenters
Grant O'Brien Group Performance and Strategic Priorities Tjeerd Jegen Australian Supermarkets and Petrol Brad Banducci Woolworths Liquor Group Dave Chambers New Zealand Supermarkets Grant O'Brien General Merchandise Matt Tyson Home Improvement David Marr Group Financial Performance Grant O'Brien Out
Slide 3: Group results: continuing operations before significant items
Continuing Operations Total Group Before Significant Items1 Change Change FY14 Change Normalised2 FY14 Change Normalised2 Sales $60.8b 2.7% 4.7% $60.8b 3.9% 5.9% EBIT $3,775.2m 4.7% $3,775.2m 3.3% 5.3% NPAT $2,451.7m 8.5% $2,451.7m 4.2% 6.1% EPS 196.5¢ 7.6% 196.5¢ 3.3% 5.2%
Slide 4: EBIT by business segment
Change $ million FY14 FY13 Change Normalised1 Australian Food, Liquor and Petrol2 3,368.0 3,199.3 5.3% 7.2% New Zealand Supermarkets (NZD) 309.8 302.7 2.3% 4.2% New Zealand Supermarkets 271.4 236.2 14.9% 17.1% General Merchandise 152.9 191.3 (20.1)% (18.8)% Hotels 275.4 263.7 4.4% 6.5% Home Improvem
Slide 5: Maintain our track record of building new growth businesses
ca «MAINTAIN OUR TRACK RECORD OF 74 BUILDING NEW GROWTH BUSINESSES
Slide 6: FY14 Progress: Australian Food & Liquor and NZ Supermarkets
FY14 Progress Australian Food & Liquor - Sales Growth (%) • Improving comparable sales, EBIT growth and market share over the past Comparable 3 years 4.7%1 4.7%1 • Delivered excellent value with key Supermarkets promotional campaigns Total providing more than $750m in savings to customers in FY14 an
Slide 7: FY14 Progress: Online and Masters
FY14 Progress Online Sales Growth ($b) / Sales Growth (%) • Online sales of over $1.2b for FY14, increasing by 50% on FY13 • Australia's market leading online Food and Liquor offers, with strong growth in our Australasian Apparel business 50% • New Zealand's market leading online Food offer • Our On
Slide 8: FY14 Progress: technology and supply chain
FY14 Progress • 5.9m Everyday Reward cardholders at beginning of year • Continued to invest in technology to enable our online growth • Opened BIG W state of the art DC in Hoxton Park NSW and • Building on our world class supply chain to drive the next National DC in South Auckland New Zealand gener
Slide 9: FY14 Progress: General Merchandise, Hotels and More To Do
FY14 Progress • New leadership team who will further develop the strategy and • Acquired 12 Compass Group hotels bring additional focus on execution and operational excellence • Dick Smith strategic review complete • Completed phase 1 of category and space changes • Commenced the transformation of o
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Slide 11: Australian Supermarkets
ee on} a PE ay pintte: rial ‘ CH po” wl AUSTRALIAN SUPERMARKETS TJEERD JEGEN MANAGING DIRECTOR AUSTRALIAN SUPERMARKETS & PETROL
Slide 12: Trading Performance: Australian Food, Liquor and Petrol
Trading Performance • Food & Liquor FY14 comparable sales growth was 3.0% with Sales – Food & Liquor ($m) 41,171 40,031 2.8% 4.7% growth stronger than FY13 as customers have responded to increased value and our improved offer – Petrol ($m) 7,065 6,794 4.0% 6.0% • Increases in market share, customer
Slide 13: Fresh food and unbeatable value
1. First choice for fresh food 2. Unbeatable value • Fresh market share grew faster than Grocery, in line with our strategy • Key promotional campaigns generated savings of $750m for customers • Improved supply chain capabilities, delivering fresher produce and • Deflation in average prices of 3.1%
Slide 14: Online retailing
3. Online retailing • Woolworths Online continues to lead the way in the retail grocery and alcohol category • Online sales growth of more than 40% in FY14 with over 3m items delivered to customers each week • Australia’s first full range dedicated online fulfilment grocery store opened in July 2014
Slide 15: Customer insights and innovative offers
4. Customer insights transforming our business 5. Innovative offers • We are using data to refine our store layouts and ranges to • Family engagement and customer loyalty created through our meet customers' evolving needs Collectables campaigns • Everyday Rewards members increased to 7.9m, up over 1
Slide 16: Petrol trading performance and objectives
Trading Performance Progress Against Objectives 1. Provide customers with a compelling fuel offer • Sales increased by 6.0%1 driven by • Continued investment in forecourt improvements, providing higher average fuel sell prices and customers with better access to diesel, premium fuels and pleasing gr
Slide 17: Liquor Group
i vornere LIQUOR GROUP BRAD BANDUCCI DIRECTOR OF LIQUOR
Slide 18: Liquor sales growth
$ billion Comments • Strong result for the year across FY10 5.6 6.8% all three formats – Dan Murphy’s (Destination) FY11 5.9 5.5% – BWS (Convenience) – The Wine Quarter (Online and FY12 6.6 12.1% Direct) • Improved access through growing FY13 7.21 7.0%2 store network and continued online innovation
Slide 19: Evolving Dan Murphy's and developing BWS
1. Continuing to evolve Dan Murphy’s 2. Developing the BWS brand and convenience offer • Continued to expand our footprint as Australia’s premier liquor • We continued to grow BWS, Australia’s largest liquor retailer, now with destination, now with 186 stores including 11 new stores opened 1,216 sto
Slide 20: Online and Direct, own and exclusive brands
3. Maintaining leadership in Online and Direct via The 4. Increasing own and exclusive brand penetration through Wine Quarter Pinnacle Drinks • danmurphys.com.au further embedded its position as the premier • Providing customers with enhanced ranges as we continue to build our Australian online liqu
Slide 21: Hotels trading performance
Trading Performance • FY14 comparable sales increased 1.0% impacted by – Subdued trading conditions in Victoria and Queensland where the majority of hotels are located Sales ($m) 1,472 1,469 0.2% 2.2% – Change to tax rates in Victoria applying to EGM revenue from 1 May 2014 – The impact during part
Slide 22: Hotels: responsible operator, network growth, offer
1. To be Australia’s most responsible operator of local pubs 2. Grow our network 3. Evolve our offer to meet customer needs • Industry leading hotel and gaming charter • Utilised opportunities to develop our • Expanding the depth of our bar ranges to underpinning our commitment to business with enha
Slide 23: New Zealand Supermarkets
mos | NEW.ZEALAND SUPERMARKETS DAVE CHAMBERS MANAGING DIRECTOR
Slide 24: Trading Performance: New Zealand Supermarkets
Trading Performance • FY14 comparable sales growth was 0.3% which reflects ongoing subdued grocery market conditions and price deflation across a number of key categories Before Significant Items2 • We have continued to improve our competitiveness in the market and lowered prices on everyday product
Slide 25: Customer value and local sourcing
1. Customer value and innovative offers 2. Leverage local sourcing • Providing increased value to customers via our ‘Price Lockdown’ • 96% of sales are sourced from suppliers that are owned or have a campaign with its range of everyday lower price products, base in New Zealand including being the fi
Slide 26: Online and growing Countdown and franchise network
3. Online 4. Grow Countdown and franchise network • Sales from countdown.co.nz, New Zealand’s leading online food • Opened 5 new Countdown stores (net) during FY14, with the site, increased more than 20% in FY14 network now 171 stores • Continued site functionality and service improvements completed
Slide 27: General Merchandise
GENERAL MERCHANDISE
Slide 28: Trading Performance: General Merchandise
Trading Performance • Comparable sales decreased 3.1% for FY14, impacted by the previously advised transformation of BIG W, highly competitive trading conditions and ongoing price deflation (3.6% for FY14) Sales ($m) 4,352 4,383 (0.7)% 2.1% • Gross margin improvement primarily reflects the acquisiti
Slide 29: Transforming our business for the future
1. Transforming our business for the future • First phase of category and space changes completed across 133 stores, rationalising space in non-core categories such as Entertainment and expanding our offer in Toys and Footwear • New BIG W senior leadership team introduced, including MD and heads of
Slide 30: Winning on value and growing footprint and online
2. Focus on winning on value everyday 3. Growing our store footprint whilst realising our Online ambition • Relaunched our BIG W ‘Lowest Price Guarantee’, increasing our • Integration of EziBuy is progressing well with its world class commitment of giving the best choices at the lowest prices distri
Slide 31: Home Improvement
HOME IMPROVEMENT MATT TYSON MANAGING DIRECTOR
Slide 32: Trading Performance: Home Improvement
Trading Performance • Despite the 42% increase, Masters sales were lower than expected and were impacted by a highly competitive market and the Federal Budget’s Sales ($m) impact on consumer confidence. Losses before interest and tax were higher than anticipated Masters 752 529 42.2% • Masters remai
Slide 33: Rationale for entering the Home Improvement market
Rationale for entering the market remains as strong as ever with a large, growing and fragmented market We have quickly built a foundation of 49 stores with a pipeline focused on key metro areas taking advantage of the growth of big box Home Improvement retailers In a short period of time we have es
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Slide 35: Balance sheet and working capital
$ million FY14 FY13 Change Inventory 4,693.2 4,205.4 11.6% • Closing inventory increase was driven by new store openings, in particular, 34 Australian Supermarkets (net) and 18 Masters stores Trade Payables (4,657.1) (4,080.0) 14.1% since FY13, increased direct global sourcing, changes in product mi
Slide 36: Inventory days
Number of Days Comments • Average inventory increased FY10 31.0 1.9 days impacted by the continued roll out of Masters stores and incremental global FY11 31.5 sourced inventory • Excluding these, average inventory increased 0.3 days FY12 32.71 33.8 • Closing inventory increased 2.1 days on FY13 FY13
Slide 37: Cash flow
$ million FY14 FY13 Change Total EBITDA 4,771.5 4,572.5 4.4% • Cash flow from operating activities before interest and tax Gain on disposal of Consumer Electronics businesses - (9.9) increased 19.8%, impacted by differences in the timing of Change in net investment in inventory creditor payments rel
Slide 38: Dividends and payout
$ billion Comments Interim dividend Buy back Final dividend In-specie distribution • In FY14, we have continued to grow CAGR: dividend payments to 13.8% 2.2 2.2 shareholders 0.7 0.5 • Payout ratio of 70% is in 1.7 1.7 line with FY131 1.6 0.3 0.9 0.9 1.3 0.9 0.8 1.1 0.7 0.7 0.9 0.6 0.7 0.5 0.5 0.4 0.
Slide 39: Return on funds employed
Percentage Comments FY10 31.0% • ROFE from continuing operations before significant items was 27.0% FY11 29.3% • On a normalised 52 week basis ROFE decreased 50 bps • Excluding the investment in FY12 27.8% our Home Improvement business, ROFE increased 57 bps FY13 28.0% 32.4%2 FY14 27.0% 33.0%2 1. Ba
Slide 40: Outlook
• Our businesses are well positioned to continue to deliver exceptional value to customers through a focus on our four Strategic Priorities, providing growth and attractive returns for our shareholders • However, we expect trading conditions to remain challenging in FY15 with consumers managing cost
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Slide 42: Appendix
Woo .wortHs LIMITED
Slide 43: Gross margin
Percentage Comments FY10 25.91% • GP margin increased 17 bps on the prior year reflecting – Improvements in buying FY11 26.03% – More effective promotional activity – Growth in exclusive brand ranges FY12 26.40% – Positive changes in sales mix • We continued to reinvest in lower prices, delivering g
Slide 44: Cost of doing business
Percentage Comments • CODB margin increased 20 bps on the FY10 19.95% prior year • Excluding non-comparable additional net costs in FY14 following the SCA FY11 19.98% transaction and the Home Improvement business which remains in start up phase, CODB margin increased 7 bps, reflecting FY12 20.29% th
Slide 45: Capital expenditure
2013 2014 2015 $ million – Full Year Actual Actual Fcst Normal and Ongoing Capex $m, Capex % to Sales New Stores 300 266 Capex Spend $m Capex as a % to Sales 2,000 4% Refurbishments 478 405 1,500 3% 1,000 2% Growth Capex 778 671 500 1% Supply Chain, IT, Online and Stay in Business 390 604 0 0% 2010
Slide 46: Disclaimer
This presentation contains summary information about Woolworths Limited (Woolworths) 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 Australian Securities Exchange,