Woolworths Holdings Limited · JSE:WHL
Woolworths — H1 FY2020 Earnings Presentation
60 slides from Woolworths's earnings presentation, February 2020
Slide 1: 2020 Interim Results
WO O LWO R T H S H O L D I N G S L I M I T E D 2020 Interim Results
Slide 2: Presentation Outline
PRESENTATION OUTLINE 01 / Review of the period 02 / Financial review 03 / Current focus areas 04 / Outlook 2
Slide 3: Review of the Period (Pre IFRS 16)
REVIEW OF THE PERIOD (PRE IFRS 16) Ian Moir
Slide 4: Group Performance
GROUP PERFORMANCE • Tough trading conditions in both markets • Shift in trading weeks in 2020 compared to prior year with Christmas week falling into H1 in current period and H2 in prior period • Slowdown in Woolworths Clothing in Q2 resulting in loss of market share • Woolworths Food maintained pos
Slide 5: South African Macro Environment
SOUTH AFRICAN MACRO ENVIRONMENT Real annual GDP growth % 6% • Growth remained weak and well below 5% potential, further impacted by load-shedding 4% 3% • 2019 retail sales growth averaged 1.2%, the 2% Forecast weakest rate since 2009 Source: Statistics SA 1% 0% 2007 2008 2009 2010 2011 2012 2013 201
Slide 6: Woolworths Fashion, Beauty and Home performance
• Total sales and comparable store sales both up 2.2% on LY (both up 0.9% adjusting for shift in trading weeks) – Poor Q2 trade (down 2.3% on LY after adjusting for trading weeks) impacted by constrained economic conditions, further exacerbated by load-shedding, Black Friday impact, and unseasonal w
Slide 7: Fashion and Home Market Share
FASHION AND HOME MARKET SHARE % market % share growth 12.0 10.0 7.0 11.0 8.0 4.0 10.0 1.0 -2.0 9.0 -5.0 8.0 -8.0 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 Dec 18 Jan 19 Feb 19 Mar 19 Apr 19 May 19 Jun 19 Jul 19 Aug 19 Sep 19 Oct 19 Nov 19 Dec 19 Woolworths 12mma market share Market 3mma growth Woolw
Slide 8: Woolworths Food performance
• Total sales up 8.1% (7.8% adjusting for the shift in trading weeks), with comparable store sales up 5.4% –C onsistent growth ahead of market due to innovative, quality products and investment in value perception –D ecember trade impacted by load-shedding, poor weather conditions and changing custo
Slide 9: Market Share
MARKET SHARE % market % share growth 10.4 12.0 10.2 10.0 10.0 8.0 9.8 9.6 6.0 9.4 4.0 9.2 2.0 9.0 8.8 0.0 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 Dec 18 Jan 19 Feb 19 Mar 19 Apr 19 May 19 Jun 19 Jul 19 Aug 19 Sep 19 Oct 19 Nov 19 Dec 19 Woolworths Food 12mma market share Market 3mma growth of all
Slide 10: Australian Macro Environment
AUSTRALIAN MACRO ENVIRONMENT Real annual GDP growth % % 5 • Despite record low interest rates, tax stimulus 4.5 4 and strong job growth, the economy has 3.5 3 Forecast remained depressed by high levels of consumer 2.5 indebtedness, a softer housing market, low wage growth, rising non-discretionary c
Slide 11: David Jones performance
• Total sales up 4.9% on LY; after adjusting for trading weeks, sales 0.5% lower and 0.4% lower on a comparable store sale basis • Q2 sales up 1.3% (after adjusting for trading weeks) with strong Black Friday sales • Still significant disruption from Elizabeth Street store refurbishment with the Gro
Slide 12: Country Road Group performance
• Total sales down 2.5%; up 3.3% excluding the sales impact of the Myer exit • Comparable store sales up 0.1% (adjusting for shift in trading weeks) – Outstanding Country Road performance, offset by fashion misses in Witchery –S trong transfer of sales into David Jones and other channels after Myer
Slide 13: Financial Review (Pre IFRS 16)
FINANCIAL REVIEW (PRE IFRS 16) Reeza Isaacs
Slide 14: Introduction
INTRODUCTION • FY20 is the first year of implementation of IFRS 16. We adopted the modified retrospective approach, so have not restated prior year’s results. As mentioned in our IFRS 16 presentation in early December 2019, we would show the results pre and post IFRS 16 for FY20 to enable comparabil
Slide 15: Financial Overview
FINANCIAL OVERVIEW Adjusted profit before tax EPS HEPS Turnover and -12.3 to R2.4 billion % -9.0 to 179.8 cps % -10.1 to 180.2 cps % concession sales +3.8 to R40.9 billion % HEPS – Adjusted diluted Interim dividend ROE* -11.7 to 179.1 cps % -3.3 to 89.0 cps % 15.3 from 16.6% % * David Jones asset im
Slide 16: Group Income Statement
GROUP INCOME STATEMENT Continued strong performance in Food; Dec 2019 Dec 2018 % underperformance in FBH Rm Rm change Woolworths Fashion, Beauty and Home 834 915 (8.9) Challenging trading conditions; Elizabeth Street disruption; margins Woolworths Food 1 157 1 071 8.0 impacted by inclusion of Boxing
Slide 17: Income Statement - Fashion, Beauty and Home
INCOME STATEMENT Dec 2019 Dec 2018 % 0.9% adjusting for shift in trading Rm Rm change weeks; disappointing performance in Womens’ outerwear and F&A; Fashion Turnover 7 236 7 078 2.2 price movement of 4.0% Cost of sales 3 864 3 741 3.3 Gross profit 3 372 3 337 1.0 Overall margin down 50 bps; SA brand
Slide 18: Income Statement - Food
INCOME STATEMENT Dec 2019 Dec 2018 % Rm Rm change 7.8% adjusting for shift in trading weeks; Turnover and concession sales 17 040 15 762 8.1 price movement of 5.1%; positive volume Concession sales (392) (366) 7.1 growth; slower December Turnover – own buy 16 648 15 396 8.1 Margin maintained; price
Slide 19: Financial Services Income Statement
Dec 2019 Dec 2018 % Rm Rm change Average total financial services assets 13 053 12 060 8.2 Strong credit card growth; new business and credit limit increases; improved store card performance % % Income statement to book to book Interest income 1 103 16.9 1 050 17.4 5.0 Interest paid 347 5.3 324 5.4
Slide 20: Book Performance
BOOK PERFORMANCE IAS 39 IFRS 9 13 349 8% 12 329 11 538 11 147 10 695 6% 5.4% 4.5% 4.5% 4% 3.2% 3.3% 20.5% 20.0% 2% 11.7% 13.6% 13.8% 2 532 2 664 1 249 1 520 1 589 0% Dec 15 Dec 16 Dec 17 Dec 18 Dec 19 Total book value (Rm)* Total provision (Rm)* Impairment charge (%)** Portfolio coverage (%) * Total
Slide 21: Income Statement - David Jones
INCOME STATEMENT 0.5% lower adjusting for shift in Dec 2019 Dec 2018 % trading weeks; comp stores 0.4% A$m A$m change lower; online up 61.8%; Elizabeth Street disruption Turnover and concession sales 1 176 1 121 4.9 Concession sales (395) (379) 4.2 Margin down 290 bps; includes Boxing Turnover – own
Slide 22: Income Statement - Country Road Group
INCOME STATEMENT Up 3.3% excluding Myer exit; online up Dec 2019 Dec 2018 % 6.2%, now 21.4% of Australasian sales; A$m A$m change good CR performance; Witchery range Turnover 541 555 (2.5) misses Cost of sales 204 200 2.0 Down 170 bps; includes Boxing Day Gross profit 337 355 (5.1) clearance Other r
Slide 23: Net Finance and Other Costs
NET FINANCE AND OTHER COSTS Dec 2019 Dec 2018 Capital Rate* Rm Rm ZAR debt R8.7bn 8.67% 403 410 Lower SA base rates AUD debt A$464m 5.19% 129 119 Higher debt levels, lower base rates Net finance costs 532 529 but higher margins Other costs 5 4 Net finance and other costs 537 533 Interest cover (time
Slide 24: Group Balance Sheet
GROUP BALANCE SHEET Constant Dec 2019 Dec 2018 currency Rm Rm % change Assets Property, plant and equipment 14 636 14 360 5.5 DJ goodwill and brand impairment at Intangible assets 7 373 13 749 (44.8) FY19 year-end Investments in joint ventures 890 793 12.2 Inventories 9 006 9 298 (0.7) Christmas wee
Slide 25: Net Gearing
NET GEARING Dec 2019 Jun 2019 Dec 2018 WHL Net debt (Rm) (11 783) (12 480) (11 673) Total net gearing reduced from FY19 year-end Interest-bearing term debt (13 240) (13 522) (13 287) Net cash and cash equivalents 1 457 1 042 1 614 Unutilised committed facilities – Group 8 674 8 147 9 033 Significant
Slide 26: Covenants
COVENANTS Dec 2019 Dec 2018 Bank limit SA Bank covenants Net debt to EBITDA (times) 1.7 1.5 <3.0 SA covenants well within bank limits Interest cover (times) 6.0 6.3 >3.5 Aus Bank covenants Net debt to EBITDA (times) 1.7 1.6 <3.0 Within bank limits; Aus covenants renegotiated during refinancing; Fixe
Slide 27: Capital Expenditure
CAPITAL EXPENDITURE Rm Spend Rm Forecast 1 600 3 200 R3 006m R2 706m A$54m R2 400m 1 200 2 400 A$14m A$37m A$21m 800 1 600 A$15m A$9m 400 800 R633m R520m – – Dec 2018 Dec 2019 FY19 FY20 FY21 Actual Forecast Plan Woolworths David Jones Base capex Elizabeth Street Country Road Group Elizabeth Street D
Slide 28: Cash Generation for the 26 Weeks Ended 29 December 2019
CASH GENERATION FOR THE 26 WEEKS ENDED 29 DECEMBER 2019 Rm 5 000 554 80 4 000 3 872 (503) 3 000 (754) 2 000 1 930 (1 319) (299) 1 000 681 (950) – Cash Working JV Net finance Taxation Mainte- Free cash Expansion Dividends Decrease inflow capital dividend costs and nance flow** capex in net from movem
Slide 29: Earnings and Distribution
EARNINGS AND DISTRIBUTION cents times Group dividend based on 1.45x 300 2.5 Woolworths SA headline earnings post IFRS 16; Aus gearing target of 2.18 253.5 A$200 million remains 1.90 242.6 1.90 2.0 1.80 1.85 206.3 200.4 200 180.2 1.5 133.0 133.0 108.5 1.0 100 92.0 89.0 0.5 – – Dec 15 Dec 16 Dec 17 De
Slide 30: Current Focus Areas
CURRENT FOCUS AREAS Ian Moir
Slide 31: Fashion, Beauty and Home focus areas
• Drive the Fashion business turnaround, specifically in Womenswear, with a focus on design to deliver better ranges and taste levels • E ntrench strong ‘on the ground’ leadership, processes and disciplines •S trengthen our value perception by focusing on great price points, key value lines, more st
Slide 32: Woolworths Food focus areas
• Absolute focus on maintaining market leading position in product quality and innovation • Provide our customers with easy and accessible convenience through a variety of formats, channels and inspiring meal solutions • Build and expand our presence in the fast, fresh Food offer • Strengthen the va
Slide 33: David Jones focus areas
• Provide accessible luxury and exclusive, differentiated products and brands, amazing experiences and great service in our top stores • Continue to focus on brand exclusivity –C ountry Road Group brands became exclusive to David Jones and trading well – Iconic Australian brand, Sportscraft, now als
Slide 34: David Jones focus areas - Elizabeth Street and real estate
• Complete refurbishment of Elizabeth Street store to create world-class department store –H ighly anticipated Ground Floor (Luxury Beauty and Accessories) opened at beginning of December 2019 to exceptional customer feedback – Sydney foot traffic has been impacted by bushfires but sales in Elizabet
Slide 35: Elizabeth Street Ground Floor
ELIZABETH STREET GROUND FLOOR
Slide 36: Country Road Group focus areas
• Continue to drive the Country Road brand performance with strong ranges and improved in-store experience • Improve Witchery’s performance with new ranges, price investment and revised breadth of offer • Continue to drive full-price sales with targeted, loyalty-based promotions and less generic dis
Slide 37: Outlook
04. OUTLOOK Tan Moir
Slide 38: Outlook - South Africa
OUTLOOK South Africa • Despite lower interest rates and muted inflation, consumer spending expected to remain constrained • Price movement in H2 expected to be 4.2% for Food and 5.7% for FBH • FBH to continue to focus on improving performance through better pricing and ranges, particularly in Womens
Slide 39: Outlook - Australia
OUTLOOK Australia • Consumer spending is likely to be muted in short-term due to stagnant wage growth and impact of bushfires but improve in the medium-term on the back of a stabilising housing market • Coronavirus already significantly impacting tourism, footfall and sales and further impact on sou
Slide 40: Trade in First Six Weeks of H2
TRADE IN FIRST SIX WEEKS OF H2 Sales growth 0.4% 7.1% 2.6% 4.2%
Slide 41: Additional Info
ADDITIONAL INFO
Slide 42: Trading Space
TRADING SPACE Projected Projected Projected Dec 2019 Dec 2018 % Jun 2020 % Jun 2021 % Jun 2022 % 000m2 000m2 change 000m change** 2 000m2 change 000m2 change Woolworths Fashion, Beauty and Home 486 481 1.2 485 1.5 483 (0.4) 478 (1.0) South Africa 441 436 1.2 440 1.1 436 (0.9) 430 (1.4) Rest of Afric
Slide 43: Projected Trading Space Additions/Reductions
PROJECTED TRADING SPACE ADDITIONS/REDUCTIONS Woolworths Fashion, Country Beauty Woolworths David Road 000m 2 and Home Food Jones Group Dec 2019 486 262 486 116 Additions 1 1 8 – Reductions (2) (2) (19) (2) Jun 2020 485 261 475 114 Additions 2 7 – 2 Reductions (4) (2) (7) (4) Jun 2021 483 266 468 112
Slide 44: Store Locations
STORE LOCATIONS Projected Projected Projected Dec 2019 Dec 2018 Growth Jun 2020 Growth*** Jun 2021 Growth Jun 2022 Growth Woolworths Fashion, Beauty and Home 282 282 – 280 1 278 (2) 272 (6) South Africa 217 217 – 216 – 214 (2) 208 (6) Rest of Africa 65 65 – 64 1 64 – 64 – Woolworths Food 452 437 15
Slide 45: Contribution to Sales
CONTRIBUTION TO SALES % of retail sales purchased on Woolworths cards Dec 2019 Dec 2018 Increase in FBH contribution driven Total Fashion, Beauty and Home 24.1% 23.9% by sustained credit card performance Total Food 11.4% 11.4% and improvement in store card Aggregate Woolworths card and credit contri
Slide 46: Income Statement (in Rands) - David Jones
INCOME STATEMENT (IN RANDS) Dec 2019 Dec 2018 % Rm Rm change Turnover and concession sales 11 812 11 485 2.8 Concession sales (3 968) (3 883) 2.2 Turnover – own buy 7 844 7 602 3.2 Cost of sales 4 714 4 260 10.7 Gross profit – own buy 3 130 3 342 (6.3) Concession and other revenue 1 019 1 024 (0.5)
Slide 47: Balance Sheet - David Jones
BALANCE SHEET Dec 2019 Dec 2018 % A$m A$m change Assets Property, plant and equipment 926 859 7.8 Goodwill and brands – 568 100.0 Intangible assets 93 92 1.1 Right-of-use assets 954 – – Inventories 331 355 (6.8) Trade and other receivables, deferred tax and tax assets 261 140 86.4 Cash and cash equi
Slide 48: Income Statement (in Rands) - Country Road Group
INCOME STATEMENT (IN RANDS) Dec 2019 Dec 2018 % Rm Rm change Turnover 5 464 5 696 (4.1) Cost of sales 2 064 2 054 0.5 Gross profit 3 400 3 642 (6.6) Other revenue 20 13 53.8 Expenses 2 855 3 029 (5.7) Store costs 2 032 2 171 (6.4) Other operating costs 823 858 (4.1) Adjusted operating profit 565 626
Slide 49: Balance Sheet - Country Road Group
BALANCE SHEET* Dec 2019 Dec 2018 % A$m A$m change Assets Property, plant and equipment 134 136 (1.5) Intangible assets 367 369 (0.5) Right-of-use assets 437 – – Inventories 133 120 10.8 Trade and other receivables, deferred tax and tax assets 180 89 >100 Cash and cash equivalents 30 50 (40.0) Total
Slide 50: IFRS 16
IFRS 16
Slide 51: Introduction
INTRODUCTION • Effective beginning of 2020 financial year (1 July 2019) • We have adopted the modified retrospective approach • Comparative amounts are not restated. Opening retained earnings is adjusted on Day 1 (1 July 2019). Results for FY20 interims, excluding IFRS 16 adjustments, have been pres
Slide 52: Group Income Statement
GROUP INCOME STATEMENT Pre IFRS 16 Adjust- Post IFRS 16 Dec 2019 ment Dec 2019 Dec 2018 Rm Rm Rm Rm Woolworths Fashion, Beauty and Home 834 135 969 915 Woolworths Food 1 157 86 1 243 1 071 WFS (50% of PAT) 159 – 159 157 Woolworths 2 150 221 2 371 2 143 David Jones 197 206 403 471 Country Road Group
Slide 53: Income Statement - Fashion, Beauty and Home
INCOME STATEMENT Pre IFRS 16 Adjust- Post IFRS 16 Dec 2019 ment Dec 2019 Dec 2018 Rm Rm Rm Rm Turnover 7 236 – 7 236 7 078 Cost of sales 3 864 – 3 864 3 741 Gross profit 3 372 – 3 372 3 337 Other revenue 7 – 7 7 Expenses 2 545 (135) 2 410 2 429 Store costs 1 773 (131) 1 642 1 709 Other operating cos
Slide 54: Income Statement - Food
INCOME STATEMENT Pre IFRS 16 Adjust- Post IFRS 16 Dec 2019 ment Dec 2019 Dec 2018 Rm Rm Rm Rm Turnover and concession sales 17 040 – 17 040 15 762 Concession sales (392) – (392) (366) Turnover – own buy 16 648 – 16 648 15 396 Cost of sales 12 547 – 12 547 11 613 Gross profit – own buy 4 101 – 4 101
Slide 55: Income Statement - David Jones
INCOME STATEMENT Pre IFRS 16 Adjust- Post IFRS 16 Dec 2019 ment Dec 2019 Dec 2018 A$m A$m A$m A$m Turnover and concession sales 1 176 – 1 176 1 121 Concession sales (395) – (395) (379) Turnover – own buy 781 – 781 742 Cost of sales 469 – 469 416 Gross profit – own buy 312 – 312 326 Concession and ot
Slide 56: Income Statement - Country Road Group
INCOME STATEMENT Pre IFRS 16 Adjust- Post IFRS 16 Dec 2019 ment Dec 2019 Dec 2018 A$m A$m A$m A$m Turnover 541 – 541 555 Cost of sales 204 – 204 200 Gross profit 337 – 337 355 Other revenue 2 – 2 1 Expenses 283 (9) 274 295 Store costs 201 (8) 193 211 Other operating costs 82 (1) 81 84 Adjusted opera
Slide 57: Group Balance Sheet
GROUP BALANCE SHEET Pre IFRS 16 Adjust– Post IFRS 16 Dec 2019 ment Dec 2019 Dec 2018 Rm Rm Rm Rm Assets Property, plant and equipment 14 636 (26) 14 610 14 360 Intangible assets 7 373 – 7 373 13 749 Right–of–use assets – 19 321 19 321 – Investments in joint ventures 890 – 890 793 Inventories 9 006 –
Slide 58: Cash Generation for the 26 Weeks Ended 29 December 2019
CASH GENERATION FOR THE 26 WEEKS ENDED 29 DECEMBER 2019 Rm 7 000 80 554 5 867 6 000 5 000 (1 257) (754) 4 000 3 000 (1 319) 1 930 2 000 (1 241) (299) 1 000 681 (950) – Cash Working JV Net finance Taxation Mainte- Lease Free cash Expansion Dividends Decrease inflow capital dividend costs and nance li
Slide 59: Impact on Key Metrics
IMPACT ON KEY METRICS Pre IFRS 16 Post IFRS 16 Dec 2019 Change Dec 2019 INCOME STATEMENT Adjusted EBIT Rbn 2.9 0.5 3.4 Operating margin % 7.3 1.5 8.8 Adjusted profit after tax Rbn 1.7 (0.2) 1.5 HEPS cents 180.2 (8.5%) 164.9 Interest cover times 7.0 (2.7) 4.3 BALANCE SHEET Net debt* Rbn 11.8 18.8 30.
Slide 60: Disclaimer
DISCLAIMER Shareholders are advised that the information in this presentation has not been reviewed and reported on by Woolworths Holdings’ external auditors and it does not constitute a profit forecast. Woolworths Holdings has acted in good faith and has made every reasonable effort to ensure the a
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