Woolworths Holdings Limited · JSE:WHL
Woolworths — H1 2011 Earnings Presentation
42 slides from Woolworths's earnings presentation, 2011
Slide 1: Overview
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 1
Slide 2: Overview: South Africa
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 2 OVERVIEW South Africa - Consumers benefiting from real wage increases, low inflation and low interest rates - Higher income consumers showing stronger recovery - An improvement in the credit environment - Consumer confidence is holding steady at
Slide 3: Overview continued
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 3 OVERVIEW CONTINUED Source: Bureau for Economic Research
Slide 4: Overview continued: Australia
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 4 OVERVIEW CONTINUED Australia - Tough retail conditions, with a significant drop in consumer spending
Slide 5: Review of the period
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 5 REVIEW OF THE PERIOD Market share gains Continued strong GP margin gain in Woolworths Good cost management Strong profit performance Adjusted HEPS +25.8% ROE up to 43.3% Strong cash flow Interim dividend +32.9% Strong balance shee
Slide 6: Woolworths - Food
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 6 WOOLWORTHS - FOOD Outstanding performance Volumes up 9.0% Above market sales growth of 11.8% Strong GP margin and improving operating margin ROS improved from 3.8% to 5.3% Profit before tax up 54.6% Positive impact from loyalty progra
Slide 7: Food turnover growth
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 7 FOOD TURNOVER GROWTH Data source: Statistics SA (Type B Retailer)
Slide 8: Woolworths - Clothing & GM
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 8 WOOLWORTHS - CLOTHING & GM Sales up 8.1%, with comparable sales up 5.7% - Clothing in South Africa (including Country Road) up 11.5%, with comparable sales up 9.2% Volume growth of 7.8% Clothing & footwear continued market share growth - Both
Slide 9: Clothing & footwear turnover growth
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 9 CLOTHING & FOOTWEAR TURNOVER GROWTH Clothing & footwear - Woolworths vs market growth (3mma) 20% 15% 10% 5% 0% -5% 5% -10% O - 08 O - 09 O - 10 Ap 0 9 Ap 1 0 Ju 0 Au 09 Au -10 F e 08 F e 09 10 J u 09 D e - 08 D e - 09 D e - 10 r-1 - - n- c- c- c- r
Slide 10: Clothing & footwear turnover growth continued
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 10 CLOTHING & FOOTWEAR TURNOVER GROWTH CONTINUED Clothing & footwear - Woolworths vs market growth (12mma) 16% 14% 12% 10% 8% 6% 4% 2% 0% O - 08 O - 09 O - 10 Ap 0 9 Ap 1 0 Ju 1 0 Au 09 Au 10 F e 08 F e 09 10 J u 09 D e - 08 D e - 09 D e - 10 - - n-
Slide 11: Woolworths - Clothing & GM continued
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 11 WOOLWORTHS - CLOTHING & GM CONTINUED Significant improvement in profitability - Increased margins in Clothing, Home and Beauty Rationalising and changing the business model in Connect cellphone business ROS up from 13.8% to 15.3% GP margin
Slide 12: Woolworths - Stores
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 12 WOOLWORTHS - STORES Improved trading densities in both Clothing & GM and Food More profitable stores Comparable store sales growth at 7.7% Planned slowdown in expansion, space growth at 3.1% (corporate stores) Progressing well on franchi
Slide 13: Country Road
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 13 COUNTRY ROAD Sales up 3.7%, with comparable sales down 9.9% Fully inclusive of sales in South Africa, with continued strong performance of the brands in South Africa Operating profit up 8.3% Relatively strong performance as a result of foc
Slide 14: Financial Services
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 14 FINANCIAL SERVICES Impairments down to 1.6% from 6.2% Operating profit of the JV up from R80m to R193m ROE up from 10.4% to 23.4% Book growth static, but much higher quality
Slide 15: WHL
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 15
Slide 16: Financial overview
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 16 FINANCIAL OVERVIEW Group turnover up 9.8% to R12.7 billion Profit before tax up 22.1% to R1.2 billion Adjusted headline earnings per share up 25.8% to 100.8 cps Diluted headline earnings per share up 15.8% to 96.6 cps ROE i
Slide 17: Group income statement
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 17 GROUP INCOME STATEMENT Dec 2010 Dec 2009* % Rm Rm change Woolworths 1 008 773 30.4 Clothing & GM 657 546 20.3 Food 351 227 54.6 Abnormal forex profit - 58 y Road Country 92 86 7.0 Financial Services JV (after tax) 65 27 140.7 Treasur
Slide 18: Group income statement commentary
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 18 GROUP INCOME STATEMENT COMMENTARY 1. Woolworths – Good profit growth driven by volumes and margin expansion in both Food and Clothing & GM. 2. Country Road – Tough trading conditions continue. Results fully inclusive of SA operations
Slide 19: Woolworths income statement
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 19 WOOLWORTHS INCOME STATEMENT Dec 2010 Dec 2009* % Rm Rm change Turnover 11 155 10 099 10.5 Cost of sales 7 668 7 143 7.3 Gross profit 3 487 2 956 18.0 Oth revenue Other 41 52 (21 .2) 2) Expenses 2 520 2 238 12.6 Store costs 1 554 1 41
Slide 20: Woolworths income statement commentary
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 20 WOOLWORTHS INCOME STATEMENT COMMENTARY 1. Turnover Total stores Comparable stores Price movement Clothing & GM 8.1% 5.7% 1.4% Food 11.8% 9.1% 3.0% Woolworths 10.5% 7.7% g sales in South Africa,, including Clothing g Country y Road &
Slide 21: Woolworths segmental performance
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 21 WOOLWORTHS SEGMENTAL PERFORMANCE Gross margin Operating margin Dec 2010 Dec 2009* Dec 2010 Dec 2009* % % % % Clothing & GM 42 9 42.9 39 2 39.2 15 3 15.3 13 8 13.8 Food 24.2 23.1 5.3 3.8 Woolworths 31 .3 29.3 9.0 7.6 O Operating ti
Slide 22: Country Road income statement
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 22 COUNTRY ROAD INCOME STATEMENT Dec 2010 Dec 2009* % A$m A$m change Turnover 226 218 3.7 Cost of sales 97 93 4.3 Gross profit 129 125 32 3.2 Other revenue 1 2 Expenses 117 115 1 .7 Store costs 81 80 1 .3 3 Other operating costs 36 35 2
Slide 23: Country Road income statement commentary
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 23 COUNTRY ROAD INCOME STATEMENT COMMENTARY 1. Turnover – Fully inclusive of South African operations in both periods A$m Dec 2010 Dec 2009 % change Comparable stores Retail 185 174 6.3% (9.6%) Concession & Wholesale 41 44 (6.8%) (10.7%
Slide 24: Financial Services income statement
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 24 FINANCIAL SERVICES INCOME STATEMENT Consolidated pro forma Dec % to Dec % to % income statement 2010 book 2009 book change Rm Rm Interest income 553 18.5 601 20.1 (8.0) Interest paid 170 5.7 202 6.7 (15.8) Net interest income 383 12.
Slide 25: Financial Services income statement commentary
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 25 FINANCIAL SERVICES INCOME STATEMENT COMMENTARY 1. Average financial services assets – Flat book growth, with reasonable new account growth being offset by higher customer payments and NTU (not taken up) rates. The quality of the book
Slide 26: Financial Services book performance
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 26 FINANCIAL SERVICES BOOK PERFORMANCE 7 000 6 102 6 177 6 148 14% 5 932 6 000 12% 5 000 9.2% 10% 4 000 7.6% 8% 3 000 6.2% 6% 1 940 1 900 1 865 1 856 2 000 4% 1 000 2% 1 .6% - 0% Dec-07 Dec-08 Dec-09 Dec-10 Gross book value (Rm) Total a
Slide 27: Balance sheet
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 27 BALANCE SHEET Dec 2010 Dec 2009* % Rm Rm change Assets Property, plant and equipment, intangible assets 2 689 2 635 2.0 and loans Investment in JVs and 628 578 8.7 associates Inventory 1 837 1 814 1 .3 Accounts receivable and 1 185 1
Slide 28: Balance sheet commentary
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 28 BALANCE SHEET COMMENTARY 1. PPE & intangible assets - Includes R48m purchase of franchises. 2. Inventory - Well controlled. 3. Accounts receivable - Continued improvement in collections. 4 Accounts payable - Continued improvement in
Slide 29: Cash generation
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 29 CASH GENERATION 2 000 R452m 1 800 1 600 (R74m) 1 400 R1 321m 1 200 (R384m) 1 000 (R303m) 800 600 R7m R496m 400 (R523m) 200 0 ( 200) 00 EBITDA Working Interest Tax Net Distributions Net share Net increase ( 400) capital and paid capex
Slide 30: Capital expenditure
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 30 CAPITAL EXPENDITURE Capex (Rm) R310 (Dec R310m (D 2009: 2009 R316 R316m)) 46 91 57 26 Depreciation Dec 2010 Dec 63 45 Rm 2009 Rm Woolworths 175 163 144 154 Country Road 44 35 Total group 219 198 Dec 2010 Dec 2009 Woolworths Retail Wo
Slide 31: Return on equity
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 31 RETURN ON EQUITY 45% 42 4% 43.3% 42.4% 43 3% 45% 39.4% 40% 40% 34.8% 35.1% 33.5% 35% 35% 28.7% 27 4% 27.4% 27 5% 27.5% 30% 27 8% 27.8% 30% 24.7% 25% 25% 26.3% 17.5% 18.3% 20% 20% 15% 15% 16.3% 13.8% 13.8% 14.8% 10% 13.5% 10% 13.3% 13
Slide 32: Earnings and distribution
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 32 EARNINGS AND DISTRIBUTION cents times 160 3.0 140 2.4 2.2 2.2 2.2 2.5 . 2.1 120 1 .9 20 2.0 100.8 2.0 100 80.1 80 70.4 1 .5 64.4 53.1 56 9 56.9 60 50.5 44.4 1 .0 38.0 40 29.5 29.5 31 .5 24.0 18.5 0.5 20 - - Dec-04 Dec-05 Dec-06 Dec-0
Slide 33: Guidance
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 33 GUIDANCE Woolworths - Sales growth expected to continue in line with H1 - Gross margin to be maintained - C ti Continued d ffocus on expenses Country Road - Sales g growth will remain under pressure - Gross margin to be maintaine
Slide 34: Guidance continued
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 34 GUIDANCE CONTINUED Taxation - Effective rate of 33% Capex Woolworths Country Road - FY2011 R600m R80m - FY2012 R650m R120m - Excludes franchise buyout - expect to buy back around 75% of stores by June (+/ (+/-R500m) R500m) Divi
Slide 35: Strategic focus
WHL WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 35
Slide 36: Strategic focus
WHL WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 36 STRATEGIC FOCUS 1. Customer Refined our segmentation. segmentation Completed our sub brand review and now have fewer, more meaningful brands. Will also be relaunching our core brands Re_ and Studio.w. 2. Loyalty programme Increased cu
Slide 37: Strategic focus continued
WHL WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 37 STRATEGIC FOCUS CONTINUED 4. Expand product Our women’s Footwear & Accessories ranges have categories with the been transformed, transformed Lingerie availability is significantly improved and customers are thrilled most potential with ou
Slide 38: Strategic focus continued
WHL WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 38 STRATEGIC FOCUS CONTINUED 7. Value chain In Food the focus on longlife availability has optimisation delivered improvements (93% to 95%) with better order fill rates from suppliers. The future focus will be on reducing longlife cover by a
Slide 39: Medium-term targets
WHL WOOLWORTHS HOLDINGS LIMITED MEDIUM-TERM TARGETS IAN MOIR 39
Slide 40: Outlook for customer income groups
WHL WOOLWORTHS HOLDINGS LIMITED MEDIUM-TERM TARGETS IAN MOIR 40 OUTLOOK FOR CUSTOMER INCOME GROUPS The number of South African adults in income groups LSM 8-10 is projected to increase from 7.7m people in 2010 to 9.4m people in 2015 100% 16% 18% 90% 23% 28% 80% 18% 70% 22% 60% 29% LSM 8-10 50% 41%
Slide 41: Medium-term targets
WHL WOOLWORTHS HOLDINGS LIMITED MEDIUM-TERM TARGETS IAN MOIR 41 MEDIUM-TERM TARGETS Achieved Achieved Medium- in FY2009 in FY2010 term target Woolworths Clothing & GM Return on sales 10.4% 12.5% 15% Food R t Return on sales l 3 6% 3.6% 3 6% 3.6% 6% Country Road Return on sales 6.3% 5.0% 8% Financial
Slide 42: Medium-term targets
WHL WOOLWORTHS HOLDINGS LIMITED MEDIUM-TERM TARGETS IAN MOIR 42