Woolworths Holdings Limited · JSE:WHL
Woolworths — FY2009 Earnings Presentation
67 slides from Woolworths's earnings presentation, August 2009
Slide 1: Audited group results for the year ended 30 June 2009
audited group results for the year ended 30 June 2009 analyst presentation - august 2009
Slide 2: Woolworths Holdings Limited overview
woolworths holdings limited Tough economic conditions continued Woolworths had improved performance from 4th quarter S Strategy successfully f ll implemented i l d and d working ki Seeing green shoots Some improvement in consumer confidence Upper end consumer recalibrating to different c
Slide 3: Review of the year
woolworths holdings limited review of the year W l Woolworths h RRetailil - Moderate sales growth, better in last quarter - Clothing & General Merchandise 12mma market share • Value and core strong in 2nd half Clothing and footwear Food • Improved margin (per RLC) (per Nielsen) • Particularly P i
Slide 4: Review of the year (continued)
woolworths holdings limited review of the year (continued) C Country R Road d - Excellent sales and profit performance - Australian Retailer of the Year Financial Services - Partnership going well - C di environment Credit i constraining i i bbookk growth h Strong balance sheet
Slide 5: WOSGLAVYORTHE FOLDINGS mr f IL
WOSGLAVYORTHE FOLDINGS mr f IL
Slide 6: Financial overview
woolworths holdings limited financial overview Retail turnover up 7.2% to R21.2 billion (52:52) Adjusted headline earnings per share up 13.9% (52:52) Total distribution to shareholders up 7.6% to 85 cps Special dividend and share buybacks of R1.1bn completed during the year
Slide 7: Group income statement (52:52)
woolworths holdings limited group income statement (52:52) JJun 2009 JJun 2008 % Rm Rm change SA Retail 1 108.7 1 134.6 (2.3) Country Road 138.3 101.0 36.9 Financial Services 129.2 158.0 Q1: 100% subsidiary 71.8 Q2 4: JV (after tax) Q2–4: 57 4 57.4 Net group interest 49.9 20.1 >100 Profit before exc
Slide 8: Group income statement commentary
woolworths holdings limited group income statement commentary 1. SA Retail – includes R79m unrealised forex loss 2. Country Road – another year of good growth 3. Financial Services – consolidated in Q1 and equity accounted thereafter 4. Net group interest – excludes WFS, and is earned on net cash po
Slide 9: SA retail income statement (52:52)
woolworths holdings limited SA retail income statement (52:52) Jun 2009 Jun 2008 % R Rm R Rm change Turnover 18 835.2 17 826.4 5.7 Cost of sales 13 555.8 12 843.4 5.5 G Gross profit fit 5 279.4 279 4 4 983.0 983 0 59 5.9 Other revenue 96.3 91.2 5.6 Expenses 4 200.4 3 940.6 6.6 Store costs 2 597.2 2
Slide 10: SA retail income statement commentary
woolworths holdings limited SA retail income statement commentary 1. Turnover (52:52) Total Comparable stores Clothing and GM 0.4% (2.8%) Food 9.3% 1.0% Total 5.7% (0.6%) 2. Gross profit – maintained despite mix dilutions, as a result of additional Clothing margin from sourcing 3. Expenses – tightly
Slide 11: Country Road income statement
woolworths holdings limited country road income statement Jun 2009 Jun 2008 % A$m A$m change Turnover 351.9 290.4 21.2 Cost of sales 142.8 113.0 26.4 Gross profit 209.1 177.4 17.9 Other revenue 4.0 3.0 33.3 Expenses 191.3 165.8 15.4 Store costs 132.3 122.2 8.3 Other operating costs 59.0 43.6 35.3 Op
Slide 12: Country Road commentary
woolworths holdings limited country road commentary 1.. Turnover u ove A$ Jun 2009 Jun 2008 % change Comparable stores Retail 255.7 215.3 18.8% 12.4% Concession 79.4 72.4 9.7% Wholesale 16.8 2.7 >100% 2. Gross profit – well controlled margins 3. Expenses – well controlled, but other costs impacted b
Slide 13: Financial services income statement
woolworths holdings limited financial services income statement Consolidated pro forma income Jun 2009 % to Jun 2008 % to % statement t t t Rm b k book Rm b k book change h Interest income 1 431.8 23.9 1 339.3 23.5 6.9 Interest paid 568.0 9.5 501.1 8.8 13.4 Net interest income 863.8 14.4 838.2 14.7
Slide 14: Financial services commentary
woolworths holdings limited financial services commentary 1. Gross financial services assets – ggrowth driven mainlyy byy extension of payment p y terms 2. Interest income – benefit of annualisation of interest rate increases 3. Interest paid – impacted by higher gearing post the ABSA deal 4. Impair
Slide 15: Financial services book performance
woolworths holdings limited financial services book performance Store Card Personal Loans VISA Card 4 103 14.06% 4 000 3 743 3 708 14% 4 000 14% 4 000 14% 3 500 12% 3 500 3 500 12% 12.46% 12% 3 000 10.25% 3 000 3 000 11.48% 8.78% 10% 10% 10% 2 500 2 500 7.62% 2 500 8% 8% 8% 2 000 5.35% 5.49% 2 000 2
Slide 16: Balance sheet
woolworths holdings limited balance sheet Jun 2009 Jun 2008 % Rm Rm change Assets Property, plant and equipment, intangible assets and loans 2 571.4 2 404.7 6.9 Investment in JVs and associates 569.6 25.0 >100 100 Inventory 1 722.7 1 371.4 25.6 Financial services assets - 5 440.0 (100) Accounts rece
Slide 17: Balance sheet commentary
woolworths holdings limited balance sheet commentary 1.. Property, ope ty, plant p a t and a equipment equ p e t – refer e e to investment vest e t sslidee for o capex cape details eta s 2. Investment in JVs and associates – includes equity accounted investment and retained earnings in WFS (approxim
Slide 18: Cash generation
woolworths holdings limited cash generation 4 000 R3 201m 3 500 3 000 2 500 (R825m) R321m R1 861m (R317m) 2 000 (R312m) 1 500 ((R295m)) 1 000 (R614m) 500 (R655m) 0 EBITDA Working Interest paid Tax Net capex Normal Net cash Special Share capital and dividend flow from dividend buybacks other WFS disp
Slide 19: Investment in the business
woolworths holdings limited investment in the business Capex (Rm) R753m (June 08: R638m) 158.0 68 2 68.2 Depreciation Jun 2009 Jun 2008 149.6 SA Retail 343.1 313.6 253.3 Country 57.0 58.7 Road WFS 1.3 5.6 420.6 341.7 Total group 401.4 377.9 Jun 2008 Jun 2009 Retail IT Other (including property)
Slide 20: Return on equity
woolworths holdings limited return on equity 40% 35 1% 35.1% 34 8% 34.8% 33.5% 35% 27.5% 32.0% 30% 27.4% 24.7% 26 3% 26.3% 25% 17.5% 18.3% 20% 15% 16.3% 10% 12.3% 13.8% 13.8% 14.8% 13.3% 11.3% 11.8% 12.0% 5% 0% Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 ROE ROE ((adjusted dj d HE
Slide 21: Earnings and distribution
woolworths holdings limited earnings and distribution cps times 140 3.5 3.0 127.8 120 114.9 3.0 105.0 109.3 100 2.3 89.4 2.2 2.5 2.2 75.5 1.9 80 2.0 61.1 60 15 1.5 15 1.5 15 1.5 1.5 1.3 40 1.0 20 0.5 29.0 38.5 54.0 63.0 76.0 79.0 85.0 0 - 2003 2004 2005 2006 2007 2008 2009 HEPS DPS Distribution cove
Slide 22: Outlook
woolworths holdings limited outlook SA Retail - volume growth expected to be muted - ggross margins g expected p to be maintained - expenses will remain tightly controlled - unrealised FY2009 forex loss will reverse in margin - goal remains to achieve return on sales of 8% in next 3 years Countr
Slide 23: Outlook (continued)
woolworths holdings limited outlook (continued) WFS remains non-comparable - tough credit environment will continue - impairments expected to deteriorate in the short term Net interest expected to be negligible Effective tax rate on PBTAE expected p to be significantly g y lower Capex largel
Slide 24: Retail review
retail rFeEVICW andrew jennings
Slide 25: Our 3 year retail strategy
woolworths holdings limited our 3 year retail strategy Customer at the Heart of Everything - Build Woolworths Headquarters Assortments, Brands and Sub-brands - Value quality and innovation at heart of Customer proposition Value, - Execute Woolworths Merchandise Cycle for Clothing and Home - Implem
Slide 26: 2008/09 hits
woolworths holdings limited 2008/09 hits Customer relationship journey well under way Headquarter - greater volumes of value merchandise - winning back customers Brands – introduced Twist, Twist Studio W, W Classic Collection – now translating into shop shop-within- within a-shop in stores C
Slide 27: 2008/09 misses
woolworths holdings limited 2008/09 misses Profitability below expectation Market share has not grown due to: - I 1st In 1 half h lf - underestimated d i d volume/value l / l - Customers shopping down to value retail Real estate: - 4 out of 22 new stores not delivering required returns - Great
Slide 28: Retail deliverables
woolworths holdings limited retail – deliverables Timelines Progress 1. Customer understanding ongoing 2. Quality : Value ongoing 3. Range Differentiation and Innovation complete 4. Improved availability Summer 09 5. Talent upgrade / skills base complete 6. Greater speed to market in Clothing & GM W
Slide 29: Customer – the relationship journey
woolworths holdings limited 1. customer – the relationship journey Retail strategy Loyalty relationship Woolworths: the shop CLOTHING FOOD BEAUTY HOME WFS CONNECT Lifestyle segmentation HEADQUARTER ASSORTMENTS DESTINATION FOR SPECIAL OCCASIONS GOOD-BUSINESS JOURNEY MILESTONES UNIQUE, FRESH & MODERN
Slide 30: Quality: value – Clothing
woolworths holdings limited 2. quality: value – Clothing Clothing pricing % price movement FY2009 FY2008 1st half 0.0% 9.6% 2nd half 5.1% 7.3% Full Year 2.5% 8.0%
Slide 31: Quality: value – Clothing
woolworths holdings limited 2. quality:value – Clothing “G t V “Great Value” l ” advertised d ti d it items are critical iti l tto changing h i price i perception ti Season on season volumes up 48% Bought units % increase on Summer 09 Summer 08 sold units Womens outerwear 2 275 300 46% Lingerie
Slide 32: Quality: value – Food
woolworths holdings limited 2. quality:value – Food What are our customers telling us …. October 2008 March 2009 “ Yes it is okay for me to hhave fun f shopping h for f food f dI “I find the cost of 5 Months later: After Great Value Initiatives love at WW because I am food at WW not necessarily payi
Slide 33: Quality: value – Food
woolworths holdings limited 2. quality:value – Food Premium to competitors of basket of 63 KVIs, monitored by Adcheck Research 12% 10% 8% 6% 4% 2% 0% -2% -4% 4% -6% Premium to Store A Premium to Store B Premium to Store C (average 2.1%) (average 1.9%) (average 0.1%) Over last 12 months significant
Slide 34: Quality: value – Food
woolworths holdings limited 2. quality:value – Food KVI Pricing Basket - 63 lines competitively priced Meal Deal - eat in for 4 under R100 Promotions - price off Promotions - link save
Slide 35: Range differentiation and innovation – 9 box grid
woolworths holdings limited 3. range differentiation and innovation – 9 box grid Classic 55% (52%) Modern 35% (39%) Contemporary 10% (9%) Best 10% (10%) Better 35% (40%) Good 55% (50%)
Slide 36: Innovation - Clothing
woolworths holdings limited 3. innovation - Clothing
Slide 37: Innovation – Food
woolworths holdings limited 3. innovation – Food Four clear pillars Everyday Gastronomic Reasons to the difference Health adventure celebrate Continued re-engineering for innovation and value - 1405 new lines launched from Jul 08 – Jun 09 - 821 lines upgraded from Jul 08 – Jun 09 Innovation ke
Slide 38: Innovation – Food
woolworths holdings limited 3. innovation – Food Everyday the difference
Slide 39: Innovation – Food
woolworths holdings limited 3. innovation – Food Health
Slide 40: Innovation – Food
woolworths holdings limited 3. innovation – Food Gastronomic adventure
Slide 41: Innovation – Food
woolworths holdings limited 3. innovation – Food Reasons to celebrate Headquarters for Flowers and Plants
Slide 42: Woolies quality at 35 000 feet...
woolworths holdings limited Woolies quality at 35 000 feet...
Slide 43: Improved availability - Clothing
woolworths holdings limited 4. improved availability - Clothing L Launch h off a focused f d “Never “N Out O t off St Stock” k” or “NOOS” list li t - 110 items in Clothing, 100 in General Merchandise - Priority receiving and stockroom locations - A focus on suppliers Planningg activities - Fully
Slide 44: Improved availability – Food
woolworths holdings limited 4. improved availability – Food Type EOD Perishables Period 4th qquarter 3rd qquarter Actual 2009 82.7% 80.7% Actual 2008 81.1% 78.5% Target 2010 84.0% • International benchmarking New count process in stores Store Location Planner trial and rollout Top 100 lines
Slide 45: Talent upgrade / skill base
woolworths holdings limited 5. talent upgrade / skill base Stores Introduced in-field Trading Structure - 4 Divisional Trading Managers - 1 National Trading Manager Experienced sale staff - Conversion of part timers to flexible 40 hours (4% to 20% by June 2009) - Provide sufficient hours of work
Slide 46: Speed to market in Clothing and General merchandise
woolworths holdings limited 6. speed to market in Clothing and General merchandise Woolworths Merchandise Cycle is entrenched after one year - Now focusing on improving efficiencies - g supplier Strategic pp partnering p g – entrenched into the Woolworths Merchandise Cycle y - Shortening of cycle
Slide 47: Improved productivity
woolworths holdings limited 7. improved productivity Ti ht expense control Tight t l continues ti Real estate - Critically reviewed new store opening plan - reduced by 44% - Fewer stores, bigger formats, focus on low risk store expansions - p Cannibalisation allowances increased compared to ppri
Slide 48: Retail priorities 2009/10
woolworths holdings limited retail priorities 2009/10 1 1. Leverage customer insights 2. Innovation – differentiation 3 3. Value / Volume 4. Availability 5 5. E Execute the h service i proposition ii 6. Trading mindset 7. Productivity
Slide 49: Country Road
7 country road coronene anne De
Slide 50: Country Road – strategic repositioning
woolworths holdings limited country road – strategic repositioning High income Previous positioning New positioning N Low income 30 30s 40+ A group Age Shift to white space Difficult for competitors to follow Concentrate on 30s with Country Road Will be targeting 40+ with Trenery
Slide 51: Country Road – review
woolworths holdings limited country road – review Continued to trade exceptionally well Australian economy less affected - China C Consumers bboosted d bby recent tax relief li f Excellent management of costs, stock and cash Opened 6 stores and expanded 5 stores Now in 14 Woolworths stor
Slide 52: Country Road – outlook
woolworths holdings limited country road – outlook Tougher retail trading conditions may continue well into next financial year Retain focus on controlling costs and managing inventories Launch of Trenery - in 16 Woolworths stores in South Africa mid-August - i 5 standalone in d l stores in i
Slide 53: Driving Miss Daisy
driving miss daisy recone mncane one WPL
Slide 54: Good business journey
woolworths holdings limited good business journey Becoming important part of the business and brand At 61% of 2012 target - 2 years into 5 year programme - A l Accelerating i transformation f i - Driving social development - Protecting the environment - Addressing climate change Business case
Slide 55: =i as = : :
=i as = : :
Slide 56: Outlook
woolworths holdings limited outlook South African economy still tough Australia less affected Businesses well positioned - value offer now in place - qualityy and innovation continue q - cost control - stock management Strategy - in place - both for short and long term
Slide 57: Woolworths Holdings
WOOLWORTHS HOLDINGS one I L
Slide 58: Group income statement (52:53)
woolworths holdings limited group income statement (52:53) Jun 2009 Jun 2008 % Rm Rm change Turnover 21 175.0 20 064.9 5.5 Cost of sales 14 501.1 13 798.3 5.1 Gross profit 6 673.9 6 266.6 6.5 Other revenue 747.3 1 687.6 (55.7) Expenses 5 704.7 5 955.0 (4.2) Operating profit 1 716.5 1 999.2 (14.1) Fi
Slide 59: Group income statement (52:53)
woolworths holdings limited group income statement (52:53) JJun 2009 JJun 2008 % Rm Rm change SA Retail 1 108.7 1 218.6 (9.0) Country Road 138.3 101.0 36.9 Financial Services 129.2 158.0 Q1: 100% subsidiary 71.8 Q2 4: JV (after tax) Q2–4: 57 4 57.4 Net group interest 49.9 20.1 >100 Profit before exc
Slide 60: SA retail – balance sheet
woolworths holdings limited SA retail – balance sheet Jun 2009 Jun 2008 % Rm Rm change Assets Property, plant and equipment, investments, d f deferred d tax, loans l and d goodwill d ill 2 369.0 369 0 2 044.9 044 9 15 8 15.8 Inventory 1 474.0 1 154.0 27.7 Accounts receivable 866.6 1 050.8 (17.5) Cas
Slide 61: SA retail – revenue analysis (52:52)
woolworths holdings limited SA retail – revenue analysis (52:52) Jun 2009 Jun 2008 % % Rm Rm h change price i movement Clothing and General merchandise 7 321.6 7 291.6 0.4 Corporate (retail) 6 391.8 6 403.3 (0.2) 2.5 Franchise (wholesale) – local 709.9 681.9 4.1 Franchise (wholesale) – international
Slide 62: SA retail – trading space
woolworths holdings limited SA retail – trading space Projected Projected Jun 2009 Jun 2008 % Jun 2010 % Jun 2011 % m2 m2 change m2 change m2 change Total footage 507 277 478 351 6.0 541 553 6.8 583 203 7.7 Clothing and 362 529 348 687 4.0 385 125 6.2 412 125 7.0 General merchandise Corporate (incl
Slide 63: SA retail – number of stores
woolworths holdings limited SA retail – number of stores Projected j Projected j As at As at growth to growth to Jun 2009 Jun 2008 Growth Jun 2010 Jun 2011 No. No. No. No. No. ota stores Total sto es 4100 385 255 437 466 Corporate 250 228 22 264 280 Full-line 121 114 7 130 136 Food standalone 129 11
Slide 64: Financial services – contribution to sales
woolworths holdings limited financial services – contribution to sales % of sales spent on Woolworths cards Jun 2009 Jun 2008 Clothing and General merchandise 31.3% 36.6% Food 16 6% 16.6% 21 1% 21.1% Total 22.4% 27.2%
Slide 65: Country Road – balance sheet
woolworths holdings limited country road – balance sheet Jun 2009 Jun 2008 % A$m A$m change Assets Property, plant and equipment 47.0 33.2 41.6 T d Trademarks k * 11 3 11.3 11 2 11.2 09 0.9 Inventory 38.8 28.6 35.7 Accounts receivable 18.9 14.4 31.3 Cash 25 8 25.8 21 8 21.8 18 3 18.3 141.8 109.2 18.
Slide 66: Country Road – income statement (in rands)
woolworths holdings limited country road – income statement (in rands) Jun 2009 Jun 2008 % Rm Rm h change Revenue 2 353.1 1 939.3 21.3 Turnover 2 335.8 1 918.4 21.8 Cost of sales 945.3 743.9 27.1 Gross profit 1 390.5 1 174.5 18.4 Other revenue 17.3 20.9 (17.2) Expenses 1 268.7 1 093.4 16.0 Store cos
Slide 67: Country Road – trading space and stores
woolworths holdings limited country road – trading space and stores % Projected j % Projected j % Jun 2009 Jun 2008 change Jun 2010 change Jun 2011 change m2 m2 m2 m2 Trading space 36 849 33 974 8.5 40 015 8.6 44 645 11.6 Retail 28 242 25 188 12.1 29 669 5.1 31 419 5.9 Concession 8 607 8 786 (2.0) 8