Woolworths Holdings Limited · JSE:WHL
Woolworths — H1 2012 Earnings Presentation
51 slides from Woolworths's earnings presentation, 2012
Slide 1: Woolworths Holdings Interim Results 2011
WOOLWORTHS HOR SIM RESULTS 2011
Slide 2: Economic Overview
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 2 ECONOMIC OVERVIEW * South Africa - Growing but more competitive retail environment - Increasing inflation - Consumer confidence in target LSM 8-10 market still positive - Real growth in consumer income - Low interest rate environment - Appetite fo
Slide 3: Review of the Period
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 3 REVIEW OF THE PERIOD * Strong SA trading performance in last 6 weeks * Continued GP margin gain in Woolworths * Woolworths return on sales up from 9.4% to 9.8%* * Strong profit performance = HEPS +23.3%* " ROE up to 50.8 %* * Strong cash flow * St
Slide 4: Woolworths - Clothing & GM
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 4 WOOLWORTHS - CLOTHING & GM * Clothing in South Africa (including Country Road) up 11.2%, with comparable sales up 5.9% - Price movement increased to 7.0% * Inconsistent category performance - Womenswear disappointed - Menswear, Kidswear and Linger
Slide 5: Clothing & Footwear Turnover Growth
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 5 CLOTHING & FOOTWEAR TURNOVER GROWTH Clothing & footwear - Woolworths vs market growth (12mma) = Woolworths growth — Market growth Clothing and footwear 12mma market share at December 2011: 15.0% Source: RLC
Slide 6: Woolworths - Food
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 6 WOOLWORTHS - FOOD Strong performance - Sales growth ahead of the market - Volume growth of 6.9% - Price movement of 4.8% "Supermarket strategy working well - Very good growth in long-life = Strong GP margin and improved operating margin = ROS incr
Slide 7: Food Turnover Growth
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 7 FOOD TURNOVER GROWTH Food - Woolworths vs market growth Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- 10 10 10 10 #40 10 #1 1 11 W111 1 ee ee Oe ee | WoW [53 Woolworths price movement ly-on-y] 5 CPI [Foo
Slide 8: Woolworths - Stores
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 8 WOOLWORTHS - STORES "Conversion of franchise stores very successful - 58 franchise stores "More profitable stores "Comparable store sales growth at 7.3%
Slide 9: Country Road
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 9 COUNTRY ROAD "Difficult trading in Australia « Strong performance of brands in SA * Total turnover down 2.7%, and comparable sales in Australia down 5.5% |A$) " Excellent control of costs and inventory = ROS up from 5.8% to 6.4% "Profit before tax
Slide 10: Financial Services
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 10 FINANCIAL SERVICES "Book growth of 6.7%, driven by personal loans *" Good quality of the book - Impairments at 1.7% *" Operating profit of the JV down 10.4% - Impacted by lower yields and investment in expansion = ROE down from 23.4% to 20.5%
Slide 11: Review
NORMAN THOMSON REVIEW
Slide 12: Financial Overview
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 12 FINANCIAL OVERVIEW «Group turnover up 11.4% to R14.1 billion "Profit before tax up 26.8% to R1.5 billion - Positive impact from unrealised gains on FECs * Headline earnings per share up 23.3 %* « ROE increased from 44.9%* to 50.8 %*
Slide 13: Group Income Statement
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 13 GROUP INCOME STATEMENT Woolworths Clothing & GM Food Country Road Financial Services JV lafter tax) Treasury Profit before tax Tax Profit after tax Effective tax rate Dec 2010 % Rm change 1 008 279 657 32.9 351 18.5 92 27.2 65 (13.8
Slide 14: Group Income Statement Commentary
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 14 GROUP INCOME STATEMENT COMMENTARY
Slide 15: Woolworths Income Statement
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 15 WOOLWORTHS INCOME STATEMENT Dec 2010 % Rm change Turnover 11155 11.0 Cost of sales 7 668 9.3 Gross profit "3 487— 14.7 Other revenue Al (7.3) Expenses 2 520 91 Store costs 1 559 16.0 Other operating costs 864 8.9 Unrealised forex (g
Slide 16: Woolworths Income Statement Commentary
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 16 WOOLWORTHS INCOME STATEMENT COMMENTARY
Slide 17: Woolworths Segmental Performance
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 17 WOOLWORTHS SEGMENTAL PERFORMANCE Gross profit margin Operating profit margin Dec 2010 Dec 2010 % % Clothing & GM* 16.3 Food 5.3 Woolworths* 9A * Operating profit margin excludes unrealised gains/losses on FECs in both periods
Slide 18: Country Road Income Statement
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 18 COUNTRY ROAD INCOME STATEMENT Dec asm changé Turnover 226 (2.7) Cost of sales 97 (8.2) Gross profit 129 1.6 Other revenue ] - Expenses 117 0.9 Store costs a 1] Other operating costs 26 - Profit before tax 13 7.7 Gross profit margin
Slide 19: Country Road Income Statement Commentary
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 19 COUNTRY ROAD INCOME STATEMENT COMMENTARY
Slide 20: Financial Services Income Statement
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 20 FINANCIAL SERVICES INCOME STATEMENT Consolidated pro forma Dec2011 %to Dec2010 %to % income statement Rm_ book Rm book change Interest income 560 177 553 18.5 1.3 Interest paid 167 5.3 170 5.7 1.8) Net interest income 393 =12.4 383
Slide 21: Financial Services Income Statement Commentary
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 21 FINANCIAL SERVICES INCOME STATEMENT COMMENTARY
Slide 22: Financial Services Book Performance
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 22 FINANCIAL SERVICES BOOK PERFORMANCE - 10% 8% | 6% | A% P 2% + 0% Dec 08 Dec 09 Dec 10 Dec 11
Slide 23: Balance Sheet
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 23 BALANCE SHEET Dec 2010 % Rm_ change Assets Property, plant and equipment, intangible assets and loans 2 689 23.5 Investment in JVs and associate 628 (0.5) Inventories 1 837 23.6 Accounts receivable and deferred tax 1 185 3.4 Net cas
Slide 24: Cash Generation
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 24 CASH GENERATION 1 800 + R1 723m 1 600 | 1 400 1 200 - 1 000 - 800 © 600 ~ 400 © 200 ~ (200) ( 400) - (600) - Cash flow from operating &IV activities ma (R161m) —_ (R19m) [R6Im) |] (R361 m) com (R304m) (R616m) Working Finance Taxatio
Slide 25: Capital Expenditure
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 25 CAPITAL EXPENDITURE Capex (Rm) R689m (Dec 2010: R365m) Depreciation Dec 2010 Rm Woolworths 192 Country Road 44 Total group 236 Dec 2011 Dec 2010
Slide 26: Return on Equity
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 26 RETURN ON EQUITY 55% 50.8%* 50% 44.4%* 44.9%* 45% van NO 40% - 35% : 30% 25% 20% 13.3% 8% — 133% 13.6% — 13.2% 12.0% 13.3% ‘5% g-——_1*"—"—__# = a | 10% 5% 0% — Jun 07 Jun 08 Jun 09 Jun 10 Jun 11 Dec09 Decl10 Dec 11 * December 2011 e
Slide 27: Earnings and Distribution
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 27 EARNINGS AND DISTRIBUTION 140 ) 135.7 ; 2.5 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 GE Adjusted HEPS [DPS = Distribution cover on adjusted HEPS
Slide 28: Guidance
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 28 GUIDANCE " Woolworths sales growth expected to be broadly in line with H1 " Woolworths space growth planned for FY2012 - 4.0% growth in Clothing space - 5.1% growth in Food space * Food inflation to increase "Gross profit margins to
Slide 29: Guidance Continued
WH L WOOLWORTHS HOLDINGS LIMITED GUIDANCE CONTINUED FINANCIAL REVIEW NORMAN THOMSON 29 * Financial Services - Expect book growth to continue - Impairments will start to increase as book grows * Taxation - Change in dividends tax will reduce effective tax rate to 27% - STC saving to be distributed to
Slide 30: Strategic Focus
IAN MOIR STRATEGIC FOCUS
Slide 31: Strategic Focus
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 31 STRATEGIC FOCUS " Food " Clothing & GM » Simplify the business » Loyalty » Africa
Slide 32: Food
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 32 FOOD = More share of the wallet = More often = More items * Trolley not a basket "Supermarket with a difference - bigger pack sizes - new categories - more dominant long life and grocery range - Clothing and Home into Food - bigger stores
Slide 33: Food continued
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 33 FOOD continued Total space 2 450m2
Slide 34: Food continued - SKUs
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 34 FOOD continued 7 500 SKUs ieee | eee —- EC S i i \ — = % rn ;
Slide 35: Food continued - Key differentiators
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 35 FOOD continued Key differentiators: = Grocery & household categories = Liquor = Increase of 1 000 SKUs in Food Ye Qe | Na |, |--2£:3242%—- SF ||! ey A PD | /\f R = |
Slide 36: Clothing & GM
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 36 CLOTHING & GM «Further roll out of successful initiatives " Capitalise on key sub brands Re & Studio.w * Shorten merchandise cycle get closer to market derisk the business " More newness more often where we need it
Slide 37: Clothing & GM continued
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 37 CLOTHING & GM continued =" Optimise the supply chain " Better sourcing - more direct, more fast response in season, scale up China office * Better availability
Slide 38: Simplify the Business
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 38 SIMPLIFY THE BUSINESS "Franchise buy back effective and profitable and driving simplification "More focus on cost of doing business and commitment to get it down "Merchandise cycle, removal of processes, reduction of time "More to be done
Slide 39: Loyalty
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 39 LOYALTY "Successful combination of instant rewards and tiered benefits " More Woolies cardholders " Tracking 66% of revenue (was 49% at launch) "Customers spending more, visiting us more often and buying bigger baskets " Weare more informe
Slide 40: Africa
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 40 AFRICA "Over | billion people on the continent "Good real GDP growth = Consumer spend is 60% of GDP mw y-T™ " Retail is beginning to formalise — more shopping malls " 104 stores by June 2014 "Currently in 12 countries with 2 more planned ?
Slide 41: Outlook
Slide 42: Outlook
WH L WOOLWORTHS HOLDINGS LIMITED OUTLOOK IAN MOIR 42 OUTLOOK *" SA trading environment unchanged "Second half sales broadly in line with first half "Country Road trading environment to remain tough "Second half performance in line with first half
Slide 43: Medium-Term Targets
WH L WOOLWORTHS HOLDINGS LIMITED OUTLOOK IAN MOIR 43 MEDIUM-TERM TARGETS Achieved Achieved in FY2010_—siin FY2011 Woolworths Clothing & GM Return on sales 12.3% 15.3% Food Return on sales 3.8% 4.8% Country Road Return on sales 5.2% 5.6% Financial Services ROE 13.9% 23.5%
Slide 44: Additional Information
ADDITIONAL INFORMATION
Slide 45: Group Income Statement
WH L WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 45 GROUP INCOME STATEMENT Dec 2010 % Rm change Turnover 12 687 11.4 Cost of sales 8 327 9.2 Gross profit 4360 15.8 Other revenue 46 (8.7) Expenses 3 304 114 Operating profit 1 102 27.8 Investment income 64 (45.3) Finance costs 64 (70.3) Profit
Slide 46: Woolworths Revenue Analysis
WH L WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 46 WOOLWORTHS REVENUE ANALYSIS % Dec 2010 % price Rm change movement Clothing & GM 4282 10.1 6.5 Corporate (retail) 3 778 16.9 Franchise (wholesale) — local 373 (57.4) Franchise (wholesale) — international 131 4.6 Food 6 635 11.7 4.8 Corporate
Slide 47: Trading Space
WH L WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 47 TRADING SPACE Projected Projected Projected Dec 2010 % Jun 2012 % Jun 2013 % Jun 2014 % m2 change m2 change* m2 change m2 change Woolworths 529819 2.3 555 422 43 593 253 6.8 638 087 7.6 Clothing & GM 374 395 19 389 656 4.0 412 983 6.0 444.61
Slide 48: Store Numbers
WH L WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 48 STORE NUMBERS Projected Projected Projected Dec 2010 Growth Jun 2012. Growth* Jun2013 Growth Jun2014 Growth Woolworths 435 1 456 18 480 24 508 28 Corporate 278 42 323 30 331 8 341 10 Franchise - SA 67 (41) 23 (29) 22 a) 22 - Franchise — 43 -
Slide 49: Financial Services Contribution to Sales
WH L WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 49 FINANCIAL SERVICES CONTRIBUTION TO SALES % of sales spent on Woolworths cards Dec 2010 Clothing & GM 29.7% Food 14.5% 20.8% Aggregate
Slide 50: Country Road Balance Sheet
WH L WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 50 COUNTRY ROAD BALANCE SHEET Dec 2010 % A$m change Assets Property, plant and equipment 56 (8.9) Trademarks * 1 - Inventories 47 (12.8) Accounts receivable and deferred tax 23 (26.1) Cash 26 3.8 163 (9.8) Equity and liabilities Shareholders’ f
Slide 51: Country Road Income Statement (in Rands)
WH L WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 51 COUNTRY ROAD INCOME STATEMENT (IN RANDS) Dec 2010 % Rm change Turnover 1532 14.5 Cost of sales 659 7A Gross profit 873 19.8 Other revenue 5 (40.0) Expenses 783 18.8 Store costs 612 18.5 Other operating costs VA 19.9 Operating profit 95 25.3