Woolworths Holdings Limited · JSE:WHL
Woolworths — H1 FY2023 Earnings Presentation
56 slides from Woolworths's earnings presentation, Feb 1, 2023
Slide 1: Interim Results H1 FY2023
WOOLWORTHS HOLDINGS LIMITED INTERIM RESULTS H1 FY2023
Slide 2: Presentation Outline
PRESENTATION OUTLINE 01 02 03 04 OVERVIEW OF STRATEGIC FINANCIAL OUTLOOK THE PERIOD UPDATE OVERVIEW AND Q&A
Slide 3: Overview of the Period
OVERVIEW OF THE PERIOD Roy Bagattini Group CEO
Slide 4: Overview of the Period
OVERVIEW OF THE PERIOD Relentless focus on the execution of our strategies is yielding results • Strong Group performance across all operating divisions – R esults not directly comparable: lockdowns in Australia in H1 FY22 | loadshedding in SA in H1 FY23 – T urnover and concession sales +16.3%* on L
Slide 5: Loadshedding Considerations
LOADSHEDDING CONSIDERATIONS Our differentiated value chain and past investments are enabling us to mitigate the significant impacts of loadshedding on profitability • Widespread impact across the South African economy, affecting every aspect of our business • Incurring c.R20 – R30m/month in food was
Slide 6: Strategic Update
STRATEGIC UPDATE Roy Bagattini Group CEO
Slide 7: A Reminder: WHL Investment Thesis
A REMINDER: WHL INVESTMENT THESIS WHL is a pre-eminent retailer of iconic brands, with significant self-driven opportunities to grow earnings independent of our macro economic context 1. Highest return on capital Food business in South Africa with unparalleled back-end capabilities in high-end foods
Slide 8: 1. Our Food Business
1. OUR FOOD BUSINESS The “holy grail”: The sweet spot which balances giving our customers the best overall proposition in the market, and our shareholders the highest return on capital in the sector BEST BEST for customers for shareholders ROCE QUALITY EXPERIENCE INNOVATION SUSTAINABILITY CONVENIENC
Slide 9: 1. Our Food Business (continued)
1. OUR FOOD BUSINESS (continued) Our biggest opportunity lies in growing our core business through driving availability, amplifying our value proposition, and increasing our market presence • Improving availability Food availability (Fresh + Longlife) % – +50bps vs LY 95 – December availability abov
Slide 10: Woolies Dash is now in even more areas
JUICY NEWS WOOLIES DASH IS NOW IN EVEN MORE AREAS GET WOOLIES FOOD DELIVERED IN STAY-COLD COOLERS FAST, FRESH, TODAY r s
Slide 11: 1. Our Food Business (continued)
1. OUR FOOD BUSINESS (continued) Notwithstanding significant opportunities to drive profitable topline growth, our industry-leading ROCE will remain the real driver of value creation for our shareholders Sales growth and ROCE: Woolworths Food vs listed competitors* % Woolworths Food Competitor A Com
Slide 12: 2. Our Fashion, Beauty & Home Businesses
2. OUR FASHION, BEAUTY & HOME BUSINESSES We are making clear progress in turning around our Fashion business and restoring underlying operational and financial health • Improving quality (as opposed to quantity) of sales – “ Edit to amplify” strategy focuses on “must win” categories –D ata insights
Slide 13: 2. Our Fashion, Beauty & Home Businesses
2. OUR FASHION, BEAUTY & HOME BUSINESSES We are making clear progress in turning around our Fashion business and restoring underlying operational and financial health Full Price Sales % contribution Sales per sqm (rands) Markdown % % ‘000 % 82 34 25 32 80 20 30 78 15 28 76 26 10 74 24 5 72 22 70 20
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Slide 15: 2. Our Fashion, Beauty & Home Businesses (continued)
2. OUR FASHION, BEAUTY & HOME BUSINESSES (continued) We have scope to profitably grow our market share in Beauty and Home • We have clear opportunities to make our overall FBH business FBH turnover and concession sales contribution % even bigger • Positioning our Beauty business to be the beauty sho
Slide 16: 3. Value Creation in Australia
3. VALUE CREATION IN AUSTRALIA The sale of David Jones unlocks significant value for the WHL Group • Considerable progress in the execution of DJ’s refreshed strategy – Improved underlying operational and financial health • DJ is trading more profitably than it has for years | well positioned to emb
Slide 17: 3. Value Creation in Australia (continued)
3. VALUE CREATION IN AUSTRALIA (continued) Country Road Group has significant runway for growth and continues to grow in significance in the WHL Group • Optimising current network of stores – Footprint reduced by >10% over the past 3 years – Trading density +>30% – Investing in new store formats • A
Slide 18: Country Road
~ (ROAD 7 ROAD
Slide 19: 4. Capital Allocation
4. CAPITAL ALLOCATION Strengthened balance sheet and sound capital allocation principles drive strong and improving free cash flow conversion 1. 2. 3. BALANCE INVESTMENT SHAREHOLDER SHEET AND GROWTH RETURNS • Total net borrowings • Investing R8bn over next • Interim dividend +97% on LY | of c.R700m
Slide 20: 5. Our Good Business Journey
5. OUR GOOD BUSINESS JOURNEY Our Good Business Journey (GBJ) is centred around three pillars: a commitment to a thriving and resilient environment, being ethical and fair, and inclusive justice PILLAR 1 PILLAR 2 PILLAR 3 THRIVING AND ETHICAL AND INCLUSIVE RESILIENT FAIR JUSTICE FOCUS AREAS FOCUS ARE
Slide 21: 5. Our Good Business Journey (continued)
5. OUR GOOD BUSINESS JOURNEY (continued) Our GBJ is embedded in everything we do, in line with our vision to be one of the world’s most responsible retailers • Deeply entrenched sustainability programme – 15 year globally-acknowledged track record • F ully committed to an ethical supply chain from f
Slide 22: Thank you to all our team members
THANK YOU TO ALL OUR TEAM MEMBERS FOR YOUR PASSION AND COMMITMENT AND TO EVERYONE IN OUR EXTENDED ECOSYSTEM FOR YOUR CONTINUED SUPPORT.
Slide 23: Financial Overview
FINANCIAL OVERVIEW Reeza Isaacs Group Finance Director
Slide 24: Financial Overview
FINANCIAL OVERVIEW Turnover and concession sales aEBIT • S trong trade and operational performance, with aEBIT +48% and aPBT +70% (although not +16.3 % on LY* to R49.9bn +48.3 to R4.8bn % on LY (+24.7% on normalised basis) fully comparable) • a dHEPS +76% and interim aPBT Net borrowings m dividend +
Slide 25: Sales Performance for the Half
SALES PERFORMANCE FOR THE HALF FBH and Food sales momentum improved progressively over the period, notwithstanding high levels of power outages (‘loadshedding’); Positive comp growth off a demanding post-lockdown base in Australia South Africa Rm Rm 21 130 FBH 10 000 7 447 25 000 8.7 8.6 12.0 7.6 •
Slide 26: Group Income Statement
GROUP INCOME STATEMENT Positive leverage through the income statement; Sales +19% | GP +22% | aEBIT +48% | aPBT +70% Dec 2022 Dec 2021 % Rm Rm change Turnover and concession sales 49 906 42 128 18.5 Gross profit 17 283 14 124 22.4 Improved sales and margins with positive Adjusted EBITDA 7 037 5 438
Slide 27: Woolworths Fashion, Beauty and Home results
aEBIT +26% with further improvement in revenue growth, margin and productivity metrics Dec 2022 Dec 2021 % Rm Rm change Turnover and concession sales 7 447 6 697 11.2 Gross profit margin 48.0% 46.3% Expenses 2 586 2 351 10.0 Adjusted EBIT 979 780 25.5 Adjusted PBT 824 608 35.5 EBIT margin 13.1% 11.6
Slide 28: Woolworths Food results
Improving trade momentum through the period, however, loadshedding negatively impacted costs and waste Dec 2022 Dec 2021 % Rm Rm change Turnover and concession sales 21 130 19 630 7.6 Gross profit margin 23.8% 24.1% Expenses 3 604 3 322 8.5 Adjusted EBIT 1 412 1 409 0.2 Adjusted PBT 1 293 1 282 0.9
Slide 29: Financial Impact of Loadshedding on Woolworths SA
FINANCIAL IMPACT OF LOADSHEDDING ON WOOLWORTHS SA Loadshedding impact felt on every line of our income statement Business disruption • Significant power outages over the period, with loadshedding reaching stage 6 • 99% of stores have generators, however, not all shopping centres have back-up power s
Slide 30: Woolworths Financial Services results
17% book growth driven by demand and new credit card accounts, which impacted impairments Dec 2022 Dec 2021 % Rm Rm change Average total financial services assets 14 337 12 919 11.0 % % Income statement to book to book Net interest income 791 11.0 677 10.5 16.8 Impairment charge 401 5.5 261 4.0 53.6
Slide 31: Country Road Group results
Growing contributor to Group profit underpinned by strong performance in Country Road brand Dec 2022 Dec 2021 % A$m A$m change Turnover 623.2 496.5 25.5 Gross profit margin 63.5% 59.5% Expenses 303.8 249.0 22.0 Adjusted EBIT 93.2 48.0 94.2 Adjusted PBT 85.6 38.7 >100 EBIT margin 15.0% 9.7% • Revenue
Slide 32: David Jones results
Successful execution of turnaround strategy delivered an exceptional result for the period Dec 2022 Dec 2021 % A$m A$m change Turnover and concession sales 1 282.8 973.1 31.8 Gross profit margin 36.4% 35.0% Expenses 369.5 319.9 15.5 Financial services operating profit 9.0 9.9 (9.1) Adjusted EBIT 106
Slide 33: Capital Expenditure
CAPITAL EXPENDITURE Increased spend on strategic investments including digital, data, online and supply chain capacity and capability Rm Excludes David Jones • FY23 includes investment in growth initiatives, such as FBH Value Chain 2 800 R2.6bn transformation, DC capacity and supply chain capability
Slide 34: Group Balance Sheet
GROUP BALANCE SHEET Robust balance sheet with healthy net equity position Constant Dec 2022 Dec 2021 currency Rm Rm % change Assets Property, plant and equipment and intangible assets 17 393 16 992 1.8 Right-of-use assets 19 627 20 671 (5.7) Increase due to inflation Investments in joint ventures 1
Slide 35: Cash Generation
CASH GENERATION Strong balance sheet and cash generation has enabled R1.5bn share repurchases and a resumption of normalised dividends Rm 8 000 7 334 Higher inventory and receivable • Free cash flow per share** +29.3% balances – timing related and to 269.0cps (Dec 2021: 208.0cps) expected to normali
Slide 36: Sale of David Jones
SALE OF DAVID JONES Sale of DJ will transform the WHL balance sheet and returns profile Current status • Expected completion 27 March 2023 with a FY23 – 24 transition period • Repatriated R1.6bn from DJ to WHL • Melbourne flagship property retained by WHL Expected impacts on WHL post completion • Ne
Slide 37: Capital Allocation and Returns to Shareholders
CAPITAL ALLOCATION AND RETURNS TO SHAREHOLDERS Enhancing shareholder returns with further share buybacks in the period and resumption of full-year dividends at a 70% payout ratio Robust balance sheet HEPS and DPS • Net borrowings of R0.7bn +76% • Strong liquidity position cps 284.7 300 • Repatriatio
Slide 38: Recent Trading
RECENT TRADING Positive trading momentum across the Group in the first eight weeks of H2 South Africa Rm 7 447 Rm 21 130 • Sales momentum 10 000 12.0 25 000 8.7 8.6 7.6 8.5 continues into H2 10.8 11.2 10.7 10.7 20 000 • H2 FBH expected price 7 500 15 000 movement of 12.0% 5 000 4.1 10 000 • H2 Food
Slide 39: Outlook
OUTLOOK Roy Bagattini Group CEO
Slide 40: Outlook
OUTLOOK Trading environment expected to be more challenging in second half | remain confident in our ability to create long-term, sustainable and meaningful value for our stakeholders • Headwinds in H2 likely to result in slower profit growth vs H1 – Higher interest rates and inflation – Softening c
Slide 41: Appendix
A PPENDI X
Slide 42: Appendix Contents
APPENDIX CONTENTS 1. W HL GROWTH BLUEPRINT 2. G ROUP PERFORMANCE 3. S EGMENTAL INCOME STATEMENTS 4. IFRS 16 – IMPACT BY SEGMENT 5. C APITAL EXPENDITURE 6. N ET BORROWINGS/(CASH) 7. AUSTRALIAN BALANCE SHEETS 8. G ROUP BALANCE SHEET – EXCLUDING DAVID JONES 9. T RADING SPACE 10. STORE LOCATIONS
Slide 43: WHL Growth Blueprint
WHL GROWTH BLUEPRINT O U R PU RPOS E O U R AS PI R ATI O N O U R FI NAN C IAL G OALS O U R VALU ES Mid single-digit revenue Collaborative To be a leading, ROCE never < WACC Quality growth – always! Adding quality to life purpose-driven, truly +5% Customer aEBIT growth > Revenue Being responsible con
Slide 44: Group Performance
GROUP PERFORMANCE Dec 2022 Dec 2021 Change 49.9bn 42.1bn +18.5% Turnover and R R concession sales Adjusted profit before tax R 3.8bn R 2.2bn +70.1% Adjusted EBIT R 4.8bn R 3.2bn +48.3% Adjusted diluted HEPS 284.7cps 162.2cps +75.5% Interim dividend per share 158.5 cps 80.5 cps +96.9% Free cash flow
Slide 45: Segmental Earnings for the Half
SEGMENTAL EARNINGS FOR THE HALF aEBIT +48.3% on LY, driven by FBH, DJ and CRG performances; Food earnings growth impacted by power outages and related costs Rm +48.3% 5 000 4 765 4 000 3 213 +5.1% adjusted for power outages 3 000 +28.4% adjusted for +25.3% +77.8% power outages normalised normalised
Slide 46: H1 FY23 Group Segmental Income Statement
H1 FY23 GROUP SEGMENTAL INCOME STATEMENT Woolworths Country David Road FBH Food Logistics WFS Jones Group Treasury Intragroup Group Dec 2022 Rm Rm Rm Rm Rm Rm Rm Rm Rm Turnover and concession sales 7 447 21 130 347 – 14 878 7 228 – (1 124) 49 906 Concession sales (61) (388) – – (5 504) – – 1 124 (4
Slide 47: H1 FY22 Group Segmental Income Statement
H1 FY22 GROUP SEGMENTAL INCOME STATEMENT Woolworths Country David Road FBH Food Logistics WFS Jones Group Treasury Intragroup Group Dec 2021 Rm Rm Rm Rm Rm Rm Rm Rm Rm Turnover and concession sales 6 697 19 630 305 – 10 798 5 494 – (796) 42 128 Concession sales (23) (308) – – (3 389) – – 796 (2 924)
Slide 48: IFRS 16 – Impact by Segment
IFRS 16 – IMPACT BY SEGMENT Group WSA DJ CRG Lease liabilities Rm Rm A$m A$m Dec 2021 28 928 6 228 1 629 376 Dec 2022 27 898 6 725 1 518 333 Average remaining lease term (years): Dec 2021 5.2 6.1 15.6 2.5 Average remaining lease term (years): Dec 2022 4.7 5.4 16.3 2.3 Average remaining lease term wi
Slide 49: Capital Expenditure
CAPITAL EXPENDITURE Rm Excludes David Jones Depreciation and amortisation 2 800 % R2.6bn Dec 2022 Dec 2021 change Woolworths (Rm) 428 477 (10.3) 2 100 David Jones (A$m) 27 29 (5.9) Country Road Group (A$m) 14 13 7.7 Group pre IFRS 16 (Rm) 911 931 (2.1) R1.5bn 1 400 Right-of-use assets (Rm) 1 361 1 2
Slide 50: Net Borrowings/(Cash)
NET BORROWINGS/(CASH) Net borrowings of R671 million after R1.5 billion share repurchase Dec 2022 Dec 2021 Net borrowings/(cash) R4.7bn WHL Net debt/(cash) (Rm) 671 (258) R4.3bn Interest-bearing debt 6 316 6 160 Net cash and cash equivalents (5 645) (6 418) Unutilised committed facilities – Group 6
Slide 51: Australian Balance Sheets
AUSTRALIAN BALANCE SHEETS Dec 2022 Dec 2021 A$m A$m Country Country David Road David Road Jones Group Total Jones Group Total Assets Property, plant and equipment 383 90 473 405 95 500 Intangible assets 1 & 2 47 357 404 54 355 409 Right-of-use assets 1 010 265 1 275 1 106 300 1 406 Inventories 300 1
Slide 52: Group Balance Sheet – Excluding David Jones
GROUP BALANCE SHEET – EXCLUDING DAVID JONES Excluding DJ assets and liabilities has a significant positive impact on the WHL balance sheet Excluding Dec 2022 David Jones Rm Rm Assets Property, plant and equipment and intangible assets 17 393 14 335 Includes Bourke Street property at book value Right
Slide 53: Trading Space
TRADING SPACE Projected Projected Projected Dec 2021 % Dec 2022 % Jun 2023 % Jun 2024 % Jun 2025 000m2 change 000m change*** 2 000m2 change 000m2 change 000m2 Woolworths Fashion, Beauty and Home* 446 (2.2) 436 (0.7) 430 0.2 431 (0.2) 430 South Africa 400 (2.5) 390 (1.0) 384 – 384 (0.5) 382 Rest of A
Slide 54: Store Locations
STORE LOCATIONS Projected Projected Projected Dec 2021 Growth Dec 2022 Growth*** Jun 2023 Growth Jun 2024 Growth Jun 2025 Woolworths Fashion, Beauty and Home 264 4 268 14 271 15 286 12 298 South Africa 199 4 203 14 208 14 222 13 235 Rest of Africa 65 – 65 – 63 1 64 (1) 63 Woolworths Food 462 15 477
Slide 55: 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 taken reasonable efforts to ensure the accuracy and completeness of the
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