Woolworths Holdings Limited · JSE:WHL
Woolworths — H1 FY2024 Earnings Presentation
55 slides from Woolworths's earnings presentation, Feb 1, 2024
Slide 1: Interim Results FY24
WOOLWORTHS HOLDINGS LIMITED INTERIM RESULTS FY24
Slide 2: Presentation Outline
PRESENTATION OUTLINE 01 02 03 04 OVERVIEW OF FINANCIAL STRATEGIC UPDATE Q&A THE PERIOD OVERVIEW AND OUTLOOK
Slide 3: Overview of the Period
OVERVIEW OF THE PERIOD Roy Bagattini Group CEO
Slide 4: Overview of the Period
OVERVIEW OF THE PERIOD Respectable result, notwithstanding external challenges and a high prior period base; we’ve done a lot of heavy lifting and our strategies are working • Group performance impacted by increasingly tough macros in both geographies and a high prior period base in Australia • Turn
Slide 5: Financial Overview
FINANCIAL OVERVIEW Zaid Manjra Group Finance Director
Slide 6: Financial Overview for the Half
FINANCIAL OVERVIEW FOR THE HALF Group results impacted by challenging macros and base effects in apparel, particularly in Australia | Balance sheet remains strong | Highly cash generative CONTINUING OPERATIONS Turnover and Adjusted Adjusted diluted Interim concession sales EBIT HEPS dividend +5.4% -
Slide 7: David Jones Update
DAVID JONES UPDATE David Jones sale transformational to the Group | On track to achieve operational separation by year-end • Final tranche of sale proceeds received during the half • Reminder – the sale unlocked R7.7bn of value and removed liabilities of R21bn from balance sheet • Retained Bourke St
Slide 8: Australian Retail Sector
AUSTRALIAN RETAIL SECTOR Trading conditions materially worse than expected – further tightening in discretionary spend, higher consumer debt levels and cost of living, with interest rates remaining higher for longer • Consumer sentiment amongst the lowest CONSUMER SENTIMENT INDEX since the mid 70’s
Slide 9: South African Macro Context
SOUTH AFRICAN MACRO CONTEXT Continued macroeconomic headwinds severely impacting consumer confidence and discretionary spend LOWEST FOURTH QUARTER FNB/BER CONSUMER CONFIDENCE INDEX READING IN MORE THAN TWO DECADES Higher living costs and unexpected business interruptions: 30 20 • Higher levels of lo
Slide 10: Loadshedding Considerations
LOADSHEDDING CONSIDERATIONS Our Woolies difference has never been more evident than it has throughout loadshedding: the trust our customers place in our brand, our unique supplier partnerships, and the investments we have made in our value chain • P ronounced impact on South African economy, busines
Slide 11: Sales Performance
SALES PERFORMANCE Exceptional Food performance throughout the half underpinned by market-leading like-for-like growth | FBH impacted by availability | CRG facing greater-than-expected pullback in discretionary spend off a high base % LY % LY % LY 10.0 8.0 2.0 1.3 8.4 8.6 8.4 8.0 – 6.0 (2.0) 6.0 3.8
Slide 12: Segmental Adjusted EBIT
SEGMENTAL ADJUSTED EBIT Group aEBIT -6.2% on LY off a high base (LY +25%) | aEBITDA -3.2% on LY | Standout performance in Food and WFS, offset by muted performance in apparel businesses Adjusted EBITDA -3.2% Rm 4 000 -6.2% 3 530 3 310 +13.2% -4.3% adjusted for adjusted for 3 000 loadshedding loadshe
Slide 13: Woolworths Food
WOOLWORTHS FOOD Positive operational leverage throughout the income statement and best-in-class ROCE Strong like-for-like (+7.2%) topline performance, notwithstanding impact of loadshedding, taxi strike and Avian flu | GP margin gains from optimising promotions and value chain efficiencies | Double-
Slide 14: Woolworths Fashion, Beauty, and Home
WOOLWORTHS FASHION, BEAUTY, AND HOME Continued focus on improving quality of sales and underlying financial health Topline growth challenged by availability, port delays and tough macro environment | Beauty sales +16% | GP margin maintained through higher full-price sales, notwithstanding negative m
Slide 15: Country Road Group
COUNTRY ROAD GROUP Decline in consumer demand impacting short-term profitability | High base (aEBIT LY +94%) Sales impacted by lower traffic and discretionary spend | Country Road brand performing well ahead of market | GP margin impacted by weaker A$ and higher promotional activity to clear invento
Slide 16: Woolworths Financial Services
WOOLWORTHS FINANCIAL SERVICES On recovery path, with profit double that of LY Average book growth +10.2%, driven by new accounts and credit card advances | Impairment rate remains elevated; however, below prior period peak | Costs exceptionally well managed, down on LY Closing book growth Net intere
Slide 17: Group Balance Sheet
GROUP BALANCE SHEET Strong balance sheet provides a solid platform as we shift into optimise, invest and growth phase Net borrowings Lease liabilities • Net borrowings increase from higher capex investment and share buybacks last year R4.1bn R10.7bn • >80% of SA utilised debt linked to ESG targets W
Slide 18: Capital Expenditure
CAPITAL EXPENDITURE Investing R10bn over 3 years in support of growth strategies Investment in capacity and capability throughout the value chain | data and analytics | digital and online | store network Rm FY24 Plan 3 500 R3.3bn A$49m 2 800 R0.5bn 16% R1.2bn 37% 2 100 R0.7bn 20% R1.5bn 1 400 R0.9bn
Slide 19: Cash Flow
CASH FLOW Positive free cash flow | Cash conversion ratio >90%, up from LY, notwithstanding increased capex Rm 5 000 220 4 287 4 000 3 000 (1 444) 2 000 (708) (886) 1 000 777 (692) – (936) (1 000) (1 402) (2 000) (1 561) Cash Working Net finance Taxation Repayment Main- Free cash Expansion Dividends
Slide 20: Capital Allocation and Returns to Shareholders
CAPITAL ALLOCATION AND RETURNS TO SHAREHOLDERS Our aspirations: Real mid-single digit aEBIT growth ROCE Gearing revenue growth > revenue growth > WACC + 5% < 1.5x What we delivered in H1: BALANCE SHEET INVESTMENT AND GROWTH SHAREHOLDER RETURNS • Sale of DJ transformational • Capex +36% on LY • Inter
Slide 21: Recent Trading and Outlook
RECENT TRADING AND OUTLOOK FOOD • Price movement in H2 expected at 6% - 7% • Net space planned at +2.9% for the full year • First eight weeks trade in H2 +8.5% - lower inflation FBH • Price movement in H2 expected at 9% - 10% • Net space expected to remain flat for the year • First eight weeks trade
Slide 22: Strategic Update and Outlook
STRATEGIC UPDATE AND OUTLOOK Roy Bagattini Group CEO
Slide 23: Reminder: Our Strategic Journey and Progress
REMINDER: OUR STRATEGIC JOURNEY AND PROGRESS 1 3 EVALUATE OPTIMISE, INVEST AND GROW • P erform a deep diagnosis of the state of the business 2 • D rive improved operational and (strategic, operational, cost efficiency financial) FIX, STRENGTHEN, AND REPOSITION • Invest in back-end capacity • D efine
Slide 24: Woolworths Food
WOOLWORTHS FOOD We continue to strengthen our holy grail whilst simultaneously growing our core business and pursing new avenues of growth • We remain focused on our “holy grail” which underpins the strength and resilience of our Food business, and its market-leading credentials everal levers enabli
Slide 25: Price Perception: Woolworths vs Listed Peers
PRICE PERCEPTION: WOOLWORTHS VS LISTED PEERS Less than what I would expect to pay Nov ‘20 vs Nov ‘23 (4ppts) (1ppt) EVERYDAY W LIST +4ppts (2ppts) TM NEW LOWER PRICES EVERY DAY Woolworths Food Competitor A Competitor B Competitor C Source: Bi-annual tracker study
Slide 26: Juicy News
= - JUICY NEWS WOOLIES DASH IS NOW IN EVEN MORE AREAS GET WOOLIES FOOD DELIVERED IN STAY-COLD COOLERS FAST, FRESH, TODAY GREENTO @ THE C. RE THIS VEHICLE IS ~€LECTRIC rowenro ey everiectric SAME DAY STAY-COLD FOOD DELIVERY 8 Delivering to Rivonia Rd, Sandton, JHB Q Search by Product or Brand Ta (| G
Slide 27: Fashion Turnaround Priorities and Sequencing
FASHION TURNAROUND PRIORITIES AND SEQUENCING We have made significant progress on the turnaround of our business and are now pursuing our next biggest commercial opportunity PHASE ONE PHASE TWO DEFINE THE MARKET, RIGHT PRODUCT AT RIGHT PRICE Trading RIGHT PLACE AND OUR POSITION density (in right qua
Slide 28: Woolworths Fashion, Beauty and Home
WOOLWORTHS FASHION, BEAUTY AND HOME We will continue to drive the turnaround of our Fashion business, with a particular focus on availability, whilst profitably growing Beauty and Home • Continued focus on “right product at the right price” anchored in our “must win” categories 8% • Improving availa
Slide 29: Country Road Group
COUNTRY ROAD GROUP Significant scope for growth by leveraging CRG’s competitive advantages and unlocking the full potential of existing brands • Unlocking the full potential of CRG brands, leveraging learnings from Country Road brand’s success to reposition other brands • Driving wholesale opportuni
Slide 30: RO} eY £ =
RO} eY £ = 1
Slide 31: Our Good Business Journey
OUR GOOD BUSINESS JOURNEY Our Good Business Journey remains embedded in everything we do and is a distinct competitive advantage • Deeply entrenched sustainability programme – investing time, capital and expertise since 2007 • Fully committed to an ethical supply chain from floor to store, and farm
Slide 32: Our Good Business Journey
OUR GOOD BUSINESS JOURNEY INCLUSIVE JUSTICE ETHICAL AND FAIR THRIVING AND RESILIENT THROUGH COUNTRY ROAD’S SUPPORT OF THE LANDCARE BIODIVERSITY PROJECT, WOOLWORTHS SOUTH AFRICA WHL GROUP 62.5 HECTARES STORE STAFF NOW EARN ALMOST Country Road Group is the only Australian IS THE FIRST fashion brand pu
Slide 33: Reminder: Our Strategic Journey and Progress
REMINDER: OUR STRATEGIC JOURNEY AND PROGRESS 1 3 EVALUATE OPTIMISE, INVEST AND GROW • P erform a deep diagnosis of the state of the business 2 • D rive improved operational and (strategic, operational, cost efficiency financial) FIX, STRENGTHEN, AND REPOSITION • Invest in back-end capacity • D efine
Slide 34: Introducing Woolworths Ventures
INTRODUCING WOOLWORTHS VENTURES Woolworths Ventures will play a key role in accelerating the execution of strategic growth initiatives in the next phase of our investment thesis • Significant progress already made in fixing and repositioning our Group FOOD SERVICES WCELLAR • Focus now shifting to op
Slide 35: Absolute Pets Acquisition
ABSOLUTE PETS ACQUISITION Acquisition of South Africa’s leading pet care retailer, Absolute Pets, will allow us to accelerate our shared growth ambitions to become the end-to-end pet care destination of choice • SENS announcement on 31 October 2023 • Intention to acquire 93.45% of shares in Absolute
Slide 36: Outlook
OUTLOOK Whilst second half outlook remains challenging, we are firmly committed to our margin targets notwithstanding the investments we are making in various strategic initiatives • H2 likely to be as challenging as H1 with consumers still under pressure in both geographies • W E ARE driving even g
Slide 37: Thank You!
THANK YOU! to our customers for your loyalty and trust, and to all our suppliers, partners and teams for your remarkable commitment, dedication and passion
Slide 38: Appendix
APPENDIX
Slide 39: Appendix Contents
APPENDIX CONTENTS • GROUP PERFORMANCE • GROUP INCOME STATEMENT • GROUP BALANCE SHEET • INCOME STATEMENTS BY BUSINESS • IFRS 16 - IMPACT BY BUSINESS • CAPITAL EXPENDITURE • NET BORROWINGS/(CASH) • AUSTRALIAN BALANCE SHEETS • TRADING SPACE • STORE LOCATIONS
Slide 40: Group Performance
GROUP PERFORMANCE Continuing operations Total Group Turnover and R38.1bn R38.1bn concession sales +5.4% on LY -23.6% on LY Adjusted profit before tax R2.6bn R2.6bn -12.1% on LY -31.8% on LY Adjusted EBIT R3.3bn R3.3bn -6.2% on LY -30.5% on LY Adjusted diluted HEPS 209.7cps 209.7cps -5.6% on LY -26.3
Slide 41: Group Income Statement
GROUP INCOME STATEMENT Dec 2023 Dec 2022 % Rm Rm change Strong Food growth offsetting weaker Turnover and concession sales 38 112 36 152 5.4 apparel growth Gross profit 13 761 13 231 4.0 Adjusted EBITDA 4 873 5 033 (3.2) Adjusted EBIT 3 310 3 530 (6.2) WSA +10%, offset by CRG Woolworths Fashion, Bea
Slide 42: Group Balance Sheet
GROUP BALANCE SHEET Constant Dec 2023 Dec 2022 currency Rm Rm % change Assets Property, plant and equipment, Investment in capacity and capability investment property and intangible assets 16 768 14 335 12.2 throughout the value chain, data, digital and Right-of-use assets 8 134 8 076 (3.2) online/s
Slide 43: Woolworths Food income statement
Positive operational leverage throughout the income statement and best-in-class ROCE Dec 2023 Dec 2022 % Rm Rm change Turnover and concession sales 22 911 21 130 8.4 Gross profit margin 24.6% 23.8% Expenses 4 003 3 604 11.1 Adjusted EBIT 1 595 1 412 13.0 Adjusted PBT 1 445 1 293 11.8 Adjusted EBITDA
Slide 44: Woolworths Fashion, Beauty and Home income statement
Continued focus on improving quality of sales and underlying financial health Dec 2023 Dec 2022 % Rm Rm change Turnover and concession sales 7 608 7 447 2.2 Gross profit margin 48.0% 48.0% Expenses 2 708 2 586 4.7 Adjusted EBIT 927 979 (5.3) Adjusted PBT 738 824 (10.4) Adjusted EBITDA 1 294 1 400 (7
Slide 45: Country Road Group income statement
Decline in consumer demand and weaker A$ impacting short-term profitability | High base (aEBIT +94% LY) Dec 2023 Dec 2022 % A$m A$m change Turnover 592.2 623.2 (5.0) Gross profit margin 62.1% 63.5% Expenses 323.2 303.8 6.4 Adjusted EBIT 50.2 93.2 (46.1) Adjusted PBT 39.6 85.6 (53.7) Adjusted EBITDA
Slide 46: Woolworths Financial Services income statement
On recovery path, with profit double that of LY Dec 2023 Dec 2022 % Rm Rm change Average total financial services assets 15 802 14 337 10.2% % % Income statement to book to book Net interest income 974 12.3 791 11.0 23.1 Impairment charge 500 6.3 401 5.5 24.7 Risk-adjusted margin 474 6.0 390 5.4 21.
Slide 47: H1 FY24 Group Segmental Income Statement
H1 FY24 GROUP SEGMENTAL INCOME STATEMENT Woolworths Country Road FBH Food Logistics WFS Group Treasury Intragroup Group Dec 2023 Rm Rm Rm Rm Rm Rm Rm Rm Turnover and concession sales 7 608 22 911 362 – 7 231 – – 38 112 Concession sales (103) (473) – – – – – (576) Turnover 7 505 22 438 362 – 7 231 –
Slide 48: H1 FY23 Group Segmental Income Statement
H1 FY23 GROUP SEGMENTAL INCOME STATEMENT Woolworths Country Road FBH Food Logistics WFS Group Treasury Intragroup Group Dec 2022 Rm Rm Rm Rm Rm Rm Rm Rm Turnover and concession sales 7 447 21 130 347 – 7 228 – – 36 152 Concession sales (61) (388) – – – – – (449) Turnover 7 386 20 742 347 – 7 228 – –
Slide 49: IFRS 16 – Impact by Segment
IFRS 16 – IMPACT BY SEGMENT Group WSA CRG Lease liabilities Rm Rm A$m Dec 2022 10 535 6 725 333 Dec 2023 10 652 6 220 363 Average remaining lease term (years): Dec 2022 4.0 5.4 2.3 Average remaining lease term (years): Dec 2023 4.4 6.1 2.2 Average remaining lease term with no options (years): Dec 20
Slide 50: Capital Expenditure
CAPITAL EXPENDITURE Depreciation and amortisation Rm % 3 500 R3.3bn Dec 2023 Dec 2022 change Woolworths (Rm) 462 428 7.9 2 800 Country Road Group (A$m) 18 14 28.6 Pre IFRS 16 (Rm) 682 596 14.4 Right-of-use assets (Rm) 881 907 (2.9) 2 100 Total (Rm) 1 563 1 503 4.0 R1.5bn 1 400 R1.1bn 700 – Dec 2022
Slide 51: Net Borrowings/(Cash)
NET BORROWINGS/(CASH) Net borrowings/(cash) Dec 2023 Dec 2022 R4.7bn R4.7bn WHL Net debt/(cash) (Rm) 4 105 671 Interest-bearing debt 6 915 6 316 Net cash and cash equivalents (2 810) (5 645) Unutilised committed facilities – Group 5 300 6 115 (A$44m) SA Net debt (Rm) 4 652 4 690 Interest-bearing deb
Slide 52: Australian Balance Sheets
AUSTRALIAN BALANCE SHEETS Dec 2023 Dec 2022 A$m A$m Country Country Road Osiris Road Osiris Group Holdings Total Group Holdings Total Assets Property, plant and equipment and investment property 132 140 272 90 140 230 Intangible assets* 366 – 366 357 – 357 Right-of-use assets 299 – 299 265 – 265 Inv
Slide 53: Trading Space
TRADING SPACE Projected Projected Projected Dec 2022 % Dec 2023 % Jun 2024 % Jun 2025 % Jun 2026 000m2 change 000m2 change* 000m2 change 000m2 change 000m2 Woolworths Fashion, Beauty and Home 435.9 0.3 436.9 – 432.2 0.5 434.3 0.6 437.1 South Africa 389.6 0.2 390.5 (0.2) 385.0 0.2 385.9 0.3 387.2 Res
Slide 54: Store Locations
STORE LOCATIONS Projected Projected Projected Dec 2022 Growth Dec 2023 Growth* Jun 2024 Growth Jun 2025 Growth Jun 2026 Woolworths Fashion, Beauty and Home 268 18 286 21 289 12 301 17 318 South Africa 203 18 221 20 224 9 233 12 245 Rest of Africa 65 – 65 1 65 3 68 5 73 Woolworths Food 477 8 485 14 4
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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