Woolworths Holdings Limited · JSE:WHL
Woolworths — H1 FY2010 Earnings Presentation
62 slides from Woolworths's earnings presentation, February 2010
Slide 1: Unaudited condensed group results for the 26 weeks to 27 December 2009
unaudited condensed group results for the 26 weeks to 27 december 2009 analyst presentation - feb 2010
Slide 2: Overview
woolworths holdings limited overview i South Africa - Tough economic conditions continued - Upper income customer seeing some relief - C Consumers continuing i i to d deleverage l - Bad debt environment improving - p g Woolworths paying Work in repositioning p y g off Australia - Tougher trading
Slide 3: Review of the period
woolworths holdings limited review i off the h period i d Group - Turnover growth ahead of market - Gross profit margins improved - Non-comparable results Woolworths Retail - Clothing and General merchandise • Market share gains in last 9 months • Strong margin improvement - Food • Market share
Slide 4: Retail turnover growth: Clothing - Woolworths vs market
woolworths holdings limited retailil turnover growth h Clothing - Woolworths vs market growth (3mma) 15% 10% 5% 0% -5% 5% -10% Nov-08 SSep-08 SSep-09 Oct-08 FFeb-09 Nov-09 Dec-08 Oct-09 JJan-09 Jul-08 Jul-09 Dec-09 JJun-09 Mar-09 Aug-09 May-09 Aug-08 Apr-09 O M O M A D D A A N N Woolworths growth Ma
Slide 5: Retail turnover growth continued: Food
woolworths holdings limited h continued retailil turnover growth i d Food - Woolworths vs market growth (3mma) 30% 25% 20% 15% 10% 5% 0% Nov-08 Feb-09 Oct-08 Dec-08 Nov-09 Oct-09 Dec-09 Mar-09 Jul-08 Jul-09 Jan-09 Sep-08 Sep-09 Jun-09 May-09 Apr-09 Aug-09 Aug-08 O O M A D D N N A A Woolworths growth
Slide 6: Review of the period continued
woolworths holdings limited review i off the i d continued h period i d - Stores • Less L aggressive expansion • Modernisation Country Road - Good sales growth in tough environment - More aggressive promotions - Successful Trenery launch – start up costs Financial Services - Results not comparab
Slide 7: FRUSH + F o\
FRUSH + F o\ A great meal sta good quality inggs Try our Innovativ: ea ans succuie.. "it "nd o range ‘ ‘ ‘es - all Se out of ee: Gomeyeeees aE
Slide 8: Financial overview
woolworths holdings limited fi financial i l overview i Retail turnover up 9.3% to R11.5 billion Diluted headline earnings per share up 38.3% to 83.4 cps Adjusted headline earnings per share up 13.8% Interim distribution to shareholders up 20.6% to 38.0 cps ROE increased from 28.7% to 42.3
Slide 9: Group income statement
woolworths holdings limited group income i statement Dec 2009 Dec 2008 % Rm Rm change SA Retail 769.1 640.4 20.1 Clothing and GM 541.8 452.7 19.7 Food 227.3 187.7 20.1 Abnormal forex profit 57 7 57.7 - Country Road 90.3 93.5 (3.4) Financial Services 26.8 99.2 100% subsidiary - 71.8 JV (after tax) 26
Slide 10: Group income statement commentary
woolworths holdings limited group income i statement commentary 1. SA Retail – Profit growth experienced in both segments as a result of good gross margin performance. 2 2. C Country Road R d – Profit P fi impacted i d bby T Trenery start-up costs. 3. Financial Services – Non-comparable, as prior ye
Slide 11: SA retail income statement
woolworths holdings limited SA retailil iincome statement Dec 2009 Dec 2008 % Rm Rm change Turnover 10 242.8 9 387.9 9.1 Cost of sales 7 218.2 6 823.3 5.8 Gross profit 3 024.6 2 564.6 17.9 Other revenue 55.0 46.9 17.3 Expenses 2 313.7 1 978.7 16.9 Store costs 1 442.2 1 255.0 14.9 Head office costs 8
Slide 12: SA retail income statement commentary
woolworths holdings limited SA retailil iincome statement commentary 1. Turnover Total Comparable stores Clothing and GM 9.7% 6.2% Food 8.9% 4.7% Total 9.1% 4.9% 2. Gross profit – Margins improved through better procurement and lower level of promotional activity. 3. Other revenue – Includes franchi
Slide 13: SA retail segmental performance
woolworths holdings limited SA retailil segmentall performance f Gross margin Operating margin Dec 2009 Dec 2008 Dec 2009 Dec 2008 % % % % Clothing and GM 39.4 35.4 13.1 12.0 Food 23.1 22.1 3.8 3.4 Total 29.5 27.3 7.5 6.7 Operating and gross margins improve in both segments
Slide 14: Country Road income statement
woolworths holdings limited country road d income i statement Dec 2009 Dec 2008 % A$m A$m change Turnover 196.8 174.8 12.6 Cost of sales 82.3 68.7 19.8 Gross profit 114.5 106.1 7.9 Other revenue 4.7 1.0 >100 Expenses 106.0 92.4 14.7 Store costs 76.0 66.3 14.6 ea office Head o ce costs 30.0 26.1 6. 1
Slide 15: Country Road commentary
woolworths holdings limited country road d commentary 1. Turnover A$ Dec 2009 Dec 2008 % change Comparable stores Retail 153.4 130.0 18.0% 4.5% Concession 44.1 41.8 5.5% 5.1% 2. Gross profit – Reduction due to higher promotional activity and the impact of hedging. 3. Store costs – Driven by an incre
Slide 16: Financial services income statement
woolworths holdings limited financial services income statement Consolidated pro forma Dec 2009 % to Dec % to % income statement Rm book 2008 book change Rm Interest income 601.3 20.1 749.7 26.1 (19.8) Interest paid 202.4 6.8 308.1 10.7 (34.3) Net interest income 398.9 13.3 441.6 15.4 (9.7) Impairme
Slide 17: Financial services commentary
woolworths holdings limited fi financial i l services i commentary 1. Gross financial services assets – Average used for % to book ratios, as opposed to actual book growth of 1.2%. 2. Net interest income – Margin squeeze resulting from rate declines, offset by larger average book. 3. Impairment char
Slide 18: Financial services book performance
woolworths holdings limited fi financial i l services i bbookk performance f 7 000 14% 6 102 6 177 5 932 6 000 12% 5 000 9.2% 10% 7.6% 4 000 8% 6.2% 3 000 6% 1 940 1 900 1 865 2 000 4% 1 000 2% 0 0% Dec-07 Dec-08 Dec-09 Gross book value (Rm) Total active accounts (000's) Impairment charge (%)
Slide 19: Financial services overview
woolworths holdings limited fi financial i l services i overview i Transition of JV has gone well Transforming the business into a professional bank Credit risk aspects managed very well Challenge now is to grow the book, in particular growing card contribution to sales VISA platform succe
Slide 20: Balance sheet
woolworths holdings limited b l balance sheet h Dec 2009 Dec 2008 % Rm Rm change Assets Property, plant and equipment, intangible assets and loans 2 634.6 2 482.2 6.1 Investment in JVs and associates 578.5 535.9 7.9 Inventoryy 1 813.9 1 551.8 16.9 Accounts receivable and deferred tax 1 233.8 1 439.9
Slide 21: Cash generation
woolworths holdings limited cash h generation i 1 500 R194m R1 114m R21m (R80m) (R111m) 1 000 (R309m) 500 (R427m) R182m (R220m) 0 EBITDA Dividends Working capital Interest Tax Capex Distributions to Share Increase received from and other paid shareholders buybacks in cash WFS and movements associate
Slide 22: Investment in the business
woolworths holdings limited investment in the business Capex (Rm) R315.6m (Dec 08: R294.7m) 26.7 61.8 56.1 Depreciation Dec 2009 Dec 2008 84.2 SA Retail 163.1 153.8 Country 35.3 27.4 232.8 Road 148.7 WFS - 1.3 Total group 198.4 182.5 Dec 2008 Dec 2009 Retail IT Other (including property)
Slide 23: Space growth - Clothing and GM
woolworths holdings limited space growthh – Clothing Cl hi andd GM Slowdown in new store openings Additional store No. of new footage (m2) stores 25 000 40 35 20 000 30 15 000 25 20 10 000 15 10 5 000 5 - - Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Actual Actual Actual Actual Projected Proj
Slide 24: Space growth - Food
woolworths holdings limited space growthh – Food F d Focus on bigger Food stores Additional store No. of new footage (m2) stores 25 000 40 35 20 000 30 15 000 25 20 10 000 15 10 5 000 5 - 0 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Actual Actual Actual Actual Projected Projected Projected N
Slide 25: Return on equity
woolworths holdings limited return on equity i 45% 42 4% 42.4% 37.5% 40% 35.1% 33.5% 34.8% 35% 27.4% 27.5% 30% 24 7% 24.7% 26 3% 26.3% 28.7% 25% 27.8% 18.3% 20% 15% 16.3% 14.8% 10% 13.8% 13.8% 11.3% 11.8% 13.3% 12.0% 12.5% 13.2% 13.5% 12.0% 5% 0% Jun‐02 Jun‐03 Jun‐04 Jun‐05 Jun‐06 Jun‐07 Jun‐08 Jun‐
Slide 26: Outlook
woolworths holdings limited outlook l k SA Retail - Sales growth expected to be close to H1 in both Clothing and GM, and Food (although price movement expected to reduce) - Gross margin performance in H2 expected to continue to outperform the prior year - Continued focus on expenses Country Road
Slide 27: Outlook continued
woolworths holdings limited outlook l k continued i d Financial Services - Book growth will remain challenging in H2 - Growth strategies to bear fruit in longer term - I Impairment i expected d to continue i to iimprove Capex SA Retail Country Road - FY2010 R575m R150m - FY2011 R575m R175m - FY2
Slide 28: Simon Susman
simon susman WOOLWORTHS HOLDINGS ora | IL
Slide 29: Continuing the retail strategy
woolworths holdings limited continuing i i theh retailil strategy B ild W Build Woolworths l h HHeadquarters d A Assortments, B Brands d and d Sub-brands S bb d Value, quality and innovation at heart of Customer proposition Execute Woolworths Merchandise Cycle for Clothing and Home Implement
Slide 30: Retail - priorities
woolworths holdings limited retailil – priorities i ii Timelines Progress 1. Leverage customer insights ongoing 2 Innovation – differentiation 2. ongoing 3. Value/volume ongoing 4. Availability ongoing 5. Execute the service proposition ongoing 6. Trading mindset ongoing 7. Productivity ongoing
Slide 31: Leverage customer insights - the relationship journey
woolworths holdings limited l leverage customer iinsights i h – the h relationship l i hi jjourney Retail strategy gy Loyalty relationship Woolworths: the shop CLOTHING FOOD BEAUTY HOME WFS CONNECT Lifestyle segmentation HEADQUARTER ASSORTMENTS DESTINATION FOR SPECIAL OCCASIONS GOOD-BUSINESS JOURNEY
Slide 32: Leverage customer insights
woolworths holdings limited l leverage customer iinsights i h Reinforced by feedback from our customers: - Clothing • Our advertising is appealing and makes them want to buy our products • Customers are commenting positively about: • Shop within shop layouts / segmentation • Our quality and fit •
Slide 33: Innovation - differentiation in Clothing
woolworths holdings limited i innovation i – differentiation diff i i in i Clothing Cl hi (Spring/Summer 09 adultwear) Classic (55%) Modern (36%) Contemporary (9%) Best (10%) Better (38%) Good 80% (52%)
Slide 34: Innovation - Clothing: Magic
woolworths holdings limited I Innovation i – Clothing: Cl hi M Magic i
Slide 35: Innovation - Clothing: Trenery
woolworths holdings limited I Innovation i – Clothing: Cl hi T Trenery
Slide 36: Innovation - Clothing: Early Learning Centre
woolworths holdings limited I Innovation i – Clothing: Cl hi EEarly l LLearning i C Centre
Slide 37: Innovation - Home: studio.w
woolworths holdings limited I Innovation i – Home: H studio.w di
Slide 38: Innovation - Food
woolworths holdings limited i innovation i – Food F d Four clear pillars Everyday Gastronomic Reasons to Health the difference Adventure celebrate Innovation key to Woolworths difference - 892 new lines launched from Jul – Dec 09 (LY: 824) - 90 lines upgraded from Jul – Dec 09 (LY: 444)
Slide 39: Value/volume - Clothing
woolworths holdings limited value/volume l / l – Clothing Cl hi Clothing pricing % price movement FY2010 FY2009 1st half 11.8% 0.0% 2nd half 5.1 % Inflation not as high as price movement Impact of bulkpacks and prior year discounting This summer’s purchases made when Rand was weak Inflation
Slide 40: Value/volume - Food
woolworths holdings limited value/volume l / l – Food F d Premium to competitors of basket of 63 Premium to competitors KVIs, monitored by Adcheck Research of basket of 150 KVIs, monitored by BMI 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% 6% 12-Mar-08 12-Apr-08 12-May-08 12-Oct-08 12-Nov-08 12-Dec-08 12-Jan
Slide 41: Value/volume - Food
woolworths holdings limited value/volume l / l – Food F d Food - Woolworths vs market growth (12mma) 25% 20% 15% 10% 5% 0% Jul-099 Aug-099 Jan-099 Dec-088 Jul-088 Aug-088 Oct-088 Oct-099 Feb-099 Dec-099 Sep-099 Sep-088 Jun-099 Mar-099 May-099 Nov-088 Apr-099 Nov-099 W l Woolworths th growth th M k t
Slide 42: Availability - Clothing and GM
woolworths holdings limited availability il bili – Clothing Cl hi andd GM Clothing, Home and Beauty availability improved as a result of: - Store clustering - Buying and planning split leading to greater focus - Merchandise cycle introduced more science to the business
Slide 43: Availability - Food
woolworths holdings limited availability il bili – Food F d Type EOD Perishables Period 2nd quarter 1st quarter Actual 2010 80.4% 82.6% Actual 2009 80.6% 81.7% Target 2010 84.0% Availabilityy focus • Long term trend holding • Location planners introduced from Jan 2010 • Improved waste at slight cost
Slide 44: Execute the service proposition
woolworths holdings limited execute the h service i proposition ii Specialised service paying dividends Increasing full time staffing component from 4% to 30% Employee engagement programme through “Lets Talk” Flexi healthcare Reduction of administrative load
Slide 45: Trading mindset
woolworths holdings limited trading di mindset i d Cluster management implemented Parallel planning with stores implemented y embedded Woolworths merchandise cycle Academies implemented
Slide 46: Improved productivity
woolworths holdings limited i improved d productivity d i i Driving the following: - GP margin % - Head office costs - Stores productivity - impacted by new footage
Slide 47: Highlights
woolworths holdings limited hi hli h highlights Improved gross profit margin % by 2.2% - Clothing and GM up 4.0% - Food up 1.0% Market share growth in Clothing, Home and Beauty – Food turned in November and December Customer value perception improved Clearer segmentation of 9 box grid in sto
Slide 48: Country Road
country road ian mor
Slide 49: Country Road - review
woolworths holdings limited country road d – review i Tougher more competitive environment: Tougher, - 3 consecutive interest rate rises - y g stimulus incentives of last year Cycling y - Highly promotional environment Sales still strong and ahead of market (12.6% v 6.7%) Margin pressure due t
Slide 50: Country Road - outlook
woolworths holdings limited country road d – outlook l k Tougher retail conditions to continue Product ranges more fashion right with good initial reaction Value strong Trenery trading well in both markets
Slide 51: Outlook
outlook << lan moir & simon susman WOOLWORTHS HOLDINGS LIMITED v" IL
Slide 52: Outlook
woolworths holdings limited outlook l k Business is in a good place with clear strategies Completely aligned to the strategies Focus on execution Reduce complexity, streamline structure and decision making process Focus on deliverables
Slide 53: Outlook continued
woolworths holdings limited l k continued outlook i d Good first half Strategy is delivering Continue driving strategy South African and Australian economies remain tough, but improving Businesses well repositioned to benefit in a moderate spending environment
Slide 54: Appendix
Secret eall
Slide 55: Group income statement
woolworths holdings limited group income i statement Dec 2009 Dec 2008 % Rm Rm change Turnover 11 549 549.8 8 10 562 562.9 9 93 9.3 Cost of sales 7 705.5 7 274.1 5.9 Gross profit 3 844.3 3 288.8 16.9 Other revenue 146.2 584.2 (75.0) Expenses 2 989.6 2 847.3 5.0 Operating profit 1 000.9 1 025.7 (2.4)
Slide 56: SA retail - balance sheet
woolworths holdings limited SA retailil – balance b l sheet h Dec 2009 Dec 2008 % Rm Rm change Assets Property, plant and equipment, investments, deferred tax, loans and goodwill 2 211.8 2 053.9 7.7 Inventory 1 533.0 1 323.8 15.8 Accounts receivable 1 167.9 1 433.8 (18.5) Cash 308.3 367.6 (16.1) 5 2
Slide 57: SA retail - revenue analysis
woolworths holdings limited SA retailil – revenue analysis l i Dec 2009 Dec 2008 % % Rm Rm change price movement Clothing and General merchandise 4 104.1 3 742.3 9.7 11.8 Corporate (retail) 3 605.0 3 278.8 9.9 Franchise (wholesale) – local 389 5 389.5 358 5 358.5 86 8.6 Franchise (wholesale) – inter
Slide 58: SA retail - trading space and stores
woolworths holdings limited SA retailil – trading di space and d stores % Projected % Projected % Projected % Dec 2009 Dec 2008 change/ Jun 2010 change Jun 2011 change/ Jun 2012 change/ m2 m2 growth m2 ((6 mths)) m2 growth m2 growth Trading space 528 415 499 888 5.7 537 474 1.7 570 219 6.1 603 464 5
Slide 59: Financial services - contribution to sales
woolworths holdings limited fi financial i l services i – contribution ib i to sales l % of sales spent p on Woolworths cards Dec 2009 Dec 2008 Clothing and General merchandise 31.6% 35.7% Food 15.7% 18.4% Total 22.4% 25.6%
Slide 60: Country Road - balance sheet
woolworths holdings limited country road d – balance b l sheet h Dec 2009 Dec 2008 % A$m A$m change Assets Property, plant and equipment 55.0 42.3 30.0 Trademarks * 11.3 11.2 0.9 Inventory 42.0 34.1 23.2 Accounts receivable 23.9 27.5 (13.1) Cash 15.8 31.6 (50.0) 148 0 148.0 146 7 146.7 09 0.9 Equity
Slide 61: Country Road - income statement (in rands)
woolworths holdings limited country road d – income i statement (i (in rands) d) Dec 2009 Dec 2008 % Rm Rm change Turnover 1 307.0 1 170.0 11.7 Cost of sales 545.0 449.8 21.2 Gross profit 762.0 720.2 5.8 Other revenue 31.5 6.6 >100 Expenses 701.8 633.0 10.9 Store costs 503.1 453.8 10.9 Head office c
Slide 62: Country Road - trading space and stores
woolworths holdings limited country road d – trading di space and d stores % Projected j % Projected j % Dec 2009 Dec 2008 change Dec 2010 change Dec 2011 change m2 m2 m2 m2 Trading space 40 704 35 948 13 44 704 10 48 704 9 Retail 30 347 27 265 11 32 347 7 34 347 6 Concession 8 603 8 683 (1) 8 603 -
Woolworths Holdings — H1 FY2010 Earnings Presentation on 6ix