Woolworths Holdings Limited · JSE:WHL
Woolworths — H1 2007 Earnings Presentation
52 slides from Woolworths's earnings presentation, 2007
Slide 1: Slide 1
Slide 2: A year of growth
woolworths holdings limited a year of growth • Revenue up 21.0% to R8.97 billion • Operating profit up 31.1% to R957.6 million • Diluted headline earnings per share up 22.9% to 63.8cps • Diluted headline earnings per share growth pre-STC up 28.5% • Diluted earnings per share (including exceptionals)
Slide 3: Trading environment
woolworths holdings limited trading environment Robust consumer environment • Structural change sustained economic growth rate – Consumer base has continued to grow – Confidence levels remained robust despite further rate hikes – Appetite for credit continued • Christmas trading strong • Food inflat
Slide 4: Woolworths Holdings income statement
woolworths holdings income statement strong operating profit growth and margin enhancement Dec 2006 Dec 2005* % Chg Rm Rm Revenue 8,970.4 7,415.3 21.0% Turnover 8,406.5 6,995.0 20.2% Cost of sales 5,522.8 4,604.6 19.9% Gross profit 2,883.7 2,390.4 20.6% Other revenue 563.9 420.3 34.2% Expenses 2,490
Slide 5: Woolworths Holdings expense analysis
woolworths holdings expense analysis store and distribution costs kept pace with sales growth R 2,500 Non R127.6m R116.1m comparable R 2,400 R48.8m R 2,300 R148.9m R 2,200 R2,490.0m R22.6m R64.6m R 2,100 17.0% 18.3% 18.5% 55.3% 17.8% 19.7% R 2,000 R2,080.4m R 1,900 R 1,800 R 1,700 R 1,600 R 1,500 De
Slide 6: Woolworths Holdings results
woolworths holdings results diluted HEPS up by 22.9% (pre-STC +28.5%) 100 4.0 90 3.5 3.1 80 3.0 3.0 70 2.3 2.2 2.5 60 2.2 50 2.0 40 1.5 30 63.8 51.9 1.0 20 38.9 42.6 32.8 10 0.5 10.5 13.0 18.5 24.0 29.5 0 - 2002 2003 2004 2005 2006 Diluted HEPS DPS Dividend cover 5 year HEPS compound annual growth r
Slide 7: Woolworths Holdings balance sheet
woolworths holdings balance sheet investment in infrastructure and financial services assets Dec 2006 Dec 2005 % Chg Rm Rm Assets Property, plant and equipment 1,801.5 1,421.2 26.8% Investment property 109.0 72.2 51.0% Goodwill 23.0 - 100.0% Export partnerships 71.2 62.4 14.1% Inventory 1,175.1 865.
Slide 8: Woolworths Holdings cash flow
woolworths holdings cash flow R 1,400.0 R 1,200.0 R 106.0m -R 32.1m -R 271.5m R 1,000.0 R 1,167.2m R 800.0 -R 409.3m R 600.0 -R 160.9m R 400.0 -R 233.2m R 200.0 R 0.0 -R 200.0 -R 576.5m -R 400.0 -R 600.0 EBITDA Disposals W orking Dividends Capex Interest paid Tax Applied to FS capital and and share
Slide 9: Woolworths Holdings capex
woolworths holdings capex investment in infrastructure and financial services assets Growth in financial services assets: Capex spend: R576.5m (Dec 05: R366.4m) R409.3m (Dec 05: R292.7m) R 700 R 700 R 600 R 600 R 88.4 R 500 R 500 R 400 R 167.8 R 400 R 72.7 R 300 R 189.4 R 300 R 95.9 R 71.2 R 200 R 2
Slide 10: Return on equity/WACC
woolworths holdings return on equity/wacc enhancing shareholder value 40% 37.2% 37.5% 34.8% 33.5% 35% 30% 27.4% 24.7% 25% 18.3% 20% 17.5% 15% 16.3% 10% 12.3% 13.8% 13.8% 11.8% 12.5% 11.3% 11.3% 5% 0% Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Dec-05 Dec-06 roe wacc
Slide 11: Woolworths Retail income statement
woolworths retail income statement gross margin enhancement in clothing and home Dec 2006 Dec 2005 * % Chg Rm Rm Revenue 7,845.8 6,511.2 20.5% Turnover 7,801.3 6,482.5 20.3% Cost of sales 5,271.6 4,374.1 20.5% Gross profit 2,529.7 2,108.4 20.0% Other revenue 44.6 28.7 55.4% Expenses 1,893.4 1,604.4
Slide 12: Woolworths Retail turnover analysis
woolworths retail turnover analysis good overall growth Dec 2006 Dec 2005 % Chg Rm Rm Clothing & home 3,460.2 3,024.4 14.4% Corporate (retail) 3,057.9 2,644.5 15.6% Franchise (wholesale) - local 321.3 278.3 15.5% Franchise (wholesale) - international 81.0 101.6 -20.3% Food 4,191.3 3,329.1 25.9% Corp
Slide 13: Woolworths Retail balance sheet
woolworths retail balance sheet increased inventory – accelerated imports and availability drive Dec 2006 Dec 2005 % Chg Rm Rm Assets Property, plant and equipment, investments deferred tax, loans and goodwill 2,288.5 1,828.3 25.2% Inventory 1,054.1 711.0 48.3% Accounts receivable 712.2 759.4 -6.2%
Slide 14: Woolworths Financial Services income statement
woolworths financial services income statement usury squeeze and adjusted provisioning for bad debts Dec 2006 % to Dec 2005 % to % chg R'm Book R'm Book Income Interest received 445.6 18.9% 344.6 18.3% 29.3% Other income - external 78.0 3.3% 48.7 2.6% 60.2% Other income - internal 46.9 2.0% 36.7 1.9
Slide 15: Woolworths Financial Services balance sheet
woolworths financial services balance sheet strong asset growth funded by borrowings Dec 2006 Dec 2005 % Chg Rm Rm Assets Plant and equipment, deferred tax, loans and accounts receivable 228.4 208.2 9.7% Financial services assets 4,991.7 4,010.6 24.5% Cash 236.7 - 5,456.8 4,218.8 29.3% Equity and li
Slide 16: Woolworths Financial Services credit statistics
woolworths financial services credit statistics quality book - statistics remain healthy Dec 2006 Dec 2005 Store card sales as a % of total sales 32.7% 32.5% Weighted average usury rate 20.0% 20.0% Average cost of funds 8.8% 7.7% Total gross books 5,250.0 4,165.6 Total provisions (258.3) (155.0) Net
Slide 17: Country Road income statement
country road income statement strong performance of retail model Dec 2006 Dec 2005 % Chg A$m A$m Revenue 108.5 105.1 3.2% Turnover 107.9 104.2 3.5% - retail 90.6 79.7 13.7% - wholesale & franchise 17.3 24.5 -29.5% Cost of sales 45.5 47.4 -3.9% Gross profit 62.3 56.8 9.7% Other revenue 0.6 1.0 -40.6%
Slide 18: Country Road income statement: conversion to rands
country road income statement conversion to rands Dec 2006 Dec 2005 % Chg Rm Rm Revenue 599.7 510.7 17.4% Turnover 596.4 506.1 17.8% Cost of sales 251.2 230.5 9.0% Gross profit 345.2 275.6 25.3% Other revenue 3.3 4.7 -29.8% Expenses 317.3 270.0 17.5% Operating profit 31.2 10.3 202.9% Finance costs 1
Slide 19: Country Road balance sheet
country road balance sheet loan from woolworths repaid Dec 2006 Dec 2005 % Chg A$m A$m Assets Property, plant and equipment 28.9 28.6 1.2% Trademarks* 11.2 10.9 2.6% Inventory 22.0 33.2 -33.6% Accounts receivable 10.8 9.4 14.8% Cash 13.5 12.2 10.3% 86.4 94.3 Equity and liabilities Shareholders funds
Slide 20: Expectations and guidance
woolworths holdings limited expectations and guidance • Retail gross margin to be maintained in second half • Slight deterioration in bad debts, but stable outlook • Capex: 2006/07: (approximately) R670m 2007/08: R500-R600m
Slide 21: Woolworths Retail divisional and operational review
woolworths retail divisional and operational review
Slide 22: Strategy delivery
strategy delivery Delivery of strategy – first half Drive top-line performance - leveraged the cross shop - convenience - continued Country Road’s growth Sweating the assets - capacity development on track - Gauteng DC operational Feb 07 - systems development on track People - improved capacity acro
Slide 23: Clothing and home
clothing and home design-led technology focus and strategic sourcing
Slide 24: Clothing and home performance
clothing and home performance turnover and growth R,m 35% R 4,000 R 3,460 30% R 3,500 R 3,024 R 3,000 25% R 2,686 R 2,423 R 2,185 R 2,500 20% R 2,000 17.2% 15% 14.4% R 1,500 13.7% 12.6% 10% 10.9% 10.9% 9.8% R 1,000 7.9% 8.4% 8.2% 5% R 500 0% R0 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Comparable growth Sa
Slide 25: Clothing performance: market share
clothing performance rlc market share • Market share to Dec 06 – 12 month moving average • this year 15.29% • last year 15.24% – 3 month moving average • this year 14.0% • last year 13.8%
Slide 26: Clothing and home performance: delivery
clothing and home performance delivery • Womenswear Market share performance (6mma) – Overall market growing at slower rate than expected – Maintained growth in line with market Dec 05 Dec 06 • Lingerie – Innovation and value improved womenswear – Stock levels significantly enhanced • Menswear linge
Slide 27: Clothing and home strategy delivering
clothing and home strategy delivering Delivery of strategy – first half LSM 9&10 taste-level - W-Collection - mens Strategic sourcing - strides made with China import quota - childrenswear growing Core availability - improved in lingerie Cross shop - beauty launch (brands in 8 stores) - W-Collection
Slide 28: Clothing and home strategic forward focus
clothing and home strategic forward focus Key focus areas – second half fashion 20% LSM 9&10 taste-level - entrench mens and childrenswear - improve homeware key Strategic sourcing - childrenswear value - lingerie value and technology 80% core Core availability - key focus Cross shop - entrench beau
Slide 29: Food
food o ll ees ~~ < bo Sf Oo a Ace: ~ = Oo c Loy) good food journey nd a convenience
Slide 30: Food performance
food performance turnover and growth R,m 50% R 4,191 R 4,500 45% R 4,000 40% R 3,329 R 3,500 35% R 2,753 R 3,000 30% R 1,939 R 2,282 R 2,500 25% 25.3% 25.9% R 2,000 20% 20.9% 20.6% 17.7% R 1,500 15% 17.5% 15.1% 12.8% 12.2% R 1,000 10% 5% 7.3% R 500 0% R0 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Comparable
Slide 31: Food performance: AC Nielsen market share
food performance ac nielsen market share • Market share to Dec 2006 – 12 month moving average • this year 8.9% AC Nielsen market share: 6mma • last year 8.2% Dec 03 7.3% – 3 month moving average • this year 9.2% Dec 04 7.8% • last year 8.6% Dec 05 8.3% Dec 06 9.0%
Slide 32: Food strategy delivering
food strategy delivering Delivery of strategy – first half Convenience - reinforced main shop – branded products 6.9% - space expansion - emerging market Good food journey - LFL growth strong - quality focus - KVI pricing - product launches and innovation Availability
Slide 33: Food strategic forward focus
food strategic forward focus Key focus areas – second half Convenience - convenience - reinforce main shop Good food journey - LFL growth excellent - quality focus - KVI pricing - product launches and innovation Availability - learn from problems over Christmas
Slide 34: Slide 34
Slide 35: Financial services performance: store card
financial services performance woolworths store card (gross book) R,m R 4,000.0 18.3% R 3,500.0 11.4% R 3,428.1 R 3,000.0 30.1% R 2,898.3 R 2,500.0 25.7% R 2,601.2 R 2,000.0 23.4% 20.4% R 1,999.3 12.6% 3.6% 9.1% R 1,500.0 5.6% R 1,590.1 1,576 R 1,000.0 1,309 1,066 1,163 1,029 R 500.0 R 0.0 Dec 02 De
Slide 36: Financial services performance: personal loans
financial services performance personal loans (gross book) R,m R 1,200.0 21.3% R 1,000.0 16.3% R 1,019.6 36.9% R 800.0 R 840.3 25.0% R 722.4 R 600.0 13.1% R 527.7 R 400.0 R 422.0 14.6% 13.4% 21.9% 17.1% 21.5% R 200.0 96 117 137 157 178 R 0.0 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Gross Book Value (R'm)
Slide 37: Financial services performance: VISA card
financial services performance VISA card (gross book) R,m R 900.0 87.8% R 800.0 R 802.3 R 700.0 R 600.0 R 500.0 63.0% R 400.0 R 427.1 82.3% R 300.0 44.4% 67.4% R 200.0 >100% >100% R 262.0 64.3% 154 60.0% 40.0% 92 R 100.0 R 143.8 40 56 R 99.5 25 R 0.0 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Gross Book Val
Slide 38: Financial services performance: net bad debt
financial services performance net bad debt 12mma (excluding cost of recoveries) R,m 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 5.8% 5.5% 5.3% 4.0% 4.3% 3.0% 3.5% 3.5% 2.0% 2.6% 2.8% 2.8% 2.4% 2.2% 1.9% 2.0% 1.0% 1.7% 1.1% 0.0% Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 W oolworths card Personal Loans Visa • Net bad de
Slide 39: Financial services performance: non-interest revenue
financial services performance non-interest revenue R,m R 90.0 57.0% R 80.0 R 70.0 R 76.6 36.3% R 60.0 40.9% R 50.0 32.3% R 48.8 R 40.0 71.4% R 30.0 R 35.8 R 20.0 R 25.4 R 19.2 R 10.0 R 0.0 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Non-interest Income (R'm)
Slide 40: Financial services strategy delivering
financial services strategy delivering Delivery of strategy – first half Growth - customer acquisition - Visa and loyalty - non-interest revenue – insurance products Changing legislation - National Credit Act / FICA - Usury rate
Slide 41: Financial services strategic forward focus
financial services strategic forward focus Key focus areas – second half Growth - tighter credit environment - target LSM 6-8 with store card - continue to grow VISA - non-interest revenue – driving insurance products Changing legislation - responsible credit - National Credit Act compliance - manag
Slide 42: Slide 42
Slide 43: Selling: trading space
selling trading space as at Dec 06 Projected Dec 2006 Dec 2005 % chg Jun 2007 m2 m2 m2 Total footage 436,529 411,072 6.2% 448,136 Clothing & home 327,960 314,890 4.2% 333,925 Corporate 239,450 230,431 3.9% Franchise SA 55,592 50,370 10.4% Franchise International 32,918 34,089 -3.4% Foods 104,644 92,
Slide 44: Selling: number of stores
selling number of stores Projected Dec 2006 Dec 2005 Store Jun 2007 no no growth no Stores 341 297 44 366 Corporate 191 165 26 207 Full line 97 89 8 100 Clothing & Home 5 7 -2 6 Food 89 69 20 101 Franchise - SA 77 69 8 79 Franchise - Engen 23 10 13 28 Franchise - International 50 53 -3 52
Slide 45: Country Road retail-only model
country road retail-only model
Slide 46: Country Road performance
country road performance turnover and growth 25% $104.2 $107.9 $120.0 $103.1 $98.6 20% $100.0 13.6% 15% $80.0 10% 7.8% 6.8% 4.6% $60.0 5% 3.5% 1.0% $40.0 0% -5% $20.0 -10% -6.5% -6.9% $0.0 Dec 03 Dec 04 Dec 05 Dec 06 Sales growth (Retail) Sales growth (Total) Total Turnover (A$'m) • sales growth of
Slide 47: Country Road strategy delivery
country road strategy delivery Delivery of strategy – first half Exit wholesale - exit existing wholesale arrangement with Myer - wholesale sales down 32% Move to retail-only model - retail sales up 14% to A$90.6m - comparable store sale up 11.0% - reduced promotional activity - operating profit up
Slide 48: Country Road strategic focus
country road strategic focus Key focus areas – second half Move to retail-only business - 70 ‘new’ stores/concessions - rollout to commence in Feb 07
Slide 49: Hil L
AN Re, co iY ee Hil L Sen
Slide 50: Strategy forward focus
strategy forward focus Key focus areas - second half Drive top-line performance - leverage the cross shop - drive convenience - continue Country Road’s growth Sweating the assets - capacity development on track - Gauteng DC operational Feb 07 - systems development on track
Slide 51: Woolworths opportunity: driving the cross-shop
woolworths opportunity driving the cross-shop kvi and new stores foods W-Collection clothing and home beauty financial VISA services LSM 6 7 8 9 10
Slide 52: Slide 52