Slide 1: Company Results Full Year Ended 24 June 2007
Michael Luscombe Chief Executive Officer Tom Pockett Company Results Finance Director Full Year Ended 24 June 2007
Slide 2: Highlights for Financial Year 2007
Highlights for Financial Year 2007 • Overall an excellent result with sales up 12.6% to $42.5b and net profit after tax up 27.5% to $1,294.0m which is at the top end of our earnings guidance. • This has been a successful year with strong results in all our businesses. • The result is the outcome of
Slide 3: Sales – continuing strong sales growth
Sales – continuing strong sales growth 45.0 42.5 40.0 37.7 12.6% 35.0 31.4 20.4% $ billions 30.0 27.9 26.3 12.2% 25.0 6.1% 9.6% (1) 20.0 15.0 10.0 5.0 - 2003 2004 2005 2006 2007 (1) Increase is based on 52 weeks. 3
Slide 4: EBIT – up 22.6% growing faster than sales
EBIT – up 22.6% growing faster than sales 2200 2,111 (3) 2000 22.6% (2) 1800 1,722 1600 32.3% (1) $ millions 1400 1,302 1200 1,065 20.5% 946 1000 12.6% 800 13.6% 600 400 200 2003 2004 2005 2006 2007 (1) Includes ALH from 31 October 2004 and MGW from 2 January 2005. (2) Includes Progressive (NZ) busi
Slide 5: EBIT Margin
EBIT Margin Margin has increased an average of 31bps per period over 5.40% the last 5 years. EBIT margin excluding Hotels is 4.65% an increase of 39bps, underpinned by Supermarkets. 5.10% 4.97% (3) 4.80% 4.56% (2) 4.50% 4.16% (1) 4.20% 3.90% 3.81% 3.59% 3.60% 3.30% 3.00% 2003 2004 2005 2006 2007 (1)
Slide 6: Profit after tax – up 27.5%
Profit after tax – up 27.5% 1,294.0 (3) 1,300 +27.5% 1,200 1,100 1,014.6 (2) 1,000 +24.3% $ Million 900 816.2 (1) 800 +18.7% 687.8 700 609.5 +12.8% 600 +16.5% 500 400 2003 2004 2005 2006 2007 (1) Includes ALH from 31 October 2004 and MGW from 2 January 2005. (2) Includes Progressive (NZ) business an
Slide 7: Earnings per share – up 19.7%
Earnings per share – up 19.7% 108.8 110 +19.7% 100 90.9 90 79.2 +14.8% 80 70.1 +13.0% Cents 70 60.7 +15.5% 60 +15.6% 50 40 30 20 (1) (1) 2003 2004 2005 2006 2007 REFLECTS STRENGTHENING OF OUR BALANCE SHEET DURING A PERIOD OF MAJOR ACQUISITIONS, INTEGRATION AND BUSINESS CHANGE. (1) For the period 200
Slide 8: CODB / Sales
CODB / Sales 23% Our targeted CODB reduction of 20 basis continues to be achieved when the distorting impacts of Petrol and Hotels are excluded. CODB was also affected by the industrial action in New Zealand. 22% 21.55% Down 12 pts P ercen tag e in 2007 21.10% 21% 20.73% 20.47% 20.35% 20% 19% 2003 2
Slide 9: Gross Profit Margin
Gross Profit Margin Up 19 pts excluding As expected Gross Margin has improved reflecting hotels improved buying and shrinkage, the success of our private label offering, the change in sales mix achieved through the rollback campaigns and a reduction in Up 29 pts supply chain transition costs. 26% in
Slide 10: Sales Summary
Sales Summary Positive momentum in all divisions Full Year Comp $ Millions FY06 FY07 Increase Sales (1) Australian Food and Liquor 25,458 (2) 27,745 9.0% 6.6% New Zealand Supermarkets 2,605 3,940 51.2% 3.3% (5) Petrol 4,390 4,837 10.2% 5.0% Total Supermarkets 32,453 36,522 12.5% BIG W 3,119 3,465 (4
Slide 11: EBIT Summary
EBIT Summary $ Millions FY06 FY07 Change Australian Food and Liquor 1,286.0 1,597.1 24.2% New Zealand Supermarkets 108.9 155.1 42.4% Petrol 53.1 82.9 56.1% Supermarkets Division 1,448.0 1,835.1 26.7% BIG W 123.1 138.6 12.6% Consumer Electronics 64.0 66.8 4.4% General Merchandise Division 187.1 205.4
Slide 12: Australian Supermarket Division
Australian Supermarket Division (Including Liquor & Petrol) Continued positive momentum and growth in market share FY06 (1) FY07 Change Sales ($m) 29,848 32,582 9.2% Gross margin (%) 23.01 23.41 40bps Cost of Doing Business (%) 18.52 18.25 -27bps EBIT to sales (%) 4.49 5.16 67bps EBIT ($ million) 1,
Slide 13: Australian Food & Liquor
Australian Food & Liquor Continued positive momentum and growth in market share • Australian Food & Liquor sales grew 9.0%. • Food and Liquor comparable store sales grew 6.6% during the year (FY06: 3.7%). • Inflation levels declined over the year as we cycled the “banana effect”. • On going investme
Slide 14: Liquor
Liquor All our liquor operations (Dan Murphy’s, BWS and attached liquor) recorded strong growth in sales and profit. • All our liquor operations have produced strong growth in total sales, comparable sales and profits. • Group Liquor sales for the year (including ALH group retail liquor sales) were
Slide 15: Petrol
Petrol Our petrol division, continues to be a good supplemental offer with petrol sites conveniently located near our supermarkets. Strong result with modest lift in margin. • Petrol sales of $4.8b, up 10.2% on last year. • Petrol comparable sales increased by 5.0% during the year. • Comparable volu
Slide 16: New Zealand Supermarkets
New Zealand Supermarkets A pleasing result with repositioning on track to achieve our objectives. FY07 FY07 $AUD $NZD Sales 3,940 4,527 Gross Margin (%) 21.77 21.77 Cost of doing business (%) 17.54 17.54 EBIT to sales (%) 4.23 4.23 Trading EBIT ($ million) 166.5 191.3 Less intercompany charges ($ mi
Slide 17: New Zealand Supermarkets
New Zealand Supermarkets A pleasing result with repositioning on track to achieve our objectives. • A pleasing result with positive signs evident. • Comparable store sales increased 3.8% (Q2) 4.9% (Q3) and 4.7% (Q4) • Operating levels returned to normal post the industrial action in quarter one. • I
Slide 18: BIG W
BIG W Strong result with recent initiatives being endorsed by our customers. FY06 FY07 Change Sales ($ million) 3,119.1 3,465.2 11.1% Gross margin (%) 29.95 29.80 -15bps Cost of Doing Business (%) 26.00 25.80 -20bps EBIT to sales (%) 3.95 4.00 5bps EBIT ($ million) 123.1 138.6 12.6% Funds Employed (
Slide 19: BIG W
BIG W Strong result with recent initiatives being endorsed by our customers. • Sales for the year of $3.5b, an increase of 11.1%. • EBIT grew faster than Sales, increasing by 12.6%. • Comparable store sales growth was 3.4% for the year, with a very strong second half performance of 7.3%. • This resu
Slide 20: Consumer Electronics - Australia & NZ
Consumer Electronics - Australia & NZ Solid result in a very competitive sector FY06 FY07 Change Sales ($ million) 1,167.1 1,285.0 10.1% Gross margin (%) 29.39 28.21 -118bps Cost of Doing Business (%) 23.91 22.68 -123bps EBIT to sales (%) 5.48 5.53 5bps EBIT 64.0 71.1 11.1% Funds Employed ($ million
Slide 21: Consumer Electronics – Australia & NZ
Consumer Electronics – Australia & NZ Solid result in a very competitive sector. Latest technology at great prices, quality brands and expert service and advice. • Business reported double digit growth in both revenue and earnings - reflected by a 10.1% sales increase and a 11.1% increase in EBIT. •
Slide 22: Consumer Electronics - India
Consumer Electronics - India • Our business venture with TATA is still in its infancy with 5 retail stores operating under the “Croma” brand. • As part of this venture Woolworths Limited provides buying, wholesale, supply chain and general consulting services to TATA. • The wholesale operations are
Slide 23: Hotels
Hotels A pleasing result given the continued influence of smoking bans 2006 2007 Change Sales ($ million) 850 1,032 21.4% Gross margin (%) 82.56 82.45 -11bps Cost of Doing Business (%) 64.78 64.66 -12bps EBIT to sales (%) 17.78 17.79 1bp EBIT ($ million) 151.1 183.7 21.6% 23
Slide 24: Hotels
Hotels A pleasing result given the continued influence of smoking bans • Hotel sales were $1,032m reflecting good growth in our existing business plus the inclusion of Taverner hotel sales from 6 February 2006. • Comparable sales were 3.2%. Gaming comparable sales for the full year were flat, offset
Slide 25: Dividends per share
Dividends per share FINAL DIVIDEND 2007: 39c 74 75 INTERIM DIVIDEND 2007: 35c +25.4% 65 59 55 51 +15.7% 45 Cents +13.3% 45 39 +15.4% 35 +18.2% 25 15 5 2003 2004 2005 2006 2007 Dividend Pay-out ratio of 69.1% marginally up on previous years 25
Slide 26: Balance Sheet
Balance Sheet $ millions FY06 FY07 Net investment in inventory down a further $76m Inventory 2,316.1 2,739.2 Average inventory down 0.2 days. Days creditors have Trade Payables (2,778.5) (3,277.4) increased slightly to 45.6 days consistent with the decision not to drive down year end inventory level
Slide 27: Cash Flow
Cash Flow $ millions FY06 FY07 EBITDA 2,244.4 2,700.6 +20.3% Net interest paid (253.2) (249.8) Taxation paid (475.3) (522.4) 1,515.9 1,928.4 Working capital items 205.6 309.7 Other non-cash items (16.7) 56.1 Total cash provided by operating activities 1,704.8 2,294.2 +34.6% Payments for the purchase
Slide 28: Average Inventory Days
Average Inventory Days Reflects conversion to reporting 36 average inventory. When we exclude the impact of Average incremental imported inventory inventory the reduction in average days reduction of was 0.7 days. 0.2 days 34 Target inventory reduction remains 1-2 days, however this may be impacted
Slide 29: Capital Management
Capital Management • Woolworths currently sets its capital structure with the objective of minimising its weighted average cost of capital whilst retaining the flexibility to pursue growth and capital management opportunities. Consistent with these objectives, Woolworths has targeted, achieved and m
Slide 30: Shareholder Payouts
Shareholder Payouts Franking credits available for distribution = $757m. (after the final dividend) Buy Back Dividend 1000 941 534 893 791 893 800 548 693 633 693 604 $ millions 600 349 141 538 538 463 400 346 407 346 284 200 243 0 2000 2001 2002 2003 2004 2005 2006 2007 PROFIT GROWTH, COUPLED WITH
Slide 31: Return on funds employed
(1) Return on funds employed 60% 49.3% 50% 42.8% 42.6% 40% Percentage 28.6% 30% 27.1% 20% (2) 24.2% 10% 0% 2003 2004 2005 2006 2007 ROFE REFLECTS IMPACT OF SIGNIFICANT ACQUISITIONS DURING THE 2006 YEAR. (1) Based on average of opening and closing funds employed. (2) Normalised for the timing of acqu
Slide 32: Return On Equity
Return On Equity (1) 60% 51.0% 50.9% 49.3% 50% 40% Percentage 33.8% 30% 27.8% 20% 10% 0% 2003 2004 2005 2006 2007 AVERAGE ROE DOWN DUE TO THE DRP UNDERWRITING IN 2006 AND OPTIONS BEING EXERCISED (1) Based on average of opening and closing Shareholders Funds. 32
Slide 33: Four Year Report Card
Four Year Report Card In comparison with our regularly FY04 FY05 FY06 FY07 expressed goals Sales will grow in the upper single digits assisted by bolt-on acquisitions +6.1% +12.2% +20.4% +12.6% EBIT will outperform sales growth assisted by cost savings +12.6% +20.5% +32.3% +22.6% EPS will outperform
Slide 34: Growth – Key messages
Growth Key messages • The Board and Management of Woolworths are committed to its consistent and clear strategies that have driven our growth to date. • The skills and commitment of our experienced retail team will drive our continued success. • With the bulk of the initiatives in our Supermarkets S
Slide 35: Growth – Performance targets
Growth Performance targets Our long term targets are key to this strategy and remain unchanged. Woolworths targets four key areas of performance measurement for its business in the long term, namely: • Sales will grow in the upper single digits assisted by bolt on acquisitions; • EBIT growth outperf
Slide 36: Growth – Project Refresh and acquisitions
Growth Project Refresh – Lower costs a key enabler Stage 1: underpinned cost savings to date, pre-requisite for stage 2. Stage 2: our new logistics program provides us with a significant strategic advantage which will underpin our ability to reduce costs over the next 5 years (targeting minimum 20 b
Slide 37: Growth – Space roll out plans
Growth Defined plans to continue space roll out • Adding 15-25 new supermarkets each year and expanding existing Supported by stores (greater than 3% p.a.). detailed plans for the next three to • Adding 6-10 BIG W stores each year (6% to 8% space rollout p.a.). five years • Adding up to 20 Dan Murph
Slide 38: Growth – In-store execution and international initiatives
Growth Continued focus on improved in-store execution and service • Woolworths will continue to focus on improving in-store execution, ranging, stock availability and customer service. In particular, initiatives will be undertaken to enhance the understanding of customers. Grow new international ini
Slide 39: Sales and Earnings Guidance FY08
Sales and Earnings Guidance FY08 We believe we are very well positioned for future growth. Sales • For FY08 we anticipate sales to grow in the range of 7% to 10%. Earnings • We also anticipate that EBIT will continue to grow faster than sales in FY08. • Net profit after tax for FY08 is expected to g
Slide 40: Appendices
CELINIT SHITOMIOON|, Appendices
Slide 41: Project Refresh
Project Refresh Cumulative savings $7.3 billion over 8 years Level III - Development Level II - Logistics 24.5% 24.10% 18.75% Level I - Reorganisation 2.68% / line items 14.10% 99 00 01 02 03 04 05 06 07 08 09 41
Slide 42: Project Refresh
Project Refresh 2,400 8 year cumulative savings = $7.3b 4.71% of sales using 1999 as the base year 1951 2,000 PA Savings $ millions 1663 Level II 1,600 Increasingly logistics 1197 driven 1,200 796 800 632 Level I 517 362 Mainly line 400 items and reorganisation 163 0 (1) (1) (1) FY00 FY01 FY02 FY03
Slide 43: Refresh Level II
Refresh Level II • Project Refresh commenced 8 years ago and continues to deliver on going efficiency benefits to the organisation. Over this period the project has generated savings of around 4.71% of sales and measured in dollar terms has achieved cumulative savings in the order of $7.3 billion. •
Slide 44: Capital Expenditure
Capital Expenditure $ Millions 2006 2007 2008 Pre-Existing Businesses (a) (a) New Stores 202 222 224 (b) Stay in Business 182 291 315 (c) Refurbishments 245 246 459 (d) Supply Chain 155 65 91 784 824 1,089 New Businesses (e) Future capital Hotels - Acquisitions 165 176 Hotels - Other 89 72 75 expend
Slide 45: Health Ratios
Health Ratios FY06 FY07 Fixed charges cover X 2.50 2.72 Days inventory (average) (1) Days 32.7 32.5 Days creditors (to sales) Days 44.5 45.6 Return on Funds Employed (ROFE) % 28.6 27.1 Return on Total Equity % 32.8 26.8 Return on Shareholders Equity % 33.8 27.8 Net working capital $M (1,126.7) (2,08
Slide 46: Fixed Charges Cover
Fixed Charges Cover 2003 2004 2005 2006 2007 EBIT 945.7 1,065.1 1,302.1 1,722.2 2,111.3 D&A 398.3 407.6 416.0 522.2 589.3 EBITDAR 2,102.7 2,282.5 2,618.3 3,314.5 3,906.9 Interest 41.2 52.8 157.8 246.3 230.5 WINs contingent coupon 41.1 42.9 - - - Rent - base 620.2 664.2 753.8 925.6 1,081.5 Rent - tur
Slide 47: Total Supermarkets
Total Supermarkets (Including Liquor, Petrol and New Zealand) (1) FY06 FY07 Change Sales ($m) 32,453 36,521 12.5% Gross margin (%) 22.93 23.23 30bps Cost of Doing Business (%) 18.47 18.21 -26bps EBIT to sales (%) 4.46 5.02 56bps EBIT ($ million) 1,448.0 1,835.1 26.7% Funds Employed ($ million) 4,185
Slide 48: Community Responsibility
Community Responsibility 48
Slide 49: Community Responsibility 2007
Community Responsibility 2007 1. Children’s Health – $35 million raised for children’s hospitals in all States and Territories in last 10 years under the Fresh Future appeal. $4.1 million in FY07 – Over $1 million raised for children’s health charities each year – JDRF, Canteen, Smith Family, Starli
Slide 50: Community Responsibility 2007
Community Responsibility 2007 3. Rural Australia & Sustainable Agriculture – $3.2 million donated to drought-affected farming families in 2007 via Country Women’s Association from the Woolworths National Drought Action Day – $1.6 million donated to Landcare to run sustainable agriculture initiatives
Slide 51: Community Responsibility 2007
Community Responsibility 2007 4. Education & Employment – 28 years of Woolworths Heritage Posters for Schools – Launch of unique mentoring and job placement scheme with Oasis Youth Support Network – 8th year supporting Harmony Day – celebrating multicultural diversity – Proactive strategies to suppo