Woolworths Holdings Limited · JSE:WHL
Woolworths — FY2011 Earnings Presentation
48 slides from Woolworths's earnings presentation, August 2011
Slide 1: Woolworths Holdings Limited Overview
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 1
Slide 2: Economic Overview
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 2 ECONOMIC OVERVIEW South Africa - Tougher overall retail environment, coming off buoyant World Cup period - Target LSM 8-10 customers more confident - Real growth in consumer income - Low inflation - Strong rand Australia - Tough oug retail e a
Slide 3: Review of the Year
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 3 REVIEW OF THE YEAR Continued market share gains Strong GP margin gain in Woolworths Good cost management Woolworths return on sales up from 7.0% to 8.7% Strong profit performance Adjusted HEPS +36.7% ROE up to 44.1% Strong cash flow
Slide 4: Woolworths - Clothing & GM
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 4 WOOLWORTHS - CLOTHING & GM Clothing in South Africa (including Country Road) up 11.5%, with comparable sales up 9.4% - Volume growth of 8.2% GM impacted by rationalisation of cellular handset business in H1 - Excluding this, up 5.2%, with compa
Slide 5: Clothing & Footwear Turnover Growth
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 5 CLOTHING & FOOTWEAR TURNOVER GROWTH Clothing & footwear - Woolworths vs market growth (12mma) 16% 14% 12% 10% 8% 6% 4% 2% 0% 9 N 10 1 9 Se 0 M 11 Ja 9 M 10 Ja 0 M 1 1 M 10 0 -0 l- 1 l- 1 l- 0 -1 -0 1 -1 -1 - n- n- - - p p ov ov ar ar ay ay Ju Ju Ju
Slide 6: Woolworths - Clothing & GM Continued
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 6 WOOLWORTHS - CLOTHING & GM CONTINUED Significant improvement in profitability across the categories Uplift to margin from improved sourcing - Onshore to offshore - Indirect to direct GP margin increased from 40.0% to 43.7% ROS up from 12.3%
Slide 7: Woolworths - Food
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 7 WOOLWORTHS - FOOD Strong performance - Some impact of World Cup in H2 - Sales growth ahead of the market - Volume growth of 7.7% Good response to value campaigns and improved pricing - Success of loyalty programme Uplift as stores mature St
Slide 8: Food Turnover Growth
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 8 FOOD TURNOVER GROWTH Food - Woolworths vs market growth (12 (12mma) ) 20% 15% 10% 5% 0% O 0 Se 0 M 1 1 Au 0 Ap 1 De 0 11 Ja 0 Fe 1 Ju 1 N 0 -1 -1 l- 1 -1 1 1 -1 r- 1 -1 -1 -1 n- c- n- p g ov b ar ay ct Ju M Woolworths growth Market growth On averag
Slide 9: Woolworths - Stores
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 9 WOOLWORTHS - STORES Improved trading densities - Clothing up 6.14% - Food up 5.4% More profitable stores Comparable store sales growth at 7.9% 54 franchise stores converted / to be converted - Approximately 75% of franchise stores converted
Slide 10: Country Road
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 10 COUNTRY ROAD Difficult trading in Australia Strong performance of brands in SA Total turnover up 1.2%, but comparable sales down 8.6% Good control of costs and inventory Profit before tax up 9.5% (A$) New CEO in place
Slide 11: Financial Services
WHL WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 11 FINANCIAL SERVICES Modest but consistent book growth Significantly improved quality of the book Impairments down from 5.1% to 1.4% Operating profit of the JV up 82.3% ROE up from 13.9% to 23.5%
Slide 12: WHL
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 12
Slide 13: Financial Overview
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 13 FINANCIAL OVERVIEW Group turnover up 9.4% to R25.6 billion Profit before tax up 31.1% to R2.3 billion Adjusted headline earnings per share up 36.7% to 214.9 cps Diluted headline earnings per share up 31.7% to 209.8 cps ROE
Slide 14: Group Income Statement
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 14 GROUP INCOME STATEMENT Jun 2011 Jun 2010* % Rm Rm change Woolworths 1 965 1 435 36.9 Clothing & GM 1 318 971 35.7 Food 647 464 39.4 Abnormal forex profit - 79 Country Road 162 142 14.1 Fi Financial i l Services S i JV (after ( ft tta
Slide 15: Group Income Statement Commentary
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 15 GROUP INCOME STATEMENT COMMENTARY 1. Woolworths – Good profit growth driven by volumes and margin expansion in both Clothing & GM and Food. 2. Country Road – Tough trading conditions in Australia. Results inclusive of SA operations i
Slide 16: Woolworths Income Statement
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 16 WOOLWORTHS INCOME STATEMENT Jun 2011 Jun 2010* % Rm Rm change Turnover 22 609 20 557 10.0 Cost of sales 15 475 14 444 7.1 Gross profit 7 134 6 113 16.7 Other revenue 103 86 19.8 Expenses 5 279 4 770 10.7 Store costs 3 193 2 885 10.7
Slide 17: Woolworths Income Statement Commentary
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 17 WOOLWORTHS INCOME STATEMENT COMMENTARY 1. Turnover Total stores Comparable stores Price movement Clothing (incl CR SA) 11.5% 9.4% 3.7% Clothing 10.6% 9.2% 3.3% GM (2.7%) (3.5%) (6.8%) Food 10.7% 8.4% 3.0% W l Woolworths th SA 10 0% 1
Slide 18: Woolworths Segmental Performance
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 18 WOOLWORTHS SEGMENTAL PERFORMANCE Gross profit margin Operating profit margin Jun 2011 Jun 2010* Jun 2011 Jun 2010* % % % % Clothing & GM 43.7 40.0 15.3 12.3 Food 24.4 23.5 4.8 3.8 Woolworths 31 .6 29.7 8.7 7.0 * Restated
Slide 19: Country Road Income Statement
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 19 COUNTRY ROAD INCOME STATEMENT Jun 2011 Jun 2010* % A$m A$m change Turnover 428 423 1 .2 Cost of sales 174 187 (7.0) Gross profit 254 236 7.6 Other revenue 4 4 Expenses 234 218 7.3 Store costs 181 165 9.7 Other operating costs 53 53 -
Slide 20: Country Road Income Statement Commentary
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 20 COUNTRY ROAD INCOME STATEMENT COMMENTARY 1. Turnover – Inclusive of SA operations in both years. Comparable sales contracted by 8.6%. 2. Gross profit – Improvement on last year, assisted by strong A$ and good sourcing. 2 Store costs
Slide 21: Financial Services Income Statement
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 21 FINANCIAL SERVICES INCOME STATEMENT Consolidated pro forma Jun % to Jun % to % income statement 2011 book 2010 book change Rm Rm Interest income 1 092 18.0 1 167 19.5 (6.4) Interest paid 333 5.5 386 6.4 (13.7) Net interest income 759
Slide 22: Financial Services Income Statement Commentary
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 22 FINANCIAL SERVICES INCOME STATEMENT COMMENTARY 1. Average financial services assets – Modest but consistent book growth. 2. Net interest income – Margin squeeze due to impact of NCA formula over 2 years. 3. Impairment charge – Signif
Slide 23: Financial Services Book Performance
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 23 FINANCIAL SERVICES BOOK PERFORMANCE 7 000 6 344 14% % 6 242 6 051 5 867 6 000 12% 5 000 9.5% 10% 4 000 7.5% 8% 3 000 5.1% 6% 1 925 1 905 1 858 1 858 2 000 4% 1 000 2% 1 .4% - 0% Jun 08 Jun 09 Jun 10 Jun 11 Gross book value (Rm) Total
Slide 24: Balance Sheet
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 24 BALANCE SHEET Jun 2011 Jun 2010* % Rm Rm change Assets Property, plant and equipment, intangible assets and loans 3 026 2 691 12.4 Investment in JVs and associate 624 614 1 .6 Inventories 1 892 1 676 12.9 Accounts receivable and defe
Slide 25: Cash Generation
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 25 CASH GENERATION R401m 3 500 R3 097m 09 (R95m) 3 000 2 500 (R985m) 2 000 1 500 (R923m) 1 000 (R585m) 500 (R207m) R396m (R307 ) (R307m) - Cash flow Working Finance Taxation Dividends Net Franchise Net Net from capital p costs capex p a
Slide 26: Capital Expenditure
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 26 CAPITAL EXPENDITURE Capex (Rm) R904m (Jun 2010: R607m) 281 107 Depreciation Jun 2011 Jun 2010 147 Rm Rm 108 26 Woolworths 398 366 155 Country Road 91 76 139 Total group 489 442 269 279 Jun 2011 Jun 2010 Woolworths Retail Woolworths I
Slide 27: Space Growth - Clothing & GM
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 27 SPACE GROWTH – CLOTHING & GM Slowdown in new store openings Net space growth and focus on extensions - FY2012 6 3% 6.3% - FY2013 7.3% Additional store - FY2014 7.8% No. of new footage (m2) stores (net) 36 000 28 30 000 24 24 000 20
Slide 28: Space Growth - Food
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 28 SPACE GROWTH – FOOD Focus on bigger stores, including Net space growth superwoolies ‘superwoolies’ - FY2012 8 2% 8.2% - FY2013 6.8% Additional store - FY2014 5.3% No. of new footage (m2) stores (net) 18 000 32 28 14 000 24 20 10 00
Slide 29: Uplift from Franchise Conversions
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 29 UPLIFT FROM FRANCHISE CONVERSIONS Investment in franchise acquisitions of approximately R600m (agreed to date) IRR of approximately 18% (including the impact of working capital investment) FY2012 PBT net impact of shift from fr
Slide 30: Return on Equity
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 30 RETURN ON EQUITY 50% 44.1% 39.4% 40% 35.1% 27.5% 26.3% 30% 20% 10% 14.8% 13.3% 13.6% 13.3% 13.2% 0% Jun 07 Jun 08 Jun 09 Jun 10 Jun 11 ROE WACC
Slide 31: Earnings and Distribution
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 31 EARNINGS AND DISTRIBUTION cents times 220 214.9 2.0 200 1 .7 1 .8 180 1 .5 1 .5 157.2 1 .5 1 .5 1 .6 160 1 .4 140 124.8 126.0 119.7 1 .2 120 1 .0 100 0.8 80 60 0.6 40 0.4 20 76.0 79.0 85.0 105.0 143.5 0.2 - - 2007 2008 2009 2010 2011
Slide 32: Guidance
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 32 GUIDANCE Gross profit - Woolworths Clothing GP margin will largely be maintained, with the enhancement arising from franchise conversions partly offset by imported inflationary pressures - Woolworths Food GP margin will be maintain
Slide 33: Guidance Continued
WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 33 GUIDANCE CONTINUED Taxation - Effective rate of approximately 30% Capex (group) - FY2012 R850m + R400m franchise conversions (balance) - FY2013 R900m - FY2014 R950m Dividend cover to be maintained at 1.5 times Since y year-en
Slide 34: Strategic Focus
WHL WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 34
Slide 35: Strategic Focus
WHL WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 35 STRATEGIC FOCUS 1. Customer Our focus is LSM 8-10 segmentation We will actively grow our penetration of LSM 8-10, and increase spend p and loyalty y y of existing g customers Segmentation work informs our branding, design, buying and
Slide 36: Strategic Focus Continued
WHL WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 36 STRATEGIC FOCUS CONTINUED 5. Get store “Big bigger” in Food and Clothing stores is working and we f formats t right i ht will continue Supermarket concept will be launched this year Engen will be expanded 6. Sweat our Focus on profi
Slide 37: Strategic Focus Continued
WHL WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 37 STRATEGIC FOCUS CONTINUED 10. Sourcing Indirect to direct and onshore to offshore drive to continue excellence ll Office now set up in China New Fast response mechanisms established for imports and local 8 weeks taken out of the mer
Slide 38: Outlook
WHL WOOLWORTHS HOLDINGS LIMITED OUTLOOK IAN MOIR 38
Slide 39: Outlook
WHL WOOLWORTHS HOLDINGS LIMITED OUTLOOK IAN MOIR 39 OUTLOOK Outlook very uncertain due to timing and extent of impact of global slowdown and debt crises Strategies in place to minimise any downside risk - More competitive opening price points - Range balancing to emphasise value - Absolute focus
Slide 40: Medium-Term Targets
WHL WOOLWORTHS HOLDINGS LIMITED OUTLOOK IAN MOIR 40 MEDIUM-TERM TARGETS Achieved A hi d Achieved A hi d Medium- M di in FY2010 in FY2011 term target Woolworths Clothing & GM Return on sales 12.3% 15.4% 17% Food Return on sales 3.8% 4.8% 6% Country Road Return on sales 5.2% 5.6% 8% Financial Services
Slide 41: Additional Information
WHL WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 41
Slide 42: Group Income Statement
WHL WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 42 GROUP INCOME STATEMENT Jun 2011 Jun 2010* % Rm Rm change Turnover 25 582 23 393 9.4 Cost of sales 16 683 15 619 6.8 Gross profit 8 899 7 774 14.5 Other revenue 127 95 33.7 Expenses 6 904 6 215 11 .1 Operating profit 2 122 1 654 28.3 Investmen
Slide 43: Woolworths Revenue Analysis
WHL WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 43 WOOLWORTHS REVENUE ANALYSIS % Jun 2011 Jun 2010* % price Rm Rm change h movement Clothing & GM 8 591 7 913 8.6 1 .9 Corporate (retail) 7 712 6 957 10.9 Franchise (wholesale) – local 632 744 (15 1) (15.1) Franchise (wholesale) – international
Slide 44: Trading Space
WHL WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 44 TRADING SPACE Projected Projected Projected Jun 2011 Jun 2010 % Jun 2012 % Jun 2013 % Jun 2014 % m2 m2 change m2 change m2 change m2 change Woolworths 532 287 518 534 2.7 568 644 6.8 609 461 7.2 652 435 7.1 Clothing & GM 374 636 368 760 1.6 3
Slide 45: Store Numbers
WHL WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 45 STORE NUMBERS Projected Projected Projected Jun 2011 Jun 2010 Growth Jun 2012 Growth Jun 2013 Growth Jun 2014 Growth Woolworths 438 419 19 464 26 491 27 525 34 Corporate 293 259 34 329 36 331 2 338 7 Franchise – SA 52 77 (25) 23 (29) 23 - 23
Slide 46: Financial Services Contribution to Sales
WHL WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 46 FINANCIAL SERVICES CONTRIBUTION TO SALES % off sales l spentt on Woolworths W l th cards d J Jun 2011 J Jun 2010 Clothing & GM 27.9% 30.6% F d Food 14 7% 14.7% 16 6% 16.6% Aggregate 20.4% 21 .5%
Slide 47: Country Road Balance Sheet
WHL WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 47 COUNTRY ROAD BALANCE SHEET Jun 2011 Jun 2010** % A$m A$m change Assets Property, plant and equipment 54 56 (3.6) Trademarks * 11 11 - Inventories 48 48 - Accounts receivable and deferred tax 21 21 - Cash 15 2 >100 149 138 8.0 Equity and liabi
Slide 48: Country Road Income Statement (in Rands)
WHL WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 48 COUNTRY ROAD INCOME STATEMENT (IN RANDS) Jun 2011 Jun 2010* % Rm Rm change Turnover 2 973 2 836 4.8 Cost of sales 1 208 1 254 (3.7) Gross p profit 1 765 1 582 11 .6 Other revenue 24 25 (4.0) Expenses 1 624 1 461 11 .2 Store costs 1 254 1 102