Woolworths Group Ltd · ASX:WOW
Woolworths — FY2011 Earnings Presentation
56 slides from Woolworths's earnings presentation, August 2011
Slide 1: Company Results Financial Year Ended 26 June 2011
Company Results Financial Year Ended 26 June 2011 Michael Luscombe Chief h f Executive Officer ff Grant O'Brien Chief Executive Officer Elect Tom Pockett Finance Director
Slide 2: Highlights — Financial Year 2011
Highlights — Financial Year 2011 • Positive overall result given challenging macro economic conditions and devastating natural disasters • Increase in NPAT of 5.1% or 6.4% excluding natural disaster costs • Increase in market shares,, sales and profits p whilst investingg significantly g y in reduci
Slide 3: Highlights — Financial Year 2011
Highlights — Financial Year 2011 FY11 $ Increase Growth Sales – Group $54 1b $54.1b $2 4b $2.4b Ç 4.7% 4 7% – excl Petrol $48.1b $1.9b Ç 4.1% EBITDA $4 134 3m $4,134.3m $255m Ç 6.6% 6 6% EBIT $3,276.4m $194m Ç 6.3% NPAT $2 124 0m $2,124.0m $103m Ç 5.1% 5 1% NPAT Ç 6.4% (excl natural disaster costs)
Slide 4: Highlights for the year
Highlights for the year WOOLWORTHS LIMITED
Slide 5: Price Leadership
Price Leadership Since January February 1983 2010 2011 4
Slide 6: Fresh Food Leadership
Fresh Food Leadership • Leading market share growth in our ‘Fresh’ offering • Continued focus on the quality and value of fresh food and exclusive brands • Market leading Fresh ideas – Fixed Price Guarantee – Fresh Food Guarantee – Further Expansion of Macro Wholefood Market range 5
Slide 7: Enhanced customer experience driving sales growth
Enhanced customer experience driving sales l growthh • Modern, innovative store formats – 10% 2015 format – 46% 2010 format – 21 new stores in 2015 format in FY11 • Contemporary, fresh 2015 format driving an excellent customer response 6
Slide 8: Integrated multi-channel offer
Integrated multi‐channel offer • Increasingly important part of overall strategy • Online sales up 63% • Dan Murphy's online launched March 2011 • New BIG W online store launched May 2010 • Refreshed Dick Smith online store with "click and collect" and online promotional events • Woolworths online a
Slide 9: Making grocery shopping easier
Making grocery shopping easier 8
Slide 10: Liquor — $5.9b Sales
Liquor —$5.9b Sales • Market share growth accelerating • Dan Murphy's new format store • Private Label continues with over 70 new lines for the year 9
Slide 11: Expansion of our liquor portfolio
Expansion of our liquor portfolio • Cellarmasters acquisition completed May 2011 • Logical strategic fit with new direct marketing k ti channels h l plus l wine i production capabilities • Enhances ability to innovate through a multi‐channel, multi‐brand and multi‐platform offer • Integration procee
Slide 12: Countdown – Largest and most trusted supermarket brand in New Zealand
Countdown – Largest and most trusted supermarket k brand b d in i New Zealand l d • Strong result in a challenging economici environment, i t coupled l d with natural disasters • Growing market share share, customer numbers, basket size and items sold • 88% stores now trading as value‐ positioned Co
Slide 13: BIG W — Lowest prices on the widest range
BIG W — Lowest prices on the widest range • Price leadership • Continuing investment in new stores and refurbs • Quality branded products • New innovative exclusive l brands • Growth of optical to 37 sites selling premium brands eg. Guess, DKNY and D&G 12
Slide 14: Dick Smith — Enhanced range, best price, techxpert advice
Dick Smith — Enhanced range, best price, techxpert h advice d i • Focus on range, price and service. Successful “We’re doing Deals” campaign • New format stores outperforming older format stores – 68% Aus and 36% NZ Dick Smith stores converted to new format • Category growth in laptop and tablet com
Slide 15: Rewarding loyal customers every time
Rewarding loyal customers every time 5 9m MEMBERS 5.9m CONVERT REWARDS TO QFF POINTS / GIFT CARDS 2 5 MEMBERS 2.5m 14
Slide 16: Innovative financial services
Innovative financial services Credit Cards Debit Cards Launched November 2010 Launched September 2010 Additional QFF Reloadable debit points for Everyday card acts as an Rewards members. alternative to a Low priced bank account for platinum card $89 general annual fee purchases, travel, online Launc
Slide 17: Home Improvement — Ready-to-compete
Home Improvement — Ready‐to‐compete • First Masters store to open on schedule in Melbourne • Unparalleled service, unbeatable value and innovative ranging for DIY and trade customers • Fresh offer into this circa $40 billion sector • Large portion of establishment costs offset by Danks trading perfo
Slide 18: Supply Chain Innovation
Supply Chain Innovation • Direct buying volumes through global sourcing increased more than 46% FREIGHT DISTRIBUTION CENTRES • Construction, commissioning and re‐engineering of distribution centres TRANSPORT CUSTOMER nationally – increased capacity, improved pick rate efficiency and immediate cost r
Slide 19: Reducing our carbon footprint
Reducing our carbon footprint LOWER CARBON • Ongoing reduction of carbon EMISSIONS intensity • 37 new energy saving initiatives LOWER WATER USE targeting – Cost savings of $120 million by 2015 LESS – 970,000 tonne reduction of PACKAGING carbon emissions by 2015 MORE RECYCLING AND REUSE 18
Slide 20: Leadership in Corporate Responsibility
Leadership in Corporate Responsibility • Implementing Ethical and Palm Oil Sourcing Policies, new Sustainable Seafood Policy • Strong community investment in FY11 includingg $18.5 million to Salvation Army’s Flood Appeal • Launch of Reconciliation Action Plan • 30% reduction in lost time injury freq
Slide 21: Committed to Australia's agricultural future
Committed to Australia's agricultural future • Proud partners of Australian farmers • 100% of our fresh meat, 97% of our fresh produce sourced from Australia • Since 2007 – 120 young farmers f have h graduated from the Woolworths Agricultural Scholarship program – $6.6m invested in Landcare initiati
Slide 22: Financial results
Financial results WOOLWORTHS LIMITED
Slide 23: Profit after tax — up 5.1%
Profit after tax — up 5.1% (6.4% excl natural di disaster costs)) $ million 2,500 2,000 2,124.0 2,020.8 ↑5.1% 1 1,835.7 , 1,835.7 ↑10.1% 1 ↑12.8% ↑14.9% 1,500 1,626.8 1,598.0 ↑25.7% ↑23.5% 1,294.0 1 000 1,000 ↑27 5% ↑27.5% 500 FY07 7 FY088 8 FY08 FY099 9 FY09 FY10 0 FY11 1 Stat Stat 0 1. Reflects gr
Slide 24: EBIT — up 6.3% (7.5% excl natural disaster costs)
EBIT — up 6.3% (7.5% excl natural disaster costs)) $ million 3,500 Totall EBIT growth 3,000 Ç6.3% Group EBIT Ç9.5% underpinned 2,500 Ç11.3% Ç13.4%1 Australian Ç7.5% by solid Ç19.8% Ç17.6%1 Ç12.9% F d and Food d 2,000 Ç17.4% Liquor EBIT growth in Ç22.6% Ç15.1% Ç19.8% Ç17.5% Australian 1,500 Ç2 2% Ç24
Slide 25: CODB / Sales
CODB / Sales Percentage 20.50 20.35% In a deflationary 20.00 19.92% 19.98% 19.95% 19.98% environment CODB was well 19.50 controlled FY07 FY08 FY09 FY10 FY11 19.00 24
Slide 26: Gross Profit Margin
Gross Profit Margin Gross margins for Percentage th Group the G have h 27 increased 12bps reflecting the 25.91% 26.03% benefits of global 26 25.66% Total buying, the use of 25.32% 25.30% GP Margin distribution centres 25 in liquor liquor, improved 24.82% shrinkage rates, 24.68% 24.34% GP Margin high
Slide 27: Dividends per share
Dividends per share Cents 125 122 Dividend pay‐out 115 Ç6 1% Ç6.1% ratio of 70% is Ç10.6% in line with the 100 104 previous year Ç13.0% 92 Final Ç24.3% Dividend 2011: 65¢ 75 74 Ç25.4% Interim Dividend 2011: 57¢ 07 08 09 10 11 FY0 FY0 FY0 FY1 FY1 50 26
Slide 28: Australian Supermarket Division
Australian Supermarket Division FY10 FY11 Change Positive momentum and growth in market Sales – Food & Liquor ($m) 34,675 36,176 4.3% share and customer numbers – Petrol ($m) 5,481 6,025 9.9% • Sales increased $1 $1.5 5 billion or 4.3% 4 3% – Total ($m) 40,156 42,201 5.1% • Comparable Food and Liquo
Slide 29: Liquor
Liquor Widening the gap on market share, sales, margins and profit • Group liquor sales of $5.9 billion, increased 5.4% • Continued success of exclusive brands, private label and Gage Road relationship • New Brisbane DC improving p g efficiencies and reducing costs • Opened 19 new Dan Murphy’s store
Slide 30: Petrol
Petrol Improving merchandise sales to complete the convenience offer Price promise, match the lowest price in the site’s market • Sales of $6.0 billion, increased 9.9% • Comparable p sales increased 7.2% reflecting higher fuel prices (FY11: $1.31; FY10: $1.24 / litre) • Comparable volumes increased
Slide 31: New Zealand Supermarkets
New Zealand Supermarkets NZ$ FY10 FY11 Change Strong result in challenging conditions Sales ($m) 5,185 5,362 3.4% • Sales NZ$5.4 billion, increased 3.4% Gross G oss margin a g (%) 22.27 22.64 37bps p CODB (%) 17.56 17.93 37bps • Comparable sales growth of 3.7% EBIT to sales (%) 4.71 4.71 ‐bps • Food
Slide 32: BIG W
BIG W FY10 FY11 Change Delivering lowest prices on the widest range Sales ($m) 4,193 4,158 (0.8)% of quality and branded products Gross G oss margin a g (%) 30.20 30.63 43bps p • Strong second half result demonstrates CODB (%) 25.43 26.37 94bps relevance of offer EBIT to sales (%) 4.77 4.26 (51)bps
Slide 33: Consumer Electronics – Australia
Consumer Electronics – Australia A$ FY10 FY11 Change Enhanced range, best price and right techxpert advice Sales ($m) 1,260 1,286 2.1% • Sales increased 2.1% with comparable sales growth Gross margin (%) 26.57 26.04 ((53)bps ) p of 4.2% 4 2% (7.1% (7 1% excl Tandy and ex‐Powerhouse) ex Powerhouse) C
Slide 34: Consumer Electronics – NZ and India
Consumer Electronics – NZ and India New Zealand – NZ$ FY10 FY11 Change Sales ($m) 341 322 (5.6)% Gross margin (%) 24.60 25.22 62bps CODB (%) 21.46 23.48 202bps EBIT to sales (%) 3.14 1.74 (140)bps EBIT ($m) 10.7 5.6 (47.7)% New Zealand – Challenging environment India – Strong growth • Sales decrease
Slide 35: Hotels
Hotels FY10 FY11 Change Sales ($m) 1,102 1,153 4.6% Proving resilient Gross G oss margin a g (%) 82.42 81.53 ((89)bps ) p • Sales up 4.6% 4 6% to $1.2 $1 2 billion, billion with CODB (%) 66.39 65.60 (79)bps comparable sales up 4.9% EBIT to sales (%) 16.03 15.93 (10)bps • Gaming comparable sales up 3
Slide 36: Cash Flow
Cash Flow $ million FY10 FY11 Change h EBITDA 3,879.8 4,134.3 6.6% Net increase in creditors 82.9 167.1 Net (increase) in inventory (94.2) (234.7) Net change in other working capital and non cash1 30 2 30.2 75 5 75.5 Cash from Operating Activities before interest and tax 3,898.7 4,142.2 6.2% Net int
Slide 37: Cash Flow
Cash Flow $ million FY10 FY11 Change Total cash provided by operating activities 2,752.0 2,991.1 8.7% Payments for ongoing capital expenditure (excl property development) (1,130.3) (1,126.3) Dividends received 12.5 10.6 Proceeds from ALE Rights renouncement 4.2 ‐ Cash available for distribution and
Slide 38: Average Inventory Days
Average Inventory Days Average Days 34 0 34.0 33.8 33.3 33.3 33.0 32 0 32.0 31 7 31.7 31.0 30 0 30.0 29.0 FY08 FY09 FY10 FY11 28.0 Inventory days increased 0.5 days. When the impact of incremental i inventory f iindent, for d Cellarmasters ll and d Home Improvement iis excluded, inventory days decre
Slide 39: Balance Sheet
Balance Sheet • Inventory increased 8.7% primarily due to increased indent $ million FY10 FY11 stock from direct sourcing, incremental inventory in liquor DCs, the purchase of inventory for new Masters stores and Inventory 3,438.8 3,736.5 inventory from the acquisition of Cellarmasters and retail T
Slide 40: Shareholder Payouts
Shareholder Payouts Estimated franking credits available for distribution (after final dividend) = $1,228m $ million Dividend 2,191 Buy‐Back Profit growth, coupled with 1,749 704 good 325 balance sheet 1,424 1,487 management, 1,280 will have 941 1,121 delivered over 894 $10.3 billion 534 604 payout
Slide 41: Capital Management
Capital Management Objective is to enhance shareholder value by optimising weighted average cost of capital whilst retaining flexibility to pursue growth and capital management opportunities • Share Buy Back ‐ October 2010 – $704m off‐market share buy‐back ‐ 2010 calendar year – $1b capital (excludi
Slide 42: Return on funds employed
Return on funds employed1 Percentage 35 34 33 33 ROFE 32 33 (excl property 30 31 31 development) 28 29 25 27 ROFE 20 FFY07 FFY09 FFY11 FFY08 FFY10 15 1 B 1. Based d on average off opening i andd closing l i ffunds d employed. l d The Th decrease d iin ROFE reflects fl lower l earnings i in i our gen
Slide 43: Earnings per share – up 6.5%
Earnings per share – up 6.5% Cents 190.0 174 6 174.6 170.0 164.0 Ç6.5% 150.7 Ç8.8% 150.0 134.9 Ç11.7% 130.0 Ç24.0% 108.8 110.0 Ç19.7% 90.0 Y08 Y11 Y10 Y07 Y09 FY FY FY FY FY 70.0 42
Slide 44: Strategy and Growth
Strategy and Growth WOOLWORTHS LIMITED
Slide 45: Key growth initiatives
Key growth initiatives Investment A customer‐focused in price, range, core business merchandise & q qualityy Leveraging Expansion of Expansion of supply chain exclusive brands global sourcing Enhance Customer Financial Services Grow market Engagement capabilities share Grow Continued Defined Home Im
Slide 46: Outlook
Outlook • The retail sector continues to endure the toughest conditions in this current economic cycle, as household savings rates are driven higher by uncertain global and domestic factors. Consumer confidence has fallen. This was seen particularly in the second half of last financial year. Therefo
Slide 47: Company Results Financial Year Ended 26 June 2011
Company Results Financial Year Ended 26 June 2011 Michael Luscombe Chief h f Executive Officer ff Grant O'Brien Chief Executive Officer Elect Tom Pockett Finance Director
Slide 48: Appendices
Appendices WOOLWORTHS LIMITED
Slide 49: EBIT – up 6.3% growing faster than sales
EBIT – up 6.3% growing faster than sales $ million FY10 FY11 Change Australian Food and Liquor 2,492.5 2,678.9 7.5% New Zealand Supermarkets (NZD) 232.2 244.1 5.1% New Zealand Supermarkets (AUD) 190.4 191.9 0.8% Petrol 99 5 99.5 117 6 117.6 18 2% 18.2% Supermarkets Division 2,782.4 2,988.4 7.4% BIG
Slide 50: Return on equity
Return on equity1 Percentage 30 29 29 28 28 28 25 20 FY07 FY09 FY11 FFY08 FFY10 15 1. Based on average of opening and closing Shareholders Funds 49
Slide 51: Capital Expenditure – Full Year
Capital Expenditure – Full Year 2011 Previous 2009 2010 2011 2012 $ million – Full Year Actual Fcst Var $ million – Full Year Actual Actual Actual Fcst New Stores 288 307 (19) New Stores 254 225 288 303 Refurbishments 492 542 (50) Refurbishments 652 622 492 454 Growth Capex 780 849 (69) Growth Capex
Slide 52: Capital Expenditure – Notes
Capital Expenditure – Notes • Reflects the continued rollout of new stores across all brands. Capital spend increased in FY11 as a New Stores result of more new stores being completed (FY11: 180 vs FY10: 156) • Reflects the continuation of refurbishment activity across our brands. Capital spend redu
Slide 53: Health ratios
Health ratios FY10 FY11 Fixed Charges Cover X 3.1 3.0 Days g )1 y inventoryy ((average) Days 33.3 33.8 Days creditors (to sales) Days 46.9 47.4 Return on Funds Employed p y (ROFE) ( ) % 31.0 29.3 Return on Total Equity % 27.4 27.3 Return on Shareholders Equity % 28.1 28.0 Net working capital $m (2,2
Slide 54: Fixed charges cover
Fixed charges cover 2007 2008 2009 2010 2011 EBIT 2,111.3 2,528.8 2,815.5 3,082.1 3,276.4 D&A 589.3 650.1 729.4 797.7 857.9 EBITDAR 3,906.9 4,494.8 4,954.6 5,357.7 5,675.5 Interest 230.5 214.0 239.6 257.4 332.6 Rent – base 1,121.1 1,223.3 1,313.5 1,390.8 1,468.1 Rent – turnover contingent 85.2 92.6
Slide 55: Defined plans for space growth
Defined plans for space growth Division Strategy for space growth Australian Supermarkets Add 15 – 25 new supermarkets per annum 3% + space growth per annum New Zealand Supermarkets p Add 3 – 5 new supermarkets p p per annum Dan Murphy’s Add 10 – 15 new stores per annum targeting over 200 stores BWS
Slide 56: Company Results Financial Year Ended 26 June 2011
Company Results Financial Year Ended 26 June 2011 Michael Luscombe Chief h f Executive Officer ff Grant O'Brien Chief Executive Officer Elect Tom Pockett Finance Director