woolworths analyst presentation feb 2005

8/12/2019 Woolworths Analyst Presentation Feb 2005

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february 2005

presentation to

investment analysts

woolworths holdings limited


2/45


Highlights

Financial review

Operational review Clothing and home

Foods

Financial services

Trading space

Country Road

Prospects

agenda


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Revenue up 13.9% - R6.4bn

Operating profit up 16.0% - R638m

Headline earnings per share up 16.2% - 46.7cps

Cash distribution up 42.3% - 18.5cps

Interim cover ratio down from 3.1 to 2.5 times

ROE of 27.4% (2003: 27.2%)

Financial services assets up 31% to R3.3bn

group highlights


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Buoyant trading conditions in SA

Low inflation

Lower interest rates

Emerging market growth

Consumer spending in Australia slowed slightly

woolworths holdings limitedtrading environment


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woolworths holdings limitedincome statement

Dec-04 Dec-03 %chg

Rm RmRevenue 6353.1 5579.7 13.9%

Turnover 6016.6 5266.0 14.3%

Cost of merchandise -4139.4 -3574.6 15.8%

Gross profit 1877.2 1691.4 11.0%Other revenue 336.5 313.7 7.3%Expenses -1575.8 -1455.1 8.3%

Operating profit 637.9 550.0 16.0%

Interest paid -62.0 -58.1 6.7%

Net profit before exceptional items 575.9 491.9 17.1%Exceptional items - -5.0 -

Net profit before tax 575.9 486.9 18.3%

Tax -168.4 -146.0 15.3%

Net profit after tax 407.5 340.9 19.5%Gross margin - on turnover 31.2% 32.1%

Operating margin - on revenue 10.0% 9.9%


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woolworths holdings limitedHEPS, DPS and cover

16.0 15.8

20.9

33.5

40.2

46.7

6.5 6.5 7.510.5

13.0

18.5

2.72.5

2.8

3.1 3.1

2.5

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04

0

0.5

1

1.5

2

2.5

3

3.5

HEPS DPS Cover


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woolworths holdings limitedbalance sheet

Dec-04 Dec-03

Rm Rm %chg

AssetsProperty, plant & equipment 1259.8 1145.1 10.0%Export partnerships 164.4 177.8 -7.5%Inventory 801.4 684.9 17.0%

Financial services assets 3326.2 2534.7 31.2%Accounts receivable & other 817.7 707.5 15.6%Cash 170.9 201.1 -15.0%

6540.4 5451.1

Equity and liabilitiesShareholders funds 3095.3 2672.0 15.8%

Accounts payable & deferred tax 1916.4 1798.4 6.6%

Borrowings - long term 500.0 - n/aBorrowings - short term 1028.7 980.7 4.9%

6540.4 5451.1

Debt: equity 49.4% 36.7%


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woolworths holdings limitedcash flow

Dec-04 Dec-03

Rm Rm

Cash inflow from trading - retail 494.8 460.2Net interest received 225.5 212.4

Working capital movements -118.1 -67.5Increase in borrowings 407.1 266.2

1009.3 871.3

Utilised by:Tax paid -170.3 -175.4

Distributions paid -221.8 -159.2Capex -207.9 -253.4Proceeds from disposals/investment income 0.7 17.7Financial services assets -456.4 -341.6Shares issued 46.4 40.6

-1009.3 -871.3


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woolworths holdings limitedcash flow (cont)

W W

Card

R302.9m

Personal

Loans

R95.7m

Visa

R57.8m

Other

R13.9m

IT

R58.5m

Retail

R135.4m

cash applied to financial services assets: R456.4m

capex: R207.9m


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woolworths holdings limitedreturn on equity/wacc

11.6% 12.9% 18.3% 23.7% 25.7% 27.4%

19.0%

17.5% 16.3%

12.4%13.7%13.7%

0%

5%

10%

15%

20%

25%

30%

Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Dec-04

ROE WACC


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woolworths operating

group


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woolworths operating groupretail results (excl financial services)

Dec-04 Dec-03 %chg

Rm RmRevenue 5,559.1 4,805.4 15.7%

Turnover 5,539.6 4,784.6 15.8%Cost of merchandise -3,917.1 -3,348.9 17.0%

Gross profit 1,622.5 1,435.7 13.0%

Other revenue & interest received 19.5 20.8 -6.3%Operating expenses -1,185.7 -1,064.9 11.3%


Interest paid - -

Net profit before exceptional items 456.3 391.6 16.5%

Exceptional items - -5.0


Tax -135.7 -116.8 16.2%Net profit after tax 320.6 269.8 18.8%

Gross margin - on turnover 29.3% 29.9%


ROE 62.9% 64.4%


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Woolworths operating groupbalance sheet (excl financial

services) Dec-04 Dec-03 %chgRm Rm

Property, plant & equipment, investments,deferred tax 1513.7 1381.6 9.6%Inventory 705.4 557.9 26.4%Accounts receivable 549.8 459.8 19.6%Cash 108.1 163.5 -33.9%

Total assets 2877.0 2562.8 12.3%

Accounts payable, provisions and tax 1754.8 1649.8 6.4%Borrowings - - -

Total shareholder interest 1122.2 913.0 22.9%


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woolworths operationsturnover analysis

Dec-04 Dec-03 %chg

Rm Rm

Turnover 5546.0 4789.6 15.8%

Clothing and home 2685.5 2422.9 10.8% Corporate (retail) 2364.5 2109.2 12.1% Franchise (wholesale) - Local 233.5 189.8 23.0% Franchise (wholesale) - International 87.5 123.9 -29.4%Foods 2753.0 2282.0 20.6% Corporate (retail) 2631.0 2225.1 18.2%

Franchise (wholesale) - Local 104.7 42.1 148.7% Franchise (wholesale) - International 17.4 14.8 17.6%Other - UPN & WFS 107.5 84.7 26.9%


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financial services resultsincome statement and balance

sheetDec-04 Dec-03 %chgRm Rm

Income

Interest received 283.9 266.2 6.6%

Less: Interest paid -60.1 -56.0 7.3%Net interest income 223.8 210.2 6.5%

Other income 70.4 57.3 22.9%

Total income 294.2 267.5 10.0%

ExpensesOperating costs -119.5 -112.5 6.2%

Net bad debts -33.8 -36.6 -7.7%

Increase in bad debt provision -28.8 -20.9 37.8%

Profit before tax 112.1 97.5 15.0%Tax -32.7 -29.2 12.0%

Profit after tax 79.4 68.3 16.3%

Financial services assets 3326.2 2534.7 31.2%

Funded by:Borrowings 1528.7 980.7 55.9%

Equity 1797.5 1554.0 15.7%

3326.2 2534.7 31.2%

Yield on average advances 17.8% 22.8%

ROE 8.9% 9.0%


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country road limited resultsincome statement

Dec-04 Dec-03 %chg

A$m A$mRevenue 103.9 100.0 3.9%

Turnover 103.1 98.7 4.5%Cost of merchandise -48.7 -46.8 4.1%

Gross profit 54.4 51.9 4.8%Other revenue 0.8 1.3 -38.5%

Operating expenses -53.2 -52.2 1.9%


Interest paid -0.4 -0.4 -


Gross margin - on turnover 52.8% 52.6%


ROE 6.0% 2.4%

Exchange rate (average for the period R/A$) 4.45 4.93


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country road limited resultsbalance sheet

Dec-04 Dec-03 %changeA$ m A$ m

Assets

Property, plant & equipment 26.8 25.3 5.9%Trademarks* 11.1 11.3 -1.8%

Inventory 22.0 25.0 -12.0%Accounts receivable 12.2 12.5 -2.4%Cash 14.4 7.4 94.6%

86.5 81.5 6.1%

Equity and liabilitiesShareholders funds 54.3 50.8 6.9%Accounts payable & provisions 32.2 30.7 4.9%

86.5 81.5 6.1%* eliminated at WHL level

Exchange rate at balance sheet date (R/A$) 4.36 5.08


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country road limited resultscash flow statement

Dec-04 Dec-03

A$m A$m

Cash generated from operations 5.9 4.3Working capital movements 0.9 -3.5

Interest paid -0.3 -0.4Taxation received - 0.1

Retained from operations 6.5 0.5

Capital expenditure -3.5 -3.5

Net cash inflow / (outflow) 3.0 -3.0Opening cash balance 11.4 10.4

Closing cash 14.4 7.4


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woolworths holdings limitedPro-forma financial effects of the securitisation

and share repurchase as per the circular

Before the After the

securitisation and securitisation, After the

the scheme - June-04 before the scheme scheme

(cents) (cents) (cents) %chg

HEPS 78.6 76.5 79.5 3.9EPS 77.4 75.3 76 0.9Diluted EPS 75.3 73.3 73.7 0.7NAV and TNAV per 328.3 328.3 237.2 -27.8ROE (%) 25.7 25.1 38.4 53.0

No. No. No. No.

WANOS (million) 861.2 861.2 765.3 95.9


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clothing & home


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clothing and hometurnover and growth

Comparable growth of 8.4%Local clothing and home grew by 13%Inflation averaged 0.6% (Dec 03 inflation of 9.3%)

R 1,654

R 1,864

R 2,185R 2,423

R 2,686

13%

17%

11% 11%

4%

R 0

R 500

R 1,000

R 1,500

R 2,000

R 2,500

R 3,000

Dec-00 Dec-01 Dec-02 Dec-03 Dec-04

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%20%

Turnover Growth rate


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clothing and homerlc market share

Market share to November 2004

12 month moving average

this year 15.8%

last year 16.4%

3 month moving average this year 14.9%

last year 15.8%


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clothing

Pricing perceived as too high Lack of focus on the Classic customer

Replenishment of core merchandise an issue

Too aggressive with the fashion ranges

Menswear Modern segment lacked appeal

clothing and homeperformance


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clothing

New leadership team in place Design-led buying teams to deliver better focused

ranges

Focus on implementation and execution

Revisit our competitive pricing with selective offshoresourcing

clothing and homethe way forward


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clothing

Womenswear Refocus on our Classic customer

Deliver the woolworths difference

Childrenswear Focus on baby and young children

Reduce prices whilst maintaining quality levels

Better sourcing, gross margin decline, narrower ranges

Menswear Design-centre to set look, style, taste, colour for season

Output more focused with clearer execution

clothing and homethe way forward


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homeware

performance

Performed well in competitive market

the way forward

Continued focus on quality, range construction and value

clothing and homeperformance & the way forward


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foods

f


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foodsturnover and growth

Comparable growth of 12.8%

Inflation averaged 3.3% (Dec 03 inflation of8.6%)

R 1,254 R 1,548 R 1,939 R 2,282 R 2,753

14%

25%

21%

18%

13%

R 0

R 500

R 1,000

R 1,500

R 2,000

R 2,500

R 3,000

2000 2001 2002 2003 2004

0%

5%

10%

15%

20%

25%

30%

Turnover Growth rate

f d


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foodsrlc market share

Market share to Dec 04

12 month average

this year 7.7%

last year 7.1%

3 month moving average

this year 7.9%

last year 7.4%

f d


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Increasingly becoming customers main shop

More aggressive promotional strategy on key items

Continued good food strategy Expansion of convenience offering (incl Engen)

Emerging market customer starting to shop in greater

depth

foodsperformance

f d


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Improve availability of core

RDF systemforecasting

Catalogue and space planning system Food formats roll-out

Extension of grocery offering

Improve value perception

New innovative products/ranges

Bakery and meat - new thoughts

foodsthe way forward


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financial services

fi i l i


33/45

financial serviceswoolworths card

Card debtors increased by 27.4% to R2.4bn Number of accounts increased by 9% to 1.16m

Contribution to sales increased to 33.7% (2003: 32.8%)

R 1,072R 1,223

R 1,901

R 2,423

961 974 1029 1066

1163

R 1,508

2.9%

3.4%

1.9% 2.0%

1.7%

0

500

1,000

1,500

2,000

2,500

3,000

Dec-00 Dec-01 Dec-02 Dec-03 Dec-04

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

Book Value (Rm) Number of Accounts ('000) Net Bad Debt

fi i l i


34/45

financial servicespersonal loans

Personal loans increased by 33.5% to R670m Number of accounts increased by 16% to 137 000

R 193

R 357

R 400

R 502

R 670

54 79 96

117 137

1.3%

2.4%

3.5%

2.6%

1.0%

0

100

200

300

400

500

600

700

Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%


fi i l i


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financial servicesvisa card

Visa card increased by 77.7% to R234m Number of accounts increased by 40% to 56 000

R 29

R 95

R 132

R 234

2540

56

13

4.0%

3.5%

3.2%

3.1%

0

50

100

150

200

250

300

Dec-01 Dec-02 Dec-03 Dec-040.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%


fi i l i


36/45

New management team Fresh thinking emerging

Growth of book

Customer recruitment strategy Disciplined credit-granting - balance growth with health of

book

Profitability Interest rate decline versus H1 2004 reduces interest net

income by c. R55m

Potential consolidation of various money-lending actspositive

Evaluating options to improve returns

Exit unit trust

financial servicesthe way forward


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woolworths

operating group

selling

l th ti


38/45

woolworths operationstrading space

June 2004

m2

Dec 2004

m2

% Change Projected

June 2005

% Change

Footage 368,300 380,844 3.4% 394,100 7.0%

Clothing and Home 289,400 298,619 3.2% 309,900 7.1%

Corporate 208,500 217,848 4.5%

Franchise - SA 45,900 46,985 2.4%

Franchise - International 35,000 33,786 -3.5%

Foods 78,900 82,225 4.2% 84,200 6.7%

Corporate 73,400 76,226 3.9%

Franchise - SA 2,500 3,161 26.4%

Franchise - International 3,000 2,838 -5.4%

Stores 255 263 3.1% 286 12.2%

Corporate 136 144 5.9%

Full line 76 82 7.9%

Clothing and Home 6 5 -16.7%Foods 54 57 5.6%

Franchise - SA 63 67 6.3%

Franchise - International 56 52 -7.1%

Modernisation

Clothing and Home 30% 37% 46%

Foods 43% 51% 61%

l th ti


39/45

Store development on track

Modernisation plan on track

Trading space opportunities Cannibalisation and capacity

Trade density potential

woolworths operationstrading space


40/45

the pilot

Targeted at fast growing middle market LSM 5-6 Value proposition

Essential range of good quality food and household

items at EDLP (every day low prices)

5 stores piloted in Western Cape Mixed results


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country road limited



42/45

Strategic decisions over last 18 months starting todeliver

Wholesale sales almost equalled previous levels

Retail volumes grew 18%Affordable prices appealed to broader base of

customers

Brand relaunch with exciting new store fit-out

country road limitedperformance



43/45

A$3m tranche of A$10m loan to be repaid in Q1

Improved strategic positioning

Better merchandise at accessible prices

Good systems

Better brand control

Cash generative

Steady progress for a sustained recovery

Successful brand repositioning takes a number ofseasons

country road limitedthe way forward


44/45

woolworths holdings

limited

prospects



45/45

Economic environment

Expect interest rates and inflation to remain at low levels

Consumer spending to remain robust, fueled by access to credit

High base effect to impact on growth rates

Company prospects

Continued growth from Foods, Financial Services and Home

New team to begin delivering in Clothing Country Road turnaround

Deliver growth in earnings

woolworths holdings limitedprospects

woolworths analyst presentation feb 2005

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