Woolworths Holdings Limited · JSE:WHL
Woolworths — FY2013 Earnings Presentation
56 slides from Woolworths's earnings presentation, Sep 8, 2013
Slide 1: Woolworths Holdings Limited Annual Results 2013
WOOLWORTHS HOLDINGS LIMITED ANNUAL RESULTS 2013
Slide 2: Economic Overview
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 2 ECONOMIC OVERVIEW = South Africa - Slowdown in unsecured lending impacting lower and middle income consumers - Upper end consumer is more confident and less constrained - Inflation under pressure, but was within target range - Competitive, promoti
Slide 3: Review of the Year (52:52)
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 3 REVIEW OF THE YEAR (52:52) TURNOVER , % " Turnover up 21.3% ° « GP margin gains across the business ADJUSTED HEPS " Strong profit performance 4 2 8 @) % « Adjusted HEPS +28.0% ° = ROE up to 49.7%* ROE UP TO = Total dividend +-18.2% A9 7 % @ " Stro
Slide 4: Woolworths Clothing & GM (52:52)
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 4 WOOLWORTHS CLOTHING & GM (52:52) Total sales* up 10.1%, with comparable sales up 6.3% - Held market share Gross profit margin increased from 44.5% to 46.4% - Margin in H2 up from 44.7% last year to 46.7% Operating margin up from 16.8% to 17.2%** P
Slide 5: Clothing & Footwear Turnover Growth
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 5 CLOTHING & FOOTWEAR TURNOVER GROWTH Clothing & footwear - Woolworths vs market growth (3mma) 16% 14% /\ — 12% ~ — 10% <= 9% —~4 6% Y A%~ T T T T 7 T Ss xy xy xy xy x xy © © & FX S oe —— Woolworths growth —— Market growth Source: RLC
Slide 6: Woolworths Food (52:52)
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 6 WOOLWORTHS FOOD (52:52) Strong performance, with total sales up 13.3% and comparable sales up 10.0% - H2 sales up 15.3%, with comparable sales up 12.7% - Supermarket strategy working well «= Growth well ahead of the market every month since Septem
Slide 7: Food Turnover Growth
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 7 FOOD TURNOVER GROWTH Food - Woolworths vs market growth 8% > x a o x S&S w 2 YS B yw ae ft o RS & RS & we ye ye Sy == Woolworths price movement (y-on-y) {CPI (Food & Non-alcoholic Beverages) (y-on-y) === Woolworths sales growth (y-on-y) —— Growth
Slide 8: Woolworths Stores
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 8 WOOLWORTHS STORES = Stores performance underpinned by improvements in: Shrinkage Direct store cost control Stock accuracy Process compliance « Underperforming stores reduced from 6.6% to 3.7% of space " African expansion continues - 7 new stores i
Slide 9: Country Road Group
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 9 COUNTRY ROAD GROUP Total turnover up 68.5% - Witchery in from Q2 - Comparable sales in Australasia up 12% versus market up 2%* Gross profit margin up from 59.7% to 61.9% - Uplift from Witchery - Good inventory management and lower markdowns Operat
Slide 10: Woolworths Financial Services
WH L WOOLWORTHS HOLDINGS LIMITED OVERVIEW IAN MOIR 10 WOOLWORTHS FINANCIAL SERVICES " Closing book growth of 15.8% " Quality of book remains very good " Impairments remained low at 1.9% " Operating profit of the JV up 29.9% " ROE above target at 27.6% BOOK GROWTH IMPAIRMENT CHARGE
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Slide 12: Financial Overview
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 12 FINANCIAL OVERVIEW 53:52 weeks Group turnover Up 23.2% Profit before tax Up 271% HEPS Up 27.3% to 340.4 cps HEPS — Adjusted Up 30.0% to 345.5 cps HEPS — Diluted Up 28.1% to 333.8 cps Total dividend up 18.2% to 234 cps ROE increased
Slide 13: Group Income Statement
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 13 GROUP INCOME STATEMENT Woolworths Clothing & GM Woolworths Food Country Road Group Financial Services JV (after tax) Woolworths Treasury Adjusted profit before tax Adjustments Profit before tax Tax Profit after tax Effective tax rat
Slide 14: Group Income Statement Commentary
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 14 GROUP INCOME STATEMENT COMMENTARY
Slide 15: Woolworths Clothing & GM Income Statement
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 15 WOOLWORTHS CLOTHING & GM INCOME STATEMENT 52 weeks Jun 2012 b Rm change Turnover 9 585 10.1 Cost of sales 5321 6.4 Gross profit 4264 14.8 Other revenue 21 (33.3) Expenses 2677 15.7 Adjusted operating profit 1608 12.6 Earnings from J
Slide 16: Clothing & GM Income Statement Commentary
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 16 CLOTHING & GM INCOME STATEMENT COMMENTARY
Slide 17: Woolworths Food Income Statement
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 17 WOOLWORTHS FOOD INCOME STATEMENT 52 weeks Jun 2012 % Rm change Turnover 15 140 13.3 Cost of sales 11323 12.7 Gross profit 3817 15.0 Other revenue 84 (119) Expenses 3020 13.4 Adjusted operating profit 881 179 Earnings from JV and ass
Slide 18: Food Income Statement Commentary
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 18 FOOD INCOME STATEMENT COMMENTARY
Slide 19: Woolworths Expenses
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 19 WOOLWORTHS EXPENSES Store costs Other operating costs General operating costs Amortisation of reacquired rights IFRS 2 charge Incentives Profit on sale of City Deep Total expenses 9 change ue) 15.8 14.5
Slide 20: Woolworths Expenses Commentary
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 20 WOOLWORTHS EXPENSES COMMENTARY
Slide 21: Country Road Group Income Statement
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 21 COUNTRY ROAD GROUP INCOME STATEMENT Jun 2013 Jun 2012 9 A$m A$m change Turnover 706 A419 68.5 Cost of sales 269 169 59.2 Gross profit 437 250 74.8 Other revenue 3 3 - Expenses 373 231 615 Store costs 284 79 58.7 Other operating cost
Slide 22: Country Road Group Income Statement Commentary
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 22 COUNTRY ROAD GROUP INCOME STATEMENT COMMENTARY
Slide 23: Woolworths Financial Services Income Statement
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 23 WOOLWORTHS FINANCIAL SERVICES INCOME STATEMENT Consolidated pro forma %to Jun2012 %to % income statement book Rm_ book change Interest income 170 1140 176 9.6 Interest paid 48 338 5.2 Al Net interest income 122. 802 124 12.0 Impairm
Slide 24: Financial Services Income Statement Commentary
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 24 FINANCIAL SERVICES INCOME STATEMENT COMMENTARY
Slide 25: Woolworths Financial Services Book Performance
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 25 WOOLWORTHS FINANCIAL SERVICES BOOK PERFORMANCE 7 958 80005 - 6% 7 000~ 5% 6 000 fo) 5 000° 4% 4000 3% 3 000 2% 2 000 |O, 1000- "% _ 4 | | ! - 0% Jun 10 Jun 11 Jun 12 Jun 13 I Gross book value (Rm) _ Total active accounts (000's) Imp
Slide 26: Balance Sheet
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 26 BALANCE SHEET Jun 2012 % Rm_ change Assets Property, plant and equipment, intangible assets and loans 3701 44.6 Investment in JVs and associate 667 15.9 Inventories 2216 30.9 Accounts receivable, tax and deferred tax 1316 217 Net ca
Slide 27: Balance Sheet Commentary
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 27 BALANCE SHEET COMMENTARY
Slide 28: Cash Generation
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 28 CASH GENERATION | R458Im (R1140m) i (R781m) R887m (R1 640m) ipezm [R67m) ; a (R193m) (R1 490m) Cash flow Working Finance Taxation Net Dividends Franchise Net share Witchery Witchery from capital and costs capex acquisitions buybacka
Slide 29: Capital Expenditure
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 29 CAPITAL EXPENDITURE Capex (Rm) * R862m (Jun 2012: R780m) Depreciation Jun 2012 Rm “ 228 Woolworths 498 107 605 Country Road Group Total group Jun 2013 Jun 2012 * Excludes Witchery acquisition and franchise conversions
Slide 30: Return on Equity
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 30 RETURN ON EQUITY 49.79 50% 46.4% % 39.4% 40% 34.8% 35.1% 312% 2TA% 30% 24.7% 20% 17.5% 18.3% 13.8% 138% 13.3% 148% 13.3% 136% 132% 132% 12.4% 113% 118% 10% 12.3% 0% Jun 01 Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09 Jun
Slide 31: Earnings and Distribution
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 31 EARNINGS AND DISTRIBUTION cents 350 © 300 — 250 © 200 — 150 100 | 50 - Jun-09 Jun-10 June Jun-12 Jun-13 * Impact of STC benefit acceleration
Slide 32: Guidance
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 32 GUIDANCE Woolworths = Clothing & GM and Food sales growth expected to be in line with FY 2013 (52:52) " Corporate space growth planned for FY 2014: - 4.3% growth in Clothing & GM space; 9.3% growth in Food space - Lower trading dens
Slide 33: Guidance Continued
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 33 GUIDANCE CONTINUED Country Road Group " Comparative sales growth will be lower, off a high base " Gross profit margin to be maintained " Tight cost control to continue « Adjusted profit for FY2013 (A$64m) represents a normalised ful
Slide 34: Guidance Continued
WH L WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW NORMAN THOMSON 34 GUIDANCE CONTINUED Group =" Taxation - effective tax rate of 28% " Capex - average of R1.4 bn per year for next three years, including unspent capex from FY 2013 = Dividend cover of 1.45 times = Preference dividend — BEE scheme has
Slide 35: Strategic Focus
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Slide 36: Strategic Focus
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 36 STRATEGIC FOCUS " Build stronger, more profitable customer relationships = Become a big foods business " Bea leading fashion retailer in the southern hemisphere " Continue to build the business in the rest of Africa = Become an omni-channe
Slide 37: Build Stronger, More Profitable Customer Relationships
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 37 BUILD STRONGER, MORE PROFITABLE CUSTOMER RELATIONSHIPS Woolworths 3m active cardholders tracking 67% of sales Point of difference: instant and targeted OVER 1000 rewards WRewards a fundamental part of Clothing IN STAN SAVINGS EVERY DAY WIT
Slide 38: Grow Ranges to Offer a Complete Shop
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 38 =" Grow our ranges to offer a complete shop - Increase SKUs - Increase bulk packs - Increase brands = Improve our price position = Enhance freshness =" Open larger format stores « Increase promotional activity and loyalty
Slide 39: Become a Big Foods Business
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 39 BECOME A BIG FOODS BUSINESS = Space expansion set to continue with extensions and new development « Shape of chain to become bigger to allow for extended catalogue and more choice in long-life and non-food categories = Focus on under-perfo
Slide 40: Be a Leading Fashion Retailer in the Southern Hemisphere
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 40 BE A LEADING FASHION RETAILER IN THE SOUTHERN HEMISPHERE Woolworths " Build fashion credibility - More in-season trading, more newness - Continue to build Modern wardrobe and | brands = Own and grow the Classic customer =" Grow the black c
Slide 41: Be a Leading Fashion Retailer in the Southern Hemisphere
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 41 BE A LEADING FASHION RETAILER IN THE SOUTHERN HEMISPHERE " Space planning to focus on extensions in 2014 and new space in 2015 and 2016 Additional store No. of new footage (000m2) stores (net) 40 40 35 4 r 35 30 | 30 25 4 25 20 | + 20 5 4
Slide 42: Be a Leading Fashion Retailer in the Southern Hemisphere
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 42 BE A LEADING FASHION RETAILER IN THE SOUTHERN HEMISPHERE = Country Road Group - Drive and grow four clearly differentiated brands - 18new Country Road and Trenery stores in South Africa over the next 3 years - Introduce Witchery and Mimco
Slide 43: Continue to Build the Business in the Rest of Africa
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 43 CONTINUE TO BUILD THE BUSINESS IN THE REST OF AFRICA = Re-acquisition of Botswana business will: - Create critical mass (merchandising, store operations and supply chain) - Bring focus to the sub-Saharan region - Provide enhanced profiling
Slide 44: Online Growth and Investment in the Future
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 44 "Country Road online site has been a big success - To reach A$50 million in FY 2014 « Launch of new Woolworths site in South Africa in August 2013 - New site more user friendly - Good response from customers - Biggest online offering of th
Slide 45: Simple, Convenient and Rewarding Financial Services
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 45 SIMPLE, CONVENIENT AND REWARDING FINANCIAL SERVICES Transform the WFS customer experience through: - In-store kiosks - 9 stores with kiosks and a further 9 rolling out by December - Providing instant credit - 15 minutes to card issue - Imp
Slide 46: Embed GBJ Throughout Our Business
WH L WOOLWORTHS HOLDINGS LIMITED STRATEGIC FOCUS IAN MOIR 46 EMBED GBJ THROUGHOUT OUR BUSINESS ¢ Saved over R189 million to date through GBJ initiatives in energy, water, fuel & packaging savings * Reduced relative energy use by 31% from our 2004 benchmark -— helping to offset tariff increases * Ach
Slide 47: Outlook
OUTLOOK IAN MOIR
Slide 48: Outlook
WH L WOOLWORTHS HOLDINGS LIMITED OUTLOOK IAN MOIR 48 OUTLOOK " South African economy will continue to be constrained = Expect the upper income consumer to be relatively resilient " First 8 weeks of sales are in line with expectations in both SA and Australia
Slide 49: Medium-Term Targets
WH L WOOLWORTHS HOLDINGS LIMITED OUTLOOK IAN MOIR 49 MEDIUM-TERM TARGETS Achieved in FY 2013 Woolworths Clothing & GM Operating profit margin Woolworths Food Operating profit margin Country Road Operating profit margin Financial Services ROE 17.2%* 6.0%* 9.5%* 27.6% * Adjusted
Slide 50: Additional Information
ADDITIONAL INFORMATION
Slide 51: Group Income Statement
WH L WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 51 GROUP INCOME STATEMENT 53 weeks 52 weeks Jun 2013 Jun 2012 % Rm Rm_ change Woolworths Clothing & GM 1856 1611 15.2 Woolworths Food 1060 884 19.9 Country Road 588 185 >100 Financial Services JV (after tax) 180 133 35.3 Woolworths Treasury 16
Slide 52: Space Footage Projections
WH L WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 52 Projected Projected Projected Jun 2013 Jun 2012 % Jun 2014 % Jun 2015 % Jun 2016 % 000m2 000m2_ change 000m2_ change 000m2 = change 000m2_ change Woolworths Clothing & GM 398 388 2.6 415 43 436 5.1 469 7.6 South Africa 359 354 14 374 | 4.2 3
Slide 53: Store Numbers
WH L WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 53 STORE NUMBERS Projected Projected Projected Jun 2013 Jun 2012. Growth Jun 2014. Growth Jun2015 Growth Jun2016 Growth Woolworths Clothing & GM 259 253 6 265 6 276 1 296 20 South Africa 197 198 (1) 200 3 206 6 214 8 ranchise) Rest of Africa 62
Slide 54: Woolworths Financial Services Contribution to Sales
WH L WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 54 WOOLWORTHS FINANCIAL SERVICES CONTRIBUTION TO SALES % of sales spent on Woolworths cards Jun 2012 Clothing & GM 28.1% Food 13.8% 19.5% Aggregate
Slide 55: Country Road Group Balance Sheet
WH L WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 55 COUNTRY ROAD GROUP BALANCE SHEET Jun 2012 % A$m change Assets Property, plant and equipment, and intangible assets 62 >100 Inventories 45 73.3 Accounts receivable and deferred 7 >100 ax Cash 25 >100 149 >100 Equity and liabilities Shareholde
Slide 56: Country Road Group Income Statement (in Rands)
WH L WOOLWORTHS HOLDINGS LIMITED ADDITIONAL INFORMATION 56 COUNTRY ROAD GROUP INCOME STATEMENT (IN RANDS) Turnover Cost of sales Gross profit Other revenue Expenses Store costs Other operating costs Adjusted operating profit Investment income Finance costs Adjusted profit before tax Transaction and