woolworths holdings limited
another year of continued growth
•
Revenue up 15.1% to R13.0bn
•
Operating profit up 24.3% - R1.3bn
•
Operating profit margin widened from 9.0% to 9.7%
•
Net profit before tax up 23.7% - R1.1bn
•
Headline earnings per share up 22.0% - 92.1cps (pre adj: 95.0cps)
•
Distribution to shareholders up 40.3% - 54.0cps
•
Cover ratio down from 1.9 to 1.7 (pre adj: 1.8)
•
ROE of 33.5% (2004 : 27.4%)
woolworths holdings limited
progress
•
Enhance shareholders’ ROE
•
•

Woolworths card book securitised
Share repurchase returned R1bn to shareholders
•
Focus on customers
• Good volume growth in clothing and home
• Strong gains in food market share
• Continued store growth
•
Focus on value and innovation
• Design/technology led buying process
• Sourcing strategy
• Clothing and home prices below last year
•
Improved availability
• Implementation of replenishment system
•
Productivity gains
•
•
•




Reduced distribution costs per unit
High volume growth with good cost control
Process improvement

woolworths holdings limited
trading environment – south africa
•
Consumer confidence levels remain high
•
Stable interest rate environment
•
Wage increases remain above inflation
•
Growth in emerging market with increasing access to credit
•
Robust real retail sales growth momentum
woolworths holdings limited results
income statement
Revenue
Turnover
Cost of merchandise
Gross Profit
Other revenue
Expenses
O perating profit
Net finance costs
Finance costs - pre share repurchase
Finance costs - share repurchase
N et profit before exceptional items
Exceptional items
Net profit before tax
Tax
N et profit after tax
Gross margin - on turnover
Operating margin - on revenue
ROE
Net profit before exceptional items - pre share repurchase (Rm)
Jun-05
Rm
12,988.9
12,220.7
8,207.6
4,013.1
768.2
3,517.1
1,264.2
152.7
132.7
20.0
1,111.5
1,111.5
307.7
803.8
Jun-04*
Rm
11,281.7
10,648.8
7,091.4
3,557.4
632.9
3,173.1
1,017.2
108.7
108.7
% Chg
908.5
10.1
898.4
257.4
641.0
22.3%
32.8%
9.7%
33.5%
33.4%
9.0%
27.4%
1,131.5
908.5
15.1%
14.8%
15.7%
12.8%
21.4%
10.8%
24.3%
40.5%
22.1%
23.7%
19.5%
25.4%
24.5%
*Prior year figures restated
woolworths holdings limited results
expenses analysis
R262.1m
R609.8m
R1,449.6m
R1,195.6m
R3,517.1m
16.0%
14.0%
14.1%
12.0%
12.6%
11.2%
10.0%
10.8%
8.0%
6.0%
4.0%
3.5%
2.0%
0.0%
Depreciation
Occupancy
Employment
Other
Total
woolworths holdings limited results
expenses analysis
Impact of change in interpretation of AC105: Leases
•
Lease expense/income recognised on a straight-line basis over the lease term for
fixed-escalation rentals
•
Results in an equal impact/charge to the income statement irrespective of the fact
that cash flows differ
Jun-05
Jun-04
Impact on Opening Retained Profit
Impact on Headline earnings
-R24,6m
-R243,0m
-R 26,5m
Impact on Headline Earnings per Share
-2,9 cps
-3,1 cps
woolworths holdings limited results
HEPS and dividend cover
2
130.0
2.1
1.9
1.7
110.0
90.0
92.1
70.0
75.5
61.1
50.0
30.0
42.4
95.0
78.6
64.8
46.2
10.0
2002
2003
*HEPS
HEPS prior adj
2004
2005
*Distribution Cover
*Prior year figures restated for AC105
Compound HEPS growth: 33.3% (5 years)
woolworths holdings limited results
balance sheet
Assets
Property, plant and equipment
Export partnerships
Inventory
Financial services assets
Accounts receivable
Cash
Equity and liabilities
Shareholders funds
Accounts payable and deferred tax
Borrowings
Debt ratio
Jun-05
Rm
Jun-04
Rm
% Chg
1,314.6
79.3
683.0
3,596.4
1,138.5
225.5
7,037.3
1,192.4
171.6
576.4
2,905.0
832.8
188.0
5,866.2
10.2%
-53.8%
18.5%
23.8%
36.7%
19.9%
20.0%
2,116.4
2,318.7
2,602.2
7,037.3
2,602.0
2,126.3
1,137.9
5,866.2
-18.7%
9.0%
128.7%
20.0%
37.0%
19.4%
financial services results
securitisation
• R2,416m of in-store card book receivables securitised in Account On Us (Pty) Ltd
• Funded by:
• R1,900m AAA rated notes issued
• R335m subordinated loan from Woolworths
• Balance funded by originator facility
• Legal ownership of the receivables rests with Account On Us and used as security
for bond holders
• Consolidated in terms of AC412
woolworths holdings limited results
cash flow
Cash inflow from trading
Net interest received
Working capital movements
Increase in borrowings
Utilised by:
Tax paid
Distribution paid
Capex
Proceeds from disposal/investment income
Financial service assets
Shares repurchased
Shares issued
Jun-05
Rm
996.5
488.1
-228.4
1,434.4
2,690.6
Jun-04
Rm
794.4
435.1
-7.5
429.7
1,651.7
-314.6
-384.2
-385.9
73.3
-722.0
-1,020.4
63.2
-2,690.6
-331.5
-271.7
-402.9
9.7
-709.8
54.5
-1,651.7
woolworths holdings limited results
cash flow (cont.)
growth in woolworths financial
services assets R722.0m
capex spend R385.9m
Other R7.4m
Visa R139.5m
W W CardR427.0m
Personal
Loans R155.5m
Retail R235.7m
IT R142.8m
woolworths holdings limited results
return on equity / wacc
40.0%
35.0%
30.0%
25.0%
20.0%
17.5%
16.3%
13.8%
15.0%
13.8%
11.3%
10.0%
5.0%
12.3%
18.3%
24.7%
27.4%
33.5%
2001
2002
2003
2004
2005
0.0%
ROE
WACC
woolworths retail results
income statement (excluding financial
services)
Jun-05
Rm
Revenue
Turnover
Cost of merchandise
Gross profit
Other revenue
Expenses
O perating profit
Finance costs
N et profit before exceptional items
Exceptional items
Net profit before tax
Tax
N et profit after tax
Gross margin - on turnover
O perating marging - on revenue
RO E
11,288.4
11,227.0
7,738.9
3,488.1
61.4
2,683.5
866.0
866.0
866.0
243.4
622.6
31.1%
7.7%
77.3%
Jun-04
*
Rm
9,751.2
9,705.3
6,655.4
3,049.9
45.9
2,405.2
690.6
690.6
10.1
680.5
196.0
484.5
% change
15.8%
15.7%
16.3%
14.4%
33.8%
11.6%
25.4%
25.4%
27.3%
24.2%
28.5%
31.4%
7.1%
81.6%
*Prior year figures restated
woolworths retail results
balance sheet (excluding financial services)
Jun-05
Rm
Jun-04
Rm
% Chg
Property, plant and equipment, investments
deferred tax, loans and goodwill
Inventory
Accounts receivable
Cash
T otal Assets
1,620.0
563.0
528.9
163.5
2,875.4
1,618.7
472.6
407.6
138.0
2,636.9
0.1%
19.1%
29.8%
18.5%
9.0%
Accounts payable, provisions and tax
Borrowings
T otal Equity
-1,951.7
923.7
-1,981.3
655.6
-1.5%
40.9%
woolworths operations
turnover analysis
Clothing & home
Corporate (retail)
Franchise (wholesale) - local
Franchise (wholesale) - international
Foods
Corporate (retail)
Franchise (wholesale) - local
Franchise (wholesale) - international
Logistics & other
Jun-05
Jun-04
% Chg
Rm
Rm
5,349.5
4,710.0
473.7
165.8
5,666.0
5,407.8
226.7
31.5
223.1
4,792.2
4,215.4
387.5
189.3
4,747.1
4,602.8
113.0
31.3
176.1
11.6%
11.7%
22.2%
-12.4%
19.4%
17.5%
100.6%
0.6%
26.7%
11,238.6
9,715.4
15.7%
financial services results
income statement & balance sheet
Revenue
Expenses
O perating profit
Finance costs
N et profit before tax
Tax
N et profit after tax
Financial services assets
Other net assets
Funded by:
Borrowings
Equity
Debt ratio
RO E
Jun-05
Rm
Jun-04
Rm
% change
773.9
400.1
373.8
149.0
224.8
64.3
160.5
647.3
330.9
316.4
104.1
212.3
62.5
149.8
19.6%
20.9%
18.1%
43.1%
5.9%
2.9%
7.1%
3,596.4
-35.7
3,560.7
2,905.0
6.3
2,911.3
23.8%
2,602.2
958.5
3,560.7
1,137.9
1,773.4
2,911.3
68.2%
11.2%
38.6%
9.3%
country road results
income statement
Revenue
Turnover
Cost of merchandise
Gross profit
Other revenue
Expenses
O perating profit
Finance costs
N et profit before tax
Average exchange rate
Gross margin - on turnover
O perating margin - on revenue
RO E (A$)
Jun-05
A$m
Jun-04
A$m
% change
211.2
208.5
99.6
108.9
2.7
107.6
4.0
0.8
3.2
194.5
191.3
89.4
101.9
3.2
101.6
3.5
1.0
2.5
8.6%
9.0%
11.4%
6.9%
-15.6%
5.9%
14.3%
-20.0%
28.0%
4.7
4.9
52.2%
1.9%
5.9%
53.3%
1.8%
3.7%
Change in accounting policy for distribution costs included in inventory: A$0.9m
country road limited results
balance sheet
Assets
Property, plant and equipment
Trademarks*
Inventory
Accounts receivable
Cash
Equity and liabilities
Shareholders funds
Accounts payable and provisions
Year end R / A$ exchange rates
Jun-05
A$m
Jun-04
A$m
27.2
10.9
23.1
11.6
11.9
84.7
25.7
11.2
23.4
11.1
11.3
82.7
55.9
28.8
84.7
52.7
30.0
82.7
5.2
4.4
* eliminated at Holdings level
clothing and home
turnover & growth
25.0%
R4,792m
R5,350m
5,000
R4,280m
R3,834m
20.0%
4,000
R3,259m
17.7%
15.0%
3,000
12.4%
10.0%
10.2%
5.0%
12.0%
11.6%
9.0%
11.6%
2,000
8.3%
1,000
6.5%
3.0%
0.0%
0
2001
2002
Comparable growth
2003
Sales growth
2004
2005
Turnover (Rm)
• Sales growth of 11.6% (2004: 12.0%)
• Corporate store comparable growth of 8.3% (2004: 9.0%)
• Deflation averaged -1.1% for the year (2004: 6.9% inflation)
clothing and home
turnover & growth
13%
9.3%
11%
9%
13.2%
10.4%
9.6%
7%
5%
3%
4.1%
1%
-1%
-0.1%
-2.1%
1H05
2H05
-3%
1H04
2H04
Inflation
• Product deflation with volume growth
Volumes
clothing
rlc market share
•
Market share to June 2005
– 12 month moving average
• this year 15.6%
• last year 16.3% (June 2004)
– 3 month moving average
• this year 16.4%
• last year 16.2% (June 2004)
*Prior year figures include an additional
trading week for some of the competitors
clothing and home
implementation
Value = innovation, quality and price
• Strategic sourcing unit to drive value and differentiation
• Technological innovation
• Supplier base rationalised
• Appropriate imports
Category (deflation)/inflation
Total
Childrenswear
-1.1%
-7.9%
Homeware
-4.5%
Menswear
-0.4%
W omenswear
-10.0%
1.8%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
clothing and home
implementation
Focus on the core customer – design-led buying
20%
Fashion
Key
80%
Core
Womenswear
• Classic customer
• Wardrobe building blocks
• Number of styles
• Menswear
• Classic garments
• Childrenswear
• Open price points down
between -10% to -20%
• Toddler
• Rationalisation and sourcing
• Home
• Authoritative range building
clothing and home
sustainable annuity growth
Availability in core
• 50% of turnover on replenishment
• Increase annuity opportunity
Availability in Core
100%
80%
85.9%
87.0%
Current
Target
60%
40%
20%
0%
foods
turnover & growth
R5,666m
35.0%
R4,747m
30.0%
5,000
R3,981m
25.0%
20.0%
6,000
4,000
R3,302m
R2,566m
3,000
15.0%
2,000
10.0%
1,000
5.0%
6.2%
6.5%
18.6% 28.7%
14.7% 20.6%
7.8% 19.2%
11.4% 19.4%
0.0%
0
2001
2002
Comparable growth
2003
Sales growth
2004
2005
Turnover (Rm)
• Sales growth of 19.4% (2004: 19.2%)
• Corporate stores comparable growth of 11.4% (2004 :
7.8%)
• Inflation averaged 3.0% for the year (2004 : 6.4%)
foods
rlc market share
•
Market share to June 2005
– 12 month moving average
• this year 7.9%
• last year 7.4% (June 2004)
– 3 month moving average
• this year 8.0%
• last year 7.6% (June 2004)
*Prior year figures include an additional
trading week for some of the competitors
foods
rlc market share
8.2%
8.0% 8.0%
8.0%
7.9% 7.9% 7.9%
7.8% 7.8% 7.8%
7.8%
7.7%
7.6%7.6% 7.6%
7.6%
7.5% 7.5%
7.4%
7.4%
7.3% 7.3%
7.2% 7.2%
7.2%
7.1% 7.1%
7.0% 7.0% 7.0% 7.0%
7.0%
6.8%
6.6%
6.4%
J03 A
S
O
Source: AC Nielsen
N
D
J
F
M
A
M
J J04 A
S
O
N
D
J
F
M
A
M
J J05
foods
food retailers growth rates
50.0%
41.5%
40.0%
30.0%
20.0%
19.0%
17.3%
11.5%
10.1%
10.0%
15.2%
19.5%
17.0%
6.4%
6.3%
5.1%
0.0%
0.0%
-4.5%
-10.0%
ppm
chk
Source: AC Nielsen
chy
hmk
ksp
ppf
pps
sco
shr
spr
ssp
us
ww
foods
sustainable growth and innovation
Increase market penetration
• Extend our main shop concept
• Extend grocery offering
• Branded 6.5% (2004: 5.0%)
• Continue to address the need for convenience
• Store accessibility
• Roll-out Woolworths food stops
• Tap the emerging market
foods
sustainable growth and innovation
Widening the gap
• Improve value perception
• Key grocery items to be below competitors everyday low prices
• Continue delivering innovation
• Improve meat shelf life
• Good food journey
• Over 100 new stores in next 4 years
foods
sustainable annuity growth
Improve availability
• Demand forecasting system – Feb 06
• In line with expectations
Availability in Foods
120%
100%
80%
95.2%
95.5%
82.8%
60%
84.5%
40%
20%
0%
Groceries
Perishables
Current
Target
financial services
woolworths card
3,000
2,500
2,562
2,000
2,148
1,500
1,000
1,669
1,349
1,149
979
1,125
1,046
1,020
1,217
500
0
2001
2002
2003
Book Value (Rm)
2004
Customers ('000)
• Book value growth of 19.3% to R2.6bn (2004 : R2,1bn)
• Customer numbers growth of 8.1% to 1.2m (2004 : R1,1m)
2005
financial services
personal loans
700
725
600
578
500
455
400
382
300
200
287
100
88
67
0
2001
2002
127
107
2003
Book Value (Rm)
2004
Customers ('000)
• Book value growth of 25.4% to R725m (2004 : R578m)
• Customer numbers growth of 15.7% to 147’000 (2004 : 127’000)
147
2005
financial services
visa credit card
350
310
300
250
200
179
150
106
100
79
70
50
20
11
5
50
34
0
2001
2002
2003
Book Value (Rm)
2004
Customers ('000)
• Book value growth of 73.2% to R310m (2004: R179m)
• Customer numbers growth of 58.0% to 79’000 (2004 : 50’000)
2005
financial services
net bad debt
6.0%
5.5%
5.0%
5.1%
4.6%
4.0%
3.8%
3.0%
3.3%
3.1%
3.0%
2.5%
2.0%
2.3%
2.0%
1.9%
1.7% 1.8%
1.0%
1.5%
0.0%
2001
2002
W oolworths card
2003
Personal Loans
• Net bad debt levels in line with expectations
• Controlled growth strategy
2004
Visa
2005
woolworths financial services
credit statistics
June
2005
Growth in credit sales
June
2004
19.8%
Credit sales as % of total sales
33.7%
33.1%
Average yield
17.6%
20.3%
Weighted average usury rate
20.3%
23.4%
Average cost of funds
8.0%
20.6%
9.7%
woolworths financial services
sustainable annuity growth
Build a credit-granting business
• Customer acquisition
• Aggressive marketing
• Launch Visa with loyalty
• Grow external non-interest revenue 45.6% (2004: 48.3%)
• Insurance products
• New product development
• Responsible credit
• Conservative behavioural scoring
woolworths operations
trading space as at
Projected
Jun-06
% Chg
m2
Jun-04
m2
Jun-05
m2
% Chg
369,654
389,645
5.4%
424,822
9.0%
Clothing and Home
Corporate
Franchise - SA
Franchise - International
289,430
208,514
45,919
34,997
302,259
221,053
47,296
33,910
4.4%
6.0%
3.0%
-3.1%
324,884
7.5%
Foods
Corporate
Franchise - SA
Franchise - International
78,928
73,352
2,539
3,037
84,849
77,921
3,940
2,988
7.5%
6.2%
55.2%
-1.6%
96,601
13.9%
1,296
2,537
3,337
31.5%
Footage
Coffee
woolworths operations
number of stores
2004
no.
2005
no.
Change
2006
no.
Change
T otal Store
255
269
14
310
41
Corporate
Full line
Clothing
Foods
136
76
6
54
149
84
5
60
13
8
-1
6
63
56
69
51
6
-5
2
5
3
15
10
Franchise SA
Franchise International
Engen
• Marginal clothing stores to have higher hurdle rates
operations
process simplification
New systems completed to date:
 Point of sale

 Customer call centre and management system
 Clothing replenishment
 Food replenishment - 50% complete
 Clothing stock ownership
 Foods distribution systems
 Supplier portal
 Credit management
 Human resource system and labour scheduling
 Outsourced all core infrastructure and support









operations
process simplification
Systems underway:
•
•
•
Foods planning – 50% rolled out
– Roll-out complete Feb 06
– In line with expectations
Retek merchandise management system
– Includes store back office
– Final testing phases
– Roll-out to commence Apr 06
Clothing buying systems
– Womenswear complete
– Roll-out complete by Jun 07
Total 5 year investment : R500m (currently in year 3)
operations
supply chain logistics
• Distribution costs per unit reduced
– Labour productivity
– Accuracy and controls
• Capacity growth in all regions, including Gauteng campus
– Development started
– Phased relocation early 07
• R450m 3 year all DC’s investment programme
country road
trading performance
•
Australia
•
•
•
Warm winter
Heavy discounting
Results
•
•
•
•
•
Sales up 9.0% to A$208.5m
Unit sales growth in excess of 30%
Gross margin declined from 53.3% to 52.2%
Operating profits up 14.3% to A$4.0m
Increased costs from air freight amounted to A$3.0m
country road
strategy
•
Strategy bedded down
•
Retek
•
Design team
•
Pricing
•
Consolidation of wholesale operation
•
Lead times reduced
strategy and prospects
• Clothing and Home further implementation
• Foods sustainable growth and innovation
• Financial Services sustainable annuity growth
• Grow annuity parts of the business
• Continue to deliver real growth in earnings