Analyst Presentation Feb 2005

woolworths holdings limited

february 2005

presentation to

investment analysts


woolworths holdings limited
agenda

• Highlights
• Financial review
• Operational review
–
–
–
–
–

Clothing and home
Foods
Financial services
Trading space
Country Road

• Prospects


woolworths holdings limited

group highlights

•
•
•
•
•
•
•

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


woolworths holdings limited
trading environment

• Buoyant trading conditions in SA
• Low inflation
• Lower interest rates
• Emerging market growth
• Consumer spending in Australia slowed slightly


woolworths holdings limited

income statement

Revenue
Turnover
Cost of merchandise
Gross profit
Other revenue
Expenses
Operating profit
Interest paid
Net profit before exceptional items
Exceptional items
Net profit before tax
Tax
Net profit after tax
Gross margin - on turnover
Operating margin - on revenue
100.0

Dec-04
Rm
6353.1
6016.6
-4139.4
1877.2
336.5
-1575.8
637.9
-62.0
575.9

575.9
-168.4
407.5
31.2%
10.0%
2.3

Dec-03
Rm
5579.7
5266.0
-3574.6
1691.4
313.7
-1455.1
550.0
-58.1
491.9
-5.0
486.9
-146.0
340.9
32.1%
9.9%

2.2

%chg
13.9%
14.3%

15.8%
11.0%
7.3%
8.3%
16.0%
6.7%
17.1%
18.3%
15.3%
19.5%

2.4
2.2


woolworths holdings limited
HEPS, DPS and cover

50.0

3.1

45.0
40.0

46.7

2.8

2.7

3.5

3.1

2.5

40.2

35.0

3

2.5

33.5

30.0

2.5
2

25.0
1.5

20.0
15.0

20.9
16.0

18.5

15.8

10.0
5.0

10.5
6.5

6.5

1

13.0
0.5

7.5

0.0

0
Dec-99

Dec-00

Dec-01
HEPS

Dec-02
DPS

Cover

Dec-03

Dec-04


woolworths holdings limited
balance sheet

A ssets
Property, plant & equipment
Export partnerships
Inventory
Financial services assets
Accounts receivable & other
Cash
E quity a nd lia bilities
Shareholders funds
Accounts payable & deferred tax
Borrowings - long term
Borrowings - short term

Debt: equity

Dec-04
Rm

Dec-03
Rm

1259.8
164.4
801.4
3326.2
817.7
170.9
6540.4

1145.1
177.8
684.9
2534.7
707.5
201.1
5451.1

10.0%
-7.5%
17.0%
31.2%
15.6%
-15.0%

3095.3
1916.4
500.0

1028.7
6540.4

2672.0
1798.4
980.7
5451.1

15.8%
6.6%
n/a
4.9%

49.4%

36.7%

%chg


woolworths holdings limited
cash flow

Cash inflow from trading - retail
Net interest received
Working capital movements
Increase in borrowings

Utilised by:
Tax paid

Distributions paid
Capex
Proceeds from disposals/investment income
Financial services assets
Shares issued

Dec-04
Rm

Dec-03
Rm

494.8
225.5
-118.1
407.1
1009.3

460.2
212.4
-67.5
266.2
871.3

-170.3
-221.8
-207.9
0.7
-456.4
46.4

-1009.3

-175.4
-159.2
-253.4
17.7
-341.6
40.6
-871.3


woolworths holdings limited
cash flow (cont)

cash applied to financial services assets: R456.4m
P ersona l
L oa ns
R95.7m

V isa
R57.8m

WW
Ca rd
R302.9m

capex: R207.9m
Reta il
R135.4m

Oth er
R13.9m

IT
R58.5m


woolworths holdings limited
return on equity/wacc

30%
25%
20%

19.0%

17.5%

16.3%

15%

13.7%

13.7%

12.4%

10%
5%

0%

11.6%

12.9%

18.3%

23.7%

25.7%

27.4%

Jun-00

Jun-01

Jun-02

Jun-03

Jun-04

Dec-04

ROE

WACC

woolworths operating
group


woolworths operating group

retail results (excl financial services)

Revenue
Turnover
Cost of merchandise
Gross profit
Other revenue & interest received
Operating expenses
Operating profit
Interest paid
Net profit before exceptional items
Exceptional items
Net profit before tax
Tax
Net profit after tax
Gross margin - on turnover
Operating margin - on revenue
ROE

Dec-04
Rm
5,559.1
5,539.6

-3,917.1
1,622.5
19.5
-1,185.7
456.3
456.3
456.3
-135.7
320.6

Dec-03
Rm
4,805.4
4,784.6
-3,348.9
1,435.7
20.8
-1,064.9
391.6
391.6
-5.0
386.6
-116.8
269.8

29.3%
8.2%
62.9%

29.9%

8.1%
64.4%

%chg
15.7%
15.8%
17.0%
13.0%
-6.3%
11.3%
16.5%
16.5%
18.0%
16.2%
18.8%


Woolworths operating group

balance sheet (excl financial services)

Property, plant & equipment, investments,
deferred tax
Inventory
Accounts receivable
Cash
Total assets
Accounts payable, provisions and tax
Borrowings
Total shareholder interest

Dec-04
Rm

Dec-03
Rm

%chg

1513.7
705.4
549.8
108.1
2877.0
1754.8
1122.2

1381.6
557.9
459.8
163.5
2562.8
1649.8
913.0

9.6%
26.4%
19.6%
-33.9%
12.3%

6.4%
22.9%


woolworths operations
turnover analysis

Turnover
Clothing and home
Corporate (retail)
Franchise (wholesale) - Local
Franchise (wholesale) - International
Foods
Corporate (retail)
Franchise (wholesale) - Local
Franchise (wholesale) - International
Other - UPN & WFS

Dec-04
Rm

Dec-03
Rm

%chg

5546.0
2685.5
2364.5
233.5

87.5
2753.0
2631.0
104.7
17.4
107.5

4789.6
2422.9
2109.2
189.8
123.9
2282.0
2225.1
42.1
14.8
84.7

15.8%
10.8%
12.1%
23.0%
-29.4%
20.6%
18.2%
148.7%
17.6%
26.9%

financial services results

income statement and balance sheet
Dec-04
Rm

Dec-03
Rm

%chg

283.9
-60.1
223.8
70.4
294.2

266.2
-56.0
210.2
57.3
267.5

6.6%
7.3%
6.5%
22.9%
10.0%

-119.5

-33.8
-28.8
112.1
-32.7
79.4

-112.5
-36.6
-20.9
97.5
-29.2
68.3

6.2%
-7.7%
37.8%
15.0%
12.0%
16.3%

Financial services assets
Funded by:
Borrowings
Equity

3326.2

2534.7

31.2%

1528.7
1797.5
3326.2

980.7
1554.0
2534.7

55.9%
15.7%
31.2%

Yield on average advances
ROE

17.8%
8.9%

22.8%
9.0%

Income
Interest received
Less: Interest paid
Net interest income
Other income
Total income
Expenses
Operating costs

Net bad debts
Increase in bad debt provision
Profit before tax
Tax
Profit after tax


country road limited results
income statement

Revenue
Turnover
Cost of merchandise
Gross profit
Other revenue
Operating expenses
Opera ting profit
Interest paid
Net profit before tax
Gross m arg in - on turnover
Opera ting m arg in - on revenue
ROE
Exchange rate (average for the period R/A$)

Dec-04
A $m
103.9
103.1
-48.7
54.4

0.8
-53.2
2.0
-0.4
1.6

Dec-03
A $m
100.0
98.7
-46.8
51.9
1.3
-52.2
1.0
-0.4
0.6

52.8%
1.9%
6.0%

52.6%
1.0%
2.4%

4.45

4.93

%chg
3.9%
4.5%
4.1%
4.8%
-38.5%
1.9%
100.0%
166.7%


country road limited results
balance sheet

Assets
Property, plant & equipment
Trademarks*
Inventory
Accounts receivable
Cash
Equity and liabilities
Shareholders funds
Accounts payable & provisions

Dec-04
A$ m

Dec-03
A$ m

%change

26.8
11.1
22.0
12.2
14.4
86.5

25.3
11.3
25.0
12.5
7.4
81.5

5.9%
-1.8%
-12.0%
-2.4%
94.6%
6.1%

54.3
32.2
86.5

50.8
30.7
81.5

6.9%
4.9%
6.1%

4.36

5.08

* eliminated at WHL level
Exchange rate at balance sheet date (R/A$)


country road limited results
cash flow statement

Cash generated from operations
Working capital movements
Interest paid
Taxation received
Retained from operations
Capital expenditure
Net cash inflow / (outflow)
Opening cash balance
Closing cash

Dec-04
A$m

Dec-03

A$m

5.9
0.9
-0.3
6.5
-3.5
3.0
11.4
14.4

4.3
-3.5
-0.4
0.1
0.5
-3.5
-3.0
10.4
7.4


woolworths holdings limited

Pro-forma financial effects of the securitisation
and share repurchase as per the circular

HEPS
EPS
Diluted EPS

NAV and TNAV per
ROE (%)

WANOS (million)

B efore the
securitisa tion a nd
the schem e - June-04
(cents)

A fter the
securitisa tion,
before the schem e
(cents)

A fter the
schem e
(cents)

%chg

78.6
77.4
75.3
328.3
25.7

76.5
75.3
73.3

328.3
25.1

79.5
76
73.7
237.2
38.4

3.9
0.9
0.7
-27.8
53.0

No.

No.

No.

No.

861.2

861.2

765.3

95.9

clothing & home


clothing and home

turnover and growth

R 3,000

20%

17%

18%

R 2,686

R 2,500

13%

R 2,000
R 1,500
R 1,000

R 1,654

R 2,423

16%
14%

R 2,185

12%

R 1,864
11%

11%

4%

10%
8%
6%
4%

R 500

2%
R0

0%

Dec-00

Dec-01

Dec-02

Turnover

Dec-03

Dec-04

Growth rate

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


clothing and home
rlc 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%


clothing and home
performance

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 home
the way forward

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 offshore
sourcing


clothing and home
the way forward

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