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february 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.

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february 2005

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  1. woolworths holdings limited february 2005 presentation to investment analysts

  2. woolworths holdings limited agenda • Highlights • Financial review • Operational review • Clothing and home • Foods • Financial services • Trading space • Country Road • Prospects

  3. 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

  4. woolworths holdings limited trading environment • Buoyant trading conditions in SA • Low inflation • Lower interest rates • Emerging market growth • Consumer spending in Australia slowed slightly

  5. woolworths holdings limited income statement

  6. woolworths holdings limited HEPS, DPS and cover

  7. woolworths holdings limited balance sheet

  8. woolworths holdings limited cash flow

  9. woolworths holdings limited cash flow (cont) cash applied to financial services assets: R456.4m capex: R207.9m

  10. woolworths holdings limited return on equity/wacc

  11. woolworths operating group

  12. woolworths operating group retail results (excl financial services)

  13. Woolworths operating group balance sheet (excl financial services)

  14. woolworths operations turnover analysis

  15. financial services results income statement and balance sheet

  16. country road limited results income statement

  17. country road limited results balance sheet

  18. country road limited results cash flow statement

  19. woolworths holdings limited Pro-forma financial effects of the securitisation and share repurchase as per the circular

  20. clothing & home

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

  22. 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%

  23. 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

  24. 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

  25. 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

  26. clothing and home performance & the way forward • homeware • performance • Performed well in competitive market • the way forward • Continued focus on quality, range construction and value

  27. foods

  28. foods turnover and growth Comparable growth of 12.8% Inflation averaged 3.3% (Dec ’03 inflation of 8.6%)

  29. 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% foods rlc market share

  30. foods performance • 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

  31. foods the way forward • Improve availability of core • RDF system – forecasting • 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

  32. financial services

  33. financial services woolworths 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%)

  34. financial services personal loans • Personal loans increased by 33.5% to R670m • Number of accounts increased by 16% to 137 000

  35. financial services visa card • Visa card increased by 77.7% to R234m • Number of accounts increased by 40% to 56 000

  36. financial services the way forward • 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 acts – positive • Evaluating options to improve returns • Exit unit trust

  37. woolworths operating group selling

  38. woolworths operations trading space

  39. woolworths operations trading space • Store development on track • Modernisation plan on track • Trading space opportunities • Cannibalisation and capacity • Trade density potential

  40. 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

  41. country road limited

  42. country road limited performance • Strategic decisions over last 18 months starting to deliver • 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

  43. country road limited the way forward • 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 of seasons

  44. woolworths holdings limited prospects

  45. woolworths holdings limited prospects • 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

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