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woolworths holdings limited

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)

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woolworths holdings limited

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  1. 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%)

  2. 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 

  3. 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

  4. woolworths holdings limited results income statement *Prior year figures restated

  5. woolworths holdings limited results expenses analysis R262.1m R609.8m R1,449.6m R1,195.6m R3,517.1m

  6. 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 -R243,0m Impact on Headline earnings -R24,6m -R 26,5m Impact on Headline Earnings per Share -2,9 cps -3,1 cps

  7. woolworths holdings limited results HEPS and dividend cover *Prior year figures restated for AC105 Compound HEPS growth: 33.3% (5 years)

  8. woolworths holdings limited results balance sheet

  9. 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

  10. woolworths holdings limited results cash flow

  11. woolworths holdings limited results cash flow (cont.) growth in woolworths financial services assets R722.0m capex spend R385.9m

  12. woolworths holdings limited results return on equity / wacc

  13. woolworths retail results income statement (excluding financial services) * *Prior year figures restated

  14. woolworths retail results balance sheet (excluding financial services)

  15. woolworths operations turnover analysis

  16. financial services results income statement & balance sheet

  17. country road results income statement Change in accounting policy for distribution costs included in inventory: A$0.9m

  18. country road limited results balance sheet * eliminated at Holdings level

  19. clothing and home turnover & growth • 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)

  20. clothing and home turnover & growth • Product deflation with volume growth

  21. 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

  22. clothing and home implementation Value = innovation, quality and price • Strategic sourcing unit to drive value and differentiation • Technological innovation • Supplier base rationalised • Appropriate imports

  23. Fashion Key Core clothing and home implementation Focus on the core customer – design-led buying 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 20% 80%

  24. clothing and home sustainable annuity growth Availability in core • 50% of turnover on replenishment • Increase annuity opportunity

  25. foods turnover & growth • 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%)

  26. 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

  27. foods rlc market share Source: AC Nielsen

  28. foods food retailers growth rates Source: AC Nielsen

  29. 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

  30. 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

  31. foods sustainable annuity growth Improve availability • Demand forecasting system – Feb 06 • In line with expectations

  32. financial services woolworths card • Book value growth of 19.3% to R2.6bn (2004 : R2,1bn) • Customer numbers growth of 8.1% to 1.2m (2004 : R1,1m)

  33. financial services personal loans • Book value growth of 25.4% to R725m (2004 : R578m) • Customer numbers growth of 15.7% to 147’000 (2004 : 127’000)

  34. financial services visa credit card • Book value growth of 73.2% to R310m (2004: R179m) • Customer numbers growth of 58.0% to 79’000 (2004 : 50’000)

  35. financial services net bad debt • Net bad debt levels in line with expectations • Controlled growth strategy

  36. woolworths financial services credit statistics JuneJune 2005 2004 Growth in credit sales 19.8% 20.6% 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% 9.7%

  37. 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

  38. woolworths operations trading space as at

  39. woolworths operations number of stores • Marginal clothing stores to have higher hurdle rates

  40. 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 

  41. 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)

  42. 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

  43. 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

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