woolworths holdings limited economy under stress economy under - - PowerPoint PPT Presentation
woolworths holdings limited economy under stress economy under stress Retail sales declining - top end hit hard - international - flight to value Interest rate increases Return of inflation Accelerating food/fuel prices
Real growth in spending power per LSM –2008
19.5% 15.0% 13.2% 6.1%
0% 5% 10% 15% 20% 25% LSM 1 LSM 2 LSM 3 LSM 4 LSM 5 LSM 6 LSM 7 LSM 8 LSM 9 LSM 10
Source: Cadiz Securities Note: The same CPIX forecast was used across all LSMs. Higher inflation in lower LSMs could alter the result above
12mma mark market s et share are 9.2% 15.3% 2008 2008 9.2% 15.5% 2007 2007 8.5% 15.1% 2006 2006 Food Food
(per N ielsen)
Clothing and Clothing and foo footwear wear
(per RLC)
up 6.2% to R1.6 billion (up 0.5% excluding week 53)
9.9% 9.5% O perating margin - on revenue
BEE IFRS 2 charge 6. 6.3 1 467 1 467 1 559 1 559 Profit before exception Profit before exceptional l items items 28.6% 36.7% Effective tax rate 34.4% 34.8% Gross margin - on turnover (12.4) (12.4) 1 087 1 087 952 952 Profit after tax Profit after tax 27.1 435 553 Tax (1 (1.1) .1) 1 522 1 522 1 505 1 505 Profit before tax Profit before tax 55
32.5 379 502 Finance costs 11.6 11.6 1 846 1 846 2 061 2 061 O perating prof O perating profit it 22.6 5 396 6 616 Expenses 33.5 1 265 1 689 O ther revenue 16.9 16.9 5 977 5 977 6 988 6 988 Gross profit Gross profit 14.7 11 400 13 077 Cost of sales 15.5 15.5 17 377 17 377 20 065 20 065 Turnover Turnover 16.7 18 642 21 754 Revenue % % ch change ange J un 2007 J un 2007 Rm Rm J un 2008 J un 2008 Rm Rm
1. 1. Gross profit margin Gross profit margin – increased due to Country Road 2. 2. O perating m O perating margin rgin – impacted mainly by bad debts 3. 3. Taxation Taxation – The effective tax rate increased by 8.1%. This was mainly due to: STC on share buyback 1.3% Impact of Country Road deferred tax last year 4.2% Sale of land last year 0.5% N on-deductible BEE charge 0.9% The lower standard tax rate was offset by the related revaluation of deferred tax assets
1.3 553 560 H2 112.0 25 53 H2 60.0 30 48 H1 (23.6) 89 68 H1 (1.9) 667 654 H1 6. 6.3 1 467 1 467 1 559 1 559 Profit Profit before BEE, exceptional item and before BEE, exceptional item and tax tax
W eek 53 (10.7) 103 92 H2 (16.7) 192 160 Financial Services 83.6 55 101 Country Road 6.4 1 220 1 298 SA Retail % % ch change ange J un 2007 J un 2007* Rm Rm J un 2008 J un 2008 Rm Rm
* Restated
5. 5.3 1 233 1 233 1 298 1 298 O perating prof O perating profit it (100) 13
7.7% 7.1% O perating margin - on revenue 63.6% 50.5% Return on equity 32.3% 32.0% Gross margin - on turnover 6. 6.4 1 220 1 220 1 298 1 298 Profit before exception Profit before exceptional l item item 14.3 4 034 4 611 Expenses * 18.9 95 113 O ther revenue 12.1 12.1 5 172 5 172 5 796 5 796 Gross profit Gross profit 13.8 10 833 12 333 Cost of sales 13.3 13.3 16 005 16 005 18 129 18 129 Turnover Turnover 13.3 16 100 18 242 Revenue % % ch change ange J un 2007 J un 2007 Rm Rm 52 weeks 52 weeks J un 2008 J un 2008 Rm Rm 53 weeks 53 weeks
* Excludes BEE charge
1. 1. Turnover Turnover 53 weeks 53 weeks 52 weeks 52 weeks Total Comparable Total Comparable Total Comparable Total Comparable Clothing and GM up 6.1% 3.1% 4.4% 1.6% Food up 18.8% 9.9% 16.7% 7.8% Total up 13.3% 7.3% 11.4% 5.3% 2. 2. Gross profit Gross profit – 0.3% drop in the gross profit margin due to mark-downs/waste 3. 3. Expenses Expenses – second half expense growth of 10.6% below turnover growth of 12.9% 4. 4. O perating m O perating margin rgin – impacted by lower gross profit margin and higher full year expenses 5. 5. RO E RO E – impacted by reduction in operating margin
14.3% 10.0% Return on equity 12.6 5 064 5 704 Average gross financial services assets Income Income 32.7 19.9 1 009 23.5 1 339 Interest received 32.7 2.0 101 2.3 134 Movement in provisions 80.4 4.9 250 7.9 451 N et bad debts 3. 3.8 7.2 11.0 11.0 7.3 14.2 25.2 25.2 1.9 3.4 % to % to book book (16.7) (16.7) 192 192 2. 2.8 160 160 Profit before tax Profit before tax 37.6 364 8.8 501 Finance costs 18.9 18.9 556 556 11.6 11.6 661 661 O perating prof O perating profit it 13.3 368 7.3 417 O perating costs* 39.4 719 17.6 1 002 Expenses Expenses 30.4 30.4 1 275 1 275 29.2 29.2 1 663 1 663 (3.2) 94 1.6 91 O ther income - internal 35.5 172 4.1 233 O ther income - external % chan change ge J un 2007 J un 2007 Rm Rm % to % to book book J un 2008 J un 2008 Rm Rm
* Excludes BEE charge
1. 1. Gross financial services assets Gross financial services assets – grew by 12.6% on average, but closing books flat on last year 2. 2. Interest received Interest received – driven by average book growth and increase in yields of 3.6% 3. 3. O ther inco O ther income - me - external external – continued focus on non-interest revenue including collection fees 4. 4. O ther inco O ther income - me - internal internal – in-store card sales slightly lower than last year 5. 5. N et bad debts N et bad debts – up on last year from 4.9% to 7.9%, but stable in H2 6. 6. Provisions Provisions – increased from 5.36% to 7.63% of the total books of gross assets 7. 7. O perating costs O perating costs – maintained as a % to book, despite adding collection capacity in H2 8. 8. Finance costs Finance costs – up slightly on a % to book basis due to higher interest rates, offset by marginally lower gearing 9. 9. Profit before tax Profit before tax – the books other than VISA had reasonable profit growth despite bad debts 10. 10. RO E RO E – down due mainly to higher bad debts
4.0% 5.0% O perating margin - on revenue 84.0 84.0 54.9 54.9 101.0 101.0 Profit before tax (Rm) Profit before tax (Rm) 5.7 6.6 Average exchange rate (R/A$) 141.0 30.0 72.3
14.2 188.6 215.4
(85.8) 19.0 2.7
15.1% 14.8% Return on equity (A$) 58.1% 61.1% Gross margin - on turnover 54.8 54.8 9. 9.3 14.4 14.4 Profit before tax Profit before tax (33.3) 0.3 0.2 Finance costs 52.1 52.1 9. 9.6 14.6 14.6 O perating prof O perating profit it 26.3 131.3 165.8 Expenses 7.1 2.8 3.0 O ther revenue 28.5 28.5 138.1 138.1 177.4 177.4 Gross profit Gross profit 13.6 99.5 113.0 Cost of sales 22.2 22.2 237.6 237.6 290.4 290.4 Turnover Turnover 22.0 240.4 293.4 Revenue % % ch change ange J un 2007 J un 2007 A$m A$m J un 2008 J un 2008 A$m A$m
1. 1. Turnover Turnover – Comparable retail store sales up by 8.4%. Concession sales are for a full year vs 5 months last year. W holesale now wound down. 2. 2. Gross profit Gross profit – Gross profit margin grew by 3.0%, mainly due to lower mark-downs and better sourcing 3. 3. Expenses Expenses – The increase in expenses is mainly due to the new concession format and the payment of incentives. Comparable costs were well managed, increasing by only 4.2%. 4. 4. Profit before tax (Rm) Profit before tax (Rm) – profit growth amplified by weaker Rand 5. 5. RO E RO E – impacted by high cash levels and intangible assets
Equity and Equity and liabilities liabilities 7. 7.8 10 443 10 443 11 262 11 262 37.9% 37.9% 40.8% 40.8% Debt ratio (debt/(debt+ equity) Debt ratio (debt/(debt+ equity) 7. 7.8 10 443 10 443 11 262 11 262 16.0 3 962 4 595 Borrowings (3.4) 3 192 3 084 Accounts payable 8.9 3 289 3 583 Shareholders’ funds 94.8 424 826 Cash 11.3 1 028 1 144 Accounts receivable and deferred tax (5.3) 5 722 5 420 Financial services assets 14.0 1 203 1 371 Inventory (5.7) 70 66 Export partnerships
106 Investment property 23.2 1 890 2 329 Property, plant and equipment, intangible assets and loans Assets Assets % % ch change ange J un 2007 J un 2007 Rm Rm J un 2008 J un 2008 Rm Rm
1. 1. Property, plant and equipment Property, plant and equipment – refer to investment slide 2. 2. Inventory Inventory – increased in line with turnover 3. 3. Financial services assets Financial services assets – down on last year due to low card sales and conservative account acquisition 4. 4. Cash and b Cash and borr rrowings
R2 368m (R24m) (R200m) (R379m) (R636m) (R747m) (R490m) R70m (R638m) (1 000) (500) 500 1 000 1 500 2 000 2 500 3 000 EBITDA Capex Disposals Interest paid Tax Dividends paid W orking capital and similar movements Share buybacks Applied to FS assets
Fin Financial services assets ncial services assets R24m (J un 07: R1 182m)
W W card Personal loans VISA Retail IT O ther (including property)
Ca Capex pex R638m (J un 07: R649m)
421 421 279 279 91 91 50 50 126 126 321 321 100 200 300 400 500 600 700 J un 2008 J un 2007 Rm Rm (28) 633 87 200 (35) 349 (200) 200 400 600 800 1 000 1 200 J un 2008 J un 2007 Rm Rm
Actual vs viability pre-tax Actual vs viability pre-tax cash cash return on investment ( return on investment (CRO I) CRO I)
(net of transfers) yea years open
Actual CRO I Viability CRO I
(4.8%) 63.1% 85.9% (5.7%) 17.2% 30.5%
0% 20% 40% 60% 80% 100% 1 2 1 2 3
15 3 68 Total
2007
28 2006 15 15 15 2005 N umber N umber of stores
Stores open minimum of 1 full year. O pening dates from 1 J uly 2004 to 30 J une 2007.
66 170 68 Total 18 711 25 2007 28 731 28 2006 18 728 15 2005 Ad Additional m2 ditional m2 N umber N umber of stores
Year opened Year opened 0% 5% 10% 15% 20% 25% 30% 35% Actual IRR Actual IRR Viability IRR iability IRR Required return Required return Risk premium Risk premium W ACC W ACC
Actual vs viability projected in Actual vs viability projected internal rate of return (IRR ternal rate of return (IRR)
(net of transfers)
Latent profit
Food st Food stores
Trading density Direct profit on sales 20 000 30 000 40 000 50 000 60 000 70 000 80 000 90 000 100 000 110 000 < 1 year 1 full year 2 full years 3 full years 4 full years R / m 2 2% 4% 6% 8% 10% 12% 14% 16% 18%
15 743 30 10 734 25 6 947 6 033 11 660 m2 18 15 28 N umber of stores
RO E W ACC
18.3% 24.7% 27.4% 33.5% 34.8% 35.1% 27.6% 16.3% 13.8% 13.8% 11.3% 11.8% 13.3% 14.8% 12.3% 17.5%
0% 5% 10% 15% 20% 25% 30% 35% 40% J un-01 J un-02 J un-03 J un-04 J un-05 J un-06 J un-07 J un-08
cps times
HEPS DPS Dividend cover Dividend cover on adjusted HEPS
61.1 75.5 89.4 105.0 115.7 29.0 38.5 54.0 63.0 76.0 79.0 127.8 3. 3.0 2. 2.3 1. 1.5 2. 2.2 2. 2.2 1. 1.9 1. 1.6 1. 1.6 10 20 30 40 50 60 70 80 90 100 110 120 130 140 2003 2004 2005 2006 2007 2008
1.0 1.5 2.0 2.5 3.0 3.5
V and excluding special dividends / share buybacks) to 33.5%
Gross book value (Rm) N umber of customers (000's) N et bad debt * (%) * 12mma excluding cost of recoveries
2 269 2 696 3 109 3 743 3 708 1 125 1 217 1 393 1 600 1 579 1.74% 2.28% 2.77% 3.65% 6.73% 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000 J une 04 J une 05 J une 06 J une 07 J une 08 0% 2% 4% 6% 8% 10% 12%
Gross book value (Rm) N umber of customers (000's) N et bad debt * (%) * 12mma excluding cost of recoveries
608 763 930 1 129 1 094 127 147 169 190 184 1.82% 1.55% 1.98% 2.67% 4.86% 1 000 2 000 3 000 4 000 J une 04 J une 05 J une 06 J une 07 J une 08 0% 2% 4% 6% 8% 10% 12%
Gross book value (Rm) N umber of customers (000's) N et bad debt * (%) * 12mma excluding cost of recoveries
187 326 629 978 50 79 129 169 162 1 065 3.81% 5.13% 4.60% 10.87% 6.76% 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000 J une 04 J une 05 J une 06 J une 07 J une 08 0% 2% 4% 6% 8% 10% 12%
(1 680) (1 680) Debt after trans bt after transaction ction/distributi istribution
(retai (retail) l) (2 800) O ther group debt (approximate) 1 120 N et cash available to retire other debt (2 250) Proposed distribution/buyback 3 370 3 370 Cash av sh availab ailable for distribution e for distribution (2 179) AO U notes redeemed 5 549 N et proceeds (30) Transaction costs (estimate) 5 579 5 579 Total cash proceeds Total cash proceeds 4 704 84% Gearing 5 600 Financial services assets 875 875 Proceeds f Proceeds for 50%+ of equity r 50%+ of equity Rm Rm Rm Rm 397 397 Profit on d Profit on disposal sposal (30) Transaction costs (estimate) 875 Proceeds (448) 50% of 16% Book value of equity sold Profit on d Profit on disposal sposal
6-12 months 7.
6-18 months 6.
5.
6-12 months 4.
6, 12, 18 months 3.
2.
1.
Pr Progress
Timelines Timelines
good better best classic modern contemporary full line Food stand alone textile only race gender age
loyal finest cross shopper instant gourmet kids come first
Comfy Conservatives Finest Cross Shopper Kids Come First Budget Families All About Me
Protect at all costs and entrench W W across all lifestyle needs Become fashion destination Regain Loyalty Address price perception
Mr Practical
Protect kids spend & opportunity to grow
14% of ‘non-food’ revenue 22% of ‘non-food’ revenue 19% of ‘non-food’ revenue 11% of ‘non-food’ revenue 23% of ‘non-food’ revenue 11% of ‘non-food’ revenue
Grow relevance
2nd half 1st half 7.3% 9.6% % pric % price e mo movem vement nt Clothing pric Clothing pricing ing
Food pricing Food pricing - % premium of W oolworths KVI basket (March – J une 2008)
0% 2% 4% 6% 8% 10% 12%
1 2
a r
1 9
a r
2 6
a r
2
p r
9
p r
1 6
p r
2 3
p r
3
p r
7
a y
1 4
a y
2 1
a y
2 8
a y
4
u n
1 1
u n
1 8
u n
2 5
u n
Premium to Store A Premium to Store B Premium to Store C
Good Good 59% 59% Bet Better ter 35% 35% Bes Best 6% 6% Contemporary Contemporary 10% 10% Moder Modern 35% 35% Classic Classic 55% 55%
W W headquarters assortments W W headquarters assortments Modern classic classic collection W W headquarters assortments W W headquarters assortments classic classic collection
SA Designers SA Designers
Modern
Innovation to drive category growth – still offering customer value for money.
new lines launched from J ul – Dec 08 (LY: 543)
lines upgraded from J ul – Dec 08 (LY: 413)
Re-engine ngineering ering core products – more pragmatic innovation
main sho shop
business journey
customer to drive
Clothing
Food
buying ing and planning planning
design
Key people in place
upskilling
disciplined process from strategy to selling – 26 Step W oolworths Merchandise Cycle.
Sourcing strategy launched
Improve productivity uctivity in comparable stores
Format strategy
Delivery of new planning system to leverage O 2
Stop non–priority projects
spending patterns ng patterns
Sharpen pric n prices, but strengthen quality and innovation
N ew ranges anges – Country Road, Twist, O rganic, yoghurt
Fitter ter and more competit competitive Food business
cost growth growth hard
store r
llout
servic ice levels e levels
the W oolw
nce
However
2007 2007 2008 2008 2007 2007 2008 2008 2007 2007 2008 2008 2007 2007 2008 2008 2007 2007 2008 2008 Rm Rm 6 616 6 616
2 077 584 584 2 507 2 507 1 074 1 074 374 374 Total Total 738 738
215 46 (94) (94) (94) 719 719 126 163 352 67 5 6 4 034 4 034 (126) 1 553
586 265 5 397 5 397 (91) (91) 1 093 1 093 1 002 1 002 4 612 4 612
(144) Allocated costs 1 793 1 793 (91) 206 179 1 783 O ther 352 352
2 129 2 129 457 81 1 969 Employment* 806 806 371 8 695 O ccupancy 317 317 59 6 309 Depreciation Intragroup Intragroup Country Ro Country Road ad Financial Financial Services Services SA Retail SA Retail
* Excludes BEE charge
Equity Equity and liabilities and liabilities 15.8 15.8 3 987 3 987 4 616 4 616 15.8 15.8 3 987 3 987 4 616 4 616 (6.8) 2 898 2 700 Accounts payable 75.9 1 089 1 916 Shareholders’ funds 268.4 98 361 Cash 16.3 486 565 Accounts receivable 12.8 1 023 1 154 Inventory 6.6 2 380 2 536 Property, plant and equipment, investments, deferred tax, loans and goodwill Assets Assets % % change change J un 2007 J un 2007 Rm Rm J un 2008 J un 2008 Rm Rm
13.3 13.3 13.6 50.0 18.9 (68.3) 72.7 17.8 18.8 18.8 13.2 (1.2) 6.7 6.1 6.1 % % change change 182 206 Franchise (wholesale) – international 667 659 Franchise (wholesale) – local 16 100 16 100 18 242 18 242 81 92 O ther revenue 14 21 Interest income 302 359 Logistics and other 167 53 Franchise (wholesale) – international 428 739 Franchise (wholesale) – local 8 123 9 568 Corporate (retail) 13.1 13.1 8 718 8 718 10 360 10 360 Food Food 6 136 6 545 Corporate (retail) 8.5 8.5 6 985 6 985 7 410 7 410 Clothing and General merchandise Clothing and General merchandise % % inflation inflation J un 2007 J un 2007 Rm Rm J un 2008 J un 2008 Rm Rm
50.0 111
Pharmacy 7.4 5 401 21.0 4 157 5 031 Coffee 8.0 5.1 15.1 14.2
7.5 6.1 8.3 8.3 % % change change (31.1) 17.8 15.4 14.4 (8.7) 1.0 7.3 4.8 7.3 7.3 % change change 2 034 9 691 130 547 142 272 27 737 59 512 282 805 370 054 517 838 517 838 Pr Projected
J une 2009 J une 2009 m2 m2 332 870 348 687 Clothing and General merchandise 108 845 124 559 Food 2 736 1 884 Franchise International 7 827 9 221 Franchise SA 98 282 113 454 Corporate 30 386 27 737 Franchise International 57 276 57 870 Franchise SA 245 208 263 080 Corporate 445 872 445 872 478 351 478 351 Tot Total foot l footage age J un 2007 J un 2007 m2 m2 J un 2008 J un 2008 m2 m2
42 48 79 133 6 117 256 425 425 J une 2009 J une 2009 N o. N o. Pr Projected
(5) 14 (1) 17 1 10 28 36 36 Growth Growth N o. N o.
2 19
28 40 40 Growth Growth N o. N o. 200 228 Corporate 47 42 Franchise International 24 38 Franchise Engen 78 77 Franchise SA 97 114 Food 5 6 Clothing and General merchandise 98 108 Full-line 349 349 385 385 Tot Total stores al stores J un 2007 J un 2007 N o. N o. J un 2008 J un 2008 N o. N o.
41.9% 36.6% Clothing and General merchandise 32.2% 32.2% 27.2% 27.2% Tot Total 24.3% 21.1% Food J un 2007 J un 2007 J un 2008 J un 2008 % of sales spent on W oolworths card % of sales spent on W oolworths cards
Equity Equity and liabilities and liabilities (0.2) (0.2) 5 907 5 907 5 915 5 915 81.3% 81.3% 80.0% 80.0% Gearing rati Gearing ratio (0.2) (0.2) 5 907 5 907 5 915 5 915 16.0 3 962 4 595 Borrowings 3.8 97 101 Accounts payable, provisions and tax (35.1) 1 848 1 219 Shareholders’ funds 43.4 208 299 Cash (2.1) 5 536 5 420 Financial services assets 9.0 163 196 Plant and equipment, deferred tax, loans and accounts receivable Assets Assets % % change change J un 2007 J un 2007 Rm Rm J un 2008 J un 2008 Rm Rm
6.1 7.6 Period-end exchange rate (R/A$)
11.2 Trademarks * Equity Equity and liabilities and liabilities 5.3 5.3 103.7 103.7 109.2 109.2 5.3 5.3 103.7 103.7 109.2 109.2 13.0 34.7 39.2 Accounts payable and provisions 1.4 69.0 70.0 Shareholders’ funds 13.0 19.3 21.8 Cash 5.1 13.7 14.4 Accounts receivable (2.7) 29.4 28.6 Inventory 10.3 30.1 33.2 Property, plant and equipment Assets Assets % % change change J un 2007 J un 2007 A$ A$m J un 2008 J un 2008 A$ A$m
* Eliminates on consolidation
83.6 83.6 55 55 101 101 Pr Profit before tax
(50.0) 2 1 Finance costs 78.9 78.9 57 57 102 102 O perati erating pro g profit it 48.1 738 1 093 Expenses 162.5 8 21 O ther revenue 49.2 49.2 787 787 1 174 1 174 Gross profit Gross profit 31.2 567 744 Cost of sales 41.7 41.7 1 354 1 354 1 918 1 918 Turnover Turnover 42.4 1 362 1 939 Revenue % % change change J un 2007 J un 2007 Rm Rm J un 2008 J un 2008 Rm Rm