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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

woolworths holdings limited

february 2005

presentation to

investment analysts

woolworths holdings limited
woolworths holdings limited

agenda

  • Highlights
  • Financial review
  • Operational review
    • Clothing and home
    • Foods
    • Financial services
    • Trading space
    • Country Road
  • Prospects
woolworths holdings limited1
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 limited2
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 limited4
woolworths holdings limited

HEPS, DPS and cover

woolworths holdings limited7
woolworths holdings limited

cash flow (cont)

cash applied to financial services assets: R456.4m

capex: R207.9m

woolworths holdings limited8
woolworths holdings limited

return on equity/wacc

woolworths operating group
woolworths operating group

retail results (excl financial services)

woolworths operating group1
Woolworths operating group

balance sheet (excl financial services)

woolworths operations
woolworths operations

turnover analysis

financial services results
financial services results

income statement and balance sheet

country road limited results2
country road limited results

cash flow statement

woolworths holdings limited9
woolworths holdings limited

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

clothing and home
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%)

clothing and home1
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 home2
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 home3
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 home4
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
clothing and home5
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
foods
foods

turnover and growth

Comparable growth of 12.8%

Inflation averaged 3.3% (Dec ’03 inflation of 8.6%)

foods1
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

foods2
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
foods3
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
financial services
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%)
financial services1
financial services

personal loans

  • Personal loans increased by 33.5% to R670m
  • Number of accounts increased by 16% to 137 000
financial services2
financial services

visa card

  • Visa card increased by 77.7% to R234m
  • Number of accounts increased by 40% to 56 000
financial services3
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
woolworths operations2
woolworths operations

trading space

  • Store development on track
  • Modernisation plan on track
  • Trading space opportunities
    • Cannibalisation and capacity
    • Trade density potential
slide40

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
country road limited
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
country road limited1
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
woolworths holdings limited10
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