woolworths holdings limited another year of continued growth
- Slides: 54
woolworths holdings limited another year of continued growth • Revenue up 15. 1% to R 13. 0 bn • Operating profit up 24. 3% - R 1. 3 bn • Operating profit margin widened from 9. 0% to 9. 7% • Net profit before tax up 23. 7% - R 1. 1 bn • Headline earnings per share up 22. 0% - 92. 1 cps (pre adj: 95. 0 cps) • Distribution to shareholders up 40. 3% - 54. 0 cps • Cover ratio down from 1. 9 to 1. 7 (pre adj: 1. 8) • ROE of 33. 5% (2004 : 27. 4%)
woolworths holdings limited progress • Enhance shareholders’ ROE • • Woolworths card book securitised Share repurchase returned R 1 bn 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
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
woolworths holdings limited results income statement *Prior year figures restated
woolworths holdings limited results expenses analysis R 262. 1 m R 609. 8 m R 1, 449. 6 m R 1, 195. 6 m R 3, 517. 1 m
woolworths holdings limited results expenses analysis Impact of change in interpretation of AC 105: 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 Impact on Headline earnings -R 24, 6 m -R 243, 0 m -R 26, 5 m Impact on Headline Earnings per Share -2, 9 cps -3, 1 cps
woolworths holdings limited results HEPS and dividend cover *Prior year figures restated for AC 105 Compound HEPS growth: 33. 3% (5 years)
woolworths holdings limited results balance sheet
financial services results securitisation • R 2, 416 m of in-store card book receivables securitised in Account On Us (Pty) Ltd • Funded by: • R 1, 900 m AAA rated notes issued • R 335 m 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 AC 412
woolworths holdings limited results cash flow
woolworths holdings limited results cash flow (cont. ) growth in woolworths financial services assets R 722. 0 m capex spend R 385. 9 m
woolworths holdings limited results return on equity / wacc
woolworths retail results income statement (excluding financial services) * *Prior year figures restated
woolworths retail results balance sheet (excluding financial services)
woolworths operations turnover analysis
financial services results income statement & balance sheet
country road results income statement Change in accounting policy for distribution costs included in inventory: A$0. 9 m
country road limited results balance sheet * eliminated at Holdings level
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)
clothing and home turnover & growth • Product deflation with volume growth
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
clothing and home implementation Value = innovation, quality and price • Strategic sourcing unit to drive value and differentiation • Technological innovation • Supplier base rationalised • Appropriate imports
clothing and home implementation Focus on the core customer – design-led buying 20% Fashion Key 80% Core 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
clothing and home sustainable annuity growth Availability in core • 50% of turnover on replenishment • Increase annuity opportunity
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%)
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
foods rlc market share Source: AC Nielsen
foods food retailers growth rates Source: AC Nielsen
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
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
foods sustainable annuity growth Improve availability • Demand forecasting system – Feb 06 • In line with expectations
financial services woolworths card • Book value growth of 19. 3% to R 2. 6 bn (2004 : R 2, 1 bn) • Customer numbers growth of 8. 1% to 1. 2 m (2004 : R 1, 1 m)
financial services personal loans • Book value growth of 25. 4% to R 725 m (2004 : R 578 m) • Customer numbers growth of 15. 7% to 147’ 000 (2004 : 127’ 000)
financial services visa credit card • Book value growth of 73. 2% to R 310 m (2004: R 179 m) • Customer numbers growth of 58. 0% to 79’ 000 (2004 : 50’ 000)
financial services net bad debt • Net bad debt levels in line with expectations • Controlled growth strategy
woolworths financial services credit statistics June 2005 Growth in credit sales June 2004 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%
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
woolworths operations trading space as at
woolworths operations number of stores • Marginal clothing stores to have higher hurdle rates
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
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 : R 500 m (currently in year 3)
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 • R 450 m 3 year all DC’s investment programme
country road trading performance • Australia • • • Warm winter Heavy discounting Results • • • Sales up 9. 0% to A$208. 5 m Unit sales growth in excess of 30% Gross margin declined from 53. 3% to 52. 2% Operating profits up 14. 3% to A$4. 0 m Increased costs from air freight amounted to A$3. 0 m
country road strategy • Strategy bedded down • Retek • Design team • Pricing • Consolidation of wholesale operation • Lead times reduced
strategy and prospects • Clothing and Home further implementation • Foods sustainable growth and innovation • Financial Services sustainable annuity growth • Grow annuity parts of the business • Continue to deliver real growth in earnings
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