whl_analyst_presentation_2016 - 16 WOOLWORTHS HOLDINGS LIMITED 2016 INTER IM R ESULTS WHL 1 PRESENTATION OUTLINE REVIEW OF THE PERIOD FINANCIAL REVIEW

whl_analyst_presentation_2016 - 16 WOOLWORTHS HOLDINGS...

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Unformatted text preview: ’16 WOOLWORTHS HOLDINGS LIMITED / 2016 INTER IM R ESULTS WHL / 1 PRESENTATION OUTLINE REVIEW OF THE PERIOD FINANCIAL REVIEW STRATEGIC FOCUS OUTLOOK WHL / 2 REVIEW O F TH E PERI O D IAN MO I R WHL / 3 BUILDING A LEADING SOUTHERN HEMISPHERE RETAILER With Woolworths, David Jones and Country Road Group we have a strong position across the southern hemisphere through • Common seasonality • Using scale and global sourcing opportunities to deliver more competitive pricing for our customers • Building on the design and procurement capability established in Woolworths • Leveraging systems, processes and structures to improve efficiency and productivity WHL / 4 DIVERSIFIED EARNINGS BASE OPERATING PROFIT BY SEGMENT (Rm) OPERATING PROFIT BY GEOGRAPHY 43% 57% Australasia Africa H1 2016 3% H1 2015 22% OPERATING PROFIT BY CATEGORY H1 2014 - 500 1000 2000 2500 Woolworths Clothing & GM Woolworths Food** David Jones** Country Road Group * 50% of PAT ** Turnover and concession sales WHL / 5 1500 3000 3500 4000 75% 4500 Woolworths Financial Services* 14% TURNOVER BY SEGMENT 30% 20% 36% Group Clothing & GM WFS* Food GROUP PERFORMANCE • Much improved performance in Clothing • Another above market performance from Food • Good performance from WFS continues • David Jones delivering well ahead of expectations • Country Road Group ahead of market despite underperformance of Country Road womenswear • Turnover and concession sales up 17.1% – up 12.3% excluding David Jones • Adjusted profit before tax up 16.5% WHL / 6 • Clothing sales in South Africa (including Country Road Group brands) up 11.7%, with comparable sales up 8.0% – Good performance by all divisions and brands – Good turnaround in kidswear due to improved value and design • Grew market share in highly competitive market • Gross profit margin increased from 47.3% to 48.1% • Operating margin of 17.9% (vs 17.6% in H1 2015 and 15.9% in H2 2015) • Operating profit up 14.6% WHL / 7 • Strong performance well ahead of the market, with total sales up 12.1% (up 11.7% excluding concession sales) and comparable sales up 5.8% • Growth ahead of the market continues • Gross profit margin increased from 25.2% to 25.4% due to more profitable promotions • O perating margin increased from 6.7% to 7.1% and operating profit up 17.6% WHL / 8 WHL OVERVIEW IAN MOIR 8 WOOLWORTHS HOLDINGS LIMITED FOOD TURNOVER GROWTH Food - Woolworths market (3mma) Woolworths vsvs market growthgrowth (3mma) 18% 16% 14% 12% 10% 8% 6% 4% 2% WHL / 9 15 De c+ 5 +1 ov N O ct +1 5 5 Se p +1 5 Au g +1 5 l +1 Ju 15 Ju n+ 5 ay +1 5 M Ap r+1 5 ar +1 M +1 5 Fe b 15 Ja n+ 14 De c+ 4 +1 ov N ct +1 4 4 O +1 Se p +1 g Au Ju l +1 4 4 0% Woolworths price movement (3mma) CPI (Food & Non-alcoholic Beverages) (3mma) Woolworths sales growth (3mma) Growth in Nielsen Defined Basket (3mma) • T otal sales up 11.2%*, including concession sales, with comparable sales increasing 9.7%* – Growth well ahead of the market – Online sales up 48% to 3.5% of sales • Gross profit margin of 41.6%* – Impacted by weaker A$ and lower intake margin • Contribution to profit across the Group up 19% • Business turnaround well advanced • New CEO from January 2016 * Including 100% of Woolworths brands in David Jones WHL / 10 • Total turnover up 11.9%, well above market growth – Strong, profitable growth in David Jones concession business – Comparable sales in Australasia up 0.1% – 16.0% increase in space – Underperformance of core Country Road womenswear business – Online sales up 28% to 11.6% of sales • Gross profit margin down from 62.3% to 61.0% – Higher markdowns from Country Road womenswear – Impact of depreciating A$ on cost of goods • Operating margin down from 12.6% to 11.8% • Operating profit up 5.2% WHL / 11 FINANCIAL REVIEW REEZA ISAACS WHL / 12 STILL SOME COMPLEXITY IN THE NUMBERS • David Jones in current period for 6 months vs 5 months in prior period • David Jones acquisition debt in place for 5 months in prior period, but higher interest charge due to the equity bridge in place for 2 months • CRG minority interest for 2 months last year • Significant adjusting items last year • Rights offer completed end September 2014; 3 months weighted WANOS impact on EPS and HEPS • Woolworths brands in David Jones are accounted for on a 50/50 profit share basis (“PSV”) WHL / 13 FINANCIAL OVERVIEW WHL / 14 Group turnover and concession sales Up 17.1% to R35.5bn – excluding David Jones Up 12.3% Adjusted profit before tax Up 16.5% to R3.4bn HEPS – Diluted Up 30.8% to 251.7 cps HEPS – Adjusted diluted Up 3.9% to 250.8 cps Interim dividend – scrip dividend option offered Up 37.8% to 133.0 cps ROE 24.6% GROUP INCOME STATEMENT WHL WOOLWORTHS HOLDINGS LIMITED FINANCIAL REVIEW REEZA ISAACS 14 GROUP INCOME STATEMENT Dec 2015 Rm Dec 2014 Rm % change 1 255 1 095 14.6 Woolworths Food 855 728 17.4 WFS (50% of PAT) 129 119 8.4 2 239 1 942 15.3 1 090 1 022 6.7 Country Road Group Profit before interest and tax 632 3 961 555 3 519 13.9 12.6 Finance and other costs Adjusted profit before tax Adjustments Profit before tax Tax Profit after tax (606) 3 355 13 3 368 (939) 2 429 (639) 2 880 (549) 2 331 (684) 1 647 (5.2) 16.5 >100 44.5 37.3 47.5 27.9% 29.3% Woolworths Clothing & GM Woolworths David Jones Effective tax rate WHL / 15 Dec 2015 Dec 2014 Unrealised FX gains 21 36 DJ and CRG transaction and related costs (8) (585) Adjustments 13 (549) Prior year impacted by non-deductible costs GROUP INCOME STATEMENT COMMENTARY Adjustments Unrealised FX gains DJ and CRG transactions and related costs Adjustments Dec 2015 21 (8) 13 Dec 2014 36 (585) (549)  Effective tax rate - Prior year impacted by non-deductible costs WHL / 16 WHL WOOLWORTHS HOLDINGS LIMITED INCOME STATEMENT FINANCIAL REVIEW REEZA ISAACS 15 WOOLWORTHS CLOTHING & GM INCOME STATEMENT Dec 2015 Rm Dec 2014 Rm 6 994 6 218 12.5 3 632 3 278 10.8 Gross profit 3 362 2 940 14.4 Other revenue 11 9 22.2 Expenses 2 119 1 855 14.2 Store costs 1 401 1 237 13.3 718 618 16.2 1 254 1 094 14.6 Gross profit margin - on turnover 48.1% 47.3% Operating profit margin - on turnover 17.9% 17.6% Turnover Cost of sales Other operating costs Operating profit WHL / 17 % change Total Clothing (incl CRG SA) C&GM (excl CRG SA, incl 50% PSV) Comp Price stores move 11.7% 8.0% 6.6% 12.5% 7.9% 6.9% Better promotions, improved markdown performance, and inclusion of PSV Impacted by PSV, marketing and BEEESOS costs INCOME STATEMENT COMMENTARY Turnover Clothing (including CRG SA) C&GM (excl CRG SA, incl 50% PSV) Total 11.7% 12.5% Comp stores 8.0% 7.9% Price move 6.6% 6.9% Gross profit - Better promotions, improved markdown performance, and inclusion of PSV Expenses - Impacted by PSV, marketing and BEEESOS costs WHL / 18 WHL INCOME STATEMENT FINANCIAL REVIEW REEZA ISAACS 16 WOOLWORTHS HOLDINGS LIMITED WOOLWORTHS FOOD INCOME STATEMENT Dec 2015 Rm Dec 2014 Rm % change 12 376 11 041 12.1 (274) (205) 33.7 12 102 10 836 11.7 9 031 8 102 11.5 3 071 2 734 12.3 56 42 33.3 Expenses 2 272 2 049 10.9 Store costs 1 588 1 417 12.1 Other operating costs 684 632 8.2 Operating profit 855 727 17.6 25.4% 25.2% 7.1% 6.7% Turnover and concession sales Concession sales Turnover – own buy Cost of sales Gross profit – own buy Concession and other revenue Gross profit margin - on turnover Operating profit margin - on turnover WHL / 19 Total 12.1% Comp Price stores move 5.8% 5.7% More profitable promotions, offset by lower sweet sales Impacted by new space INCOME STATEMENT COMMENTARY Turnover and concession sales Total 12.1% Comp stores 5.8% Price move 5.7% Gross profit - own buy - More profitable promotions, offset by lower sweet sales Store costs - Impacted by new space WHL / 20 WHL EXPENSES FINANCIAL REVIEW REEZA ISAACS 17 WOOLWORTHS HOLDINGS LIMITED WOOLWORTHS EXPENSES WHL / 21 Dec 2015 Rm Dec 2014 Rm % change Store costs Base New stores 2 989 2 047 942 2 654 1 973 681 12.6 3.8 Other operating costs 1 402 1 250 12.2 Total expenses 4 391 3 904 12.5 Benefit of lower card commissions and improved staff scheduling Impact of PSV, marketing and BEEESOS costs EXPENSES COMMENTARY Base store costs - Benefit of lower card commissions and improved staff scheduling Other operating costs - Impact of PSV, marketing and BEEESOS costs WHL / 22 WHL INCOME STATEMENT FINANCIAL REVIEW REEZA ISAACS 18 WOOLWORTHS HOLDINGS LIMITED WFS INCOME STATEMENT Consolidated pro-forma income statement Dec 2015 Rm % to book Dec 2014 Rm % to book % change Interest income 958 19.4 838 18.7 14.3 Interest paid 274 5.5 243 5.4 12.8 684 13.8 595 13.3 15.0 241 4.8 214 4.8 12.6 443 9.0 381 8.5 16.3 Non-interest revenue 374 7.6 332 7.4 12.7 Operating costs 461 9.3 383 8.6 20.4 356 7.2 330 7.4 7.9 Net interest income Impairment charge Risk-adjusted margin Profit before tax WHL / 23 Average financial services assets 9 893 8 950 Return on equity 28.4% 29.4% 10.5 Portfolio book growth and margin gains on interest rate increases Improvement in portfolio book offset by increase in debt counselling inflows WRewards and NCAA implementation costs Closing book up 7.8% slowdown due to NCAA implementation INCOME STATEMENT COMMENTARY Net interest income - Portfolio book growth and margin gains on interest rate increases Impairment charge - Improvement in portfolio book offset by increase in debt counselling inflows Operating costs - WRewards and NCAA implementation costs Average financial services assets - Closing book up 7.8% - slowdown due to NCAA implementation WHL / 24 WHL WOOLWORTHS HOLDINGS LIMITED BOOK PERFORMANCE FINANCIAL REVIEW REEZA ISAACS 19 WFS BOOK PERFORMANCE 10 000 9 938 9 221 10% 8 359 8 000 8% 7 344 6 558 6 000 4 000 2 000 4.3% 3.0% 1 863 4.8% 4.8% 4% 2.7% 1 885 1 926 1 918 1 888 2% 0% Dec 11 Gross book value (Rm) WHL / 25 6% Dec 12 Dec 13 Total active accounts (000's) Dec 14 Dec 15 Impairment charge (%) INCOME STATEMENT WHL FINANCIAL REVIEW REEZA ISAACS 20 WOOLWORTHS HOLDINGS LIMITED DAVID JONES INCOME STATEMENT 6 months Dec 2015 A$m Turnover and concession sales Concession sales Turnover – own buy Cost of sales Gross profit – own buy Concession and other revenue Gross profit Expenses Store costs Other operating costs 1 149 (391) 758 404 354 91 445 347 286 61 890 (273) 617 313 304 61 365 265 225 40 98 9 107 (3) 104 100 7 107 107 38.7% 8.5% 41.0% 11.2% Department store operating profit Financial services operating profit Operating profit before restructure costs Restructure costs Operating profit Gross profit margin Operating profit margin** * From acquisition date of 1 August 2014 ** Department store operating profit as a percentage of turnover and concession sales WHL / 26 5 months* Dec 2014 A$m Sales growth of 11.2%, with comparable stores up 9.7% Includes high clearance month of July, and lower intake margin on A$ weakness Change in concession/own buy mix and service model, expansion of CRG Cost of initiatives and private label launch INCOME STATEMENT COMMENTARY Turnover and concession sales - Sales growth of 11.2%, with comparable stores up 9.7% Gross profit – own buy - Includes high clearance month of July, and lower intake margin on A$ weakness Concession and other revenue - Change in concession/own buy mix and service model, expansion of CRG Expenses - Cost of initiatives and private label launch WHL / 27 INCOME STATEMENT WHL FINANCIAL REVIEW REEZA ISAACS 21 WOOLWORTHS HOLDINGS LIMITED DAVID JONES INCOME STATEMENT 6 months Dec 2015 A$m Turnover and concession sales Concession sales Turnover – own buy Cost of sales Gross profit – own buy Concession and other revenue Gross profit Expenses Store costs Other operating costs 1 149 (391) 758 404 354 91 445 347 286 61 Department store operating profit Financial services operating profit Operating profit before restructure costs Restructure costs Operating profit Gross profit margin Operating profit margin** 480 361 98 9 107 (3) 104 119 38.7% 8.5% 41.6% 10.3% * Accounting for CRG concessions as own buy and includes 100% PSV ** Department store operating profit as a percentage of turnover and concession sales WHL / 28 Full vertical* 6 months Dec 2015 A$m 1 155 Positive gross profit and operating profit margin leverage for the Group from higher margins and expense leverage INCOME STATEMENT COMMENTARY Gross profit margin Operating profit margin - Positive gross profit and operating profit margin leverage for the Group from higher margins and expense leverage WHL / 29 WHL WOOLWORTHS HOLDINGS LIMITED INCOME STATEMENT FINANCIAL REVIEW REEZA ISAACS 22 COUNTRY ROAD GROUP INCOME STATEMENT Turnover Cost of sales Gross profit Other revenue Expenses Store costs Other operating costs Operating profit Gross profit margin - on turnover Operating profit margin - on turnover WHL / 30 Dec 2015 A$m Dec 2014 A$m % change 516 201 315 2 256 184 72 461 174 287 1 230 164 66 11.9 15.5 9.8 100.0 11.3 12.2 9.1 61 58 5.2 61.0% 11.8% 62.3% 12.6% Above market growth, comparable sales up 0.1% in Australasia Increased markdowns in Country Road womenswear Impact of 16.0% new space INCOME STATEMENT COMMENTARY Turnover - Above market growth, comparable sales up 0.1% in Australasia Gross profit - Increased markdowns in Country Road womenswear Store costs - Impact of 16.0% new space WHL / 31 FINANCE AND OTHER COSTS WHL FINANCIAL REVIEW REEZA ISAACS 23 WOOLWORTHS HOLDINGS LIMITED TREASURY Dec 2014 Rm Capital Rate** ZAR senior debt* R10bn 8.91% 443 365 AUD senior debt* $497m 4.42% 115 110 36 194 - 134 594 803 Short-term facilities Equity bridge Net finance costs Less: non-recurring finance costs Other costs Total finance and other costs * Includes amortised costs ** Partially hedged all-in rate including amortisation of upfront costs WHL / 32 Dec 2015 Rm - (164) 12 - 606 639 BALANCE SHEET WHL FINANCIAL REVIEW REEZA ISAACS 24 WOOLWORTHS HOLDINGS LIMITED BALANCE SHEET Assets Property, plant and equipment and investment properties Intangible assets Investment in JVs and associate Inventories Accounts receivable, tax, deferred tax and loans Cash Equity and liabilities Shareholders’ funds Borrowings Other non-current liabilities and deferred tax Accounts payable, provisions and tax WHL / 33 Dec 2015 Rm Dec 2014 Rm % change Constant currency % change 16 986 18 505 957 7 299 13 758 16 562 866 5 676 23.5 11.7 10.5 28.6 7.7 (3.2) 10.5 17.3 4 837 1 525 50 109 4 311 2 765 43 938 12.2 (44.8) 14.0 3.8 (49.1) 0.9 19 078 15 950 14 027 16 840 36.0 (5.3) 11.1 (11.0) 3 186 11 895 3 284 9 787 (3.0) 21.5 (13.0) 11.5 50 109 43 938 14.0 0.9 New stores and project costs Impacted by space growth, inflation, PSV and lower sell through in CRG Net gearing in constant currency has improved BALANCE SHEET COMMENTARY Property, plant and equipment and investment properties - New stores and project costs Inventories - Impacted by space growth, inflation, PSV and lower sell through in CRG Cash Borrowings - Net gearing in constant currency has improved WHL / 34 CASH GENERATION FOR SIX MONTHS FROMFINANCIAL JUNE 2015 REVIEW REEZA ISAACS 25 WHL WOOLWORTHS HOLDINGS LIMITED CASH GENERATION For six months from June 2015 Rm 6 000 5 208 5 000 (102) (592) 4 000 (962) 3 000 2 000 (1 432) 1 000 531 (1 442) Cash flow from operating & JV activities WHL / 35 Working capital & other movements Finance costs Taxation Net capex Dividends (25) (122) Share Net scheme borrowings settlements Net increase in cash CAPITAL EXPENDITURE WHLWHL WOOLWORTHSWOOLWORTHS HOLDINGS LIMITED HOLDINGS LIMITED DEPRECIATION FINANCIAL REVIEW FINANCIAL REEZAREVIEW ISAACS 26 REEZA ISAACS 26 CAPITALCAPITAL EXPENDITURE EXPENDITURE DEPRECIATION DEPRECIATION Capex (Rm)Capex (Rm) R1 305m (Dec 2014: R1 305m R1 325m) (Dec 2014: R1 325m) 221 221 491 375 491 375 82 82 Dec 2015 Rm Dec Dec2014 2015 Rm Rm Dec 2014 % change Rm % change Woolworths Woolworths 410 366 410 12.0366 12.0 David Jones David Jones 292 234 292 24.8234 24.8 Country Road Group Country Road Group143 110 143 30.0 110 30.0 710 845 19.0 710 19.0 Total group Total Group 709 709 Dec 2015 752 Dec 2015 Dec 2014 Woolworths Woolworths David Jones David Jones Country Road Group Country Road Group WHL / 36 752 Dec 2014 845 EARNINGS AND DISTRIBUTION WHL FINANCIAL REVIEW REEZA ISAACS 27 WOOLWORTHS HOLDINGS LIMITED EARNINGS AND DISTRIBUTION cents 1.9 1.8 280 1.9 1.9 1.9 times 2.0 253.5 240 1.6 200 194.1 183.6 156.7 160 1.2 133.0 129.5 120 80 96.4 82.1 71.6 0.8 96.5 0.4 40 - Dec 11 Dec 12 HEPS* Dec 13 DPS** * HEPS based on weighted average number of shares ** DPS based on closing number of shares WHL / 37 Dec 14 Distribution cover Dec 15 - GUIDANCE WHL / 38 GROUP • Deterioration in global outlook; impact on SA and Australian economies and consumer • Our response – appropriate review of costs and capex • Trading in the first 6 weeks of the second half has been in line with that of the first half Shareholders are advised that this information has not been reviewed and reported on by the group’s external auditors and it does not constitute a profit forecast. WHL / 39 • • • • Clothing & GM price movement expected to be 8 – 9% for FY2016 Food price movement expected to be 6 – 7% for FY2016 Full year space growth: 5.0% in Clothing & GM; 9.8% in Food Gross profit margins to be broadly maintained in Clothing; will be some price investment in Food • WFS book growth and costs to be impacted by NCAA, and higher interest rates will affect interest income and impairments Shareholders are advised that this information has not been reviewed and reported on by the group’s external auditors and it does not constitute a profit forecast. WHL / 40 • Above market sales growth expected to continue – up against a strong second half last year • Transformation to gain traction – will impact expenses and capex in H2 • Expecting improved sales performance from Country Road womenswear • Mimco to roll out in 11 Myer stores in Q3 • Continued focus on cost management Shareholders are advised that this information has not been reviewed and reported on by the group’s external auditors and it does not constitute a profit forecast. WHL / 41 GROUP CONTINUED • Taxation - effective tax rate of 28% in SA and 30% in Australia • Capex for FY2016 – R2.0bn in South Africa – A$100m in David Jones – A$56m in Country Road Group Shareholders are advised that this information has not been reviewed and reported on by the group’s external auditors and it does not constitute a profit forecast. WHL / 42 STRATEGIC FOCUS IAN MOIR WHL / 43 STRATEGY UPDATE • Group Focus – Stronger, more profitable customer relationships – Towards total retail – Drive synergies and efficiencies – Embed sustainability throughout the business • Woolworths • David Jones • Country Road Group WHL / 44 GROUP FOCUS 1 Stronger, more profitable customer relationships • Customer insights and data will drive and inform all our business decisions which will shift us from being a customer centric business to a customer driven group WHL / 45 GROUP FOCUS 2 Towards total retail • I ncreased focus on the customer and integrated, customer-focused technology to move from a channel to total retail experience • Building single view of customer, enabling customers to be recognised and rewarded in real time, with delivery of personalised, seamless service across channels • Digitally transform stores, improving connectivity to enable staff and customers to engage differently • Increased focus on mobile commerce • Investigate potential for single E-commerce platform across the group WHL / 46 GROUP FOCUS 3 Drive synergies and efficiencies • D rive scale benefits across the southern hemisphere • Improved distribution capacity • Leverage real estate in Australia WHL / 47 GROUP FOCUS 4 Embed sustainability throughout the business • D riving a consistent, group-wide Good Business Journey strategy with the objective of being the most sustainable retailer in the southern hemisphere WHL / 48 • Be a leading fashion retailer in the southern hemisphere – Attract younger, more modern, black customers while maintaining our older, very loyal, more classic customer – Lead the market in quality and range – Strengthen valu...
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