2002 ANNUAL
GENERAL MEETING
WOOLWORTHS
WOOLWORTHSLIMITED
LIMITED
Annual General Meeting
ROGER CORBETT
Chief Executive Officer
22 November 2002
WOOLWORTHS LIMITED
DELIVERING
VALUE TO:
SHAREHOLDERS
AND
CUSTOMERS
1
WOOLWORTHS BUSINESS PROFILE
Sales Year to
30 June 2002
$M’s
Store Numbers
(current)
19,595.0
686 Supermarkets
146 Liquor Stores
(including Dan Murphy)
Plus Petrol
1,119.3
269
Big W
2,280.5
104
659.0
360
23,653.8
1,565
Food and Liquor
Consumer Electronics
Continuing (1)
Operations
• Woolworths employed over 145,000 people across Australia as at 30 June 2002,
or 1 in 59 working Australians, 50,000 in regional and rural areas
• During the year we welcomed 7,000 Franklins employees
(1)
Excludes Wholesale Operations
2
WOOLWORTHS VICTORIAN BUSINESS
Stores
Warehouses
Employees
Supermarkets
174
4
29,616
Dan Murphy
12
-
520
BWS/First Estate
10
-
82
Plus Petrol
85
-
790
Big W
16
-
3,980
Consumer
Electronics
74
-
821
371
4
35,809
Total
Woolworths has a $1.5 billion investment in Victoria
3
RESULTS HIGHLIGHTS Y/E 30/6/02
•
•
•
•
•
•
•
•
•
Sales up 17.0% to $24.5 billion
Costs down 38 basis points to 21.84%
Earnings before Interest and Tax (EBIT) up 17.8%
Net Operating Profit after Tax and servicing Income
Notes up 22.2% to $523.2 million
Earnings per share up 25.1% to 50.24 cents
Dividends per share up 22.2% to 33 cents
Days inventory down 3.3 days to 37.3 days
Average Return on Funds Employed (ROFE) up to
38.1%
Average Return on Equity (ROE) up to 48.1%
4
SALES GROWTH
$3½ billion sales growth driven by
- $2 billion organic & bolt ons
- $1 billion ex-Franklins stores
- $½ billion 53rd week
26,000
24,473.0
24,000
$ Million
22,000
20,915.1
20,000
18,000
16,000
14,000
18,988.8
17,527.3
+14.9%*
+10.1%
+8.3%
16,001.1 *
+9.5%
+10.2%
12,000
1998 #
* 52 weeks comparable
1999 #
2000 #
2001
2002
# Adjusted to exclude WST
5
FIRST QUARTER SALES RESULTS
Food and Liquor
Petrol
Supermarkets
BIG W
Consumer Electronics
General Merchandise
*
Continuing Operations
Wholesale Division
Total Quarter Sales
($ Millions)
FY2002 FY2003
Increase
4,751
211
4,962
521
153
674
5,636
195
5,831
13.4%
76.8%
16.1%
12.7%
22.9%
15.0%
16.0%
-33.3%
14.3%
5,387
373
5,760
587
188
775
6,535
130
6,665
Comparable
Store Sales
Increase
5.5%
6.4%
12.3%
6
CODB / SALES
Costs = The Key Enabler
25
24
Down 38pts
in FYO2
23.95
23.59
Down
211pts in
3yrs
23.09
23
22.22
% 22
21.84
Cumulative
Reductions
$1,042 mil
21
20
19
1998 #
1999 #
Cost
`
Reduction
2000 #
0.86%x $19.0 b
$163 m
2001
1.73%x $20.9 b
$362 m
2002
2.11%x $24.5 b
$517 m =
$1042 m
# Adjusted to exclude WST
7
GROSS PROFIT MARGIN
Margin
Reduction
28
27
0.67%x $19.0 b
1.43%x $20.9 b
$127 m
$438 m = $864 m
$299 m
LOWERING THE
COST OF LIVING
INCREASE
27.03
26.82
1.79%x $24.5 b
26.36
26
25.60
83% OF
REDUCTION TO
CUSTOMERS
DOWN
36PTS IN
FYO2
DOWN
179PTS IN
3YRS
25.24
%
25
Cumulative
Reductions
$864 mil
24
23
1998
#
1999
#
2000
#
2001
2002
# Adjusted to exclude WST
8
EBIT MARGIN SUMMARY
EBIT MARGIN UP 2 BASIS POINTS.
FRANKLINS CONTRIBUTES 2% ON $1B SALES,
EQUATED TO 3.46% EX-FRANKLINS - UP 8 BASIS POINTS
OR 3.49% OF SALES FOR CONTINUING BUSINESSES (EXCLUDING WHOLESALE)
3.6
% Margin
3.4
3.38
3.2
3.40
3.27
3.23
3.08
3.0
2.8
2.6
1998 #
1999 #
2000 #
2001
2002
# Adjusted to exclude WST
9
EBIT SUMMARY
FY02
After
Goodwill
Increase
After
Goodwill
$m
Food & Liquor
Petrol
Total Supermarkets
734.7
12.7
747.4
19.7%
176.1%
20.8%
BIG W
Consumer Electronics
Total General Merchandise
93.5
28.0
121.5
12.1%
-9.1%
6.4%
Total Trading Result
Property
Central overheads
Continuing operations
Wholesale
Discontinued operations
868.9
34.2
(77.8)
825.3
7.4
-
18.6%
3.3%
31.9%
16.7%
48.0%
-
Group EBIT
832.7
17.8%
10
FRANKLINS ANALYSIS
• 72 ex Franklins stores acquired, current status:
– 13 trading as Food for Less
– 54 trading as Woolworths / Safeway Supermarkets
– 1 store to reopen as Woolworths Supermarket in F03 (now open)
– 1 store converted and reopened as Dan Murphy (Belconnen)
– 3 stores to be converted to Dan Murphy in F03 (Eltham, Vermont Sth and
Frankston) (2 now open)
• Smooth transition overall was very pleasing, however as always
several areas could have been handled better
• 4 existing Supermarkets were sold in accordance with ACCC
undertakings
• Capital conversion costs of $117 milion ($105 mil in F02) vs original
estimate $126 mil
11
FRANKLINS ANALYSIS
• Store sales results for F02 slightly above our acquisition
expectation at $1.05 bil ($1.01 bil excluding sales in respect of 4
stores sold in accordance with ACCC undertakings)
• Store costs higher than existing Woolworths / Safeway stores
but in line with acquisition expectation and will improve to
Woolworths norms in F03
• F02 EBIT of $20 mil was at the top end of our acquisition
expectation
12
PROFIT AFTER TAX (AFTER WINS)
550
523.2
500
$ Million
450
428.0
22.2%
400
364.0
17.6%
350
300.5
312.3
16.6%
300
250
16.5%
3.9%
200
1998
1999
2000
2001
2002
*
* 53 Weeks
13
EARNINGS PER SHARE
50.24
50
45
40.16
Cents
40
32.36
35
30
26.54
27.25
24.10%
25
20
25.10%
18.75%
2.68%
14.10%
15
1998
1999
2000
2001
2002
14
DIVIDENDS PER SHARE
36
33
33
Cents
30
27
27
23
24
22.2%
21
18
17
15
6.3%
18
17.4%
27.8%
5.9%
12
1998
1999
2000
2001
2002
15
DAYS STOCK ON HAND
INVENTORY DOWN 3.3 DAYS WITH
IN-STOCK POSITION RECORD HIGH
50
47
46.2
Days
44.7
44
40.8
41
40.6
Tandy &
Liberty
Liquor
38
37.3
35
1998
1999
2000
2001
2002
16
RETURN ON FUNDS EMPLOYED
40%
38.07%
35.04%
36%
32%
29.08%
%
28%
26.83%
24.43%
24%
20%
1998
1999
2000
2001
2002
Based on average of opening and closing funds employed
17
RETURN ON EQUITY
48.13
50
45
43.19
40
35
% 30
25
20
28.92
23.15
21.88
1998
1999
15
10
2000
2001
2002
Based on average of opening and closing Shareholders funds
18
PROJECT REFRESH
Restatement of Project Refresh after three years:
• “Refresh” savings over the next five years to be no
less than 1% of annual sales ie 20+ bp’s per annum
• Refresh savings will be shared approximately 50/50
between customer and shareholder
19
PROJECT REFRESH
Cumulative savings $5.1 bil over 8 years
Level III - Development
24.5%
Level II - Logistics
24.10%
18.75%
2.68%
Level14.10%
I - Reorganisation
/ line items
99
00
01
02
03
04
05
06
07
20
PROJECT REFRESH
1,200
8 year cum savings = $5.1 bil
1051
3.11% of sales
Savings in years 4 to 8 = $4.1 bil
PA Savings $ m
Additional 1% of sales to 3.11% cumulative
900
807
3 year Cum savings = $1.0 bil
600
Level II
925
2.11% of sales
Increasingly
logistics driven
697
595
517
Level I
368
300
Mainly line
items and
reorganisation
163
0
00
01
02
03
04
05
06
07
21
GROWTH
Considerable opportunities for continuing growth in both
revenues and earnings
•
Add 15 to 25 new Supermarkets per year for the foreseeable future
•
Expand BIG W at a rate of 6 - 8 per year (10 for 2002/2003 year) growing the
chain from its current level of104 to150
•
Grow liquor from sales of $1.4bil to $2.5bil
•
Grow petrol from 269 canopies currently open to 350 over 3 years
•
Further potential to grow sales in existing core businesses:
–
–
–
–
•
Relatively low share of national fresh food market
Significant number of new stores yet to mature
Trend towards gradual deregulation of trading hours and product restrictions
New formats and ranges
Strength of our balance sheet allows us to address larger acquisitions should
they become available, these will be examined and pursued if they add to
shareholder value
22
SALES AND EARNINGS GUIDANCE
• As consistently stated previously, we anticipate sales will grow in
the high single digits and earnings (EBIT and EPS) will grow in the
low double digits for the foreseeable future
• Sales and earnings guidance were reviewed at the end of the first
quarter and left unchanged with the release of the first quarter
sales
• It is not Woolworths normal practice to provide sales guidance,
however sales guidance is given for this year only to help the
market understand the impact of non comparable sales from ex
Franklins stores, as well as the impact of moving from a 53 week
year in FY02 to a 52 week year in FY03. Our normal practice of
providing earnings guidance will of course continue
• Sales have continued to perform well and have grown in line with
our expectations in the 6 weeks since the end of the first quarter
23
SALES AND EARNINGS GUIDANCE
• Subject to current trends continuing and a satisfactory Christmas
trading period, we now expect normalised (52 week) sales growth for
2002 / 2003, for continuing operations, will be of the order of 10.5% to
11.0% (previous guidance anticipated a 10.0% increase)
• Our costs continue to reduce and in line with our objectives we
anticipate that EBIT growth for the half year and full year will exceed
sales growth, resulting in thickening EBIT margins
• We now anticipate EPS will grow in a range of 55.5 cps to 57.5 cps
after goodwill (previously 55 cps to 57.5 cps) and 58 cps to 60 cps
before goodwill (previously 57.5 cps to 60 cps). This improves our
previous earnings guidance by 1% or 0.5 cent at the bottom of the
range
• This guidance is given subject to a continuation of the current
business and economic environment and a satisfactory Christmas
trading period
24
2002 ANNUAL
GENERAL MEETING