Analyst Presentation Feb 2005

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 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 limited trading environment • Buoyant trading conditions in SA • Low inflation • Lower interest rates • Emerging market growth • Consumer spending in Australia slowed slightly woolworths holdings limited income statement Revenue Turnover Cost of merchandise Gross profit Other revenue Expenses Operating profit Interest paid Net profit before exceptional items Exceptional items Net profit before tax Tax Net profit after tax Gross margin - on turnover Operating margin - on revenue 100.0 Dec-04 Rm 6353.1 6016.6 -4139.4 1877.2 336.5 -1575.8 637.9 -62.0 575.9 575.9 -168.4 407.5 31.2% 10.0% 2.3 Dec-03 Rm 5579.7 5266.0 -3574.6 1691.4 313.7 -1455.1 550.0 -58.1 491.9 -5.0 486.9 -146.0 340.9 32.1% 9.9% 2.2 %chg 13.9% 14.3% 15.8% 11.0% 7.3% 8.3% 16.0% 6.7% 17.1% 18.3% 15.3% 19.5% 2.4 2.2 woolworths holdings limited HEPS, DPS and cover 50.0 3.1 45.0 40.0 46.7 2.8 2.7 3.5 3.1 2.5 40.2 35.0 2.5 33.5 30.0 2.5 25.0 1.5 20.0 15.0 20.9 16.0 18.5 15.8 10.0 5.0 10.5 6.5 6.5 13.0 0.5 7.5 0.0 Dec-99 Dec-00 Dec-01 HEPS Dec-02 DPS Cover Dec-03 Dec-04 woolworths holdings limited balance sheet A ssets Property, plant & equipment Export partnerships Inventory Financial services assets Accounts receivable & other Cash E quity a nd lia bilities Shareholders funds Accounts payable & deferred tax Borrowings - long term Borrowings - short term Debt: equity Dec-04 Rm Dec-03 Rm 1259.8 164.4 801.4 3326.2 817.7 170.9 6540.4 1145.1 177.8 684.9 2534.7 707.5 201.1 5451.1 10.0% -7.5% 17.0% 31.2% 15.6% -15.0% 3095.3 1916.4 500.0 1028.7 6540.4 2672.0 1798.4 980.7 5451.1 15.8% 6.6% n/a 4.9% 49.4% 36.7% %chg woolworths holdings limited cash flow Cash inflow from trading - retail Net interest received Working capital movements Increase in borrowings Utilised by: Tax paid Distributions paid Capex Proceeds from disposals/investment income Financial services assets Shares issued Dec-04 Rm Dec-03 Rm 494.8 225.5 -118.1 407.1 1009.3 460.2 212.4 -67.5 266.2 871.3 -170.3 -221.8 -207.9 0.7 -456.4 46.4 -1009.3 -175.4 -159.2 -253.4 17.7 -341.6 40.6 -871.3 woolworths holdings limited cash flow (cont) cash applied to financial services assets: R456.4m P ersona l L oa ns R95.7m V isa R57.8m WW Ca rd R302.9m capex: R207.9m Reta il R135.4m Oth er R13.9m IT R58.5m woolworths holdings limited return on equity/wacc 30% 25% 20% 19.0% 17.5% 16.3% 15% 13.7% 13.7% 12.4% 10% 5% 0% 11.6% 12.9% 18.3% 23.7% 25.7% 27.4% Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Dec-04 ROE WACC 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 3,000 4.0% 3.4% 2,500 3.5% 2.9% R 2,423 3.0% 2,000 2.5% R 1,901 2.0% 1.9% 1,500 R 1,508 1,000 R 1,072 1.7% R 1,223 974 961 2.0% 1029 1066 1163 1.5% 1.0% 500 0.5% 0.0% Dec-00 Dec-01 Book Value (Rm) Dec-02 Dec-03 Number of Accounts ('000) Dec-04 Net Bad Debt • 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 services personal loans 700 4.0% 3.5% R 670 600 3.0% 500 R 502 2.4% 400 300 2.6% 2.5% R 400 2.0% R 357 1.3% 1.5% 200 1.0% R 193 100 3.5% 79 54 Dec-00 137 117 96 1.0% 0.5% 0.0% Dec-01 Book Value (Rm) Dec-02 Dec-03 Number of Accounts ('000) Dec-04 Net Bad Debt • Personal loans increased by 33.5% to R670m • Number of accounts increased by 16% to 137 000 financial services visa card 300 4.5% 4.0% 4.0% 3.5% 250 3.2% R 234 200 3.5% 3.1% 3.0% 2.5% 150 2.0% R 132 100 1.5% R 95 1.0% 50 R 29 13 Dec-01 Book Value (Rm) 25 Dec-02 56 40 0.5% 0.0% Dec-03 Number of Accounts ('000) Dec-04 Net Bad Debt • Visa card increased by 77.7% to R234m • Number of accounts increased by 40% to 56 000 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 operating group selling woolworths operations trading space June 2004 m2 Dec 2004 % Cha ng e m2 P rojected % Cha ng e June 2005 368,300 289,400 208,500 45,900 35,000 78,900 73,400 2,500 3,000 380,844 298,619 217,848 46,985 33,786 82,225 76,226 3,161 2,838 3.4% 3.2% 4.5% 2.4% -3.5% 4.2% 3.9% 26.4% -5.4% 394,100 309,900 7.0% 84,200 6.7% S tores Corporate Full line Clothing and Home Foods Franchise - SA Franchise - International 255 136 76 54 63 56 263 144 82 57 67 52 3.1% 5.9% 7.9% -16.7% 5.6% 6.3% -7.1% 286 12.2% M odernisa tion Clothing and Home Foods 30% 43% 37% 51% F oota g e Clothing a nd H om e Corporate Franchise - SA Franchise - International F oods Corporate Franchise - SA Franchise - International 46% 61% 7.1% woolworths operations trading space • Store development on track • Modernisation plan on track • Trading space opportunities • Cannibalisation and capacity • Trade density potential 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) • 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 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 limited prospects 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