Annual Report 2006 Download a copy of our Annual Report 2006

168 Pages·2006·1.91 MB·English

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CONTENTS WOOlWOrThS limiTEd ALH Group Pty Ltd
– Registered Office
Principal registered office in Australia
1 Woolworths Way
1 Woolworths Way
Bella Vista NSW 2153
Bella Vista NSW 2153
Tel: [phone]
Tel: [phone]
– Victorian Office
Web: www.woolworthslimited.com.au
Ground Floor
3 Chairman’s Report
BIG W 16-20 Claremont Street
4 Group Managing Director’s Report
Web: www.bigw.com.au South Yarra VIC 3141
6 – The Results in Brief
Tel: [phone]
8 – Supermarkets National Supermarkets
– Queensland Office
12 – General Merchandise Web: www.woolworths.com.au
Level 1
14 – Consumer Electronics
Woolworths Petrol 152 Oxford Street
16 – Hotels
Tel: [phone] Bulimba QLD 4171
17 Our focus is:
BWS Company Secretary
18 – Project Refresh
Web: www.beerwinespirits.com.au Peter Horton
22 – Strategy and Growth
26 – Capital Management Woolworths Ezy Banking Share Registrar
28 – People Power Web: www.ezybanking.com.au Computershare Investor Services Pty Limited
32 – Being Responsible Level 3
Dan Murphy’s
60 Carrington Street
36 Board of Directors 789 Heidelberg Road
Sydney NSW 2000
38 Senior Management Alphington VIC 3078
Tel: [phone]
40 Directors’ Statutory Report Tel: [phone]
Fax: [phone]
42 – Remuneration Report 2006 Fax: [phone]
Web: www.computershare.com.au
59 – Auditor’s Declaration Web: www.danmurphys.com.au
Auditor
60 Corporate Governance Dick Smith Electronics/Tandy
Deloitte Touche Tohmatsu
67 Financial Report to Shareholders 2 Davidson Street
Grosvenor Place
160 Shareholder Information Chullora NSW 2190
225 George Street
IBC Company Directory Tel: [phone]
Sydney NSW 2000
Fax: [phone]
Web: www.deloitte.com.au
Web: www.dse.com.au
Progressive Enterprises Limited
80 Favona Road
Mangere
Auckland
New Zealand
Tel: [phone]
Fax: [phone]
Web: www.progressive.co.nz
Designed and produced by Precinct.
Photography by Anthony Geernaert.
Earnings before
interest and
Sales up 20.4% taxation (EBIT)
from continuing up 32.3% to Earnings before
operations. $1,722.2 million. interest, taxation,
depreciation
Total sales for this EBIT margins and amortisation
year compared with improved from (EBITDA)
last year up 20.4% 4.16% in 2005 to up 30.6% to
to $37,734 million. 4.56% in 2006. $2,244.4 million.
Highlights

Earnings per share Final dividend Reduction in Net operating profi t
(EPS) up 14.8% per share (DPS) inventory days after tax up 24.3%
to 90.9 cents 31 cents to bring (excluding to $1,014.6 million.
(AIFRS adjusted). total DPS for the Progressive and
year to 59 cents, up Taverner) from Average return on
15.7% with total 30.4 days to funds employed
dividend paid and 29.1 days, a (ROFE) was 28.6%.
proposed for the reduction of
year amounting 1.3 days.
to approximately
$692.4 million.
2
CHAIRMAN’S REPORT SUCCESSFUL ACQUISITIONS
TO THE SHAREHOLDERS A further testament to a well-balanced performance
by Roger Corbett and his team is the simultaneous
acquisitions and integration of major new assets,
including Progressive Enterprises Limited
supermarket operations in New Zealand, the
Taverner Hotel Group, the Bruce Mathieson Group
EPS (cents) Dividend per share (cents) (BMG) and the Australian Leisure and Hospitality
Group (ALH).
TRIBUTE TO ROGER CORBETT
On behalf of all shareholders and the Board,
52 60 70 79 90 33 39 45 51 59 I would like to pay tribute to Roger Corbett for an
.5 .7 .1 .2 .9 .0 .0 .0 .0 .0
outstanding performance as Managing Director and
0 0 0 0 0 0 0 0 0 0
2 3 4 5 6 2 3 4 5 6 Chief Executive. His period of leadership has seen
Woolworths transformed to great advantage for its
investors and staff.
Roger has shown remarkable dedication, energy,
passion and high ethical standards which have set
a wonderful example for everyone in the Group.
RECORD RESULTS
The Board acted very deliberately to ensure Roger
I am pleased to report on another outstanding year will be available for selected tasks and advice without
for Woolworths, with Roger Corbett (in his last year in any way cutting across the role of his successor as
as Group Managing Director and CEO) and his CEO, Michael Luscombe.
management team again delivering record results
MICHAEL LUSCOMBE
across a wide range of performance criteria.
This is highlighted by the achievement of a net The Board was delighted to appoint Michael to
profi t after tax of $1 billion for the fi rst time, a real become CEO and Managing Director from within
landmark. It has enabled the delivery of excellent our talented senior management ensuring a
returns for shareholders with earnings per share smooth transition with continuity and his long-
increasing by 14.8% and with a total dividend of term experience.
59 cents per share, up 15.7%. Over the recent years, the standard of its
management team and their stability has been a
KEY PRIORITIES
major factor in the success of the Woolworths Group.
The continuing improvement over the last eight Large, complex enterprises must have very competent
years refl ects the constant focus on two key priorities teams driving every detailed part of the business.
– driving cost reductions and effi ciency, combined
GOVERNANCE
with healthy growth internally and by acquisitions.
The huge improvements via Project Refresh and This Annual Report contains a section dedicated
building a new supply chain system have ensured to reporting on our continued attention to high
Woolworths is at world standards in terms of standards of governance. Woolworths has a small
effi ciency and cost-effectiveness. These are a great but dedicated Board of Directors, and I thank them
credit to the teams throughout the Group who have for their part in the success of the Group.
planned, implemented and refi ned these complex
CONTRIBUTION BY OUR PEOPLE
arrangements to make them a great contributor to
Left the future of the business for many years ahead. Woolworths has an impressive and dedicated team
James Strong,
of approximately 175,000 people spread across many
Chairman, COMPETITIVE ENVIRONMENT
Roger Corbett, operations and stores. Our performance is a result
outgoing Chief All of this has been achieved in a very competitive of their efforts, individually and collectively.
Executive Offi cer and
environment, and some pressures on the prevailing On behalf of the Board, I thank them for their
Michael Luscombe,
Chief Operating Offi cer. economic climate in parts of the market. contribution, enthusiasm and pride in our business.
JAMES STRONG
CHAIRMAN
3
GROUP MANAGING
DIRECTOR’S REPORT
On behalf of my colleagues and all of the a valued discount to our Supermarket and BIG W
approximately 175,000 members of the Woolworths customers. With full year petrol sales of $4.4 billion
team, I am proud to report to you another excellent and a network of 491 sites across Australia, we are
result for the fi nancial year 2005/2006. This year well-placed to continue to grow and consolidate this
our net profi t after tax (NPAT) exceeded $1 billion key business.
($1,014.6 million) for the fi rst time in Woolworths’ Liquor – The continued development and rollout
history, which is an outstanding result and milestone of our liquor outlets across Australia, trading under
for the Group. This result refl ects the commitment and the brand names of Woolworths Liquor, BWS and
dedication of the Woolworths’ team and consistent Dan Murphy’s, has allowed us to meet our stated
delivery against our clearly articulated strategies. medium-term target of $3.5 billion in annual liquor
The strong operating performance this year sales even earlier than expected. At year end we had
was achieved despite undertaking signifi cant over one thousand liquor outlets around Australia.
transforming business changes, incurring one-off
BUSINESS ACHIEVEMENTS
costs associated with the transition to our new supply
chain and the focus on integrating our acquisitions. Signifi cant benefi ts are being achieved from
The management team at Woolworths has performed improving the IT and supply chain processes
outstandingly, keeping focused on the customer in a (Project Refresh) to world-class standards and now
challenging and transitioning year. we are starting to reap the benefi ts arising from these
improvements. These initiatives provide Woolworths
TRADING ACHIEVEMENTS
with a major strategic advantage going forward and
Our Australian Supermarket division traded underpin our forecast cost reductions.
strongly. Comparable sales growth was strong over Since its inception in 1999 Project Refresh has
the year and consistent with expectations. concentrated on a number of initiatives including
The New Zealand Supermarket division traded a major business restructuring program which saw
above our expectations. Woolworths acquired this signifi cant changes in the way we do business.
business on 2 November 2005. There are signifi cant Over the past seven years to the end of FY06,
opportunities to enhance this business with good Project Refresh has delivered cost savings amounting
progress being made on many of these initiatives. to 4.51% of sales. Measured in terms of dollars,
BIG W had a solid result for the year in a diffi cult this was a cumulative saving of $5.3 billion.
market. Sales exceeded $3 billion for the fi rst time in
ACQUISITION ACHIEVEMENTS
BIG W’s trading history and comparable sales growth
for the year was broadly in line with expectations, Three signifi cant acquisitions have been undertaken
despite a tightening of discretionary spending. during the year: Progressive New Zealand (including
There continues to be positive widespread acceptance 20 ex-FAL Australian supermarkets), Taverner and
of our Every Day Low Pricing strategy. BMG. Each of these acquisitions has contributed
Dick Smith Electronics produced an excellent signifi cantly to the Group result and we have
result with double-digit sales and EBIT growth. already made excellent progress in integrating these
Comparable sales (after adjusting for the impact operations into the Group.
of negative movements in the New Zealand dollar) Our expansion into New Zealand has been
also increased by a healthy 10.6%, carrying on particularly pleasing as this has expanded our base
from the excellent comparable sales growth shown market and allows us to utilise our organisational
in 2005. strengths to directly benefi t the ultimate consumer
Petrol now has comprehensive coverage across by way of better value, increased range and customer
Australia and continues to deliver signifi cant retail focused service. Our initial initiatives in the
volumes of petroleum products, whilst providing New Zealand market have been well received and
4
we look forward to expanding on the goodwill we
have developed and improving the overall shopping
experience across this market.
Our hotel acquisitions have provided an
opportunity to refocus our efforts on repositioning
and improving our performance in all areas of our
hotel and retail liquor businesses. There have been The strong operating performance
outstanding improvements in the cost of doing
this year was achieved despite
business in our Hotels division as a number of
initiatives implemented post-acquisition, including undertaking signifi cant transforming
restructuring and rationalising of support offi ces,
business changes, incurring one-off
systems and processes, have allowed for improved
operating effi ciencies at all venues. Further, we have costs associated with the transition
also continued and enhanced our focus on our efforts
to our new supply chain and the
in regard to responsible gaming practices.
During the year we also completed the successful focus on integrating our acquisitions.
sale of eleven of our Distribution Centres for
The management team at Woolworths
$846 million. The transaction was very competitively
priced and provides Woolworths with the fl exibility has performed outstandingly,
to alter and adapt its Distribution Centres to meet its
keeping focused on the customer in a
changing operational needs over time.
challenging and transitioning year.
THE FUTURE
The past year has been an exciting and challenging
one for Woolworths and I am greatly indebted to
the Board, my colleagues and our supply partners
for their continued support and dedication.
Our performance is truly indicative of the hard work
and commitment of Woolworths people at every
level of our business and my thanks go to each one
of them. Indeed, I fi rmly believe that the fi nest retail
leaders in this country wear a Woolworths name
badge. It is the continued efforts of all these people
that ensure Woolworths has excellent foundations for
continued growth.
Finally, I want to take this opportunity to thank
all the staff of Woolworths for making me part of
this family for many years. I have been fortunate to
meet countless employees, suppliers and customers
over this time, and it is truly the people that make
this company great. I leave Woolworths in the
most capable hands of the Board and Michael
Luscombe. I know they will be ably supported by
Woolworths’ extremely strong, stable and experienced
management team and the dedicated people who
serve and support the customers in all of our stores.
I feel proud that I have been a part of the drive to
propel the company to greater success and market
leadership whilst maintaining our core values and
culture. It is on that confi dent note I can say, that the
best is yet to come.
ROGER CORBETT
GROUP MANAGING DIRECTOR AND
CHIEF EXECUTIVE OFFICER
5
Group Managing Director’s Report
THE RESULTS IN BRIEF
52 WEEKS ENDED 25 JUNE 2006
FY06 FY05
AIFRS AIFRS Change
$m $m %
SALES
Australian Food and Liquor 25,458(1) 23,570(3) 8.0%
New Zealand Supermarkets 2,605(2) – –
Petrol 4,390 3,308 32.7%
Supermarket division 32,453 26,878 20.7%
BIG W 3,119 2,909 7.2%
Consumer Electronics 1,167 1,007 15.9%
General Merchandise division 4,286 3,916 9.4%
Hotels 850(4) 416(5) 104.3%
Continuing operations 37,589 31,210 20.4%
Wholesale division 145 142 2.1%
Group sales 37,734 31,352 20.4%
FY06 FY05 FY05 FY05
AIFRS AIFRS AIFRS AGAAP AGAAP
Statutory Statutory Change Statutory Statutory
Before After
Goodwill Goodwill
$m $m % $m $m
EARNINGS BEFORE
INTEREST AND TAX (EBIT)
Australian Food and Liquor 1,286.0 1,091.5 17.8% 1,105.8 1,077.2
New Zealand Supermarkets 108.9 – – – –
Petrol 53.1 36.2 46.7% 36.3 36.3
Supermarket division 1,448.0 1,127.7 28.4% 1,142.1 1,113.5
BIG W 123.1 118.3 4.1% 118.0 118.0
Consumer Electronics 64.0 54.5 17.4% 55.0 51.8
General Merchandise division 187.1 172.8 8.3% 173.0 169.8
Hotels 151.1 52.8 186.2% 64.8 54.9
Total trading result 1,786.2 1,353.3 32.0% 1,379.9 1,338.2
Property 18.3 21.2 (13.7%) 20.3 20.3
Central overheads (84.1) (74.9) 12.3% (77.9) (77.9)
Continuing operations 1,720.4 1,299.6 32.4% 1,322.3 1,280.6
Wholesale division 1.8 2.5 (28.0%) 2.5 2.4
Group EBIT 1,722.2 1,302.1 32.3% 1,324.8 1,283.0
Notes (1) (2) (3) (4) (5)
Includes 20 Australian Represents New Includes ALH retail Includes BMG hotel Represents ALH
ex-FAL store sales Zealand Supermarket liquor sales since sales from 1 July 2005 hotel sales since
from 2 November operations from 1 November 2004 and Taverner hotel 1 November 2004 and
2005, ALH retail, 2 November 2005. and MGW retail sales from 6 February MGW hotel sales since
MGW retail and BMG liquor sales since 2006. 3 January 2005.
retail sales for the 3 January 2005.
52 weeks and Taverner
retail sales from
6 February 2006.
6
FY06 FY05 Change FY05
AIFRS AIFRS AIFRS AGAAP
Statutory Statutory Statutory Statutory
$m $m % $m
PROFIT
Earnings before interest, tax, depreciation, amortisation
and rent (EBITDAR) 3,314.5 2,618.3 26.6% 2,648.9
Property rent – base 925.6 753.8 22.8% 758.5
Property rent – turnover contingent 97.7 80.6 21.2% 80.6
Fitout rent 46.8 65.8 (28.9%) 65.8
Earnings before interest, tax, depreciation and
amortisation (EBITDA) 2,244.4 1,718.1 30.6% 1,744.0
Depreciation 522.2 416.0 25.5% 419.2
Goodwill amortisation – – – 41.8
Earnings before interest and tax (EBIT) 1,722.2 1,302.1 32.3% 1,283.0
Net fi nancing costs(1) 249.7 150.1 66.4% 153.7
Operating income tax expense 445.8 334.8 33.2% 337.7
Net operating profi t after income tax 1,026.7 817.2 25.6% 791.6
Minority interests (12.1) (1.0) – (1.1)
Net operating profi t after tax and outside equity interests 1,014.6 816.2 24.3% 790.5
Margins
Gross profi t 25.03% 24.89% 0.14%pts 24.89%
Cost of doing business 20.47% 20.73% (0.26%)pts 20.80%
EBIT to sales 4.56% 4.16% 0.40%pts 4.09%
RETURNS
Funds employed (period end) 7,804.8 4,230.1 84.5% 4,467.1
ROFE (average) 28.6% 42.6% (14%)pts 38.7%
Weighted average ordinary shares on issue (million)(2) 1,116.3 1,030.6 8.3% 1,043.7
Ordinary earnings per share (cents) 90.9 79.2 14.8% 75.7
Diluted earnings per share (cents) 90.3 78.9 14.4% 75.3
Interim dividend per share (cents) 28 24 16.7% 24
Final dividend per share (cents)(3) 31 27 14.8% 27
Total dividend per share (cents) 59 51 15.7% 51
Notes (1) (2) (3)
Interest capitalisation The average ordinary Final dividend payable
$3.4 million shares have been on 6 October 2006 will
(2005: $7.7 million). adjusted to remove be fully franked at 30%
employee shares held (2005: 30%).
by the Custodian
company as required
under AIFRS.
7
Group Managing Director’s Report
AUSTRALIAN During the year 46 new supermarkets were opened
(1H: 29 stores, 2H: 17 stores) which includes 20 ex-
SUPERMARKET DIVISION
FAL Australian stores (from 2 November 2005). Total
trading area in Australian Supermarket grew by 6.1%
(INCLUDING LIQUOR AND PETROL)
which was in excess of our stated range due to the
ex-FAL Australian stores acquired during the year.
The bulk of the stores were opened towards the end of
each half year.
Inventory levels for the year for the Australian
Supermarket division were down by half a day
(excluding the one-off impact of 20 ex-FAL Australian
stores and Taverner retail). This is despite the impact
of dual stocking required during transitioning to
our new Distribution Centres (DCs) and the impact
of moving stock from DSD to our new DC network.
StockSmart and AutoStockR systems continue
to provide us the opportunity to better manage
inventory levels without decreasing stock availability.
Supermar
FOOD AND LIQUOR
For the full year, Australian Supermarket division Taverner retail has been included in the
sales increased 11.0% of which Food and Liquor Supermarket division and Taverner’s hotel operations
sales in Australia grew 8.0% with comparable sales have been included in our Hotels segment from
growing 3.7% during the year. Infl ation in the year 6 February 2006. BMG has been consolidated from
was just over 2%. 1 July 2005, and included in the Supermarkets
Cost savings continue to be vigorously pursued. division are BMG’s retail operations with BMG’s
The Australian Supermarket division’s cost of doing hotel operations included in our Hotels segment.
business declined by 59 basis points during the year All our existing liquor operations, including Dan
even after we expensed $80 million of transition Murphy’s, BWS and attached liquor, continue to
costs associated with moving to our new supply chain perform well and recorded strong growth in both
arrangements. sales and profi ts. Total liquor sales for the year were
Woolworths’ policy is and has consistently been to $3.5 billion (FY05: $2.6 billion) which represents the
reduce costs and lower prices. This will remain our achievement of our medium-term target of $3.5 billion
fundamental strategy moving forward. However, in annual liquor sales earlier than expected.
Food and Liquor gross margins improved refl ecting Dan Murphy’s has expanded its operations in the
improved buying and shrinkage control and the year with 15 stores opened (three of which were
benefi t fl owing from the reduction of direct store in Queensland) bringing the total number of Dan
deliveries. The reduction in direct store deliveries Murphy’s stores to 52. We now have the sites and
lowers the costs of goods as suppliers’ costs are the licenses to have in excess of 100 Dan Murphy’s
reduced resulting in improved gross margins. around Australia over the next two to three years.
For the Australian Supermarket division, EBIT grew Dan Murphy’s provides customers with excellent
faster than sales, increasing by 18.7% compared with value for money, extensive product ranging,
sales growth of 11.0%. The Australian Supermarket personalised service and expertise.
division’s EBIT margin increased from 4.19% last year At the end of the year Woolworths Limited had
to 4.49% this year, an increase of 30 basis points. 1,015 liquor outlets.
8