GICS - Food/Staples

Woolworths Group Limited ASX Code: WOW Price: $39.29 12 Mth Target Price: $40.60 Rating: Neutral

Business Summary Snapshot Woolworths (WOW) is a retail operator in Australia and New Zealand, with Date 26 September 2021 3,357 stores and approximately 215,000 employees. Its business division Market Cap. $49,806m Shares on issue 1,267.7m comprises of Australian Food, New Zealand Food and . 12 Month High $42.66 12 Month Low Australian Food: This division is involved in procurement of food and related $31.80 products for resale and provision of services to customers in Australia. This Rating division is divided in three sections woolsworth , Everyday Rating Neutral reward, and Financial services and insurance. This section includes 12 Mth Target Price $40.60 chain operating 995 stores across Australia, Woolworths Capital Gain 3.9% Rewards loyalty program and financial products tailored to Woolworths Gross Yield 4.1% Implied Total Return customers. 8.1% New Zealand Food: This division is involved in procurement of food and Investment Fundamentals drinks for resale to customers in New Zealand. This division own 181 FYE 30 Jun 2021A 2022F 2023F 2024F stores and has over 18,000 team members and more than Profit $m 1,972.0 1,735.0 1,893.0 1,995.0 20,000 product lines. Profit (norm)* $m 1,972.0 1,735.0 1,893.0 1,995.0

Big W: Big W brand is involved in procurement of discount general EPS* ¢ 156.0 141.0 155.0 163.0 merchandise products for resale to customers in Australia. As of now they EPS Growth % 22.8 -9.6 9.9 5.2 have network of 183 stores nationally. BIG W is partnered with Good360 to P/E* x 25.0 27.7 25.2 24.0 help deliver brand new items to families in need. P/E Relative % 0.0 0.0 0.0 0.0

Restructuring: On 2 February 2020, Woolworths Drinks business was DPS ¢ 108.0 103.0 113.0 119.0 restructured to create Endeavour Group. On 4 February 2020 Endeavour Yield % 2.8 2.6 2.9 3.0 Group merged with ALH Group. Woolworths Group owns 85.4% of Franking % 100.0 100.0 100.0 100.0 Endeavour Group. * Adjusted for goodwill and unusual items Source: Based on Citi estimates Latest Research Share Price Chart FY21 Result: Update encouraging as the business reinvests Woolworths reported EBIT of $2,764 million on a continuing basis, an 11.5% YoY growth. The trading update was encouraging with Supermarkets reporting solid sales growth heading into FY22e. However, both opex and capex are expected to be elevated going forward as the business reinvests for better capacity and to future proof its operations. The company announced a $2.0 billion off-market share buyback to be completed in October 2021 and declared a 55cps final dividend. For more information see research 30 Aug 2021.

Total Return on $10,000 Investment

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Profit & Loss ($M) Cash Flow ($M) 2017A 2018A 2019A 2020A 2021A 2017A 2018A 2019A 2020A 2021A Sales Revenue 55,669 56,726 59,984 63,675 55,694 Receipts from Customers 65,499 66,899 68,998 68,898 72,688 Total Revenue ex. Int. 55,913 57,187 60,272 63,850 55,811 Funds from Operations 4,024 3,775 3,858 6,067 6,162 EBITDA 3,340 3,651 3,946 5,677 5,372 Net Operating Cashflow 3,122 2,930 2,948 4,561 4,624 Depreciation & Amort. -1,014 -1,103 -1,222 -2,458 -2,608 Capex -1,910 -1,848 -1,991 -2,149 -2,389 Goodwill Amortisation ------Acquisitions & Investments -6 -38 -80 -91 -244 EBIT 2,326 2,548 2,724 3,219 2,764 Sale of Invest. & Subsid. 201 287 1,682 34 19 Net Interest -194 -154 -126 -843 -613 Net Investing Cashflow -1,431 -1,510 -246 -1,945 -2,200 Profit Before Tax 2,132 2,394 2,598 2,376 2,151 Proceeds from Issues 56 ------Income Tax -650 -718 -780 -730 -647 Dividends Paid -562 -780 -1,318 -1,199 -1,154 Outside Equity Int. -60 -71 -66 -44 -65 Net Financing Cashflow -1,729 -1,060 -2,917 -1,612 -3,043 Profit after Tax 1,534 1,724 2,952 1,602 1,972 Net Increase Cash -39 360 -215 1,004 -619 Significant Items after Tax -- -- -259 -437 102 Cash at Beginning 956 917 1,277 1,066 2,068 Reported Profit after Tax 1,534 1,724 2,693 1,165 2,074 Exchange Rate Adjust. -1 -- 4 -2 -3 Preferred Dividends ------Cash at End 917 1,277 1,066 2,068 1,446

Ratios and Substantial Shareholders Balance Sheet ($M) 2017A 2018A 2019A 2020A 2021A 2017A 2018A 2019A 2020A 2021A Profitability Ratios Cash & Equivalent 909 1,273 1,066 2,068 1,009 EBITDA Margin % 6.00 6.44 6.58 8.92 9.65 Receivables 410 420 470 548 480 EBIT Margin % 4.18 4.49 4.54 5.06 4.96 Inventories 4,080 4,233 4,280 4,434 3,132 Net Profit Margin % 2.55 2.83 2.92 2.52 2.58 Other Current Assets 350 434 257 742 206 Return on Equity % 14.93 15.31 17.03 18.33 104.35 Current Assets 6,994 7,181 6,298 8,125 15,786 Return on Assets % 6.90 7.39 7.96 5.74 4.81 Prop. Plant & Equipment 8,438 9,026 9,519 20,804 17,030 Intangibles 6,533 6,465 6,526 7,717 4,671 Debt/Safety Ratios Other Non-Current Assets 422 527 402 911 342 Net Debt/Equity % 21.48 14.10 19.34 183.69 798.10 Non-Current Assets 15,922 16,377 17,193 30,347 23,450 Interest Cover x 12.01 16.55 21.62 3.82 4.51 Total Assets 22,916 23,558 23,491 38,472 39,236 Interest Bearing Debt 3,030 2,803 3,129 18,659 14,888 Top 5 Substantial Shareholders Other Liabilities 10,009 9,906 9,693 10,781 22,609 BlackRock Group 6.4% Total Liabilities 13,040 12,709 12,822 29,440 37,497 The Vanguard Group,Inc 5.0% Net Assets 9,876 10,849 10,669 9,032 1,739 Share Capital 5,615 6,055 5,828 6,022 5,253 Reserves 114 353 490 391 -6,989 Retained Earnings 3,797 4,073 3,968 2,329 3,115 Outside Equity Int. 350 368 383 290 360 Total Shareholders Equity 9,876 10,849 10,669 9,032 1,739

Current Analyst Recommendations * Principals & Directors Principals Company Secretary Ms Katrina Eastoe Ms Michelle Hall Directors Mr Michael James Ullmer(Non-Executive Director) Mr Gordon McK Cairns(Non-Executive Chairman,Non-Executive Director) Mr Scott Perkins(Non-Executive Director) Ms Siobhan Louise McKenna(Non-Executive Director) Ms Maxine Nicole Brenner(Non-Executive Director) Mr Bradford Leon Banducci(Chief Executive Officer,Managing Director) Ms Holly Suzanna Kramer(Non-Executive Director) Ms Kathryn (Kathee) Tesija(Non-Executive Director) Ms Jennifer Carr-Smith(Non-Executive Director)

* Source: Morningstar. This chart shows the spread of recommendations from those broker analyst's in Australia with research coverage of this stock.

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