Woolworths Group Limited ABN 88 000 014 675

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Woolworths Group Limited ABN 88 000 014 675 Woolworths Group Limited ABN 88 000 014 675 HALF- YEAR RESUL T S FY18 1 Table of contents Key highlights and progress..................................................................................................3 Brad Banducci Financial results .....................................................................................................................7 David Marr Business update....................................................................................................................15 Outlook...................................................................................................................................37 Brad Banducci HALF- YEAR RESULTS FY18 2 Key highlights Voice of Customer (VOC) scores continue to improve across the Woolworths Group with all businesses improving their customer experience Continued improvement in customer metrics driving sales growth with Group sales from continuing operations up 3.8%, with Australian Food sales +4.9% and Endeavour Drinks +4.8% Group EBIT from continuing operations up 9.9% with Australian Food EBIT up 11.1% despite continued investment during the half BIG W performing in line with the turnaround plan, but still a long way to go Pleasing progress on digital agenda with Pick up rolled out to over 1,000 Australian Food sites in the half and a material improvement in the online shopping and delivery experience HALF- YEAR RESULTS FY18 3 Woolworths Group FY18 priorities 6 CUSTOMER 1ST Create competitive TEAM AND CULTURE advantage across Woolworths Group CONNECTED, PERSONALISED AND CONVENIENT 5 SHOPPING EXPERIENCES IN FOOD AND DRINKS TRANSFORM EVOLVE Create differentiated UNLOCK VALUE 2 AUS AND 3 OUR DRINKS 4 customer propositions IN PORTFOLIO NZ FOOD BUSINESS E2E PROCESSES – ‘BETTER FOR CUSTOMERS Engineer a lean 1 operating model AND SIMPLER FOR STORES’ HALF- YEAR RESULTS FY18 4 Progress against our key priorities Customer 1st team and Connected, personalised & Transform Australian and culture convenient shopping experiences New Zealand Food • Increasing VOC scores across the Group • Material improvements in woolworths.com.au site • In Australian Food, VOC scores improved across all key metrics • >1 million VOC feedback surveys completed • Pick up now live in over 1,000 Australian Food sites • 37 Renewals and 35 Upgrades during the half • Woolworths Group Purpose, Ways-of-Working • Successful ‘Shop with Rewards’ campaign over • Customer 1st Ranging well progressed and and Core Values cascaded to the Group Christmas in Woolworths Supermarkets, BWS Woolworths brand refresh almost complete • Strong VOT maintained and an increase in and BIG W • Improved sales momentum in New Zealand Food VOS scores • Opened second Sydney CFC in January and first with further investment planned for FY18 Melbourne CFC in February • '24 Days of Good Acts'- a series of customer- • More work to do to deliver a consistently good focused events across Australian and New Zealand • More to do to improve online and delivery customer experience in all stores and days of Food experience and upgrade underlying IT platforms the week • More work to do to improve safety performance Evolve our Endeavour Drinks Unlocking value in our Portfolio End-to-end processes -‘better for business customers & simpler for stores’ • Strong sales growth from BWS and • Continued momentum in sales and EBIT • 1POS rolled out to over 580 Woolworths Dan Murphy’s from ALH Hotels with increased focus on Supermarkets responsible gaming • High double-digit online sales growth in BWS, • Key process improvements initiatives successfully Dan Murphy’s and Langton’s • BIG W turnaround progressing in line with plan landed during the half • Over 300 BWS stores now offering express and • Robust trading performance from Petrol • Significant improvement in on-shelf availability in December scheduled delivery from store • More work to do to deliver a more stable sales • Improved store IT support with less than 60 second • Steve Donohue appointed as MD, Endeavour base and improve underlying stock flow process wait time on calls to IT hotline Drinks in BIG W and assess the most appropriate options for Petrol • More work to do on making things ‘simpler for stores’ • More work to do to meet our customers increasing need for convenience HALF- YEAR RESULTS FY18 5 Table of contents Key highlights and progress ................................................................................................. 3 Brad Banducci Financial results .....................................................................................................................7 David Marr Group financial results .......................................................................................................................................8 Key balance sheet metrics .............................................................................................................................. 10 Cash flow summary ......................................................................................................................................... 11 Capital expenditure ..........................................................................................................................................12 Capital management ........................................................................................................................................13 Business update….................................................................................................................15 Outlook…...............................................................................................................................37 Brad Banducci HALF- YEAR RESULTS FY18 6 Results – Half-year 2018 Continuing Operations Total Group Change Change Sales 29.8bn 3.8% 32.3bn 0.9% EBIT 1,430m 9.9% 1,552m 23.4% NPAT attributable to 902m 14.7% 969m 37.6% shareholders of Woolworths Earnings per share 69.7¢ 13.7% 74.9¢ 32.4% Dividend per share 43¢ 26.5% Return on average funds 24.0% 323bps 28.1% 804bps employedi Return on average funds 13.8% 118bps 15.3% 317bps employed - lease adjustedi i HY17 before significant items Note: unless otherwise stated, all continuing operations results are compared to HY17 continuing operations before significant items Total Group sales and EBIT includes sales and EBIT from continuing and discontinued operations HALF- YEAR RESULTS FY18 8 Group EBIT $m HY18 HY17 Change Continuing operations Australian Food 901 812 11.1% Endeavour Drinks 310 302 2.5% New Zealand Food (AUD) 138 155 (11.1)% New Zealand Food (NZD) 150 163 (7.7)% BIG W (10) (27) (64.4)% Hotels 163 139 17.1% Central overheads (72) (80) (9.4)% EBIT continuing operations 1,430 1,301 9.9% Discontinued operations – Home Improvement 27 (118) n.m.* Discontinued operations – Petrol 95 74 27.9% Group EBIT 1,552 1,257 23.4% * n.m. not meaningful HALF- YEAR RESULTS FY18 9 Key balance sheet metrics continuing to improve Average inventory days ROFE Days Percentage Continuing operations Continuing operations Group Continuing operations – lease adjusted 41.6 41.3 24.0 40.7 40.6 40.4 20.8 39.7 39.4 39.3 38.2 13.8 12.6 36.6 HY14 HY15 HY16 HY17 HY18 HY17 HY18 Average inventory days from continuing operations declined 3.2 pts improvement in ROFE (continuing ops) driven by by 1.6 days during the year predominately driven by higher EBIT and working capital improvements. Lease- Australian and NZ Food and Endeavour Drinks adjusted ROFE (continuing ops) up 1.2 pts Note: all numbers exclude significant items in FY16 HALF- YEAR RESULTS FY18 10 Cash realisation and free cash flow remain strong Cash flow summary $m HY18 HY17 Change Operating activities before interest and tax 2,406 2,758 (12.7)% Interest and tax (431) (562) (23.3)% Operating activities 1,975 2,196 (10.1)% Investing activities (605) (386) 56.9% Free cash flow before dividends 1,370 1,810 (24.3)% and share issues Share issues/other - 56 n.c.* Dividends (416) (271) 53.9% Free cash flow after dividends and 954 1,595 (40.2)% share issues Cash realisation ratio 125% 171% * n.c. not comparable HALF- YEAR RESULTS FY18 11 Higher operating capex driven by increased store renewals, IT and digital investment $m HY18 HY17 Continuing operations Operating capex 770 606 Property development 107 107 Gross capex 877 713 Property sales (24) (162) Net capex 853 551 Discontinued operations – Home Improvement* (12) (6) Discontinued operations – Petrol 6 14 Group net capex 847 559 Operating capex – HY18 Operating capex – HY17 11% 13% 21% 22% New stores FY18 operating Renewals / Refurbs capex guidance 7% $770m $606m SIB / Other Growth of $1.8bn remains 38% 14% 34% 11% Supply Chain unchanged 7% IT 12% 10% * HY18 Home Improvement net capex excludes the sale of 40 Masters freehold trading sites and 21 Masters freehold development sites. These were included in the sale of Hydrox Holdings Pty Ltd on 11 October 2017 for a headline sale price of $525m HALF- YEAR RESULTS FY18 12 Capital management 100 Interim Final Interim payout (RHS) 80 Dividend and Dividend Reinvestment Plan Cents 75 80 • Fully franked FY18 interim dividend of 43 cents per 70 Payout (%) Payout share – up 26% on prior year 60 33 65 0 60 • DRP discount of 1.5% retained for FY18 interim 50 40 55 dividend, but will not apply to FY18 final dividend or 50 for the foreseeable future 20 44 43 34 45 0 40 Debt and credit rating FY16 FY17 HY18 • Committed to solid investment grade rating • All credit metrics strengthened in line with higher EBIT Fixed charges cover ratio (x) 2.5 2.4 2.7 Funding & liquidity
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