T 2006 R L REPO A ANNU WOOLWORTHS LIMITED ANNUAL REPORT 2006 COMPANY DIRECTORY WooLwoRTHS LIMIteD ALH Group Pty Ltd CONTENTS – Registered Office Principal registered office in Australia 1 Woolworths Way 1 Woolworths Way Bella Vista NSW 2153 Bella Vista NSW 2153 Tel: (02) 8885 0000 Tel: (02) 8885 0000 – Victorian Office Web: www.woolworthslimited.com.au Ground Floor 3 Chairman’s Report 16-20 Claremont Street 4 Group Managing Director’s Report BIG W South Yarra VIC 3141 6 – The Results in Brief Web: www.bigw.com.au Tel: (03) 9829 1000 8 – Supermarkets National Supermarkets – Queensland Office 12 – General Merchandise Web: www.woolworths.com.au Level 1 14 – Consumer Electronics 152 Oxford Street 16 – Hotels Woolworths Petrol Tel: 1300 655 055 Bulimba QLD 4171 17 Our focus is: Company Secretary 18 – Project Refresh BWS Peter Horton 22 – Strategy and Growth Web: www.beerwinespirits.com.au 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: 1300 368 664 40 Directors’ Statutory Report Tel: (03) 9497 3388 Fax: (02) 8234 5050 42 – Remuneration Report 2006 Fax: (03) 9497 2782 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: (02) 9642 9100 Sydney NSW 2000 Fax: (02) 9642 9111 Web: www.deloitte.com.au Web: www.dse.com.au Progressive Enterprises Limited 80 Favona Road Mangere Auckland New Zealand Tel: +64 (9) 275 2788 Fax: +64 (9) 275 3074 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, 52.5 60.7 70.1 79.2 90.9 33.0 39.0 45.0 51.0 59.0 I would like to pay tribute to Roger Corbett for an 02 03 04 05 06 02 03 04 05 06 outstanding performance as Managing Director and 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 Michael Luscombe, environment, and some pressures on the prevailing On behalf of the Board, I thank them for their 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.