Woolworths Group Limited ABN 88 000 014 675 Together. 2018 ANNUAL REPORT Page 8 CONTENTS Our key priorities SECTION 1 PERFORMANCE HIGHLIGHTS Across the year, Woolworths Group delivered 2018 a number of achievements across our six strategic Our impact 2 Chairman's Report 4 priorities, including the continuing transformation Chief Executive of our Australian and New Zealand Food businesses, Officer's Report 5 and the improvement in customer satisfaction scores Woolworths Group Purpose 7 Annual Report across the Group. Our key priorities 8 Group Sustainability 11 Group Financial Performance 14 SECTION 2 BUSINESS REVIEW Australian Food 16 Endeavour Drinks 18 TogetherTogether wewe are:are New Zealand Food 20 Portfolio Business — BIG W 22 ListeningListening toto ourour customers. Connecting personalised and convenient shopping Portfolio Business — Hotels 23 experiences.experiences. Transforming Transforming of our our Australian Australian and and New New Zealand Zealand Food Food businesses. businesses. Discontinued Operations 24 Evolving our Endeavour drinks business. Unlocking Value in our portfolio. Creating Overheads, balance sheet Evolving our Endeavour Drinks business. Unlocking value in our Portfolio. Improving and cash flow 25 end-to-endBETTER processes and SIMPLER to be better end to for end customers processes and for simplercustomer and and safer stores. for stores. Capital management 26 New store rollout plans 26 CreatingWe create better better experiences together. experiences together. Non-IFRS financial Pages 4–6 information and glossary 27 Our Material Risks 29 Chairman SECTION 3 and Chief DIRECTORS’ REPORT Page 11 Governance 32 Executive Board Skills and Experience 33 Officer Group Board of Directors 34 Group Executive Committee 36 Reports Sustainability Directors’ Statutory Report 38 Remuneration Report 40 Chairman, Gordon Cairns, Throughout the year, our team and CEO, Brad Banducci, has made significant progress towards the achievement of our SECTION 4 reflect on the achievements of the year, opportunities 2020 Strategy commitments, FINANCIAL REPORT to improve and the focus including the important steps to Auditor's Independence move towards a circular economy. Declaration 60 areas for the year ahead. Financial Report 61 Directors’ Declaration 117 Independent Auditor’s Report 118 SECTION 5 OTHER INFORMATION Our customers Five year summary 122 Page 2 Shareholder information & Corporate Governance Page 16 Statement 126 Our impact Company directory 128 Woolworths Group is a diverse Group business update group of Australian and New There were a number of business highlights during Zealand retail businesses that M the year, including the opening of Pitt Street Metro impact a number of sectors 29 on 20 June. Read more about Pitt Street Metro across society. served on average per week on page 17. 2 3 ANNUAL REPORT 2018 REPORT ANNUAL GROUP WOOLWORTHS Founded in 1924, Woolworths Group is one of Australia's largest retailers with some of the most recognised and trusted Our impact brands – including Woolworths, Countdown, Our team Dan Murphy's, BWS and BIG W. Woolworths Group is a proud Australian and New Zealand employer and a committed business partner to many thousands of farmers, 201,522 producers and manufacturers. Our customers 3 team members Women in Young team members senior management <25 years old Our store network HIGHLIGHTS 1PERFORMANCE 32% 74,757 M Voice of Team Indigenous and refugee 29 engagement score program recruits served on average per week 54% 46% REVIEW 2 BUSINESS 3,240 Female Male 82% 1,875 Voice of across 528 stores since the Customer score 1 Pick up locations 2 beginning of the program ACT 2,828 JUNE NSW 59,848 81% 2018 +2,900 NT 1,925 QLD 40,200 Current graduate Total recordable injury REPORT 3 DIRECTORS' Australian Food 1,008 SA 11,888 program members frequency rate (TRIFR) Rewards members Transactions TAS 4,846 New Zealand Food 181 VIC 44,655 Endeavour Drinks 1,545 WA 16,412 80 14.16% BIG W 183 NZ 18,430 10.9M 1.5BN Other 490 17.46% from FY17 Hotels 323 4REPORT FINANCIAL 3 Our financial highlights Revenue Our community Our planet EBIT 5INFORMATION OTHER Free Fruit for Kids Carbon emissions Free Cash Flow M 3,973 $ before dividends 56,726 3,775 Direct community investment totalling Australian Food 37,379 26M 6 New Zealand Food 5,898 2,548 $1,420M 2,446 Endeavour Drinks 8,271 2,326 13% BIG W 3,566 $30.8M pieces of fruit shared 18.7% from 2017 Hotels 1,612 below 2015 levels Food saved for Our community contribution 2014 2015 2016 2017 2018 Dividend Return on funds Solar power Plastic removed per share 4 Tax paid 5 employed (ROFE) as a % of EBIT generation from fruit and vegetable packaging 7 M 8.12M $2,548 ¢ M % 103 $661 24.1 meals 1.24% 2,211MW 9.5% from 2017 22.6% from 2017 1% from 2017 1.9 pts from 2017 180t 1 Overall Satisfaction Store and Online - Australian Food. 4 Full Year fully franked dividend including special dividend. 7 Plastic removed across fruit and vegetable packaging over the last 12 months. 2 Including Australian and New Zealand Food, Endeavour Drinks and BIG W. 5 From Group cash flow. 3 From continuing operations before significant items. 6 New Zealand Food (AUD). 4 5 ANNUAL REPORT 2018 REPORT ANNUAL GROUP WOOLWORTHS Chairman's Report Chief Executive Officer's Report Gordon Cairns Brad Banducci program, we saw 45 refugees commence employment in our Metro and Woolworths supermarkets. We were the first retail organisation to be recognised as AWEI Gold Tier Employer for LGBTI inclusion. In FY18 we reduced our carbon emissions to HIGHLIGHTS 1PERFORMANCE 13% below 2015 levels. At last year's AGM, we committed to review ALH's responsible gaming practices. In August, we completed two reviews with the findings leading to measures being put in place to address shortcomings. We will continue REVIEW 2 BUSINESS to support ALH on this journey. SHAREHOLDER VALUE Reflecting the progress we are making, our total return to shareholders in FY18 was 22.4%, outperforming the market. REPORT 3 DIRECTORS' This was driven by solid financial results from continuing operations: revenue growing at 3.4%, EBIT up 9.5%, NPAT growth of 12.9%, and Return on Funds Employed of 24.1%. Our balance sheet was also stronger with net repayable debt reduced by a 4REPORT FINANCIAL further $677 million, through business Last year in my report, I focused on three areas: growth and good working capital This year we have been focused on embedding our • The combined effort from the strategy, culture and capital management. I am pleased management. As a result we were Ways-of-Working and Core Values to deliver on our Group team to increase the number of delighted to declare a final dividend of Pick up sites to over 2,900 stores to report we have made good progress in all three 50 cents, taking the full year dividend Purpose, to create better experiences together, that better the across Australian and New Zealand as part of our transformation journey. This year I want to 93 cents per share, an increase lives of our customers. I am proud of the team’s achievements supermarkets, Dan Murphy’s, BWS and BIG W to enhance our to call out three others, equally integral to our journey: of 11% on the prior year. In addition, through being better together in FY18 as we continue on our connected, personalised and convenient 5INFORMATION OTHER recognising our strong franking credit customer experiences innovation, community, and shareholder value. balance, and the benefits from our journey to deliver on our Group Purpose. petrol partnership, we have also • Continuing to evolve our store announced a fully franked special renewal program in transforming INNOVATION COMMUNITY FY18 HIGHLIGHTS shareholders with the final dividend of Australia and New Zealand Food, dividend of 10 cents per share. Amongst the many innovations in the We are proud of our contribution to the Improved customer satisfaction 50 cents in October. completing a total of 80 Renewals during the year led to higher customer (11 new stores) including 54 group, our digital business, WooliesX community and to the environment. In conclusion, both board and In our focus on changing our business numbers across all of our businesses, Upgrades is a standout. In a little over a year, We contributed over $30 million in management are pleased with our for the better, we made significant direct community investment in FY18. driving sales growth from continued st we have created a market‑leading progress, but diligent and determined progress against our six strategic • Customer 1 Ranging rolled out We provided over eight million meals operations of 3.4%. EBIT increased by business with over $1 billion in to meet the challenges and priorities. Further detail on the progress across all BWS stores with ranges in food rescue through our partners opportunities ahead. 9.5% despite reinvestment in initiatives tailored to local customers, as we sales, servicing 6.2 million orders that will deliver benefits in future years. can be found on pages 8 to 10. The key OzHarvest, Foodbank and FareShare. continue evolving the Drinks business and growing at 30%. Customers highlights include: We removed 180 tonnes of plastic from The strong trading performance also who shop with us both in‑store and resulted in a meaningful reduction in • Whilst we still have a lot to do to our fruit and vegetables, and removed • Voice of Customer, Voice online spend significantly more than net debt and improved financial profile turnaround BIG W to unlock value single‑use plastic bags from our in‑store only customers. Online sales which has allowed for an increase in of Supplier and Voice of Team in our portfolio, focusing on fixing Australian supermarkets on 20 June.