Woolworths Supermarkets: Corporate Overview and Stakeholder Analysis

GROUP PROJECT TEAM MEMBERS: ANISH ALI KHAN – K201010 THERENSIA DENSIA – K201072 ROJANANTHAN THEVAPALAN – K2010179 SUBMITTED TO: SAM ASSENSO DATE OF SUBMISSION: 29/01/2023

1. Describe the company’s history, its core operations and activities, size in terms of market share or capitalisation Woolworth is Australia’s leading supermarket brand with expertise in selling groceries, durable goods, home compliances and home décor for their customers. Woolworths Supermarkets (abbreviated “Woolies” in Australia) is an Australian supermarket and grocery retail chain operated by the Woolworths Group. Woolworths, founded in 1924, is Australia’s largest grocery store chain, with a 33% market share in 2019. Woolworths International (Australia) is a wholly owned subsidiary of Woolworths Holdings Limited, which is rooted in South Africa. Woolworth is in the retail sector, and till 2021, Woolworth holds the market share of 37.4% in the grocery and food retail market (Banerjee, 2022). Woolworths Group Limited is a privately held, publicly traded business that produces revenue through the retail sale of supermarket food, home furnishings, online data business intelligence, and management consulting. Woolworths says, "We are concerned about how our products are produced and are committed to an open, transparent, discoverable, and ethical distribution chain. We care about our people and are dedicated to becoming a multicultural and diverse company that increases the well-being of our employees, customers, and communities". Woolworths sells publications, DVDs, health and beauty, household goods, pet and baby supplies, and stationaries about groceries (vegetables, fruit, meat, processed foods, etc.). WHL's vision is to be the most successful store group in the southern hemisphere. Its quest is to be the top choice for consumers in the southern hemisphere who appreciate worth, innovative thinking, and sustainable development. It performs around 40 retail locations in New Zealand and Australia. 2. Identify some stakeholders and describe their relationship with the company The stakeholder engagement programme helps the Group better traverse a challenging regulatory, policy-making, and political situation; it offers ongoing macro-environmental insights; it develops goodwill envoys; and, inevitably, it ensures our social licence to operate. Woolworths has 12 prominent retail stakeholders: customers, distributors, rivals, administration, investing public, service providers, employees, supervisors, property owners, shareholders, society, and activists. Woolworths Limited comprehends its stakeholders' necessities and does everything in its power to make sure they are entirely comfortable. It also contributed significantly to the nation and society by rewarding its stakeholders and meeting society's needs

(Hertz, 2022). Meeting stakeholders' requirements enables the company to boost revenues and profits and emerge as a market leader. Due to the policies, it has incorporated, the organization has broadened its size of the market and prospective market. It typically makes attempts to address the concerns and problems of its stakeholders. 3. Identify and compute the following corporate governance indicators from the collected/downloaded annual report Name of the large shareholders: ANZ banking group and Black Horizon Plc are two largest shareholders of the Woolworth Ltd. Classification of the ownership: BlackRock Fund Advisors has 3.76% stakes with 45,589,373 shares Total number of directors: 11 directors out of which 2 are independent. Percentage of non-executive directors: 3% Percentage of independent director: 2% Compensation of directors and top-executives: $11200 and $10900 Any of these are sustainable shareholders: Approx. 14% independent shareholdings by outsiders. Evaluate the role of finance and treasury department of the company in financial management: The treasury department is responsible for a company's finances. The treasurer must keep a record of actual and anticipated free cash flow along with unique financing sources and utilise these details to properly engage surplus money whilst also being primed for extra borrowed money or capital elevates (Dilshod and Madina, 2022). Key performance indicators: Key performance indicators (KPIs) assess a company's performance compared to a specific agenda, priorities, or industry experts. Financial KPIs include net income (or the bottom line, profit margin), total revenue minus particular expenses, and liquidity ratios.

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04. Woolworths International (Australia) Pty Limited, trading as Country Road Group, is a foreign-owned private company that derives most of its revenue from the provision of apparel, homewares, and related accessories. The company employs approximately 5,610 staff and operates in Australia, New Zealand, Hong Kong, Singapore, and South Africa, and is administered from its head office in Burnley, Victoria. Woolworths International (Australia) is a wholly owned subsidiary of the South African-based, Woolworths Holdings Limited. LAST PRICE / TODAY'S CHANGE - $35.150 + $0.409 (1.180%) (on 27/01/2023) VOLUME - 1,573,866 BID / OFFER RANGE - $34.890 - $35.170 MARKET CAPITALISATION - $42.26B Financial summary of WOOLWORTHS GROUP LIMITED with all the key numbers Right now, Woolworths has a market capitalization of 42.083B AUD. The company has an EPS TTM of 1.27 AUD, a dividend yield of 2.65%, and a P/E of 27.48. On February 22, Woolworths Group Limited's anticipated earnings were 0.71 Australian dollars. Valuation Ratios P/E Ratio (TTM) 27.81 P/E Ratio (including extraordinary items) 5.30 Price to Sales Ratio 0.72 Price to Book Ratio 7.17 Price to Cash Flow Ratio 12.72 Enterprise Value to EBITDA 11.77

Enterprise Value to Sales 0.95 Total Debt to Enterprise Value 0.28 Total Debt to EBITDA 3.41 EPS (recurring) 1.24 EPS (basic) 1.27 EPS (diluted) 1.26 Efficiency Ratios Revenue/Employee 307,318 Income Per Employee 7,813 Receivables Turnover 91.09 Total Asset Turnover 1.68 Liquidity Ratios Current Ratio 0.57 Quick Ratio 0.23 Cash Ratio 0.10 Profitability Ratios Gross Margin +29.65 Operating Margin +4.21

Pretax Margin +3.44 Net Margin +2.54 Return on Assets 4.27 Return on Equity 42.04 Return on Total Capital 12.96 Return on Invested Capital 8.72 Capital Structure Ratios Total Debt to Total Equity 280.32 Total Debt to Total Capital 73.71 Total Debt to Total Assets 50.38 Interest Coverage 4.17 Long-Term Debt to Equity 248.11 Long-Term Debt to Total Capital 65.24 Long-Term Debt to Assets 0.45 Solvency ratios Debt to assets ratio 0.50 Debt to equity ratio 2.75 Long term debt to total assets ratio 0.45

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(Source: Woolworths group Annual report, 2022)

5. ( 2021 ) (Source: ASX Website)

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( 2022 ) (Source: ASX Website) SHARE INFORMATION Day range $34.590 - $34.930 Previous close $34.790 Average volume 1,982,772 52-week range $31.670 - $39.630 Foreign exempt? No ISIN AU000000WOW2 Share description Ordinary Fully Paid Shares on issue 1,216,476,503

FUNDAMENTALS P/E ratio 27.64 EPS $1.258 Revenue $60.84B (AUD) Net profit $7.93B (AUD) Cash flow -$45.00 Price/free cash flow $10.80 Free cash flow yield 9.25% DIVIDENDS Type Final Dividend amount $0.530 Annual yield 2.64% Ex-date 31 Aug 2022 Record date 01 Sep 2022 Pay date 27 Sep 2022 Franking 100% IBISWorld forecasts the All-Ordinaries index to rise by 4.1% during 2022-23, to average 7,879.3 index points. Growing total business profit figures and strong commodity prices are expected to support the value of the index in the current year. Continued supply constraints and inflationary

pressures have supported commodity prices. However, rising interest rates in response to inflationary pressure are anticipated to constrain business expansion and investment in equities, hindering growth in the index. Moreover, subdued economic growth in China is expected to limit demand for Australian commodities, which is expected to place downward pressure on the performance and therefore value of the index’s largest companies, such as BHP Group Ltd. Largely consistent cuts to the cash rate by the RBA over most of the past five years have contributed to growth in the All-Ordinaries index as it drove up stock valuations. Furthermore, strong growth across the technology sector over the past five years has supported a rise in the index. In addition, local interest rates remained higher than interest rates in other developed countries for much of the period. As a result, Australia remained an attractive place to invest, driving greater demand for shares in local companies and pushing up the All-Ordinaries index. 06. • Mergers Activities: Woolworths has purchased 9 businesses, including 2 in the previous 5 years. Private equity firms made a total of 2 acquisitions. Additionally, it sold off two assets. 2011 saw Woolworths make its largest acquisition to date when it paid $330 million for Cellarmasters Group. Its greatest publicly known transaction was the $1.3 billion sale of Woolworths - 527 Fuel & Convenience Stores to BP in 2016. Woolworths has purchased businesses in 2 nations. The two industries that the company is mainly focused on are retail (23%) and drinks (23). • Woolworths has announced plans to merge its drinks and hospitality businesses into a single entity which will be divested from the group in 2020 to allow for a greater focus on its core food business.

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Endeavour Drinks and ALH Group will unite under the title Endeavour Group, creating Australia’s largest integrated drinks and hospitality business, with sales of approximately $10 billion. The group will comprise over 1500 BWS and Dan Murphy’s retail drinks outlets and 327 ALH hotels. The merger is expected to be completed in the second half of this calendar year, with Woolworths to hold 84.5 per cent of the business and Bruce Mathieson Group (BMG), a partner in ALH joint venture, to own 14.6 per cent. Woolworths Group is then planning a separation of the business through a demerger “or other value-accretive alternative”. If demerged, Woolworths is expected to retain a minority stake. The separation will result in a simplified organisational structure within Woolworths Group and allow more focus on growing the supermarket end, thus creating “two market-leading customer focused businesses”. “Over the past three years we have progressively moved from a period of fixing the basics as part of our turnaround to investing for the future as part of our transformation,” Woolworths Group CEO Brad Banducci said in a statement to the ASX on Wednesday. “As we look to build customer differentiation in all of our businesses and prepare for an agile and digitally enabled future, we have decided to simplify Woolworths Group through a combination and subsequent separation of Endeavour Group.”

Woolworths Group CFO David Marr will oversee the merger and separation of Endeavour Group, taking up the new role of chief operating officer at Woolworths Group. Finance director of Australian Food Stephen Harrison will take over the CFO role from August 1. ALH already owns 86 Dan Murphy’s and 512 BWS store retail drinks outlets and comprises around 35 per cent of the group’s retail drinks sales. The merger will include Endeavour Drinks’ own and exclusive brands business, Pinnacle Drinks, wine auction and retail business Langton’s, wine subscription business Cellarmasters and an 8.7% stake in ALE Property Group. Woolworths Group chairman Gordon Cairns said that the decision is in the best interests of shareholders. “The Board believes that a merger of Endeavour Drinks and ALH followed by a separation, is in shareholders’ best interests and will benefit customers and team members of both groups,” Cairns said. “The decision has been taken after consideration of the future prospects of both businesses and how they can be best realised. It reflects the Board’s focus on maximising long-term shareholder value.” The restructure is subject to shareholder approval, which is expected to be sought at Woolworths Group’s 2019 AGM.

• Woolworths Limited PESTEL analysis is a strategic tool to analyse the macro environment of the organization. PESTEL stands for - Political, Economic, Social, Technological, Environmental & Legal factors that impact the macro environment of Woolworths Limited. Changes in the macro-environment factors can have a direct impact on not only the Woolworths Limited but also can impact other players in the Food & Staples Retailing. The macro- environment factors can impact the Porter Five Forces that shape strategy and competitive landscape. They can impact individual firm’s competitive advantage or overall profitability levels of the Food & Staples Retailing industry. 7. Stock Return Rate of Return = (Dividend Received + Ending Price – Beginning Price) / Beginning Price * 100 Rate of Return = ($2.60 + $16.06 - $21.38) / $21.38 * 100 Rate of Return = -$2.72 / $21.38 * 100 Rate of Return = -12.72% Market Return ER = Rf + (Rm –Rf) x beta 0.10 = 0.055 + (Rm – 0.055) x 0.70 0.045 = 0.70 Rm – 0.0385 Rm = 11.93% Therefore, market return would be 11.93%. 10 years government Return

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C = Annual coupon = 1000*5% = 50 r= Annual yeild = 4% F = Par value = 1000 n = NO. of coupons = 10 Ex-Dividends Beta: Beta is calculated in the excel sheet and it is 0.219.

CAPM: Rfr = 3% Mrp = 8% Required rate of return = Rfr + (beta * mrp) = 3% + (0.219 * 8%) = 4.752% Type of Strategy used by Woolworths: Woolworths engage in aggressive risk investment strategy. The diversified foundation and competitive advantages, such as classification and geographic diversity, a predominance of trusted, elevated private-label brands, sizable intellectual property and innovative thinking capabilities developed over decades, and business sustainability credentials, are all leveraged by this strategy. 8. Weighted Average Cost of Capital WACC 1. Weights: An organization's obligations and values are its primary sources of capital. In order to achieve this, we must determine the meaning of value and duty in general. Market Cap is shorthand for "market capitalization," especially when referring to Value (E). Woolworths Gathering is now valued at A$42759.149 M in the business sector. Since determining an obligation's fair value is so difficult, we have relied on The Action's book esteem (D). It might be calculated by aggregating the average yearly payments made in the past for all obligation and capital leases, regardless of term length. To compare, Woolworths Group's average annual long-term obligation and capital rent obligations were A$1405 million as of June 2022. Book Value of Obligation (D) is AU$15825.5M.

This is how we calculate the weight of values: Obligation weight is calculated as follows: a) Value weight = E/(E + D) = 42759.149/(42759.149 + 15825.5) = 0.7299 D/(E + D) = 15825.5/(42759.149 + 15825.5) = 0.2701 b) Obligation weight 2. Cost of Equity: Capital Resource Evaluating Model (CAPM) to establish minimum acceptable rate of return. Value Cost = Risk-Free Rate of Return + Resource Beta * Profit Increase from Speculation - Stable Rate of Return = Market Restored Assumption a) The risk-free rate used was the 10-Year Depository Steady Growth Rate. Each day, fresh information will be made available. A risk-free rate as of right now is 3.5700000%. Read this if you want some advice on handling your money. In particular, we focus on the nation or area where the company is headquartered and its 10-Year Depository Steady Development Pace. We'll have to rely on the US 10-Year Depository Steady Development Rate in the absence of more specific data. b) Beta measures the extent to which expected resource returns differ from the usual surplus market returns. The beta for the Woolworths Get together is.50. c) The term "market premium" refers to the difference between the market's average return and the risk-free rate of return. Market premium of 6% must be used in the computation. Equity Cost of Capital = 3.57 x 10(-6) + 0.5 x 6 % = 6.57 % 3. Cost of Debt: A positive interest cost of A$58M in June 2022 is attributable to Woolworths Gathering, which is shown in the cost of debt service. Book Value of Obligation shows a negative figure for the company of A$15825.5M. (D). Interest on Debt = 58 / 15825.5 = 0.3665 %. 4. Multiply by one minus Average Tax Rate: Multiply by -1 and then by 4 bases its calculations on the average tax rate over the last two years. A tax rate of 100% or less may be used to compute the average tax rate. In cases when the

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computed average tax rate is more than 100%, the maximum tax rate is used instead. The average tax rate is set to 0% if and only if it is less than 0% after calculation. 9. Debt Ratio over past 2 years The total amount of Woolworths Group's outstanding short-term debt and capital lease obligation as of the end of June 2022 is A$1,926 million. Woolworths Group has a Long-Term Debt & Capital Lease Obligation of A$14,837,000,000. This amount is due in the fiscal quarter ending in June 2022. Total Stockholders Equity for Woolworths Group was A$5,980,000,000 as at the conclusion of the company's fiscal quarter in June 2022. As of the conclusion of the June 2022 quarter, Woolworths Group's debt to equity ratio was 2.80. Woolworths has a WACC of 5.5185% due to the fact that it does not issue preference shares, taking into account its current capital structure (D/E ratio = 15.52%). In order to take into consideration the possibility of changes in Woolworths' future capital structure, the analysis makes use of two different sensitivity analyses. Woolworths is more likely to fund future borrowings via debt since its current debt to equity ratio is just 15.5% and it is still capable of handling the higher risk. This is despite the fact that an increase in the D/E ratio shows that the company is carrying more debt and is thus subject to more risk.

References;  Banerjee, S. (2022). A Review on Strategic Analysis of Australian Supermarkets. Journal of Production, Operations Management and Economics (JPOME) ISSN 2799-1008, 2(06), 36-45.  Dilshod, S., & Madina, K. (2022). AUDIT OF BUDGET ORGANIZATION EXECUTION OF EXPENDITURE ESTIMATE. Open Access Repository, 8(12), 363- 366.  Hertz, H. (2022). Do You Have an Organizational Purpose? Is It Mere Propaganda?.  Woolworths group limited. Available at: https://www2.asx.com.au/markets/company/wow [Accessed on: 22nd January 2023]  Ratios & Margins Woolworths Group Ltd, 2022. Available at: https://www.wsj.com/market-data/quotes/AU/WOW/financials [Accessed on: 20th January 2023]  Woolworths Group Limited - Australian Company Profile. Available at: https://www.ibisworld.com/au/company/woolworths-international-australia-pty-limited/ 428825/ [Accessed on: 19th January 2023]  All Ordinaries Index, 2022. Available at: https://www.ibisworld.com/au/bed/all- ordinaries-index/3170/ [Accessed on: 24th January 2023]  Woolworths Mergers and Acquisitions Summary. Available at: https://mergr.com/woolworths-group-acquisitions [Accessed on: 23rd January 2023]  Ruth Hogan, 2019. Woolworths to divest drinks and hospitality businesses. Inside Retail. Available at : https://insideretail.com.au/news/woolworths-to-divest-drinks-and- hospitality-businesses-201907#:~:text=Woolworths%20has%20announced%20plans %20to,on%20its%20core%20food%20business. [Accessed on: 23rd January 2023]  Woolworths group 2022, Annual Report, Available at: https://www.woolworthsgroup.com.au/content/dam/wwg/investors/reports/2022/full- year/2022%20Annual%20Report.pdf [Accessed on: 23rd January 2023]  Woolworths Limited PESTEL & Environment Analysis. Available at: http://fernfortuniversity.com/term-papers/pestel/nyse4/4816-woolworths-limited.php [Accessed on: 26th January 2023]

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Student Group Work Guidelines Purpose: The following guideline is designed to help you organise and manage your group assessment task. Group work – Getting started: Once your group is formed, the group work guideline can be useful to set up effective group work. 1 Introduction : Spend some time getting to know each other, exchange preferred contact details. 2. Outcomes : Look at the assessment together and discuss: • What do we need to achieve / what is our outcome? • Break the assessment into individual tasks/steps from start to finish. For each task / step, discuss how long it would take. • Based on the tasks / steps and timing, create a timeline or diagram showing who will do what and when. You will need some mini-deadlines so tasks are completed on time and in sequence. 3. Student Group Work Guidelines and Individual Contribution Statement Please remember that each group member receives a copy of the guideline and, once all responsibilities are assigned, each copy must be the same. This is important as it shows that all group members are aware of their responsibilities to the group. At the end of the completion of the Project Trimester a single hard-copy to be submitted to Lecturer and a soft copy to be uploaded to Moodle link. 4. What’s next? Set up a schedule to meet – when/where/how often/how long? Meeting frequently will allow you to keep on track and to resolve any issues you may face over the assignment. Tips for group work:

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1. Show respect to other members by • Communicating effectively – responding to messages, listening to others, allowing everyone the opportunity to speak and contribute. • Sticking to the schedule of meetings and tasks 2. If you have issues with group members not contributing, talk to your lecturer or ALS Coordinator. 3. If you would like assistance with getting started, your ALS Co-ordinator would be happy to help! STUDENT GROUP WORK GUIDELINE Unit Title: Finance Management Assessment Item Title Project Report Assessment Due Date: 29/01/2023 Group Members 1. Anish Ali Khan (K201010) 2. Therensia Densia (K201072) 3. Rojananthan Thevapalan (K210179) 4. Thi Thanh Thao Doan (K210433) #1 Student Name: Therensia Densia Tasks Responsible for: part 1, 2, 3 #2 Student Name: Rojananthan Thevapalan Tasks Responsible for: part 4, 5, 6 #3 Student Name: Anish Ali Khan Tasks Responsible for: part 7, 8, 9

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#4 Student Name: Thi Thanh Thao Doan Tasks Responsible for: Part 10, 11, 12 Individual Contribution Statement Form CONFIDENTIAL Note: To be completed individually on completion of the project. A signed hard-copy to be submitted to your Project Lecturer and a soft copy to be uploaded to the Moodle link. Team Name: __________________________________ Lecturer Name: Sam Assenso (Please respond to the relevant box below) All work has been equally and fairly distributed and all team members have contributed more or less equally. I think it is fair that we all receive the same team mark for all tasks completed by the team. (Write brief notes in the box below)-

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* Work has NOT been equally distributed. I would suggest that the individual contribution for each task as listed could be summarised as follows: Tasks Team member Name Individual Contribution % (Score out of 100 for each task) Comments Anish Ali Khan 100 Therensia Densia 100 Rojananthan Thevapalan 100 Thi Thanh Thao Doan 0 Did not contributed in group report and presentation. Note: Type in, then print and sign. Additional comments/notes- Add here (use additional pages if required) …………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………… Signed: ……Anish Ali Khan……………………………………………….. Date: …29/01/2023…………………

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