Wesfarmers Limited · ASX:WES
Wesfarmers — Debt Investor Presentation (February 2015)
48 slides from Wesfarmers's debt investor presentation, February 2015
Slide 1: 2015 Half-Year Results Debt Investor Update
2015 Half-Year Results Debt Investor Update February 2015
Slide 2: Presentation outline
Presentation Group outlineHighlights Performance 2015 Half-Year Results | 2
Slide 3: Group performance summary
Group performance summary Half-Year ended 31 December ($m) 2014 2013 % Revenue from continuing operations 31,970 30,743 4.0 Revenue from discontinued operations - 1,110 - Total revenue 31,970 31,853 0.4 Finance costs (158) (170) 7.1 EBIT from continuing operations 2,076 1,960 5.9 EBIT from discontin
Slide 4: Strength through diversified earnings
Strength through diversified earnings Half-Year ended 31 2014 2013 % December ($m) Coles 895 836 7.1 Home Improvement 618 562 10.0 Office Supplies 50 42 19.0 Kmart 289 260 11.2 Target 70 70 - WesCEF 95 110 (13.6) Resources 35 59 (40.7) Industrial & Safety 50 73 (31.5) Divisional EBIT from 2,102 2,01
Slide 5: Divisional performance highlights
Divisional performance highlights Coles Officeworks • Good supermarket result • Continued execution of the ‘every channel’ • Ongoing improvements in productivity & strategy operational efficiencies funded greater • Sales growth achieved in store & online investment in lower prices • Strong growth in
Slide 6: Divisional performance highlights (continued)
Divisional performance highlights (continued) Target Resources • Earnings reflected a challenging first • Significant decline in export metallurgical & quarter with markdowns undertaken to steaming coal prices affected revenues clear excess winter inventory • Increased sales volumes & a lower A$:US$
Slide 7: Working capital management
Working capital management • Further reduction in net working capital days • Increased working capital cash inflows from retail supported by business growth (1.9 days or portfolio: 13.1% reduction on prior corresponding – Higher creditors at period end due to business growth – Year-end timing differ
Slide 8: Operating cash flow generation
Operating cash flow generation • Improved cash realisation of 116.6% in $m Cash realisation % 1H15: 2,400 160 – Higher working capital cash inflows from 1,800 120 retail portfolio (timing of creditor payments at Coles in prior corresponding 1,200 80 period & strong inventory focus) 600 40 • Group re
Slide 9: Capital investment & property recycling
Capital investment & property recycling Half-Year ended 31 December ($m)1 2014 2013 % • Effective deployment of capital to Coles 537 554 (3.1) capture highest growth & return HIOS 370 280 32.1 Target 78 46 69.6 opportunities Kmart 93 89 4.5 – Coles & HIOS comprise 75% of 1H15 Resources 65 33 97.0 In
Slide 10: Coles
Coles 2015 Half-Year Results | 10
Slide 11: Coles performance summary
Coles performance summary Half-Year ended 31 December ($m) 2014 2013 % Coles Division Revenue 19,483 18,946 2.8 EBITDA 1,171 1,076 8.8 Depreciation & amortisation (276) (240) (15.0) EBIT 895 836 7.1 Food & Liquor Revenue1 15,559 14,770 5.3 Headline sales growth (%)2,3 5.3 4.7 Comparative sales growt
Slide 12: Food & Liquor highlights: Extending value leadership & focus on freshness
Food & Liquor highlights Extending value leadership & focus on freshness • Reduced the cost of the weekly shopping basket % A track record of lowering prices – Continued long-term process of greater investment 8 in trusted low prices 6 4 – Compelling weekly specials 2 – Coles brand providing a high
Slide 13: Food & Liquor highlights: Project Unity delivering greater simplicity
Food & Liquor highlights Project Unity delivering greater simplicity • Simplified in-store operations Simpler store operations for greater efficiency Indexed – “Easy” or “Assisted Ordering” completed for 130 meat, bakery & fresh produce 125 120 – Greater efficiency through more assisted 115 check-ou
Slide 14: Food & Liquor highlights: Extending into new services & channel
Food & Liquor highlights Extending into new services & channel • Strong growth in Coles Online Refrigerated “click & collect” lockers – Accelerated sales growth – Better value with “Every Day” prices now available – More convenient with over 100 “click & collect” sites in total & expanding – Improve
Slide 15: Food & Liquor highlights: Transforming liquor
Food & Liquor highlights Transforming liquor • Liquor performance remained challenging Reshaping the liquor network # stores • Long-term transformation 60 – Progressed clearance of excess & inactive 40 8 10 8 3 8 12 stock 20 11 33 35 33 35 20 27 17 – Initiated first stage of price reductions e.g. 0
Slide 16: Home Improvement & Office Supplies
Home Improvement & Office Supplies 2015 Half-Year Results | 16
Slide 17: HIOS performance summary
HIOS performance summary Half-Year ended 31 December ($m) 2014 2013 % Revenue Home Improvement 4,959 4,434 11.8 Office Supplies 802 745 7.7 Total 5,761 5,179 11.2 EBITDA Home Improvement 686 625 9.8 Office Supplies 61 53 15.1 Total 747 678 10.2 EBIT Home Improvement 618 562 10.0 Office Supplies 50 4
Slide 18: Home Improvement highlights
Home Improvement highlights • Strong revenue growth of 11.8% – Total store 11.7%; store-on-store 9.1% – Positive in all regions & all categories – Good momentum in consumer & commercial – Absolute growth of $525m (on 1H14) • EBIT increase of 10.0% – Strong underlying trading – Productivity gains & g
Slide 19: Home Improvement highlights
Home Improvement highlights • Contributions from all growth drivers – Creating more value – Better customer experiences – Accelerating brand reach » Wider & deeper digital ecosystem » Increasing physical network – Expanding commercial presence – More merchandise innovation • Investments strengthenin
Slide 20: Office Supplies highlights
Office Supplies highlights • Continuing cycle of strong earnings & ROC growth Sales growth momentum % 8.0 • Revenue growth of 7.7% 8 6.7 7.5 7 6.0 6 – Strong store sales growth 5 4 3.0 – 14 consecutive halves of store transaction growth 3 2.7 2 – Six year 1H online sales CAGR of 17.9% 1 0 1Q14 2Q14
Slide 21: Office Supplies highlights
Office Supplies highlights • In-store merchandising investment – Improved layouts & expanded ranges – Delivering sales & margin uplift • Strong & continuous growth in SME market – Multi-dimensional service investment » Stores, online, call centre, mobile, face-to-face – Significant opportunity for f
Slide 22: Kmart
Kmart 2015 Half-Year Results | 22
Slide 23: Kmart performance summary
Kmart performance summary Half-Year ended 31 December ($m) 2014 2013 % Revenue 2,442 2,321 5.2 EBITDA 333 299 11.4 Depreciation & amortisation (44) (39) (12.8) EBIT 289 260 11.2 EBIT margin (%) 11.8 11.2 Total sales growth1 (%) 5.3 1.7 Comparative store sales growth1 (%) 2.4 0.3 1 2014 growth reflec
Slide 24: Kmart highlights
Kmart highlights • Growth in revenue – Sustained focus on lowering prices – Continued growth in customer transactions – Strong trading over the second quarter & Christmas period • Increase in EBIT & return on capital – Improvement in product ranges – Effective working capital management – Increased
Slide 25: Target
Target 2015 Half-Year Results | 25
Slide 26: Target performance summary
Target performance summary Half-Year ended 31 December ($m) 2014 2013 % Revenue 1,935 1,965 (1.5) EBITDA 112 113 (0.9) Depreciation & amortisation (42) (43) 2.3 EBIT 70 70 - EBIT margin (%) 3.6 3.6 Total sales growth1 (%) (1.8) (4.4) Comparative store sales growth1 (%) (1.0) (4.2) 1 2014 growth refl
Slide 27: Target highlights
Target highlights • Year-on-year earnings growth in Q2 offset by clearance in Q1, as previously indicated • Customer & volume growth supported by investment in lower prices • First Christmas in 3 years with comparable store sales growth Better customer experience, supported by the delivery of new st
Slide 28: Resources
Resources 2015 Half-Year Results | 28
Slide 29: Resources performance summary
Resources performance summary Half-Year ended 31 December ($m) 2014 2013 % Revenue 689 764 (9.8) Royalties1 (80) (121) 33.9 Mining & other costs (501) (508) 1.4 EBITDA 108 135 (20.0) Depreciation & amortisation (73) (76) 3.9 EBIT 35 59 (40.7) Coal production (‘000 tonnes) 7,781 7,454 4.4 1 Includes
Slide 30: Resources highlights
Resources highlights • Continued strong safety performance • Record Curragh coal production & sales volumes during calendar year 2014 • Lower export coal prices partly offset by higher sales volumes • Continued strong cost performance – Recorded unit mine cash costs for the half 32% below 1H12 peak;
Slide 31: Chemicals, Energy & Fertilisers; Industrial & Safety
Chemicals, Energy & Fertilisers Industrial & Safety 2015 Half-Year Results | 31
Slide 32: Other businesses performance summary
Other businesses performance summary Half-Year ended 31 December ($m) 2014 2013 % Chemicals, Energy & Revenue 810 772 4.9 Fertilisers 1 Industrial & Safety 835 804 3.9 Chemicals, Energy & EBIT 95 110 (13.6) Fertilisers 2 Industrial & Safety 50 73 (31.5) 1 Includes Kleenheat Gas and ALWA (prior to th
Slide 33: Chemicals, Energy & Fertilisers highlights
Chemicals, Energy & Fertilisers highlights • In chemicals, higher contribution from ammonium nitrate (AN) following the recent capacity expansion offset by: – Increased gas input costs in ammonia business & loss of carbon abatement income ($20m in 1H15) – Ongoing challenging economic conditions for
Slide 34: Industrial & Safety highlights
Industrial & Safety highlights • Earnings impacted by volume & margin pressures • Continued very subdued customer & project activity across most sectors – Margins remained under pressure from intense competition & rising cost of imports • Resetting cost base & investing in customer value in response
Slide 35: Outlook
Presentation outline Outlook 2015 Half-Year Results | 35
Slide 36: Outlook
Outlook Retail • Group’s portfolio of retail businesses positioned well • Continued reinvestment of productivity gains & cost savings expected to support ongoing improvements to value & range propositions • Ongoing optimisation & expansion of store networks • Continued advancement of digital capabil
Slide 37: Outlook (continued)
Outlook (continued) Group • Generally optimistic as domestic economy transitions • Maintain a strong balance sheet • Secure growth opportunities through entrepreneurial initiative • Ensure sustainability through responsible long-term management • Leverage & build human resource capability • Continue
Slide 38: Debt Management
Debt Management 2015 Half-Year Results | 38
Slide 39: Financial discipline is core to Wesfarmers' strategy
Financial discipline is core to Wesfarmers’ strategy Maintaining prudent capital structure and strong credit rating is important to Wesfarmers • Recent activity - Jun 14: Sold Insurance underwriting and broking business; received proceeds of A$2.9 billion - Aug 14: Cancelled A$1.25 billion syndicate
Slide 40: Maintaining strong credit metrics
Maintaining strong credit metrics • Strong credit ratings: Moody’s A3 (stable); Standard & Poor’s A- (stable) - Favourable revision of credit metric targets Solid credit • Continued strength in Group’s debt service position metrics - Gross debt of $6.1 billion, net debt of $5.1 billion - Strong liqu
Slide 41: Strong business risk profile
Strong business risk profile • Business risk – Strong market position in food and liquor retail in Australia – Home Improvement business has a leading market position and demonstrates strong and stable earnings growth – Officeworks: ‘every channel’ approach leading to strong market position in all c
Slide 42: Strong business risk profile
Strong business risk profile • Low EBITDA and margin volatility v’s ‘strong’ peers - data spans the past 7 financial years 18.0% 16.0% 15.4% 14.0% 12.0% 11.2% 11.3% 10.0% 8.8% 8.1% 8.0% 7.0% 6.3% 6.0% 5.5% 5.5% 4.9% 4.6% 4.5% 4.7% 4.1% 4.0% 4.0% 2.0% 2.0% 0.0% 12.0% 10.0% 9.6% 8.0% 6.1% 6.0% 5.6% 5.
Slide 43: Strong business risk profile
Strong business risk profile • Low EBITDA and margin volatility v’s ASX rated companies - data spans the past 7 financial years 30.0% 27% 26% 25% 25.0% 21% 20.0% 18% 15.0% 13% 11% 11% 12% 10% 10.0% 5% 6% 4% 5.0% 2.0% 0.0% 30.0% 26% 25.0% 23% 20% 20.0% 16% 14% 15.0% 11% 10.0% 8% 9% 5% 6% 4% 4% 5.0% 2
Slide 44: Pro-active debt management
Pro-active debt management • Refinancing objectives – Focus on extending maturity profile and maintaining liquidity headroom – Commitment to maintain diversity of funding sources in domestic and key international debt capital markets – Standard terms and conditions across all DCM programmes, with a
Slide 45: Pro-active debt management
Pro-active debt management • Geographical DCM funding diversity at 31 December 2014 MTN EUR1,750m US144A USD1,400m MTN AUD1,350m • Maturity profile at 31 December 2014 $m 1,500 July 15: €500m (A$756m) May 16: US$650m (A$604m) 1,000 500 0 (500) (1,000) (1,500) (2,000) FY15 FY16 FY17 FY18 FY19 FY20 FY
Slide 46: Capital management considerations
Capital management considerations • Dividend policy takes into account through the cycle free cash flow requirements and debt refinancing • Strong phase of capital expenditure led growth • Dividend investment plan neutralised since 2008/09 final dividend; potential to preserve cash • Potential cash
Slide 47: Questions
Questions 2015 Half-Year Results | 47
Slide 48: Wesfarmers
0s Wesfarmers
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