Wesfarmers Limited · ASX:WES
Wesfarmers — FY2022 Earnings Presentation
65 slides from Wesfarmers's earnings presentation, Aug 26, 2022
Slide 1: 2022 Full-year results briefing presentation
2022 Full-year results briefing presentation To be held on Friday 26 August 2022
Slide 2: Presentation outline
Presentation outline Item Presenter Pages Performance overview Rob Scott 3 – 10 Financial performance Anthony Gianotti 11 – 18 Outlook Rob Scott 19 – 21 Q&A Rob Scott Anthony Gianotti Michael Schneider Ian Bailey Ian Hansen Sarah Hunter Tim Bult Emily Amos Nicole Sheffield Divisional appendices 23 –
Slide 3: Group performance overview
Group performance overview Rob Scott Managing Director, Wesfarmers Limited
Slide 4: Wesfarmers' primary objective is to provide a satisfactory return to shareholders
Wesfarmers’ primary objective is to provide a satisfactory return to shareholders We believe it is only possible to achieve this over the long term by: Anticipating the needs of our Looking after our team Engaging fairly with our customers and delivering members and providing a safe, suppliers, and
Slide 5: 2022 Financial year highlights
2022 Financial year highlights Solid results, Full year First half - Second half - impacted by COVID strong growth supported by strong second $2,352m NPAT 14.2% NPAT1 13.1% NPAT1 half growth >34k store trading $1.00 final dividend No lockdowns days impacted Operational Health OneDigital Lithium capa
Slide 6: Solid financial result reflects strong second half
Solid financial result reflects strong second half Solid full year financial results $36.8b $2.35b $4.2b $2.0b Revenue Net profit after tax cash distributions acquisitions2 and paid to shareholders net capex +8.5% YoY - 2.9% YoY1 $2.3b capital return API, Beaumont Tiles, (+4.9% excl. Health) (+13.1%
Slide 7: Developing platforms to support long-term shareholder returns
Developing platforms to support long-term shareholder returns Investing in our businesses Renewing the portfolio Strengthened e-commerce capabilities and omnichannel offer Development of Mt Holland 1,500+ stores lithium project 100m+ online interactions per month 1 Construction activities underway $
Slide 8: Divisional highlights
Divisional highlights Bunnings Kmart WesCEF Officeworks Group Group • Supported working and learning from home • Remarkable period of • Strong results in 2H22 • Record earnings for the year • Higher costs due to COVID growth, FY19-FY22: following the significant impact • Strong operating impacts and
Slide 9: Focus on long-term value, consistent with our objective
Focus on long-term value, consistent with our objective Climate and Environment Team Community 6.4% $49m >140,000 reduction in Scope 1 and Scope 2 in team member COVID-related support vaccinations delivered at Bunnings sites emissions1 3.3% $54m 140GWh Indigenous employment parity re-gained in direc
Slide 10: Group performance summary
Group performance summary Year ended 30 June ($m) 2022 2021 Var % Revenue 36,838 33,941 8.5 Revenue (excluding Health) 35,598 33,941 4.9 EBIT 3,633 3,717 (2.3) EBIT (after interest on lease liabilities) 3,416 3,491 (2.1) EBIT (after interest on lease liabilities) (excl. significant items)1 3,416 3,5
Slide 11: Financial performance
Financial performance Anthony Gianotti Chief Financial Officer, Wesfarmers Limited
Slide 12: Divisional sales performance
Divisional sales performance Sales performance ($m) 2021 Year ended 30 June 2022 Retail sales1 GTV Revenue Total sales +5.2% K+T: (4.0%) +4.6% +1.6% +41.7% +3.8% growth Comp sales +4.8% (1.0%) +8.6% growth 17,739 16,861 6,795 6,832 2,592 2,182 3,014 3,153 3,041 2,146 1,855 1,925 973 989 Bunnings Kma
Slide 13: Divisional earnings performance
Divisional earnings performance EBT1 Performance and earnings results reflect: FY22 2H22 • Resilience of operating model and strong execution of strategic agenda $2,204m $945m Bunnings Group • Strong commercial growth and solid DIY activity ↑ 0.9% ↑ 3.7% • Investment in long-term growth initiatives
Slide 14: Other business performance summary
Other business performance summary Year ended 30 June ($m) Holding % 2022 2021 Var % Share of profit of associates and joint ventures BWP Trust 24.8 121 65 86.2 Other associates and joint ventures1 Various 36 23 56.5 Sub-total share of profit of associates and joint ventures 157 88 78.4 OneDigital (
Slide 15: Divisional cash flow and working capital
Divisional cash flow and working capital • Divisional operating cash flows declined 14.2% to $4.1b, Divisional NWC cash movement with divisional cash generation of 78%1 due to: Year end 30 June ($m) 2022 2021 – Retail NWC2 movements due to normalisation in inventory following temporarily low balance
Slide 16: Group cash flow
Group cash flow Group operating cash flow ($b) • Group operating cash flows declined $1.1b or 32.0% to $2.3b, with cash realisation of 59%: – Lower divisional cash flows – Increased tax payments on higher instalment rates • Principal component of lease payments of $1.0b • Net capital expenditure of
Slide 17: Balance sheet and debt management
Balance sheet and debt management • Repositioned balance sheet to optimise cost of Debt maturity profile2 funds and debt maturity profile $m – Reduced average cost of funds1 to 3.11% 1,750 1,250 (FY21: 4.74%) 750 – Extended weighted average debt term to maturity 250 to 5.0 years (FY21: 3.5 years) (2
Slide 18: Shareholder distributions
Shareholder distributions • Fully-franked final ordinary dividend of Shareholder distributions1 $1.00 per share $/share Nov 2018 – Reflects strong 2H NPAT result 5.00 Demerger of Coles 4.00 3.78 – Takes full-year ordinary dividend to 2.78 $1.80 per share 3.00 2.23 2.00 1.00 1.80 2.00 1.70 • Dividend
Slide 19: Outlook
Outlook Rob Scott Managing Director, Wesfarmers Limited
Slide 20: Current operating environment
Current operating environment Retail trading conditions have remained robust through the first seven weeks of FY23, with particularly strong sales in Kmart Group Wesfarmers’ businesses are well positioned for current operating conditions and to meet the changing needs of customers Industrial busines
Slide 21: Group outlook
Group outlook • The Australian economy is starting from a strong base with low unemployment and high levels of household savings, but the effects of inflation and higher living costs are placing pressure on parts of the economy, including household budgets • The Group continues to actively manage in
Slide 22: Questions
Questions
Slide 23: Appendix: Divisional summaries
Appendix: Divisional summaries
Slide 24: Bunnings Group
Bunnings Group Michael Schneider Managing Director, Bunnings Group
Slide 25: Bunnings performance summary
Bunnings performance summary Year ended 30 June ($m) 2022 2021 Var % Revenue 17,754 16,871 5.2 EBITDA 3,057 2,993 2.1 Depreciation and amortisation (740) (692) (6.9) EBIT 2,317 2,301 0.7 Interest on lease liabilities (113) (116) 2.6 EBT 2,204 2,185 0.9 Net property contribution 52 (10) n.m. EBT (exc
Slide 26: Bunnings sales and earnings overview
Bunnings sales and earnings overview • Revenue of $17.8 billion – Total store sales growth of 4.2% (7.8% in the second half) – Driven by strong commercial growth and solid DIY activity, while cycling elevated levels of demand in prior year – Deeper digital engagement contributing to sales growth onl
Slide 27: Bunnings progress on strategy
Bunnings progress on strategy • Strengthen the core – Driving the best value in the market for customers through lowest prices, widest range and best experience – Heightened productivity focus to offset inflation impacts – Managed and improved stock positions, despite global supply chain disruptions
Slide 28: Bunnings outlook
Bunnings outlook • Well positioned for a range of market conditions – Diversity of business and offer across consumer DIY and commercial – Solid pipeline of new build and renovation activity – DIY growth opportunities as customers spend more time improving, maintaining and developing their homes – W
Slide 29: Kmart Group
Kmart Group Ian Bailey Managing Director, Kmart Group
Slide 30: Kmart Group performance summary
Kmart Group performance summary Year ended 30 June ($m) 2022 2021 Var % Revenue 9,635 9,982 (3.5) EBIT1 506 787 (35.7) EBT1 418 693 (39.7) Significant items - (59) n.m EBT including significant items 418 634 (34.1) EBT margin1 (%) 4.3 6.9 ROC (R12, %) 22.9 52.1 Safety (R12, TRIFR) 8.3 9.2 Scope 1 an
Slide 31: Kmart and Target performance overview
Kmart and Target performance overview • Revenue decreased by 3.5% to $9,129m Year ended 30 June ($m)1 2022 2021 Var % – 25% of store trading days lost in first half Revenue 9,129 9,456 (3.5) – Customer traffic to stores improved as EBITDA2 1,088 1,349 (19.3) restrictions eased EBT2 505 739 (31.7) –
Slide 32: Kmart and Target progress on strategy
Kmart and Target progress on strategy • Kmart continued to invest in strategic initiatives to profitably grow share of wallet and reduce costs by: – Implementing productivity improvements to enable ongoing lowest price leadership – Driving customer participation instore and online through new and ex
Slide 33: Kmart and Target outlook
Kmart and Target outlook • Kmart is uniquely placed in inflationary environment to extend low-price leadership and deliver long-term earnings growth through: – Growing share of wallet by leveraging product development capability, growing online, and personalising the customer experience – Digitising
Slide 34: Catch performance overview
Catch performance overview • Gross transaction value (GTV) growth of 1.6% Year ended 30 June ($m) 2022 2021 Var % – Elevated growth during periods of lockdown in first Gross transaction value 989 973 1.6 half offset by a decline as restrictions eased, particularly across the in-stock business Revenu
Slide 35: Chemicals, Energy and Fertilisers
Chemicals, Energy and Fertilisers Ian Hansen Managing Director, Wesfarmers Chemicals, Energy & Fertilisers
Slide 36: Chemicals, Energy and Fertilisers performance summary
Chemicals, Energy and Fertilisers performance summary Year ended 30 June ($m) 2022 2021 Var % Revenue1 Chemicals 1,397 1,018 37.2 Energy 491 406 20.9 Fertilisers 1,153 722 59.7 Total 3,041 2,146 41.7 EBITDA 634 473 34.0 Depreciation and amortisation (93) (88) (5.7) EBIT 541 385 40.5 Interest on leas
Slide 37: Chemicals, Energy and Fertilisers operational performance
Chemicals, Energy and Fertilisers operational performance Safety Plant Productivity TRIFR1 Chemicals - Production Volume and Availability2 kt % 1,400 100 12 1,200 10 1,000 8 90 800 6 600 4 80 400 2 200 0 0 70 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 P
Slide 38: Chemicals, Energy and Fertilisers overview
Chemicals, Energy and Fertilisers overview • Revenue of $3,041m was up 41.7% and earnings of $540m were up 40.6% on the prior year, driven by higher global commodity prices, particularly for LPG, fertilisers and other ammonia-related products Chemicals: Earnings significantly up on prior year – Ammo
Slide 39: Chemicals, Energy and Fertilisers outlook
Chemicals, Energy and Fertilisers outlook • Chemicals business is expected to continue benefiting from strong global commodity prices – Demand for AN and sodium cyanide is expected to remain robust – Final investment decision on the sodium cyanide expansion project expected in 1H23 • Energy earnings
Slide 40: Officeworks
Officeworks Sarah Hunter Managing Director, Officeworks
Slide 41: Officeworks performance summary
Officeworks performance summary Year ended 30 June ($m) 2022 2021 Var % Revenue 3,169 3,029 4.6 EBITDA 303 328 (7.6) Depreciation and amortisation (113) (106) (6.6) EBIT 190 222 (14.4) Interest on lease liabilities (9) (10) 10.0 EBT 181 212 (14.6) EBT margin (%) 5.7 7.0 ROC (R12, %) 17.8 22.3 Total
Slide 42: Officeworks sales and earnings overview
Officeworks sales and earnings overview • Sales growth of 4.6% to $3,153m $m Sustained sales growth – Sales growth of 5.5% in second half 3,500 +4.6% +8.6% – Continued strong demand for technology and 3,000 +20.4% 3,014 3,153 furniture products 2,500 +7.6% 2,775 +9.1% – Online penetration of 40% inc
Slide 43: Officeworks progress on strategy
Officeworks progress on strategy Our team – Continued focus on safety, health and wellbeing Customer experience – Partnership with Flybuys has doubled the number of known customers and increased personalisation Connecting with our communities – Reduced emissions by 10% through continued investment i
Slide 44: Officeworks outlook
Officeworks outlook • Officeworks’ everyday low-prices, wide range, great service, and well established every-channel offer make it well positioned to support retail and business customers • Officeworks maintains its focus on driving productivity and efficiency in stores, the support centre and thro
Slide 45: Industrial and Safety
Industrial and Safety Tim Bult Managing Director, Wesfarmers Industrial and Safety
Slide 46: Industrial and Safety performance summary
Industrial and Safety performance summary Year ended 30 June ($m) 2022 2021 Var % Revenue 1,925 1,855 3.8 EBITDA 171 148 15.5 Depreciation and amortisation (75) (74) (1.4) EBIT 96 74 29.7 Interest on lease liabilities (4) (4) - EBT 92 70 31.4 EBT margin (%) 4.8 3.8 ROC (R12, %) 7.9 6.2 Safety (R12,
Slide 47: Industrial and Safety overview
Industrial and Safety overview • The Industrial and Safety businesses continued their reliable supply of critical products to customers, despite global supply chain disruptions and labour availability constraints due to COVID-19 • Revenue growth of 3.8% to $1,925m – Blackwoods’ revenue increased due
Slide 48: Industrial and Safety outlook
Industrial and Safety outlook The Industrial and Safety businesses will continue to manage disruptions to global supply chains, labour availability challenges and the inflationary environment • All businesses will maintain their focus on delivering improvements in performance and profitability • Bla
Slide 49: Health
Health Emily Amos Managing Director, Health
Slide 50: Health performance summary
Health performance summary Three months ended 30 June ($m) 2022 Revenue 1,240 EBITDA (2) Depreciation and amortisation (22) EBIT1 (24) Interest on lease liabilities (1) EBT1 (25) 1. Includes non-cash expenses of $11m relating to assets recognised as part of Wesfarmers’ acquisition of API, impairment
Slide 51: Health overview
Health overview • Revenue of $1,240m for the period 31 March 2022 to 30 June 2022 – Solid sales from Pharmacy Distribution, supported by demand for COVID-19 treatments and rapid antigen tests, as well as strong new customer acquisition – Strong Priceline sales across health categories, partially off
Slide 52: Health outlook
Health outlook • COVID-19 impacts expected to continue in the near term, but Health remains well positioned to deliver long-term growth – Focus on integration activities and improving underlying performance in the core business – Accelerating the transformation of the business, with investment acros
Slide 53: Wesfarmers OneDigital
Wesfarmers OneDigital Nicole Sheffield Managing Director, OneDigital
Slide 54: OneDigital overview
OneDigital overview • Brings together the Group’s digitally native businesses: – OnePass – OneData – Catch (from 1 July 2022) • Supporting the Group’s data and digital ambitions: – Delivering operational efficiencies and growth for divisions – Providing customers with a more seamless, rewarding and
Slide 55: OneDigital outlook
OneDigital outlook • OneDigital will build on FY22 momentum and focus on: – Accelerating growth and delivering operational efficiencies for the Group’s divisions – Increasing customer lifetime value • OnePass is focused on delivering broader benefits to members – Partnerships with Bunnings and Offic
Slide 56: Appendix: Additional information
Appendix: Additional information
Slide 57: Group management balance sheet
Group management balance sheet ($m)1 FY22 API4 1H22 FY21 Commentary (vs. FY21) Inventories 6,084 385 5,605 4,502 • Increase due to higher trading stock driven by network growth in Bunnings, acquisition of API, higher average unit cost across retailers and WesCEF, and strategy to hold additional stoc
Slide 58: Capital expenditure
Capital expenditure • Gross capital expenditure of $1.1b, up 27.7% Year ended 30 June1 ($m) 2022 2021 Var % on prior year Bunnings 349 445 (21.6) – Development capex of $304m and capitalised interest of $34m relating to the Mt Holland mine and concentrator, and at Kwinana refinery Kmart Group 150 18
Slide 59: Management of lease portfolio
Management of lease portfolio • Lease liabilities totalled $7.1b and Lease liabilities ($m) FY22 FY21 represented 60% of Group fixed financial Bunnings 3,692 3,738 obligations as at 30 June 2022 Kmart Group 2,642 2,817 • Average remaining committed lease term of Officeworks 345 334 4.41 years (FY21:
Slide 60: Divisional return on capital
Divisional return on capital Rolling 12 months to 30 June 2022 2021 EBT Cap Emp1 ROC EBT Cap Emp1 ROC Var ($m) ($m) (%) ($m) ($m) (%) (ppt) Bunnings 2,204 2,854 77.2 2,185 2,651 82.4 (5.2) Kmart Group2 418 1,825 22.9 693 1,329 52.1 (29.2) WesCEF3 540 2,503 21.6 384 2,171 17.7 3.9 Officeworks 181 1,0
Slide 61: Retail store networks
Retail store networks As at 30 June 2022 1,779 locations across Australia and New Zealand Brand NSW/ACT VIC QLD SA WA TAS NT NZ Total Bunnings Warehouse 81 63 52 18 29 7 3 29 282 Smaller format 18 15 11 3 9 - - 11 67 Trade 7 3 7 2 3 1 - 9 32 Tool Kit Depot - - - 5 6 - - - 11 Beaumont Tiles1 34 32 30
Slide 62: Revenue reconciliation – Kmart Group
Revenue reconciliation – Kmart Group Year ended 30 June ($m) 2022 2021 Segment revenue (Gregorian) 9,635 9,982 Less: Non-sales revenue (87) (74) Headline sales (Gregorian) 9,548 9,908 Add: Gregorian adjustment1 (47) (15) Headline sales revenue (Retail)2 9,501 9,893 1. Adjustment to headline sales re
Slide 63: Retail calendars – full year
Retail calendars – full year Business Retail sales period Bunnings, Officeworks and Catch FY22 1 Jul 2021 to 30 Jun 2022 (12 months) FY21 1 Jul 2020 to 30 Jun 2021 (12 months) FY20 1 Jul 2019 to 30 Jun 2020 (12 months) Kmart FY22 28 Jun 2021 to 26 Jun 2022 (52 weeks) FY21 29 Jun 2020 to 27 Jun 2021
Slide 64: Glossary of terms
Glossary of terms Acronym Term/definition AASB Australian Accounting Standards Board LNG Liquefied natural gas ALM Australian Light Minerals LPG Liquefied petroleum gas m Million API Australian Pharmaceutical Industries Ltd n.m. Not meaningful B2B Business-to-business n.r. Not reported CFC Customer
Slide 65: Wesfarmers
We Wesfarmers