Wesfarmers Limited · ASX:WES
Wesfarmers — Debt Investor Presentation (2019)
50 slides from Wesfarmers's debt investor presentation, 2019
Slide 1: 2019 Full-year Results Debt Investor Update
2019 Full-year Results Debt Investor Update
Slide 2: Group Performance Overview
Group Performance Overview 7 Wesfarmers
Slide 3: Progress on strategic agenda: FY19 highlights
Progress on strategic agenda: FY19 highlights • Significant portfolio repositioning Portfolio • Successful demerger of Coles management • Divestments of Bengalla, Kmart Tyre & Auto (KTAS) & stake in Quadrant Energy • Divisional leadership - Kmart Group, Officeworks, Target People • Corporate Office
Slide 4: Managing businesses for long-term success
Managing businesses for long-term success Our divisions remain focused on managing their businesses for long-term success & value creation A relentless focus Investing for the Building on unique on customers long term capabilities & platforms • Maintaining price leadership • Constant product innovat
Slide 5: Financial overview
Financial overview Year ended 30 June ($m) 2019 2018 Var % Results from continuing operations1 EBIT 2,974 2,344 26.9 EBIT (excl. significant items) 2,974 2,650 12.2 NPAT 1,940 1,409 37.7 NPAT (excl. significant items) 1,940 1,709 13.5 Earnings per share (excl. significant items) (cps) 171.5 151.1 13
Slide 6: Divisional earnings summary
Divisional earnings summary EBIT ($m) % of divisional Year ended 30 June 2019 2018 Var % EBIT RoC (%) Bunnings Australia & New Zealand 1,626 1,504 8.1 57% 50.5 Kmart Group (continuing 540 626 (13.7) 29.1 operations)1,2 19% Industrials (continuing operations)2 519 497 4.4 18.5 WesCEF 433 379 14.2 32.
Slide 7: Operational highlights
Operational highlights • Bunnings: Continued sales growth in consumer & commercial, in all product categories & across all major trading regions; growth reflects diversity of customer base & resilience of product offering despite softening conditions in residential housing market • Kmart Group – Kma
Slide 8: Operating & free cash flows
Operating & free cash flows Divisional cash generation1 • Divisional cash generation1 from continuing excluding discontinued operations2 operations2 remained strong at 97% 120% • Reported operating cash flows of $2,718m FY15-FY19 average = 103% 100% impacted by 80% – Demerger of Coles resulting in r
Slide 9: Capital expenditure
Capital expenditure Continuing operations Year ended 30 June ($m)1 2019 2018 Var % • Gross capital expenditure from continuing Bunnings 470 497 (5.4) operations decreased $80m to $860m Kmart Group 205 286 (28.3) – Decrease in Kmart Group capital expenditure Officeworks 42 45 (6.7) due to brand acqui
Slide 10: Long-term value creation
Long-term value creation We are committed to delivering satisfactory returns to our shareholders Wealth creation & value distribution1 $29.6b $6.5b $1.5b We believe this is only possible to achieve over Payments to Employees Government suppliers $0.2b the long term by: Lenders $14.5b $48.7b $3.2b Va
Slide 11: Building trust - aligned with shareholder value over the long term
Building trust - aligned with shareholder value over the long term Wesfarmers is committed to improving the ways we impact our community & the environment, to ensure we continue to create value in the future Key focus areas include1: • Continue relentless focus on providing safe workplaces • Provide
Slide 12: Outlook
7 Wesfarmers
Slide 13: Outlook
Outlook Operational • Bunnings: Well positioned for continued growth through further investment in customer value & expanding addressable markets into new channels & services; moderated trading conditions are expected to continue • Kmart Group - Kmart: Ended the period with improved sales momentum &
Slide 14: Debt Management
Debt Management 7 Wesfarmers
Slide 15: Maintaining strong credit ratings and balance sheet
Maintaining strong credit ratings and balance sheet • Strong credit ratings: Moody’s A3 (Stable); Standard & Poor’s A- (Stable) • Maintaining prudent capital structure and strong credit rating is important to Wesfarmers • Continued strength in Group’s debt position – Strong liquidity position, suppo
Slide 16: Net financial debt
Net financial debt Movements in net financial debt ($b)1 3.6 3.6 2.5 Ordinary (2.7) (2.0) dividends 2.1 0.7 1.1 (1.1) Special dividend Net debt Proceeds from Net proceeds Dividends paid Operating Net capex & other Net debt 30 June 2018 Coles demerger on divestments cash flows investing activities 30
Slide 17: Financial discipline is core to Wesfarmers' strategy
Financial discipline is core to Wesfarmers’ strategy • FY19 Treasury activities – November 2018: Demerger of Coles completed; received $2b – November 2018 & December 2018: Divestments of Kmart Tyre and Auto, Quadrant Energy & Bengalla; received net proceeds totalling $1.1b – March 2019: Repaid A$500
Slide 18: Management of lease portfolio
Management of lease portfolio Fixed financial obligations Weighted average lease terms3 4.8% 3.1% 2.2% 1.7% 0.6% Bank facilities 6.8% & bonds1 12.9% 12.3% 12.1% 14.7% Demerger of Coles 24% ($2.6b) 32.9% 31.4% 32.3% 32.3% 30.7% Operating 52.6% 53.2% 53.9% 59.7% 49.8% leases2 76% ($8.5b) FY15 FY16 FY1
Slide 19: Pro-active debt management
Pro-active debt management Debt maturity profile as at 30 June 2019 • Continued focus on maturity profile & $m maintaining liquidity 1,200 AUD$350m repayable headroom in revolving 800 March 2020 bilateral bank facilities 400 • Commitment to 0 ensure diversity of (400) funding sources, including the
Slide 20: Reduced funding costs
Reduced funding costs • Finance costs decreased to $175m in FY19 (FY18 $221m) reflecting lower average debt levels • All-in effective borrowing cost 5.10% in FY19 (FY18: 4.18%) – Borrowing costs increased due to the repayment of low cost bank debt Finance costs & weighted average cost of debt $m 375
Slide 21: Dividends & capital management
Dividends & capital management • Dividend policy takes into account through the cycle free cash flow requirements & debt refinancing • Fully-franked ordinary final dividend of $0.78 per share – Takes into account available franking credits, strong balance sheet, robust credit metrics & cash flow gen
Slide 22: Appendix: 2019 Full-year Results Briefing Presentation (Operational Extract)
Appendix: 2019 Full-year Results Briefing Presentation (Operational Extract)
Slide 23: Bunnings Australia & New Zealand
Bunnings Australia & New Zealand
Slide 24: Bunnings performance summary
Bunnings performance summary Year ended 30 June ($m) 2019 2018 Var % Revenue 13,166 12,544 5.0 EBITDA1 1,818 1,683 8.0 Depreciation & amortisation (192) (179) (7.3) EBIT1 1,626 1,504 8.1 EBIT margin1 (%) 12.3 12.0 EBIT margin excluding property (%) 11.7 11.7 RoC (R12, %) 50.5 49.4 Safety (R12, TRIFR
Slide 25: Bunnings sales overview
Bunnings sales overview • Revenue growth of 5.0% to $13,166m – Total store sales growth 5.2% – Store-on-store growth of 3.9% • Sales growth reflects diversity of customer base & resilience of product offering despite softening conditions in residential housing market • Continued growth across the bu
Slide 26: Bunnings earnings overview
Bunnings earnings overview • Reported EBIT increased 8.1% to $1,626m – Includes higher than usual net property contribution of $85m • EBIT excluding property contribution up 4.8% – Continued focus on cost control – Stable EBIT margin performance relative to previous corresponding period • Operating
Slide 27: Bunnings progress on strategic agenda
Bunnings progress on strategic agenda Good progress on strategic agenda • Driving Stronger Growth – 17 new trading locations opened – Wider commercial market penetration – Range expansion & innovation – Further investment in customer value • Better Experiences – Click & collect rollout commenced – E
Slide 28: Bunnings outlook
Bunnings outlook • Moderated trading conditions are expected to continue • Well positioned for continued growth – Further investment in customer value – Category expansion – Expanding service & installation offerings • Ongoing development of broader digital capabilities – Significant investment in o
Slide 29: Kmart Group
Kmart Group Pe Olurget
Slide 30: Kmart Group performance summary
Kmart Group performance summary Year ended 30 June1 ($m) 2019 2018 Var % Revenue2 8,598 8,505 1.1 EBITDA3 733 820 (10.6) Depreciation & amortisation (193) (194) 0.5 EBIT3 540 626 (13.7) EBIT (including KTAS)4 550 660 (16.7) EBIT margin3 (%) 6.3 7.4 RoC3,5 (R12, %) 29.1 32.2 Safety (R12, TRIFR) 19.4
Slide 31: Kmart sales overview
Kmart sales overview • Total sales growth of 1.5% • Flat comparable sales growth – lower growth in apparel & non-seasonal products – exit from DVD category – offset by modest growth in home & kids general merchandise • Implemented initiatives to address stock flow & productivity issues to support fu
Slide 32: Target sales overview
Target sales overview • Total sales declined 1.5%, reflecting ongoing rationalisation of the store network • Comparable sales declined 0.8% – Trading momentum moderated in 2H19 – Customer value proposition yet to resonate with customers in a sustainable way – Growth in ‘Best’ ranges, particularly in
Slide 33: Kmart Group overview
Kmart Group overview • Earnings decreased by 13.7% to $540m1 Kmart Group EBIT & RoC $m % • Kmart earnings declined, impacted by: 40.0% 600 – Moderation in sales momentum 30.0% 450 – Implementation of a number of initiatives to 20.0% 300 optimise product flow & store processes – Increase in stock los
Slide 34: Kmart Group outlook
Kmart Group outlook • The Kmart Group remains well positioned for the future • Kmart ended the period with improved sales momentum & will continue to focus on – creating a great place to shop that is simple to run & delivers better products at even lower prices – maintaining lowest price leadership
Slide 35: Industrials
Industrials o nergy &Tertlisers aN suntan BY J?7ee (NG EYan Kleenheat {fjmoowoor “n © Wesfarmers NZSafetyBlackwoods WORKWEAR GRCONCAP Industrial and Safety coregas
Slide 36: Industrials performance summary
Industrials performance summary Year ended 30 June ($m) 2019 2018 Var % Revenue Chemicals, Energy & Fertilisers1,2 2,078 1,830 13.6 Industrial & Safety 1,752 1,750 0.1 Total 3,830 3,580 7.0 EBITDA Chemicals, Energy & Fertilisers1,2 513 458 12.0 Industrial & Safety 124 159 (22.0) Total 637 617 3.2 EB
Slide 37: Chemicals, Energy & Fertilisers performance summary
Chemicals, Energy & Fertilisers performance summary Year ended 30 June1 ($m) 2019 2018 Var % Revenue2 Chemicals 1,000 932 7.3 Energy 468 423 10.6 Fertilisers 610 475 28.4 Total 2,078 1,830 13.6 EBITDA3 513 458 12.0 Depreciation & amortisation (80) (79) (1.3) EBIT 433 379 14.2 EBIT (including Quadran
Slide 38: WesCEF operational performance
WesCEF operational performance WesCEF TRIFR Chemicals - Production Volume & Availability kt % 18 1,200 100 16 1,050 14 90 900 12 750 80 10 600 8 450 70 6 4 300 60 2 150 0 0 50 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Production volume (LHS) Availabili
Slide 39: Chemicals, Energy & Fertilisers overview
Chemicals, Energy & Fertilisers overview • Earnings of $433m, 14.2% increase on the prior year ‒ FY19 earnings included one-off insurance proceeds of $30m, partially offset by a one-off provision of $19m; earnings up 11.3% excluding one offs • Earnings growth across all business units with improved
Slide 40: Industrial & Safety performance summary
Industrial & Safety performance summary Year ended 30 June ($m) 2019 2018 Var % Revenue 1,752 1,750 0.1 EBITDA 124 159 (22.0) Depreciation & amortisation (38) (41) 7.3 EBIT 86 118 (27.1) EBIT margin (%) 4.9 6.7 RoC (R12, %) 5.8 8.4 Safety (R12, TRIFR) 6.9 6.6 2019 Full-year results | 40
Slide 41: Industrial & Safety overview
Industrial & Safety overview • The performance of Industrial & Safety was impacted by a disappointing year in Blackwoods • Revenue in line with the prior year – Blackwoods’ revenue declined, with increased demand in mining, offset by lower sales in construction & SME segment – Workwear Group’s reven
Slide 42: Chemical, Energy & Fertilisers outlook
Chemical, Energy & Fertilisers outlook • Production & demand for chemical products expected to remain robust • AN to continue to benefit from ongoing disruption at competing Burrup plant; beyond this earnings are expected to be affected by an oversupply of EGAN in WA • AN margin to be impacted in FY
Slide 43: Industrial & Safety outlook
Industrial & Safety outlook • Australian market conditions & demand expected to remain relatively stable, but weakness in NZ market is expected to persist • ERP, supply chain & digital investment will continue in Blackwoods & Workwear Group; these activities are now expected to continue for the next
Slide 44: Officeworks
Officeworks
Slide 45: Officeworks performance summary
Officeworks performance summary Year ended 30 June ($m) 2019 2018 Var % Revenue1 2,314 2,142 8.0 EBITDA 195 181 7.7 Depreciation & amortisation (28) (25) (12.0) EBIT 167 156 7.1 EBIT margin (%) 7.2 7.3 RoC (R12, %) 17.0 16.6 Safety (R12, TRIFR) 8.5 10.2 Sales growth2 7.6 9.1 1. 2019 revenue reflects
Slide 46: Officeworks overview
Officeworks overview • Sales growth of 7.6% $m Sustained sales growth 2,400 – Every channel approach delivering strong +7.6% 2,200 +9.1% sales growth in both stores & online 2,000 +6.1% – Ongoing improvement in sales density +8.1% 1,800 – Online sales penetration in excess of 20% 1,600 – Strong mome
Slide 47: Officeworks overview
Officeworks overview Progress on strategic agenda • Our team – Enterprise Agreement lodged with Fair Work Commission • Customer experience – Trialled new store format (Mentone, Vic) – 45% increase in click & collect orders year-on-year – Improvement in customer satisfaction levels • Connecting with
Slide 48: Officeworks outlook
Officeworks outlook • Focus on helping make bigger things happen for customers, team, the community & stakeholders • Execution of refreshed strategy to drive long-term earnings growth – Continued investment in digital, supply chain & new growth initiatives – Investment in data & analytics to better
Slide 49: Questions
Questions
Slide 50: Wesfarmers
We Wesfarmers