Slide 1: 2011 Full-Year Results Teleconference
2011 Full-Year Results Teleconference 18 August 2011
Slide 2: Presentation outline
2 Presentation outline Item Presenter Page 1 Group Performance Highlights Richard Goyder 3 2 Coles Ian McLeod 12 3 Home Improvement & Office Supplies John Gillam 22 4 Target Launa Inman 30 5 Kmart Guy Russo 34 6 Insurance Rob Scott 38 7 Resources Stewart Butel 42 8 Chemicals, Energy & Fertilisers To
Slide 3: Group Performance Highlights
Group Performance Highlights Richard Goyder Managing Director, Wesfarmers Limited
Slide 4: Group performance highlights
4 Group performance highlights • Operating revenue of $54.9 billion, up 5.9% • Earnings before interest & tax of $3,232 million, up 12.7% • Finance costs of $526 million, down 19.6% • Net profit after tax of $1,922 million, up 22.8% • Earnings per share of $1.67, up 22.8% • Operating cash flows of $
Slide 5: Group performance highlights (cont)
5 Group performance highlights (cont) • Coles continued to deliver strong earnings growth, ahead of sales growth, reflecting solid sales momentum supported by operational efficiencies • Bunnings recorded another good result underpinned by good merchandising execution & cost focus; 27 new locations o
Slide 6: Group performance summary
6 Group performance summary Year ended 30 June ($m) 2011 2010 % Revenue 54,875 51,827 5.9 EBITDA 4,155 3,786 9.7 EBIT 3,232 2,869 12.7 Finance costs (526) (654) 19.6 Tax expense (784) (650) (20.6) Net profit after tax (pre significant items) 1,922 1,702 12.9 Net profit after tax (post significant it
Slide 7: Return to growth in earnings per share
7 Return to growth in earnings per share • 22.8% growth in earnings per share • Dividend payout ratio strong at 90.0% cps % of NPAT 250 125% 200 100% 150 75% 100 195.2 50% 174.2 158.5 166.7 135.7 50 25% 0 0% FY2007 FY2008 FY2009 FY2010 FY2011 EPS Dividend payout ratio [RHS] FY2007 - FY2009: EPS adju
Slide 8: Strength through diversified earnings
8 Strength through diversified earnings Year ended 30 June Divisional EBIT Percentage of 2011 2010 % EBIT ($m) (FY11, $m) Divisional EBIT 3,500 Insurance Insurance 1%; Coles 1,166 962 21.2 (FY10: 4%) WIS Home Improvement 802 728 10.2 WES CEF Office Supplies 80 74 8.1 3,000 Industrial 24%; (FY10: 16%
Slide 9: ROC focused businesses
9 ROC focused businesses • Focus on return on capital through earnings growth & capital efficiency improvements 2011 2010 R12 Capital Year ended 30 June EBIT ROC ROC Employed $m $m % % Coles 1,166 14,973 7.8 6.5 Home Improvement 802 2,863 28.0 30.4 Office Supplies 80 1,195 6.7 6.3 Target 280 3,359 8
Slide 10: Progress on key strategic initiatives
10 Progress on key strategic initiatives Retail • Coles: turnaround remains on track to meet internal expectations – Delivering solid sales momentum through better value, quality & service; supported by operational efficiency programs • HIOS: ongoing progress with ‘range reset’ work, improving the c
Slide 11: Progress on key strategic initiatives (cont)
11 Progress on key strategic initiatives (cont) Industrials • Resources: major expansion projects at Curragh & Bengalla (expected completion Q1 CY2012), continued focus on productivity improvements • WES CEF: focus on expansion opportunities (including AN31) & improving plant performance • WIS: ongo
Slide 12: Coles
Coles Ian McLeod Managing Director
Slide 13: Coles performance summary
Coles 13 Coles performance summary Year ended 30 June ($m) 2011 2010 % Revenue1 32,073 30,002 6.9 EBIT1,2 1,166 962 21.2 ROC % 7.8 6.5 Safety (R12 LTIFR) 15.9 12.8 Food & Liquor Revenue 25,236 23,731 6.3 Total store sales growth %3,4 6.3 5.6 Comp store sales growth %3,4 6.3 5.0 Trading EBIT 1,066 86
Slide 14: Turnaround fundamental & far reaching
Coles 14 Turnaround fundamental & far reaching Incremental EBIT & ROC expansion • Divisional EBIT growing three $m ROC 140 7.8% 8% times faster than sales 120 – 40 bps EBIT margin expansion in 100 7% FY2011 80 5.9% 6% 60 • Increasing divisional ROC at an 40 5% 20 accelerating pace 0 4% – Strong cash
Slide 15: Truly better value
Coles 15 Truly better value • $800 million+ savings for Australians in FY2011 – 6,000+ prices reduced in the last 12 months • Coles brand sales growth at double branded rate – 1,000+ new Coles brand products launched in FY2011 – Strong growth in transactions – Basket penetration at record levels • ‘
Slide 16: Improving quality fresh food
Coles 16 Improving quality fresh food • $600 million more Fresh sales in FY2011 • ‘Australia First’ sourcing policy – Increased velocity throughout the supply chain – Focus on quality consistency • Increasing importance of ethical sourcing & animal welfare – Hormone growth promotant free beef – Sow
Slide 17: Efficiency improvements
Coles 17 Efficiency improvements • $100 million+ wastage reduction Index Reduction in wastage 100 in FY2011 90 – Better promotional planning to 80 reduce overstock & markdowns 70 – Removal of duplication in ranges 60 – Demand led ordering 50 • Consistent improvement in supply chain efficiency Index
Slide 18: A better customer experience
Coles 18 A better customer experience • A consistently better customer experience – 94 renewal stores landed in FY2011 – ~100 renewal stores planned for FY2012 – Majority of renewal stores with double digit sales growth • Better choice, broader range, more engagement – Continued strong performance o
Slide 19: Liquor
Coles 19 Liquor • Shift to bigger & better stores to meet consumer demand – Encouraging growth in bigger 1st Choice stores throughout FY2011 – Challenging environment for smaller freestanding stores – Work-in-progress to rebalance the fleet • Increasing penetration of clean skin wine, exclusive bran
Slide 20: Convenience
Coles 20 Convenience • Continued strength in compelling customer offer • Strong fuel volume growth – Double fuel discount; good customer response & continuing volume lift – Strong growth in diesel & V Power coupled with increasing pump capacity • Capital efficient refurbishment of 450 sites complete
Slide 21: … but more to do
Turnaround momentum maintained Coles 21 … but more to do • Continued investment in value Renewed, Right Stores, Clean, Easy to Right Place • Focus on fresh food quality Shop Stores Deliver Great • Further category innovation Service with Great People Value • Efficiency in stores, support Marketing /
Slide 22: Home Improvement & Office Supplies
Home Improvement & Office Supplies John Gillam Managing Director
Slide 23: HIOS performance summary
Home Improvement & 23 Office Supplies HIOS performance summary Year ended 30 June ($m) 2011 2010 % Revenue Home Improvement 6,780 6,413 5.7 Office Supplies 1,471 1,409 4.4 8,251 7,822 5.5 EBIT Home Improvement 802 728 10.2 Office Supplies 80 74 8.1 882 802 10.0
Slide 24: Home Improvement
Home Improvement Home Improvement & Office Supplies 24 Performance summary Year ended 30 June ($m) 2011 2010 % Revenue 6,780 6,413 5.7 Trading Revenue 6,773 6,410 5.7 (excl. property rental income & non-trading items) EBIT 802 728 10.2 Trading EBIT / Trading Revenue (%) 11.8 11.4 Net property contri
Slide 25: Home Improvement highlights
Home Improvement & 25 Office Supplies Home Improvement highlights • Trading revenue growth 5.7% – 5.8% consumer sales growth – 5.6% total store sales growth (Store-on-store growth of 3.0%) – 5.1% lift in commercial sales • Strong focus on customer improvements, expansion, ‘range reset’ work & better
Slide 26: Home Improvement outlook
Home Improvement & 26 Office Supplies Home Improvement outlook • Continued growth – Positive contributions from consumer & commercial – Enhanced offer • Maintain strategic focus on five growth drivers – Service – Category expansion & customer experience – Network expansion & reinvestment – Commercia
Slide 27: Office Supplies
Office Supplies Home Improvement & Office Supplies 27 Performance summary Year ended 30 June ($m) 2011 2010 % Revenue 1,471 1,409 4.4 EBIT 80 74 8.1 EBIT / Revenue (%) 5.4 5.3 ROC (R12 %) 6.7 6.3 Safety (R12 LTIFR) 12.2 12.1
Slide 28: Office Supplies highlights
Home Improvement & 28 Office Supplies Office Supplies highlights • Pleasing sales growth – Retail store sales up 5.2% – Strong transaction growth maintained – B2B growing with strategies gaining traction • Solid earnings growth in challenging market conditions • Investment & improvement focus delive
Slide 29: Office Supplies outlook
Home Improvement & 29 Office Supplies Office Supplies outlook • Moderate sales growth – Competitive pressure on sales & margin remains strong • Focus on execution of strategic agenda – Drive sales – Improve customer offer & service – Expand & upgrade store network – Reduce complexity & cost of doing
Slide 30: Target
Target Launa Inman Managing Director
Slide 31: Target performance summary
Target 31 Target performance summary Year ended 30 June ($m) 2011 2010 % Revenue 3,782 3,825 (1.1) EBIT 280 381 (26.5) EBIT margin (%) 7.4 10.0 ROC (R12 %) 8.3 11.7 Safety (R12 LTIFR) 7.0 8.0 Total sales growth1 (%) (1.2) 0.9 Comparative store sales growth1(%) (1.2) (0.9) 1 2011 for the 52 weeks 27
Slide 32: Target highlights
Target 32 Target highlights • Solid EBIT margin in a challenging trading period • Sustained increase in customer transactions & sales volumes – 2H FY2011 comparable store sales growth of 1.7% – Delivery of in-house designs in homewares & childrenswear • Sales assisted by a positive customer response
Slide 33: Target outlook
Target 33 Target outlook • A challenging & competitive trading environment expected to continue into FY2012 – Customers shopping for value, requiring incentive to spend – Ongoing focus on expense & capital management • Continuing focus on – Improving customer service – Broadening customer offerings:
Slide 34: Kmart
Kmart Guy Russo Managing Director
Slide 35: Kmart performance summary
Kmart 35 Kmart performance summary Year ended 30 June ($m) 2011 2010 % Revenue 4,036 4,019 0.4 EBIT1 201 190 5.8 EBIT margin (%) 5.0 4.7 ROC (R12 %)1 23.5 21.8 Safety (R12 LTIFR) 6.8 9.1 Total sales growth2 (%) 0.4 0.4 Comparative store sales growth2 (%) 0.3 (0.1) 1 2011 excludes $3m earnings relati
Slide 36: Kmart highlights
Kmart 36 Kmart highlights • Solid earnings growth through product sourcing improvements & reductions in cost of doing business • Strong continued growth in volumes & customer transactions • Subdued comparable store sales growth in challenging retail environment • Fully operating under everyday low p
Slide 37: Kmart outlook
Kmart 37 Kmart outlook • Connect more customers with the ‘new Kmart’ – Continued focus on product offer to deliver everyday items for families across all categories – Communicate price & value to customers through increased marketing & media engagement activity • Improve operating model efficiency –
Slide 38: Insurance
Insurance Rob Scott Managing Director
Slide 39: Insurance performance summary
Insurance 39 Insurance performance summary Year ended 30 June ($m) 2011 2010 % Total Revenue 1,739 1,698 2.4 Gross Written Premium Underwritten 1,426 1,347 5.9 EBITA Underwriting (29) 75 n.m. EBITA Broking 62 59 5.1 EBITA Other (3) (3) - EBITA Insurance Division 30 131 (77.1) EBIT Insurance Division
Slide 40: Insurance highlights
Insurance 40 Insurance highlights • Unprecedented number of catastrophe events in Australia & NZ • Net retention on CAT program exceeded six times with event claims & reinsurance reinstatements $110 million over allowances • Liability Adequacy Test adjustment of $32 million arising from: – Higher re
Slide 41: Insurance outlook
Insurance 41 Insurance outlook • Continued focus on disciplined underwriting & pricing • Capitalise on strong customer response to new initiatives – Retail personal lines – Corporate Solutions – Broker EDI solution (my.place) • Significant increase in reinsurance costs & higher retentions from 1 Jul
Slide 42: Resources
Resources Stewart Butel Managing Director
Slide 43: Resources performance summary
Resources 43 Resources performance summary Year ended 30 June ($m) 2011 2010 % Revenue1 1,778 1,416 25.6 EBITDA 488 285 71.2 Depreciation & amortisation (119) (120) 0.8 EBIT2 369 165 123.6 ROC (R12%) 28.5 14.4 Coal Production (‘000 tonnes) 13,599 14,107 Safety (R12 LTIFR)3 1.3 2.1 1 2011 includes tr
Slide 44: Resources highlights: Curragh
Resources 44 Resources highlights: Curragh • Ongoing production recovery at Curragh from significant weather- related events: – Record rainfall for the year – Major flooding in December – January – Groundwater inflow into mining areas – Associated significant increase in mine cash costs ($/t increas
Slide 45: Resources highlights: Bengalla & Premier
Resources 45 Resources highlights: Bengalla & Premier Bengalla • 14.2% increase in sales volumes on strong export demand • Continued progress of the stage one expansion to 7.5mtpa (9.3mtpa Run of Mine); completion expected Q1 CY2012 Premier • 37.2% increase in sales volumes, reflecting increased dem
Slide 46: Resources outlook
Resources 46 Resources outlook • Q1 FY2012 pricing negotiations completed – 10% decrease on Q4 FY2011 for the weighted average Curragh metallurgical coal price • Strong shipping performance from our traditional customers • Tight labour market & industry cost pressures – Cost control programs continu
Slide 47: Chemicals, Energy & Fertilisers
Chemicals, Energy & Fertilisers Tom O’Leary Managing Director
Slide 48: Chemicals, Energy & Fertilisers performance summary
Chemicals, Energy & Fertilisers Chemicals, Energy & Fertilisers 48 Performance summary Year ended 30 June ($m) 2011 20101 % Revenue Chemicals 647 606 6.8 Energy2 541 510 6.1 Fertilisers 453 454 (0.2) 1,641 1,570 4.5 EBITDA3 379 293 29.4 Depreciation & amortisation (96) (97) 1.0 EBIT3 283 196 44.4 EB
Slide 49: Chemicals, Energy & Fertilisers highlights
Chemicals, Energy & Fertilisers Chemicals, Energy & Fertilisers 49 Highlights • Chemicals earnings (excl. insurance) in line with last year with solid production & demand partially offset by: – Increased gas input costs & higher A$ (sodium cyanide) – AV performance affected by low PVC – VCM spread1
Slide 50: Chemicals, Energy & Fertilisers outlook
Chemicals, Energy & Fertilisers Chemicals, Energy & Fertilisers 50 Outlook • Continuing strong demand for ammonia, AN & sodium cyanide expected offset by: – Major 35-day ammonia plant planned shutdown to be completed in 1H FY2012 (~$15 million earnings impact) – Adverse impact of high A$ on sodium c
Slide 51: Industrial & Safety
Industrial & Safety Olivier Chretien Managing Director
Slide 52: Industrial & Safety performance summary
Industrial & Safety Industrial & Safety 52 Performance summary Year ended 30 June ($m) 2011 20101 % Revenue 1,557 1,412 10.3 EBITDA 192 168 14.3 Depreciation & amortisation (26) (30) 13.3 EBIT 166 138 20.3 EBIT margin (%) 10.7 9.8 ROC (R12 %) 13.1 10.5 Safety (R12 LTIFR) 2.3 1.6 1 Restated to includ
Slide 53: Industrial & Safety highlights
Industrial & Safety 53 Industrial & Safety highlights • Strong results supported by market conditions & competitive position – Double digit sales & earnings growth • Better performing business portfolio – Sales & earnings growth in all business segments including Coregas – Divested Motion, merged Bl
Slide 54: Industrial & Safety outlook
Industrial & Safety 54 Industrial & Safety outlook • Positive albeit uncertain non-resource sector outlook – Continued growth in activity from major mining & oil & gas projects – Ongoing margin pressure & increasing labour retention challenges – Uncertain outlook for manufacturing sector & New Zeala
Slide 55: Other Business & Capital Management
Other Business & Capital Management Terry Bowen Finance Director, Wesfarmers Limited
Slide 56: Other business performance summary
56 Other business performance summary Holding Year ended 30 June ($m) 2011 2010 % % Share of profit/(loss) of associates: Gresham Private Equity Funds 1 Various (60) 43 n.m. Gresham Partners 50 1 1 - Wespine 50 7 6 16.7 BWP Trust 23 19 27 (29.6) Sub-total (33) 77 n.m. Interest revenue 2 38 65 (41.5)
Slide 57: Working capital & other cash flows
57 Working capital & other cash flows • Inventory Cash Movement ($m) Year ended 30 June – HI: Network expansion & increased sales Inflow/(Outflow) 2011 2010 – Coles: Safety stock for supply system Inventory (347) 2 Payables 396 596 change, further centralised delivery & 1 Receivables (312) (171) sal
Slide 58: Portfolio of strong cash generating assets
58 Portfolio of strong cash generating assets • Cash realisation above 100% despite working capital investment • Through the cycle operating cash flows fund dividends & investing activities • Strong phase of growth capital investment underway $m % 4,000 160 3,500 140 3,000 120 2,500 100 2,000 80 1,5
Slide 59: Strong capital investment phase underway
59 Strong capital investment phase underway Year ended 30 June 2011 2010 % • Continued investment in land & buildings ($m)1 Coles 761 719 5.8 • Increased refurbishments to strengthen Home Improvement & 613 445 37.8 retail networks Office Supplies Target 87 88 (1.1) • Resources investment to expand p
Slide 60: Continued strengthening of balance sheet
60 Continued strengthening of balance sheet times Fixed charges cover • Strong balance sheet 5.0 – Fixed charges cover (R12) 2.7 times 4.0 – Cash interest cover (R12) 9.5 times 3.0 – Net debt to EBITDA of 1.0 times 2.0 • Improved credit ratings 1.0 – Standard & Poor’s A- (stable) 0.0 FY2007 FY2008 F
Slide 61: Debt financing
61 Debt financing • Gross debt of $4.9 billion, net debt of $4.3 billion • Liquidity supported by $2.0 billion of committed undrawn facilities • Continued diversification & lengthening of Group’s debt profile – Issued US$650 million five-year US Bond – Established $2.5 billion revolving syndicated f
Slide 62: Average debt tenor of 3.0 years across diversified sources of debt
Average debt tenor of 3.0 years across 62 diversified sources of debt $m 1.3% 2,000 9.3% 17.8% 1,500 1,000 30.6% 15.0% 500 0 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 26.0% (500) Capital Markets Cash at bank & on deposit Bank Bilaterals Syndicated facilities Syndicated facilities US Bonds Euro Bond
Slide 63: Partially Protected Shares (WESN)
63 Partially Protected Shares (WESN) • WESN classified as ordinary shares & confer the same rights in all respects as WES, except for price protection • Lapse date 23 November 2011, four years from issue date • Extension of lapse date for a further 12 months if: – Average of ASX S&P 200 Industrials
Slide 64: Outlook
Outlook Richard Goyder Managing Director, Wesfarmers Limited
Slide 65: Outlook
65 Outlook • The Group retains a positive outlook, given solid operating fundamentals & recovery from one-off impacts affecting FY2011 – Subject to any adverse shocks from a fragile global economy • Strong phase of capital investment underway is expected to strengthen financial performance Retail •
Slide 66: Outlook
66 Outlook Insurance • Insurance earnings expected to improve in the absence of numerous catastrophe events; higher reinsurance costs to place pressure on margins Industrials • Strong outlook for industrial divisions, supported by expansion projects & continuing solid demand for chemical & industria
Slide 67: For all the latest news visit www.wesfarmers.com.au
For all the latest news visit www.wesfarmers.com.au