Slide 1: 2018 Full-Year Results Briefing Presentation
2018 Full-Year Results Briefing Presentation To be held on Wednesday, 15 August 2018
Slide 2: Presentation outline
Presentation outline Item Presenter Page Group Performance Overview Rob Scott 3 Group Balance Sheet & Cash Flow Anthony Gianotti 9 Bunnings Australia & New Zealand Michael Schneider 17 Coles John Durkan 22 Department Stores Guy Russo 31 Officeworks Mark Ward 35 Industrials David Baxby 39 Group Outlo
Slide 3: Group Performance Overview
Group Performance Overview Rob Scott Managing Director, Wesfarmers Limited
Slide 4: Financial overview
Financial overview Variance to pcp Excluding (exc. significant Year ended 30 June ($m) Reported significant items2 items2) Results from continuing operations1 Earnings before interest & tax 4,061 4,367 4.5 Net profit after tax 2,604 2,904 5.2 Basic earnings per share (cps) 230.2 256.8 4.9 Results in
Slide 5: Group performance summary
Group performance summary Year ended 30 June ($m) 2018 2017 Var % Results from continuing operations1 EBIT 4,061 4,177 (2.8) EBIT (exc. significant items)2 4,367 4,177 4.5 Net profit after tax 2,604 2,760 (5.7) Net profit after tax (excl. significant items)2 2,904 2,760 5.2 Earnings per share (excl.
Slide 6: Divisional earnings summary
Divisional earnings summary EBIT ($m) Year ended 30 June 2018 2017 Var % Var $m % of EBIT Bunnings Australia & NZ 1,504 1,334 12.7 170 Bunnings UK & Ireland1 (266) (89) n.m. (177) Coles2 1,500 1,609 (6.8) (109) Department Stores3 660 543 21.5 117 Officeworks 156 144 8.3 12 Industrials 867 915 (5.2)
Slide 7: Divisional return on capital
Divisional return on capital Rolling 12 months to 30 June 2018 2017 EBIT Cap Emp RoC RoC Var ($m) ($m) (%) (%) (ppt) Bunnings Australia & New Zealand 1,504 3,045 49.4 41.8 7.6 Coles 1,500 16,386 9.2 9.7 (0.5) Department Stores1 660 2,013 32.8 24.1 8.7 Officeworks 156 939 16.6 14.7 1.9 WesCEF2 390 1,
Slide 8: Long-term value creation
Long-term value creation We are committed to creating value for Wealth creation, value distribution2 shareholders, customers, employees & the $9.3b communities we serve $47.2b Employees Payments to suppliers $2.1b • Top 10 Australian taxpayer $15.7b Government $69.9b $0.2b Wealth Value Lenders • Rel
Slide 9: Group Balance Sheet & Cash Flow
Group Balance Sheet & Cash Flow Anthony Gianotti Chief Financial Officer, Wesfarmers Limited
Slide 10: Other business performance summary
Other business performance summary Year ended 30 June ($m) Holding % 2018 2017 Var % Share of profit of associates BWP Trust 25 45 55 (18.2) Other Various 11 31 (64.5) Sub-total share of profit of associates 56 86 (34.9) Interest revenue1 12 8 50.0 Other (66) (23) n.m. Corporate overheads (135) (125
Slide 11: Operating cash flows
Operating cash flows • Operating cash flows of $4,080m, down Year ended 30 June ($m) 2018 2017 $146m Cash movement inflow/(outflow) – Primarily driven by higher tax payments Receivables & prepayments (225) 58 – Cash realisation ratio remains strong at Inventory (54) (296) 100.6%1 Payables 279 165 –
Slide 12: Capital expenditure
Capital expenditure • Gross capital expenditure increased $134m to Year ended 30 June ($m)1 2018 2017 Var % $1,815m Coles 715 805 (11.2) Bunnings Australia & NZ 497 367 35.4 – Increased number of BANZ store openings Department Stores 293 225 30.2 – Acquisition of Kmart brand name for $100m Officewor
Slide 13: Free cash flows
Free cash flows Annual free cash flows • FY18 free cash flows of $3,422m, $751m $m Sale of Insurance Sale of credit card Sale of Curragh & lower than last year 6,000 division receivables BUKI 4,000 – Lower operating cash due to higher tax payments 2,000 0 – Higher net capital expenditure (2,000) Acq
Slide 14: Balance sheet & debt management
Balance sheet & debt management • Net financial debt1 of $3.6b as at Debt maturity profile2 $m 30 June 2018, down from $4.3b at 1,500 30 June 2017 1,200 – US$750m bond ($728m including currency 900 swaps) repaid in March 2018 600 300 – £705m ($1,145m) of sterling denominated 0 bank facilities cancel
Slide 15: Finance costs & credit metrics
Finance costs & credit metrics • All-in effective borrowing cost 4.18% in FY18 $m Finance costs & weighted average cost of debt 400 6.0% (FY17: 4.04%) 350 5.0% – Increased weighting of higher cost bonds 300 4.0% 250 as lower cost bank debt was repaid 200 3.0% • Finance costs decreased by 16% due to
Slide 16: Dividends
Dividends Net cash flow composition • Cumulative dividend payments & capital $m 6,000 Net cash flow composition management distributions of $13.0b since FY14 $m 6,000 4,500 – Funded by free cash flows 4,500 3,000 • Full-year dividend of $2.23 per share 1,500 3,000 fully-franked, in line with previou
Slide 17: Bunnings Australia & New Zealand
Bunnings Australia & New Zealand Michael Schneider Managing Director, Bunnings Group
Slide 18: Bunnings Australia & New Zealand performance summary
Bunnings Australia & New Zealand performance summary Full-year ended 30 June ($m) 2018 2017 Var % Revenue 12,544 11,514 8.9 EBITDA1 1,683 1,505 11.8 Depreciation & amortisation (179) (171) (4.7) EBIT1 1,504 1,334 12.7 EBIT margin1 (%) 12.0 11.6 RoC (R12, %) 49.4 41.8 Safety (R12, AIFR) 14.3 18.9 Tot
Slide 19: Bunnings Australia & New Zealand overview
Bunnings Australia & New Zealand overview • Sustained strong sales performance Bunnings store-on-store sales growth % 20.0 18.7 – Total store sales growth 8.9%; store-on-store 16.3 14.9 14.8 15.3 growth of 7.8% 16.0 13.7 14.3 13.7 12.0 – Sales growth in all trading regions; both consumer & commercia
Slide 20: Bunnings Australia & New Zealand overview (cont.)
Bunnings Australia & New Zealand overview (cont.) Strong progress on strategic agenda Creating better experiences • Launch of online transactions for special orders • Dedicated in-store commercial service offer • More solar energy generation Strengthening the core • Continued safety focus with reduc
Slide 21: Bunnings Australia & New Zealand outlook
Bunnings Australia & New Zealand outlook • Well-positioned for continued growth; sales growth in 1H19 to be moderated by the strong trading performance achieved in 1H18 • Dynamic competitive landscape • Strong focus on maintaining a compelling & differentiated customer offer • Continued network rein
Slide 22: Coles
Coles John Durkan Managing Director, Coles
Slide 23: Coles performance summary
Coles performance summary Year ended 30 June ($m) 2018 2017 Var % Coles Revenue1 39,388 39,217 0.4 EBITDA2 2,151 2,256 (4.7) Depreciation & amortisation (651) (647) (0.6) EBIT2 1,500 1,609 (6.8) EBIT margin2 (%) 3.8 4.1 RoC (R12, %) 9.2 9.7 Safety (R12, TRIFR) 33.3 38.8 Food & Liquor Revenue1 33,627
Slide 24: Food & Liquor overview
Food & Liquor overview • Sales momentum steadily improved over the year – Acceleration in 4Q18, with comp growth of 1.8% – Improvement driven by customer transactions, unit growth & increased average basket size – Customer satisfaction improved to highest level in two years – Growth in Fresh market
Slide 25: Food & Liquor overview (cont.)
Food & Liquor overview (cont.) • Customer focus in a competitive market positions the business for sustainable long-term growth – Pricing: Lower fresh produce prices a key driver of deflation, ~4,500 products now on ‘Everyday Low Pricing’ – Fresh: Improved quality & a focus on deepening supplier rel
Slide 26: Food & Liquor overview: Online & flybuys
Food & Liquor overview: Online & flybuys • Continued improvement in Coles Online customer experience – Strong double digit sales & transaction growth – Significant expansion in click & collect locations (992 as at 30 June) – Two fully operational Online fulfilment centres – Move to price parity with
Slide 27: Food & Liquor overview: Liquor transformation progresses
Food & Liquor overview: Liquor transformation progresses • Positive sales momentum continued – 11 consecutive quarters of comparable sales growth – Growth in transactions, units & basket size • Continued expansion & optimisation of the store network – 163 Liquorland renewals completed for the year –
Slide 28: Convenience overview
Convenience overview • Improved comparable store sales momentum – Comparable store sales of 4.6% in 4Q18 – Double digit growth in food-to-go offering – Compelling ‘Every Day Value’ proposition • Lower earnings driven by lower fuel volumes & commercial terms of Alliance agreement • Continued emphasis
Slide 29: Network investment
Network investment • History of disciplined capital allocation: Store renewals (refurbishments + new stores) – Focused on ROC & sales density metrics # of stores 140 Significant reset of portfolio Ongoing investment in network – Data-led approach to store ranging & layout 120 (customer insights, fly
Slide 30: Coles outlook
Coles outlook • Focus on execution of ‘Fresh Tomorrow’ strategy, centred on driving greater convenience & innovation for customers, is expected to position Coles for long-term growth • Sales momentum has continued to increase in 1Q19, driven by a successful Little Shop campaign, other promotional in
Slide 31: Department Stores
Department Stores Guy Russo Chief Executive Officer, Department Stores Managing Director, Target
Slide 32: Department Stores performance summary
Department Stores performance summary Year ended 30 June ($m) 2018 2017 Var % Revenue 8,837 8,528 3.6 EBITDA1 862 739 16.6 Depreciation & amortisation (202) (196) (3.1) EBIT1 660 543 21.5 EBIT margin1 (%) 7.5 6.4 RoC2 (R12, %) 32.8 24.1 Safety (R12, LTIFR) 4.2 5.1 Kmart Total sales growth3 (%) 8.0 7
Slide 33: Department Stores overview
Department Stores overview • Revenue increased 3.6% to $8.8b – Kmart: driven by double-digit growth in customer transactions & units sold as customers responded to improvements in the product offer & price investment – Target: growth in online, menswear & homewares more than offset by ongoing reset
Slide 34: Department Stores outlook
Department Stores outlook • The Department Stores division is well positioned for the future • Kmart will continue to focus on: – Leading the lowest price in a highly competitive market – Maintaining strong brand perception for on-trend everyday items – Relentless pursuit of lowest cost & increasing
Slide 35: Officeworks
Officeworks Mark Ward Managing Director, Officeworks
Slide 36: Officeworks performance summary
Officeworks performance summary Year ended 30 June ($m) 2018 2017 Var % Revenue 2,142 1,964 9.1 EBITDA 181 168 7.7 Depreciation & amortisation (25) (24) (4.2) EBIT 156 144 8.3 EBIT margin (%) 7.3 7.3 RoC (R12, %) 16.6 14.7 Safety1 (R12, AIFR) 10.2 11.9 Sales growth2 9.1 6.1 1. 2017 has been restated
Slide 37: Officeworks overview
Officeworks overview • Strong headline results $m Continued revenue growth 2,200 +9.1% – Revenue growth of 9.1% FY09-FY18 Revenue CAGR = 5.7% 2,000 +6.1% o Sales growth in stores & online +8.0% 1,800 – EBIT growth of 8.3% +8.8% +4.6% 1,600 o Effective gross margin & CODB management +4.4% +0.7% +1.6%
Slide 38: Officeworks outlook
Officeworks outlook • Continued focus on disciplined execution of strategic agenda – Strengthen & expand the customer offer – Extend ‘every channel’ reach – physically & digitally – Enhance productivity & efficiency – Invest in talent, diversity & safety – Make a positive difference in the community
Slide 39: Industrials
Industrials David Baxby Managing Director, Industrials
Slide 40: Industrials performance summary
Industrials performance summary Year ended 30 June ($m) 2018 2017 Var % Revenue Chemicals, Energy & Fertilisers1 1,830 1,639 11.7 Industrial & Safety 1,750 1,776 (1.5) Resources2 1,689 1,746 (3.3) Total 5,269 5,161 2.1 EBITDA Chemicals, Energy & Fertilisers3 469 472 (0.6) Industrial & Safety 159 158
Slide 41: Chemicals, Energy & Fertilisers performance summary
Chemicals, Energy & Fertilisers performance summary Year ended 30 June ($m) 2018 2017 Var % Revenue Chemicals 932 813 14.6 Energy1 423 368 14.9 Fertilisers 475 458 3.7 Total 1,830 1,639 11.7 EBITDA 469 472 (0.6) Depreciation & amortisation (79) (77) (2.6) EBIT 390 395 (1.3) EBIT excluding significan
Slide 42: Chemicals, Energy & Fertilisers overview
Chemicals, Energy & Fertilisers overview • Increased revenue, underlying earnings & ROC supported by strong demand for products • Chemicals earnings increased compared to the prior year: – Strong WA EGAN1 demand due to unplanned disruptions at competing Burrup AN plant resulting in opportunistic sal
Slide 43: Industrial & Safety performance summary
Industrial & Safety performance summary Year ended 30 June ($m) 2018 2017 Var % Revenue 1,750 1,776 (1.5) EBITDA 159 158 0.6 Depreciation & amortisation (41) (43) 4.7 EBIT 118 115 2.6 EBIT margin (%) 6.7 6.5 RoC (R12, %) 8.4 8.4 Safety (R12, LTIFR) 1.5 1.4 2018 Full-year results | 43
Slide 44: Industrial & Safety overview
Industrial & Safety overview • Revenue 1.5% lower than prior year: – Blackwoods revenue marginally below prior year with strong demand in the mining segment offset by lower sales in government, manufacturing & utilities – Workwear Group revenue lower with strong demand in Australia offset by weaker
Slide 45: Resources performance summary
Resources performance summary • Reflects nine months’ contribution from Curragh Coal Mine prior to sale on 29 March 2018 Year ended 30 June ($m) 20181 2017 Var % Revenue 1,689 1,746 (3.3) Royalties2 (331) (262) (26.3) Mining & other costs (942) (1,019) 7.6 EBITDA3 416 465 (10.5) Depreciation & amort
Slide 46: Resources overview
Resources overview • Sale of Curragh to Coronado Coal Group completed 29 March 2018 – Nine month contribution drove decrease in FY18 revenue (down 3.3%) & EBIT (down 11.4%) • Robust thermal & metallurgical coal export markets resulted in higher average prices • Reduction in hedge book losses to $28m
Slide 47: Industrials outlook
Industrials outlook Chemicals, Energy & Fertilisers • Production & demand for products is expected to remain robust • Chemicals earnings in FY19 expected to be affected by an oversupply of EGAN in the WA market, subject to competitive factors • Growing contribution from natural gas retailing, althou
Slide 48: Industrials outlook
Industrials outlook Bengalla • Sale of 40% interest in the Bengalla joint venture for $860m • Completion expected Q2 2019 financial year • The sale of Bengalla concludes the strategic review of Resources 2018 Full-year results | 48
Slide 49: Group Outlook
Group Outlook Rob Scott Managing Director, Wesfarmers Limited
Slide 50: Outlook
Outlook • Following repositioning of the portfolio, Wesfarmers is well placed to deliver sustainable growth in earnings & improved shareholder returns • Demerger expected to complete in November 2018 – Coles to be demerged with a strong balance sheet providing significant flexibility • Following the
Slide 51: Questions
Questions
Slide 52: Appendix: Supplementary Information
Appendix: Supplementary Information
Slide 53: Group management balance sheet – overview
Group management balance sheet – overview Year ended 30 June ($m)1 2018 2017 Commentary Inventories 6,011 6,530 Receivables & prepayments 1,939 1,936 Detailed working capital discussion Trade & other payables (6,552) (6,616) provided on slide 54 Other 492 410 Net working capital 1,890 2,260 Property
Slide 54: Balance sheet – working capital
Balance sheet – working capital Year ended 30 June ($m)1 2018 2017 Commentary • Decrease reflects divestments of Curragh & Inventories 6,011 6,530 BUKI, partially offset by increase in BANZ due to network growth Receivables & prepayments 1,939 1,936 • Decrease reflects divestments of Curragh & Trade
Slide 55: Retail store networks
Retail store networks As at 30 June 2018 More than 3,800 locations across Australia & New Zealand Brand NSW/ACT VIC QLD SA WA TAS NT NZ Total Bunnings Warehouse 76 57 43 14 32 7 3 27 259 Smaller format 18 13 15 3 9 - - 20 78 Trade 7 4 7 2 3 1 - 8 32 Total Bunnings 101 74 65 19 44 8 3 55 369 Coles Su
Slide 56: Industrial & Safety distribution network
Industrial & Safety distribution network As at 30 June 2018 462 locations with 175 branches, 220 gas distribution points & 67 Workwear franchises NSW/ Brand ACT VIC QLD SA WA TAS NT NZ Other1 Total Blackwoods 19 14 21 6 20 3 3 35 1 122 Workwear Group 21 17 29 5 14 2 1 1 2 92 (incl. 67 franchised) Co
Slide 57: Revenue reconciliation – Coles
Revenue reconciliation – Coles Year ended 30 June ($m) 2018 2017 Food & Food & Conv. Total Conv. Total Liquor Liquor Segment revenue (Gregorian)1 33,627 5,761 39,388 33,084 6,133 39,217 Less: Other revenue (231) (18) (249) (374) (12) (386) Headline sales (Gregorian) 33,396 5,743 39,139 32,710 6,121
Slide 58: Revenue reconciliation – Department Stores
Revenue reconciliation – Department Stores Year ended 30 June ($m) 2018 2017 Segment revenue (Gregorian) 8,837 8,528 Less: Non sales revenue (4) (5) Headline sales (Gregorian) 8,833 8,523 Less: Gregorian adjustment1 (26) (22) Headline sales revenue (Retail)2 8,807 8,501 1. Adjustment to headline sal
Slide 59: Wesfarmers
We Wesfarmers