Slide 1: 2016 Full-year Results Briefing Presentation
2016 Full-year Results Briefing Presentation Wednesday, 24 August 2016
Slide 2: Presentation outline
Presentation outline Item Presenter Page Group Performance Overview Richard Goyder 3 Group Balance Sheet & Cash Flow Terry Bowen 10 Coles John Durkan 18 Home Improvement John Gillam 26 Department Stores Guy Russo 34 - Target Guy Russo 36 - Kmart Ian Bailey 40 Officeworks Mark Ward 44 Industrials Rob
Slide 3: Group Performance Overview
Group Performance Overview Richard Goyder Managing Director Wesfarmers Limited
Slide 4: Financial overview
Financial overview Excluding Variance to pcp Full-year ended 30 June 2016 Reported significant items1 (exc. significant items) Operating revenue $66.0b $66.0b 5.7% Earnings before interest & tax $1,346m $3,607m (4.0%) Net profit after tax $407m $2,353m (3.6%) Earnings per share 36.2 cps 209.5 cps (3
Slide 5: Group performance summary
Group performance summary Full-year ended 30 June ($m) 2016 2015 var % Revenue 65,981 62,447 5.7 EBITDA 2,642 4,978 (46.9) EBIT 1,346 3,759 (64.2) EBIT (exc. significant items)1 3,607 3,759 (4.0) Net profit after tax 407 2,440 (83.3) Net profit after tax (exc. significant items)1 2,353 2,440 (3.6) O
Slide 6: Divisional earnings
Divisional earnings EBIT ($m) year ended 30 June 2016 2015 var % var $ Coles 1,860 1,783 4.3 77 Home Improvement 1,214 1,088 11.6 126 Bunnings Australia & NZ 1,213 1,088 11.5 125 Bunnings UK & Ireland1 1 - - - Department Stores 275 522 (47.3) (247) Kmart 470 432 8.8 38 Target2 (195) 90 n.m. (285) Of
Slide 7: Divisional return on capital (RoC)
Divisional return on capital (RoC) Rolling 12 months to 30 June 2016 2015 EBIT Cap Emp RoC RoC Variance ($m) ($m) (%) (%) (ppt) Coles 1,860 16,541 11.2 11.0 0.2 Home Improvement1 1,214 3,599 33.7 33.5 0.2 Bunnings Australia & New Zealand 1,213 3,312 36.6 33.5 3.1 Department Stores 275 3,629 7.6 13.8
Slide 8: Strong value creation for all stakeholders
Strong value creation for all stakeholders Employees: $8.8b Government: $0.9b3 (taxes) Rent: $3.0b D&A: $1.3b EBIT: $3.5b1 FY16 FY16 Lenders: $0.3b (interest costs) Shareholders: $2.3b2 Suppliers & Services: $49.7b • Significant direct employer 220,000 • Significant indirect employer (supplier payme
Slide 9: Sustainability
Sustainability Safety Ethical Sourcing Diversity • Total Recordable Injury • Improved transparency of our • 3,300 Indigenous employees Frequency Rate reduced supply chain • Increased representation of 15% to 33.4 (3,211 factories audited) women in management roles Community contributions Climate cha
Slide 10: Group Balance Sheet & Cash Flow
Group Balance Sheet & Cash Flow Terry Bowen Finance Director Wesfarmers Limited
Slide 11: Other business performance summary
Other business performance summary Year ended 30 June ($m) Holding % 2016 2015 var % Share of profit of associates BWP Trust 25 77 52 48.1 Other Various 5 13 (61.5) Sub-total share of profit of associates 82 65 26.2 Interest revenue1 5 27 (81.5) Other (31) (73) 57.5 Corporate overheads (124) (124) -
Slide 12: Working capital management
Working capital management • Working capital outflows in the retail Year ended 30 June ($m) 2016 2015 portfolio were partially offset by working Cash movement inflow/(outflow) capital inflows in the Industrials division Receivables & prepayments (51) 47 • Retail movement driven by Inventory (444) (1
Slide 13: Cash flow generation
Cash flow generation • FY16 operating cash flows declined 11.2% to $m Cumulative cash realisation % $3,365m due to higher working capital 20,000 150 investment • Cash realisation1 of 94.9% 100 10,000 – Decrease driven by higher working capital 50 – Cash realisation excluding the investments made to
Slide 14: Capital expenditure
Capital expenditure • Capital deployed to high return opportunities Year ended 30 June ($m)1 2016 2015 var % Coles 797 941 (15.3) – Coles & Home Improvement comprised 70% of capital expenditure Home Improvement 538 711 (24.3) Kmart 163 169 (3.6) – Coles FY16 RoC2 of 30.0% (excluding Target 129 127 1
Slide 15: Debt management
Debt management • Continued to implement debt strategy by maintaining Debt sources2 diversity of sourcing, pre-funding debt maturities, maintaining access to diverse debt capital markets & Domestic Bank ensuring an appropriate maturity spread profile Bonds Bilaterals 27% 38% • Net financial debt1 in
Slide 16: Funding costs & credit metrics
Funding costs & credit metrics • ‘All-in’ effective borrowing cost further reduced to Finance costs & 4.50% $m weighted average cost of debt % 600 9 – Reflects active management of debt sources & the benefit of a lower BBSW rate 400 6 • Solid credit metrics – Cash interest cover1 (R12) at 16.8 times
Slide 17: Dividends
Dividends • Delivering returns over the long-term by $/share Shareholder distributions (declared) balancing shareholder distributions with 3.5 3.00 disciplined capital investment 3.0 2.30 • Full-year dividend of $1.86 per share, fully 2.5 1.00 2.00 1.86 franked 2.0 1.65 0.50 0.10 1.5 1.11 – Final di
Slide 18: Coles
Coles John Durkan Managing Director Coles
Slide 19: Coles performance summary
Coles performance summary Year ended 30 June ($m) 2016 2015 var % Coles Division Revenue1 39,242 38,201 2.7 EBITDA2 2,475 2,347 5.5 Depreciation & amortisation (615) (564) (9.0) EBIT2 1,860 1,783 4.3 EBIT margin2 (%) 4.7 4.7 RoC (R12%) 11.2 11.0 Safety (R12 LTIFR) 8.4 8.0 Food & Liquor Revenue1 32,5
Slide 20: Creating trusted value with customers
Food & Liquor highlights Creating trusted value with customers • Lowering the cost of the weekly shop for customers – 7.5% cumulative deflation from FY09 – More than 3,100 products at Every Day prices as at 30 June – Largest Coles brand activation to date, with nearly 1,000 products added to Every D
Slide 21: Driving greater simplicity
Food & Liquor highlights Driving greater simplicity • Building long-term supplier partnerships – More long-term strategic partnerships with Australian growers to improve quality & availability – Longer term end-to-end planning from supplier to shelf, reducing volatility & improving availability – Co
Slide 22: Boldly extending into new services & channels
Food & Liquor highlights Boldly extending into new services & channels • Extending convenience with Coles Online – First standalone online supermarket launched in Victoria in April 2016 – FY16 transaction growth & sales growth of ~25% – Delivering a world class customer experience with a new website
Slide 23: Progressing the Liquor transformation
Food & Liquor highlights Progressing the Liquor transformation Reshaping the liquor network • Positive comparable sales growth achieved # stores through 2H FY16 60 10 5 8 8 8 2 40 • Continued optimisation of the network in FY16 11 20 17 33 27 35 33 51 35 – 30 underperforming stores closed 0 (34) (21
Slide 24: Convenience shop sales growing strongly
Convenience highlights Convenience shop sales growing strongly • Convenience shop sales growth remains strong Expanding the convenience network # stores – 11.1% headline sales growth driven by record 35 transaction growth 30 25 – Strong growth in food-to-go underpinned by new 20 sandwich & bakery ra
Slide 25: Coles outlook
Coles outlook • Competition is robust & Coles will continue to be customer-led in everything that we do • Continued investment in value, service & fresh to drive sales growth • Investment funded by a focus on simplifying the business • Maintain a focus on transforming liquor as improving profitabili
Slide 26: Home Improvement
Home Improvement John Gillam Chief Executive Officer Bunnings Group
Slide 27: Home Improvement performance summary
Home Improvement performance summary Year ended 30 June ($m) 2016 2015 var % Revenue1 11,571 9,534 21.4 EBITDA1,2 1,383 1,228 12.6 Depreciation & amortisation1 (169) (140) (20.7) EBIT1,2 1,214 1,088 11.6 EBIT margin1,2 (%) 10.5 11.4 RoC1 (R12%) 33.7 33.5 Bunnings Australia & New Zealand - RoC (R12%)
Slide 28: Home Improvement performance summary (continued)
Home Improvement performance summary (continued) Year ended 30 June ($m) 2016 2015 var % Revenue1 11,571 9,534 21.4 Bunnings Aust & NZ 10,575 9,534 10.9 Bunnings UK & Ireland1 ($) 996 n.a. Bunnings UK & Ireland1 (£) 517 n.a. EBIT1,2 1,214 1,088 11.6 Bunnings Aust & NZ 1,213 1,088 11.5 Bunnings UK &
Slide 29: Home Improvement highlights
Home Improvement highlights Bunnings Australia and New Zealand • Strong sales growth – Total store sales growth of 11.1% » Store-on-store growth of 8.1% – Positive across Australia (all regions) & New Zealand – Good momentum in consumer & commercial – Solid growth across all categories • Good increa
Slide 30: Home Improvement highlights (continued)
Home Improvement highlights (continued) Bunnings Australia and New Zealand (cont.) • Wider brand reach – Deeper engagement in digital eco-system – 22 new trading locations opened • Continued team investment – More training investment (product, project) – Improved safety & enhanced diversity • Better
Slide 31: Home Improvement highlights (continued)
Home Improvement highlights (continued) Bunnings United Kingdom and Ireland (Homebase) • Repositioning of Homebase well underway – New trading strategies implemented » Merchandising, pricing, marketing & operations » Reshaped with home improvement & garden market focus – Wider product choices & deep
Slide 32: Home Improvement highlights (continued)
Home Improvement highlights (continued) Bunnings United Kingdom and Ireland (cont.) • New leadership team well established • Special purpose Advisory Board in place • Transition, integration & separation activity well advanced – Many transitional services already terminated • Preparation commenced f
Slide 33: Home Improvement outlook
Home Improvement outlook Australia and New Zealand • Significant long-term opportunities • Increase traction from strategic agenda – Creating better experiences – Strengthening the core – Driving stronger growth UK and Ireland • Focused on Phase 1 of Acquisition Plans – Establish strong foundations
Slide 34: Department Stores
Department Stores Guy Russo Chief Executive Officer Department Stores Managing Director Target
Slide 35: Department Stores performance summary
Department Stores performance summary Year ended 30 June ($m) 2016 2015 var % Revenue Kmart 5,190 4,553 14.0 Target 3,456 3,438 0.5 Total 8,646 7,991 8.2 EBITDA Kmart 571 521 9.6 Target1 (105) 176 n.m. Total 466 697 (33.1) EBIT Kmart 470 432 8.8 Target1 (195) 90 n.m. Total 275 522 (47.3) 1 2016 excl
Slide 36: Target
Target Guy Russo Managing Director Target
Slide 37: Target performance summary
Target performance summary Year ended 30 June ($m) 2016 2015 var % Revenue 3,456 3,438 0.5 EBITDA1 (105) 176 n.m. Depreciation & amortisation (90) (86) (4.7) EBIT1 (195) 90 n.m. EBIT excluding significant items1,2 (50) 90 n.m. EBIT margin excluding significant items1,2 (%) (1.4) 2.6 RoC (R12 %) (8.2
Slide 38: Target highlights
Target highlights • Progress since creation of Department Stores division in February 2016 − Renewed vision, values & strategy − Cost base reduction & business reset » Right-sized store support centre & advanced office relocation » Accelerated supply chain streamlining, with further eight off-sites
Slide 39: Target outlook
Target outlook • FY17 reflects a transitional year − Embed the revised strategy − Accelerate the conversion to EDLP » Exit unprofitable sales » Exit Toy Sale » Prioritise volume / 365 lines − Reduce inventory levels & improve range quality − Moderate capital expenditure, including renewal review & r
Slide 40: Kmart
Kmart Ian Bailey Managing Director Kmart
Slide 41: Kmart performance summary
Kmart performance summary Year ended 30 June ($m) 2016 2015 var % Revenue 5,190 4,553 14.0 EBITDA 571 521 9.6 Depreciation & amortisation (101) (89) (13.5) EBIT 470 432 8.8 EBIT margin (%) 9.1 9.5 RoC (R12 %) 37.7 32.9 Safety (R12 LTIFR) 6.7 7.0 Total sales growth1 (%) 13.5 8.2 Comparable store sale
Slide 42: Kmart highlights
Kmart highlights • Revenue growth across all categories, underpinned by increased customer transactions & units sold • Strong growth in EBIT & RoC – Improvement in range architecture – Greater value across all price tiers – Improved efficiency in all operational areas – Strong working capital manage
Slide 43: Kmart outlook
Kmart outlook • Remain focused on growth strategies – Volume retailer – Operational excellence – Adaptable stores – High performance culture • Relentless pursuit of lowest cost • Better products at even lower prices • Further understanding of customers to make better commercial decisions • Develop &
Slide 44: Officeworks
Officeworks Mark Ward Managing Director Officeworks
Slide 45: Officeworks performance summary
Officeworks performance summary Year ended 30 June ($m) 2016 2015 var % Revenue 1,851 1,714 8.0 EBITDA 156 139 12.2 Depreciation & amortisation (22) (21) (4.8) EBIT 134 118 13.6 EBIT margin (%) 7.2 6.9 RoC (R12 %) 13.5 11.4 Safety (R12 AIFR) 15.9 19.2 Total sales growth1 (%) 8.1 8.8 1 2016 growth re
Slide 46: Officeworks highlights
Officeworks highlights • Strong headline results Revenue growth momentum $m – Revenue growth of 8.0% 1,900 8.0% 1,800 8.8% – EBIT growth of 13.6%, six year CAGR of 10.9% 1,700 4.6% 1.6% – RoC up 207 basis points to 13.5% 1,600 0.7% 4.4% 1,500 7.9% 1,851 • Continued investment in ‘every channel’ stra
Slide 47: Officeworks outlook
Officeworks outlook • Disciplined execution of strategic agenda – Driving ‘every channel’ strategy – anywhere, anytime, anyhow – A compelling offer – ‘one stop shop’ – Delivering great service through an engaged team – Increasing value for customers – Maintaining strong relationships with stakeholde
Slide 48: Industrials
Industrials Rob Scott Managing Director
Slide 49: Industrials performance summary
Industrials performance summary Year ended 30 June ($m) 2016 2015 var % Revenue Chemicals, Energy & Fertilisers 1,820 1,839 (1.0) Industrial & Safety 1,844 1,772 4.1 Resources 1,008 1,374 (26.6) Total 4,672 4,985 (6.3) EBITDA Chemicals, Energy & Fertilisers1 400 345 15.9 Industrial & Safety2 105 108
Slide 50: Chemicals, Energy & Fertilisers performance summary
Chemicals, Energy & Fertilisers performance summary Year ended 30 June ($m) 2016 2015 var % Revenue Chemicals 910 840 8.3 Energy1 325 435 (25.3) Fertilisers 585 564 3.7 Total 1,820 1,839 (1.0) EBITDA 400 345 15.9 Depreciation & amortisation (106) (112) 5.4 EBIT 294 233 26.2 EBIT excluding restructur
Slide 51: Chemicals, Energy & Fertilisers highlights
Chemicals, Energy & Fertilisers highlights • Strong growth in earnings & RoC – Higher Chemicals earnings with plants operating at full capacity (excluding the planned major shutdown of the ammonia plant in 2H FY16) – Significant increase in Kleenheat earnings following improved terms for gas feedsto
Slide 52: Industrial & Safety performance summary
Industrial & Safety performance summary Year ended 30 June ($m) 2016 2015 var % Revenue 1,844 1,772 4.1 EBITDA 105 108 (2.8) Depreciation & amortisation (42) (38) (10.5) EBIT 63 70 (10.0) EBIT excluding restructuring costs1 98 90 8.9 EBIT margin excluding restructuring costs1 (%) 5.3 5.1 RoC (R12 %)
Slide 53: Industrial & Safety highlights
Industrial & Safety highlights • Revenue increase of 4.1% largely due to the full-year contribution of Workwear Group (acquired in December 2014) – Lower demand from mining & construction customers – Strong growth in Coregas driven through the Blackwoods platform & ‘Trade n Go’ rollout – Sales & mar
Slide 54: Resources performance summary
Resources performance summary Year ended 30 June ($m) 2016 2015 % Revenue 1,008 1,374 (26.6) Royalties1 (143) (167) 14.4 Mining & other costs2 (1,029) (992) (3.7) EBITDA2 (164) 215 n.m. Depreciation & amortisation (146) (165) 11.5 EBIT2 (310) 50 n.m. RoC (R12%) (22.9) 3.4 Coal production (‘000 tonne
Slide 55: Resources highlights
Resources highlights • Continued improvements in safety with no LTIs recorded in Curragh for the 21 months to 30 June 2016 • 26.6% decline in revenue – Seaborne metallurgical coal markets remain in oversupply, resulting in lower export prices – Unfavourable metallurgical coal sales mix, driven by cu
Slide 56: Industrials outlook
Industrials outlook Chemicals, Energy & Fertilisers • Continue focus on strong operational performance • International commodity prices, seasonal & competitive factors expected to impact FY17 earnings – Prevailing global ammonia & Saudi CP prices are lower (in AUD) than at this time last year – Cycl
Slide 57: Industrials outlook
Industrials outlook Resources • Earnings dependent upon export coal pricing & exchange rates, with export market conditions expected to remain challenging in the near-term • Continue strong focus on operational productivity, cost control & capital discipline – Implementation of expert panel recommen
Slide 58: Outlook
Outlook Richard Goyder Managing Director Wesfarmers Limited
Slide 59: Outlook
Outlook Retail • Well positioned to continue delivering growth in an increasingly competitive environment where consumers are expected to remain value-conscious • Ongoing focus on delivering further value, better service & improved ranges supported by merchandise innovation & productivity improvemen
Slide 60: Outlook (continued)
Outlook (continued) Group • Maintain a strong balance sheet & cash flow generation • Secure growth opportunities through entrepreneurial initiatives • Ensure sustainability through responsible long-term management • Leverage & build human resource capability 2016 Full-year Results | 60
Slide 61: Questions
Questions
Slide 62: Wesfarmers
os Wesfarmers