Wesfarmers Limited · ASX:WES
Wesfarmers — Debt Investor Presentation (2020)
49 slides from Wesfarmers's debt investor presentation, 2020
Slide 1: 2020 Full-year results debt investor update
2020 Full-year results debt investor update
Slide 2: Group performance overview
Group performance overview 7 Wesfarmers
Slide 3: Demonstrably performing, consistent with our values
Demonstrably performing, consistent with our values During this challenging year, our businesses and team members played a critical role in supporting customers, partners and the communities in which our businesses operate Anticipating the needs Looking after our team Engaging fairly with of our cus
Slide 4: Impact of COVID-19 on operations and financial results
Impact of COVID-19 on operations and financial results • Implementation of additional measures to protect the health and safety of team members and customers Focus on safety • Extension of a range of additional leave and benefits to affected team members and support • Resulted in some additional ope
Slide 5: Financial overview
Financial overview 2020 2020 2019 Variance Year ended 30 June ($m) Post AASB 16 Pre AASB 16 Reported %1 Results from continuing operations excluding significant items Revenue 30,846 30,846 27,920 10.5 EBIT (after interest on lease liabilities) 2,942 2,964 2,974 (0.3) NPAT 2,083 2,099 1,940 8.2 Basic
Slide 6: Operational highlights
Operational highlights • Bunnings: Strong sales growth with the second half sales underpinned by strong growth in consumer sales as customers spent more time working and undertaking projects at home; earnings result reflects the continued execution of the strategic agenda and continued focus on disc
Slide 7: Divisional sales performance
Divisional sales performance Sales performance ($m) 2019 Year ended 30 June1 2020 Retail sales (excludes Catch) Revenue +13.9% +5.4% (2.6%) +20.4% +0.3% (0.4%) 14,996 13,162 5,759 6,068 2,763 2,692 2,305 2,775 2,078 2,085 1,752 1,745 Bunnings Kmart Target Officeworks WesCEF Industrial and Safety • S
Slide 8: Divisional earnings performance
Divisional earnings performance Earnings Before Tax (EBT) ($m) 2020 2020 2019 Variance % of divisional Year ended 30 June1 Post AASB 16 Pre AASB 16 Reported %2 EBT2 Bunnings 1,826 1,852 1,626 13.9 64% Kmart Group3 410 413 540 (23.5) 14% Officeworks 197 190 167 13.8 7% WesCEF4 394 393 433 (9.2) 14% I
Slide 9: Operating and free cash flows
Operating and free cash flows • Divisional cash generation from continuing Divisional cash generation1 % operations increased 38 ppt to 135% excluding discontinued operations2 160 • Operating cash flows increased 32% to $3,597m 140 120 FY15 - FY19 average - 103% – Strong divisional operating cash fl
Slide 10: Working capital
Working capital 2020 2019 • Significant favourable but temporary working Year ended 30 June ($m) Pre AASB 16 Reported capital inflow of $723m driven by retail divisions Working capital movements (continuing operations) Cash movement inflow/(outflow) • Lower inventory levels at year end Receivables a
Slide 11: Capital expenditure
Capital expenditure • Gross capital expenditure from continuing Year ended 30 June1 ($m) 2020 2019 Var % operations of $867m in line with prior period Bunnings 511 470 8.7 – Higher capital expenditure in Bunnings from Kmart Group 142 205 (30.7) development of digital offer – Higher capital expenditu
Slide 12: Managing businesses for long-term success
Managing businesses for long-term success While addressing the near-term requirements of COVID-19, the divisions remain focused on managing their businesses for long-term success and value creation Building on unique A relentless focus Investing for the capabilities and on customers long term platfo
Slide 13: Group outlook
Group outlook • The continued impact of COVID-19, and potential government responses, presents significant uncertainty for the operating environment • The Group will continue to prioritise the safety of customers and team members in a COVID-19 environment • Customers spending more time at home, and
Slide 14: Debt management
Debt management Wesfarmers
Slide 15: Maintaining strong credit ratings and balance sheet
Maintaining strong credit ratings and balance sheet • Strong credit ratings: Moody’s A3 (stable outlook); Standard and Poor’s A- (stable outlook) • Standard and Poor’s favourable adjustment of Debt / EBITDA target metric from 2.25x to 2.75x provides additional debt headroom, reflecting: – Impact of
Slide 16: Net financial debt
Net financial debt Movements in net financial debt1 ($b) (0.7) 1.6 Working 0.6 capital Net capex inflows 1.0 Kidman and Catch (2.1) (2.9) acquisitions Trading and (0.2) 0 other operating cash flows 1.7 (3.6) Net financial debt1 Net capex and Net financial debt1 30 June 2019 acquisitions 30 June 2020
Slide 17: Management of lease portfolio
Management of lease portfolio • Undiscounted lease commitments totalled Weighted average lease terms (%)2 $8.5b1 and represent 79% of Group fixed 3.1 2.2 1.7 0.6 0.3 financial obligations as at 30 June 2020 12.9 12.3 12.1 6.8 5.3 31.3 • Shorter average remaining lease tenure of 31.4 32.3 32.3 32.9 4
Slide 18: Pro-active debt management
Pro-active debt management • Continued focus on Debt maturity profile1 $m maturity profile and 1,200 maintaining liquidity headroom in bilateral 0 bank facilities AUD500m repayable (1,200) November 2020 • Commitment to (2,400) ensure diversity of funding sources, (3,600) FY20 FY21 FY22 FY23 includin
Slide 19: Reduced funding costs
Reduced funding costs • Finance costs decreased by 24% to $133m in FY20 (FY19: $175m) due to lower average debt balances • Decrease in all-in effective borrowing costs to 4.93%1 (FY19: 5.10%1) $m Finance costs and weighted average cost of debt1 350 6.0% 300 5.0% 250 4.0% 200 3.0% 150 2.0% 100 50 1.0
Slide 20: Dividends & capital management
Dividends & capital management • Dividend policy takes into account through the cycle free cash flow requirements and debt refinancing • Fully-franked final ordinary dividend of $0.77 per share – Reflects strong underlying NPAT result – Takes into account available franking credits, strong balance s
Slide 21: Questions
Questions
Slide 22: Appendix: 2020 Full-year results briefing presentation (Operational extract)
Appendix: 2020 Full-year results briefing presentation (Operational extract)
Slide 23: Bunnings
Bunnings ZUNNINGS BUNNINGS TRADE”
Slide 24: Bunnings performance summary
Bunnings performance summary 2020 2020 2019 Variance Year ended 30 June ($m) Post AASB 16 Pre AASB 16 Reported %1 Revenue 14,999 14,999 13,166 13.9 EBITDA2 2,601 2,053 1,818 12.9 Depreciation and amortisation (658) (201) (192) (4.7) EBIT2 1,943 1,852 1,626 13.9 Interest on lease liabilities (117) -
Slide 25: Bunnings sales overview
Bunnings sales overview • Revenue growth of 13.9% to $14,999m – Total store sales growth of 14.7% – Store-on-store sales growth of 14.7% – Provided a convenient offer for consumer and trade customers while operating safely in a COVID-19 environment • Second-half sales growth underpinned by strong gr
Slide 26: Bunnings earnings overview
Bunnings earnings overview • Earnings increased 13.9% to $1,852m with a significantly lower net property contribution • Earnings excluding property contribution increased 17.8% – Continued focus on disciplined cost control – $20m of additional costs in cleaning, PPE for team members and additional s
Slide 27: Bunnings progress on strategic agenda
Bunnings progress on strategic agenda • Even stronger offer – Continued network investment – Expanded ranges and more in situ displays – 3,500 additional in-store experts providing specialist advice • Data and digital – Rollout of Click and Deliver across Australia and New Zealand – Launched new con
Slide 28: Adapting to new COVID-19 environment
Adapting to new COVID-19 environment • Established in-store protocols to ensure customer and team safety – Limiting customers in stores, physical distancing measures – Installed perspex register guards in all Australian stores – Increased cleaning in-store and deep cleans every night across store ne
Slide 29: Bunnings outlook
Bunnings outlook • Outlook remains highly uncertain • Trading performance likely to moderate as extraordinary growth in the second half likely to have pulled sales forward from FY21 in some categories • Weaker economic conditions expected in Australia and New Zealand with gradual removal of financia
Slide 30: Kmart Group
Kmart Group
Slide 31: Kmart Group performance summary
Kmart Group performance summary 2020 2020 2019 Variance Year ended 30 June1 ($m) Post AASB 16 Pre AASB 16 Reported %2 Revenue 9,217 9,217 8,598 7.2 EBITDA3 1,122 639 733 (12.8) Depreciation and amortisation (601) (216) (193) (11.9) EBIT3 521 423 540 (21.7) Interest on lease liabilities (102) (1) - n
Slide 32: Kmart and Target performance summary
Kmart and Target performance summary • Revenue growth of 3.0% to $8,853m Year ended 30 2020 2019 Variance – Kmart sales growth of 5.4% June ($m) Pre AASB 16 Reported % – Target sales decline of 2.6% Revenue 8,853 8,598 3.0 • Earnings decline of 22.0% to $421m1 predominantly EBITDA1 619 733 (15.6) dr
Slide 33: Catch performance summary
Catch performance summary 2020 • Strong growth across both in-stock and marketplace Year ended 30 June1 ($m) Post AASB 16 segments Gross transaction value 632 – Revenue of $364m since acquisition Revenue 364 – Gross transaction value increasing 49.2% since EBITDA 20 acquisition and 75.5% in the seco
Slide 34: Kmart Group outlook
Kmart Group outlook • In an uncertain environment, Kmart Group is well-positioned to deliver sustainable long-term returns • Kmart will continue to focus on investing for future growth – Ongoing investment in technology and digital capabilities, including online re-platform – Conversion of selected
Slide 35: Officeworks
Officeworks
Slide 36: Officeworks performance summary
Officeworks performance summary 2020 2020 2019 Variance Year ended 30 June ($m) Post AASB 16 Pre AASB 16 Reported %1 Revenue 2,787 2,787 2,314 20.4 EBITDA 307 221 195 13.3 Depreciation and amortisation (99) (31) (28) (10.7) EBIT 208 190 167 13.8 Interest on lease liabilities (11) - - n.m. EBT 197 19
Slide 37: Officeworks overview
Officeworks overview • Sales growth of 20.4% Sustained sales growth – Every-channel approach continues to deliver strong 2,900 +20.4% sales growth in stores and online 2,700 – Online sales penetration of approximately 30%, 2,500 +7.6% including Click and Collect sales 2,300 +9.1% – Strong second hal
Slide 38: Officeworks progress on strategic agenda
Officeworks progress on strategic agenda • Our team – Prioritised focus on keeping the team safe – Approval and implementation of new Enterprise Agreement for stores • Customer experience – Redefined back-to-school – Improved online offer – Commenced building data and analytics platform • Connecting
Slide 39: Officeworks outlook
Officeworks outlook • Outlook for year ahead remains uncertain, with changing customer shopping patterns and COVID-19 measures expected to impact trading conditions • Continued investment to ensure COVID safe operations • Well-positioned for the future • Execution of strategy to drive long-term grow
Slide 40: Chemicals, Energy and Fertilisers
Chemicals, Energy and Fertilisers
Slide 41: Chemicals, Energy and Fertilisers performance summary
Chemicals, Energy and Fertilisers performance summary 2020 2020 2019 Variance Year ended 30 June1 ($m) Post AASB 16 Pre AASB 16 Reported %2 Revenue3 Chemicals 1,022 1,022 1,000 2.2 Energy 424 424 468 (9.4) Fertilisers 639 639 610 4.8 Total 2,085 2,085 2,078 0.3 EBITDA4 481 474 513 (7.6) Depreciation
Slide 42: Chemicals, Energy and Fertilisers operational performance
Chemicals, Energy and Fertilisers operational performance Chemicals – Production Volume and Availability - • Further improvement in safety results supported by divisional framework – ‘Safe Person, Safe Process, Safe Place’ • Strong plant performance and continued benefits from debottlenecking initia
Slide 43: Chemicals, Energy and Fertilisers overview
Chemicals, Energy and Fertilisers overview • Revenue of $2,085m in line with prior period, with volume growth in Chemicals and Fertilisers, offset by lower prices (primarily Saudi CP1) and volumes in Energy • Earnings of $393m, down 9.2% on prior period driven by lower sales in Energy as well as com
Slide 44: Chemicals, Energy and Fertilisers outlook
Chemicals, Energy and Fertilisers outlook • Product demand expected to remain robust in iron ore and gold mining sectors • Chemicals volumes are expected to moderate marginally • Increase in AN sales to fertiliser and export markets as a result of lower EGAN sales now that the competing Burrup plant
Slide 45: Industrial and Safety
Industrial and Safety w ‘ Wesfarmers zSatetyBiackwoods WORKWEAR © Industrial and Saf coregas GREENCAP
Slide 46: Industrial and Safety performance summary
Industrial and Safety performance summary 2020 2020 2019 Var Year ended 30 June ($m) Post AASB 16 Pre AASB 16 Reported %1 Revenue 1,745 1,745 1,752 (0.4) EBITDA2 136 93 124 (25.0) Depreciation and amortisation (77) (38) (38) - EBIT2 59 55 86 (36.0) Interest on lease liabilities (5) - - n.m. EBT2 54
Slide 47: Industrial and Safety overview
Industrial and Safety overview • The performance of Industrial and Safety was below expectations • Industrial and Safety businesses focused on supporting customers to respond to the Australian bushfires and COVID-19 during the year by – Sourcing critical products, including personal protective equip
Slide 48: Industrial and Safety outlook
Industrial and Safety outlook • Market conditions in Australia and NZ are expected to be uncertain and remain challenging in FY21 • Blackwoods continues to focus on improving the customer value proposition – Continued investment in data and digital – Implementation of the ERP system • Workwear Group
Slide 49: Wesfarmers
We Wesfarmers