Wesfarmers Limited · ASX:WES
Wesfarmers — H1 FY2022 Earnings Presentation
51 slides from Wesfarmers's earnings presentation, Feb 17, 2022
Slide 1: 2022 Half-year results briefing presentation
2022 Half-year results briefing presentation To be held on Thursday 17 February 2022
Slide 2: Presentation outline
Presentation outline Item Presenter Page Group performance overview Rob Scott 3 Financial performance Anthony Gianotti 9 Bunnings Michael Schneider 17 Kmart Group Ian Bailey 22 Officeworks Sarah Hunter 28 Chemicals, Energy and Fertilisers Ian Hansen 33 Industrial and Safety Tim Bult 37 Group outlook
Slide 3: Wesfarmers' primary objective is to provide a satisfactory return to shareholders
Wesfarmers’ primary objective is to provide a satisfactory return to shareholders We believe it is only possible to achieve this over the long term by: Anticipating the needs of our Looking after our team Engaging fairly with our customers and delivering members and providing a safe, suppliers and s
Slide 4: Group purpose and long-term focus continue to inform our strategies
Group purpose and long-term focus continue to inform our strategies Good progress on sustainability agenda and additional investment supporting the wellbeing of team members and the community through lockdowns $37m 70% >2,600 140GWh $2.5b in team member of operational waste calls by team new agreeme
Slide 5: Financial overview
Financial overview Half-year ended 31 December ($m) 2021 2020 Var % Results excluding significant items1 Revenue 17,758 17,774 (0.1) EBIT 1,905 2,171 (12.3) NPAT 1,213 1,414 (14.2) Basic earnings per share (cps) 107.3 125.0 (14.2) Results including significant items1 NPAT 1,213 1,390 (12.7) Basic ea
Slide 6: Progress on priorities to support long-term growth
Progress on priorities to support long-term growth New market-leading data and Invest in platforms for Accelerate the pace of digital ecosystem long-term growth continuous improvement • New data and digital division led • Continue to direct capital to • Integrated sustainability further by Nicole Sh
Slide 7: New data and digital division and subscription program
New data and digital division and subscription program • New division to support the development of the Group’s market-leading data and digital ecosystem – Investing in foundations necessary to deliver great value, convenience and experiences to customers across the Group – Includes the Group data a
Slide 8: Group performance summary
Group performance summary Half-year ended 31 December ($m) 2021 2020 Var % Revenue 17,758 17,774 (0.1) EBIT 1,905 2,137 (10.9) EBIT (after interest on lease liabilities) 1,796 2,023 (11.2) EBIT (after interest on lease liabilities) (excl. significant items)1 1,796 2,057 (12.7) NPAT 1,213 1,390 (12.7
Slide 9: Financial performance
Financial performance Anthony Gianotti Chief Financial Officer, Wesfarmers Limited
Slide 10: Divisional sales performance
Divisional sales performance 1H20 Sales performance ($m) 1H21 Half-year ended 31 December 1H22 Retail sales1 GTV2 Revenue 1-year growth +1.7% (10.3%) +3.7% +1.0% +29.8% +5.1% 2-year growth +26.5% (5.2%) +28.1% +97.5% +21.1% +10.0% 9,046 9,204 7,275 5,185 4,909 4,652 1,226 1,515 1,571 616 889 830 1,0
Slide 11: Divisional earnings performance and return on capital
Divisional earnings performance and return on capital EBT1 ($m) 2021 Var (%) ROC2 (R12, %) Half-year ended vs vs 31 December 2021 2020 2019 2020 2019 2021 2020 20193 Bunnings 1,259 1,274 938 (1.2) 34.2 79.0 76.6 51.5 Kmart Group 178 487 352 (63.4) (49.4) 24.5 35.5 25.1 Officeworks 82 100 82 (18.0) -
Slide 12: Other business performance summary
Other business performance summary Half-year ended 31 December ($m) Holding % 2021 2020 Var % Share of profit of associates and joint ventures BWP Trust 24.8 86 36 138.9 Other associates and joint ventures1 Various 9 5 80.0 Sub-total share of profit of associates and joint ventures 95 41 131.7 Data
Slide 13: Working capital and cash flow
Working capital and cash flow • Divisional operating cash flows declined 16.1%, Half-year ended 31 December ($m) 2021 2020 with divisional cash generation of 100%1 Working capital cash movement – Lower earnings growth Receivables and prepayments 189 176 – Higher inventories due to targeted investmen
Slide 14: Capital expenditure
Capital expenditure • Gross capital expenditure of $583m, up $173m on Half-year ended 31 December1 ($m) 2021 2020 Var % the prior corresponding period – WesCEF includes $139m associated with Bunnings 196 219 (10.5) development of the Mt Holland lithium project Kmart Group 81 81 - – Continued investm
Slide 15: Balance sheet and debt management
Balance sheet and debt management • Continued to reposition the balance sheet to Debt maturity profile3 optimise cost of funds and debt maturity profile $m 2,000 – Distributed $2.3b capital return during the half 1,000 – Extended weighted average debt term to 0 maturity to 6.5 years (1H21: 1.2 years
Slide 16: Dividends
Dividends • Fully-franked half-year ordinary dividend of Shareholder distributions1 $/share $0.80 per share Demerger of Coles 4.50 Nov 2018 • Dividend record date 23 February 2022; 4.00 3.78 3.50 dividend payable 30 March 2022 3.00 2.78 2.00 2.50 2.23 1.00 • Dividend investment plan: not underwritte
Slide 17: Bunnings
Bunnings Michael Schneider Managing Director, Bunnings Group
Slide 18: Bunnings performance summary
Bunnings performance summary Half-year ended 31 December ($m) 2021 2020 Variance % Revenue 9,209 9,054 1.7 EBITDA 1,677 1,669 0.5 Depreciation and amortisation (362) (337) (7.4) EBIT 1,315 1,332 (1.3) Interest on lease liabilities (56) (58) 3.4 EBT 1,259 1,274 (1.2) Net property contribution 41 1 n.
Slide 19: Bunnings sales and earnings overview
Bunnings sales and earnings overview • Revenue growth of 1.7% to $9,209m – Total store sales growth of 26.1% on a two-year1 basis – Solid revenue performance, noting cycling extraordinary revenue growth in 1H21 – First quarter impacted by government restrictions in many states, strong trading in the
Slide 20: Bunnings progress on strategy
Bunnings progress on strategy • Strengthen the core – Relentless focus on delivering value to customers through lowest prices, widest range and best experience – Maintained strong stock levels and availability – Safety, community and renewable energy initiatives – Range reviews to refresh, expand an
Slide 21: Bunnings outlook
Bunnings outlook • Operating environment remains uncertain – Recent COVID-19 cases impacting consumer spending and team absenteeism – Expect continued COVID-related costs associated with cleaning, PPE and team member support – Supply chain constraints and inflationary pressure in some categories exp
Slide 22: Kmart Group
Kmart Group Ian Bailey Managing Director, Kmart Group
Slide 23: Kmart Group performance summary
Kmart Group performance summary Half-year ended 31 December ($m) 2021 2020 Variance % Revenue 4,917 5,441 (9.6) EBITDA1 483 818 (41.0) Depreciation and amortization (260) (283) 8.1 EBIT1 223 535 (58.3) Interest on lease liabilities (45) (48) 6.3 EBT1 178 487 (63.4) Significant items - (34) n.m. EBT
Slide 24: Kmart and Target performance summary
Kmart and Target performance summary • Revenue decreased by 10.0% to $4,602m Half-year ended – Kmart comparable sales decrease of 6.4% 31 December ($m) 2021 2020 Var % – Target comparable sales growth of 6.0% Revenue1 4,602 5,112 (10.0) – Almost 25 percent of store trading days lost EBITDA1,2 513 82
Slide 25: Kmart and Target progress on strategy
Kmart and Target progress on strategy • Kmart continued to invest in key strategic initiatives to: – Further develop data and digital assets, including the re-platforming of the Kmart website – Build resilience and flexibility in the supply chain, leveraging technology and data solutions – Improve t
Slide 26: Catch performance overview
Catch performance overview • Gross transaction value (GTV) growth of 1.0% Half-year ended 31 December ($m) 2021 2020 Var (%) – Elevated GTV growth during periods of lockdown Gross transaction value 616 610 1.0 – Offset by a decline as restrictions eased, particularly across the in-stock business Rev
Slide 27: Kmart Group outlook
Kmart Group outlook • Near-term trading environment is expected to remain uncertain and volatile • Global and local supply chain disruptions and cost pressures are expected to continue • Inventory levels continue to be actively managed, current stock concentrated in non-seasonal lines • Kmart remain
Slide 28: Officeworks
Officeworks Sarah Hunter Managing Director, Officeworks
Slide 29: Officeworks performance summary
Officeworks performance summary Half-year ended 31 December ($m) 2021 2020 Variance % Revenue 1,580 1,523 3.7 EBITDA 142 156 (9.0) Depreciation and amortisation (55) (51) (7.8) EBIT 87 105 (17.1) Interest on lease liabilities (5) (5) - EBT 82 100 (18.0) EBT margin (%) 5.2 6.6 ROC1 (R12, %) 19.6 23.4
Slide 30: Officeworks sales and earnings overview
Officeworks sales and earnings overview • Sales growth of 3.7% to $1,580m Sales growth momentum (two-year basis) % – Strong growth in technology and furniture products, 40 37.7 37.7 partially offset by a decline in office supplies and 35 print & create 30 28.1 24.3 – Continued disruption from tempor
Slide 31: Officeworks progress on strategy
Officeworks progress on strategy Our team – Continued focus on the safety, health and wellbeing of the team Customer experience – Launched partnership with Flybuys, allowing customers to collect points when shopping in-store and online – Commenced rollout of refreshed brand to create a more engaging
Slide 32: Officeworks outlook
Officeworks outlook • The near-term operating environment is expected to remain challenging with continued impacts of COVID-19 on customer demand and team member availability • Ongoing global supply shortages of some products, and shipping and transport disruptions • Expect higher operating costs to
Slide 33: Chemicals, Energy and Fertilisers
Chemicals, Energy and Fertilisers Ian Hansen Managing Director, Wesfarmers Chemicals, Energy and Fertilisers
Slide 34: Chemicals, Energy and Fertilisers performance summary
Chemicals, Energy and Fertilisers performance summary Half-year ended 31 December ($m) 2021 2020 Variance % Revenue1 Chemicals 642 489 31.3 Energy 252 206 22.3 Fertilisers 183 135 35.6 Total 1,077 830 29.8 EBITDA 262 202 29.7 Depreciation and amortisation (43) (42) (2.4) EBIT 219 160 36.9 Interest o
Slide 35: Chemicals, Energy and Fertilisers overview
Chemicals, Energy and Fertilisers overview • Revenue of $1,077m, up 29.8% and earnings of $218m, up 36.3% on the prior corresponding period, supported by higher global commodity prices, particularly for LPG, ammonia, and ammonia-related products • Market-Based Scope 1 and 2 emissions declined due to
Slide 36: Chemicals, Energy and Fertilisers outlook
Chemicals, Energy and Fertilisers outlook • Chemicals expected to benefit from a continued strong global ammonia price and the recommencement of production from the ammonia plant in December 2021 • Demand for AN from the mining sector expected to remain robust • Sodium Cyanide earnings expected to b
Slide 37: Industrial and Safety
Industrial and Safety Tim Bult Managing Director, Wesfarmers Industrial and Safety
Slide 38: Industrial and Safety performance summary
Industrial and Safety performance summary Half-year ended 31 December ($m) 2021 2020 Variance % Revenue 944 898 5.1 EBITDA 80 76 5.3 Depreciation and amortisation (37) (37) - EBIT 43 39 10.3 Interest on lease liabilities (2) (2) - EBT 41 37 10.8 EBT margin (%) 4.3 4.1 ROC1 (R12, %) 6.5 5.4 Safety (R
Slide 39: Industrial and Safety overview
Industrial and Safety overview • The Industrial and Safety businesses continued the reliable supply of critical products to customers during the year, despite global supply chain disruptions and labour availability constraints due to COVID-19 • Revenue growth of 5.1% to $944m – Blackwoods’ revenue i
Slide 40: Industrial and Safety outlook
Industrial and Safety outlook • Market conditions are expected to remain uncertain and challenging for the remainder of FY22 – The Industrial and Safety businesses will continue to be impacted by COVID-related disruptions to global supply chains and labour availability challenges • All businesses wi
Slide 41: Group outlook
Group outlook Rob Scott Managing Director, Wesfarmers Limited
Slide 42: Outlook
Outlook • Through COVID-19, Wesfarmers and its businesses have focused on supporting team members, building deeper customer relationships and community trust, while continuing to invest for long-term growth – This ongoing focus, combined with a strong balance sheet and portfolio of cash-generative b
Slide 43: Questions
Questions
Slide 44: Appendix: Supplementary information
Appendix: Supplementary information
Slide 45: Group management balance sheet
Group management balance sheet ($m)1 1H22 FY21 1H21 Commentary (versus 1H21) • Increase due to higher levels of stock in transit Inventories 5,605 4,502 4,516 and inventory held in DCs for Kmart Group and higher inventory levels for WesCEF Receivables and prepayments 1,267 1,434 1,024 Trade and othe
Slide 46: Movements in net financial debt
Movements in net financial debt 0.0 Net financial debt Net financial cash 2 • Net financial debt1 position of $2.6b as at 31 December 2021 • Compares to the net financial cash1 position of $0.1b as at 30 June 2021 • Largely driven by the $2.3b distribution of surplus capital by way of capital return
Slide 47: Management of lease portfolio
Management of lease portfolio • Lease liabilities totalled $7.2b and ($m) 1H22 FY21 1H21 represented 70% of Group fixed financial Bunnings 3,854 3,738 3,822 obligations as at 31 December 2021 Kmart Group 2,794 2,817 2,875 • The planned network changes within the Kmart and Target store network comple
Slide 48: Divisional return on capital
Divisional return on capital Rolling 12 months to 31 December 2021 2020 EBT Cap Emp1 ROC EBT Cap Emp1 ROC Var ($m) ($m) (%) ($m) ($m) (%) (ppt) Bunnings 2,170 2,745 79.0 2,162 2,823 76.6 2.4 Kmart Group 384 1,569 24.5 554 1,561 35.5 (11.0) Officeworks 194 988 19.6 215 918 23.4 (3.8) WesCEF2 442 2,25
Slide 49: Retail store networks
Retail store networks As at 31 December 2021 More than 1,000 locations across Australia and New Zealand Brand NSW/ACT VIC QLD SA WA TAS NT NZ Total Bunnings Warehouse 79 63 52 18 29 7 3 29 280 Smaller format 19 15 11 3 9 - - 12 69 Trade 7 3 7 2 3 1 - 7 30 Adelaide Tools / TKD - - - 5 4 - - - 9 Beaum
Slide 50: Revenue reconciliation – Kmart Group
Revenue reconciliation – Kmart Group Half-year ended 31 December ($m) 2021 2020 Segment revenue (Gregorian) 4,917 5,441 Less: Non sales revenue (48) (35) Headline sales (Gregorian) 4,869 5,406 Add: Gregorian adjustment1 87 100 Headline sales revenue (Retail)2 4,956 5,506 1. Adjustment to headline sa
Slide 51: Retail calendars
Retail calendars Business Retail sales period Bunnings, Officeworks and Catch 1H22 1 Jul 2021 to 31 Dec 2021 (6 months) 1H21 1 Jul 2020 to 31 Dec 2020 (6 months) 1H20 1 Jul 2019 to 31 Dec 2019 (6 months) Kmart 1H22 28 Jun 2021 to 2 Jan 2022 (27 weeks) 1H21 29 Jun 2020 to 3 Jan 2021 (27 weeks) 1H20 1