Wesfarmers Limited · ASX:WES
Wesfarmers — Citi Investor Conference London 2011
83 slides from Wesfarmers's conference presentation, March 2011
Slide 1: Investment Conference Discussion Pack
IInvestment t t Conference C f Discussion Pack Citi Investor I t C Conference f London March 2011
Slide 2: Disclaimer
2 Disclaimer This presentation has been prepared by Wesfarmers Limited. The information contained in this presentation is for information purposes only and does not constitute an offer to issue or arrange to issue, securities or other financial products, nor is it intended to constitute legal, tax o
Slide 3: Index
3 Index 1 Philosophy, Performance & Direction 4 2 Group Overview 11 3 2011 Half-Year Results 15 4 Capital Management 20 5 Outlook 27 6 Operating Divisions 31 7 Sustainability 76 8 Investor Relations Contacts & Information 82
Slide 4: Philosophy, Performance & Direction
Philosophy, p y Performance & Direction
Slide 5: Wesfarmers at a glance
5 Wesfarmers at a glance • Commercially focused culture with primary objective of achieving satisfactory returns for shareholders • Focus F on four f core values: l integrity; i t it openness; accountability; t bilit & boldness b ld • Strength of diversified operations with strong portfolio of growt
Slide 6: The Wesfarmers Way
6 The Wesfarmers Way OBJECTIVE Satisfactory return to shareholders VALUE CREATING STRATEGIES Strengthen existing Secure growth Ensure sustainability Renew the portfolio businesses through opportunities through through responsible through value-adding operating excellence and entrepreneurial long-ter
Slide 7: Recent evolution of Wesfarmers
7 Recent evolution of Wesfarmers Acquisition Events | Divestment Events | Growth Events FY07 August 2007: Australian Vinyls A$142m Completion of Curragh North conveyor & coal FY08 handling Completion Wesfarmers TSR index A$360m of AN2 plant A$310m All O Ords d AAccumulation l ti IIndex d September 2
Slide 8: Portfolio of leading brands
8 Portfolio of leading brands Retail Businesses Industrial Businesses Insurance
Slide 9: Strength of unique network coverage
9 Strength of unique network coverage Big Box Retail Discount Dept. Stores 8 10 147 96 Consumer 2 24 4 Staples Retail 80 106 73 559 21 Industrial 58 37 46 250 22 Insurance* 22 131 15 218 83 *Wesfarmers Insurance operates out of four locations in the United Kingdom & 131 721 33 one location in New Ca
Slide 10: Management team
10 Management team Managing Director Richard Goyder Finance Director Terry Bowen Food & Liquor Retailing Coles Ian McLeod Big Box Retailing Home Improvement John Gillam & Office Supplies Discount Department Target Launa Inman Store Retailing Kmart Guy Russo Insurance Insurance Rob Scott Industrials
Slide 11: Group Overview
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Slide 12: Financial summary
12 Financial summary Half-Year ended 31 December 2010 2009 % Change Operating Results Revenue A$m 28 074 28,074 26 533 26,533 58 5.8 EBITDA A$m 2,378 1,996 19.1 Earnings before interest and tax A$m 1,917 1,547 23.9 Net profit after tax (pre significant items) A$m 1,173 918 27.8 N t profit Net fit af
Slide 13: Divisional summary
13 Divisional summary 1H FY11 1H FY11 1H FY11 Activities Revenue EBIT EBIT (A$ ) (A$m) (A$ ) (A$m) C t ib ti 1 Contribution The division comprises one of Australia's largest Coles supermarket businesses, liquor retailing outlets, 16,059 575 29% fuel & convenience outlets. Home Australia & New Zealan
Slide 14: Divisional summary (cont.)
14 Divisional summary (cont.) 1H FY11 1H FY11 1H FY11 Activities Revenue EBIT EBIT (A$m) (A$m) Contribution1 Provider of underwriting, broking, premium funding Insurance & financial services activities in Australia, New 872 65 3% Zealand & the UK. Mining of metallurgical & steaming coal to domestic
Slide 15: 2011 Half-Year Results
2011 Half Half‐Year Year Results
Slide 16: 2011 Half-year results: Group performance
2011 Half-year results 16 Group performance Half Year ended 31 December (A$m) 2010 2009 % Group Financial Highlights Operating revenue 28,074 26,533 5.8 • First half profit after tax of A$1,173 million, up EBITDA 2,378 1,996 19.1 33.4% EBIT 1,917 1,547 23.9 Finance costs (272) (319) 14.7 • Operating
Slide 17: 2011 Half-year results: Divisional performance
2011 Half-year results 17 Divisional performance Divisional Performance Overview Half Year ended 2010 2009 % 31 December (A$m) • Coles’ performance was pleasing with revenue up 5.9% & EBIT up 18.3%; good progress continues to be made on the Coles 575 486 18.3 turnaround Home Improvement 457 422 8.3
Slide 18: 2011 Half-year results: Return on capital performance
2011 Half-year results 18 Return on capital performance • ROC underpins long standing culture of financial discipline • Divisional s o a focus ocus o on g growth o in ROC OC through oug ea earnings gs g growth o & improvements po e e s in capital efficiency 2010 2009 Rolling 12 months to 31 December
Slide 19: 2011 Half-year results: Other businesses performance
2011 Half-year results 19 Other businesses performance Half-Year ended 31 December Holding 2010 2009 % (A$m) % Associates share of profit/(loss): Gresham Private Equity Funds Various (28) 29 n.m. Gresham Partners 50 ((1)) 2 n.m. Wespine 50 5 4 25.0 Bunnings Warehouse Property Trust 23 12 10 20.0 Ass
Slide 20: Capital Management
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Slide 21: Balance sheet & dividend
21 Balance sheet & dividend • Strong balance sheet provides financial flexibility • Operating cash flows continue to provide balance sheet support – Working capital focus remains – Seasonally stronger working capital cash flows in the first half • Credit ratings maintained – Standard & Poor’s BBB+ (
Slide 22: Working capital management
22 Working capital management • Slow down in working capital improvement as foreshadowed – 1H FY10 cash flows reflect supplier reset work, Kmart off-site closures, strong seasonall stock t k sellll th through h & significant i ifi t ffertiliser tili price i d declines li att CSBP • Overall net worki
Slide 23: Portfolio of strong cash generating assets
23 Portfolio of strong cash generating assets • Cash realisation ratio remained strong at 120.0% • Seasonally stronger first half cash flows A$m % 2,500 200 2,000 160 1,500 120 1,000 80 500 40 0 0 1H FY07 1H FY08 1H FY09 1H FY10 1H FY11 NPATDA* Operating Cash Flow Cash Realisation Ratio (RHS) * 1H F
Slide 24: Investment expenditure (cash basis)
24 Investment expenditure (cash basis) • Continued investment to drive future growth, including A$345 million on land & buildings • FY11 capital expenditure estimate A$2.2 to A$2.4 billion, subject to changes in freehold property activity Capital Expenditure ( (1H FY11, A$m) $ ) Capital Expenditure
Slide 25: Debt financing
25 Debt financing • Further strengthening of the Group’s liquidity position – Cash interest cover (R12) improved to 7.7 times – Fixed charges cover (R12) improved to 2.6 times – Net debt to equity reduced to 14.8% • Gross debt of A$5.0 A$5 0 billion, billion net debt of A$3 A$3.7 7 billion – Establi
Slide 26: Extension of debt tenor
26 Extension of debt tenor • Further lengthening of Group’s debt maturity profile – Established A$2.5 billion revolving syndicated facility with equal maturities in December 2013 & December 2014 – Proceeds used to repay A$2.5 billion of syndicated debt facility maturing in December 2011 (A$1.8 billi
Slide 27: Outlook
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Slide 28: Flood & storm events
Flood & storm events 28 (Post 31 December 2010) • Second half earnings will be negatively affected by severe flood & storm events, including g cyclone y Yasi, experienced in Q3 FY11 • The financial impact, estimated to date, on the Group’s retail businesses includes: – Writedown of damaged plant pla
Slide 29: Outlook
29 Outlook • Strong first half result provides a solid foundation for the remainder of the financial year Retail • The Group Group’ss retail businesses are well placed but performance is subject to any adverse impact to consumer confidence & a competitive retail environment • Coles will continue to
Slide 30: Outlook (cont.)
30 Outlook (cont.) Insurance • Underwriting performance before one-off events is expected to continue to benefit from improved risk selection & portfolio remediation Industrials • Strong demand & increased price prospects for coal; tempered by difficult mining conditions, industry cost pressures & c
Slide 31: Operating Divisions
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Slide 32: Coles
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Slide 33: Coles: 2011 Half-year performance
Coles Coles 33 2011 Half-year performance Highlights Financial Performance • Food & Liquor comp. sales growth of 6.4%3 ; total sales Half-Year ended 31 December (A$m) 2010 2009 % growth 6.3%3 Coles Division Revenue 16,059 15,161 5.9 • Strong EBIT growth of 18 18.3% 3% EBIT 575 486 18 3 18.3 • Seven
Slide 34: Coles: Strategy on track
Coles Coles 34 Strategy on track Building a Solid Delivering Driving the Coles Foundation Consistently Well Difference ormance Perfo • Create a strong top team • Embed the new culture • Culture of continuous • Cultural change • Team member development improvement • Availability & store standards • I
Slide 35: Coles: Historic performance
Coles Coles 35 Historic performance Food & Liquor Comparative Store Sales Growth EBIT ROC % A$m % 8.0 1,000 10 800 8 6.0 600 6 4.0 400 4 200 2 2.0 0 0 2006 2007 2008* 2009 2010 00 0.0 First Half EBIT Second Half EBIT Return on Capital (R12) Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q210
Slide 36: Coles: Network as at December 2010
Coles Coles 36 Network as at 31 December 2010 Selling Area 6 7 11 Supermarkets (sqm) 1 599 157 1,599,157 Liquor (sqm) – ex hotels 185,236 148 221 78 81 96 6 112 67 52 30 6 43 247 259 5 210 166 193 174 742 Supermarkets 15 15 787 Li Liquor stores t 95 Hotels 624 Convenience
Slide 37: Home Improvement & Office Supplies
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Slide 38: Home Improvement: 2011 Half-year performance
Home Improvement & Home Improvement Office Supplies 38 2011 Half-year performance Highlights Financial Performance – Home Improvement Home Improvement Half-Year ended 31 December (A$m) 2010 2009 % • Trading revenue growth of 4.4% Revenue 3,572 3,402 5.0 – 4.1% 4 1% total stores sales growth with sto
Slide 39: Home Improvement: Strategy & historic performance
Home Improvement Home Improvement & Office Supplies 39 Strategy & historic performance EBIT A$m ROC % Growth Strategies 800 40 Home Improvement Strategies Details 35 Profitable sales growth Strengthening customer service Improving the offer 600 30 Investing in & expanding the network Better stock fl
Slide 40: Home Improvement: Network as at 31 December 2010
Home Improvement Home Improvement & Office Supplies 40 Network as at 31 December 2010 191 Warehouse stores 57 Smaller format stores 2 32 Trade Centres 31 5 9 24 6 3 9 3 2 57 17 6 14 24 1 47 1 9 5 2 1 2
Slide 41: Office Supplies: 2011 Half-year performance
Home Improvement & Office Supplies Office Supplies 41 2011 Half-year performance Highlights Financial Performance – Office Supplies • Retail store sales growth of 7.5% Half-Year ended 31 December (A$m) 2010 2009 % – Underpinned by strong growth in transactions Revenue 706 662 6.6 • 18.5% earnings gr
Slide 42: Office Supplies: Strategy & historic performance
Office Supplies Home Improvement & Office Supplies 42 Strategy & historic performance EBIT ROC Growth Strategies A$m % Office Supplies Strategies Details 80 8 Improve the customer offer Enhance & expand the product range H l customers to b Help be more environmentally i ll conscious i Rollout more n
Slide 43: Officeworks & Harris Technology network
Officeworks & Harris Technology Home Improvement & Office Supplies 43 Network as at 31 December 2010 Retail Stores 133 Officeworks 5 Harris Technology 26 1 1 Business 11 1 1 4 Fulfilment Centres 8 3S Service i C Centres t 45 2 1 1 Print Hub 2 1 41 1 1 1 2
Slide 44: Target
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Slide 45: Target: 2011 Half-year performance
Target Target 45 2011 Half-year performance Highlights Financial Performance • Sales results affected by a difficult retail environment Half-Year ended 31 December (A$m) 2010 2009 % – Significant price deflation due to strong AUD & competition – Summer apparel sales affected by wet & cool weather ac
Slide 46: Target: Strategy & historic performance
Target Target 46 Strategy & historic performance EBIT ROC Growth Strategies A$m % Target Strategies Details 500 20 Profitable sales ggrowth Continued investment in the store pportfolio with new stores & refurbishments 400 16 Continue to grow clothing & homewares in good, better, best product ranges
Slide 47: Target: Network as at December 2010
Target Target 47 Network as at 31 December 2010 3 59 31 26 97 69 290 Target stores (i l 119 T (incl. Targett C Country) t ) 5
Slide 48: Kmart
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Slide 49: Kmart: 2011 Half-year performance
Kmart Kmart 49 2011 Half-year performance Highlights Financial Performance • Improved underlying profitability Half-Year ended 31 December (A$m) 2010 2009 % – 13.0% increase in profit to A$174 million, driven by gross margin improvement & cost control Revenue 2,271 2,226 2.0 • Customers continue to
Slide 50: Kmart: Strategy & historic performance
Kmart Kmart 50 Strategy & historic performance EBIT ROC Growth Strategies A$m % Kmart Strategies Details 250 35 Customer - outstanding experience All about the Kmart customers; Fast & friendly service; 30 Clean & tidy stores; Lowest price; More convenient 200 shopping hours; Community engagement 25
Slide 51: Kmart: Network as at December 2010
Kmart Kmart 51 Network as at 31 December 2010 186 Kmart stores 250 KTAS centres 2 3 36 52 21 28 13 19 51 70 12 43 73 5 5 3
Slide 52: Insurance
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Slide 53: Insurance: 2011 Half-year performance
Insurance Insurance 53 2011 Half-year performance Highlights Financial Performance • Increased earnings across underwriting & broking Half-Year ended 31 December (A$m) 2010 2009 % • Revenue in line with 1H FY10 notwithstanding Gross Written Premium Underwritten 659 680 ((3.1)) underwriting portfolio
Slide 54: Insurance: Business overview
Insurance Insurance 54 Business overview Australia New Zealand United Kingdom Broking Underwriting Group Services
Slide 55: Insurance: Strategy & historic performance
Insurance Insurance 55 Strategy & historic performance EBITA ROC Growth Strategies A$m % Insurance Strategies Details 160 20 Performance improvement Strong focus on underwriting & claims disciplines & business process enhancement Focus on customer needs Work with new & existing business partners to
Slide 56: Insurance: Geographical presence as at December 2010
Insurance Insurance 56 Geographical presence as at 31 December 2010 3 1 UK 4 3 14 4 19 1 2 1 1 5 13 6 22 11 7 19 1 6 Lumley Insurance (Australia) 13 Lumley General New Zealand 11 6 WFI 90 3 4 1 OAMPS 1 29 2 Crombie Lockwood 17 1 OAMPS New Caledonia location not shown
Slide 57: Resources
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Slide 58: Resources: 2011 Half-year performance
Resources Resources 58 2011 Half-year performance Highlights Financial Performance • Performance Half-Year ended 31 December (A$m) 2010 2009 % – Strong 1H FY11 financial result given difficult weather conditions – Curragh g mine cash costs ((A$/t)) increased 19.9% 1H FY11 vs. 1H Revenue1 957 624 53
Slide 59: Resources: Strategy & historic performance
Resources Resources 59 Strategy & historic performance EBIT A$m ROC % Growth Strategies 1,000 100 Resources Strategies Details Maximise export sales & optimise Curragh expansion tonnage contracts in place sales mix Price relativity improved 800 80 Maximise higher value products Winner of Australian
Slide 60: Resources: Sales
Resources Resources 60 Sales Coal Sales Volumes by Mine (1H11) Australian Hard Coking Coal Prices Mine Australian hard coking coal prices Steaming Metallurgical Total US$/Tonne (Nominal) FOB Australia ( Quaterly price to March 2011 verse spot) (mtpa) 400 Curragh, QLD^ 1.4 3.2 4.5 300 Premier, WA 1.5
Slide 61: Resources: Hedging profile as at December
Resources Resources 61 Hedging profile as at 31 December 2010 Curragh Bengalla Full Year Current US$ Average Full Year Current US$ Average end sold forward A$ / US$ end sold forward A$ / US$ 30 June (US$m) hedge rate 30 June (US$m) hedge rate 20111 380 0.86 20111 59 0.83 2012 630 0.84 2012 85 0.81 2
Slide 62: Curragh mine expansion
Resources Resources 62 Curragh mine expansion • Wesfarmers approved in November 2009 the investment of A$286 million to expand Curragh metallurgical coal exports to 8.0 – 8.5mtpa • Curragh has rail & export capacity contracted at 8 8.5mtpa 5mtpa • Curragh has forward-sold the additional production t
Slide 63: Curragh expansion study to 10mtpa
Resources Resources 63 Curragh expansion study to 10mtpa • Feasibility study (FS) commenced – Mining & Coal Handling Preparation Plant studies • Potential to expand Curragh to 10mtpa metallurgical exports from FY14 – Wiggins Island commissioning – Additional rail capacity required – Potential for ad
Slide 64: Bengalla expansion study
Resources Resources 64 Bengalla expansion study • Expansion to 10.7mtpa ROM tonnes through two stages – Stage One 9.3mtpa ROM – Stage Two 10.7mtpa ROM • Stage One approved – November 2010 (A$56m)1 • Stage Two feasibility study nearing completion • Additional port capacity secured • Phase one complet
Slide 65: Wiggins Island Coal Export Terminal
Resources Resources 65 Wiggins Island Coal Export Terminal • Stage One development of 27mtpa port capacity (Curragh share h 1 1.5mtpa) 5 t ) • Decision on investment & p y commitment in 1H take-or-pay CY11 • First shipment 2014 • Potential cumulative capacity from subsequent stages – up to 80mtpa
Slide 66: Resources: Locations
Resources Resources 66 Locations Coal Premier Coal C Curragh h Bengalla (40%)
Slide 67: Chemicals, Energy & Fertilisers
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Slide 68: Chemicals, Energy & Fertilisers: 2011 Half-year performance
Chemicals, Energy Chemicals, Energy & Fertilisers & Fertilisers 68 2011 Half-year performance Highlights Financial Performance • Increased earnings from ammonia & ammonium nitrate Half-Year ended 31 December (A$m) 2010 20092 % – Strong demand & plant performances Revenue Chemicals 315 292 7.9 • Incr
Slide 69: Chemicals, Energy & Fertilisers: Strategy & historic performance
Chemicals, Energy Chemicals, Energy & Fertilisers & Fertilisers 69 Strategy & historic performance EBIT A$m A$ ROC % Growth Strategies 160 24 WESCEF Strategies Details 20 120 Improve offers Ongoing development of product & 16 sevice differentiation Improve competitiveness Optimisation of cost base &
Slide 70: Chemicals, Energy & Fertilisers: Locations as at 31 December 2010
Chemicals, Energy Chemicals, Energy & Fertilisers & Fertilisers 70 Locations as at 31 December 2010 16 CSBP fertilisers 6 CSBP chemicals 1 2 Australian Vinyls 2 1 4 4 QNP (50%) 8 ALWA 16 20 3 AGR (75%) 7 3 5 1 21 enGen 16 6 11 46 Kleenheat 9 2 2
Slide 71: Industrial and Safety
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Slide 72: Industrial & Safety: 2011 Half-year performance
Industrial & Safety Industrial & Safety 72 2011 Half-year performance Highlights Financial Performance • Strong results supported by market conditions & Half-Year ended 31 December (A$m) 2010 20091 % competitive position – 12.3% sales growth (first half last year affected by GFC2) Revenue 774 689 12
Slide 73: Industrial & Safety: Strategy & historic performance
Industrial & Safety Industrial & Safety 73 Strategy & historic performance EBIT A$m ROC % Growth Strategies 140 21 Industrial & Safety Strategies Details 120 18 Increase share of customers' products Strong delivery performance & customer service & services spend Broadening product range 100 15 Stren
Slide 74: Industrial & Safety: Distribution network as at 31 December 2010
Industrial & Safety Industrial & Safety 74 Distribution network as at 31 December 2010 236 industrial & safety locations & 129 gas distribution points Australia(1) No. 72 “All your workplace needs” industrial (2) 2 3 16 12 1 8 9 44 Safety 18 9 1 1 6 4 24 Materials handling, g, lifting g & rigging gg
Slide 75: Other businesses
75 Other businesses Gresham: 50% interest in Gresham Partners, an independent Half-Year ended 31 December (A$m): 2010 2009 i investment t t bank b k focused f d on financial fi i l advisory d i services, i private equity investment and property investment funds. Share of associates profit/(loss): We
Slide 76: Sustainability
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Slide 77: Sustainability: Priorities
Sustainability 77 Priorities In the context of its commitment to sustainable outcomes, Wesfarmers has nominated five keyy Wesfarmers is again a areas of focus that will contribute towards delivering member of the Dow satisfactory returns for its shareholders in 2010 & beyond: Jones Sustainability Wo
Slide 78: The importance of people
Sustainability 78 The importance of people • Australia’s largest private sector employer, employing some 200,000 employees, largely in Australia & New Zealand • Wesfarmers recognises the significant social & commercial value of diversity at all levels of its workforce • Reduction in LTIFR & TRIFR du
Slide 79: Carbon emissions reduction & energy management
Sustainability 79 Carbon emissions reduction & energy management • Wesfarmers is pursuing energy efficiency in our facility design, construction, maintenance & redevelopment practices • We continued to invest in new technologies & systems during the period – Installation in some 600 Coles supermarke
Slide 80: Community investment
Sustainability 80 Community investment • Wesfarmers recognises & invests in areas of the community which it believes contribute to building long-term cohesion, leadership & innovation • During g the p period all businesses made a strong g contribution to supporting pp g the recent Australian flood r
Slide 81: A reduced overall environmental footprint
Sustainability 81 A reduced overall environmental footprint • Wesfarmers’ business operations have both direct & indirect environmental impacts, including water usage, packaging, emissions to air solid & liquid waste air, waste, & land rehabilitation • Key initiatives commissioned during the period
Slide 82: Investor Relations Contact
82 Investor Relations Contact Alex Willcocks General Manager, Investor Relations & Planning Wesfarmers Limited 40 The Esplanade, Perth WA 6000 T: + 61 8 9327 4323 E: awillcocks@wesfarmers.com.au W: www.wesfarmers.com.au For further information on Wesfarmers including: A Annual l reports; t financial
Slide 83: For all the latest news visit www.wesfarmers.com.au
For all the latest news visit www.wesfarmers.com.au