Slide 1: 2014 Full-Year Results Briefing
2014 Full-Year Results Briefing 20 August 2014 2014 Full--Year Results | 1
Slide 2: Presentation outline
Presentation outline Item Presenter Page Group Performance Highlights Richard Goyder 3 Coles John Durkan 12 Home Improvement & Office Supplies John Gillam 22 Kmart Guy Russo 32 Target Stuart Machin 36 Chemicals, Energy & Fertilisers Tom O’Leary 41 Resources Stewart Butel 45 Industrial & Safety Olivi
Slide 3: Group Performance Highlights
Group Performance Highlights Richard Goyder Managing Director, Wesfarmers Limited 2014 Full-Year Results | 3
Slide 4: Financial highlights
Financial highlights Year ended 30 June 2014 Reported Excluding NTIs Operating revenue $62.3bn ▲ 4.2% $62.3bn ▲ 4.2% EBIT $4,150m ▲ 13.4% $3,786m ▲ 3.5% NPAT $2,689m ▲ 18.9% $2,398m ▲ 6.1% Earnings per share $2.35 ▲ 19.8% $2.09 ▲ 6.8% Return on equity (R12) 10.5% ▲160 bps 9.4% ▲ 50 bps • Solid incre
Slide 5: Group performance summary
Group performance summary Year ended 30 June ($m) 2014 2013 % Revenue 62,348 59,832 4.2 EBITDA 5,273 4,729 11.5 EBIT 4,150 3,658 13.4 EBIT (excluding NTIs)1 3,786 3,658 3.5 EBIT from continuing operations (excluding NTIs)1 3,566 3,453 3.3 Finance costs (363) (432) 16.0 Tax expense (1,098) (965) (13.
Slide 6: Focus on shareholder returns
Focus on shareholder returns • Earnings growth, balance sheet strength, Distributions to shareholders $/share robust credit metrics & good cash flow 3.00 generation have supported increased 3.00 distributions to shareholders • Dividends declared 2.50 1.00 2.30 – Final ordinary dividend (fully-franke
Slide 7: Strength through diversified earnings
Strength through diversified earnings Divisional EBIT Percentage of Year ended 30 June $m ($m) 2014 2013 % Divisional EBIT: 4,000 Insurance1 Insurance 6% Coles 1,672 1,533 9.1 (FY13: 5%) WIS Home Improvement 979 904 8.3 3,500 Resources Industrial 12% (FY13: 15%) Office Supplies 103 93 10.8 WesCEF Ta
Slide 8: Return on capital
Return on capital • Focus on return on capital to deliver satisfactory shareholder returns 2014 2013 EBIT Cap Emp ROC ROC Rolling 12 months to 30 June ($m) ($m) (%) (%) Coles 1,672 16,272 10.3 9.5 Home Improvement 979 3,343 29.3 25.9 Office Supplies 103 1,097 9.4 8.1 Kmart 366 1,361 26.9 25.9 Target
Slide 9: Divisional performance highlights
Divisional performance highlights Coles Bunnings • Earnings growth driven by • Earnings increased strongly with improvements in customer value, improved sales momentum & growth in all increased fresh sales, a better store regions & customer segments experience & lower costs of doing • Effective prop
Slide 10: Divisional performance highlights (cont'd)
Divisional performance highlights (cont’d) Kmart WesCEF • Earnings growth driven by further • AN3 capacity expansion construction improvements in merchandising & store completed within time & to budget productivity • Chemicals earnings affected by planned & • Further growth in customer transactions
Slide 11: Divisional performance highlights (cont'd)
Divisional performance highlights (cont’d) Resources Insurance • Lower export coal prices affected revenue • Good result given divestment transaction • Strong focus on cost control activities for majority of year • Improved production & sales volume • Growth in Coles personal lines, improved perform
Slide 12: Coles
Coles John Durkan Managing Director 2014 Full-Year Results | 12
Slide 13: Coles performance summary
Coles performance summary Year ended 30 June ($m) 2014 2013 % Coles Division Revenue 37,391 35,780 4.5 EBIT1 1,672 1,533 9.1 ROC (R12 %) 10.3 9.5 Safety (R12 LTIFR) 8.0 9.5 Food & Liquor Revenue2 29,220 27,933 4.6 Headline sales growth (%)3,4 4.7 5.5 Comparative sales growth (%)3,4 3.7 4.3 Trading E
Slide 14: Investing for future growth
Investing for future growth Coles vs. global best practice Today’s retail environment Coles • Costs of living continue to Performance World (FY09) class grow for Australian households Sales density ($/sqm) • Increasingly competitive market conditions Freshness (days cover) • Customers remain cautiou
Slide 15: Food & Liquor highlights: Focus on value, freshness & innovation
Food & Liquor highlights Focus on value, freshness & innovation Lowering prices for 5 years • Continued value leadership % 8 − ‘Celebrate Specials’, ‘Deeper Down Down’ 6 4 − Targeted value offers with ‘spend get cash’, ‘spend 2 get points’ & ‘choose your offer’ 0 (2) − Greater investment in trusted
Slide 16: Food & Liquor highlights: Simplify supply chain & operations
Food & Liquor highlights Simplify supply chain & operations Continuing towards simpler store operations • Simplified in-store operations Indexed 125 − 430+ stores with ‘Easy Ordering’ for meat & bakery − Roll-out fresh produce ‘Assisted Ordering’ 105 − Reduced queue time with more than 5,000 assiste
Slide 17: Food & Liquor highlights: Bold extension into new channels & services
Food & Liquor highlights Bold extension into new channels & services Coles Mobile Wallet • Expansion of financial services – Agreement to form a financial services joint venture with GE Capital Australia (August 2014) – Multiple new products launched e.g. ‘no fee’ credit card, life insurance, Coles
Slide 18: Food & Liquor highlights: Delivery of a better supermarket store network
Food & Liquor highlights Delivery of a better supermarket store network Sales density continuing to grow • Continued sales density growth Indexed 135 27% − Rebalancing ‘macro space’ layouts to optimise sales 125 • Stronger pipeline supporting increased space growth 115 − Net space growth of 2.2% in
Slide 19: Food & Liquor highlights: Liquor transformation
Food & Liquor highlights Liquor transformation • Continued liquor underperformance # stores Reshaping the liquor network • Beginning the liquor transformation 60 40 10 10 8 8 – Detailed review to guide development of action 12 11 8 20 36 33 35 33 20 27 17 plans 0 (19) (24) (21) (25) (18) (28) – Comm
Slide 20: Convenience highlights: Growth in Coles Express
Convenience highlights Growth in Coles Express • Lower fuel volumes following reduced fuel docket discounts & higher fuel prices • Improved shop sales with better customer offer ‒ New ‘Expresso to Go’ & frozen carbonated beverages performed strongly • Continued focus on convenience offer growth Expa
Slide 21: Coles outlook
Coles outlook • Stronger focus on customers • Continue to invest in value & fresh to drive sales • Focus on simplifying & reducing costs • Maintain disciplined & returns-focused capital management • Invest in new channels & services to drive long-term growth • Progress liquor transformation 2014 Ful
Slide 22: Home Improvement & Office Supplies
Home Improvement & Office Supplies John Gillam Managing Director 2014 Half-Year Results | 22
Slide 23: HIOS performance summary
HIOS performance summary Year ended 30 June ($m) 2014 2013 % Revenue Home Improvement 8,546 7,661 11.6 Office Supplies 1,575 1,506 4.6 Total 10,121 9,167 10.4 EBIT Home Improvement 979 904 8.3 Office Supplies 103 93 10.8 Total 1,082 997 8.5 2014 Full-Year Results | 23
Slide 24: Home Improvement performance summary
Home Improvement performance summary Year ended 30 June ($m) 2014 2013 % Revenue 8,546 7,661 11.6 EBIT 979 904 8.3 EBIT margin (%) 11.5 11.8 ROC (R12 %) 29.3 25.9 Safety (R12 AIFR) 28.8 31.7 2014 Full-Year Results | 24
Slide 25: Home Improvement highlights
Home Improvement highlights • Good sales growth – Total store sales growth of 11.7% – Good momentum in consumer & commercial – Store-on-store growth of 8.4% • Strong uplifts across core business activities – Improving customer outcomes » More value, wider range & better experiences – Deeper brand re
Slide 26: Home Improvement highlights
Home Improvement highlights • Pleasing uplift in earnings – Gains from growth agenda & productivity work – Absorbing impacts » Accelerated network development » Creating more customer value • ROC trending as planned – Growth investment delivering return uplift – Strong & innovative capital managemen
Slide 27: Home Improvement outlook
Home Improvement outlook • Strategic agenda focused on driving growth & strengthening core business • Multiple growth drivers – More customer value – Better customer experiences – Greater brand reach – Expanding commercial – More merchandise innovation • Investing for a stronger business – Team, sto
Slide 28: Office Supplies performance summary
Office Supplies performance summary Year ended 30 June ($m) 2014 2013 % Revenue 1,575 1,506 4.6 EBITDA 124 117 6.0 Depreciation & amortisation (21) (24) 12.5 EBIT 103 93 10.8 EBIT margin (%) 6.5 6.2 ROC (R12 %) 9.4 8.1 Safety (R12 AIFR) 21.9 33.9 2014 Full-Year Results | 28
Slide 29: Office Supplies highlights
Office Supplies highlights • Pleasing revenue growth of 4.6% – Six years of continued store transaction growth » 30 million store transactions achieved in FY14 – Good outcomes from new ranges & layouts – Continued growth in online volumes » Annualised online sales c.$190m • Strong earnings growth of
Slide 30: Office Supplies highlights
Office Supplies highlights • ‘Every Channel’ strategy continued to gain traction – Enhanced online platform launched – Six new stores opened – Strong gains in B2B market • Strong growth in ROC of 15.8% driven by – Earnings growth – Business model productivity – Disciplined capital management 2014 Fu
Slide 31: Office Supplies outlook
Office Supplies outlook • Continued volume growth Every Channel Strategy – Unpredictable market conditions Store team Apps » Highly competitive members Stores » Ongoing cost & margin pressure Traditional Digital media media • Deliver on strategic agenda – Growth & productivity Social media Phone Int
Slide 32: Kmart
Kmart Guy Russo Managing Director 2014 Full-Year Results | 32
Slide 33: Kmart performance summary
Kmart performance summary Year ended 30 June ($m) 2014 2013 % Revenue 4,209 4,167 1.0 EBIT 366 344 6.4 EBIT margin (%) 8.7 8.3 ROC (R12 %) 26.9 25.9 Safety (R12 LTIFR) 7.0 9.2 Total sales growth1 (%) 0.9 2.7 Comparable store sales growth1 (%) 0.5 2.1 1 2014 growth reflects the 52 week period 1 July
Slide 34: Kmart highlights
Kmart highlights • Kmart’s strategy continues to resonate with customers – 18 consecutive quarters of growth in transactions & units sold – Price leadership driving volume • Growth in revenue, EBIT & return on capital – Enhanced range architecture – Improved productivity through end-to-end process e
Slide 35: Kmart outlook
Kmart outlook • Continued focus on growth – Volume retailer – Operational excellence – Adaptable stores – High performance culture • Accelerate store refurbishment program • Expansion of growth categories • End-to-end efficiency across the business • Continue to prioritise safety of team members, cu
Slide 36: Target
Target Stuart Machin Managing Director 2014 Half-Year Results | 36
Slide 37: Target performance summary
Target performance summary Year ended 30 June ($m) 2014 2013 % Revenue 3,501 3,658 (4.3) EBIT1 86 136 (36.8) EBIT margin (%) 2.5 3.7 ROC (R12 %) 2.9 4.6 Safety (R12 LTIFR) 5.7 8.4 Total sales growth2 (%) (4.2) (1.7) Comparative store sales growth2 (%) (5.3) (3.3) 1 2014 excludes a $677 million impai
Slide 38: Target highlights
Target highlights • A challenging year with earnings affected by progressive introduction of a ‘first price, right price’ strategy resulting in price deflation ahead of sourcing benefits • Implementation of many changes to fix the basics; adverse earnings impact offset by a number of benefits which
Slide 39: Target transformation plan
Target transformation plan Fixing the basics (FY14-15) • Improve availability • Some improvement in availability, but lots more to do • Enhance online functionality • $10m invested to deliver a stable & scalable online platform • Improve service & refresh stores • Format upgraded in nine stores to i
Slide 40: Target outlook
Target outlook • Continued significant changes in the 2015 financial year – Focus to remain on fixing the basics • Winter clearance activity in 1H FY15 earnings • Improved ranges for spring/summer 2015 supported by better sourcing & continued SKU rationalisation • Further improvements in customer ex
Slide 41: Chemicals, Energy & Fertilisers
Chemicals, Energy & Fertilisers Tom O’Leary Managing Director 2014 Half-Year Results | 41
Slide 42: Performance summary
Chemicals, Energy & Fertilisers Performance summary Year ended 30 June ($m) 2014 2013 % Revenue Chemicals 730 731 (0.1) Energy1 592 577 2.6 Fertilisers 490 497 (1.4) Total 1,812 1,805 0.4 EBITDA2 314 348 (9.8) Depreciation & amortisation (93) (99) 6.1 EBIT2 221 249 (11.2) Sales volume (‘000t): Chemi
Slide 43: Chemicals, Energy & Fertilisers highlights
Chemicals, Energy & Fertilisers highlights • $95 million gain on sale of 40% interest in ALWA & agreement to sell Kleenheat Gas east coast LPG distribution business (subject to ACCC clearance) • Expansion of ammonium nitrate production capacity from 520ktpa to 780ktpa completed within budgeted time
Slide 44: Chemicals, Energy & Fertilisers outlook
Chemicals, Energy & Fertilisers outlook • Full-year earnings contribution from expanded ammonium nitrate production capacity • Ammonia earnings expected to be negatively impacted by higher gas input costs (~$30 million in FY15) & planned shutdown in first half • Loss of carbon abatement income expec
Slide 45: Resources
Resources Stewart Butel Managing Director 2014 Full-Year Results | 45
Slide 46: Resources performance summary
Resources performance summary Year ended 30 June ($m) 2014 2013 % Revenue 1,544 1,539 0.3 Royalties1 (221) (262) 15.6 Mining & other costs (1,033) (978) (5.6) EBITDA 290 299 (3.0) Depreciation & amortisation (160) (151) (6.0) EBIT 130 148 (12.2) ROC (R12%) 8.9 10.0 Coal production (‘000 tonnes) 15,7
Slide 47: Resources highlights
Resources highlights • Continued improvement in safety performance – 12 months lost time injury free (March 2013 to February 2014) – Strong safety performance with good reduction in LTIFR • Record production & sales of metallurgical coal during FY14 • Continued focus on cost control & productivity i
Slide 48: Resources outlook
Resources outlook • Export markets − Global metallurgical coal market remains in near-term over supply − Continued low export metallurgical & steaming coal prices anticipated in 1H FY15 • Financial year 2015 − Continued variability expected with low export coal pricing; 1QFY15 Curragh hard coking co
Slide 49: Industrial & Safety
Industrial & Safety Olivier Chretien Managing Director 2014 Full-Year Results | 49
Slide 50: Industrial & Safety performance summary
Industrial & Safety performance summary Year ended 30 June ($m) 2014 2013 % Revenue 1,621 1,647 (1.6) EBITDA 161 192 (16.1) Depreciation & amortisation (30) (27) (11.1) EBIT 131 165 (20.6) EBIT margin (%) 8.1 10.0 ROC (R12 %) 11.6 14.7 Safety (R12 TRIFR) 11.6 14.3 2014 Full-Year Results | 50
Slide 51: Industrial & Safety highlights
Industrial & Safety highlights • Sustained market pressures – Reduced activity levels & strong cost focus from industrial customers – Good momentum in New Zealand & Coregas • Good progress on realignment of cost base – Network rationalised through closure of 25 branches & 7.1% reduction in headcount
Slide 52: Industrial & Safety outlook
Industrial & Safety outlook • Subdued economic environment & margin pressures expected to remain – Division well placed to respond to market recovery – Continue lowering cost to serve through technology & operational excellence • New Zealand market expected to remain favourable on the back of constr
Slide 53: Insurance
Insurance Anthony Gianotti Managing Director 2014 Full-Year Results | 53
Slide 54: Insurance performance summary
Insurance performance summary Year ended 30 June ($m) 2014 2013 % Revenue 2,167 2,083 4.0 EBITA Underwriting 168 136 23.5 EBITA Broking1 65 86 (24.4) EBITA Other - (4) n.m. EBITA Insurance Division 233 218 6.9 EBITA Insurance Division (excluding EQ2)2 278 218 27.5 EBIT Insurance Division 220 205 7.3
Slide 55: Insurance highlights
Insurance highlights • Underwriting – Completion of sale of business to Insurance Australia Group on 30 June 2014 – Continued improvement in loss ratios through disciplined underwriting practices & favourable claims experience across most portfolios – Solid growth in gross written premium despite so
Slide 56: Balance Sheet & Cash Flow
Balance Sheet & Cash Flow Terry Bowen Finance Director, Wesfarmers Limited 2014 Full-Year Results | 56
Slide 57: Other business performance summary
Other business performance summary Year ended 30 June ($m) Holding % 2014 2013 % Share of profit/(loss) of associates: Gresham Various 1 (10) n.m. Wespine 50 7 5 40.0 BWP Trust 24 37 27 37.0 Sub-total 45 22 104.5 Interest revenue 10 13 (23.1) Other (64) (46) (39.1) Corporate overheads (113) (108) (4
Slide 58: Non-trading items summary
Non-trading items summary Year ended 30 June 2014 ($m) Pre-tax Tax Impact Post-tax Gain on sale of Insurance division 1,040 (101) 939 Gain on sale of 40% interest in ALWA 95 - 95 Target goodwill impairment (677) - (677) Liquor restructuring provision (94) 28 (66) Total non-trading items 364 (73) 291
Slide 59: Working capital management
Working capital management • Further reduction in net working capital days supported by business growth (1.8 days or 12.5% reduction in FY14; 10.8 days reduction since FY09) • Reduced working capital cash flows in FY14 – Year-end timing differences resulting in additional creditor payment run for Co
Slide 60: Solid operating cash flow generation
Solid operating cash flow generation $m Annual cash realisation % • NPATDA growth (excluding NTIs) 5.7% & cash 4,500 150 realisation of 92%1 (101% adjusted for year-end 3,000 100 timing differences affecting creditors at Coles) • Lower cash realisation in FY14 driven by lower 1,500 50 working capita
Slide 61: Disciplined capital investment
Disciplined capital investment • Effective deployment of capital to capture Year ended 30 June ($m)1 2014 2013 % Coles 1,016 1,187 (14.4) highest growth & returns opportunities HI & OS 557 549 1.5 – Coles & HIOS comprise 70% of FY14 Kmart 162 95 70.5 capex Target 78 81 (3.7) WesCEF 172 262 (34.4) •
Slide 62: Property disposals increased
Property disposals increased • Reduced net property capex driven by Property capital expenditure $m % increased disposals 1,250 50 • Recent transactions 1,000 40 – Sale & leaseback of 12 Bunnings stores to 750 30 BWP Trust in FY14 realising 500 20 $282 million 250 10 – Sale & leaseback of 15 Bunning
Slide 63: Composition of committed financial obligations & diversity of funding sources
Composition of committed financial obligations & diversity of funding sources • Strategy to diversify sourcing, pre-fund debt maturities & maintain access to diverse debt capital markets Fixed financial obligations1 Debt sources1 Bank Bonds, Bilaterals bilaterals & 5% syndicated Domestic facilities
Slide 64: Risk management of debt maturities
Risk management of debt maturities • Debt strategy to ensure a good maturity spread profile without significant refinancing in any one year • Receipt of Insurance proceeds resulted in increased cash position, lower bank bilateral balance & repayment of debt drawn under syndicated facility at 30 June
Slide 65: Further decline in funding costs
Further decline in funding costs • Effective cost of debt reduced in FY14 to Weighted-average debt cost % 5.4%; FY15F c. 5.4% 10.0 9.0 • Interest cost savings expected to moderate 8.0 in FY15 7.0 6.0 – Due to debt mix (lower ratio of short-term 5.0 drawn debt) 4.0 3.0 2.0 1.0 0.0 FY09 FY10 FY11 FY12
Slide 66: Maintaining strong credit metrics
Maintaining strong credit metrics times Fixed charges cover • Solid credit metrics 3.5 – Cash interest cover (R12) improved to 15.9 3.0 2.5 times (from 12.2 times in FY13) 2.0 – Fixed charges cover (R12) improved to 3.2 1.5 times (from 3.0 times in FY13) 1.0 0.5 • Strong credit ratings 0.0 FY09 FY10
Slide 67: Cash flows have supported strong investment phase & dividend growth
Cash flows have supported strong investment phase & dividend growth • Cumulative free cash flows have funded significant investment activity, strong dividend distributions & capital management Net cash flow composition $m 4,500 3,000 Includes Insurance & ALWA net 1,500 proceeds 0 (1,500) FY09 FY10 F
Slide 68: Dividends
Dividends Year ended 30 June 2014 $/share Ordinary Interim $0.85 Final $1.05 Full-year $1.90 Special $0.10 Total $2.00 • Final ordinary dividend of $1.05 per share (fully-franked); full-year dividend of $1.90 per share (fully-franked) • Special ‘Centenary’ dividend of 10 cents per share (fully-frank
Slide 69: Capital management – completed
Capital management – completed • Capital management of approx. $2.6 billion Cumulative capital management $m $m since FY09 1,000 3,000 – Capital return of 50 cents per share in 800 2,400 November 2013, including a proportionate 600 1,800 share consolidation, returning $579 million to 400 1,200 share
Slide 70: Capital management – announced
Capital management – announced • Capital management of $1.00 per fully-paid ordinary share – Distribution to shareholders of approximately $1.1 billion – Returns portion of Group’s surplus capital equitably to shareholders while maintaining balance sheet flexibility – Expected to comprise a capital
Slide 71: Outlook
Outlook Richard Goyder Managing Director, Wesfarmers Limited 2014 Full-Year Results | 71
Slide 72: Outlook
Outlook Retail • Growth to be supported by continued improvements to service & customer propositions, investments in value, merchandise innovation & expanded channel reach through optimised store networks & digital platforms • Focus to continue on increased operational productivity & supply chain ef
Slide 73: Outlook (cont'd)
Outlook (cont’d) Group • Strengthen existing businesses through operating excellence & satisfying customer needs • Secure growth opportunities through entrepreneurial initiative • Renew the portfolio through value-adding transactions • Ensure sustainability through responsible long-term management •
Slide 74: Questions
Questions 2014 Full-Year Results | 74
Slide 75: 2014 Full-Year Results | 75
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