Slide 1: 2010 Full-Year Results Teleconference
For personal use only 2010 Full-Year Results Teleconference 19 August 2010
Slide 2: Presentation outline
2 Presentation outline Item Presenter Page For personal use only 1 Group Performance Highlights Richard Goyder 3 2 Coles Ian McLeod 12 3 Home Improvement & Office Supplies John Gillam 21 4 Target Launa Inman 29 5 Kmart Guy Russo 33 6 Resources Stewart Butel 39 7 Insurance Rob Scott 46 8 Chemicals, E
Slide 3: Group Performance Highlights
For personal use only Group Performance Highlights Richard Goyder Managing Director, Wesfarmers Limited
Slide 4: Group performance highlights
4 Group performance highlights For personal use only • Group EBIT result of $2.9 billion – Solid retail performance, despite tough trading conditions in the second half – Improved performance from industrial businesses following return to more normalised operating conditions – Encouraging Insurance
Slide 5: Group performance highlights (cont)
5 Group performance highlights (cont) For personal use only • Coles achieved encouraging earnings growth; turnaround continues to meet Wesfarmers' expectations • Bunnings continued to deliver a strong performance, with improvements in both the retail & trade offers • Kmart & Officeworks made good pr
Slide 6: Group performance summary
6 Group performance summary For personal use only Year ended 30 June ($m) 2010 2009 % Revenue 51,827 50,982 1.7 EBITDA1 3,786 3,803 (0.4) EBIT1 2,869 2,947 (2.6) Net profit after tax (pre significant items)1 1,702 1,628 4.5 Net profit after tax (post significant items)1 1,565 1,522 2.8 Operating cas
Slide 7: EBIT performance
7 EBIT performance For personal use only • Robust earnings performance across most divisions – Retail earnings up 15.8%, reflecting good progress on strategic plans – Industrial earnings up 38.6%, on more normalised operating conditions – Resources earnings down 81.4%, affected by lower commodity pr
Slide 8: Earnings per share
8 Earnings per share • 2010 EPS reflects reduced earnings from Resources & For personal use only increased shares on issue following recent equity raisings cps (WANOS) % of NPAT 250 150 200 120 150 90 218.5 100 195.2 60 174.2 158.5 135.7 50 30 0 0 2006 2007 2008 2009 2010 EPS Dividend payout ratio [
Slide 9: Cash flows
9 Cash flows • For personal use only Portfolio of strong cash generating businesses • Record operating cash flow performance despite reduction from Resources • Cash realisation improved through continued working capital management $m % 3,500 140 3,000 120 2,500 100 2,000 80 1,500 60 1,000 40 500 20
Slide 10: Divisional EBIT
10 Divisional EBIT For personal use only Year ended 30 June ($m) 2010 2009 % Coles 962 831 15.8 Home Improvement 728 659 10.5 Office Supplies 74 65 13.8 Target 381 357 6.7 Kmart 196 109 79.8 Resources1 165 885 (81.4) Insurance 122 91 34.1 Industrial & Safety 111 114 (2.6) Chemicals & Fertilisers 121
Slide 11: Divisional return on capital
11 Divisional return on capital (‘ROC’) • Improved return on capital performance across most divisions For personal use only • Focus remains on growth in return on capital 2010 2009 R12 Capital Year ended 30 June EBIT ROC ROC Employed $m $m % % Coles 962 14,830 6.5 5.5 Home Improvement 728 2,398 30.
Slide 12: Coles
For personal use only Coles Ian McLeod Managing Director
Slide 13: Coles financial performance
Coles 13 Coles financial performance Year ended 30 June ($m) 2010 2009 % For personal use only Revenue 30,002 28,799 4.2 EBIT 962 831 15.8 ROC % 6.5 5.5 Safety (R12 LTIFR) 12.8 15.9 Food & Liquor Revenue1 23,731 22,506 5.4 Total store sales growth %3,4 5.6 6.2 Comp store sales growth %3,4 5.0 4.6 Tr
Slide 14: Coles highlights - strategy on track
Coles 14 Coles highlights - strategy on track Building a Solid Delivering Driving the Coles use only Foundation Consistently Well Difference For personalPerformance • Create a strong top team • Embed the new culture • Culture of continuous improvement • Cultural change • Team member development • St
Slide 15: Value cut-through
Coles 15 Value cut-through For personal use only • Lower prices on key value items – ‘Down, down, prices are down’ • Fewer, deeper promotions – Super Specials – Dollar Dazzlers • Quality food costs less at Coles – Feed Your Family for under $10 • Improving private label offer – Coles brand repackagi
Slide 16: More appealing fresh food offer
Coles 16 More appealing fresh food offer For personal use only • Double digit growth in produce & bakery • Renewal stores changing the mix • Fresher, faster supply chain • Effective sponsorship support – Masterchef – My Kitchen Rules • Investment in craft skills – Greengrocers – Bakers – Butchers
Slide 17: A better customer experience
Coles 17 A better customer experience For personal use only • Scale roll-out of new store formats – 56 renewal stores to date – c.100 additional renewal stores in FY11 • New concepts across the network – Health & beauty – Entertainment & paper shop • Cleaner, open stores with improved service – Roll
Slide 18: Working smarter stores
Coles 18 Working smarter stores For personal use only • Easy ordering rollout going to plan – 316 stores to date – Roll-out complete by FY12 • Shelf-friendly packaging roll-out – Efficient replenishment & fewer out of stocks • Ongoing investment in store standards – c. $70 million in equipment refur
Slide 19: Liquor & Convenience
Coles 19 Liquor & Convenience For personal use only • Coles Liquor – Growing market share • Exclusive range & private label growing – Evolving format development • Convenience – Comp. fuel volumes up 0.7% in FY10 – Better convenience store offer – Ongoing network improvement
Slide 20: Coles outlook - turnaround on track
Coles 20 Coles outlook - turnaround on track For personal use only • Turnaround strategy being driven at pace • Coles now entering phase two of turnaround • Focus on building greater customer trust • However, economic conditions remain challenging • In this environment, quality, service & value are
Slide 21: Home Improvement & Office Supplies
For personal use only Home Improvement & Office Supplies John Gillam Managing Director
Slide 22: HIOS performance summary
Home Improvement & 22 Office Supplies HIOS performance summary For personal use only Year ended 30 June ($m) 2010 2009 % Revenue Home Improvement 6,413 5,845 9.7 Office Supplies 1,409 1,306 8.0 7,822 7,151 9.4 EBIT Home Improvement 728 659 10.5 Office Supplies 74 65 13.8 802 724 10.8
Slide 23: Home Improvement performance summary
Home Improvement Home Improvement & Office Supplies 23 Performance summary For personal use only Year ended 30 June ($m) 2010 2009 % Revenue 6,413 5,845 9.7 Trading Revenue 6,410 5,808 10.4 (excl. property & non-trading items) EBIT 728 659 10.5 Trading EBIT / Trading Revenue (%) 11.4 11.2 ROC (R12 %
Slide 24: Home Improvement highlights
Home Improvement & 24 Office Supplies Home Improvement highlights For personal use only • Trading revenue growth 10.4% – 10.3% cash sales growth – Store-on-store growth of 7.3% – 10.8% lift in trade sales • Strong focus on expansion, customer & business improvements • Opened 22 trading locations – 1
Slide 25: Home Improvement outlook
Home Improvement & 25 Office Supplies Home Improvement outlook For personal use only • Continued sales growth – Positive contributions from retail & trade – Purposeful ‘value focus’, some deflationary impacts • Maintain strategic focus on five growth drivers – Service – Category expansion – Network
Slide 26: Office Supplies Performance Summary
Office Supplies Home Improvement & Office Supplies 26 Performance Summary For personal use only Year ended 30 June ($m) 2010 2009 % Revenue 1,409 1,306 8.0 EBIT 74 65 13.8 EBIT / Revenue (%) 5.3 5.0 ROC (R12 %) 6.3 5.7 Safety (R12 LTIFR) 12.1 12.3
Slide 27: Office Supplies highlights
Home Improvement & 27 Office Supplies Office Supplies highlights For personal use only • Pleasing sales growth – Retail stores sales up 9.0%, underpinned by strong transaction growth – Officeworks Business sales continue to gain momentum • Double digit earnings growth in challenging conditions • Inv
Slide 28: Office Supplies outlook
Home Improvement & 28 Office Supplies Office Supplies outlook For personal use only • Moderate sales growth – Competitive pressures on margin & costs • Focus on execution of strategic agenda to lift profitability – Improve customer offer & service – Drive sales – Expand & upgrade network – Reduce co
Slide 29: Target
For personal use only Target Launa Inman Managing Director
Slide 30: Target performance summary
Target 30 Target performance summary For personal use only Year ended 30 June ($m) 2010 2009 % Revenue 3,825 3,788 1.0 EBIT 381 357 6.7 EBIT margin (%) 10.0 9.4 ROC (R12 %) 11.7 10.4 Safety (R12 LTIFR) 8.0 9.2 Total sales growth1 (%) 0.9 7.2 Comparative store sales growth1(%) (0.9) 4.2 1 2010 for th
Slide 31: Target highlights
Target 31 Target highlights For personal use only • Solid profitability in a challenging trading period • Sales assisted by a positive customer response to improvements in ladieswear & baby related products • Improvements in margin through – Increased apparel contribution to sales – Tightly managed
Slide 32: Target outlook
Target 32 Target outlook For personal use only • A challenging & competitive trading environment will continue to place pressure on margins & comparable store sales growth • Continue to embed new product design & development capabilities to maintain leadership position through differentiation – Focu
Slide 33: Kmart
For personal use only Kmart Guy Russo Managing Director Kmart Guy Russo
Slide 34: Kmart performance summary
Kmart 34 Kmart performance summary For personal use only Year ended 30 June ($m) 2010 2009 % Revenue 4,019 3,998 0.5 EBIT1,2 190 109 74.3 EBIT margin (%) 4.7 2.7 ROC (R12 %)2 21.8 10.5 Safety (R12 LTIFR) 9.1 11.3 Total sales growth3 (%) 0.4 0.5 Comparative store sales growth3 (%) (0.1) 0.2 1 Exclude
Slide 35: Kmart - the journey
Kmart 35 Kmart - the journey For personal use only
Slide 36: Kmart strategy
Kmart 36 Kmart strategy For personal use only
Slide 37: Kmart highlights
Kmart 37 Kmart highlights • Customers responding well to lowest prices & better in-store For personal use only environment – Comparative sales growth of 1.9% for the 25 weeks ending 27 June – Growth in sales supported by uplift in transactions • Increased focus on underlying financial disciplines as
Slide 38: Kmart outlook
Kmart 38 Kmart outlook • Renewal remains active For personal use only – Continue focus on customer service, clean & tidy stores & fast & friendly checkouts – Leverage efficiencies through cost of doing business – Ongoing investment in refreshing floors & fitting rooms • Continue with transition to G
Slide 39: Resources
For personal use only Resources Stewart Butel Managing Director
Slide 40: Resources performance summary
Resources 40 Resources performance summary For personal use only Year ended 30 June ($m) 2010 2009 % Revenue1 1,416 2,411 (41.3) EBITDA 285 990 (71.2) Depreciation & amortisation2,3 (120) (105) (14.3) EBIT3,4 165 885 (81.4) ROC (R12%) 14.4 82.4 Coal Production (‘000 tonnes) 14,107 15,107 (6.6) Safet
Slide 41: Resources highlights
Resources 41 Resources highlights • Continued improvement in safety performance For personal use only • $286 million Curragh expansion to 8.0 - 8.5mtpa export metallurgical capacity underway – Completion expected late CY11 • Blackwater Creek diversion achieved practical completion 10 December 2009 –
Slide 42: Curragh mine expansion
Resources 42 Curragh mine expansion For personal use only • Expand metallurgical coal exports to 8.0mtpa - 8.5mtpa • Approved capital expenditure of $286 million • Export rail & port capacity contracted • Expansion tonnage contracts in place • Construction underway • Two week shutdown of existing Co
Slide 43: Curragh expansion study to 10mtpa exports
Resources 43 Curragh expansion study to 10mtpa exports For personal use only • Feasibility study commenced – Mining & Coal Handling Preparation Plant studies • Potential to expand Curragh to 10mtpa metallurgical exports from FY14 – Wiggins Island commissioning – Additional rail capacity required – P
Slide 44: Bengalla expansion study
Resources 44 Bengalla expansion study For personal use only • Feasibility study nearing completion • Additional port capacity secured • Expansion from 5.5mtpa to 8.5mtpa (10.7mtpa ROM) through two stages – Stage One 7.5mtpa – Stage Two 8.5mtpa • Target additional production FY13 • Stage One developm
Slide 45: Resources outlook
Resources 45 Resources outlook • Q1 FY11 pricing negotiations completed – 11% increase on For personal use only Q4 FY10 • Strong shipping performance from our traditional customers • Re-emergence of tight labour market & industry cost pressures – Cost reduction programs continue • Premier sole coal
Slide 46: Insurance
For personal use only Insurance Rob Scott Managing Director
Slide 47: Insurance performance summary
Insurance 47 Insurance performance summary Year ended 30 June ($m) 2010 20092 % For personal use only Gross Written Premium Underwritten 1,347 1,358 (0.8) Total Revenue 1,698 1,720 (1.3) EBITA Underwriting 75 40 87.5 EBITA Broking 59 63 (6.3) EBITA Other (3) - n.m. EBITA Insurance Division1 131 103
Slide 48: Insurance highlights
Insurance 48 Insurance highlights For personal use only • Strong turnaround in underwriting profitability – Benefits of portfolio remediation & improvements in claims management – Improved focus on risk selection & profitable underwriting • Various factors impacting underwriting earnings in FY10 – C
Slide 49: Insurance outlook
Insurance 49 Insurance outlook For personal use only • Continued improvements in underwriting performance • Return to growth in gross written premiums from new initiatives – Corporate Solutions, Electronic Data Interchange (‘EDI’), Retail • Commercial premium rate environment likely to remain compet
Slide 50: Chemicals, Energy & Fertilisers
For personal use only Chemicals, Energy & Fertilisers Tom O’Leary Managing Director
Slide 51: Chemicals & Fertilisers Performance summary
Chemicals & Fertilisers Chemicals, Energy & Fertilisers 51 Performance summary For personal use only Year ended 30 June ($m) 2010 2009 % Revenue Chemicals 606 615 (1.5) Fertilisers 454 547 (17.0) 1,060 1,162 (8.8) EBITDA 183 115 59.1 Depreciation & amortisation (62) (63) (1.6) EBIT 1211 52 132.7 Sal
Slide 52: Chemicals & Fertilisers highlights
Chemicals, Energy 52 & Fertilisers Chemicals & Fertilisers highlights For personal use only • Production & demand for ammonia, ammonium nitrate & sodium cyanide improved • Commissioning of 8ktpa sodium cyanide expansion in 4Q FY10 • Recovery from Varanus Island gas disruption last year • Fertiliser
Slide 53: Energy performance summary
Chemicals, Energy 53 & Fertilisers Energy performance summary For personal use only Year ended 30 June ($m) 2010 2009 % Revenue 611 598 2.2 EBITDA 153 122 25.4 Depreciation & amortisation (51) (47) (8.5) EBIT 1021 75 36.0 ROC (R12 %) 13.1 9.2 WLPG production (kt) 188 170 10.6 Safety (R12 LTIFR) 4.3
Slide 54: Energy highlights
Chemicals, Energy 54 & Fertilisers Energy highlights For personal use only • Increased production due to higher gas flow rate & stable LPG content • Recovery of international LPG prices • Full year of LNG sales, albeit heavy duty vehicle off-take remains challenging • Recovery of industrial gas mark
Slide 55: Outlook
Chemicals, Energy & Fertilisers Chemicals, Energy & Fertilisers 55 Outlook For personal use only • Continuing strong demand for ammonium nitrate & sodium cyanide expected • Increased gas input costs in sodium cyanide production • Finalisation of front end engineering and design ('FEED') study into a
Slide 56: Industrial & Safety
For personal use only Industrial & Safety Olivier Chretien Managing Director
Slide 57: Industrial & Safety Performance summary
Industrial & Safety Industrial & Safety 57 Performance summary For personal use only Year ended 30 June ($m) 2010 2009 % Revenue 1,311 1,294 1.3 EBITDA 125 127 (1.6) Depreciation & amortisation (14) (13) (7.7) EBIT 1111 114 (2.6) EBIT margin (%) 8.5 8.8 ROC (R12 %) 13.9 14.1 Safety (R12 LTIFR) 1.6 2
Slide 58: Industrial & Safety highlights
Industrial & Safety 58 Industrial & Safety highlights For personal use only • Solid result in challenging economic environment – Recovery in second half: 11% sales growth; EBIT up 30% on last year • Continued strong delivery & customer service performance – New distribution centres in Perth, Aucklan
Slide 59: Industrial & Safety outlook
Industrial & Safety 59 Industrial & Safety outlook For personal use only • Stronger growth platforms to take advantage of any further market recovery • Improved market conditions – Ongoing margin pressure & growing labour retention challenge • Future growth driven by: – Increasing share of customers
Slide 60: Other Business & Capital Management
For personal use only Other Business & Capital Management Terry Bowen Finance Director, Wesfarmers Limited
Slide 61: Other business performance summary
61 Other business performance summary For personal use only Holding Year ended 30 June ($m) 2010 2009 % % Share of profit/(loss) of associates: Gresham Private Equity Funds Various 43 (57) n.m. Gresham Partners 50 1 1 - Wespine 50 6 4 50.0 Bunnings Warehouse Property Trust 23 27 (8) n.m. Sub-total 7
Slide 62: Non-trading & significant items
62 Non-trading & significant items For personal use only 2010 2010 ($m) Segment Comment Pre-tax Post-tax Coles (property) (21) (17) Other Property impairments & surplus lease provision Kmart (33) (23) Other Supply chain restructuring WES CEF1 (5) (4) Other Restructuring costs Coregas (53) (52) Other
Slide 63: Working capital management
63 Working capital management For personal use only • Retail strategies continue to deliver improvements – Significant working capital released from acquired Coles Group assets since acquisition – Further improvements in operating cycle expected, albeit at a slower rate • Industrial businesses benef
Slide 64: Investment expenditure
64 Investment expenditure • Strong return on capital focus For personal use only Year ended 30 June ($m) 2010 2009 % Coles 719 567 26.8 • Continued investment to drive future growth Home Improvement & Office Supplies 445 377 18.0 – Retail: store roll outs & Target 88 92 (4.3) refurbishments, signifi
Slide 65: Debt financing
65 Debt financing For personal use only • Gross debt of $5.4 billion, net debt of $4.0 billion • Pro-active diversification & lengthening of Group’s debt profile – Repaid $2.2 billion of debt obligations during the year, including reduction in FY12 & FY13 syndicated debt obligations of $1.3 billion
Slide 66: Debt maturity profile
66 Debt maturity profile For personal use only $m 2,000 • Cash at bank & on deposit used to fund: 1,500 – Dividends 1,000 – Seasonal working capital 500 – Short-term debt maturities – Organic growth (capex) 0 Current FY11 FY12 FY13 FY14 FY15 FY16 • Total liquidity at 30 June (500) $2.6 billion consi
Slide 67: Balance sheet & dividend
67 Balance sheet & dividend • Strong balance sheet For personal use only – Net debt to equity of 16.3% at 30 June 2010 – Cash interest cover of 6.8 times – Net debt to operating cash flows of 1.2 times • Standard & Poor’s credit rating BBB+ (positive), Moody’s Baa1 (stable) • Final dividend $0.70 pe
Slide 68: Outlook
For personal use only Outlook Richard Goyder Managing Director, Wesfarmers Limited
Slide 69: Outlook
69 Outlook For personal use only • Wesfarmers is well placed to benefit from any further upturn in the Australian economy • The Group is cognisant of the fragility of global markets & domestic consumer confidence • Optimistic about the Group’s retail businesses – Particularly the opportunity to extr
Slide 70: For all the latest news visit www.wesfarmers.com.au
For personal use only For all the latest news visit www.wesfarmers.com.au