Wesfarmers Limited · ASX:WES
Wesfarmers — Non-Deal Roadshow (March 2008)
80 slides from Wesfarmers's roadshow presentation, March 2008
Slide 1: Investment Conference: Philosophy, Performance and Direction
Investment Conference Philosophy, Performance and Direction Citigroup – London Goldman Sachs JBWere – New York March 2008 Discussion Pack 1
Slide 2: Index
Index 1 Philosophy, Performance and Direction 3 2 Sustainability 8 3 Coles Transaction 12 4 Group Overview 24 5 2008 Half Year Results 28 6 Operating Divisions 41 7 Capital Management 77 8 Outlook 79 9 Investor Relations Contacts and Information 80 2
Slide 3: Philosophy, Performance and Direction
Philosophy, Performance and Direction
Slide 4: Long-term, consistent strategies
Long-term, consistent strategies MANAGING BALANCE SHEET EFFECTIVELY 4
Slide 5: Key Attributes
Key Attributes Growth Quality Earnings Opportunities Assets Improvement • Continued store roll-out; • National store networks; • 1H08 Cash comp of 12.2%; Home Improvement Range expansion Leading in sectors 5 year EBITA CAGR of & Office Supplies 12.6% p.a. • Network investment • National store networ
Slide 6: Key Attributes
Key Attributes Growth Quality Earnings Opportunities Assets Improvement • Strong demand; Curragh & • Sizeable production • Maintaining lowest quartile Resources Bengalla feasibility studies capacity; Consistent cash cost production of quality, low costs export coal • Broker consolidation; • Diverse
Slide 7: A history of strong returns
A history of strong returns EPS Share (cents) Price(A$)* 300 50 40 200 30 20 100 10 0 0 97 98 99 00 01 02 03 04 05 06 07 1H08 EPS (AGAAP) Girrah EPS Landmark EPS EPS (AIFRS) ARG EPS Wesfarmers Share Price * Adjusted for capital reconstructions 97 98 99 00 01 02 03 04 05 06 07 Wesfarmers TSR Index Al
Slide 8: Sustainability
Sustainability
Slide 9: Sustainability
Sustainability Financial performance • All our actions are directed towards satisfying our corporate objective of providing a satisfactory return to shareholders. To be sustainable, Wesfarmers must continue to achieve high standards of financial performance thereby allowing us to make the most meani
Slide 10: Sustainability
Sustainability Environmental responsibility • Our diverse range of businesses expose us to a number of challenging or Wesfarmers is a potentially challenging environmental issues, including waste disposal, contamination and greenhouse gas emissions. We set legal compliance as a member of the Dow min
Slide 11: Sustainability
Sustainability Sustainability reporting • Voluntarily publicly reporting on sustainability issues since 1998/99. The stand-alone Sustainability Report is published to coincide with the company's Annual General Meeting. The 2007 report runs to more than 90 pages of very detailed information on our en
Slide 12: Coles Transaction
Coles Transaction
Slide 13: A unique opportunity
A unique opportunity 1. Leading positions in a highly attractive industry structure Coles is a very 2. Unique retail platform with an irreplaceable store attractive network acquisition for Wesfarmers 3. Wesfarmers’ retail sector know-how 4. Substantial opportunity to create value from the Coles busi
Slide 14: Unique Platform and Asset Base
Unique Platform and Asset Base • Coles is one of two national leaders in supermarkets Coles Packaged Grocery Market Share by Food and Liquor State National Market Share National: 34.1% Woolw orths 30% QLD: 33.1% Specialty / WA: 33.1% Others 47% SA: 36.1% NSW: 32.2% VIC: Coles / Bi-Lo 37.1% 23% Sourc
Slide 15: Unique Platform and Asset Base
Unique Platform and Asset Base Discount DS Market Shares Fuel Market Shares Coles Target 24% Caltex Kmart 27% 23% 34% Others 11% Woolw orths 17% Exxon Other BigW 10% 13% 26% BP 15% Source: Bain & Company Source: CGJ, IBIS World 2005 and 2006 Office Products Market Shares Officew orks 16% Corporate E
Slide 16: The Coles Transaction - Outcomes
The Coles Transaction - Outcomes 9 DIVISIONS 545M ORDINARY SHARES 152M WPPS SHARES WES > 200,000 EMPLOYEES > 400,000 SHAREHOLDERS 12 ADDITIONAL BRANDS 16
Slide 17: Pro-forma EBIT Contribution
Pro-forma EBIT Contribution Coles FY07 EBIT Contribution Wesfarmers FY07 Pro-Forma EBIT Contribution1 Other 7% Kmart 7% Other Chemicals & Fertilisers Energy 7% Coles 3% 4% Coles Target 58% 28% 22% Industrial & Safety 4% Officeworks Insurance 6% 4% Wesfarmers FY07 EBIT Contribution Resources 12% Othe
Slide 18: Business Restructure
Business Restructure Wesfarmers Board Managing Director: Richard Goyder Finance Director: Gene Tilbrook Divisional Board Divisional MD Divisional CFO Home Improvement & Coles Kmart Target Office Supplies Tailored Approach Strategic Review RETAIL OPERATIONS Industrial & Chemicals & Resources Energy I
Slide 19: Implementation of Management Plan
Implementation of Management Plan Wesfarmers Managing Director • Ian McLeod appointed MD of Coles; extensive international retailing experience Coles • Terry Bowen appointed as CFO; Mick McMahon continues as COO • Divisional Board will include executives with international retail experience • The Of
Slide 20: Overview and Culture
Overview and Culture • Change of ownership creates an environment for management to realise the full potential of the Coles businesses Implementation of Cultural Change Specific Plans for Management • Removal of external distractions - focus • Streamline head and divisional offices management on ope
Slide 21: Plans for the Businesses
Plans for the Businesses Medium Term Value Creation Value Accretive from Date of Acquisition Coles Target • Stabilise the business • Focus on retail basics • Continuation of strong performance • Deliver supply chain cost savings and • Support current margin mix initiatives overhead reductions • Aggr
Slide 22: Investing for Growth - Capital Expenditure
Investing for Growth - Capital Expenditure • Wesfarmers has a history of ongoing investment in its businesses to deliver shareholder value • Approximately 70% of capex will be invested in the network (across brands) through new store roll out, increased refurbishments and maintenance • Approx $5bn t
Slide 23: Integration - Progress update
Integration - Progress update Task Solution design Implementation Integrate • All “integrate” functions reporting Specialist corporate functions to Wesfarmers corporate office • Complete (accounting, tax, treasury, etc) • On schedule for full integration by June 2008 Create Develop divisional struct
Slide 24: Group Overview
Group Overview
Slide 25: Financial Summary
Financial Summary FY06* FY07 1H08 % Change pcp Operating Results Revenue A$m 8,859 9,754 9,808 107.9 EBITDA A$m 1,650 1,650 1,266 60.1 Earnings before interest and tax A$m 1,366 1,305 1,046 70.6 Net profit after tax A$m 869 786 601 53.3 Financial Position Total assets A$m 7,430 12,076 37,110 299.0 N
Slide 26: Divisional Summary – Proforma FY07
Divisional Summary – Proforma FY07 Proform FY07 Proforma FY07 Proforma FY07 Activities Revenue EBIT EBIT (A$m) (A$m) Contribution The division comprises one of Australia's largest Coles supermarket businesses, liquor retailing outlets, fuel and 26,230 773 28% convenience outlets and an online pharma
Slide 27: Divisional Summary (cont.)
Divisional Summary (cont.) Proform FY07 Proforma FY07 Proforma FY07 Activities Revenue EBIT EBIT (A$m) (A$m) Contribution Mining of metallurgical and steaming coal to domestic and Resources export markets 1,134 338 13% Provider of underwriting, broking, premium funding, Insurance software developmen
Slide 28: 2008 Half Year Results
2008 Half Year Results
Slide 29: 2008 Half Year Results Performance Highlights
2008 Half Year Results Performance Highlights Group Performance Highlights Half Year ended 31 December ($m) 2007 2006 % Operating revenue 9,808 4,718 107.9 • Completion of Coles transaction on 23 EBITDA 1,266 791 60.1 November 2007 EBIT 1,046 613 70.6 – Target and Kmart performing well Net profit af
Slide 30: Divisional Performance Overview
2007 Full Year Results Performance Highlights Divisional Performance Overview Half Year ended 31 December ($m) 2007 2006 % Home Improvement & Office Supplies 332 270 23.0 • 1H08 includes, for the first time, 5 weeks Coles 130 - n/a contribution from the ex-Coles Group Target 118 - n/a businesses Kma
Slide 31: Home Improvement & Office Supplies 2008 Half Year Performance
Home Improvement & Office Supplies 2008 Half Year Performance Highlights Financial Performance Home Improvement Half Year ended 31 December 2007 2006 ($m) • Store on store cash sales growth of 12.2% Revenue Home Improvement 2,795 2,471 13.1 • 6.1% lift in trade sales Office Supplies 115 n/a - • 6 wa
Slide 32: Coles – 2008 Half Year Performance
Coles – 2008 Half Year Performance Highlights Financial Performance 23 November to 31 December ($m) 2007 • Improving Food & Liquor sales trend Revenue 2,919 • Christmas trading solid, but later than last year EBITDA 175 Depreciation & Amortisation^ (45) • Strong increase in Convenience sales EBIT 13
Slide 33: Target – 2008 Half Year Performance
Target – 2008 Half Year Performance Highlights Financial Performance • 9 new store openings since July 31, 2007 23 November to 31 December ($m) 2007 • Profit from Christmas trading period comfortably ahead Revenue 605 of last year EBITDA 123 • All high margin departments continue to perform well Dep
Slide 34: Kmart – 2008 Half Year Performance
Kmart – 2008 Half Year Performance Highlights Financial Performance • Improvement in performance commenced 2H07 23 November to 31 December ($m) 2007 • Strategic adjustments to the business are generating Revenue 692 improved results EBITDA 106 • Returned to comp sales increase Depreciation & Amortis
Slide 35: Resources – 2008 Half Year Performance
Resources – 2008 Half Year Performance Highlights Financial Performance • Strong metallurgical coal demand in constrained Half Year ended 31 December ($m) 2007 2006 % infrastructure environment Revenue 530 587 (9.7) • Bengalla’s Wantana Pit Modified Development Consent approval EBITDA 179 267 (33.0)
Slide 36: Insurance – 2008 Half Year Performance
Insurance – 2008 Half Year Performance Highlights Financial Performance % • Increased frequency of severe weather events Half Year ended 31 December* ($m) 2007 2006 • Continued acquisition of small broking operations in Gross Written Premium Underwritten 618 546 13.2 EBITA Underwriting 38 61 (37.7)
Slide 37: Industrial & Safety – 2008 Half Year Performance
Industrial & Safety – 2008 Half Year Performance Highlights Financial Performance • Operating revenue improved by 10.7% to $642m Half Year ended 31 December* ($m) 2007 2006 – Growth in all businesses Revenue 642 580 10.7 – Inclusion of Bullivants EBITDA 66 58 13.8 • Earnings increased by 20% to $61m
Slide 38: Chemicals & Fertilisers – 2008 Half Year Performance
Chemicals & Fertilisers – 2008 Half Year Performance Highlights Financial Performance • EBA successfully renegotiated Half Year ended 31 December ($m) 2007 2006 % • Ammonia plant production ahead of last year despite Revenue Chemicals 218 125 74.4 performance problems • Higher production, sales and
Slide 39: Energy – 2008 Half Year Performance
Energy – 2008 Half Year Performance Highlights Financial Performance • WA LNG project remains on budget Half Year ended 31 December* ($m) 2007 2006 % • Good progress on industrial gas supply projects Revenue 281 222 26.6 EBITDA 66 51 29.4 • Record high energy prices Depreciation & Amortisation^ (18)
Slide 40: Other Businesses – 2008 Half Year Performance
Other Businesses – 2008 Half Year Performance Highlights Financial Performance Gresham Private Equity – Fund 1 Half Year ended 31 December ($m) Holding% 2007 2006 Associates: • Norcros divested, with some deferred Gresham Private Equity - Fund 1 50 3 0 Gresham Private Equity - Fund 2 67 23 (1) consi
Slide 41: Operating Divisions
Operating Divisions
Slide 42: Home Improvement & Office Supplies
Home Improvement & Office Supplies WIDEST RANGE LOWEST PRICES BEST SERVICE 42
Slide 43: Store Network
Store Network at December 2007 2 160 Bunnings Warehouse Stores 63 Small format Bunnings Stores 112 Officeworks Stores 28 5 20 19 10 7 3 8 10 48 18 37 35 12 25 40 1 2 1 2 2 Excludes 12 Trade operational sites and 10 Harris Technology stores 43
Slide 44: Home Improvement & Office Supplies Performance
Home Improvement & Office Supplies Performance EBIT A$m ROC % Growth Strategies 600 35 Home Improvement Strategies 30 Strong focus on “driving the basics” – Price, Range & Service 500 Two-pronged store network investment – existing and new Profitable sales growth Warehouse store rollout continues –
Slide 45: Office Supplies
Office Supplies Integration Update Strategies Details • Now part of expanded “Home Re-establish authority across Improvement & Office Supplies” Division Enhance core categories • Integration work proceeding to plan competitive Improve in-store execution – – 2 businesses, 2 executive teams position p
Slide 46: Coles
coe io coles © Be °S. WHY PAY MORE!
Slide 47: Coles Store Network at December 2007
Coles Store Network at December 2007 PRO-FORMA EBIT CONTRIBUTION 10 8 11 (FY07PF) 28% 152 228 79 77 91 5 116 68 66 31 5 44 236 248 4 2,000+ stores & hotels 208 110,000+ employees 158 1.8m+ m2 selling area 193 155 748 Supermarkets 761 Liquor stores 14 16 93 Hotels 621 Convenience 47
Slide 48: Coles - Strategies
Coles - Strategies Strategies Details Increase store efficiencies Greater focus on space and category management Innovate and improve product offer Execute revised Fresh and house brand strategies Food Improve in-store execution – product availability and customer service Enhance customer service Em
Slide 49: Target
Target 49
Slide 50: Target Store Network
Target Store Network at December 2007 PRO-FORMA EBIT CONTRIBUTION 2 (FY07PF) 11% 54 31 25 93 64 274 Target stores (incl 118 Target Country) 5 50
Slide 51: Target - Strategies
Target - Strategies Strategies Details Further enhance leading position in Strengthen position in key categories through product extensions market Access operational efficiencies Create more flexible in-store space management Target higher growth sectors and Grow network through store roll-out posit
Slide 52: Kmart
Kmart where good times start | as Tyre & Auto Service
Slide 53: Kmart Store Network
Kmart Store Network at December 2007 PRO-FORMA EBIT CONTRIBUTION 2 3 (FY07PF) 4% 37 54 20 31 13 20 450 stores 49 74 12 42 80 183 Kmart stores 5 5 3 267 KTAS centres 53
Slide 54: Kmart – Strategic Review
Kmart – Strategic Review • Strategic review of Kmart underway – Completion expected March 2008 • Wesfarmers is confident that one or a combination of these options will deliver value in excess of that assumed in Wesfarmers’ valuation Strategic Review Options 1. Improving the trading performance of t
Slide 55: Resources
Resources =< Sa ( UWURRAGSGF 40 Premier Coal BENGALLA
Slide 56: Resources - Locations
Resources - Locations PRO-FORMA EBIT CONTRIBUTION (FY07PF) 13% 660 employees 3 coal mines Coal 24 coal customers Premier Coal Curragh 27% Bengalla (40%) 56
Slide 57: Resources - Performance
Resources - Performance Growth Strategies EBIT A$m ROC % 700 90 Opportunities / Challenges 2007/08 Strategic initiatives 80 Maximise export sales 600 Long-term export contracts in place 70 Strong export customer demand Optimise sales mix 500 Maintain export price relativity 60 Curragh North conveyor
Slide 58: Resources - Sales
Resources - Sales Coal Sales Volumes by Mine (FY07) Hard Coking Coal Prices Mine Domestic Export Export US$/Tonne (Nominal) FOB Australia Total (mtpa) Steaming Steaming Metallurgical 300 275 250 Curragh, QLD 2.2 6.5 8.7 225 200 175 Premier, WA 3.0 3.0 150 125 Bengalla*, NSW 0.4 1.8 2.2 100 75 50 Tot
Slide 59: Curragh and Bengalla Expansion Studies
Resources Curragh and Bengalla Expansion Studies Curragh Expansion Study Bengalla Expansion Study • Feasibility study to expand exports to 8.0 • Development consent approval granted - 8.5mtpa • Potential expansion from 8.7mtpa to 10.7mtpa • Upgrade of CHPP to 2,200tph ROM • Additional overburden rem
Slide 60: Insurance
Insurance Se WESFARMERS FEDER ATION Lumley *« OAMPS CROMBIE @ LOCKWOOD New Zealand's Insurance Brokers
Slide 61: Insurance - Locations
Insurance - Locations 2 PRO-FORMA EBIT 1 CONTRIBUTION 4 (FY07PF) 2 4 13 4% 20 1 2 1 1 3 12 8 18 9 5 18 6 3,000 employees 1 146 10%locations Lumley General Australia 10 5 Lumley General New Zealand 9 3 4 1 Wesfarmers Federation Insurance 84 2 OAMPS 29 Crombie Lockwood 14 61
Slide 62: Insurance - Performance
Insurance - Performance Growth Strategies EBIT A$m ROC % 160 35 Opportunities / Challenges Strategies 140 30 Maintain underwriting disciplines Maintain key alliances and relationships Target Profitable growth LGA online initiative 120 25 Underwriting WFI expansion via “Yourinsurancegroup” Expansion
Slide 63: Insurance – Underwriting Performance
Insurance – Underwriting Performance Reduced reinsurance levels: strategy to retain more risk 1H08 Gross Written Premium by Class of Business Personal % Total $618m $113m Liability $116m 40 30 Marine $24m 20 Engineering $41m Commercial 10 $133m AMO $19m Crop $22m 0 2004 2005 2006 2007 Commercial Rei
Slide 64: Industrial & Safety
Industrial & Safety Australian market leader in distribution of Maintenance, Repair and Operating supplies (MRO) National Specialist Businesses Australia New Zealand 64
Slide 65: Industrial & Safety – Distribution Network
Industrial & Safety – Distribution Network PRO-FORMA EBIT CONTRIBUTION 2 1 (FY07PF) 17 11 1 4 4 4% 16 10 6 1 1 5 7 5 5 6 1 1 17 7 3 4 1 AUSTRALIAN BUSINESSES No. 11 7 24 22 3,200 employees Blackwoods 75 1 1 1 238 locations 10 21 Atkins Electrical 6 5 3 100,000+ customers Protector Alsafe 44 Motion 8
Slide 66: Industrial & Safety - Performance
Industrial & Safety - Performance Growth Strategies EBIT A$m ROC % 140 18 Opportunities Strategic Initiatives Networks expansion 16 120 Target higher growth New product ranges and services 14 sectors Acquisitions complementing organic growth 100 12 Ongoing focus on customer service and delivery perf
Slide 67: Chemicals & Fertilisers
Chemicals & Fertilisers 67
Slide 68: Chemicals & Fertilisers - Locations
Chemicals & Fertilisers - Locations PRO-FORMA EBIT CONTRIBUTION (FY07PF) 7% 4 4 7 730 employees 300 chemical customers ■ CSBP fertilisers Manufacturing plant 4 2 2 major fertiliser Import and distribution centres 5 distributors servicing Depots 6 over 5,000 farmers Regional Sales Representatives 25
Slide 69: Chemicals & Fertilisers – Performance
Chemicals & Fertilisers – Performance Growth Strategies EBIT A$m ROC % Opportunities / Challenges Strategies 120 20 Maintain and grow business Kwinana AN duplication 100 Chemicals Upgrade of QNP 16 Improve performance of sodium Focus on plant performance achieving better output cyanide business and
Slide 70: Energy
Energy SG KleenheatGas a aa ( \ SJ WN enGen AIR LIQUIDE, coregas (Sc WESTERN AUSTRALIA
Slide 71: Energy - Locations
Energy - Locations PRO-FORMA EBIT CONTRIBUTION (FY07PF) 3% 950 employees 279,500 gas customers 23 remote power stations Gas and Power Kleenheat Gas 3 air separation units Wesfarmers LPG 1 LPG extraction plant Coregas 1 hydrogen plant enGen 28% Air Liquide WA 71
Slide 72: Energy - Performance
Energy - Performance Growth Strategies EBIT A$m ROC % Strategies Sector 80 50 Industrial gas growth in: 70 • eastern states sales; and 40 • oil and gas sector 60 Maximise LPG production Improve – Existing Businesses 50 LPG distribution: 30 • customer focus; and 40 • controllable costs 20 30 Pursue n
Slide 73: Energy - Businesses
Energy - Businesses Activities Activities Activities distributor and marketer of liquefied design, construction, operatation and Production, distribution and marketing of petroleum gas (LPG) and gas appliances to a maintenance of both company-owned and industrial and medical gases on Australia’s bro
Slide 74: Other Businesses
Other Businesses Gresham: 50% interest in Gresham Partners, an independent investment (A$m) 2006 2007 bank focused on financial advisory services, private equity investment and property investment funds. Wesfarmers also Profit before tax: holds significant investments in Gresham's Private Equity Fun
Slide 75: Gresham Private Equity
Gresham Private Equity Gresham Private Equity – Fund 1 Gresham Private Equity – Fund 2 • Wesfarmers’ current commitment $180m; • Norcros divested, with some deferred Capital invested $141m consideration • New Investments: • Current investment $31m – Barminco • Exit of Riviera expected within several
Slide 76: Gresham Private Equity Current Investment Portfolio
Gresham Private Equity Fund 2 CURRENT INVESTMENT PORTFOLIO Noel Leeming Australian Pacific Paper Products GEON electrical retailer (Pacific Print Group) manufacturer & distributor (New Zealand) leading commercial printing of disposable nappies (Australia) business (NZ + Aust) Witchery Barminco Exper
Slide 77: Capital Management
Capital Management • Net Debt / Equity of 70.1% at 31 December 2007 • Cash Interest Cover Ratio (rolling 12 months) of 5.0 times • $4,000 million to be refinanced in 2008 – DIP, Australian and offshore debt, hybrids • Dividend Investment Plan – 75%* underwrite for interim dividend - 1% discount • Fr
Slide 78: Capital Management
Capital Management 1H08 Capital Expenditure Total: A$588m $3m $78m $173m $127m $14m $93m $6m $95m Home Improvement & Office Supplies Coles, Target and Kmart Resources Insurance Industrial & Safety Chemicals & Fertiliser Energy Other 78
Slide 79: Outlook
Outlook • Focus on bringing about substantial change in Coles • Continuing good results in most businesses • Impact of higher interest rates and fuel price volatility • Strengthening coal price outlook • One-off transaction/restructure costs in 2H08 expected; too early to quantify • $4bn to be refin
Slide 80: Investor Relations Contact
Investor Relations Contact Wesfarmer’s Public Affairs and Investor Relations For further information on Wesfarmers including: Keith Kessell 61 8 9327 4251 kkessell@wesfarmers.com.au Annual reports Financial results announcements Tanya Rybarczyk 61 8 9327 4323 Presentations and webcasts trybarczyk@we