Wesfarmers Limited · ASX:WES
Wesfarmers — Debt Investor Presentation (2019)
44 slides from Wesfarmers's debt investor presentation, 2019
Slide 1: 2019 Half-Year Results Debt Investor Update
2019 Half-Year Results Debt Investor Update
Slide 2: Group Performance Overview
Group Performance Overview
Slide 3: Long-term shareholder returns
Long-term shareholder returns 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 Looking after our team Engaging fairly with our of our customers & members & providing a suppli
Slide 4: Progress on strategic agenda: 1H19 highlights
Progress on strategic agenda: 1H19 highlights Portfolio • Demerger of Coles management – • Sale of Bengalla significant • Sale of Kmart Tyre & Auto repositioning • Sale of stake in Quadrant Energy • Ian Bailey, MD Kmart Group • Marina Joanou, MD Target Talent – key • Sarah Hunter, MD Officeworks app
Slide 5: Financial overview
Financial overview Variance to pcp Excluding (exc. significant Half-year ended 31 December ($m) Reported significant items2 items2) Results from continuing operations1 Earnings before interest & tax 1,645 1,645 9.5% Net profit after tax 1,080 1,080 10.4% Basic earnings per share (cps) 96 96 10.5% Re
Slide 6: Group performance summary
Group performance summary Half-year ended 31 December ($m) 2018 2017 Var % Results from continuing operations1 EBIT 1,645 1,196 37.5 EBIT (excl. significant items)2 1,645 1,502 9.5 Net profit after tax 1,080 678 59.3 Net profit after tax (excl. significant items)2 1,080 978 10.4 Earnings per share (
Slide 7: Divisional earnings summary
Divisional earnings summary EBIT ($m) Half-year ended 31 December 2018 2017 Var % Var $m % of divisional EBIT Bunnings Australia & New Zealand 932 864 7.9 68 57% Kmart Group (continuing operations)1 383 398 (3.8) (15) 24% Including KTAS2 393 415 (5.3) (22) Officeworks 76 68 11.8 8 5% Industrials (co
Slide 8: Operational highlights
Operational highlights • Bunnings: Continued sales growth in consumer & commercial, in all product categories & across all major trading regions; growth was achieved despite high levels of growth in 1H18, high rainfall on the East Coast & softening in conditions in the residential housing market • K
Slide 9: Operating cash flows
Operating cash flows • Divisional cash generation1 excluding % Divisional cash generation1 discontinued operations remains strong at excluding discontinued operations2 160 approximately 115%2 140 • Operating cash flows of $1,987m impacted by 120 100 demerger of Coles 80 – Coles operating cash flow $
Slide 10: Working capital & free cash flows
Working capital & free cash flows • Positive working capital result lower than 1H18 Half-year ended 31 December ($m) 2018 2017 – Timing of Coles demerger during seasonal Cash movement inflow/(outflow) inventory build & removal of the usual Receivables & prepayments 73 (169) working capital unwind du
Slide 11: Capital expenditure
Capital expenditure • Gross capital expenditure, including Half-year ended 31 discontinued operations, decreased $49m to December ($m)1 2018 2017 Var % $955m Bunnings 240 275 (12.7) – Higher capital expenditure in Coles Kmart Group 119 197 (39.6) – Investment in Coregas healthcare Officeworks 20 11
Slide 12: Outlook
Outlook
Slide 13: Outlook
Outlook Operational • BANZ well positioned for continued growth; moderated trading conditions are expected to continue • The Kmart Group is well positioned for the future; in the short term earnings will be affected by moderated trading momentum & continued focus on customer value in Kmart & ongoing
Slide 14: Debt Management
Debt Management
Slide 15: Maintaining strong balance sheet and credit ratings
Maintaining strong balance sheet and credit ratings • Continued strength in Group’s debt position – Net financial debt1 of $0.3b as at 31 December 2018 – Net financial debt1 down from $3.6b at 30 June 2018; significantly decreased from $3.9b at 31 December 2017 – Strong liquidity position, supported
Slide 16: Financial discipline is core to Wesfarmers' strategy
Financial discipline is core to Wesfarmers’ strategy • Recent activities – November 2018: Demerger of Coles completed; received $2b – November 2018 & December 2018: Divestments of Kmart Tyre and Auto, Quadrant Energy & Bengalla; received net proceeds totalling $1.1b • Future debt maturities – March
Slide 17: Management of lease portfolio
Management of lease portfolio • Undiscounted lease commitments totalled Weighted average lease terms $8.6b & represent 74% of Group fixed financial 4.8% 3.1% 2.2% 1.7% 0.8% obligations as at 31 December 2018 12.9% 12.3% 12.1% 8.0% 14.7% – Undiscounted lease commitments reduced by 31.4% 32.3% 32.3% 3
Slide 18: Pro-active debt management
Pro-active debt management • Continued focus on Debt maturity profile as at 31 December 2018 maturity profile & $m AUD$500m repayable 1,500 March 2019 maintaining liquidity 1,000 headroom in revolving 500 bilateral bank facilities 0 (500) • Commitment to (1,000) (1,500) ensure diversity of (2,000) f
Slide 19: Reduced funding costs
Reduced funding costs • Finance costs decreased by 14.9% to $97m in 1H19 due to lower average debt levels • All-in effective borrowing cost 4.90% in 1H19 (1H18: 4.08%) – Increased weighting of higher cost bonds as lower cost bank debt was repaid $m Finance costs & weighted average cost of debt 180 6
Slide 20: Dividends
Dividends • Dividend policy takes into account through the cycle free cash flow requirements & debt refinancing • Fully-franked ordinary interim dividend of $1.00 per share & fully-franked special dividend of $1.00 per share (total dividend amount of $2.3b) – Distributes profits from asset disposals
Slide 21: Questions
Questions
Slide 22: Appendix: 2019 Half-Year Results Briefing Presentation (Operational Extract)
Appendix: 2019 Half-Year Results Briefing Presentation (Operational Extract)
Slide 23: Bunnings Australia & New Zealand
Bunnings Australia & New Zealand
Slide 24: Bunnings Australia & New Zealand performance summary
Bunnings Australia & New Zealand performance summary Half-year ended 31 December ($m) 2018 2017 Var % Revenue 6,909 6,566 5.2 EBITDA1 1,027 953 7.8 Depreciation & amortisation (95) (89) (6.7) EBIT1 932 864 7.9 EBIT margin1 (%) 13.5 13.2 RoC (R12, %) 50.2 47.0 Safety (R12, TRIFR) 12.0 15.8 Total stor
Slide 25: Bunnings Australia & New Zealand overview
Bunnings Australia & New Zealand overview • Revenue growth of 5.2% – Total store growth of 5.5%; store-on-store growth of 4.0% – Continued growth in consumer & commercial, in all product categories & across all major trading regions – Growth was achieved despite high levels of growth in 1H18, high r
Slide 26: Bunnings Australia & New Zealand overview
Bunnings Australia & New Zealand overview • Strong progress on strategic agenda • Driving growth – Continued investment in customer value – Product range expansion & innovation – Ongoing network & layout refresh work • Better experiences – Click & collect pilot trial underway – PowerPass mobile app
Slide 27: Bunnings Australia & New Zealand outlook
Bunnings Australia & New Zealand outlook • Moderated trading conditions are expected to continue • Well positioned to continue to drive growth ‒ Investing further in customer value ‒ Broadening product ranges ‒ Expanding service offerings • Continued development of digital capability ‒ Significant i
Slide 28: Kmart Group
Kmart Group BE Orlurget
Slide 29: Kmart Group performance summary
Kmart Group performance summary Half-year ended 31 December ($m) 2018 2017 Var % Revenue1 4,639 4,604 0.8 EBITDA1 480 497 (3.4) Depreciation & amortisation1 (97) (99) 2.0 EBIT1 383 398 (3.8) EBIT (including KTAS)2 393 415 (5.3) EBIT margin1 (%) 8.3 8.6 RoC3 (R12, %) 33.9 25.6 Safety3 (R12, TRIFR) 21
Slide 30: Kmart Group overview
Kmart Group overview • Revenue increased 0.8% to $4,639 million1 • Kmart: – Total sales growth of 1.0% – Modest decline in comparable sales driven by underperformance in apparel, lower growth in non-seasonal products & exit from DVD category – Strong double digit sales growth in online offer support
Slide 31: Kmart Group overview
Kmart Group overview • Earnings decreased by 3.8% to $383m1 – Kmart earnings declined primarily due to increased store & supply chain expenses resulting from additional stores, increased units sold, underlying cost inflation & implementation of revised product flow through the supply chain to reduce
Slide 32: Kmart Group outlook
Kmart Group outlook • Kmart Group is well positioned for the future • In the short term earnings will be affected by moderated trading momentum & continued focus on customer value in Kmart & ongoing transformation in Target • Kmart will continue to focus on: – Creating a great place to shop that is
Slide 33: Officeworks
Officeworks
Slide 34: Officeworks performance summary
Officeworks performance summary Half-year ended 31 December ($m) 2018 2017 Var % Revenue 1,100 1,017 8.2 EBITDA 90 80 12.5 Depreciation & amortisation (14) (12) (16.7) EBIT 76 68 11.8 EBIT margin (%) 6.9 6.7 RoC (R12, %) 17.2 15.7 Safety (R12, TRIFR) 11.0 10.7 Sales growth1 8.2 9.8 1. 2018 growth re
Slide 35: Officeworks overview
Officeworks overview • Strong headline results Revenue growth momentum % – Revenue growth of 8.2% 12 9.7 10 9.1 8.5 o Strong sales growth in stores & online 8.2 8 7.0 6.3 o Ongoing improvement in sales density 6 5.9 – EBIT growth of 11.8% 4 2 o Effective gross margin & CODB management 0 – RoC (R12)
Slide 36: Officeworks outlook
Officeworks outlook • Continued focus on execution of strategic agenda – Strengthen & expand the customer proposition by continually adding new products & services – Extend ‘every channel’ reach – physical & digital – Enhance productivity & efficiency through effective cost control & working capital
Slide 37: Industrials
Industrials
Slide 38: Industrials performance summary (continuing operations)
Industrials performance summary (continuing operations) Half-year ended 31 December ($m) 2018 2017 Var % Revenue Chemicals, Energy & Fertilisers 874 764 14.4 Industrial & Safety 876 869 0.8 Total 1,750 1,633 7.2 EBITDA Chemicals, Energy & Fertilisers1 221 216 2.3 Industrial & Safety 61 73 (16.4) Tot
Slide 39: Chemicals, Energy & Fertilisers performance summary
Chemicals, Energy & Fertilisers performance summary Half-year ended 31 December1 ($m) 2018 2017 Var % Revenue2 Chemicals 502 439 14.4 Energy 233 223 4.5 Fertilisers 139 102 36.3 Total 874 764 14.4 EBITDA 221 216 2.3 Depreciation & amortisation (36) (35) (2.9) EBIT 185 181 2.2 EBIT3 (including Quadra
Slide 40: Chemicals, Energy & Fertilisers overview
Chemicals, Energy & Fertilisers overview • Modest earnings growth & improved capital efficiency increased RoC by 2.5 ppt • Chemicals earnings slightly lower – Strong WA EGAN1 demand due to continued disruption at competing Burrup plant but AN2 earnings impacted by increasing ammonia input costs & cu
Slide 41: Industrial & Safety performance summary
Industrial & Safety performance summary Half-year ended 31 December ($m) 2018 2017 Var % Revenue 876 869 0.8 EBITDA 61 73 (16.4) Depreciation & amortisation (19) (21) 9.5 EBIT 42 52 (19.2) EBIT margin (%) 4.8 6.0 RoC (R12, %) 7.5 8.3 Safety (R12, TRIFR) 7.3 6.4 2019 Half-year results | 41
Slide 42: Industrial & Safety overview
Industrial & Safety overview • Revenue 0.8% higher than prior corresponding period – Blackwoods revenue broadly in line, with increased Australian revenues from stronger mining demand offset by weakness in construction & New Zealand market – Workwear Group revenue lower due to timing of uniform sale
Slide 43: Industrials outlook
Industrials outlook Chemicals, Energy & Fertilisers • Production & demand for products expected to remain robust • AN to continue to benefit from ongoing disruption at competing Burrup plant but medium term earnings will be affected by an oversupply of EGAN in WA • Growth in natural gas retail is ex
Slide 44: Wesfarmers
We Wesfarmers