Wesfarmers Limited · ASX:WES
Wesfarmers — Debt Investor Presentation (August 2014)
53 slides from Wesfarmers's debt investor presentation, August 2014
Slide 1: 2014 Full-Year Results Debt Investor Update
2014 Full-Year Results Debt Investor Update August 2014 2014 Full--Year Results | 1
Slide 2: Group Performance Highlights
Group Performance Highlights 2014 Full--Year Results | 2
Slide 3: 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 Net profit after tax 2,689 2,2
Slide 4: Financial highlights
Financial highlights • Solid increase in underlying profit • Non-trading items (NTIs) contributed $291 million of after-tax profit for the year • Underlying earnings growth largely driven by: – Stronger performances in Coles & Bunnings – Lower financing costs • Strong focus on disciplined capital de
Slide 5: 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 6: 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 7: 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 8: 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 9: 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 10: Solid operating cash flow generation
Solid operating cash flow generation $m Annual cash realisation % • NPATDA growth (excluding NTIs) 5.7% & cash 4,500 150 realisation of 92%1 (101% adjusted for year-end 3,000 100 timing differences affecting creditors at Coles) • Lower cash realisation in FY14 driven by lower 1,500 50 working capita
Slide 11: Disciplined capital investment
Disciplined capital investment • Effective deployment of capital to capture Year ended 30 June ($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 12: 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 $282 million 250 10 – Sale & leaseback of 15 Bunning
Slide 13: Coles
Coles 2014 Full-Year Results | 13
Slide 14: Coles performance summary
Coles performance summary Year ended 30 June ($m) 2014 2013 % Coles Division Revenue 37,391 35,780 4.5 EBIT1 1,672 1,533 9.1 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 EBIT1,5 1,536 1,368 12.3 EBIT margin (%) 5.3 4.9
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: Home Improvement & Office Supplies
Home Improvement & Office Supplies 2014 Half-Year Results | 19
Slide 20: 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 | 20
Slide 21: 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 22: 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 • High rate of network expansion continuing – Opened 20 warehouse stores in FY14 – Expected to open at least 2
Slide 23: 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.$190m • Strong earnings growth of
Slide 24: Office Supplies highlights
Office Supplies highlights • ‘Every Channel’ strategy continued to gain traction – Enhanced online platform launched – Six new stores opened – Strong gains in B2B market • Strong growth in ROC of 15.8% driven by – Earnings growth – Business model productivity – Disciplined capital management 2014 Fu
Slide 25: Kmart
Kmart 2014 Full-Year Results | 25
Slide 26: Kmart performance summary
Kmart performance summary Year ended 30 June ($m) 2014 2013 % Revenue 4,209 4,167 1.0 EBIT 366 344 6.4 EBIT margin (%) 8.7 8.3 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 2013 to 29 June 2014 & the 52 week period 2 July
Slide 27: 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 28: Target
Target 2014 Half-Year Results | 28
Slide 29: 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 Total sales growth2 (%) (4.2) (1.7) Comparative store sales growth2 (%) (5.3) (3.3) 1 2014 excludes a $677 million impairment of Target’s goodwill (reported as a NTI).
Slide 30: Target highlights
Target highlights • A challenging year with earnings affected by progressive introduction of a ‘first price, right price’ strategy resulting in price deflation ahead of sourcing benefits • Implementation of many changes to fix the basics; adverse earnings impact offset by a number of benefits which
Slide 31: Resources
Resources 2014 Full-Year Results | 31
Slide 32: Resources performance summary
Resources performance summary Year ended 30 June ($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) Coal production (‘000 tonnes) 15,759 13,730 14.8 1 Inc
Slide 33: 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 34: Chemicals, Energy & Fertilisers; Industrial & Safety
Chemicals, Energy & Fertilisers Industrial & Safety 2014 Full-Year Results | 34
Slide 35: Other businesses performance summary
Other businesses performance summary Full-Year ended 30 June ($m) 2014 2013 % Chemicals, Energy & Revenue 1,812 1,805 0.4 Fertilisers 1 Industrial & Safety 1,621 1,647 (1.6) Chemicals, Energy & EBIT 221 249 (11.2) Fertilisers 2 Industrial & Safety 131 165 (20.6) 1 Includes Kleenheat Gas & ALWA (prio
Slide 36: Chemicals, Energy & Fertilisers highlights
Chemicals, Energy & Fertilisers highlights • $95 million gain on sale of 40% interest in ALWA & agreement to sell Kleenheat Gas east coast LPG distribution business (subject to ACCC clearance) • Expansion of ammonium nitrate production capacity from 520ktpa to 780ktpa completed within budgeted time
Slide 37: Industrial & Safety highlights
Industrial & Safety highlights • Sustained market pressures – Reduced activity levels & strong cost focus from industrial customers – Good momentum in New Zealand & Coregas • Good progress on realignment of cost base – Network rationalised through closure of 25 branches & 7.1% reduction in headcount
Slide 38: Insurance
Insurance 2014 Full-Year Results | 38
Slide 39: Insurance performance summary
Insurance performance summary Year ended 30 June ($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 40: 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 41: Outlook
Outlook 2014 Full-Year Results | 41
Slide 42: 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 43: 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 44: Debt Management
Debt Management 2014 Full--Year Results | 44
Slide 45: Financial discipline is core to Wesfarmers’ strategy
Financial discipline is core to Wesfarmers’ strategy Maintaining prudent capital structure and strong credit rating is important to Wesfarmers • Recent activity - Mar 13: A$350 million 7 year Australian domestic bond - Mar 13: US$750 million 5 year Rule 144A bond - Apr 13: A$1.25 billion refinancing
Slide 46: 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 47: Maintaining strong credit metrics
Maintaining strong credit metrics • Strong credit ratings: Moody’s A3 (stable); Standard & Poor’s A- (stable) - Favourable revision of credit metric targets Solid credit • Continued strength in Group’s debt service position metrics - Gross debt of $5.1 billion, net debt of $3.4 billion - Strong liqu
Slide 48: Pro-active debt management
Pro-active debt management • Focus on extending maturity profile and maintaining liquidity headroom in revolving and bilateral facilities Refinancing • Commitment to maintain diversity of funding sources including the domestic and international objectives debt capital markets • Standard terms and co
Slide 49: Pro-active debt management
Pro-active debt management Geographical MTN EUR1,150m DCM Funding US144A USD1,400m Diversity MTN AUD1,850m Debt maturity profile1 $m 1,500 1,000 500 Maturity Profile at 30 0 June 2014 (500) (1,000) (1,500) (2,000) FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 Bank Bilaterals Capital Markets Cash
Slide 50: 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 51: Through the cycle cash flows
Through the cycle cash flows • Dividend policy takes into account through the cycle free cash flow requirements and debt refinancing • Strong phase of capital expenditure led growth • Dividend investment plan neutralised since 2008/09 final dividend; potential to preserve cash • Continued focus on w
Slide 52: Questions
Questions http://www.wesfarmers.com.au/debt-investors.html 2014 Full-Year Results | 52
Slide 53: 2014 Full-Year Results | 53
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