Wesfarmers Limited · ASX:WES
Wesfarmers — Citi Investor Conference London March 2011
40 slides from Wesfarmers's conference presentation, March 2011
Slide 1: Philosophy, Performance & Direction
Philosophy, Performance & Direction Terry Bowen, Finance Director Citi Investor Conference London March 2011
Slide 2: Disclaimer
2 Disclaimer This presentation has been prepared by Wesfarmers Limited. The information contained in this presentation is for information purposes only and does not constitute an offer to issue or arrange to issue, securities or other financial products, nor is it intended to constitute legal, tax o
Slide 3: Philosophy Based on a Single Focus
Philosophy Based on a Single Focus Satisfactory returns to shareholders
Slide 4: Wesfarmers at a glance
4 Wesfarmers at a glance • Commercially focused culture with primary objective of achieving satisfactory returns for shareholders • Focus on four core values: integrity; openness; accountability; & boldness • Strength of diversified operations with strong portfolio of growth & cash generating busine
Slide 5: The Wesfarmers Way
5 The Wesfarmers Way OBJECTIVE Satisfactory return to shareholders VALUE CREATING STRATEGIES Strengthen existing Secure growth Ensure sustainability Renew the portfolio businesses through opportunities through through responsible through value-adding operating excellence and entrepreneurial long-ter
Slide 6: Portfolio of leading brands
6 Portfolio of leading brands Retail Businesses Industrial Businesses Insurance
Slide 7: Strength of unique network coverage
7 Strength of unique network coverage Big Box Retail Discount Dept. Stores 8 10 147 96 Consumer 2 24 4 Staples Retail 80 106 73 559 21 Industrial 58 37 46 250 22 Insurance* 22 131 15 218 83 *Wesfarmers Insurance operates out of four locations in the United Kingdom & 131 721 33 one location in New Ca
Slide 8: Management Team
8 Management Team Managing Director Richard Goyder Finance Director Terry Bowen Food & Liquor Retailing Coles Ian McLeod Big Box Retailing Home Improvement John Gillam & Office Supplies Discount Department Target Launa Inman Store Retailing Kmart Guy Russo Insurance Insurance Rob Scott Industrials R
Slide 9: Group Results
Group Results
Slide 10: Group financial highlights
10 Group financial highlights • First half profit after tax of A$1,173 million, up 33.4% • Operating revenue of A$28,074 million, up 5.8% • Group EBIT result of A$1,917 million, up 23.9% – Growth in earnings across most divisions – Solid retail performance in challenging trading conditions, up 5.6%
Slide 11: Group performance highlights
11 Group performance highlights Retail • Coles‟ performance was pleasing with revenue up 5.9% & EBIT up 18.3%; good progress continues to be made on the turnaround • Bunnings‟ result was solid with operational improvements across its three strategic pillars: widest range; lowest price; & best servic
Slide 12: Group performance highlights (cont.)
12 Group performance highlights (cont.) Industrials • Resources earnings were significantly up on increased coal prices despite higher than average rainfall affecting production & increasing mining costs • WES CEF & WIS recorded strong results driven by increased resource sector activity, good opera
Slide 13: Group performance summary
13 Group performance summary Half Year ended 31 December (A$m) 2010 2009 % Operating revenue 28,074 26,533 5.8 EBITDA 2,378 1,996 19.1 EBIT 1,917 1,547 23.9 Finance costs (272) (319) 14.7 Tax expense (472) (349) (35.2) Net profit after tax 1,173 879 33.4 Operating cash flow 1,960 2,083 (5.9) Earning
Slide 14: Earnings per share (EPS)
14 Earnings per share (EPS) • Return to EPS growth, following impact of equity raisings on 2008 & 2009 result • 33.3% growth in EPS reflects strong growth in earnings from Retail & Industrial businesses Au. cps (WANOS) 150 120 90 60 125.1 98.1 103.6 101.7 76.3 30 0 1H FY07 1H FY08 1H FY09 1H FY10 1H
Slide 15: Diversified earnings
15 Diversified earnings Divisional EBIT Percentage of Half Year ended (1H FY11, A$m) Divisional EBIT 2010 2009 % 31 December (A$m) 2,000 Insurance Insurance 3%; WIS (1H10: 4%) Coles 575 486 18.3 WES CEF Home Improvement 457 422 8.3 Industrial 24%; Office Supplies 32 27 18.5 Resources (1H10: 9%) 1,50
Slide 16: Continued focus on divisional ROC
16 Continued focus on divisional ROC • ROC underpins long standing culture of financial discipline • Divisional focus on growth in ROC through earnings growth & improvements in capital efficiency 2010 2009 Rolling 12 months to 31 December EBIT Cap Emp ROC ROC A$m A$m % % Coles 1,051 14,868 7.1 5.9 H
Slide 17: Operating Divisions
Operating Divisions
Slide 18: Coles
Coles 18 2011 Half-year performance Highlights Financial Performance Half-Year ended 31 December (A$m) 2010 2009 % • Food & Liquor 6.3%1 total sales growth & Coles Division Revenue 16,059 15,161 5.9 comp. sales growth of 6.4%1 EBIT 575 486 18.3 ROC (R12 %) 7.1 5.9 • Strong EBIT growth of 18.3% Safet
Slide 19: Home Improvement & Office Supplies
Home Improvement & Office Supplies 19 2011 Half-year performance Highlights Financial Performance – Home Improvement • Trading revenue growth of 4.4% Half-Year ended 31 December (A$m) 2010 2009 % – 4.1% total store sales growth (store-on-store Revenue 3,572 3,402 5.0 growth of 1.7%) Trading Revenue
Slide 20: Home Improvement & Office Supplies
Home Improvement & Office Supplies 20 2011 Half-year performance Highlights Financial Performance – Office Supplies • Officeworks retail store sales growth of Half-Year ended 31 December (A$m) 2010 2009 % 7.5% Revenue 706 662 6.6 – Underpinned by strong transaction growth EBIT 32 27 18.5 • OW Busine
Slide 21: Target
Target 21 2011 Half-year performance Highlights Financial Performance • Sales results affected by a difficult retail Half-Year ended 31 December (A$m) 2010 2009 % environment Revenue 2,120 2,182 (2.8) – Significant price deflation due to strong AUD EBIT 206 279 (26.2) & competition EBIT margin (%) 9
Slide 22: Kmart
Kmart 22 2011 Half-year performance Highlights Financial Performance • Improved underlying profitability Half-Year ended 31 December (A$m) 2010 2009 % – 13.0% increase in profit to $174 million, driven Revenue 2,271 2,226 2.0 by gross margin improvement & cost control EBIT1,2 174 154 13.0 • Customer
Slide 23: Insurance
Insurance 23 2011 Half-year performance Highlights Financial Performance • Increased earnings across underwriting & Half-Year ended 31 December (A$m) 2010 2009 % broking Gross Written Premium Underwritten 659 680 (3.1) • Revenue in line with 1H FY10 Total Revenue 872 868 0.5 notwithstanding underwri
Slide 24: Resources
Resources 24 2011 Half-year performance Highlights Financial Performance • Performance Half-Year ended 31 December (A$m) 2010 2009 % – Strong 1H FY11 financial result given difficult Revenue1 957 624 53.4 weather conditions EBITDA 305 61 400.0 – Curragh mine cash costs (A$/t) increased Depreciation
Slide 25: Chemicals, Energy & Fertilisers
Chemicals, Energy & Fertilisers 25 2011 Half-year performance Highlights Financial Performance • Increased earnings from ammonia & Half-Year ended 31 December (A$m) 2010 20092 % ammonium nitrate Revenue Chemicals 315 292 7.9 Energy3 286 252 13.5 – Strong demand & plant performances Fertilisers 121 1
Slide 26: Industrial & Safety
Industrial & Safety 26 2011 Half-year performance Highlights Financial Performance • Strong results supported by market conditions Half-Year ended 31 December (A$m) 2010 20091 % & competitive position Revenue 774 689 12.3 – 12.3% sales growth (1H FY10 affected by GFC) EBITDA 92 78 17.9 – 21.5% EBIT
Slide 27: Other business performance summary
27 Other business performance summary Holding Half-Year ended 31 December (A$m) 2010 2009 % % Associates share of profit/(loss): Gresham Private Equity Funds Various (28) 29 n.m. Gresham Partners 50 (1) 2 n.m. Wespine 50 5 4 25.0 Bunnings Warehouse Property Trust 23 12 10 20.0 Associates sub-total (
Slide 28: Capital Management
Capital Management
Slide 29: Balance sheet & dividend
29 Balance sheet & dividend • Strong balance sheet provides financial flexibility • Operating cash flows continue to provide balance sheet support – Working capital focus remains – Seasonally stronger working capital cash flows in the first half • Credit ratings maintained – Standard & Poor‟s BBB+ (
Slide 30: Working capital management
30 Working capital management • Slow down in working capital improvement as foreshadowed – 1H FY10 cash flows reflect supplier reset work, Kmart off-site closures, strong seasonal stock sell through & significant fertiliser price declines at CSBP • Overall net working capital days improvement for re
Slide 31: Portfolio of strong cash generating assets
31 Portfolio of strong cash generating assets • Cash realisation ratio remained strong at 120.0% • Seasonally stronger first half cash flows A$m % 2,500 200 2,000 160 1,500 120 1,000 80 500 40 0 0 1H FY07 1H FY08 1H FY09 1H FY10 1H FY11 NPATDA* Operating Cash Flow Cash Realisation Ratio (RHS) * 1H F
Slide 32: Investment expenditure (cash basis)
32 Investment expenditure (cash basis) • Continued investment to drive future growth, including A$345 million on land & buildings • FY11 capital expenditure estimate A$2.2 to A$2.4 billion, subject to changes in freehold property activity Capital Expenditure (1H FY11, A$m) Capital Expenditure Insura
Slide 33: Debt financing
33 Debt financing • Further strengthening of the Group‟s liquidity position – Cash interest cover (R12) improved to 7.7 times – Fixed charges cover (R12) improved to 2.6 times – Net debt to equity reduced to 14.8% • Gross debt of A$5.0 billion, net debt of A$3.7 billion – Established new syndicated
Slide 34: Extension of debt tenor
34 Extension of debt tenor • Further lengthening of Group‟s debt maturity profile – Established A$2.5 billion revolving syndicated facility with equal maturities in December 2013 & December 2014 – Proceeds used to repay A$2.5 billion of syndicated debt facility maturing in December 2011 (A$1.8 billi
Slide 35: Outlook
Outlook
Slide 36: Flood & storm events
Flood & storm events 36 (Post 31 December 2010) • Second half earnings will be negatively affected by severe flood & storm events, including cyclone Yasi, experienced in Q3 FY11 • The financial impact, estimated to date, on the Group‟s retail businesses includes: – Writedown of damaged plant, equipm
Slide 37: Outlook
37 Outlook • Strong first half result provides a solid foundation for the remainder of the financial year Retail • The Group‟s retail businesses are well placed but performance is subject to any adverse impact to consumer confidence & a competitive retail environment • Coles will continue to impleme
Slide 38: Outlook
38 Outlook Insurance • Underwriting performance before one-off events is expected to continue to benefit from improved risk selection & portfolio remediation Industrials • Strong demand & increased price prospects for coal; tempered by difficult mining conditions, industry cost pressures & carryover
Slide 39: Questions
Questions ii
Slide 40: For all the latest news visit www.wesfarmers.com.au
For all the latest news visit www.wesfarmers.com.au
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