Wesfarmers Limited · ASX:WES
Wesfarmers — Debt Investor Presentation (August 2012)
38 slides from Wesfarmers's debt investor presentation, August 2012
Slide 1: 2012 Full-Year Results Debt Investor Update
2012 Full-Year Results Debt Investor Update August 2012
Slide 2: Group Performance Highlights
Group Performance Highlights
Slide 3: Group performance highlights
3 Group performance highlights • Operating revenue of $58.1 billion, up 5.8% • Earnings before interest & tax of $3,549 million, up 9.8% • Net profit after tax (NPAT) of $2,126 million, up 10.6% • Operating cash flows of $3,641 million, up 24.8% • Free cash flows of $1,472 million, up 41.4% • Fully-
Slide 4: Group performance highlights (cont)
4 Group performance highlights (cont) • Strong growth in retail earnings – Continued price reinvestment supported by operating efficiencies – Improvements in value, offer & service driving strong transaction growth – Store network improvements, in particular by Coles & Bunnings – Improvements in ran
Slide 5: Group performance summary
5 Group performance summary Year ended 30 June ($m) 2012 2011 % Revenue 58,080 54,875 5.8 EBITDA 4,544 4,155 9.4 EBIT 3,549 3,232 9.8 Finance costs (505) (526) 4.0 Net profit after tax 2,126 1,922 10.6 Operating cash flows 3,641 2,917 24.8 Cash interest cover 10.8 9.5 13.7 Net debt to EBITDA 1.1 1.0
Slide 6: Strength through diversified earnings
6 Strength through diversified earnings Divisional EBIT Percentage of Year ended 30 June (FY12, $m) Divisional EBIT 2012 2011 % Insurance 0%; EBIT ($m) Insurance WIS (FY11: 1%) Coles 1,356 1,166 16.3 3,500 WES CEF Industrial 24%; Home Improvement 841 802 4.9 (FY11: 24%) Resources Office Supplies 85
Slide 7: Portfolio of strong cash generating assets
7 Portfolio of strong cash generating assets • 24.8% growth in operating cash flows through strong earnings growth & effective working capital management $m % 4,000 160 3,500 3,000 120 2,500 2,000 80 1,500 1,000 40 500 0 0 FY2009 FY2010 FY2011 FY2012 NPATDA (1) Operating Cash Flow Cash Realisation R
Slide 8: Working capital management
8 Working capital management • Disciplined working capital Cash Movement ($m) Year ended 30 June 1 Inflow/(Outflow) 2012 2011 management supporting strong Inventory (16) (347) growth in operating cash flows Payables 274 396 Receivables (362) (312) • Reduction in retail working capital Net working ca
Slide 9: Strong capital investment phase underway
9 Strong capital investment phase underway • Investment in retail portfolio Year ended 30 June 2012 2011 % – Improvement in the Bunnings store ($m)1 Coles 1,193 761 56.8 network HI & OS 587 613 (4.2) – Strong investment in improving Target 65 87 (25.3) Coles network and, in particular, Kmart 134 105
Slide 10: Divisional Performance
Divisional Performance
Slide 11: Coles performance summary
Coles 11 Coles performance summary Year ended 30 June ($m) 2012 2011 % Revenue 34,117 32,073 6.4 EBIT 1,356 1,166 16.3 Food & Liquor Revenue1 26,561 25,282 5.1 Total store sales growth %2,3 4.6 6.3 Comp store sales growth %2,3 3.7 6.3 Trading EBIT1 1,232 1,071 15.0 EBIT Margin % 4.6 4.2 Convenience
Slide 12: Sustained turnaround momentum
Coles 12 Sustained turnaround momentum • Outperformed the Food & Liquor Index F&L R12 sales density market for last three years 120 115 – 16 consecutive quarters of sales 110 density improvement 105 100 – Strong underlying transaction & 95 volume growth 90 Q109 Q309 Q110 Q310 Q111 Q311 Q112 Q312 • S
Slide 13: Ongoing efficiency gains
Coles 13 Ongoing efficiency gains • Sustainable efficiencies in store Index Reduction in wastage : sales operations 100 90 – $400 million reduction in waste 80 over last four years with more 70 progress expected 60 50 – Automated ordering and receiving 40 of deliveries Q109 Q309 Q110 Q310 Q111 Q311
Slide 14: Our customers come first, always
Coles 14 Our customers come first, always • Expanding & renewing the store • Improving customer service network – Customer service training for – 2% additional net selling area in FY12 almost 30,000 Team Members – Strong pipeline to secure >2% net – Craft skills training programs for selling area gr
Slide 15: HIOS performance summary
Home Improvement & 15 Office Supplies HIOS performance summary Year ended 30 June ($m) 2012 2011 % Revenue Home Improvement 7,162 6,780 5.6 Office Supplies 1,482 1,471 0.7 8,644 8,251 4.8 EBIT Home Improvement 841 802 4.9 Office Supplies 85 80 6.3 926 882 5.0
Slide 16: HIOS highlights
Home Improvement & 16 Office Supplies HIOS highlights Home Improvement • Trading revenue growth of 5.6% – 5.3% consumer sales growth, store-on-store growth of 3.9% – 6.9% lift in commercial sales • Opened 16 trading locations -13 new warehouse stores and one smaller format store and two trade centre
Slide 17: Target performance summary
Target 17 Target performance summary Year ended 30 June ($m) 2012 2011 % Revenue 3,738 3,782 (1.2) EBIT 244 280 (12.9) EBIT (excluding restructuring provision)1 284 280 1.4 EBIT2 margin (%) 6.5 7.4 Total sales growth3 (%) (1.8) (1.2) Comparative store sales growth3 (%) (2.1) (1.2) 1 Excluding restru
Slide 18: Target highlights
Target 18 Target highlights • Earnings affected by $40 million provision for future supply chain restructuring • Improvements in underlying performance – Focus on profitability of promotions & clearance activity – Introduction of ‘Target Essentials’ range – Promotions which focus on quality, style &
Slide 19: Kmart performance summary
Kmart 19 Kmart performance summary Year ended 30 June ($m) 2012 2011 % Revenue 4,055 4,036 0.5 EBIT1 266 201 32.3 EBIT margin (%) 6.6 5.0 Total sales growth2 (%) 0.0 0.4 Comparative store sales growth2 (%) 0.0 0.3 1 2012 excludes $2 million earnings relating to Coles Group Asia overseas sourcing ope
Slide 20: Kmart highlights
Kmart 20 Kmart highlights • Strong EBIT growth & margin improvement – Improved product sourcing – Better stock management – Everyday core range performing well • Connecting more Australian & New Zealand families with the new Kmart – 10 consecutive quarters of growth in customer transactions & units
Slide 21: Insurance performance summary
Insurance 21 Insurance performance summary Year ended 30 June ($m) 2012 2011 % Total Revenue 1,915 1,739 10.1 EBITA Underwriting (58) (29) (100.0) EBITA Broking 79 62 27.4 EBITA Other (4) (3) (33.3) EBITA Insurance Division 17 30 (43.3) EBITA Insurance Division (excluding EQ2)1 125 30 316.7 EBIT Ins
Slide 22: Insurance highlights
Insurance 22 Insurance highlights • Underwriting earnings significantly affected by $108 million increase in reserves associated with 22 February 2011 Christchurch earthquake (EQ2) • Strong increase in earnings from Broking, reflecting the successful integration of acquired businesses & solid sales
Slide 23: Resources performance summary
Resources 23 Resources performance summary Year ended 30 June ($m) 2012 2011 % Revenue1 2,132 1,778 19.9 Royalties2 (368) (229) (60.7) Mining & other costs3 (1,175) (1,061) (10.7) EBITDA 589 488 20.7 Depreciation & amortisation (150) (119) (26.1) EBIT4 439 369 19.0 Coal production (‘000 tonnes)5 14,
Slide 24: Resources highlights
Resources 24 Resources highlights • Ongoing focus on safety performance – 42% reduction in Total Reportable Injury Frequency Rate (TRIFR) at Curragh • Increased production volumes driven by mine expansions – Curragh expansion to 8.0 – 8.5mtpa metallurgical coal exports completed within budget – Curr
Slide 25: Other businesses performance summary
25 Other businesses performance summary Year ended 30 June ($m) 2012 2011 % Chemical, Energy & Revenue 1,786 1,641 8.8 Fertilisers1 Industrial & Safety 1,690 1,557 8.5 Chemical, Energy & EBIT 258 283 (8.8) Fertilisers2,3,4 Industrial & Safety 190 166 14.5 1 Includes Kleenheat Gas (KHG), ALWA, enGen
Slide 26: Other businesses highlights
26 Other businesses highlights Chemicals, Energy & Fertilisers • Construction underway to expand ammonium nitrate (AN) production capacity from 520 thousand tonnes per annum (ktpa) to 780 ktpa – Board approval received in December 2011 for $550 million expansion • Chemicals earnings increased due to
Slide 27: Outlook
Outlook
Slide 28: Outlook
28 Outlook Retail • Investments in value, merchandising, service, store networks & productivity initiatives expected to drive further earnings growth – Sustained turnaround momentum expected in Coles, Kmart & Officeworks – Bunnings’ solid performance expected to continue – New initiatives within tra
Slide 29: Outlook
29 Outlook Resources • Recently completed mine expansions will support higher sales volumes • Recent movements in export coal prices & the exchange rate are unfavourable, in the short term, for coal revenues • We believe long term metallurgical coal market fundamentals remain sound Industrial & Safe
Slide 30: Debt Management
Debt Management
Slide 31: Financial discipline is core to Wesfarmers' strategy
31 Financial discipline is core to Wesfarmers’ strategy Maintaining prudent capital structure and a A-/Baa1 credit rating is important to Wesfarmers • Apr 08: A$2.6 billion equity raising and US$650 million 5 year Rule 144A bond • Feb 09: A$4.6 billion equity raising • Sep 09: A$500 million 5 year A
Slide 32: Strong credit metrics
32 Strong credit metrics Cash interest cover ratio (times) Fixed charges cover ratio (times) 12.0 3.0 10.0 8.0 2.0 6.0 4.0 1.0 2.0 - - FY2008 FY2009 FY2010 FY2011 FY2012 FY2008 FY2009 FY2010 FY2011 FY2012 S&P EBIT interest coverage - lease adj. (times) S&P Debt / EBITDA - lease adj. (times) 4.0 6.0
Slide 33: Pro-active debt management
33 Pro-active debt management Debt as at 30 June 2008 Debt as at 30 June 2012 (pro- forma: includes 10 year Euro bond)
Slide 34: Pro-active debt management
34 Pro-active debt management • Focus on extending maturity profile and maintaining liquidity headroom in revolving and bilateral facilities Refinancing • Commitment to diversity of funding sources including the domestic and international debt capital markets objectives • Standard terms and conditio
Slide 35: Through the cycle cash flows
35 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 • Potential cash proceeds from future asset sales - Retail property once development sites maximised (freehold land
Slide 36: Questions
Questions OXON RIO Wesfarmers
Slide 37: Important notice
Important notice This presentation is not an offer, solicitation or recommendation with respect to the purchase or sale of any security in the United States or any other jurisdiction. Securities may not be offered or sold in the United States absent registration under the Securities Act of 1933 (the
Slide 38: For all the latest news visit www.wesfarmers.com.au
For all the latest news visit www.wesfarmers.com.au
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