Slide 1: 2019 Full-year Results Briefing Presentation
2019 Full-year Results Briefing Presentation To be held on Tuesday 27 August 2019
Slide 2: Presentation outline
Presentation outline Item Presenter Page Group Performance Overview Rob Scott 3 Group Balance Sheet & Cash Flow Anthony Gianotti 11 Bunnings Australia & New Zealand Michael Schneider 23 Kmart Group Ian Bailey 29 Industrials David Baxby 35 Officeworks Sarah Hunter 44 Group Outlook Rob Scott 49 2019 F
Slide 3: Group Performance Overview
Group Performance Overview Rob Scott Managing Director, Wesfarmers Limited
Slide 4: Progress on strategic agenda: FY19 highlights
Progress on strategic agenda: FY19 highlights • Significant portfolio repositioning Portfolio • Successful demerger of Coles management • Divestments of Bengalla, Kmart Tyre & Auto (KTAS) & stake in Quadrant Energy • Divisional leadership - Kmart Group, Officeworks, Target People • Corporate Office
Slide 5: Managing businesses for long-term success
Managing businesses for long-term success Our divisions remain focused on managing their businesses for long-term success & value creation A relentless focus Investing for the Building on unique on customers long term capabilities & platforms • Maintaining price leadership • Constant product innovat
Slide 6: Financial overview
Financial overview Excluding Variance to pcp % Year ended 30 June Reported sig. items1 (ex. sig. items1) Results from continuing operations2,3 Earnings before interest & tax ($m) 2,974 2,974 12.2 Net profit after tax ($m) 1,940 1,940 13.5 Basic earnings per share (cps) 171.5 171.5 13.5 Results inclu
Slide 7: Divisional earnings summary
Divisional earnings summary EBIT ($m) Year ended 30 June 2019 2018 Var % Var $m % of divisional EBIT Bunnings Australia & New Zealand 1,626 1,504 8.1 122 Kmart Group (continuing operations)1,2 540 626 (13.7) (86) Industrials (continuing operations)3 519 497 4.4 22 WesCEF 433 379 14.2 54 Industrial &
Slide 8: Divisional return on capital
Divisional return on capital Rolling 12 months to 30 June 2019 2018 EBIT Cap Emp RoC RoC Var ($m) ($m) (%) (%) (ppt) Bunnings Australia & New Zealand 1,626 3,220 50.5 49.4 1.1 Kmart Group (continuing operations)1,2 540 1,853 29.1 32.2 (3.1) Industrials (continuing operations)3 519 2,801 18.5 18.3 0.
Slide 9: Long-term value creation
Long-term value creation We are committed to delivering satisfactory Wealth creation & value distribution1 returns to our shareholders $29.6b $6.5b $1.5b Payments to Employees Government suppliers We believe this is only possible to achieve over $0.2b Lenders the long term by $14.5b $48.7b $3.2b Val
Slide 10: Group performance summary
Group performance summary Year ended 30 June ($m) 2019 2018 Var % Results from continuing operations1 EBIT 2,974 2,344 26.9 EBIT (excl. significant items)2 2,974 2,650 12.2 NPAT 1,940 1,409 37.7 NPAT (excl. significant items)2 1,940 1,709 13.5 Earnings per share (excl. significant items)2 (cps) 171.
Slide 11: Group Balance Sheet & Cash Flow
Group Balance Sheet & Cash Flow Anthony Gianotti Chief Financial Officer, Wesfarmers Limited
Slide 12: Significant items summary
Significant items summary Year ended 30 June 2019 ($m) Pre-tax Tax impact Post-tax Gain on demerger of Coles 2,319 (55) 2,264 Gain on sale of Bengalla 679 (34) 645 Gain on sale of KTAS 267 (23) 244 Gain on sale of Quadrant Energy 138 (18) 120 Provision relating to supply chain modernisation in Coles
Slide 13: Discontinued operations summary
Discontinued operations summary Year ended 30 June ($m) Effective date 2019 2018 Coles1 28 Nov 2018 478 1,500 Bengalla (40% interest) 3 Dec 2018 94 172 KTAS 1 Nov 2018 10 34 Quadrant Energy 27 Nov 2018 5 11 (13.2% indirect interest) Curragh & BUKI During FY18 - (79) Total EBIT from discontinued oper
Slide 14: Other businesses performance summary
Other businesses performance summary Full-year ended 30 June ($m) Holding % 2019 2018 Var % Share of profit of associates Coles 15 128 - n.m. BWP Trust 25 42 45 (6.7) Other associates1,2 Various 45 11 n.m. Sub-total share of profit of associates 215 56 n.m. Interest revenue3 27 12 n.m. Other2,4 1 (6
Slide 15: Operating & free cash flows
Operating & free cash flows Divisional cash generation1 • Divisional cash generation1 from continuing excluding discontinued operations2 operations2 remained strong at 97% 120% • Reported operating cash flows of $2,718m FY15-FY19 average = 103% 100% impacted by 80% – Demerger of Coles resulting in r
Slide 16: Working capital management
Working capital management • Group working capital movements including Year ended 30 June ($m) 2019 2018 discontinued operations impacted by timing of Working capital movements (incl. discontinued operations)1 the Coles demerger during seasonal inventory Cash movement inflow/(outflow) build & remova
Slide 17: Capital expenditure
Capital expenditure Continuing operations Year ended 30 June ($m)1 2019 2018 Var % • Gross capital expenditure from continuing Bunnings 470 497 (5.4) operations decreased $80m to $860m Kmart Group 205 286 (28.3) – Decrease in Kmart Group capital expenditure Officeworks 42 45 (6.7) due to brand acqui
Slide 18: Net financial debt
Net financial debt Movements in net financial debt ($b)1 3.6 3.6 2.5 Ordinary (2.7) (2.0) dividends 2.1 0.7 1.1 (1.1) Special dividend Net debt Proceeds from Net proceeds Dividends paid Operating Net capex & other Net debt 30 June 2018 Coles demerger on divestments cash flows investing activities 30
Slide 19: Debt management
Debt management Finance costs & weighted average cost of debt Debt maturity profile $m $m 375 6.0% 1,200 300 800 4.5% 225 400 3.0% 150 0 1.5% (400) 75 0 0.0% (800) FY15 FY16 FY17 FY18 FY19 FY19 FY20 FY21 FY22 FY23 Bank facilities Capital markets Cash & equivalents Finance costs [LHS] Weighted averag
Slide 20: Management of lease portfolio
Management of lease portfolio Fixed financial obligations Weighted average lease terms3 4.8% 3.1% 2.2% 1.7% 0.6% Bank facilities 6.8% & bonds1 12.9% 12.3% 12.1% 14.7% Demerger of Coles 24% ($2.6b) 32.9% 31.4% 32.3% 32.3% 30.7% Operating 52.6% 53.2% 53.9% 59.7% 49.8% leases2 76% ($8.5b) FY15 FY16 FY1
Slide 21: Updated estimate: impact of new lease accounting standard
Updated estimate: impact of new lease accounting standard • Wesfarmers will adopt the new lease accounting Estimated pro forma impact on standard (AASB16) in FY20 FY19 financials (continuing operations) • Preliminary impact of standard as at Balance sheet (as at 1 July 2019) 1 July 2018 was provided
Slide 22: Dividends & capital management
Dividends & capital management Shareholder distributions (declared) $/share 3.50 3.00 2.78 Final dividend reflects earnings from 2.50 2.23 2.23 continuing operations 2.00 1.00 2.00 1.86 1.50 1.20 1.20 1.11 0.95 0.78 Interim dividend included earnings from 1.00 discontinued 0.50 0.89 0.91 1.03 1.03 1
Slide 23: Bunnings Australia & New Zealand
Bunnings Australia & New Zealand Michael Schneider Managing Director, Bunnings Group
Slide 24: Bunnings performance summary
Bunnings performance summary Year ended 30 June ($m) 2019 2018 Var % Revenue 13,166 12,544 5.0 EBITDA1 1,818 1,683 8.0 Depreciation & amortisation (192) (179) (7.3) EBIT1 1,626 1,504 8.1 EBIT margin1 (%) 12.3 12.0 EBIT margin excluding property (%) 11.7 11.7 RoC (R12, %) 50.5 49.4 Safety (R12, TRIFR
Slide 25: Bunnings sales overview
Bunnings sales overview • Revenue growth of 5.0% to $13,166m – Total store sales growth 5.2% – Store-on-store growth of 3.9% • Sales growth reflects diversity of customer base & resilience of product offering despite softening conditions in residential housing market • Continued growth across the bu
Slide 26: Bunnings earnings overview
Bunnings earnings overview • Reported EBIT increased 8.1% to $1,626m – Includes higher than usual net property contribution of $85m • EBIT excluding property contribution up 4.8% – Continued focus on cost control – Stable EBIT margin performance relative to previous corresponding period • Operating
Slide 27: Bunnings progress on strategic agenda
Bunnings progress on strategic agenda Good progress on strategic agenda • Driving Stronger Growth – 17 new trading locations opened – Wider commercial market penetration – Range expansion & innovation – Further investment in customer value • Better Experiences – Click & collect rollout commenced – E
Slide 28: Bunnings outlook
Bunnings outlook • Moderated trading conditions are expected to continue • Well positioned for continued growth – Further investment in customer value – Category expansion – Expanding service & installation offerings • Ongoing development of broader digital capabilities – Significant investment in o
Slide 29: Kmart Group
Kmart Group Ian Bailey Managing Director, Kmart Group
Slide 30: Kmart Group performance summary
Kmart Group performance summary Year ended 30 June1 ($m) 2019 2018 Var % Revenue2 8,598 8,505 1.1 EBITDA3 733 820 (10.6) Depreciation & amortisation (193) (194) 0.5 EBIT3 540 626 (13.7) EBIT (including KTAS)4 550 660 (16.7) EBIT margin3 (%) 6.3 7.4 RoC3,5 (R12, %) 29.1 32.2 Safety (R12, TRIFR) 19.4
Slide 31: Kmart sales overview
Kmart sales overview • Total sales growth of 1.5% • Flat comparable sales growth – lower growth in apparel & non-seasonal products – exit from DVD category – offset by modest growth in home & kids general merchandise • Implemented initiatives to address stock flow & productivity issues to support fu
Slide 32: Target sales overview
Target sales overview • Total sales declined 1.5%, reflecting ongoing rationalisation of the store network • Comparable sales declined 0.8% – Trading momentum moderated in 2H19 – Customer value proposition yet to resonate with customers in a sustainable way – Growth in ‘Best’ ranges, particularly in
Slide 33: Kmart Group overview
Kmart Group overview • Earnings decreased by 13.7% to $540m1 Kmart Group EBIT & RoC $m % • Kmart earnings declined, impacted by: 40.0% 600 – Moderation in sales momentum 30.0% 450 – Implementation of a number of initiatives to 20.0% 300 optimise product flow & store processes – Increase in stock los
Slide 34: Kmart Group outlook
Kmart Group outlook • The Kmart Group remains well positioned for the future • Kmart ended the period with improved sales momentum & will continue to focus on – creating a great place to shop that is simple to run & delivers better products at even lower prices – maintaining lowest price leadership
Slide 35: Industrials
Industrials David Baxby Managing Director, Industrials
Slide 36: Industrials performance summary
Industrials performance summary Year ended 30 June ($m) 2019 2018 Var % Revenue Chemicals, Energy & Fertilisers1,2 2,078 1,830 13.6 Industrial & Safety 1,752 1,750 0.1 Total 3,830 3,580 7.0 EBITDA Chemicals, Energy & Fertilisers1,2 513 458 12.0 Industrial & Safety 124 159 (22.0) Total 637 617 3.2 EB
Slide 37: Chemicals, Energy & Fertilisers performance summary
Chemicals, Energy & Fertilisers performance summary Year ended 30 June1 ($m) 2019 2018 Var % Revenue2 Chemicals 1,000 932 7.3 Energy 468 423 10.6 Fertilisers 610 475 28.4 Total 2,078 1,830 13.6 EBITDA3 513 458 12.0 Depreciation & amortisation (80) (79) (1.3) EBIT 433 379 14.2 EBIT (including Quadran
Slide 38: WesCEF operational performance
WesCEF operational performance WesCEF TRIFR Chemicals - Production Volume & Availability kt % 18 1,200 100 16 1,050 14 90 900 12 750 80 10 600 8 450 70 6 4 300 60 2 150 0 0 50 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Production volume (LHS) Availabili
Slide 39: Chemicals, Energy & Fertilisers overview
Chemicals, Energy & Fertilisers overview • Earnings of $433m, 14.2% increase on the prior year ‒ FY19 earnings included one-off insurance proceeds of $30m, partially offset by a one-off provision of $19m; earnings up 11.3% excluding one offs • Earnings growth across all business units with improved
Slide 40: Industrial & Safety performance summary
Industrial & Safety performance summary Year ended 30 June ($m) 2019 2018 Var % Revenue 1,752 1,750 0.1 EBITDA 124 159 (22.0) Depreciation & amortisation (38) (41) 7.3 EBIT 86 118 (27.1) EBIT margin (%) 4.9 6.7 RoC (R12, %) 5.8 8.4 Safety (R12, TRIFR) 6.9 6.6 2019 Full-year results | 40
Slide 41: Industrial & Safety overview
Industrial & Safety overview • The performance of Industrial & Safety was impacted by a disappointing year in Blackwoods • Revenue in line with the prior year – Blackwoods’ revenue declined, with increased demand in mining, offset by lower sales in construction & SME segment – Workwear Group’s reven
Slide 42: Chemical, Energy & Fertilisers outlook
Chemical, Energy & Fertilisers outlook • Production & demand for chemical products expected to remain robust • AN to continue to benefit from ongoing disruption at competing Burrup plant; beyond this earnings are expected to be affected by an oversupply of EGAN in WA • AN margin to be impacted in FY
Slide 43: Industrial & Safety outlook
Industrial & Safety outlook • Australian market conditions & demand expected to remain relatively stable, but weakness in NZ market is expected to persist • ERP, supply chain & digital investment will continue in Blackwoods & Workwear Group; these activities are now expected to continue for the next
Slide 44: Officeworks
Officeworks Sarah Hunter Managing Director, Officeworks
Slide 45: Officeworks performance summary
Officeworks performance summary Year ended 30 June ($m) 2019 2018 Var % Revenue1 2,314 2,142 8.0 EBITDA 195 181 7.7 Depreciation & amortisation (28) (25) (12.0) EBIT 167 156 7.1 EBIT margin (%) 7.2 7.3 RoC (R12, %) 17.0 16.6 Safety (R12, TRIFR) 8.5 10.2 Sales growth2 7.6 9.1 1. 2019 revenue reflects
Slide 46: Officeworks overview
Officeworks overview • Sales growth of 7.6% $m Sustained sales growth 2,400 – Every channel approach delivering strong +7.6% 2,200 +9.1% sales growth in both stores & online 2,000 +6.1% – Ongoing improvement in sales density +8.1% 1,800 – Online sales penetration in excess of 20% 1,600 – Strong mome
Slide 47: Officeworks overview
Officeworks overview Progress on strategic agenda • Our team – Enterprise Agreement lodged with Fair Work Commission • Customer experience – Trialled new store format (Mentone, Vic) – 45% increase in click & collect orders year-on-year – Improvement in customer satisfaction levels • Connecting with
Slide 48: Officeworks outlook
Officeworks outlook • Focus on helping make bigger things happen for customers, team, the community & stakeholders • Execution of refreshed strategy to drive long-term earnings growth – Continued investment in digital, supply chain & new growth initiatives – Investment in data & analytics to better
Slide 49: Group Outlook
Group Outlook Rob Scott Managing Director, Wesfarmers Limited
Slide 50: Outlook
Outlook • Portfolio actions taken during the year have enabled the delivery of improved shareholder returns & significantly strengthened the balance sheet • Given the diversity & resilience of portfolio, the Group remains well placed for a range of economic conditions • Businesses within the portfol
Slide 51: Questions
Questions
Slide 52: Appendix: Supplementary Information
Appendix: Supplementary Information
Slide 53: Group management balance sheet – overview
Group management balance sheet – overview Year ended 30 June ($m)1 2019 2018 Commentary Inventories 4,246 6,011 Receivables & prepayments 1,203 1,939 Detailed working capital discussion Trade & other payables (3,620) (6,552) provided on slide 54 Other 266 492 Net working capital 2,095 1,890 Property
Slide 54: Balance sheet – working capital
Balance sheet – working capital Year ended 30 June ($m)1 2019 2018 Commentary Decrease primarily reflects demerger of Coles & disposal of Bengalla, partially offset by investment in Inventories 4,246 6,011 inventory to support year-end sales campaign in Kmart Receivables & prepayments 1,203 1,939 De
Slide 55: Balance sheet – working capital from continuing operations
Balance sheet – working capital from continuing operations Year ended 30 June ($m)1 2019 2018 Commentary Increase reflects investments in Kmart to support Inventories 4,246 3,883 year-end sales campaigns Receivables & prepayments 1,203 1,169 Increase reflects investments in Kmart to support Trade &
Slide 56: Retail store networks
Retail store networks As at 30 June 2019 More than 1,000 locations across Australia & New Zealand Brand NSW/ACT VIC QLD SA WA TAS NT NZ Total Bunnings Warehouse 77 58 47 16 32 7 3 27 267 Smaller format 17 14 13 3 8 - - 20 75 Trade 7 4 7 2 3 1 - 8 32 Total Bunnings 101 76 67 21 43 8 3 55 374 Kmart Gr
Slide 57: Revenue reconciliation – Kmart Group
Revenue reconciliation – Kmart Group Year ended 30 June ($m) 2019 2018 Segment revenue (Gregorian) 8,598 8,505 Less: Non sales revenue1 (56) (5) Headline sales (Gregorian) 8,542 8,500 Less: Gregorian adjustment2 127 126 Headline sales revenue (Retail)3 8,669 8,626 1. 2019 revenue reflects changes in
Slide 58: Wesfarmers
We Wesfarmers