Wesfarmers Limited · ASX:WES
Wesfarmers — Wesfarmers Ltd Old — H1 FY2023 Earnings Presentation
63 slides from Wesfarmers's earnings presentation, Feb 15, 2023
Slide 1: 2023 Half-year results briefing presentation
2023 Half-year results briefing presentation To be held on Wednesday 15 February 2023
Slide 2: Presentation outline
Presentation outline Item Presenter Pages Group performance overview Rob Scott 3–9 Financial performance Anthony Gianotti 10 – 17 Outlook Rob Scott 18 – 19 Q&A Rob Scott Anthony Gianotti Michael Schneider Ian Bailey Ian Hansen Sarah Hunter Tim Bult Emily Amos Nicole Sheffield Appendix: Divisional su
Slide 3: Group performance overview
Group performance overview Rob Scott Managing Director, Wesfarmers Limited
Slide 4: Wesfarmers' primary objective is to provide a satisfactory return to shareholders
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 of our Looking after our team Engaging fairly with our customers and delivering members and providing a safe, suppliers, and
Slide 5: 2023 Half-year highlights
2023 Half-year highlights Increase in profit and Largest divisions Responding well interim dividend particularly strong to market conditions Pleasing financial $22.6b revenue +114.0% Kmart Group EBT Value credentials results for the half $1.4b NPAT, up 14.1% +48.6% WesCEF EBT Strong operating result
Slide 6: Divisional highlights
Divisional highlights Bunnings Kmart WesCEF Officeworks Group Group • Increased demand across key categories that were impacted • Performance highlights • Significant sales and earnings • Record earnings for the half by lockdowns in 1H22 resilience of operating model growth with strong execution • S
Slide 7: Well-placed portfolio of businesses with exposure to growth
Well-placed portfolio of businesses with exposure to growth Strong businesses with clear Exposure to growth in Significantly expanded data competitive advantages health and critical minerals and digital capabilities • Trusted retail brands • Favourable long-term demand • Broad digital reach with ove
Slide 8: Focus on long-term value, consistent with our objective
Focus on long-term value, consistent with our objective Climate & environment People Communities increase in Scope 1 and 2 total recordable injury direct and indirect 7.3% market-based emissions, 11.4 frequency rate (TRIFR) and $36m community contributions due to increased ammonia a continued focus
Slide 9: Group performance summary
Group performance summary Half-year ended 31 December ($m) 2022 2021 Var % Revenue 22,558 17,758 27.0 Revenue (excl. Health) 19,780 17,758 11.4 EBIT 2,160 1,905 13.4 EBIT (after interest on lease liabilities) 2,053 1,796 14.3 NPAT 1,384 1,213 14.1 Basic earnings per share (cps) 122.3 107.3 14.0 Retu
Slide 10: Financial performance
Financial performance Anthony Gianotti Chief Financial Officer, Wesfarmers Limited
Slide 11: Divisional sales performance
Divisional sales performance Sales performance ($m) Half-year ended 31 December 2021 2022 Retail sales1 GTV Revenue Total sales +6.3% K+T: +24.5% +4.6% (26.8%) +30.2% +3.6% growth Comp sales +2.8% +17.1% +2.8% growth 9,782 9,204 4,531 3,487 2,778 1,167 1,263 1,571 1,644 1,402 616 1,077 944 978 451 B
Slide 12: Divisional earnings performance
Divisional earnings performance EBT1 Performance and earnings results reflect: 1H23 Bunnings • Strong commercial growth and continued consumer growth $1,278m Group • Increased foot traffic to stores and shopping frequency as customer behaviour normalised ↑ 1.5% • Continued focus on value, with price
Slide 13: Other business performance summary
Other business performance summary Half-year ended 31 December ($m) Holding % 2022 2021 Var % Share of profit of associates and joint ventures BWP Trust 24.8 28 86 (67.4) Other associates and joint ventures1 Various 16 9 77.8 Sub-total share of profit of associates and joint ventures 44 95 (53.7) On
Slide 14: Working capital and cash flow
Working capital and cash flow Net working capital cash movement • Divisional operating cash flows increased 13.4%, Half-year ended 31 December ($m) 2022 2021 with divisional cash generation of 97%1 – Growth in divisional earnings Receivables and prepayments 74 189 – Strong cash generation in Kmart a
Slide 15: Capital expenditure
Capital expenditure • Gross cash capital expenditure of $676m, up 16.0% Half-year ended 31 December1 ($m) 2022 2021 Var % – WesCEF includes $204m of development capex and $21m of capitalised interest relating to the Bunnings 226 196 15.3 Mt Holland lithium project Kmart Group2 62 62 - – Increased in
Slide 16: Balance sheet and debt management
Balance sheet and debt management Debt maturity profile3 • Benefits of recent actions to reposition balance sheet and optimise cost of funds $m 1,750 – Weighted average cost of debt1 declined to 3.06% 1,250 (1H22: 3.70%) 750 – Weighted average debt term to maturity of 250 4.6 years (1H22: 6.5 years)
Slide 17: Shareholder distributions
Shareholder distributions Shareholder distributions1 • Fully-franked ordinary interim dividend of $0.88 per share $/share Demerger of Coles • Dividend record date 21 February 2023; dividend payable Nov 2018 5.00 28 March 2023 4.00 3.78 • Dividend investment plan: not underwritten; last day for 2.78
Slide 18: Outlook
Outlook Rob Scott Managing Director, Wesfarmers Limited
Slide 19: Group outlook
Group outlook • Remain focused on long-term value creation • Strong balance sheet and portfolio of cash-generative businesses with market-leading positions provide the flexibility to respond to risks and opportunities under a range of economic scenarios • Elevated inflation and higher interest rates
Slide 20: Questions
Questions
Slide 21: Appendix: Divisional summaries
Appendix: Divisional summaries
Slide 22: Bunnings Group
Bunnings Group Michael Schneider Managing Director, Bunnings Group
Slide 23: Bunnings Group performance summary
Bunnings Group performance summary Half-year ended 31 December ($m) 2022 2021 Variance % Revenue 9,792 9,209 6.3 EBITDA 1,721 1,677 2.6 Depreciation and amortisation (387) (362) (6.9) EBIT 1,334 1,315 1.4 Interest on lease liabilities (56) (56) - EBT 1,278 1,259 1.5 Net property contribution 35 41 (
Slide 24: Bunnings Group performance overview
Bunnings Group performance overview • Revenue growth of 6.3% to $9,792m - Total sales growth of 10.4% on three-year CAGR1 basis - Growth across all major trading regions, and in consumer and commercial customer segments - Wet weather in the east coast impacted spring trading in garden and outdoor ca
Slide 25: Bunnings Group progress on strategy
Bunnings Group progress on strategy • Consumer growth - Delivering more value to customers through lowest prices, widest range & best experience - Roll-out of new ranges and continued expansion of addressable market - Leveraging data insights to localise and personalise marketing communications - St
Slide 26: Bunnings Group progress on strategy
Bunnings Group progress on strategy • Supply chain evolution - Stabilisation of global supply chains, supporting a recovery in stock flow and efficiency - Developing fulfilment centre and last mile capabilities • Technology & innovation - Enhancing the digital experience across the customer journey
Slide 27: Bunnings Group outlook
Bunnings Group outlook • Focus remains on delivering profitable growth over the long-term • Demand outlook across consumer and commercial is supported by a pipeline of renovation and building activity • Opportunities for Bunnings to continue to deliver the best value to customers and continue to bui
Slide 28: Kmart Group
Kmart Group Ian Bailey Managing Director, Kmart Group
Slide 29: Kmart Group performance summary
Kmart Group performance summary Half-year ended 31 December1 ($m) 2022 2021 Variance % Revenue 5,714 4,605 24.1 EBITDA 765 513 49.1 Depreciation and amortisation (250) (247) (1.2) EBIT 515 266 93.6 Interest on lease liabilities (40) (44) 9.1 EBT 475 222 114.0 EBT margin (%) 8.3 4.8 ROC2 (R12, %) 43.
Slide 30: Kmart Group sales and earnings overview
Kmart Group sales and earnings overview • Revenue increased by 24.1% to $5,714m – Kmart comparable sales growth of 17.1% – Target comparable sales growth of 2.8% – Sales reflected pleasing underlying demand growth and normalised trading conditions after COVID-19 lockdowns in prior corresponding peri
Slide 31: Kmart Group progress on strategy
Kmart Group progress on strategy • Kmart continued to invest in key strategic initiatives to profitably grow share of wallet and reduce costs: – Implementing productivity improvements to enable ongoing price leadership – Driving customer participation instore and online through new and expanded prod
Slide 32: Kmart Group outlook
Kmart Group outlook • Kmart remains uniquely placed in an inflationary environment to extend low-price leadership and deliver long-term earnings growth through: – Growing share of wallet by leveraging leading product development capability to launch new customer offerings and expand existing categor
Slide 33: Chemicals, Energy and Fertilisers
Chemicals, Energy and Fertilisers Ian Hansen Managing Director, Wesfarmers Chemicals, Energy and Fertilisers
Slide 34: Chemicals, Energy and Fertilisers performance summary
Chemicals, Energy and Fertilisers performance summary Half-year ended 31 December ($m) 2022 2021 Variance % Revenue1 Chemicals 860 642 34.0 Energy 265 252 5.2 Fertilisers 277 183 51.4 Total 1,402 1,077 30.2 EBITDA 372 262 42.0 Depreciation and amortisation (48) (43) (11.6) EBIT 324 219 47.9 Interest
Slide 35: Chemicals, Energy and Fertilisers overview
Chemicals, Energy and Fertilisers overview Chemicals: Earnings increased significantly for the half – Strong Ammonia earnings were supported by favourable global prices, and strong plant performance as a result of benefits from the major maintenance shutdown in the prior corresponding period – AN1 e
Slide 36: Chemicals, Energy and Fertilisers outlook
Chemicals, Energy and Fertilisers outlook • Chemicals earnings are expected to remain strong in the second half of the financial year with demand for AN and sodium cyanide expected to remain robust, but remain subject to changes in commodity pricing • Energy earnings are likely to continue to be imp
Slide 37: Officeworks
Officeworks Sarah Hunter Managing Director, Officeworks
Slide 38: Officeworks performance summary
Officeworks performance summary Half-year ended 31 December ($m) 2022 2021 Variance % Revenue 1,651 1,580 4.5 EBITDA 152 142 7.0 Depreciation and amortisation (62) (55) (12.7) EBIT 90 87 3.4 Interest on lease liabilities (5) (5) - EBT 85 82 3.7 EBT margin (%) 5.1 5.2 ROC1 (R12, %) 17.3 19.6 Total sa
Slide 39: Officeworks performance overview
Officeworks performance overview • Sales growth of 4.6% to $1.6b – Represents three-year sales growth of 10.3% p.a1 – Sales in print & create, stationery, art and education recovering following impact of lockdowns in prior periods – Benefits of investment in Flybuys, with significant growth in sales
Slide 40: Officeworks progress on strategy
Officeworks progress on strategy Our team – Continued focus on safety, health and wellbeing Customer experience – Increased use of data to deliver a more personalised customer experience – Strong increase in NPS1 through improvements to delivery, in-store service and click and collect offer Connecti
Slide 41: Officeworks outlook
Officeworks outlook • Strong return to the traditional Back to School categories of stationery, art and education • Officeworks’ everyday low-prices, widest range, great service, and well established every-channel offer ensure it is well positioned to support retail and business customers and meet t
Slide 42: Wesfarmers Industrial and Safety
Wesfarmers Industrial and Safety Tim Bult Managing Director, Wesfarmers Industrial and Safety
Slide 43: Industrial and Safety performance summary
Industrial and Safety performance summary Half-year ended 31 December ($m) 2022 2021 Variance % Revenue 978 944 3.6 EBITDA 89 80 11.3 Depreciation and amortisation (40) (37) (8.1) EBIT 49 43 14.0 Interest on lease liabilities (2) (2) - EBT 47 41 14.6 EBT margin (%) 4.8 4.3 ROC1 (R12, %) 8.1 6.5 Safe
Slide 44: Industrial and Safety performance overview
Industrial and Safety performance overview • Revenue growth of 3.6% to $978m – Blackwoods’ revenue increased due to growth across key sales regions and from strategic customers in the mining, utilities and government sectors – Workwear Group’s revenue increased due to higher demand for corporate and
Slide 45: Industrial and Safety outlook
Industrial and Safety outlook • Near-term market conditions in Australia and New Zealand are expected to be impacted by ongoing economic pressures, particularly from the heightened cost environment • The Industrial and Safety businesses continue to actively manage cost inflation, labour availability
Slide 46: Wesfarmers Health
Wesfarmers Health Emily Amos Managing Director, Health
Slide 47: Health performance summary
Health performance summary Half-year ended 31 December1 ($m) 2022 Revenue 2,778 EBITDA 66 Depreciation and amortisation (36) EBIT2 30 Interest on lease liabilities (3) EBT2 27 EBT margin (%) 1.0 Scope 1 and 2 market-based emissions (ktCO2e) 7 1. Rolling 12-month measures such as ROC and TRIFR will b
Slide 48: Health overview
Health overview • Strong sales result from Pharmacy Distribution – Underpinned by customer acquisition and growth from trading partners – Assisted by continued elevated demand for COVID-19 treatments and price inflation in some categories – Transition to the new Marsden Park distribution centre comp
Slide 49: Health outlook
Health outlook • The Health division is well positioned to continue to improve financial performance and deliver long-term growth • Focused on transformation activities and investment to strengthen the competitive position of API and its pharmacist partners – New Priceline website is on track for la
Slide 50: Wesfarmers OneDigital
Wesfarmers OneDigital Nicole Sheffield Managing Director, Wesfarmers OneDigital
Slide 51: Significant expansion of data and digital capabilities
Significant expansion of data and digital capabilities Large scale digital reach Unique and complementary Driving value through member programs deeper customer connections and operating efficiency 56% % of sales to known 34% customers Accelerating % of sales to known growth of customers OnePass FY18
Slide 52: Catch performance overview
Catch performance overview Half-year ended • Disappointing sales and earnings result impacted by 31 December1 ($m) 2022 2021 Var (%) operational and execution challenges Gross transaction value 451 616 (26.8) • Catch had invested significantly in inventory, fulfilment capacity and team to support ra
Slide 53: Catch progress on strategy
Catch progress on strategy Areas of progress Improvement required • Strong growth in marketplace since acquisition, with • Cost structure unsustainable post COVID increased GTV, additional suppliers and new brands • Transition from “deal of the day” to scalable first party • Onboarding of products f
Slide 54: OnePass performance and outlook
OnePass performance and outlook • Significant progress in development of OnePass program with incremental benefits for divisions during the half • Increasing member engagement, shopping frequency, online sales conversion and cross-shop rates demonstrate value proposition is resonating with customers
Slide 55: Appendix: Supplementary information
Appendix: Supplementary information
Slide 56: Group management balance sheet
Group management balance sheet ($m)1 1H23 FY22 API4 1H22 Inventories 6,634 6,084 385 5,605 Receivables and prepayments 2,281 2,364 656 1,267 Trade and other payables (5,689) (5,362) (690) (5,204) Other 263 238 - 133 Net working capital 3,489 3,324 351 1,801 Property, plant and equipment 3,680 3,621
Slide 57: Movements in net financial debt
Movements in net financial debt • Net financial debt1 position of $4.7b as at 31 December 2022, compares to the net financial debt1 position of $4.3b as at 30 June 2022 • Largely driven by the payment of $1.1b of fully-franked dividends and higher capital expenditure during the half 1. Interest-bear
Slide 58: Management of lease portfolio
Management of lease portfolio • Lease liabilities totalled $6.9b and represented 58% Lease liabilities ($m) 1H23 FY22 1H22 of Group fixed financial obligations as at Bunnings 3,738 3,692 3,854 31 December 2022 Kmart Group2 2,411 2,616 2,764 • Average remaining committed lease term of WesCEF 64 61 50
Slide 59: Divisional return on capital
Divisional return on capital Rolling 12 months to 31 December 2022 2021 EBT Cap Emp1 ROC EBT Cap Emp1 ROC Var ($m) ($m) (%) ($m) ($m) (%) (ppt) Bunnings 2,223 3,145 70.7 2,170 2,745 79.0 (8.3) Kmart Group2 760 1,756 43.3 459 1,322 34.7 8.6 WesCEF3 646 2,806 23.0 442 2,254 19.6 3.4 Officeworks 184 1,
Slide 60: Retail and health networks
Retail and health networks As at 31 December 2022 1,785 locations across Australia and New Zealand Brand NSW/ACT VIC QLD SA WA TAS NT NZ Total Bunnings Warehouse 82 63 51 19 29 7 3 29 283 Smaller format 19 15 11 2 9 - - 12 68 Trade 7 3 6 2 3 1 - 9 31 Tool Kit Depot - - 1 5 7 - - - 13 Beaumont Tiles1
Slide 61: Revenue reconciliation – Kmart Group
Revenue reconciliation – Kmart Group Half-year ended 31 December ($m) 2022 20211 Segment revenue (Gregorian) 5,714 4,605 Less: Non sales revenue (32) (38) Headline sales (Gregorian) 5,682 4,567 Add: Gregorian adjustment2 112 87 Headline sales revenue (Retail)3 5,794 4,654 1. 2021 results have been r
Slide 62: Retail calendars
Retail calendars Business Retail sales period Bunnings, Officeworks and Catch 1H23 1 Jul 2022 to 31 Dec 2022 (6 months) 1H22 1 Jul 2021 to 31 Dec 2021 (6 months) 1H21 1 Jul 2020 to 31 Dec 2020 (6 months) Kmart 1H23 27 Jun 2022 to 1 Jan 2023 (27 weeks) 1H22 28 Jun 2021 to 2 Jan 2022 (27 weeks) 1H21 2
Slide 63: Wesfarmers
We Wesfarmers