Wesfarmers Limited · ASX:WES
Wesfarmers — H1 FY2021 Earnings Presentation
51 slides from Wesfarmers's earnings presentation, Feb 18, 2021
Slide 1: 2021 Half-year results briefing presentation
2021 Half-year results briefing presentation To be held on Thursday 18 February 2021
Slide 2: Presentation outline
Presentation outline Item Presenter Page Group performance overview Rob Scott 3 Group balance sheet and cash flow Anthony Gianotti 10 Bunnings Michael Schneider 16 Kmart Group Ian Bailey 21 Officeworks Sarah Hunter 27 Chemicals, Energy and Fertilisers Ian Hansen 32 Industrial and Safety Tim Bult 37
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 s
Slide 5: Maintaining a long-term focus, consistent with our values
Maintaining a long-term focus, consistent with our values Anticipating the needs of our Looking after our team Engaging fairly with our customers and delivering members and providing a safe, suppliers and sourcing ethically competitive goods and services fulfilling work environment and sustainably •
Slide 6: Financial overview
Financial overview Half-year ended 31 December ($m) 2020 2019 Var % Results from continuing operations excluding significant items1 Revenue 17,774 15,249 16.6 EBIT 2,171 1,734 25.2 EBIT (after interest on lease liabilities) 2,057 1,615 27.4 NPAT 1,414 1,127 25.5 Basic earnings per share (cps) 125.0
Slide 7: Divisional sales performance
Divisional sales performance Sales performance ($m) 1H20 Half-year ended 31 December 1H21 Retail sales (excludes Catch)1 Revenue Total sales +24.3% +7.1% +2.3% +23.6% (6.6%) +4.7% growth Comp sales +27.7% +9.1% +13.0% growth 9,046 7,275 3,417 3,658 1,492 1,527 1,226 1,515 889 830 858 898 Bunnings Km
Slide 8: Divisional earnings performance and return on capital
Divisional earnings performance and return on capital EBT1 ($m) RoC2 (R12, %) Half-year ended 31 December 2020 2019 Var (%) 2020 2019 Var (ppt) Bunnings 1,274 938 35.8 76.6 51.5 25.1 Kmart Group3 487 343 42.0 35.5 25.1 10.4 Officeworks 100 82 22.0 23.4 17.2 6.2 WesCEF4 160 173 (7.5) 18.1 26.7 (8.6)
Slide 9: Group performance summary
Group performance summary Half-year ended 31 December ($m) 2020 2019 Var % Results from continuing operations1 Revenue 17,774 15,249 16.6 EBIT 2,137 1,734 23.2 EBIT (after interest on lease liabilities) 2,023 1,615 25.3 EBIT (after interest on lease liabilities) (excl. significant items)2 2,057 1,61
Slide 10: Group balance sheet and cash flow
Group balance sheet and cash flow Anthony Gianotti Chief Financial Officer, Wesfarmers Limited
Slide 11: Other business performance summary
Other business performance summary Half-year ended 31 December ($m) Holding % 2020 2019 Var % Share of profit of associates and joint ventures Coles1 4.9 - 73 n.m. BWP Trust 24.8 36 34 5.9 Other associates and joint ventures2 Various 5 27 n.m. Sub-total share of profit of associates and joint ventur
Slide 12: Working capital and cash flow
Working capital and cash flow • Divisional operating cash flows increased Half-year ended 31 December ($m) 2020 2019 16.1%1 Working capital cash movement – Strong divisional earnings growth Receivables and prepayments 176 96 – Ongoing normalisation of working capital Inventory (671) (286) positions
Slide 13: Capital expenditure
Capital expenditure • Gross capital expenditure of $410m Half-year ended 31 December1 ($m) 2020 2019 Var % – Increased investment in data and digital capabilities in all divisions Bunnings 219 269 (18.6) – The successful conversion of 19 Target stores to Kmart stores, including 12 large formats Kmar
Slide 14: Balance sheet and debt management
Balance sheet and debt management • Maintained significant balance sheet flexibility Debt maturity profile2 • Net cash1 position of $871m as at $m 1,200 31 December 2020, compared to net cash of $471m as at 30 June 2020 0 – Solid operating cash flow performance (1,200) – Repayment of $500m in domest
Slide 15: Dividends
Dividends • Fully-franked half-year ordinary dividend of Dividends1 $0.88 per share $/share Demerger of Coles – Reflects strong underlying NPAT result 3.50 Nov 2018 3.00 2.78 • Dividend record date 24 February 2021; 2.50 2.23 2.23 1.00 2.00 1.70 dividend payable 31 March 2021 1.50 1.20 1.20 0.18 0.7
Slide 16: Bunnings
Bunnings Michael Schneider Managing Director, Bunnings Group
Slide 17: Bunnings performance summary
Bunnings performance summary Half-year ended 31 December ($m) 2020 2019 Var % Revenue 9,054 7,276 24.4 EBITDA 1,669 1,316 26.8 Depreciation and amortisation (337) (321) (5.0) EBIT 1,332 995 33.9 Interest on lease liabilities (58) (57) (1.8) EBT 1,274 938 35.8 Net property contribution 1 22 n.m. EBT
Slide 18: Bunnings sales and earnings overview
Bunnings sales and earnings overview • Revenue growth of 24.4% to $9,054m – Total store sales growth of 24.8% – Store-on-store sales growth of 27.7% – Strong growth across all product categories and major trading regions – Particularly strong growth in garden and outdoor living – Online penetration
Slide 19: Bunnings progress on strategy
Bunnings progress on strategy • Investing in customer experience – Investment in lower prices across a wide number of categories and products – 6,000 additional team members to service increased demand – Product display upgrades and refreshed ranges • Development of the digital agenda – Ongoing enha
Slide 20: Bunnings outlook
Bunnings outlook • Outlook remains uncertain • Trading performance expected to continue to benefit from consumers continuing to spend more time at home • Sales and earnings growth likely to moderate from March as the business begins to cycle the initial impacts of COVID-19 in the prior year • Contin
Slide 21: Kmart Group
Kmart Group Ian Bailey Managing Director, Kmart Group
Slide 22: Kmart Group performance summary
Kmart Group performance summary Half-year ended 31 December ($m)1 2020 2019 Var % Revenue 5,441 4,990 9.0 EBITDA2 818 696 17.5 Depreciation and amortisation (283) (292) 3.1 EBIT2 535 404 32.4 Interest on lease liabilities (48) (52) 7.7 EBT2 487 352 38.4 EBT including payroll remediation costs 487 34
Slide 23: Kmart and Target performance overview
Kmart and Target performance overview • Revenue growth of 5.7% to $5,112m Half-year ended 31 December ($m) 2020 2019 Var % – Kmart comparable sales growth of 9.1% – Target comparable sales growth of 13.0% Revenue 5,112 4,835 5.7 – Very strong growth in online EBITDA1 822 685 20.0 EBT1 502 348 44.3 •
Slide 24: Kmart and Target progress on strategy
Kmart and Target progress on strategy • Kmart continued to invest in initiatives to enhance its customer offer, including new in-store retail technology and the development of data and digital capabilities • Good progress on actions to accelerate the growth of Kmart and optimise the Target store net
Slide 25: Catch performance overview
Catch performance overview • Strong growth across both the in-stock and marketplace Half-year ended 31 segments December ($m)1 2020 2019 – Gross transaction value growth of 95.6% Gross transaction value 610 255 Revenue 329 155 • Accelerated investment in marketing and capability – Active customers i
Slide 26: Kmart Group outlook
Kmart Group outlook • In an uncertain and volatile environment, Kmart Group is well-positioned for the future • Current global supply chain disruptions expected to continue • Kmart will continue to focus on investing for future growth – Accelerating development of new technology capabilities and opt
Slide 27: Officeworks
Officeworks Sarah Hunter Managing Director, Officeworks
Slide 28: Officeworks performance summary
Officeworks performance summary Half-year ended 31 December ($m) 2020 2019 Var % Revenue 1,523 1,231 23.7 EBITDA 156 137 13.9 Depreciation and amortisation (51) (48) (6.3) EBIT 105 89 18.0 Interest on lease liabilities (5) (7) 28.6 EBT 100 82 22.0 EBT margin (%) 6.6 6.7 RoC1 (R12, %) 23.4 17.2 Total
Slide 29: Officeworks sales and earnings overview
Officeworks sales and earnings overview • Sales growth of 23.6% % Sales growth momentum – Every-channel offer continues to deliver strong sales 30 28.5 growth in stores and online 25 23.6 – Online sales penetration approximately 37%, including 20 Click and Collect sales 15 11.5 – Increased demand fo
Slide 30: Officeworks progress on strategy
Officeworks progress on strategy Our team – Continued focus on the safety, health and wellbeing of the team Customer experience – Investment in data analytics capabilities to improve marketing and increase the personalisation of communications with customers – New and expanded product ranges Connect
Slide 31: Officeworks outlook
Officeworks outlook • Outlook is uncertain but Officeworks remains well-positioned for the future • Sales and earnings growth likely to moderate from March as the business begins to cycle the initial impacts of COVID-19 in the prior year • Execution of strategy to drive long-term growth – Investment
Slide 32: Chemicals, Energy and Fertilisers
Chemicals, Energy and Fertilisers Ian Hansen Chief Executive Officer, Wesfarmers Chemicals, Energy and Fertilisers
Slide 33: Chemicals, Energy and Fertilisers performance summary
Chemicals, Energy and Fertilisers performance summary Half-year ended 31 December ($m)1 2020 2019 Var % Revenue2 Chemicals 489 510 (4.1) Energy 206 219 (5.9) Fertilisers 135 160 (15.6) Total 830 889 (6.6) EBITDA 202 214 (5.6) Depreciation and amortisation (42) (41) (2.4) EBIT 160 173 (7.5) Interest
Slide 34: Mt Holland lithium project Final Investment Decision
Mt Holland lithium project Final Investment Decision • Wesfarmers together with 50:50 JV partner, SQM, Overview of Mt Holland lithium project approved the final investment decision (FID) for the Mt Holland lithium project • Provides new growth opportunity for WesCEF – Capitalises on strong chemical
Slide 35: Chemicals, Energy and Fertilisers overview
Chemicals, Energy and Fertilisers overview • Revenue of $830m down 6.6%, driven by a combination of lower Chemicals and Fertilisers sales volumes and lower energy prices (Saudi CP1) • Earnings of $160m down 7.5% impacted by lower AN2 sales and weaker export demand in the sodium cyanide business • Ch
Slide 36: Chemicals, Energy and Fertilisers outlook
Chemicals, Energy and Fertilisers outlook • Production and demand for AN expected to remain stable • Weaker sodium cyanide export demand is expected to continue, driven by ongoing disruption to international gold mines due to COVID-19 • The sodium cyanide business is investigating opportunities to e
Slide 37: Industrial and Safety
Industrial and Safety Tim Bult Managing Director, Wesfarmers Industrial and Safety
Slide 38: Industrial and Safety performance summary
Industrial and Safety performance summary Half-year ended 31 December ($m) 2020 2019 Var % Revenue 898 858 4.7 EBITDA1 76 61 24.6 Depreciation and amortisation (37) (36) (2.8) EBIT1 39 25 56.0 Interest on lease liabilities (2) (3) 33.3 EBT1 37 22 68.2 EBT including payroll remediation costs 37 7 n.m
Slide 39: Industrial and Safety overview
Industrial and Safety overview • Industrial and Safety businesses continued to support customers in response to COVID-19 – Sourcing critical products including respiratory, cleaning and hygiene products – Ensuring critical oxygen supply to hospital groups – Providing additional risk consulting servi
Slide 40: Industrial and Safety outlook
Industrial and Safety outlook • Market conditions are expected to remain uncertain and challenging for the remainder of FY21 • Blackwoods continues to focus on improving the customer value proposition – Build on improvements to its core operational capabilities – Progress the implementation of the E
Slide 41: Group outlook
Group outlook Rob Scott Managing Director, Wesfarmers Limited
Slide 42: Outlook
Outlook • Economic conditions in Australia have recovered strongly and the outlook is more positive, subject to future COVID-19 risks • Sales across the Group’s retail businesses have continued to remain strong through January and February, with some impact from government-mandated trading restricti
Slide 43: Questions
Questions
Slide 44: Appendix: Supplementary information
Appendix: Supplementary information
Slide 45: Significant items and discontinued operations summary
Significant items and discontinued operations summary Half-year ended 31 December 2020 ($m) Pre-tax Tax impact Post-tax Restructuring costs in Kmart Group (34) 10 (24) Total significant items (34) 10 (24) Half-year ended 31 December 2019 ($m) Pre-tax Tax impact Post-tax Capital losses in BUKI (dispo
Slide 46: Group management balance sheet
Group management balance sheet ($m)1 1H21 FY20 1H20 Commentary (versus 1H20) Inventories 4,516 3,844 4,578 Receivables and prepayments 1,024 1,261 1,124 • Increase due to higher purchases in Bunnings, Trade and other payables (4,520) (4,008) (4,130) Kmart Group and Officeworks Other 160 172 150 Net
Slide 47: Management of lease portfolio
Management of lease portfolio • Lease liabilities totalled $7.3b and represent ($m) 1H21 FY20 1H20 82% of Group fixed financial obligations as at Bunnings 3,822 3,727 3,873 31 December 2020 Kmart Group 2,875 2,943 3,136 • The ongoing store closures and conversion program within Target has supported
Slide 48: Divisional return on capital
Divisional return on capital Rolling 12 months to 31 December 2020 2019 EBT Cap Emp1 RoC EBT Cap Emp1 RoC Var ($m) ($m) (%) ($m) ($m) (%) (ppt) Bunnings 2,162 2,823 76.6 1,632 3,171 51.5 25.1 Kmart Group2 554 1,561 35.5 500 1,990 25.1 10.4 Officeworks 215 918 23.4 173 1,004 17.2 6.2 WesCEF3 381 2,10
Slide 49: Retail store networks
Retail store networks As at 31 December 2020 More than 1,000 locations across Australia and New Zealand Brand NSW/ACT VIC QLD SA WA TAS NT NZ Total Bunnings Warehouse 79 61 50 18 30 7 3 28 276 Smaller format 19 14 13 3 9 - - 12 70 Trade 7 3 7 2 3 1 - 7 30 Adelaide Tools - - - 6 - - - - 6 Total Bunni
Slide 50: Revenue reconciliation – Kmart Group
Revenue reconciliation – Kmart Group Half-year ended 31 December1 ($m) 2020 2019 Segment revenue (Gregorian) 5,441 4,990 Less: Non-sales revenue (35) (33) Headline sales (Gregorian) 5,406 4,957 Add: Gregorian adjustment2 100 102 Headline sales revenue (Retail)3 5,506 5,059 1. 2019 includes Catch fro
Slide 51: Retail calendars
Retail calendars Business Retail sales period Bunnings, Officeworks and Catch 1H21 1 Jul 2020 to 31 Dec 2020 (6 months) 1H20 1 Jul 2019 to 31 Dec 2019 (6 months) 1H19 1 Jul 2018 to 31 Dec 2018 (6 months) Kmart 1H21 29 Jun 2020 to 3 Jan 2021 (27 weeks) 1H20 1 Jul 2019 to 5 Jan 2020 (27 weeks) 1H19 25