Slide 1: 2017 Full-year Results Briefing Presentation
2017 Full-year Results Briefing Presentation Thursday, 17 August 2017
Slide 2: Presentation outline
Presentation outline Item Presenter Page Group Performance Overview Richard Goyder 3 Group Balance Sheet & Cash Flow Terry Bowen 10 Coles John Durkan 18 Home Improvement Michael Schneider 26 Department Stores Guy Russo 37 Target Guy Russo 39 Kmart Ian Bailey 43 Officeworks Mark Ward 47 Industrials R
Slide 3: Group Performance Overview
Group Performance Overview Richard Goyder Managing Director, Wesfarmers Limited
Slide 4: Financial overview
Financial overview Variance to pcp Year ended 30 June ($m) Reported (exc. significant items)1 Operating revenue $68.4b 3.7% Earnings before interest & tax $4,402m 22.0% Net profit after tax $2,873m 22.1% Earnings per share (cps) 254.7 21.6% Operating cash flow per share (wanos, incl. res shares) (cp
Slide 5: Group performance summary
Group performance summary Year ended 30 June ($m) 2017 2016 Var % Revenue 68,444 65,981 3.7 EBITDA 5,668 2,642 114.5 EBIT 4,402 1,346 227.0 EBIT (exc. significant items)1 4,402 3,607 22.0 Net profit after tax 2,873 407 n.m. Net profit after tax (exc. significant items)1 2,873 2,353 22.1 Operating ca
Slide 6: Divisional earnings summary
Divisional earnings summary EBIT ($m) Year ended 30 June 2017 2016 Var % Var $m % of EBIT Coles1 1,609 1,860 (13.5) (251) Home Improvement2 1,245 1,214 2.6 31 Bunnings Australia & NZ 1,334 1,213 10.0 121 Bunnings UK & Ireland2 (89) 1 n.m. (90) Department Stores3 543 275 97.5 268 Target3 (10) (195) n
Slide 7: Divisional return on capital
Divisional return on capital Rolling 12 months to 30 June 2017 2016 EBIT Cap Emp RoC RoC Var ($m) ($m) (%) (%) (ppt) Coles1 1,609 16,586 9.7 11.2 (1.5) Home Improvement2 1,245 4,110 30.3 33.7 (3.4) Bunnings Australia & NZ 1,334 3,192 41.8 36.6 5.2 Bunnings UK & Ireland2 (89) 918 (9.7) n.a. n.a. Depa
Slide 8: Strong value creation
Strong value creation $6.8b $8.7b Payments for rent, services Employees $2.1b & other external costs (salaries, wages & Government other benefits) (taxes & royalties) $0.3b Lenders (borrowed funds) $15.2b $2.5b Wealth Value Value Shareholders creation distribution distribution (dividends) $1.6b Rein
Slide 9: Sustainability
Sustainability Safety Ethical Sourcing Diversity • Total Recordable Injury • Improved transparency of • More than 4,000 Indigenous Frequency Rate reduced 16% supply chain – more than 5,455 employees to 28.3 factories audited • Increased representation of women in management roles Community contribut
Slide 10: Group Balance Sheet & Cash Flow
Group Balance Sheet & Cash Flow Terry Bowen Finance Director, Wesfarmers Limited
Slide 11: Other business performance summary
Other business performance summary Year ended 30 June ($m) Holding % 2017 2016 Var % Share of profit of associates BWP Trust 25 55 77 (28.6) Other Various 31 4 n.m. Sub-total share of profit of associates 86 81 6.2 Interest revenue1 8 5 60.0 Other (23) (30) 23.3 Corporate overheads (125) (124) (0.8)
Slide 12: Operating cash flows
Operating cash flows • Operating cash flows increased by $861m to Year ended 30 June ($m) 2017 2016 $4,226m Cash movement inflow/(outflow) – Strong earnings growth & improvement in Receivables & prepayments 58 (51) cash realisation ratio to 102.1%1 Inventory (296) (444) – Highly cash generative port
Slide 13: Disciplined capital expenditure
Disciplined capital expenditure • Gross capital expenditure decreased $218m to Year ended 30 June ($m)1 2017 2016 Var % $1,681m Coles 805 797 1.0 Home Improvement 445 538 (17.3) – Fewer store openings in BANZ Kmart 154 163 (5.5) – Reduced refurbishment activity in Target Target 71 129 (45.0) Officew
Slide 14: Strong cash flow generation
Strong cash flow generation • FY17 free cash flows of $4,173m, $2,940m Annual free cash flows higher than last year $m Sale of Insurance Sale of Coles’ credit 6,000 division card receivables – Higher operating cash flows & lower net 4,000 capital expenditure 2,000 – Sale of Coles’ credit card receiv
Slide 15: Strong balance sheet & debt management
Strong balance sheet & debt management • Net financial debt1 of $4.3b as at Debt maturity profile2 30 June 2017, down from $6.5b at $m 1,500 30 June 2016 1,000 – $500m of domestic medium term notes repaid 500 November 2016 using existing cash balances & bank facilities 0 (500) – More than $900m debt
Slide 16: Finance costs & credit metrics
Finance costs & credit metrics • All-in effective borrowing cost further reduced $m Finance costs & weighted average cost of 500 8.0% from 4.50% in FY16 to 4.04% in FY17 debt 450 7.0% 400 – Reflects active management of debt sources 350 6.0% 300 5.0% • Solid credit metrics 250 200 4.0% 3.0% 150 – Ca
Slide 17: Dividends
Dividends • Cumulative dividend payments & capital Net cash flow composition management distributions of $12.5b since FY13 $m 6,000 – Funded by free cash flows 4,500 3,000 • Record earnings & strong cash flow 1,500 performance for the year supporting full-year dividend of $2.23 per share 0 fully-fra
Slide 18: Coles
Coles John Durkan Managing Director, Coles
Slide 19: Coles performance summary
Coles performance summary Year ended 30 June ($m) 2017 2016 Var % Coles Revenue1 39,217 39,242 (0.1) EBITDA2 2,256 2,475 (8.8) Depreciation & amortisation (647) (615) (5.2) EBIT2 1,609 1,860 (13.5) EBIT margin2 (%) 4.1 4.7 RoC (R12, %) 9.7 11.2 Safety (R12, LTIFR) 8.8 8.4 Food & Liquor Revenue1 33,0
Slide 20: Food & Liquor overview
Food & Liquor overview • FY17 EBIT of $1,609m Lowering prices for 8 years & counting % – Accelerated proactive investment in customer offer 8 6 – Positive comp sales growth & strong cash flow 4 generation achieved in a low growth environment 2 0 – Includes $39m profit on sale of Coles’ interest in J
Slide 21: Food & Liquor overview: Investing in the customer offer
Food & Liquor overview: Investing in the customer offer • FY17 characterised by accelerated investment in the customer offer • Strategic focus on improving each element of the customer offer to ensure Coles retains a strong market position as competition increases • Investment in Food has been balan
Slide 22: Food & Liquor overview: Boldly extending into new services & channels
Food & Liquor overview: Boldly extending into new services & channels • Delivering convenience with Coles Online – Double digit sales growth – Increased fulfilment rates & delivery efficiency – Second ‘dark store’ to launch in Sydney in early FY18 • Leveraging flybuys to deliver better value – Partn
Slide 23: Food & Liquor overview: Liquor transformation
Food & Liquor overview: Liquor transformation • Positive comparable sales growth achieved Growing transactions over time through FY17 +16% – Seven quarters of positive comp sales growth – More than 20% growth in Liquor Online • Acceleration of network optimisation – 200 Liquorlands renewed in FY17 F
Slide 24: Convenience overview: Fuelling Convenience
Convenience overview: Fuelling Convenience • Convenience shop sales growth remained positive Expanding the Convenience network # stores – 3.6% transaction growth driven by a compelling 35 30 customer offering 25 20 – Launch of ‘Big Yum at Little Coles’ 15 31 10 22 17 12 11 – Compelling value through
Slide 25: Coles outlook
Coles outlook • Operating environment expected to remain highly competitive • FY18 earnings are expected to be affected by the annualisation of 2H17 investment in the customer offer, lower property earnings & lower Financial Services earnings following the sale of Coles’ credit card receivables • Fo
Slide 26: Home Improvement
Home Improvement Michael Schneider Managing Director, Bunnings Group Managing Director, Bunnings Australia & New Zealand
Slide 27: Home Improvement performance summary
Home Improvement performance summary Year ended 30 June ($m) 2017 2016 Var % Revenue1 13,586 11,571 17.4 EBITDA1,2,3 1,463 1,383 5.8 Depreciation & amortisation1 (218) (169) (29.0) EBIT1,2,3 1,245 1,214 2.6 EBIT margin1,2,3 (%) 9.2 10.5 RoC1 (R12%) 30.3 33.7 Bunnings Australia & NZ - RoC (R12%) 41.8
Slide 28: Home Improvement performance summary (continued)
Home Improvement performance summary (continued) Year ended 30 June ($m) 2017 2016 Var % Revenue1 13,586 11,571 17.4 Bunnings Australia & NZ 11,514 10,575 8.9 Bunnings UK & Ireland ($)1 2,072 996 n.m. Bunnings UK & Ireland (£)1 1,229 517 n.m. EBIT1,2,3 1,245 1,214 2.6 Bunnings Australia & NZ2 1,334
Slide 29: Bunnings Australia & New Zealand
Bunnings Australia & New Zealand Michael Schneider Managing Director, Bunnings Group Managing Director, Bunnings Australia & New Zealand
Slide 30: Bunnings Australia & New Zealand overview
Bunnings Australia & New Zealand overview • Pleasing & consistent sales growth – Total store sales growth of 8.9%; store-on-store growth of 7.3% – Positive trading performance across all major regions; consumer & commercial – Solid growth across all categories • EBIT increase of 10.0% – Continued va
Slide 31: Bunnings Australia & New Zealand overview (continued)
Bunnings Australia & New Zealand overview (continued) Strong progress on strategic agenda: Creating better experiences – More team member training – More in-store activities – Engaging with customers Strengthening the core – Continued safety focus, reduced injury frequency – Better in-stock, fewer g
Slide 32: Bunnings Australia & New Zealand outlook
Bunnings Australia & New Zealand outlook • Dynamic competitive landscape • Strong focus on long-term value creation • Continued network reinvestment & expansion • Ongoing investments in lower prices, range innovation & customer service • Accelerate digital activities • Access to majority of former M
Slide 33: Bunnings United Kingdom & Ireland
Bunnings United Kingdom & Ireland Michael Schneider Managing Director, Bunnings Group Managing Director, Bunnings Australia & New Zealand
Slide 34: Bunnings United Kingdom & Ireland overview
Bunnings United Kingdom & Ireland overview • Revenue of £1.2b ($2.1b), loss before interest & tax of £54m ($89m) – £19m ($33m) transition & restructure costs; includes concession exits & pilot store program – 4Q17 sales decreased 6.8% in local currency terms – Significant disruption impacting perfor
Slide 35: Bunnings United Kingdom & Ireland overview (continued)
Bunnings United Kingdom & Ireland overview (continued) Transition & separation • Exited non-core products • Standalone services, concession exits Building trust • Team development & engagement – Building high-performance culture • Ceased install & in-home service Four Bunnings Warehouse pilots • Str
Slide 36: Bunnings United Kingdom & Ireland outlook
Bunnings United Kingdom & Ireland outlook Continuing to build strong foundations • Strengthen leadership team • Realign organisational structures • Relaunch & rollout kitchen & bathroom offers Pilot store development & proof of concept • 15 to 20 pilot stores expected by 31 December 2017, subject to
Slide 37: Department Stores
Department Stores Guy Russo Chief Executive Officer, Department Stores Managing Director, Target
Slide 38: Department Stores performance overview
Department Stores performance overview Year ended 30 June ($m) 2017 2016 Var % Revenue Target 2,950 3,456 (14.6) Kmart 5,578 5,190 7.5 Total 8,528 8,646 (1.4) EBITDA Target1 74 (105) n.m. Kmart 665 571 16.5 Total 739 466 58.6 EBIT Target1 (10) (195) n.m. Kmart 553 470 17.7 Total 543 275 97.5 n.m. –
Slide 39: Target
Target Guy Russo Chief Executive Officer, Department Stores Managing Director, Target
Slide 40: Target performance overview
Target performance overview Year ended 30 June ($m) 2017 2016 Var % Revenue 2,950 3,456 (14.6) EBITDA1 74 (105) n.m. Depreciation & amortisation (84) (90) 6.7 EBIT1 (10) (195) n.m. EBIT excluding significant items1,2 3 (50) n.m. EBIT margin excluding significant items1,2 (%) 0.1 (1.4) RoC (R12%) (1.
Slide 41: Target overview
Target overview • EBIT, excluding restructuring costs1, up $53m – Improved margins through better quality of sales – Cost base reduction well progressed across stores, supply chain & store support office • Sales affected by decisive actions taken to transform the business: – Removal of loss making p
Slide 42: Target outlook
Target outlook • FY18 to continue to reflect the significant transition underway, focused on: – Improving fashionability & quality of sales – Reducing end-to-end costs – Progressing renewal & space & range trials – Relocating store support office • Ongoing focus on working capital improvement & cash
Slide 43: Kmart
Kmart Ian Bailey Managing Director, Kmart
Slide 44: Kmart performance overview
Kmart performance overview Year ended 30 June ($m) 2017 2016 Var % Revenue 5,578 5,190 7.5 EBITDA 665 571 16.5 Depreciation & amortisation (112) (101) (10.9) EBIT 553 470 17.7 EBIT margin (%) 9.9 9.1 RoC (R12%) 43.7 37.7 Safety (R12 LTIFR) 6.0 6.7 Total sales growth1 (%) 7.9 13.5 Comparable sales gr
Slide 45: Kmart overview
Kmart overview • Continued strong performance – Revenue growth of 7.5% to $5.6 billion – EBIT up 17.7% to $553m – ROC of 43.7%, up 596 bps • Revenue growth underpinned by increased customer transactions & units sold – Strong growth of everyday product ranges – Ongoing price investment continuing to
Slide 46: Kmart outlook
Kmart outlook • Continue to drive sustainable growth through: – A great place to shop that is simple to run – Better products at even lower prices • Increased focus on enhancing the customer shopping experience in-store & online • Focus on operational efficiencies to facilitate volume growth • Ongoi
Slide 47: Officeworks
Officeworks Mark Ward Managing Director, Officeworks
Slide 48: Officeworks performance summary
Officeworks performance summary Year ended 30 June ($m) 2017 2016 Var % Revenue 1,964 1,851 6.1 EBITDA 168 156 7.7 Depreciation & amortisation (24) (22) (9.1) EBIT 144 134 7.5 EBIT margin (%) 7.3 7.2 RoC (R12%) 14.7 13.5 Safety (R12 AIFR) 12.0 15.9 Sales growth1 6.1 8.1 1. 2017 growth reflects the p
Slide 49: Officeworks overview
Officeworks overview • Pleasing headline results $m Revenue growth momentum 6.1% 2,000 – Revenue growth of 6.1% 8.0% 1,800 – EBIT growth of 7.5% 8.8% 4.6% 1.6% – RoC (R12) up 121 bps to 14.7% 1,600 4.4% 0.7% 7.9% • Strong focus on customer offer 1,400 – New & expanded product ranges 1,200 – Merchand
Slide 50: Officeworks outlook
Officeworks outlook • Continued focus on disciplined execution of strategic agenda – Strengthen & expand the customer offer – Extend ‘every channel’ reach – Enhance productivity & efficiency – Invest in talent, diversity & safety – Make a positive difference in the community • Variable trading condi
Slide 51: Industrials
Industrials Rob Scott Managing Director, Industrials Deputy Chief Executive Officer, Wesfarmers Limited
Slide 52: Industrials performance summary
Industrials performance summary Year ended 30 June ($m) 2017 2016 Var % Revenue Chemicals, Energy & Fertilisers1 1,639 1,820 (9.9) Industrial & Safety 1,776 1,844 (3.7) Resources 1,746 1,008 73.2 Total 5,161 4,672 10.5 EBITDA Chemicals, Energy & Fertilisers2 472 400 18.0 Industrial & Safety3 158 105
Slide 53: Chemicals, Energy & Fertilisers performance summary
Chemicals, Energy & Fertilisers performance summary Year ended 30 June ($m) 2017 2016 Var % Revenue Chemicals 813 910 (10.7) Energy1 368 325 13.2 Fertilisers 458 585 (21.7) Total 1,639 1,820 (9.9) EBITDA 472 400 18.0 Depreciation & amortisation (77) (106) 27.4 EBIT 395 294 34.4 EBIT excluding signif
Slide 54: Chemicals, Energy & Fertilisers overview
Chemicals, Energy & Fertilisers overview • Revenue affected by lower PVC & fertiliser volumes as well as lower fertiliser & ammonia commodity prices, partially offset by higher natural gas & electricity revenue • EBIT & RoC increased despite lower revenue – Higher Chemicals earnings, driven by lower
Slide 55: Industrial & Safety performance summary
Industrial & Safety performance summary Year ended 30 June ($m) 2017 2016 Var % Revenue 1,776 1,844 (3.7) EBITDA 158 105 50.5 Depreciation & amortisation (43) (42) (2.4) EBIT 115 63 82.5 EBIT excluding restructuring costs1 115 98 17.3 EBIT margin excluding restructuring costs1 (%) 6.5 5.3 RoC (R12 %
Slide 56: Industrial & Safety overview
Industrial & Safety overview • Revenue down 3.7% – Blackwoods’ revenue showing signs of stabilising following a prolonged period of decline – Workwear Group affected by lower sales in industrial wear & FX translation of UK sales – Growth in Coregas through ‘Trade N Go’ & NZ expansion (Supagas acquis
Slide 57: Resources performance summary
Resources performance summary Year ended 30 June ($m) 2017 2016 Var % Revenue 1,746 1,008 73.2 Royalties1 (262) (143) (83.2) Mining & other costs2 (1,019) (1,029) 1.0 EBITDA2 465 (164) n.m. Depreciation & amortisation (60) (146) 58.9 EBIT2 405 (310) n.m. RoC (R12 %) 69.0 (22.9) Coal production (‘000
Slide 58: Resources overview
Resources overview • Strong production & earnings recovery, with EBIT increasing $715m • 73.2% increase in revenue – Significant increases in metallurgical & thermal coal prices during FY17 – FY17 sales mix: Hard 42%; Semi 23%; PCI 35% – Lower hedge book losses of $92m ($147m in FY16) • 12.5% increa
Slide 59: Industrials outlook
Industrials outlook Chemicals, Energy & Fertilisers • Continued focus on strong operational performance & innovation • Chemicals earnings will be affected by an anticipated oversupply in the WA EGAN market; partially offset by new contracts including AN emulsion offtake • Increased competition in th
Slide 60: Industrials outlook (continued)
Industrials outlook (continued) Resources • Continue strong focus on operational productivity, cost control & capital discipline • Earnings dependent on export coal pricing & exchange rates – Export market conditions expected to remain volatile in near term – Implementation of index-linked quarterly
Slide 61: Group Outlook
Group Outlook Richard Goyder Managing Director, Wesfarmers Limited
Slide 62: Outlook
Outlook Group • Given diverse business operations & strong balance sheet, the Group remains generally optimistic in its outlook • Cash generative portfolio, capital disciplines & strong balance sheet position the Group well to take advantage of growth opportunities where satisfactory returns to shar
Slide 63: Outlook (continued)
Outlook (continued) Retail • Coles to focus on further improvements in fresh quality, merchandising & availability, while continuing to drive operational efficiencies to support investments in value & service; sales & margin pressures expected to persist in a very competitive environment • Positive
Slide 64: Questions
Questions
Slide 65: Wesfarmers
4 Wesfarmers