Wesfarmers Limited · ASX:WES
Wesfarmers — Debt Investor Presentation (2020)
46 slides from Wesfarmers's debt investor presentation, 2020
Slide 1: 2020 Half-year Results Debt Investor Update
2020 Half-year Results Debt Investor Update
Slide 2: Group Performance Overview
Group Performance Overview 7 Wesfarmers
Slide 3: Continued focus on sustainable value creation over the long term
Continued focus on sustainable value creation over the long term 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 custo
Slide 4: Financial overview
Financial overview 2019 2019 2018 Variance Half-year ended 31 December ($m) Post AASB 16 Pre AASB 16 Reported %2 Revenue1 15,249 15,249 14,388 6.0 EBIT1 1,734 1,637 1,645 (0.5) EBIT (after interest on lease liabilities)1 1,615 1,637 1,645 (0.5) NPAT1 1,127 1,142 1,080 5.7 Basic earnings per share (c
Slide 5: Operational highlights
Operational highlights • Bunnings: Solid earnings growth underpinned by an ongoing focus on store cost control & continued growth in consumer & commercial markets across all product categories & across all major trading regions; continued to make significant improvements to the in-store & online cus
Slide 6: Divisional sales performance
Divisional sales performance Sales performance ($m) 2018 Half-year ended 31 December1 2019 Retail sales (excludes Catch) Revenue +5.3% +7.6% (4.3%) +11.5% +1.7% (2.1%) 7,275 6,907 3,176 3,417 1,559 1,492 1,100 1,226 874 889 876 858 Bunnings Kmart Target Officeworks WesCEF Industrial and Safety • Ple
Slide 7: Divisional earnings performance
Divisional earnings performance Earnings Before Tax (EBT) ($m) 2019 2019 2018 Var % of divisional Half-year ended 31 December1 Post AASB 16 Pre AASB 16 Reported %2 EBT2 Bunnings 938 961 932 3.1 61% Kmart Group3 343 345 383 (9.9) 22% Officeworks 82 79 76 3.9 5% WesCEF 173 174 185 (5.9) 11% Industrial
Slide 8: Operating cash flows
Operating cash flows • Divisional cash generation1 from continuing Divisional cash generation1 % operations up 11 ppt to 126% excluding discontinued operations2 160 – 1H20 operating cash flows before tax from 140 1H16 – 1H20 average = 125% divisions increased 4% to $2,179m 120 100 • Reported operati
Slide 9: Capital expenditure
Capital expenditure Half-year ended 31 • Gross capital expenditure from continuing December ($m)1 2019 2018 Var % operations of $455m in line with prior period Bunnings 269 240 12.1 – Higher capital expenditure in Bunnings from development of digital offer Kmart Group 80 119 (32.8) – Higher capital
Slide 10: Sale of 4.9 per cent ownership in Coles Group
Sale of 4.9 per cent ownership in Coles Group • Subsequent to period end, the Group sold 4.9 per cent of the issued capital of Coles Group Limited (ASX:COL) – Following the sale, Wesfarmers will retain a minority interest of 10.1 per cent in Coles & its right to nominate a director on the Coles Boar
Slide 11: Managing businesses for long-term value creation
Managing businesses for long-term value creation Our divisions remain focused on long-term value creation 1 2 3 Building on unique A relentless focus Investing for the capabilities and on customers long term platforms • Maintaining price leadership • Constant product innovation • Leading market posi
Slide 12: Outlook
7 Wesfarmers
Slide 13: Outlook
Outlook Operational • Bunnings: Well-positioned for continued growth with a focus on broadening commercial markets, investment in digital platforms, increased use of data analytics, price investment & network expansion • Kmart Group - Kmart: Well-positioned in the market & is expected to continue to
Slide 14: Debt Management
Debt Management 7 Wesfarmers
Slide 15: Maintaining strong credit ratings & balance sheet
Maintaining strong credit ratings & balance sheet • Strong credit metrics & stable credit ratings – Moody’s A3 (stable outlook) – Standard & Poor’s A- (stable outlook) • Maintaining prudent capital structure & strong credit rating is important to Wesfarmers • Continued strength in Group’s debt posit
Slide 16: Management of lease portfolio
Management of lease portfolio • Undiscounted lease commitments Weighted average lease terms (%)1 totalled $8.7b and represent 77% of 3.1% 1.7% 0.5% 2.2% 0.6% Group fixed financial obligations as at 12.3% 12.1% 6.8% 6.2% 12.9% 31 December 2019 32.9% 32.6% 31.4% 32.3% 32.3% • Shorter average remaining
Slide 17: Pro-active debt management
Pro-active debt management • Continued focus on maturity profile & Debt maturity profile1 $m maintaining liquidity headroom in revolving 1,200 bank facilities 900 AUD350m repayable March 600 2020 • Commitment to ensure diversity of funding 300 sources, including the domestic & international 0 debt c
Slide 18: Reduced funding costs
Reduced funding costs • Finance costs decreased by 29 per cent to $69m in 1H20 (1H19: $97m) reflecting lower average debt levels • All-in effective weighted average cost of debt decreased to 4.78 per cent (1H19: 4.90%) – All-in borrowing cost expected to reduce further following maturity of $350m me
Slide 19: Dividends & capital management
Dividends & capital management • Dividend distributions subject to franking $/share Shareholder distributions (declared) credit availability, earnings, credit metrics & 3.50 cash flow 3.00 2.78 – Maximising value of franking credits for 2.50 2.00 1.86 2.23 2.23 1.00 2.00 shareholders 1.20 1.20 1.50
Slide 20: Appendix A: ESG Standards
Appendix A: ESG Standards 7 Wesfarmers
Slide 21: Long-term value creation through strong ESG standards
Long-term value creation through strong ESG standards Wesfarmers was awarded the leading retailer in the 2019 Dow Jones Sustainability Index (DJSI) World – retail index Key focus areas include1: • Continue relentless focus on providing safe workplaces • Provide team members with development opportun
Slide 22: Appendix B: 2020 Half-year Results Briefing Presentation (Operational Extract)
Appendix B: 2020 Half-year Results Briefing Presentation (Operational Extract)
Slide 23: Bunnings Australia and New Zealand
Bunnings Australia and New Zealand
Slide 24: Bunnings performance summary
Bunnings performance summary 2019 2019 2018 Var Half-year ended 31 December ($m) Post AASB 16 Pre AASB 16 Reported %1 Revenue 7,276 7,276 6,909 5.3 EBITDA 1,316 1,059 1,027 3.1 Depreciation and amortisation (321) (98) (95) (3.2) EBIT 995 961 932 3.1 Interest on lease liabilities (57) - - n.m. EBT 93
Slide 25: Bunnings performance summary
Bunnings performance summary • Revenue growth of 5.3% to $7,276m – Total store sales growth of 5.8% – Store-on-store growth of 4.7% – Growth across all major trading regions • Earnings increased 3.1% to $961m – Lower net property contribution • Earnings excluding property contribution increased 4.3%
Slide 26: Bunnings progress on strategic agenda
Bunnings progress on strategic agenda • Even Stronger Offer – 8 new trading locations opened – 8 store upgrades and expansions – Continued range expansion and innovation – Ongoing investment in customer value – Assembly and installation offer expanded to 35 services – Product training delivered to m
Slide 27: Bunnings outlook
Bunnings outlook • Moderated trading conditions expected to continue – Customers remain cautious while significant weather events and bushfires continue to impact communities around Australia • Further investment in data and digital capabilities – Focus on building click and collect offer in New Zea
Slide 28: Kmart Group
Kmart Group
Slide 29: Kmart Group performance summary
Kmart Group performance summary 2019 2019 2018 Var Half-year ended 31 December ($m)1 Post AASB 16 Pre AASB 16 Reported %2 Revenue 4,990 4,990 4,639 7.6 EBITDA 687 453 480 (5.6) Depreciation and amortisation (292) (108) (97) (11.3) EBIT 395 345 383 (9.9) Interest on lease liabilities (52) - - n.m. EB
Slide 30: Kmart Group sales overview
Kmart Group sales overview • Revenue increased by 7.6% to $4,990m – Kmart sales increased $241m, more than offsetting a $67m decline in Target • Kmart total sales growth of 7.6% reflected a continued focus on lowest price positioning, stronger operational execution and enhancements to the product ra
Slide 31: Kmart Group earnings overview
Kmart Group earnings overview • Earnings decreased by 9.9% to $345m – Excluding a one-off provision for payroll remediation in Target, earnings decreased 7.6% • Kmart earnings growth driven by strong sales growth and improved execution – Despite unfavourable foreign exchange rate impacts and higher
Slide 32: Kmart Group outlook
Kmart Group outlook • Kmart remains well-positioned in the market – Expected to continue to offset the cost impacts from lower exchange rates and higher team member wages • Target performance is unlikely to improve materially in the near term – Continue to focus on reducing costs by further leveragi
Slide 33: Industrials
Industrials @ lent Wesfarmers Chemicals, nilid au LPG see EMG =¥2! Keenheat [moowoon C= ae NZSafetyBlackwoods © WORKWEAR c GREENCAP Industrial and Safety ataore
Slide 34: Chemicals, Energy and Fertilisers performance summary
Chemicals, Energy and Fertilisers performance summary 2019 2019 2018 Var Half-year ended 31 December ($m)1 Post AASB 16 Pre AASB 16 Reported %2 Revenue3 Chemicals 510 510 502 1.6 Energy 219 219 233 (6.0) Fertilisers 160 160 139 15.1 Total 889 889 874 1.7 EBITDA 214 212 221 (4.1) Depreciation and amo
Slide 35: Chemicals, Energy and Fertilisers overview
Chemicals, Energy and Fertilisers overview • Revenue of $889m up 1.7% on pcp, reflecting volume growth in Chemicals and Fertilisers, offset by lower energy prices (including Saudi CP1) and flat LPG volumes • Earnings of $174m, down 5.9% on prior period impacted by competitive pressures in Energy • C
Slide 36: Chemicals, Energy and Fertilisers outlook
Chemicals, Energy and Fertilisers outlook • Product demand and plant production volumes are expected to remain stable, with iron ore and gold market demand remaining robust • Earnings are expected to moderate – Lower EGAN sales volumes as competing Burrup plant comes online in second half – Continue
Slide 37: Industrial and Safety performance summary
Industrial and Safety performance summary 2019 2019 2018 Var Half-year ended 31 December ($m) Post AASB 16 Pre AASB 16 Reported %1 Revenue 858 858 876 (2.1) EBITDA 46 25 61 (59.0) Depreciation and amortisation (36) (19) (19) - EBIT 10 6 42 (85.7) Interest on lease liabilities (3) - - n.m. EBT 7 6 42
Slide 38: Industrial and Safety overview
Industrial and Safety overview • The performance of Industrial and Safety business was disappointing, principally due to continued underperformance of Blackwoods • Revenue of $858m, down 2.1% on prior period – Blackwoods revenue declined as sales growth from strategic customers and the Western Austr
Slide 39: Industrial and Safety outlook
Industrial and Safety outlook • Blackwoods is implementing a number of turnaround initiatives to improve the operating model – Implementation of new regional sales structure – Continued investments in ERP and other digital capabilities • Some positive customer feedback and improvement in service met
Slide 40: Officeworks
Officeworks
Slide 41: Officeworks performance summary
Officeworks performance summary 2019 2019 2018 Var Half-year ended 31 December ($m) Post AASB 16 Pre AASB 16 Reported %1 Revenue 1,231 1,231 1,100 11.9 EBITDA 137 94 90 4.4 Depreciation and amortisation (48) (15) (14) (7.1) EBIT 89 79 76 3.9 Interest on lease liabilities (7) - - n.m. EBT 82 79 76 3.
Slide 42: Officeworks sales overview
Officeworks sales overview • Strong headline sales results % Sales growth momentum 14 – Sales growth of 11.5% 12 11.5 9.7 o Strong sales growth in stores and online 10 9.1 8.5 8.2 8 7.0 7.1 6.3 o Robust transaction growth as offer continues to 6 5.9 resonate with customers 4 2 • Continued focus on i
Slide 43: Officeworks earnings overview
Officeworks earnings overview Strong earnings and RoC growth • Earnings growth of 3.9% to $79m $m 16.9 % 180 18 – Continued investment in price to maintain customer trust 160 16 140 14 o Competitive environment remains intense 120 12 – Change in sales mix impacting gross margin 100 10 80 5.7 8 – COD
Slide 44: Officeworks progress on strategic agenda
Officeworks progress on strategic agenda • Our team – New Enterprise Agreement for store teams implemented • Customer experience – Improvement in customer satisfaction levels • Connecting with our communities – $800k contributed to the Australian Literacy and Numeracy Foundation – 84% operational wa
Slide 45: Officeworks outlook
Officeworks outlook • Continued focus on strategic agenda to drive long-term growth – Our team – Customer experience – Connecting with our communities – Operational excellence – Growing our business • Earnings growth to be moderated by ongoing investment in price, team and technology 2020 Half-year
Slide 46: Questions
Questions