Slide 1: 2015 Full-Year Results Briefing Presentation
2015 Full-Year Results Briefing Presentation Thursday, 20 August 2015
Slide 2: Presentation outline
Presentation outline Item Presenter Page Group Performance Highlights Richard Goyder 3 Coles John Durkan 12 Home Improvement & Office Supplies John Gillam 20 Kmart Guy Russo 31 Target Stuart Machin 35 Chemicals, Energy & Fertilisers Tom O’Leary 39 Resources Stewart Butel 43 Industrial & Safety Olivi
Slide 3: Group Performance Highlights
Group Performance Highlights Richard Goyder Managing Director, Wesfarmers Limited
Slide 4: Financial highlights
Financial highlights Year ended 30 June 2015 Variance to prior corresponding period Continuing operations1 Reported excluding NTIs2 Operating revenue of $62.4b 0.2% 3.8% EBIT of $3,759m (9.4%) 5.4% NPAT of $2,440m (9.3%) 8.3% Earnings per share of $2.16 (7.9%) 9.9% Return on equity (R12) of 9.8% (70
Slide 5: Group performance summary
Group performance summary Year ended 30 June ($m) 2015 2014 % Revenue 62,447 62,348 0.2 EBITDA 4,978 5,273 (5.6) EBIT 3,759 4,150 (9.4) EBIT (from continuing operations1 excluding NTIs2) 3,759 3,566 5.4 Finance costs (315) (363) 13.2 Tax expense (1,004) (1,098) 8.7 Net profit after tax 2,440 2,689 (
Slide 6: Strength through diversified earnings
Strength through diversified earnings EBIT ($m) Percentage of divisional EBIT growth 2015 2014 % EBIT FY15 Year ended 30 June Food, liquor & petrol retailing 1,783 1,672 6.6 +$111m Coles 1,783 1,672 6.6 46% FY14 FY15 Home Improvement & Office 1,206 1,082 11.5 +$124m Supplies Home Improvement 1,088 9
Slide 7: Return on capital
Return on capital 2015 2014 Rolling 12 months to 30 June EBIT Cap Emp ROC ROC ($m) ($m) (%) (%) Food, liquor & petrol retailing 1,783 16,276 11.0 10.3 Home Improvement & Office Supplies 1,206 4,278 28.2 24.4 Department store retailing 522 3,778 13.8 10.4 Industrials 353 4,245 8.3 11.7 • Continued fo
Slide 8: Divisional performance highlights
Divisional performance highlights Coles Officeworks • Improved sales momentum • Best performance under Wesfarmers’ • Operating efficiencies supported further ownership investment in lower prices • Merchandise category expansion & focus on • Growth in customer transactions, average delivery of improv
Slide 9: Divisional performance highlights (cont’d)
Divisional performance highlights (cont’d) Target Resources • Transformation plan progressed well • Significant decline in export coal prices adversely • Sales momentum improved as customers affected earnings responded positively to range improvements & • Good results in productivity improvements &
Slide 10: Focus on shareholder returns
Focus on shareholder returns • Dividend & capital management distributions Shareholder distributions (declared) $/share supporting long-term shareholder returns 3.50 • Underlying earnings growth, balance sheet 3.00 strength & good cash generation supported an 3.00 increase in ordinary dividends Inte
Slide 11: Broad & significant economic contribution
Broad & significant economic contribution Investment FY15 Gross capital expenditure $ billions Dividends & capital management $3.5b $315m Interest on borrowings $2.2b Distributions to Financing costs $8.2b ~500,000 $1.3b b shareholders ~$90m Community contributions Employee benefits Direct & indirec
Slide 12: Coles
Coles John Durkan Managing Director
Slide 13: Coles performance summary
Coles performance summary Year ended 30 June ($m) 2015 2014 % Coles Division Revenue 38,201 37,391 2.2 EBITDA1 2,347 2,157 8.8 EBIT1 1,783 1,672 6.6 EBIT margin (%) 4.7 4.5 ROC (R12%) 11.0 10.3 Safety (R12 LTIFR) 8.0 8.4 Food & Liquor Revenue2 30,784 29,220 5.4 Headline sales growth (%)3,4 5.3 4.7 C
Slide 14: Food & Liquor highlights: Delivering fresh-led trusted value
Food & Liquor highlights Delivering fresh-led trusted value • Focused on growing fresh – Double digit fresh produce sales & volume growth – Improving fresh quality & availability – Investing in team member craft skills & in-store service • Delivering trusted value – More than 2,000 products at trust
Slide 15: Food & Liquor highlights: Greater simplicity delivering productivity savings
Food & Liquor highlights Greater simplicity delivering productivity savings Suppliers Supply Chain Store • Greater collaboration with • Improved freshness with flow • Investing in simpler & suppliers through efficiency smarter stores – Implemented Coles – More products on stockless – Simplified proc
Slide 16: Food & Liquor highlights: Boldly extending into new services & channel
Food & Liquor highlights Boldly extending into new services & channel • Extended Coles’ financial services offering – More than 880,000 insurance & credit card customers – Competitive new products introduced: mobile wallet, low rate MasterCard & prepaid credit card, new home & landlord insurance • C
Slide 17: Food & Liquor highlights: Progressing the liquor transformation
Food & Liquor highlights Progressing the liquor transformation Optimising the liquor network • Liquor remains challenging, with transformation # stores progressing as planned 60 5 40 8 10 8 8 • Significant investment in value 20 12 11 35 51 33 27 33 20 17 - • Simplified Liquorland range in 163 store
Slide 18: Convenience highlights: Accelerating growth in convenience
Convenience highlights Accelerating growth in convenience • Strong network growth Expanding the convenience network # stores 25 – 22 new sites opened & two closed in FY15 20 22 – Bigger stores planned 15 10 12 9 10 11 • Better convenience store offer 5 8 1 - – Strong convenience store sales growth i
Slide 19: Coles Outlook
Coles Outlook • Absolute focus on end-to-end simplicity to reduce cost base to fund further investments in trusted value, fresh & customer service • Maintain disciplined & returns-focused capital management • Grow new channels & services to drive long-term growth • Progress liquor transformation • D
Slide 20: Home Improvement & Office Supplies
Home Improvement & Office Supplies John Gillam Managing Director
Slide 21: HIOS performance summary
HIOS performance summary Year ended 30 June ($m) 2015 2014 % Revenue Home Improvement 9,534 8,546 11.6 Office Supplies 1,714 1,575 8.8 Total 11,248 10,121 11.1 EBITDA Home Improvement 1,228 1,106 11.0 Office Supplies 139 124 12.1 Total 1,367 1,230 11.1 EBIT Home Improvement 1,088 979 11.1 Office Sup
Slide 22: Home Improvement performance summary
Home Improvement performance summary Year ended 30 June ($m) 2015 2014 % Revenue 9,534 8,546 11.6 EBITDA 1,228 1,106 11.0 Depreciation & amortisation (140) (127) (10.2) EBIT 1,088 979 11.1 EBIT margin (%) 11.4 11.5 ROC (R12 %) 33.5 29.3 Safety (R12 AIFR) 24.8 29.1 Total store sales growth (%)1 11.4
Slide 23: Home Improvement highlights
Home Improvement highlights • Strong sales growth…increased by $1 billion – Total store sales growth of 11.4% » Store-on-store growth 8.8% – Positive across Australia (all regions) & New Zealand – Good momentum in consumer & commercial – Pleasing growth across all categories • Good increase in EBIT…
Slide 24: Home Improvement highlights
Home Improvement highlights • Customer engagement enhanced – More value, wider range & better experiences – Service uplifts from in-store tech • Deeper brand reach – Digital offering widened with richer content – 29 new trading locations opened • Continued team investment – Wonderful community invol
Slide 25: Home Improvement highlights
Home Improvement highlights • Strong investment program focused on growth & core business capabilities • Good capital management disciplines • Market leading ROC of 33.5%...increased by 425 basis points 2015 Full-Year Results | 25 Home Improvement
Slide 26: Home Improvement outlook
Home Improvement outlook • Good momentum from strategic agenda • Multiple growth drivers – Good long-term prospects – More value, better experiences, greater brand reach, expanding commercial & merchandising innovation – Network reinvestment & expansion continues • Investing for a stronger business
Slide 27: Office Supplies performance summary
Office Supplies performance summary Year ended 30 June ($m) 2015 2014 % Revenue 1,714 1,575 8.8 EBITDA 139 124 12.1 Depreciation & amortisation (21) (21) - EBIT 118 103 14.6 Trading EBIT margin (%) 6.9 6.5 ROC (R12 %) 11.4 9.4 Safety (R12 AIFR) 19.2 21.9 2015 Full-Year Results | 27 Office Supplies
Slide 28: Office Supplies highlights
Office Supplies highlights • Strong headline results Revenue growth momentum $m – Revenue growth of 8.8% to $1.7 billion 1,800 8.8% 1,700 4.6% – EBIT growth of 14.6%, six year CAGR of 10.4% 1,600 0.7% 1.6% 4.4% 7.9% – ROC up 202 basis points to 11.4% 1,500 1,400 1,300 • ‘Every channel’ strategic age
Slide 29: Office Supplies highlights
Office Supplies highlights • Continued investment in the ‘every channel’ strategy – New & expanded categories – Improved store layout & design changes – Online enhancements received favourably by customers – Ongoing investment in physical & digital service – Seven new stores opened – Positive result
Slide 30: Office Supplies outlook
Office Supplies outlook • Continue driving ‘every channel’ strategic agenda – Reach & engage more customers » Anywhere, Anyhow, Anytime – Provide compelling value to customers – Lift productivity, further cost & complexity reduction – Ensure Officeworks remains a great place to work • Continued grow
Slide 31: Kmart
Kmart Guy Russo Managing Director
Slide 32: Kmart performance summary
Kmart performance summary Year ended 30 June ($m) 2015 2014 % Revenue 4,553 4,209 8.2 EBITDA 521 448 16.3 Depreciation & amortisation (89) (82) (8.5) EBIT 432 366 18.0 EBIT margin (%) 9.5 8.7 ROC (R12 %) 32.9 26.9 Safety (R12 LTIFR) 7.0 7.0 Total sales growth (%)1 8.2 0.9 Comparable store sales grow
Slide 33: Kmart highlights
Kmart highlights • Revenue growth underpinned by increased customer transactions & units sold – Growth across all key categories • Strong growth in EBIT & ROC – Improvement in range architecture – Greater value across price tiers – Increased operational efficiencies – Strong working capital manageme
Slide 34: Kmart outlook
Kmart outlook • Remain focused on the growth strategies: – Volume retailer – Operational excellence – Adaptable stores – High performance culture • Relentless focus on price leadership • Continue to improve range architecture • Close management of cost of doing business • Management of foreign curre
Slide 35: Target
Target Stuart Machin Managing Director
Slide 36: Target performance summary
Target performance summary Year ended 30 June ($m) 2015 2014 % Revenue 3,438 3,501 (1.8) EBITDA1 176 167 5.4 Depreciation & amortisation (86) (81) (6.2) EBIT1 90 86 4.7 EBIT margin (%) 2.6 2.5 ROC (R12 %) 3.6 2.9 Safety (R12 LTIFR) 4.7 5.7 Total sales growth (%)2 (1.8) (4.2) Comparable store sales g
Slide 37: Target highlights
Target highlights • Improving revenue trend – Volume growth increasingly offsetting lower prices – 4Q15 Easter adjusted comparable sales flat – Online year-on-year sales growth of 51% • EBIT stabilised – Difficult first quarter due to high levels of winter clearance – Improved margin performance – 7
Slide 38: Target transformation plan
Target transformation plan Transitioning from ‘Fixing the Basics’ to ‘Growth & Efficiency’ • Drive sourcing & supply chain efficiencies • Improve stock availability • Accelerate store renewal program • Continue to grow profitable online sales • Reduce SKUs to improve fashion, style & quality • Embed
Slide 39: Chemicals, Energy & Fertilisers
Chemicals, Energy & Fertilisers Tom O’Leary Managing Director
Slide 40: Chemicals, Energy & Fertilisers performance summary
Chemicals, Energy & Fertilisers performance summary Year ended 30 June ($m) 2015 2014 % Revenue Chemicals 840 730 15.1 Energy1 435 592 (26.5) Fertilisers 564 490 15.1 Total 1,839 1,812 1.5 EBITDA2 345 314 9.9 Depreciation & amortisation (112) (93) (20.4) EBIT2 233 221 5.4 External3 sales volume (‘00
Slide 41: Chemicals, Energy & Fertilisers highlights
Chemicals, Energy & Fertilisers highlights • Earnings included a net $10 million gain from one-offs – Insurance proceeds & gain on sale of Kleenheat east coast LPG distribution business partially offset by asset writedowns • In chemicals, significantly higher contribution (excluding insurance procee
Slide 42: Chemicals, Energy & Fertilisers outlook
Chemicals, Energy & Fertilisers outlook • Overall outlook remains subject to international commodity prices & exchange rates • Positive Chemicals outlook, excluding AV – Increased AN demand expected to drive continued growth in AN earnings – Sodium cyanide sales covering total expanded capacity in p
Slide 43: Resources
Resources Stewart Butel Managing Director
Slide 44: Resources performance summary
Resources performance summary Year ended 30 June ($m) 2015 2014 % Revenue 1,374 1,544 (11.0) Royalties1 (167) (221) 24.4 Mining & other costs (992) (1,033) 4.0 EBITDA 215 290 (25.9) Depreciation & amortisation (165) (160) (3.1) EBIT 50 130 (61.5) ROC (R12%) 3.4 8.9 Coal production (‘000 tonnes) 15,5
Slide 45: Resources highlights
Resources highlights Safety • Significant improvement in safety performance with 50% reduction in LTIFR Production • Record metallurgical coal & run-of-mine coal production at Curragh during FY15 Costs • Continued focus on cost control & productivity improvement at Curragh – Achieved unit mine cash
Slide 46: Resources outlook
Resources outlook Export markets • Global metallurgical coal market remains in near-term over supply • Continued low export metallurgical & steaming coal prices anticipated in 1H FY16 Financial year 2016 • Continued variability expected with low export coal pricing; 1Q FY16 Curragh hard coking coal
Slide 47: Industrial & Safety
Industrial & Safety Oliver Chretien Managing Director
Slide 48: Industrial & Safety performance summary
Industrial & Safety performance summary Year ended 30 June ($m) 2015 2014 % Revenue 1,772 1,621 9.3 EBITDA 108 161 (32.9) Depreciation & amortisation (38) (30) (26.7) EBIT 70 131 (46.6) EBIT – excluding one-off restructuring costs1 90 131 (31.3) EBIT margin (%) 4.0 8.1 ROC (R12 %) 5.5 11.6 Safety (R
Slide 49: Industrial & Safety highlights
Industrial & Safety highlights • Earnings impacted by volume & margin pressure & restructuring activity – Reduced customer & project activity – Margin compression from lower Australian dollar & customers’ cost focus – $20 million of one-off restructuring costs • Good progress made on resetting cost
Slide 50: Industrial & Safety outlook
Industrial & Safety outlook • Weak customer activity & margin pressure expected to continue in FY16 – Business is well positioned for market share gain & growth in new areas • Continued focus on cost of doing business – Supply chain, customer service & sales force effectiveness & technology investme
Slide 51: Balance Sheet & Cash Flow
Balance Sheet & Cash Flow Terry Bowen Finance Director, Wesfarmers Limited
Slide 52: Other business performance summary
Other business performance summary Year ended 30 June ($m) Holding % 2015 2014 % Share of profit of associates: BWP Trust 25 52 37 40.5 Other Various 13 8 62.5 Sub-total share of profit of associates 65 45 44.4 Interest revenue 27 10 170.0 Other (73) (64) (14.1) Corporate overheads (124) (113) (9.7)
Slide 53: Working capital management
Working capital management • Strong focus on working capital efficiencies • Cash inflows from working capital movements – Improved overall inventory management – Year-end timing differences resulting in additional creditor payment at Coles in FY14 Net working capital days1 Year ended 30 June ($m) 20
Slide 54: Solid operating cash flow generation
Solid operating cash flow generation • Cash realisation of 104% • Higher cash realisation in FY15 driven by working capital cash inflows from retail portfolio $m Cash realisation % 4,400 160 3,300 120 2,200 80 1,100 40 - - FY09 FY10 FY11 FY12 FY13 FY14 FY15 NPATDA¹ Operating cash flow Cash realisati
Slide 55: Capital investment & property recycling
Capital investment & property recycling • Effective capital deployment to high return Year ended 30 June ($m)1 2015 2014 % Coles 941 1,016 (7.4) opportunities HIOS 750 557 34.6 – Coles & HIOS comprised 76% of capital Kmart 169 162 4.3 expenditure (up from 70% in FY14) Target 127 78 62.8 – Coles FY15
Slide 56: Cash flows supported investment phase & shareholder distributions
Cash flows supported investment phase & shareholder distributions • Free cash flows above the prior year, when adjusting for the proceeds from disposal of the Insurance division – Higher operating cash flows partially offset by increased acquisition activity (Workwear Group & Quadrant Energy) & lowe
Slide 57: Diversity of funding sources & risk management of debt maturities
Diversity of funding sources & risk management of debt maturities • Debt strategy to diversify sourcing, pre-fund debt maturities, $m Debt maturity profile1 maintain access to diverse debt capital markets & ensure a 1,500 good maturity spread profile 1,000 • FY15 debt activity: 500 – A$500 million m
Slide 58: Optimised funding costs
Optimised funding costs • “All-in” weighted average cost of debt maintained at 5.4% (FY15); FY16F c. 5.0% • Benefits from lower finance costs expected to moderate in FY16 – High average debt balance to offset reduced cost of debt Finance costs & % $m weighted average cost of debt 1,000 10 800 8 600
Slide 59: Credit metrics & ratings
Credit metrics & ratings • Solid credit metrics – Cash interest cover (R12) improved to 20.5 times (from 15.9 times in FY14) – Fixed charges cover (R12) of 3.0 times (from 3.2 times in FY14) • Stable credit ratings – Standard & Poor’s A- (stable) & Moody’s A3 (stable) 2015 Full-Year Results | 59
Slide 60: Dividends & capital management
Dividends & capital management Shareholder distributions (declared) • Full-year ordinary dividend of $2.00 per share $/share 3.00 3.00 fully-franked, up 5.3%1 2.50 2.30 1.00 2.00 – Final dividend of $1.11 per share 2.00 1.65 0.50 0.10 1.50 – Record date 27 August 2015 with final 1.50 1.10 1.25 1.03
Slide 61: Outlook
Outlook Richard Goyder Managing Director, Wesfarmers Limited
Slide 62: Outlook
Outlook Retail • With customers remaining focused on value, Group’s retail portfolio is expected to benefit from strategies to drive further value for customers & improvement in merchandise offers • Create increased value through investment of sourcing & supply chain efficiencies • Customer offer im
Slide 63: Outlook (continued)
Outlook (continued) Group • Well placed to strengthen & build upon existing businesses with a focus on seeking to deliver improved shareholder returns • Retain a strong balance sheet to secure growth opportunities, should they arise • Optimise the portfolio, where practical • Ensure sustainability t
Slide 64: Questions
Questions 2015 Full-Year Results | 64
Slide 65: Wesfarmers
os Wesfarmers