Wesfarmers Limited · ASX:WES
Wesfarmers — Debt Investor Presentation (2018)
40 slides from Wesfarmers's debt investor presentation, 2018
Slide 1: 2018 Half-year Results Debt Investor Update
2018 Half-year Results Debt Investor Update
Slide 2: Group Performance Summary
Group Performance Summary
Slide 3: Group performance summary
Group performance summary Half-year ended 31 December ($m) 2017 2016 Var % Revenue 35,903 34,917 2.8 EBIT 1,113 2,429 (54.2) EBIT (exc. significant items)1 2,350 2,429 (3.3) Net profit after tax 212 1,577 (86.6) Net profit after tax (exc. significant items)1 1,535 1,577 (2.7) Operating cash flow 2,8
Slide 4: Divisional earnings summary
Divisional earnings summary EBIT ($m) Half-year ended 31 December 2017 2016 Var % Var $m Bunnings Australia & NZ 864 770 12.2 94 Bunnings UK & Ireland1 (165) (48) n.m. (117) Coles2 790 920 (14.1) (130) Department Stores3 415 387 7.2 28 Officeworks 68 62 9.7 6 WesCEF4 188 187 0.5 1 Industrial & Safet
Slide 5: Operating cash flows & working capital management
Operating cash flows & working capital management • Operating cash flows increased $249m to Half-year ended 31 December ($m) 2017 2016 $2,897m Cash movement inflow/(outflow) – Improvement in cash realisation ratio to Receivables & prepayments (169) (110) 132.6%1 Inventory (452) (617) – Highly cash g
Slide 6: Disciplined capital expenditure
Disciplined capital expenditure Half-year ended 31 December • Gross capital expenditure increased $80m to ($m)1 2017 2016 Var % $1,004m BANZ 275 212 29.7 – Acquisition of Kmart brand name for $100m BUKI 56 16 n.m. Coles 377 463 (18.6) – Higher number of store openings in BANZ Department Stores 201 1
Slide 7: Bunnings Australia & New Zealand
Bunnings Australia & New Zealand
Slide 8: Bunnings Australia & New Zealand performance summary
Bunnings Australia & New Zealand performance summary Half-year ended 31 December ($m) 2017 2016 Var % Revenue 6,566 5,957 10.2 EBIT1 864 770 12.2 EBIT margin1 (%) 13.2 12.9 Total store sales growth2 (%) 10.1 8.4 Store-on-store sales growth2 (%) 9.0 6.5 1. Includes net property contribution for 2017
Slide 9: Bunnings Australia & New Zealand overview
Bunnings Australia & New Zealand overview • Revenue growth of 10.2% – Total store growth of 10.1%; store-on-store growth of 9.0% – Positive trading performance across all regions, consumer & commercial & all categories – Cycling weather & stock liquidation impacts • EBIT increase of 12.2% – Operatin
Slide 10: Bunnings United Kingdom & Ireland
Bunnings United Kingdom & Ireland
Slide 11: Bunnings United Kingdom & Ireland performance summary
Bunnings United Kingdom & Ireland performance summary Half-year ended 31 December ($m) 2017 2016 Var % Revenue 875 1,038 (15.7) EBIT1 (165) (48) n.m. EBIT margin1 (%) (18.9) (4.6) Total sales growth2 (£, %) (15.2) n.a. Store-on-store sales growth2 (£, %) (13.4) n.a. n.m. = not meaningful n.a. = not
Slide 12: Bunnings United Kingdom & Ireland overview
Bunnings United Kingdom & Ireland overview • Revenue down 15.7% – Significant clearance volumes in prior year – Inconsistent store standards – New ranges did not offset exit of discontinued lines • 15 pilots trading as at 31 December 2017 – Positive customer feedback & community engagement – Widest
Slide 13: Coles
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Slide 14: Coles performance summary
Coles performance summary Half-year ended 31 December ($m) 2017 2016 Var % Coles Revenue1 19,978 20,056 (0.4) EBIT2 790 920 (14.1) EBIT margin2 (%) 4.0 4.6 Food & Liquor Revenue1 17,056 16,878 1.1 Headline sales growth3,4 (%) 1.9 2.2 Comparable sales growth3,4 (%) 0.9 1.3 Inflation/(deflation)4 (1.6
Slide 15: Coles overview
Coles overview • Customer focus maintained in a competitive market • Sales momentum improved during the half – Stronger Q2 comparable transaction growth, the highest in six quarters – Units per basket growth – Fresh participation & market share gains – Customer satisfaction improvements • Relatively
Slide 16: Coles overview
Coles overview • Coles Online continues to improve the customer experience – Strong double digit sales & transaction growth – Disciplined investment & cost control leading to profitable growth • Largest ‘Online Supermarket’ (dark store) in Australia launched in Sydney in 2Q18 • 12 month trial launch
Slide 17: Department Stores
Department Stores
Slide 18: Department Stores performance summary
Department Stores performance summary Half-year ended 31 December ($m) 2017 2016 Var % Revenue 4,769 4,619 3.2 EBIT1 415 387 7.2 EBIT margin1 (%) 8.7 8.4 Kmart Total sales growth2 (%) 8.6 9.1 Comparable sales growth2 (%) 5.4 5.7 Target Total sales growth3 (%) (6.2) (17.4) Comparable sales growth3 (%
Slide 19: Department Stores overview
Department Stores overview • Revenue growth of 3.2% – Kmart: continued investment in price resulted in higher customer transactions & units per basket – Target: further reset of product, price & range, particularly across womenswear, toys & general merchandise • Continued growth in Kmart earnings su
Slide 20: Officeworks
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Slide 21: Officeworks performance summary
Officeworks performance summary Half-year ended 31 December ($m) 2017 2016 Var % Revenue 1,017 927 9.7 EBIT 68 62 9.7 EBIT margin (%) 6.7 6.7 Sales growth1 9.8 5.8 1. 2017 growth reflects the six months to 31 December 2017 & the six months to 31 December 2016. 2016 growth reflects the six months to
Slide 22: Officeworks overview
Officeworks overview • Strong headline results % Revenue growth momentum 12.0 – Revenue growth of 9.7% 9.9 9.7 10.0 9.1 Sales growth in stores & online 7.7 8.0 7.0 6.3 – EBIT growth of 9.7% 6.0 5.9 Effective gross margin & CODB management 4.0 – RoC (R12) up 1.8 ppts to 15.7% 2.0 0.0 • Ongoing im
Slide 23: Industrials
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Slide 24: Industrials performance summary
Industrials performance summary Half-year ended 31 December ($m) 2017 2016 Var % Revenue Chemicals, Energy & Fertilisers1 764 695 9.9 Industrial & Safety 869 884 (1.7) Resources 1,071 742 44.3 Total 2,704 2,321 16.5 EBIT Chemicals, Energy & Fertilisers2 188 187 0.5 Industrial & Safety 52 52 - Resour
Slide 25: Chemicals, Energy & Fertilisers overview
Chemicals, Energy & Fertilisers overview • Increased revenue, earnings & ROC, supported by strong production performance & solid demand • Chemicals’ earnings increased compared to the previous corresponding period: – Strong production across all plants, particularly Ammonia due to disruptions in pre
Slide 26: Industrial & Safety overview
Industrial & Safety overview • Revenue decline of 1.7% – Strong demand in the mining & construction sectors did not offset weakness in other sectors & timing of uniform sales in Workwear Group • Earnings of $52m in line with the previous corresponding period – Blackwoods: improved trading margins du
Slide 27: Resources overview
Resources overview • Continued strength in coal prices during 1H18 & strong production resulted in 44.3% increase in revenue – 1H18 sales mix: Hard 48%; Semi 12%; PCI 40% – Lower hedge book losses of $17m ($45m in 1H17) • 51.4% increase in EBIT due to higher revenue • Stanwell obligations reduced 1H
Slide 28: Outlook
Outlook
Slide 29: Outlook
Outlook Retail • BANZ to maintain strong focus on long-term value creation with continued investment in network, lower prices, range innovation & customer service; launch of online special orders • BUKI review to improve returns ongoing; current focus on significantly improving Homebase trading perf
Slide 30: Outlook
Outlook Industrials • Production & demand for WesCEF products is expected to remain strong for the remainder of the financial year • Industrial & Safety market conditions & demand generally expected to remain stable for 2H18 • Resources earnings dependant on export coal pricing & exchange rates, wit
Slide 31: Outlook
Outlook Group • Continued focus on strong cash flow generation & maintaining strong balance sheet • Continue to reinforce strong customer offers across all brands • Attracting, developing & retaining the best talent • Progressing growth opportunities across divisions through investment & entrepreneu
Slide 32: Developing our digital & data capabilities
Developing our digital & data capabilities • Total retail online sales of $761m, up 22%, for 1H18 Total retail online sales $m • Officeworks continuing to strengthen market-leading 1,400 ‘every-channel’ proposition 1,200 1,000 – Free click & collect and free same day delivery 800 600 • Coles investi
Slide 33: Debt Management
Debt Management
Slide 34: Maintaining strong balance sheet and credit metrics
Maintaining strong balance sheet and credit metrics • Continued strength in Group’s debt service position - Net financial debt1 of $3.9b as at 31 December 2017 - Net financial debt1 down from $4.3b at 30 June 2017; significantly Strong balance decreased from $5.4b at 31 December 2016 sheet - Strong
Slide 35: Financial discipline is core to Wesfarmers' strategy
Financial discipline is core to Wesfarmers’ strategy Maintaining prudent capital structure and strong credit rating is important to Wesfarmers • Recent activity - September 2017: Standard & Poor’s outlook revised from negative to stable on improved credit metrics - October 2017: Euro debt investor u
Slide 36: Pro-active debt management
Pro-active debt management MTN EUR1,250m US144A USD750m Geographical DCM Funding Diversity MTN AUD1,350m Maturity Profile at 31 December 2017 Funding Diversity at 31 December 2017 USD750m (AUD728m) repayable March 2018 $m Domestic Bank 2,000 Bonds Facilities 1,500 27% 25% 1,000 500 0 (500) US Bonds
Slide 37: Reduced funding costs
Reduced funding costs • Finance costs decreased 23.5% to $114m due to lower average debt balance • ‘All-in’ effective borrowing cost 4.08% consistent with 4.04% in FY17 $m Finance costs & weighted average cost of debt 200 6.0% 180 5.0% 160 140 4.0% 120 100 3.0% 80 2.0% 60 40 1.0% 20 0 0.0% 1H14 1H15
Slide 38: Capital management considerations
Capital management considerations • Dividend policy takes into account through the cycle free cash flow requirements and debt refinancing • Dividend investment plan neutralised since FY09 final dividend until FY16 interim dividend • DIP not neutralised for FY16 final dividend and FY17 interim divide
Slide 39: Questions
Questions
Slide 40: Wesfarmers
We Wesfarmers