2016 FULL-YEAR RESULTS
GROUP PERFORMANCE SUMMARY
Strong performances across a majority of the Group's businesses were offset by challenging
basket size. The Coles Liquor transformation achieved an important milestone with positive
Outlook
Competition in the retail sector is expected to remain robust, with value continuing
to be important to customers. Within this environment, the retail businesses are well- positioned to continue to deliver growth through strategies focused on achieving further improvements in value, service and range. These strategies will be supported by ongoing productivity savings and strong cost disciplines. Ongoing merchandise innovations, digital strategies and store network improvements and expansions are further expected to contribute to growth. Bunnings will continue to establish its United Kingdom and Ireland business. The 2017 financial year will be a transitional year for Target, with the business focusing on embedding its revised strategy.
The outlook for the Industrials division remains challenging in the short-term. The Resources business will continue to focus on improving operational efficiency. While its earnings will be largely dependent on export coal prices and exchange rates, the business will report lower depreciation and lower hedge losses in the 2017 financial year. The Group continues to evaluate all strategic options for this business. WesCEF's outlook is subject
to international commodity pricing, exchange rates, competitive factors and seasonal conditions. Industrial and Safety will continue to invest in capability and performance improvements across the business to mitigate ongoing sales and margin pressures.
Wesfarmers will continue to prioritise cash flow generation, capital discipline and balance sheet strength, while managing its business portfolio with a long-term view. It is strongly focused on delivering organic growth opportunities in each of its businesses while being well positioned to take advantage of any other opportunities that deliver value to shareholders.
FINAL DIVIDEND PER SHARE
trading conditions and restructuring activities
at Target and the impact of low commodity prices on the Resources business.
comparable sales growth for the year, reflecting
investments in price, range and store network. The Convenience business produced a solid
The Group reported a net profit afer tax (NPAT)
result despite lower fuel volumes, with stronger growth in store sales than the prior year.
$0.95We are pleased to provide shareholders with a summary of
of $407 million. The result included non-cash
impairments of Target and Curragh totalling
$2,116 million before tax, as well as $145 million (pre-tax) of restructuring costs and provisions to reset Target. Excluding these significant items, NPAT decreased 3.6 per cent to $2,353 million.
A highlight for the year was the acquisition of Homebase, the second largest home
Bunnings Australia and New Zealand produced another very strong result, with total store sales growth of 11.1 per cent and store-on-store sales growth of 8.1 per cent, reflecting the solid execution of its strategic agenda. Sales growth was achieved across all areas of the business following the delivery of greater digital and physical brand reach, continued commercial
down 14.4 per cent2015 $1.11
Wesfarmers Limited's results for the full-year ended 30 June 2016. For more detail we encourage
improvement and garden retailer in the
United Kingdom and Ireland, which provides a platform for long-term value creation.
The Group's balance sheet remained strong, with
expansion and increased customer value.
Good progress has been made to reshape the Homebase business since ownership, with results in line with the acquisition plans.
2015
2016
2016 $0.95
you to read the relevant announcements lodged with the ASX on 24 August 2016.
Michael Chaney AO
Chairman
Richard Goyder AO
Managing Director
26 August 2016
active management of debt sources supporting
further reductions in funding costs.
In line with the Group's dividend policy, which considers earnings, cash flows and franking credits, a final ordinary dividend of
$0.95 per share was declared, bringing the full-year ordinary dividend to $1.86 per share.
Retail
In a competitive environment, the retail businesses continued to invest in customer value, service, stores and online, and improved merchandise ranges to deliver long-term growth and improved returns. Excluding Target, the retail portfolio delivered growth in earnings before interest and tax (earnings or EBIT) of
7.5 per cent. This growth was offset by weak underlying performance in Target and the cost of restructuring activities following the creation of the Department Stores division in February 2016 to create a stronger platform for growth.
The continued momentum in Coles' Food and Liquor business was a good result given a
competitive market and accelerating deflation. Food and liquor revenue grew $1,780 million driven by improvements in value, quality and service. The ongoing simplification of end-
to-end processes through the business has supported continued investment in these areas while further improvements in Coles' fresh offer resulted in increased transaction volumes and
Kmart delivered a significant increase in earnings and return on capital through improvements in range and productivity, as well as a strong focus on providing the lowest prices on everyday items. Sales growth was achieved across all categories, supported by continued investment in new stores and refurbishments. Following the creation of the Department Stores division, decisive steps were taken to reduce Target's cost base and reset inventory in line with a revised strategic plan. While Target's revenue was in line with last year, it reported
an operating loss of $195 million, including
$145 million of restructuring costs and provisions to reset the business. The underlying loss of $50 million was primarily driven by high levels of seasonal clearance and the impact of a lower Australian dollar on margins.
Officeworks delivered another year of strong growth in earnings and return on capital.
Continued investments in price, service, the in-store environment and the online offer, as well as expanded merchandise ranges contributed to growth across every channel.
Industrials
The performance of the Industrials division was significantly affected by depressed conditions across the resources sector. Underlying earnings were $306 million lower, primarily driven by an operating loss of $310 million for the Resources
business where continued cost improvements
were more than offset by lower export coal prices, a decline in coal sales volumes due to significant wet weather events and $147 million of losses from currency hedges. The Industrial and Safety business simplified its operations and reduced costs to mitigate sales and margin pressures in an environment where customers remained cost conscious. The Chemicals,
Energy and Fertilisers (WesCEF) business had a strong year with earnings growth across all three business units.
Cash flow
Operating cash flows of $3,365 million were
$426 million lower than last year, driven by lower earnings and a working capital outflow. Higher working capital investments were made to improve stock availability in Homebase and to support sales growth across the retail businesses; partially offset by working capital inflows across the Industrials portfolio.
Gross capital expenditure of $1,899 million was
$340 million lower, primarily due to fewer store openings in Bunnings and Coles. Proceeds from disposals were lower and net capital expenditure of $1,336 million was $216 million below the prior period.
Free cash flows of $1,233 million were
$660 million lower, primarily due to the acquisition of Homebase.
2
Strong performances across a majority of the Group's businesses were offset by challenging trading conditions and restructuring at Target and the impact of lower commodity prices on the Industrials division.
REVENUE
$65,981M up 5.7 per centEARNINGS BEFORE INTEREST AND TAX
$3,607M down 4.0 per cent1(reported down 64.2 per cent)
NET PROFIT AFTER TAX
$2,353M down 3.6 per cent1(reported down 83.3 per cent)
EARNINGS PER SHARE
$2.09 down 3.1 per cent1(reported down 83.2 per cent)
RETURN ON EQUITY (R12)
9.6% down 0.2 ppt1(reported down 8.1 ppt)
$62,447m
$65,981m
$3,759m
$3,607m
$2,440m
$2,353m
$2.16
$2.09
9.8%
9.6%
$1,346m | $407m | $0.36 | 1.7% | ||||||
2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 |
Excluding significant items.
1 Excluding significant items. Significant items were a non-cash impairment of Target of $1,266 million pre-tax ($1,249 million post-tax); a non-cash impairment of Curragh of $850 million pre-tax ($595 million post-tax); and $145 million pre-tax ($102 million post-tax) of restructuring costs and provisions to reset Target.
3
COLES | HOME IMPROVEMENT | DEPARTMENT STORES | |||
Financial performance | Outlook | Bunnings Australia | Bunnings United Kingdom | Target | Kmart |
Continued investment in the customer offer delivered improved transaction volumes, basket size and sales density
Headline food and liquor sales up
5.1 per cent
Comparable food and liquor sales up 4.1 per cent
Food and liquor deflation of
1.7 per cent
More than 3,100 items on Every Day pricing at year end
Coles Online transactions up more than 25 per cent
Positive comparable sales growth in liquor, led by Liquorland
Coles Express revenue declined on lower fuel volume and prices but convenience store sales increased on improved food-to-go offer, Coles Brand growth and extended Every Day value
Robust competition
Continued focus on improved customer offer
Investment in lowering the cost of the weekly shop through Every Day pricing, compelling specials, innovation and quality in Coles Brand and personalised flybuys offers
Investments in store network, market-leading fresh food quality and availability, world class service and new channels and services, funded by end-to-end simplicity throughout the business
Progress the Liquor transformation with focus on sustaining improved sales while improving profitability
Continued network and shop sales growth at Coles Express
and New Zealand
Financial performance
Total store sales growth of 11.1 per cent and store-on-store sales up
8.1 per cent
Strong sales growth across consumer and commercial, all merchandise categories, all major regions
Earnings growth from strong trading, productivity gains and good cost disciplines
Continued major investment in the expansion and upgrading of the store network
Strong increase in return on capital due to earnings growth and good capital disciplines
Outlook
Continued focus on driving growth, creating better experiences
for customers and the wider community, and strengthening the core of the business
Achieving greater brand reach, both digitally and physically
and Ireland (Homebase)
Financial performance
Homebase sales of $986m and earnings of $1m in line with expectations for the first four months of ownership
Investment in additional inventory to support wider product choices and deeper stock holdings
Customer participation (as measured by transactions) has increased by 7.5 per cent on a like-for-like trading basis
Outlook
All work prioritised around building strong business foundations
Driving a stronger operating performance from the repositioned Homebase business, implementing plans for the establishment of four to six pilot Bunnings Warehouse stores in FY2017 and continuing to restructure the underlying business infrastructure to provide support for low-cost, high-capability operations
Financial performance
Total store sales up 0.2 per cent, comparable sales down 0.4 per cent
Earnings affected by $145m of restructuring costs, high level of seasonal stock clearance and a lower Australian dollar
Progress included reduction of cost base, reset of vision, values and strategy, inventory reduction and store network review
Non-cash impairment of $1,266m (pre-tax)
Outlook
FY2017 a transitional year
Focus on embedding the revised strategy, accelerating everyday low pricing, exiting unprofitable ranges, prioritising volume/ every day lines, further reducing inventory and improving quality
Strong focus on capital efficiency
Financial performance
Total store sales up 13.5 per cent, comparable sales up 10.5 per cent
Strong sales growth supported by increased transactions and units sold
Earnings improved through sales growth and increased operational efficiencies
Opened six new stores and completed 37 refurbishments
Outlook
Relentless pursuit of lowest cost
Continued commitment to improving range architecture, driving productivity and maintaining a high performance culture
Plans to open 11 stores and complete 33 refurbishments in FY2017
COLES
$39,242Mup 2.7 per cent
HOME IMPROVEMENT
$11,571Mup 21.4 per cent
BUNNINGS AUSTRALIA AND NEW ZEALAND
$10,575Mup 10.9 per cent
TARGET
$3,456Mup 0.5 per cent
KMART
$5,190Mup 14.0 per cent
2015 $38,201m
2016 $39,242m
REVENUE
2015
2016
2015 $9,534m
2016 $11,571m
2015
2016
2015 $9,534m
2016 $10,575m
2015
2016
2015 $3,438m
2016 $3,456m
2015
2016
2015 $4,553m
2016 $5,190m
2015
2016
EARNINGS BEFORE INTEREST AND TAX
$1,860Mup 4.3 per cent
$1,214Mup 11.6 per cent
$1,213Mup 11.5 per cent
($50M)excluding significant items
$470Mup 8.8 per cent
2015 $1,783m | 2015 $1,088m | 2015 $1,088m | 2015 | $90m | 2015 | $432m | ||||||||||
2016 $1,860m | 2015 | 2016 | 2016 $1,214m | 2015 | 2016 | 2016 $1,213m | 2015 | 2016 | 2016 | ($50m) | 2015 | 2016 | 2016 | $470m | 2015 | 2016 |
RETURN ON CAPITAL (R12)
11.2%up 0.2 ppt
33.7%up 0.2 ppt
36.6%up 3.1 ppt
restructuring costs and provisions
(8.2%) 37.7%up 4.8 ppt
2015 11.0%
2015 33.5%
2015 33.5%
2015 3.6%
2015 32.9%
2015
2016 11.2%
2015
2016
2016 33.7%
2015
2016
2016 36.6%
2015
2016
2016 (8.2%)
2016
2016 37.7%
2015
2016
4
Wesfarmers Ltd. published this content on 26 August 2016 and is solely responsible for the information contained herein.
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