Strong First Half Performance from Wesfarmers

Wesfarmers Limited has reported a net profit after tax (NPAT) of $1,210 million1 for the half-year ended 31 December 2019. Excluding the impact of the new lease accounting standard and discontinued operations, Wesfarmers’ NPAT increased 5.7 per cent to $1,142 million.

Managing Director Rob Scott said the result was underpinned by the strong performance of the Group’s largest businesses in Bunnings and Kmart, and solid ongoing performance in Chemicals, Energy and Fertilisers (WesCEF).

“Bunnings, Kmart and Officeworks delivered a pleasing trading performance, with sales growth increasing relative to the prior corresponding period. Strict working capital management and disciplined capital expenditure also resulted in strong cash flow generation across the Group’s operating divisions.

“In contrast to the rest of the Group, the Industrial and Safety result was disappointing and the performance of Target was below expectations. A number of initiatives are underway to address the underperformance of both businesses.

“Pleasing progress continues on the Group’s digital strategy, with a number of divisions successfully implementing initiatives in conjunction with the Advanced Analytics Centre,” Mr Scott said. “The Group’s retail businesses also delivered further improvements in their respective e-commerce capabilities with strong growth in online sales of 35 per cent for the half. The enhancements in digital capability continue to complement existing store networks with sales density improving in the Group’s retail divisions.

“During the period, the Group completed the acquisition of Kidman Resources Limited (Kidman) and Catch Group Holdings Limited (Catch). While modest, both investments provide new growth platforms that will benefit from the Group’s existing capabilities and support shareholder returns over the long term.

“Reflecting the strong cash flow performance and disciplined capital investment, the Group retained a strong balance sheet with net financial debt of $2,317 million at the end of the period.

“The directors have declared a fully-franked ordinary interim dividend of $0.75 per share, reflecting earnings from continuing operations and Wesfarmers’ dividend policy, which takes into account available franking credits, the strong balance sheet, robust credit metrics and cash flow generation while preserving balance sheet capacity to take advantage of value-accretive growth opportunities, if and when they arise.”

Following the payroll errors previously identified, Wesfarmers’ businesses have conducted extensive reviews of their respective payroll systems and processes. As a result of these reviews, some additional payroll errors have been identified.

“Immediate steps are being taken to rectify identified issues, notify and repay affected team members, including interest, and ensure accuracy in the future through a robust program of auditing and monitoring,” Mr Scott said.

The Group’s first half results include the impact of the estimated payroll remediation costs and associated expenses. The remediation costs at Target and Industrial and Safety have been separately disclosed within the divisional results to outline the underlying performance of these businesses. The review did not identify any material errors in the remaining businesses.

See a short video summary of the results here.

Source: Wesfarmers & Insight DIY.

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