Wesfarmers earnings results

CommSec CommSec

 

22 February 2019

Results ($m)

Half Year 2019

Half Year 2018

Change

Revenue 

14,388.0

13,814

+4.2%

Net Debt

324.0

3,864.0

-91.6%

Significant Items

3,250

(1,237.0)

-

Net Profit after Tax (NPAT) 

4,538.0

212.0

-

Underlying Profit 

1,080.0

678.0

+59.3%

Bloomberg Consensus 

1,102.0

 

 

Interim Dividend ($)

2.00

1.03

+94.2%

Wesfarmers (WES) profits boosted by asset sales; Announces special dividend

 

Results

  • Wesfarmers (WES) posted its first half year result after spinning off Coles in November, with underlying earnings and the performance of most of its businesses meeting the market’s expectations. Underlying profit rose by 59.3% to $1,080m. 

Drivers

  • Its bottom line was boosted most by one-off significant items as WES simplified its business by selling a number of assets including Coles, Kmart Tyre, Quadrant Energy (oil and gas business) and Bengalla (its final coal mine). Not including the impact of these asset sales, the result was boosted by a stronger than expected Officeworks result and Bunnings, which wasn’t as bad as feared. 
  • Bunnings received the most attention as the largest contributor to earnings post the Coles’ demerger in November. While there have been signs of deceleration in sales growth, the slowing was not as bad as the market anticipated. Bunning’s like-for-like sales growth (which doesn’t include the impact of new stores or closures) rose by 4% (vs 9% a year earlier). Softer consumer sentiment and the slowdown in NSW & VIC housing markets provide a headwind for hardware retailers. WES seemed cautious with Bunnings’s outlook.
  • Earnings at Kmart fell by close to 4% to $383m while revenue edged higher by 0.8% to $4,639m. The result was held back by increased store and supply chain expenses due to new store openings and higher costs. Target continues to be in a ‘transformation’ phase, with store closures remaining in focus. WES said short term earnings will be affected by slower trading momentum and the ongoing Target restructure. 
  • Officeworks stood out in the result with an 8% lift in revenue and near 12% jump in underlying earnings. It was boosted by strong sales growth both in stores and online.
  • Its Energy, Chemicals and Fertilizer business recorded 14% growth in revenue and 2.2% in earnings. 

Dividend

  • WES has declared a fully-franked interim dividend of $1 per share together with a $1 special dividend. This continues the trend of special dividends or capital returns from many Australian companies ahead of potential changes to franking credit rules following the Federal Election in May. The dividends will be paid to eligible investors on 10 April 2019. 

Outlook

  • No specific guidance was provided for the full year. Risks for its core consumer facing businesses include heightened competition, deteriorating consumer sentiment and a greater than expected slowdown in the property market.

Share price

  • WES shares surged by around 7% following the result with investors perhaps pleased with a sweetened dividend and a Bunnings’ result which wasn’t as bad as some feared. 

Tags:

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