Wesfarmers (WES) SNAPSHOT
Profile: Wesfarmers (WES) is a diverse business operator headquartered in Perth, WA. Its businesses include Bunnings, Target, Kmart, Officeworks, WesCEF and Wesfarmers Industrial & Safety. Its products and services span across various segments including home improvement, office supplies, general merchandise, chemicals, energy, fertilisers and safety equipment.
History: Wesfarmers’ origins trace back to a Western Australian farmers’ co-operative formed in 1914. In 1984, Wesfarmers listed on the ASX. WES acquired 10% of Bunnings in 1987. In 1993, McEwans hardware was purchased by Bunnings, and in the same year Bunnings opened its first ‘big box store’ in Sunshine, Victoria. In November 1994, WES acquired the remaining 52% of shares in Bunnings for $594m. In 2007, Wesfarmers acquired Coles. WES demerged Coles (ASX:COL) and divested interests in Bengalla, KTAS and Quadrant Energy in 2018. In 2019, WES acquired Kidman Resources for $776m and Catch Group for $230m.
Earnings composition: Bunnings generated 57% of total earnings before interest and tax (EBIT) before significant items with $1.6bn in FY19. Kmart Group generated $540m (19%), while WesCEF produced $433m (15%). Officeworks delivered $167m (6%) and Industrials & Safety contributed $86m (3%).
Most recent result – 1H20: EBIT was $1,734m. On a pre-AASB 16 (accounting standard changes) basis, EBIT was down 0.5% to $1,637m from the prior corresponding period (pcp). Bunnings, Kmart and Officeworks had good revenue growth during the period. Bunnings EBIT was up 3.1% on the pcp. Kmart Group, which includes both Kmart and Target, was impacted by weak sales from Target, with apparel performing poorly. Kmart Group EBIT was down 9.9% on the pcp. WesCEF EBIT was down 5.9%, having been impacted by competitive pressures in Energy. Industrial and Safety EBIT was down 85.7% on the pcp to $6m (pre-AASB 16), largely due to the continued underperformance of Blackwood – a supplier of tools, workwear and other industrial supplies. Officeworks EBIT was up 3.9%. NPAT from continuing operations was up 5.7% on the pcp. A $0.75 dividend was declared.
Post 1H20: Having held a 15% stake in COL following its demerger, WES sold down 4.9% of its stake in February 2020 and a further 5.2% stake at the end of March 2020, meaning it now has a 4.9% stake in COL.
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