Wesfarmers shares rose more than 3% yesterday after it reported a moderately encouraging first half result, marred by an underpayments scandal to some staff.
The shares closed up 2.8% at $46.55.
The company reported a 6% increase in revenue to $15,249 million in six months to December 2019, from $14,388 million in the corresponding half (adjusted for the spin-off of Coles)
The company said the result reflected strong sales growth across Bunnings, Kmart, and Officeworks.
Earnings before interest and tax (EBIT) was at $1.734 billion post the application of AASB 16 (a changed accounting standard).
Excluding that changed standard was $1.637 billion, down 0.5% from $1.645 billion in the prior corresponding period.
Net profit after tax (NPAT) from continuing operations was up 5.7% to $1.127 billion post the changed standard or $1.142 billion excluding the change. This represented a 5.7% increase over the PCP.
An interim fully franked dividend of 75 cents per share was declared, down from $1 a share, with the reduction reflecting the demerger of Coles and divestment of the final stake in the Bengalla coal mine in NSW.
CEO 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.
Bunnings sales increased 5.3% $7.275 billion from $6.907 billion in the December half of 2018 and earnings increased 3.1% to $961 million. Kmart Group’s revenue increased by 7.6% to $4.990 million for the half.
Kmart sales increased $241 million, more than offsetting a sales decline of $67 million in Target but earnings fell 9.9% to $345 million, however, this includes a one-off provision for that payroll remediation in Target. Excluding this provision, earnings fell 7.6%.
Officeworks sales grew 11.5% to $1.226 billion from $1.100 billion. Earnings grew 3.9% to $79 million.
“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,” Mr. Scott said in the ASX statement.
“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 percent 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,” he said.
