Wesfarmers: strong half-year results and senior management changes

Wesfarmers Limited has reported a net profit after tax (NPAT) of $1,393 million for the half-year ended December 31, 2015, an increase of 1.2 per cent on the previous corresponding period.

Managing Director Richard Goyder said strong performances across the group’s retail portfolio supported continued earnings growth in a period in which low commodity prices provided a significant headwind for the group’s resources business.

“The group’s retail portfolio delivered a strong increase in earnings before interest and tax [EBIT] of $176 million, or 9.2 per cent, during the half, supported by good Christmas seasonal trading in all businesses,” he said.

“Investment in customer value, store network improvement and better merchandise offers and service drove increased earnings across the retail portfolio. Overall, return on capital for the retail portfolio improved strongly as a continuing focus on capital efficiency further leveraged the earnings growth recorded.”

EBIT at Coles increased 5.6 per cent to $945 million for the half on revenue growth of 3.1 per cent. Food and liquor recorded sales growth of six per cent.

“The good momentum in Coles’ food and liquor business continued during the half,” Mr Goyder said. “Food and liquor revenue grew $937 million, driven by investing benefits from operational simplification and supply chain efficiencies into better value for customers and improvements in service, particularly over the Christmas period. Coles continued to make improvements in its fresh offer, resulting in increased transaction volumes and basket size.

“The transformation of Coles Liquor was further progressed with encouraging signs, and over the period included work on price investment, range simplification and store network optimisation. Despite lower fuel volumes and average fuel price, the convenience business produced a solid result, supported by strong growth in store sales.”

The group also announced a restructure of its department store businesses into a new division, with Kmart Managing Director Guy Russo becoming Department Stores CEO, overseeing both the Kmart and Target businesses.

Target Managing Director Stuart Machin will continue in his role until July 2016, after which he will take on a new senior role in the group.

Kmart Chief Operating Officer Ian Bailey will become the new Managing Director at Kmart and Kmart Finance Director Marina Joanou the Finance Director of the new department stores division.

“This restructure will enable Kmart and Target to maximise and share opportunities where appropriate, while maintaining and growing these iconic Australian brands,” Mr Goyder said.

Wesfarmers also announced that, following completion of the UK Homebase acquisition by Bunnings, which remains subject to the approval of Home Retail Group shareholders, Wesfarmers Finance Director Terry Bowen would replace John Gillam as Chairman of the Officeworks board. Mr Gillam will become CEO of the expanded Bunnings business, overseeing operations in Australia and New Zealand, and the UK and Ireland.

“Wesfarmers continues to evolve as a business,” Mr Goyder said. “Bunnings’ recent expansion into the UK and Ireland and the restructure of our industrial businesses into a single new industrials division reinforce our performance and development culture and underline the group’s focus on growth opportunities.”

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