A rebound in resources plus another solid contribution from its Kmart department store and Bunnings’ Australian operations helped Wesfarmers more than offset another loss in Target, a loss in its new UK operations and a weaker contribution from the Coles supermarket chain in the year to June 30.
Wesfarmers yesterday reported a 27.6% jump in full-year profit to $2.87 billion, up from $2.25 billion a year earlier, excluding impairments recorded against Target and its coal assets in 2015-16.
Including those impairments, profit increased 605% to $2.87 billion, from $407 million the previous year (which is an inaccurate comparison).
Total revenue across its businesses, which include Coles, Bunnings, Kmart, Target, industrial services and Officeworks, hit $68.44 billion, up 3.7%.
Shareholders are going to benefit. Wesfarmers said it will pay a final, fully franked dividend of $1.20 a share, bringing the total full-year payout to $2.23 per share, up a large 19.9% on the 2015-16 payout.
Despite that the shares only managed a small 0.3% rise to $41.87 after rising above $43 in early trading.
Earnings before interest and tax (EBIT) at Coles fell $251 million to $1.6 billion, a 13% fall as the company reinvested $200 million in pricing and other initiatives to meet the challenge from the recovering Woolies (which reports on August 23), Metcash’s IGA chain, Aldi, plus newcomers like Costco.
Same-stores supermarket sales growth slipped from 4.1% to 1% and total revenue fell 0.1% as price deflation slowed from 1.7% a year ago to 0.8%.
Coles said that $200 million net of cost savings into price reductions and service in the June-half was three times its investment in the December-half and in 2016 as it took the battle back up to Woolies and Aldi in particular.
Target lost $10 million – better than a year ago loss of $195 million, but still nowhere near enough compared to Kmart which lifted EBIT 17.7% to $553 million. Officeworks, earnings grew a solid 7.5% to $144 million.
But the star was the company’s coal mines in Queensland and NSW where there a $715 million turnaround, which swung from a $310 million loss in 2015-16 to a $405 million profit in the year to June thanks to the surge in coal prices globally.
The industrial businesses (run by incoming Wesfarmers chief executive Rob Scot) also so a recovery with earnings before interest and tax almost doubling to $115 million in the industrials and safety business with a 34% jump in the energy, chemicals and fertiliser business to $395 million.
At Bunnings, was the major beneficiary of the demise of Woolworths Masters hardware adventure in 2016 and it grew Australia and NZ earnings 10%, offsetting losses of $89 million in the UK and Ireland start up (the old Home Base do it your self business). Those losses saw EBIT for the group as a whole rise just 2.6% to $1.25 billion.
