Slimmed Down Wesfarmers Rewards Shareholders

By Glenn Dyer | More Articles by Glenn Dyer

As forecast shareholders in shrunken retail group, Wesfarmers’ are to be showered with cash after the company completed a series of restructurings that culminated with the spin-off of the Coles supermarket chain late last year.

The news took the headlines (it has been widely forecast that the company would reveal these moves at the interim results release) and also took attention away from the continuing sluggishness of what was the powerful retail performer, the Kmart department store chain.

Wesfarmers said on Thursday shareholders would receive $1.1 billion cash return through a $1 per share special dividend, in addition to a $1 half-year dividend. The interim was trimmed from the previous payout of $1.03 a share.

Investors loved the news, pushing the shares up nearly 7% to $34.97.

The cash splash follows the sale or spin-off of Coles, Kmart Tyre and Auto, Quadrant Energy and the Bengalla coal mine.

The sales proceeds from those deals saw statutory net profit came in at $4.5 billion, up from $212 million a year earlier which included a $306 million impairment at Target, the struggling department store chain

Earnings before interest and tax (EBIT) was up 37.5% to $1.65 billion off group revenue of $14.39 billion, up 4.2%.

Bunnings continued to be Wesfarmers’ stand-out performer, with revenue up 5.2% to $6.91 billion and EBIT up 7.9 percent to $932 million. Bunnings is now Wesfarmers single largest business with Coles having gone.

Wesfarmers said Bunnings’ results were achieved despite a moderation of trading conditions and high levels of growth in the prior corresponding period,” it said.

“It was assisted by an ongoing focus on cost control and continued favorable commercial property market conditions resulting in further positive outcomes on property divestments,” directors said yesterday.

At the department store group – made up of Kmart and Target-sales barely grew – rising by just 0.8% in the half year as the momentum vanished from Kmart.

Earnings fell by 3.8% to $383 million as a result with clothing sales at Kmart especially weak (they were weaker at other chains as well in the half).

That was driven by weaker apparel sales at Kmart and increased store and supply chain costs, Mr. Scott said.

“Despite these challenges customer feedback remained strong and was reflected in increased units sold during the half. Target delivered earnings growth through improved trading margins reflecting increased levels of direct sourcing, an improved sales mix and the benefit of annualised cost savings received during the half.”

Officeworks again did well reporting EBIT of $76 million, up 11.8%, from an 8.2% lift in sales to $1.1 billion in the half.

Wesfarmers said while it was well-position for long-term growth, cost-of-living pressures and big falls in house values in key east coast property markets had contributed to a drop in retail spending and consumer confidence.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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