Australia's Wesfarmers says 1H result partly lifted by Bunnings

Wednesday 15th February 2017

ASX-listed conglomerate Wesfarmers today reported strong earnings growth in the first half, bolstered by results in Bunnings Australia and New Zealand, Kmart and Officeworks.

The company reported a net profit of A$1.58 billion in the six months to Dec. 31, up 13 percent on the year. Operating revenue was A$34.9 billion, up 4.3 percent on the year. It announced an interim dividend of A$1.03 per share, also a 13 percent increase on the year.

“Total retail earnings were in line with the prior corresponding period, with very strong results reported for Bunnings Australia and New Zealand (BANZ), Kmart and Officeworks,” managing director Richard Goyder said. “The continued momentum in these businesses was particularly pleasing and reflects the strong market positions they have each established."

BANZ reported earnings growth of 9.8 percent to A$770 million with revenue growth of 8.3 percent. It did not break down specific figures for New Zealand.

Goyder said the strong result included store-on-store sales growth of 6.5 percent and a 317 basis point improvement in return on capital to 39 percent. Bunnings, the dominant player in Australia, now has 53 stores and trade centres in New Zealand compared to 301 in Australia. Nine new stores opened between June and December and two were closed. A further 11 are under construction.

New Zealand's construction sector is experiencing a boom as demand for building supplies was underpinned by the Canterbury rebuild for several years and is now being supported by the multi-billion dollar pipeline of work needed to address the housing shortage in Auckland.

Wesfarmers' Kmart business also fared well, with earnings up 16 percent to A$371 million on revenue growth of 8.9 percent. New Zealand has 19 of the company's 214 Kmart stores.

The company said it has commenced a strategic review of its Officeworks division which could include an initial public offering.

"Officeworks is well positioned for future growth with a strong competitive position and ongoing initiatives to grow its addressable market," said Goyder. He noted, however, the business will be retained if divestment options do not meet Wesfarmers’ valuation hurdles.

The earnings report comes on the heels of news that Goyder will step down in late 2017. He will be succeeded by Rob Scott, who currently heads the company's industrials division and is now deputy chief executive.

Wesfarmers' ASX-listed shares last traded at A$42.13, down 1.6 percent over the past 12 months.

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