Wesfarmers Annual Report 2009 Annual Report 2009 www.wesfarmers.com.au Corporate directory Wesfarmers Limited ABN 28 008 984 049 Registered office Financial calendar+ Level 11, Wesfarmers House Record date for final dividend 31 August 2009 40 The Esplanade, Perth, Final dividend paid 1 October 2009 Western Australia 6000 Annual General Meeting 10 November 2009 Telephone: (+61 8) 9327 4211 Our primary objective is to provide Half-year end 31 December 2009 Facsimile: (+61 8) 9327 4216 Half-year profit announcement February 2010 Website: www.wesfarmers.com.au Record date for interim dividend February 2010 Email: [email protected] a satisfactory return to shareholders Interim dividend payable March 2010 Year-end 30 June 2010 Executive directors We aim to achieve this by: Richard Goyder + Timing of events is subject to change Managing Director and Chief Executive Officer – satisfying the needs of customers through the provision of goods and services Annual General Meeting on a competitive and professional basis; Terry Bowen The 28th Annual General Meeting of Wesfarmers Limited will be Finance Director held at the Perth Convention Centre, Mounts Bay Road, Perth, – providing a safe and fulfilling working environment for employees, rewarding good Western Australia on Tuesday, 10 November 2009 at 2.00pm Non-executive directors (Perth time). performance and providing opportunities for advancement; Bob Every Chairman Website – contributing to the growth and prosperity of the countries in which we operate by conducting Colin Carter OAM Patricia Cross To view the 2009 Annual Report, shareholder and company existing operations in an efficient manner and by seeking out opportunities for expansion; James Graham AM information, news announcements, background information on Tony Howarth AO Wesfarmers’ businesses and historical information, visit Wesfarmers’ – responding to the attitudes and expectations of the communities in which we operate; website at www.wesfarmers.com.au Charles Macek – placing a strong emphasis on protection of the environment; and Diane Smith-Gander Glossary David White – acting with integrity and honesty in dealings both inside and outside the company. $ Australian dollars being the currency for the Company Secretary Commonwealth of Australia Linda Kenyon ASIC Australian Securities and Investments Commission Share registry ASX Australian Securities Exchange Computershare Investor Services Pty Limited ASX Principles ASX Corporate Governance Principles and Level 2, 45 St Georges Terrace Recommendations (Second Edition) Perth, Western Australia 6000 Board Board of Directors of Wesfarmers Limited Telephone Coles group Includes Coles food and liquor, fuel and Australia: 1300 558 062 convenience businesses, Target, Kmart, Officeworks International: (+61 3) 9415 4631 and Harris Technology Facsimile EBIT Earnings before interest and tax Australia: (03) 9473 2500 (bottom left) – Keiran Farrell, Group Taxation Manager, Wesfarmers corporate office. Group Wesfarmers Limited and its subsidiaries International: (+61 3) 9473 2500 (top left) – Liz Ottaviano, People Development Adviser, CSBP. IFRS International Financial Reporting Standards (top right) – Vijay Mahesh, Coles Duty Manager. Email: [email protected] LNG Liquefied natural gas (bottom right) – Scott Weatherall, Graduate Geologist, Curragh. Website: www.computershare.com.au LPG Liquefied petroleum gas WESOP Wesfarmers Employee Share Ownership Plan WESP Wesfarmers Employee Share Plan WLTIP Wesfarmers Long Term Incentive Plan WSSSP Wesfarmers Salary Sacrifice Share Plan WESFARMERS LIMITED CONTENTS ABN 28 008 984 049 2 Highlights and summary 20 Coles 8 Chairman’s message 2 4 Home Improvement 10 Managing Director’s review and Office Supplies 12 Finance Director’s review 28 Target 14 Wesfarmers leadership team 32 Kmart 16 Review of operations 36 Resources 40 Insurance 44 Chemicals and Fertilisers The cover and pages 1 through to 72 are printed on Monza Recycled which contains Pages 73 through to 180 are printed on Precision which is PEFC Certified 48 Industrial and Safety 55 per cent recycled fibre (25 per cent post consumer and 30 per cent pre consumer) and made from elemental chlorine free bleached pulp sourced from sustainably 52 Energy and FSC Certified pulp, which ensures that all virgin pulp is derived from well- managed forests and non controversial sources. It is manufactured by an managed forests and controlled sources. It is manufactured by an ISO 14001 ISO 14001 certified mill using renewable energy sources. 56 Other activities certified mill. Monza Recycled is an FSC Mixed Sources Certified paper. Designed and produced by Ross Barr & Associates Pty Limited Designed and produced Wesfarmers’ 2009 results highlight our strength through diversity 57 Sustainability 60 Board of Directors 62 Corporate governance statement 71 Investor information 72 Financial statements 1 4 9 Directors’ report 176 Annual statement of coal resources and reserves 178 Shareholder information 180 Five year financial history WESFARMERS ANNUAL REPORT 2009 1 Highlights and summary NET PROFIT EARNINGS PER SHARE* DIVIDEndS PER SHARE ($m) (cents) (cents) $1,535m 160 cents 110 cents * Excludes earnings from the sale of ARG. * 2005 to 2008 earnings per share restated # Restated for finalisation of Coles for the entitlement offers. acquisition accounting. 225 215 218.5 1,535 200 195.2 80 1 178.3 # 174.2 160.0 * 1,063 869 10 786 1 702 09 05 06 07 08 05 06 07 08 09 05 06 07 08 09 Strong performance and a positive outlook despite the challenging economic environment Financial highlights Operational highlights – 52 per cent increase in revenue to $51.0 billion* – 10,000 new jobs created across the Wesfarmers Group – 34 per cent increase in earnings before interest and tax – Record production and sales from the Curragh (EBIT) to $2,977 million* coal mine – 44 per cent increase in net profit after tax to – Curragh commenced the Blackwater Creek diversion $1,535 million* project which will increase mine potential – $1.60 earnings per share for the full-year compared – More than 120 new retail outlets were opened across with $1.74 for 2008 the Group – 110 per cent increase in operating cash flow to – Coles turnaround continuing to meet internal $3,044 million* expectations with 13 new format stores opened – $0.60 fully-franked final dividend per share declared – 10 new Bunnings warehouses and 10 trade centres (above earlier guidance) with total full-year dividend of opened with continued investment across the store $1.10 per share network. Another 10 stores under construction with – Successfully completed $4.6 billion equity raising 20 more sites being developed – Balance sheet strengthened with net debt reduced by – 33 Target store refurbishments completed with new $4.8 billion store design standards including layout, fixtures, flooring and signage – Gearing (net debt to equity) significantly reduced to 18.3 per cent, with cash interest cover (cash basis) at – Appointment of a new management team to lead Kmart a healthy 5.3 times – Kmart and Officeworks business transformations – Resources’ EBIT up 116.3 per cent to $915 million underway – Revenue for the Coles division was $28.8 billion with – Increased ammonium nitrate production at CSBP as food and liquor comparable store sales growth of a result of the commissioning of the new ammonium 4.6 per cent nitrate plant – Bunnings’ store-on-store cash sales growth of – Commissioning of the 175 tonne-per-day liquefied 10.1 per cent with trading EBIT up 13.9 per cent natural gas plant at Kwinana – Comparable store sales growth at Target of 4.2 per cent – Restructure of the Lumley Australia and New Zealand businesses progressed well and the move to a single * Coles, Kmart, Officeworks and Target included for the period of underwriting licence in Australia was completed 23 November 2007 to 30 June 2008. 2 WESFARMERS ANNUAL REPORT 2009 OpERATING CASH FLOW VALUE GENERATED PER SHARE (cents) And DISTRIBUTED 325 cents Value generated by Wesfarmers 2009 2008 $10,486m $8,568m Employees – salaries, 341 % wages and other % 8 325 10 benefits 299 % 10 18% Government – taxes % 8 % and royalties 248 247 50 60% 9% Lenders – borrowed 12% funds % 15 Shareholders – dividends on their investment Reinvested in the business 05 06 07 08 09 Results summary 2009 2008 * Key financial Revenue $m 50,982 33,584 Net profit before interest and tax $m 2,977 2,229 Net profit after tax $m 1,535 1,063 Dividends $m 1,102 1,533 Total assets $m 39,295 37,178 Net debt $m 4,435 9,276 Shareholders’ equity $m 24,252 19,598 Capital expenditure on property, plant and equipment and intangibles $m 1,503 1,241 Depreciation and amortisation $m 1,024 660 Key share data Earnings per share cents 160.0 174.2 ** Dividends per share cents 110.0 200.0 Net tangible assets per share $ 3.14 -1.36 Operating cash flow per share $ 3.25 2.47 Key ratios Return on average shareholders’ equity % 7.4 8.6 Gearing (net debt to equity) % 18.3 47.3 Interest cover (cash basis) times 5.3 4.9 * Restated for finalisation of Coles acquisition accounting. ** Earnings per share restated for the entitlement offers. WESFARMERS ANNUAL REPORT 2009 3 Wesfarmers’ major business groupings of retail, industrial and insurance reach a wide and diverse range of customers. They shop with us for groceries, clothes, home improvement products and petrol. They also insure with us and they buy coal, gas, chemicals and safety products. (bottom left) – Coles supplier, Anthony Yewers from Berrysweet Strawberry Farm. (top left) – Gordon Wilson, Bunnings team member, with a customer. (top right) – Mark Graham, Western Australian farmer and CSBP customer. (bottom right) – Luke Nullmeyers, Coles Express team member. 4 WESFARMERS ANNUAL REPORT 2009 Wesfarmers 2009 providing value to a diverse range of customers WESFARMERS ANNUAL REPORT 2009 5 Wesfarmers’ values of integrity, openness, accountability and boldness are integral to ensuring that we deliver on our core objective of providing a satisfactory return to shareholders. We also recognise the importance of good custodianship of the environment and the responsible conduct of our businesses in the communities in which we operate.