WES - Wesfarmers Limited

Dona Ferentes said:

it would appear so. .... from 2019


from https://www.covalentlithium.com/refinery .. (being the 50:50 WES/ SQM JV) ... and 2021

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Obviously WES has a lot of confidence in the BEV revolution, last year making a play for rare earths, this year lithium.

From today's presentation

Bunnings still expanding its footprint and service offering to commercial trades:
• Expanded supply and install product offer for builders
• New trade service desk format and more trailer parking spaces
• Increased PowerPass app functionality and engagement
• Opened new format Adelaide Tools store in Parafield, South Australia (March 2021)
• Agreement to acquire Beaumont Tiles in April 2021 (subject to conditions, including regulatory approval)

There is a lot about online marketing: a focus on leveraging data and digital platforms to develop new revenue streams
Divisional online penetration has been increasing y.o.y. and ranges from 37% for Officeworks (up from 29%), Target at 16% up from 7%, KMart at 8.7% up from 3.7% while Bunnings, at 3.1% from almost nothing, is the laggard.

And the Mt Holland lithium project, including mine, concentrator on site and refinery at Kwinana: Wesfarmers’ expected share of total project capital expenditure estimated at approximately $950m
• Indicative construction timeline, subject to approvals:
– Project construction to commence: 2H CY21
– First production from refinery: 2H CY24

Dona Ferentes said:

From today's presentation

Bunnings still expanding its footprint and service offering to commercial trades:
• Expanded supply and install product offer for builders
• New trade service desk format and more trailer parking spaces
• Increased PowerPass app functionality and engagement
• Opened new format Adelaide Tools store in Parafield, South Australia (March 2021)
• Agreement to acquire Beaumont Tiles in April 2021 (subject to conditions, including regulatory approval)

There is a lot about online marketing: a focus on leveraging data and digital platforms to develop new revenue streams
Divisional online penetration has been increasing y.o.y. and ranges from 37% for Officeworks (up from 29%), Target at 16% up from 7%, KMart at 8.7% up from 3.7% while Bunnings, at 3.1% from almost nothing, is the laggard.

And the Mt Holland lithium project, including mine, concentrator on site and refinery at Kwinana: Wesfarmers’ expected share of total project capital expenditure estimated at approximately $950m
• Indicative construction timeline, subject to approvals:
– Project construction to commence: 2H CY21
– First production from refinery: 2H CY24

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Steady as she goes, is WES. Well apart from UK expansion which seems a long way in the past now.

gg

Wesfarmers said sales had fallen at some of its retail businesses and growth had slowed at others as they cycled a boom in spending on hardware, technology and homewares at the height of the pandemic last year.

“Year-on-year sales growth had generally moderated and been negative in some months for some businesses, due to elevated activity in the prior year,” the company said in a high level trading update released at its annual strategy day on Thursday.

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Online growth had moderated as customers returned to bricks and mortar stores and online penetration - e-commerce sales as a percentage of total sales - had fallen but remained above pre-COVID levels.
For example, Bunnings’ online penetration had dropped below 2 per cent from 3.1 per cent at the end of December, while gross transaction values at Catch Group had been negative in recent months.

Wesfarmers chief executive Rob Scott provided no sales figures and did not elaborate on the performance of individual businesses, saying only that the group was experiencing “significant volatility” in monthly sales results.

And, speaking at the Investment Day, CEO Rob Scott was confident about the group’s prospects for growth and happy about the quality of its portfolio following the demerger of Coles, the sale of coal and other assets, derisking Target by closing stores and slashing its cost base, and the restructure of industrial and safety supplier Blackwoods.

“We think we have a phenomenal mix of businesses that represent a unique balance between defensiveness and high cash generation and good growth perspectives,” he said.

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Mr Scott and chief financial officer Anthony Gianotti hinted that Wesfarmers, which is cashed up after selling two-thirds of its 15 per cent stake in Coles for more than $2 billion, was closer to returning surplus capital to shareholders, saying they were evaluating options to “right-size” the balance sheet and get capital back to investors.

“I’ve consistently said it’s unlikely we’ll go out and do a really big acquisition, because often big acquisitions are very expensive and not in the best interests of shareholders,” Mr Scott told the Financial Review.

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“In terms of right-sizing the balance sheet, we acknowledge that we have plenty of capacity at the moment. We’re also not sitting on surplus franking credits, so if we were to get cash back to shareholders in a tax-effective way we’d need to consider a capital return which would require Tax Office approval and shareholder approval and those things take time.”

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Go, WES (young man)

<< another lift today... $57.13 close>>

Dona Ferentes said:

Go, WES (young man)

<< another lift today... $57.13 close>>

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there has been solid buying for WES of late ............ and pushing through $60 with ease .... now $60.92

EDIT ... Update .... punching through $61

WES $62.20 + COL $17.80 = $80 !!

Value creation.

WES reported today, revenue up 10%, EBIT up 18% and NPAT 16%.
Final dividend of 0.90c a share.
A fairly neutral commentary on the Mt Holland Lithium venture, progressing as normal from what i can interpret.
WES is my major Lithium play. Net capital expenditure next FY(22) is expected to be of around 30% on the Mt Holland project alone.
SP is down 2.75% as the market digests the news.

Proposed return of capital to shareholders
Wesfarmers today announced a proposed return of capital to shareholders of $2.00 per share. The distribution is subject to approval by Wesfarmers shareholders at the Annual General Meeting (AGM) on 21 October 2021.
If approved, the total amount of the distribution will be approximately $2.3 billion. Chief Financial Officer Anthony Gianotti said that the proposed return of surplus capital to shareholders reflects Wesfarmers’ commitment to efficient capital management and its focus on providing a satisfactory return to shareholders. “The proposed return of capital is enabled by the strength of the Group’s balance sheet, its access to well-established funding sources and the resilient and cash-generative nature of its businesses, as well as the receipt of proceeds from the sale of assets in recent years,” Mr Gianotti said. “Upon completion of the return of capital, Wesfarmers expects to retain its current strong credit ratings and maintain the balance sheet capacity to withstand a range of economic conditions, support continued investment in the Group’s businesses and take advantage of value-accretive opportunities as they arise. “The distribution will provide an opportunity to reset the capital structure and, together with the maturity of two Euro bonds in October 2021 and August 2022, will support the continued optimisation of the Group’s debt maturity profile and cost of borrowing.”
An application for a Class Ruling has been lodged with the Australian Taxation Office in relation to the form and taxation treatment of the proposed distribution. The form of the distribution is dependent on the Class Ruling, but is likely to be entirely capital in nature, with no dividend component.
Shareholders will be unable to elect to participate in the Dividend Investment Plan in relation to the capital return. If the Class Ruling is issued in line with the application, it is expected to confirm that there is no immediate tax liability for most Wesfarmers shareholders relating to the capital return. Instead, the cost base of shares for capital gains tax purposes will be reduced by the capital component. For shareholders with a cost base of less than the capital component, an assessable capital gain could arise.
A detailed explanation of the proposal and confirmation of the timetable will be included with the Notice of Meeting which will be sent to shareholders in September 2021. If approved, shareholders are expected to receive their payments on 2 December 2021.

DYOR

i hold WES

i am not over-joyed to see this , it implies WES cannot find good value in the investment market either ( because i am as sure as heck , finding GOOD places to invest difficult )

I didn't comment on this aspect of the report, but that is my first instinct. Are they not sitting on a pile of cash looking for investment opportunities? Some of these Aussie big caps show little in the way of initiative or imagination.

bk1 said:

I didn't comment on this aspect of the report, but that is my first instinct. Are they not sitting on a pile of cash looking for investment opportunities? Some of these Aussie big caps show little in the way of initiative or imagination.

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they seem to forget that investment is not only buying an overpriced other listed company.disappointed but i sold most of wes when the trailing stop was hit last week? or early this week.
Actually sad when you think of it...

WES has made some rebuffed offers .. API was one that affected me , but what else is there that MIGHT be a fit ( given WES is more an investment vehicle than a diversified corporation , to my thinking )

since they have divested COL , some potential targets have been less attractive , synergy-wise

ALSO WES is still wrestling on how to deal with Office-Works , personally i hope they go for a property trust similar to BWP , but who knows after the rapid u-turn on the UK hardware adventure ( i reckon the property trust spin-off would have been a better option there as well )

last i heard WES is sitting on a very large pile of cash , BUT i am guessing the lithium play will need more cash in time , so maybe not super large ALSO WES thinks they have in-house mineral processing/manufacturing expertise , so a possible bolt-on to the lithium play is possible ( say battery manufacture )

please remember WES prefers to buy 100% of a business whilst a similar investment vehicle SOL is quite happy to grab 20% of a company and put some directors on the board and steer it that way ( most of the time )

divs4ever said:

say battery manufacture )

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WES are the only aussie company that i forsee having the skills and the expertise to capture ANY of the downstream value of BEV in this country.
The value or the prize is huge. Look at the lengths the Indonesians (for example), are going to, to try and be players in this space.

bk1 said:

WES are the only aussie company that i forsee having the skills and the expertise to capture ANY of the downstream value of BEV in this country.
The value or the prize is huge. Look at the lengths the Indonesians (for example), are going to, to try and be players in this space.

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probably has the cash reserves ( and credit facility as well )

but don't forget CSR , they have some skills in-house , just not so sure about the cash-pile

WES is a behemoth and it will get bigger. It is number 7 in the ASX by market capitalisation and I'd like to show the top 10 because this is the important comparison heading in to the unknown of Covid next year and next decade. Thanks to market index.com.au for the screenshot.

Five of the top ten are banks or financial institutions, while two are major miners, one is a major pharmaceutical and Woolies comes in last. WES to me always seems like a quiet achiever, beginning as a WA co-op and tightly run with its only major bugger up being its Bunnings foray in to the UK some years ago.

It has returned capital today to shareholders in a tax efficient way because it can afford to. Quite apart from its profitable businesses alluded to in previous posts it is in the process of setting debt in place at low rates which will never be seen again. I would imagine this will be a mixture of short and long term appropriate to its acquisition plans. Debt for acquisition is better than capital in a low interest environment.

It will acquire because it can. It will pay bottom dollar and walk away from any haggling if necessary. Walking away is the best tactic when you are busy. It also sends a signal for future acquisition engagements. WES is very busy in everything from home improvement and outdoor living; apparel and general merchandise; office supplies; chemicals, energy and fertilisers, and industrial and safety products.

It is not bullet proof, no company in the present pandemic and national and international disruption and uncertainty is.

WES forms an appropriately large part of my SMSF, while maintaining a conservative spread of investments, because of its diversity and proven capital gain and income stream, its focus on shareholder returns and its stability in an uncertain world.

I will keep on adding on weakness in the share price and I would not be surprised if in 10 years time it is number one on this list and involved to a major degree in the activities of the other nine.

gg

Garpal Gumnut said:

WES is a behemoth and it will get bigger.

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Totally agree, as long as the discipline they employ for allocating capital. Wesfarmers under Rob Scott has seen the subtle shift in executive incentives to focus on ROE. Scott’s personal benchmark for achieving his bonus is an ROE target of 21.5 per cent.

In the day-to-day management of the company, however, return on capital is the prime driver of performance. The Wesfarmers annual report says the ROC benchmark makes executives focus on increasing earnings or increasing earnings by managing existing assets efficiently, as well as making an adequate return on any new capital deployed.

Garpal Gumnut said:

WES is very busy in everything from home improvement and outdoor living; apparel and general merchandise; office supplies; chemicals, energy and fertilisers, and industrial and safety products.

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I think data analytics is (are?) their strength. Rob Scott has lifted investment in digital capabilities at Wesfarmers and is building what he calls a “data and digital ecosystem”, spending $100 million this year and reaching across the conglomerate. Officeworks (online sales penetration of 35 per cent in 2021) has seen members of its technology team move on to Bunnings (online sales at 2.3 per cent of total sales in 2021.)

Garpal Gumnut said:

It is not bullet proof, no company in the present pandemic and national and international disruption and uncertainty is.

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Staying national, plenty of avenues to explore. Bunnings UK probably reinforced that.

Happy to hold a truckload

Dona Ferentes said:

Totally agree, as long as the discipline they employ for allocating capital. Wesfarmers under Rob Scott has seen the subtle shift in executive incentives to focus on ROE. Scott’s personal benchmark for achieving his bonus is an ROE target of 21.5 per cent.

In the day-to-day management of the company, however, return on capital is the prime driver of performance. The Wesfarmers annual report says the ROC benchmark makes executives focus on increasing earnings or increasing earnings by managing existing assets efficiently, as well as making an adequate return on any new capital deployed.

I think data analytics is (are?) their strength. Rob Scott has lifted investment in digital capabilities at Wesfarmers and is building what he calls a “data and digital ecosystem”, spending $100 million this year and reaching across the conglomerate. Officeworks (online sales penetration of 35 per cent in 2021) has seen members of its technology team move on to Bunnings (online sales at 2.3 per cent of total sales in 2021.)

Staying national, plenty of avenues to explore. Bunnings UK probably reinforced that.

Happy to hold a truckload

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Do not forget their LIT exposure know-how..just a bit sad they just give away that cash.maybe after getting the loans for even less?
My trailing stop was not 100% so i still owe some and yes, i believe it is a great company,probably the best out of the 10 listed above

Wesfarmers wary of mounting lockdown toll


DYOR

i hold WES

so Ita Buttrose MIGHT be the single source of credible information on Covid in Australia

well , WES has already signed up Alison Watkins to the board , not a huge chance Ita will get an invite as well ... is there