Wesfarmers earnings hit record despite Coles decline

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Wesfarmers this week released its full-year results for 2016/17, showing an increase in net profit after tax (NPAT) from $2,466 million for the previous year to $2,873 million.

Excluding the significant items recorded in the prior year, NPAT increased 22.1 per cent, while earnings per share increased 21.6 per cent to a record $2.55 per share.

In contrast, earnings declined for the group’s biggest business, Coles, with revenue similar to the previous year’s.

“The results achieved during the year demonstrated the strength of the group’s conglomerate structure, as well as our focus on cash generation and capital efficiency,” Wesfarmers Managing Director Richard Goyder said.

“A strong recovery in the performance of the industrials division reflected higher earnings across all three business units, and was driven in particular by higher coal prices and increased coal production in the resources business. Retail earnings were also above the prior year, supported by continued strong momentum in Bunnings Australia and New Zealand, Kmart and Officeworks.

“The group’s capital management was again a highlight, with operating cashflows increasing $861 million to $4,226 million and the cash-realisation ratio increasing to 102.1 per cent. Higher operating cashflows, lower net capital expenditure and the proceeds from the sale of Coles’ credit-card receivables resulted in very strong, free cashflows of $4,173 million and further strengthening of the group’s balance sheet.

“Given the record earnings and strong cashflow performance for the year, the directors today declared a fully-franked final ordinary dividend of $1.20 per share, bringing the full-year ordinary dividend to $2.23 per share, 19.9 per cent above the prior year.”

According to the results, Coles’ earnings decreased 13.5 per cent to $1,609 million for the full year, with revenue broadly in line with the previous year. Food and liquor recorded sales growth of two per cent, with comparable sales growth of one per cent building on the strong growth achieved in 2015/16.

“In a very competitive environment, Coles invested in value, service and better quality and availability in fresh, to deliver continued growth in sales,” Mr Goyder said.

“Coles continued to execute its customer-led strategy, which it expects will provide a platform for sustainable growth in earnings and return on capital over the long term.

“The Coles liquor transformation was progressed through investments in price, range and the quality of the store network, with the business achieving its second consecutive year of positive sales growth. The convenience business reported lower revenue due to lower fuel volumes, while store sales continued to grow.”

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