Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

UPDATE 3-Australian retailer Wesfarmers soars on hopes for swift turnaround

Published 15/08/2018, 03:45 pm
Updated 15/08/2018, 03:45 pm
UPDATE 3-Australian retailer Wesfarmers soars on hopes for swift turnaround

UPDATE 3-Australian retailer Wesfarmers soars on hopes for swift turnaround

* British hardware exit hammers full year profit

* NPAT A$1.2 bln vs A$2.9 bln a year ago

* Bunnings, Kmart businesses post record earnings

* Shares hit all-time high (Adds fresh management quote)

By Tom Westbrook

SYDNEY, Aug 15 (Reuters) - Australian conglomerate Wesfarmers Ltd WES.AX posted record earnings in core divisions on Wednesday, sending its shares to a record high as investors glimpsed the rapid growth promised by a restructuring initiated by new managing director Rob Scott.

Although an inglorious exit from an ill-fated hardware expansion in Britain hammered full-year profit almost 60 percent lower, profit from continuing operations rose 5.2 percent to A$2.9 billion ($2.1 billion), beating market expectations.

Much of that rise was due to double-digit earnings growth in Wesfarmers' domestic hardware and department stores, which are set to become the company's core after its Coles supermarket chain is spun off as part of a major portfolio overhaul.

Coles' earnings fell 6.8 percent to their lowest in six years, buttressing management's decision to get out of the business.

"Finally the sum of the parts is starting to equal the whole," said James McGlew, executive director of Perth stockbroker Argonaut Ltd, which owns Wesfarmers shares.

Wesfarmers shares had jumped 3.2 percent to a record high of A$52.21 by 0505 GMT, while the broader market .AXJO edged higher.

NEW DRIVERS

Net profit for the retail-to-chemicals conglomerate more than halved to A$1.2 billion for the year to June 30.

The fall was almost entirely due to A$1.2 billion in costs associated with abandoning a loss-making hardware business in Britain. last November as that disaster deepened, Scott decided to cut losses and quit Britain.

He has since moved to remake a firm so big and diversified it is often treated as a proxy for the Australian economy.

He is unwinding its single biggest purchase, Coles, due to demerge in November, and this month sold a car repair business and profitably ended a 27-year investment in coalmining. business he has retained showed strong growth.

Australian hardware business Bunnings posted a 12.7 rise in earnings to A$1.5 billion, while discount department store Kmart showed signs of a long-awaited turnaround with a 21.5 percent earnings jump to A$660 million.

"Following the demerger Wesfarmers will have a portfolio of cash-generative businesses with good growth momentum and leading positions in growing markets," Scott told investors on a conference call.

The company will hand each Wesfarmers shareholder one Coles share when it lists separately, keeping a 15 percent stake.

Scott said improvement in Coles' comparable sales growth, which doubled in the fourth quarter to 1.8 percent, showed its outlook had brightened since six months ago.

Wesfarmers announced a final dividend of A$1.20, unchanged from last year, and gave no profit guidance for 2019, besides saying the company is "well placed" to grow.

($1 = 1.3847 Australian dollars)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.