Wesfarmers Limited

Well hello everyone and welcome to our 2025 full year results briefing and today I'm joined in Perth with our divisional managing directors and our CFO Anthony Giannotti. I'll start with providing a summary of the group's performance for the year together with some comments on our strategic progress. Anthony will then talk through the financial results in more detail Then I'll provide some broader comments on the portfolio and the outlook for the group. And then our divisional managing directors, Anthony and I, would be happy to take any questions. So starting on slide four, a slide that will be familiar to most of you. Westfarmers primary objective is to deliver a satisfactory return to shareholders. And we define satisfactory as a top quartile total shareholder return over the long term. And we recognise that we can only achieve this if we continue to anticipate the needs of our customers, look after our team members, engage with suppliers in a fair and ethical manner, contribute positively to the communities in which we operate, take care of the environment and act with integrity and honesty. Now turning to slide five. This year, Westfarmers net profit after tax increased 14.4%, and excluding significant items, profit increased 3.8%. Trading conditions were challenging in the 2025 financial year, especially in the first half, as many customers and businesses continued to face cost of living and cost of doing business pressures. Our solid result in this environment highlights the quality of our businesses and teams, and it was pleasing to see our largest divisions, Bunnings and Kmart Group, continue to perform well. Our results reflect continued strong execution of growth and productivity initiatives. This has helped our businesses deliver greater value, service and convenience to customers at a time when many face cost pressures. And we finished the year with an expanded addressable market and more opportunities for growth and value creation. We also undertook a number of portfolio actions to improve returns to shareholders, and I'll talk about them in a minute. As a result of these portfolio actions, the board is proposing a capital management distribution of $1.50 per share subject to shareholder approval. Now while the form of the distribution is subject to an ATO ruling, this is expected to include a capital return of $1.10 per share and a fully franked special dividend of 40 cents. And together with our total dividend for the year of $2.06, this takes our distribution to shareholders for the year to $3.56 per share. Now turning to slide six, this provides some of the divisional highlights for the year. I won't talk to these because Anthony will cover divisional performance in a minute. So turning to slide seven, this slide sets out some of the recent portfolio actions and demonstrates the group's financial discipline and focus on shareholder returns. We want our capital allocated to businesses that have attractive prospects for shareholder returns. And I feel that we've made good progress on this front through the year. As noted earlier, the proposed capital management initiative has been made possible by select portfolio actions undertaken in recent years, including the sale of core gas for $770 million. As many of you know, this year, we also announced the wind down of Catch, which ceased trading in April. And this included the transfer of Catch's fulfillment centers to Kmart Group and select digital capabilities to our retail divisions. Now, this will improve earnings in 2026 as we have eliminated the Catch operating losses. And the move to next day delivery for much of Kmart and Targus East Coast operations will improve the customer experience of our online operations. And our broader understanding of marketplaces is also helping Kmart with the launch of a new curated marketplace in the first half of this financial year. During the last year, we also completed the divestment of Wesseff's LPG and LNG distribution businesses, completed small bolt-on acquisitions in Officeworks and Health. We announced the wind-up of the BPI property structure and announced the intention to internalise BWP Trust management rights and the extension and variation of Bunnings leases within BWP. And this transaction completed on the 1st of August and will deliver extended tenure and more flexible lease terms at key Bunnings sites. Turning to slide eight. This year, our focus on long-term value creation again enabled us to deliver better outcomes for our teams, customers, suppliers, communities and the environment. The group's total reportable injury frequency rate continued to improve from 11 to 9.5 at the end of the year, with Bunnings delivering a significant improvement in performance. During the year, we delivered a 9.3% reduction in the group's Scope 1 and Scope 2 market-based emissions. Bunnings and Officeworks have now achieved their 100% renewable energy targets, while Kmart Group is on track to achieve this by December 2025. And in a major step towards achieving WESF's decarbonisation goals, CSBP installed tertiary abatement catalysts in one of its three nitric acid plants, reducing nitrous oxide emissions by 98%. And planning is underway to install abatement technology in the remaining three plants. I'll now hand over to Anthony, who'll provide more detail on the financial performance, the group's balance sheet and cash flows.

Thanks Rob and hello everyone. Slide 11 in our presentation provides details on the sales performance across each of our divisions for the year. I'll speak to sales and earnings performance on the next slide, but at an overall level we were pleased with the sales growth achieved in our retail businesses, with notable improvements in the momentum of sales growth in the second half across both Bunnings and Kmart Group. Our strong value credentials continue to resonate with consumers, which supported transaction and unit growth across all of our retail businesses. On slide 12, at a total level, divisional earnings increased 4.6% for the year, with the pleasing results in our retail divisions more than offsetting the impact of lower earnings in WESF, which was impacted by lower global commodity prices. Our retail businesses continued to execute well during the year and on a combined basis Bunnings, Kmart Group and Officeworks increased earnings by 5.2% with positive momentum into the second half with earnings growth increasing to 6.4%. I'll now step through the divisional results in a bit more detail. In Bunnings, sales growth of 3.3% was supported by its lowest price positioning, which underpinned growth in sales, transactions and units sold across both consumer and commercial segments. Consumer sales growth was supported by robust demand for home repair and necessity products, while range innovation and expansion attracted higher store visitation and drove strong sales growth in the tools, outdoor living, smart home and paint categories. Growth in commercial sales reflected resilient demand from trades, organisations and business customers, but partially offset by lower demand from builders, where we saw continued softness in residential building activity. This year Bunnings continued to invest in its network to support its omnichannel customer offering, which included rolling out its new tool shop to 175 stores, with the new format performing well. Bunnings' ongoing cost discipline and the execution of productivity initiatives continue to support investments in price, range and experience. Bunnings' earnings before property contributions of $2.34 billion represented an increase of 4% for the year. Kmart Group delivered earnings of just over a billion dollars for the year, an increase of 9.2%. Kmart Group's value credentials and world-class product development continue to resonate with customers. It was pleasing to see strong growth in Kmart's app utilisation, with active monthly app users doubling on the prior year to more than 1.3 million. The strong earnings growth reflected the solid sales performance as well as further productivity gains from the integration of Kmart and Target systems and processes and ongoing digitisation across stores, sourcing and supply chain. These productivity benefits mitigated the impact of ongoing cost of doing business inflation, which supported higher earnings growth in the second half of 12.6%. WSF's earnings declined 9.3% to just under $400 million for the year, impacted by increased losses in covalent and lower global commodity prices. In chemicals, earnings were broadly in line with the prior year, as lower ammonium earnings were offset by favourable ammonium nitrate recontracting outcomes. In clean heat, earnings were impacted by higher natural gas costs and lower LPG production volumes, which were partially offset by the impact of higher Saudi contract price. Fertilisers earnings increased on the prior year, supported by higher sales volumes, including from a strong end to the 2024 growing season. During the year, Covalent completed construction of the Kwinana lithium hydroxide refinery, and a key milestone was reached in July when first product at the refinery was achieved. Due to subdued market pricing and higher unit costs during production ramp-up, Wessef's lithium business contributed a loss of $59 million. Despite this loss, the business generated positive operating cash flow for the year. In Officeworks, sales increased 3.8% and earnings increased 1.9% to $212 million for the year. The result was supported by growth in key categories, including technology and print and create, partially offset by lower furniture sales and more subdued activity across business customers, which reflected the challenging economic conditions affecting SMEs. Earnings growth was also impacted by one-off costs associated with the closure of Sirconomy, as well as increased investment in price in response to elevated competitor activity. In industrial and safety, revenue declined 1.2%, reflecting the challenging economic conditions facing business customers across Australia and New Zealand. Earnings decreased 4.6% to $104 million, with the earnings result including $9 billion in restructuring costs across Blackwoods and Workwear Group that were largely recognised in the first half. The restructuring costs reflect actions to reset the operating model and cost base enabled by recent system investments to better position the businesses in a more challenging trading environment. The benefits of these actions started to materialise in the second half and excluding restructuring costs, earnings were at $113 million or 3.7% above the prior year. West Farmers Health continued to focus on its transformation program to accelerate growth and improve earnings. Earnings of $64 million included $18 million of amortisation expenses relating to business acquisitions. Excluding these costs, earnings increased 17.1% to $82 million. Priceline Pharmacy's headline network sales increased 11.9%, which includes both retail and dispensary sales. Priceline Pharmacy's retail sales were supported by network expansion, price reductions on key value lines, the launch of new and exclusive brands, and the ongoing contribution of Sister Club. MediAesthetics delivered profitable growth following the consolidation of its clinic network to create a more sustainable operating model, and digital health continued to perform well, underpinned by growth in services through instant scripts. The stronger performance of consumer was partially offset by the wholesale segment, which was affected by higher fulfilment costs and increased competitive intensity, despite higher sales from customer acquisitions and strong demand for high value drug categories. The wholesale segment continues to focus on executing productivity initiatives to mitigate higher supply chain costs and increase competition and is expected to benefit from investments to improve its customer proposition. Turning now to slide 13. Across our other businesses and corporate overheads, we reported a loss of $168 million, which was in line with the prior year. The group's share of profit from associates and joint ventures increased by $45 million to $64 million, primarily driven by favourable property revaluations in both BWP Trust and BPI. Group overheads were broadly in line with the prior year, while other corporate earnings decreased by $52 million. This decrease was primarily reflected in lower group insurance result and lower interest received. Other EBIT includes the continued development of the OnePass membership program, the group's customer and data insights capabilities through OneData, and investment associated with the recent launch of the group's new retail media network. Together, the investment associated with these initiatives was $63 million. The benefits from these investments continue to be realised through incremental sales and earnings in the divisional results. Before I move to the next slide, and as a reminder, I just wanted to note that separate from the result in the other segment, the group's statutory result includes the impact of significant items, which are detailed on slide 57 of the presentation. As previously disclosed and as Rob talked to, these items included the gain on the sale of core gas, the profit on the wind-up of the BPI property structure, and the one-off costs associated with the wind-up and the transition of catch. These items totaled $279 million on a pre-tax basis, with each being in line with the guidance we had previously provided to the market. I'll now turn to working capital and cash flow on slide 14. Divisional operating cash flows increased 2.3% for the year with divisional cash realisation at 100%. Divisional cash flow reflected disciplined networking capital management at Kmart Group and West Farmers Health, partially offset by networking capital investment in Bunnings to support higher customer demand and the rollout of the new tool shop format across the network. Overall, inventory remains in a healthy position with good stock availability across the retail divisions. At a group level, operating cash flows decreased 0.6% to $4.6 billion, with divisional cash flow growth offset by higher tax paid due to the timing of tax payments in the prior year. Free cash flows for the year increased 6.9% to $3.4 billion, supported by the divisional operating cash flow result and the cycling of the group's acquisitions of silk and instant scripts in the prior year. Moving to capital expenditure on slide 15. The group invested gross capex of $1.15 billion, which was 6.6% up on the prior year. This was primarily driven by higher spending on new stores and expansion projects in Bunnings. Proceeds from the sale of PP&E were higher for the period, reflecting increased property disposals within Bunnings, which resulted in net capital expenditure for the year increasing 5.3% to $1.1 billion. For the 2026 financial year, we have given net capital expense guidance in the range of one to $1.3 billion, which remains obviously subject to net property investments and the timing of project expenditures. It's worth noting this guidance does exclude any proceeds from the sale and leaseback of Bunnings properties following the previously announced wind-up of the BPI property structure in September 2025. The group has agreed to a sale and leaseback transaction for six of the 15 properties that are currently in the BPI property structure at a valuation of around $290 million. As noted, this amount is not included in the net capex guidance we've provided. We'll continue to look at sale and lease back opportunities for the remaining BPI properties through the year. Turning to balance sheet and debt management on slide 16. The strength of our balance sheet continues to provide the group with significant flexibility and the capacity to support our investment and to take advantage of value accretive opportunities as they arise. We continue to actively monitor the group's debt mix and manage exposure to variable interest rates. The average cost of funds for the year decreased from 3.9% to 3.8% and the weighted average debt term to maturity increased to five years following the successful $1.1 billion seven-year Euro bond issued in June this year. Other finance costs decreased 5.4% to $157 million. On a combined basis, other finance costs, including the component of interest that was capitalised, decreased 2.6% to $187 million. West Farmers retained significant headroom against key credit metrics and this year reduced its debt to EBITDA ratio, excluding significant items to 1.7 times. After adjusting for the proceeds from the sale of core gas, which completed on the 1st of July 2025, the ratio improves further to 1.6 times. The group retains considerable funding headroom and at the end of the financial year the group had available unused bank financing facilities of around $1.7 billion and this excludes the $770 million in cash that was received from the sale of Core Gas on the 1st of July. And finally, two shareholder distributions on slide 17. As Rob's already mentioned, the board has determined to pay a fully frank final dividend of $1.11 per share, bringing total dividends for the year to $2.06 per share. In addition to the final order of dividend, the directors have also recommended a capital management initiative under which shareholders will receive a distribution of $1.50 per share. The distribution is consistent with our focus on providing a satisfactory return to shareholders and will enable a more efficient capital structure while still maintaining balance sheet capacity to take advantage of value accretive opportunities as they arise. The proposal remains subject to a final ruling from the ATO, but is expected to comprise a capital component of $1.10 and a fully franked special dividend of 40 cents per share. The return also remains subject to shareholder approval at the group's AGM on 30 October, with payment expected on 4 December. In line with recent practice, we do intend to continue to purchase shares on market to satisfy any shares issued as part of our dividend investment plan. And with that, I'll now hand back to Rob to cover outlook.

Thanks, Anthony. And I'll turn to slide 19. Now, while today is all about our results, at a time when the Australian government's reflecting on how to address lagging productivity, I feel it's important to emphasise the broader contribution made by Westfarmers. And as most of you on the call would understand, businesses like ours and other big businesses play a critical role in the prosperity of Australia. And when businesses like Westfarmers are successful, Australians benefit. We also operate in competitive markets against some very large multinational companies that benefit from structuring their operations and capabilities in other jurisdictions. We also operate in trade exposed areas where national competitiveness really matters. The recent economic reform round table highlighted opportunities to reduce the regulatory burden on businesses, encourage investment, fast track approval processes and better control government spending. And while a range of options were canvassed, any changes that increase the already high tax burden on Australian companies or apply new regulations or constraints that make it harder to compete will put many Australian jobs at risk and materially reduce living standards in the future. Now, at West Farmers, our investments are directed towards initiatives that drive productivity, accelerate growth and advance sustainability. And these investments support national prosperity and resilience more generally. And some examples of this. Probably one of the most significant investments that Westfarmers businesses make is in lower prices for millions of Australians. And this is well understood through the everyday low price policies of Bunnings, Kmart and Officeworks. We provide wages and career development for 109,000 Australian team members. we pay 1.5 billion in taxes to federal and state governments in Australia. And when we consider the payroll taxes and other taxes and charges, we actually pay closer to an effective tax rate of 38%. This year, we also proposed to distribute $4 billion to our shareholders. Now, these distributions support over 480,000 direct shareholders, the vast majority of which are Australian retail investors, and approximately 13 million Australians through their super accounts. So turning to slide 20, before I discuss the outlook, I just wanted to make three points on the positioning of the group's portfolio. First, our high-quality businesses provide us with a platform for long-term value creation through their unique mix of resilience and growth. Our retail divisions benefit from strong value credentials, broad customer appeal, omnichannel capabilities, and leading market positions. This provides resilience when customer demand is softer across the economy, while at the same time we remain leveraged to any improvement in demand from households and commercial customers. WESF is a critical supplier to key industries that support the Australian economy, such as iron ore, gold and agriculture, where Australia has a competitive advantage. Second, our businesses have a pipeline of long-term growth and efficiency opportunities, including initiatives to expand our addressable market, better leverage data, digital and AI capabilities. We're confident that our new and developing businesses, which currently make a minimal contribution to earnings, will realise significant potential over the next three to five years. This includes our health division and our lithium joint venture, which are exposed to strong demand fundamentals, and also obviously our new retail media business. And other new businesses such as Retail Media and ANCO Global provide new growth opportunities that haven't currently existed. Now, finally, the strength of the group's balance sheet supports continued investment across the portfolio and provides capacity to manage potential risks and opportunities that may arise. So turning to the outlook on slide 21, at a macro level, costs of doing business pressures are persisting in Australia, and they are weighing on business demand and investment, while geopolitical risks continue to add some uncertainty. Now, despite these challenges, the Australian economy remains resilient, supported by strong labour markets and moderating inflation, and this is contributing to a modest improvement in consumer demand. The recent easing of interest rates is expected to provide further relief for households and businesses, supporting consumer sentiment and business confidence. Going forward, our retail divisions are well positioned to grow their accessible markets and profitably grow their share of customer wallet supported by strong value credentials. Bunnings, Kmart Group and Officeworks remain focused on leveraging investments in their omnichannel assets and capabilities to drive sales and earnings. For the first eight weeks of the 2026 financial year, Bunnings' sales growth was stronger compared to the second half of the 2025 financial year, supported by its market-leading customer value proposition. Kmart Group's sales growth was broadly in line with the stronger sales growth experienced in the second half, and Officeworks maintained solid sales momentum with its sales growth broadly in line with the second half. Along with our joint venture partner, SQM, West Farmers remains focused on the covalent lithium product. And as I mentioned earlier, we were pleased to report that the covalent team achieved first product at the refinery in July 2025. For covalent, the 2026 financial year will be a transitional year with lithium hydroxide production expected to ramp up over the next 18 months. Overall, I'm really pleased with the progress made to strengthen our portfolio over the past year. Our businesses are now more productive, more efficient, and with more growth opportunities. Looking ahead, Westfarmers remains committed to strengthening our existing businesses, investing in emerging growth platforms that will shape the future of the portfolio and create long-term shareholder value. So with that, we're all now happy to take your questions.