Wesfarmers Limited

Ladies and gentlemen, thank you for holding and welcome to the West Farmers 2026 half-year results briefing. Your lines will be muted during the briefing. However, you will have an opportunity to ask questions immediately afterward and instructions will be provided on how to do this at that time. This call is also being webcast live on the West Farmers website and can be accessed from the homepage of westfarmers.com.au. I would now like to hand the call over to the Managing Director of West Farmers Limited, Mr. Rob Gull.

Thanks very much, and hello, everyone. Welcome to our 2026 half-year results briefing. I'm joined here today in Perth with all of our Divisional Managing Directors and our CFO, Anthony Gianotti. I'll begin, as I always do, with a summary of the group's performance, highlights across the portfolio, and then Anthony will talk about through the financial results in more detail, and I'll conclude with some comments on group outlook, and then all of us would be very happy to take your questions. So starting on slide four, a slide that will be familiar to most of you, West Farmer's primary objective is to deliver a satisfactory return to shareholders. We define satisfactory as a top quartile opportunity 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 where we operate, take care of the environment and act with integrity and honesty. And over the last half, our teams and our divisions have made great progress in each of these areas, and you'll hear about this through the presentation. So turning to slide five, the financials. This half, Westfarmers' net profit after tax increased 9.3% to $1.6 billion. This growth was underpinned by strong earnings contributions from our largest divisions, including Bunnings and Kmart, alongside significant improvement in our newer growth platforms of lithium and health. And I'd really like to thank the managing directors of these divisions, Mike Schneider, Alex Pozeska, Aaron Hood and Emily Amos for what them and their teams have delivered in a challenging operating environment. Now, our results really reflect strong operating performance and disciplined execution of the group's strategies. Productivity initiatives helped our businesses navigate these challenging market conditions as higher costs of living pressures continue to weigh on many households. Our businesses performed well in this environment, making good progress, digitising business operations and using technology to mitigate cost pressures and to keep prices low for customers. Our retail businesses continued to expand their addressable markets and improve in-store space productivity, whilst WESF progressed key expansion projects. As a result of the higher profits, the Board is determined to pay a fully franked interim dividend of $1.02 a share, which is a 7.4% increase on the prior year. Overall, I'm pleased that we've been able to deliver strong growth in profit while keeping prices low in our retail businesses. This reinforces our long-standing commitment to delivering a win-win outcome for customers and shareholders, especially at a time when inflation is persistent. For some businesses, low prices can result in margin erosion, but for businesses such as Bunnings and Kmart, low prices drive sales growth and support operating leverage, with earnings growing faster than sales. Turning to slide six, which provides some of the divisional highlights for the half, I'll let Anthony talk in more detail to divisional performance, but I wanted to make a few comments. All of our divisions, with the exception of Officeworks, grew earnings in the half. The strongest earnings growth was delivered, as I said earlier, by our new growth businesses, namely Lithium and Health. And these businesses have made good progress in the last half and are still very much at the early stages of realising their potential. In Officeworks, the earnings decline was largely a result of costs associated with its business transformation program. These changes are tough to make, and we've shown in the past that we're not afraid to make proactive changes and to take a long-term view to help our businesses realise their potential. We have given the new MD, John Galtieri, a mandate to make these bold changes, and as one of our most experienced retail leaders, he understands and has driven retail excellence through his roles in Kmart over many years. John can talk in more detail on the program and his strategies to unlock future growth in earnings. Turning to slide 7, at West Farmers we recognise the alignment between long-term shareholder value and sustainability performance. The group's TRIFA improved year-on-year from 9.9 to 9.6, with Bunnings delivering continued improvement in performance through its multi-year injury prevention program. We contributed $59 million in direct and indirect support to communities across Australia and New Zealand. And it was also really pleasing to see that group scope one and two market base emissions fell by more than 27% half on half, largely as a result of our retail businesses achieving their 100% renewable energy target in 2025. And this is a significant milestone demonstrating how the group's ambition to build climate resilience aligns with stronger business performance. Now, turning to slide eight, you can see the summarised financial performance of the group. I'll now hand over to Anthony, who can talk to this in more detail and provide more context on balance sheet and cash flow.

Thanks, Rob, and hello, everyone. On slide 10, we've provided details of the sales performance across the group for the half, but I'll speak to both sales and earnings across each of our divisions in a little bit more detail on slide 11. At a total level, divisional earnings increased 6.8% for the half, supported by strong results in Bunnings, Kmart Group and Wessef, and good momentum in health. In Bunnings, sales growth of 4% was supported by growth across all product categories, operating regions and in both consumer and commercial segments. Strong consumer sales growth reflected resilient demand for home repair and maintenance, pleasing performance from new and expanded ranges, and growth in digital sales. Sales growth across all customer types in the commercial segment reflected the strength of the offer during a period in which residential building activity has remained subdued. During the half, Bunnings completed the rollout of its new warehouse tool shop format, now in 283 stores, which continued to support the higher sales in the tools category. Bunnings benefited from productivity improvements enabled by rostering and supply chain initiatives and further investment in technology, supporting reinvestment in price, range and customer experience. Overall, excluding the net impact of property contributions, Bunnings' earnings increased 5% to $1.39 billion. Kmart Group delivered earnings of $683 million for the half, an increase of 6.1%. Kmart Group continued to benefit from its strong value credentials and the uniqueness of the ANCO product range. delivering growth in customer numbers. Product innovation in ANCO's one-up and two-up price tiers generated strong customer demand with home and general merchandise categories performing consistently well over the half. Higher sales growth in Kmart was partially offset by lower sales in Target, which was impacted by more difficult trading conditions in apparel, particularly in seasonal categories, and the forced closure of a Target distribution centre in Queensland due to a severe weather event which impacted availability. The earnings result was supported by disciplined pricing and inventory management in a competitive environment and an ongoing focus on productivity which mitigated cost of doing business pressures and supported margin. WESF's earnings increased 18.1% to $209 million, benefiting from a positive contribution from the lithium business for the first time. In chemicals, earnings were broadly in line with the prior year, as lower ammonia earnings were offset by ammonium nitrate, which benefited from strong WA mining demand. In clean heat, earnings decreased due to a lower Saudi CP price, while fertiliser earnings benefited from improved margins. In lithium, earnings of $6 million reflected strong operating performance from the mine and concentrator, with the plant achieving above nameplate capacity towards the end of the half, as well as a more favourable pricing environment. Following the achievement of first product at Covalent's lithium hydroxide refinery, commissioning activity has been pleasing with the refinery producing high-quality product, demonstrating that the underlying process is operating as intended. Production ramp-up has been affected by intermittent odour issues, with engineering works to address the issue underway and due to be completed by mid-calendar year. While the ramp-up continues, excess spodumene concentrate is being sold profitably. In Officeworks, sales increased 4.7%, while earnings of $68 million were $19 million below the prior corresponding period, in line with our previous guidance. As Rob's already mentioned, during the half, Officeworks commenced a significant transformation program as it transitions to a low-cost operating model to support low prices for customers and long-term earnings growth. Earnings were impacted by $15 million in one-off costs associated with the program, largely reflecting restructuring activities and ERP-related costs. The balance of the earnings decline on the prior year was largely driven by clearance activity, completed to support the introduction of new and expanded product ranges, as well as lower sales in the furniture category. In the second half, the transformation program is expected to continue with a further $25 million in one-off costs, reflecting continued restructuring activity and higher ERP spend. Importantly, successful execution of the program will structurally lower the cost base and provide a foundation for improved performance, with benefits to positively impact earnings in the 2027 financial year. At West Farmers Health, earnings of $38 million included $7 million of amortisation expenses. Excluding these expenses and restructuring costs in the prior period, earnings increased 9.8%. Priceline Pharmacy's headline network sales increased 14.4%, supported by network expansion and a strong customer response to key initiatives executed during the half. These included the promotional campaigns, investment in everyday value lines, differentiated skincare and beauty products, and the expanded private label range. MediAesthetics delivered profitable growth supported by an improved operating model following network consolidation, and Digital Health maintained strong momentum driven by growth in instant script services. Wholesale delivered a material improvement in performance, supported by new customer acquisitions, increased volumes from existing pharmacy partners, and continued demand for weight loss and high-value drug categories. In the supply chain, lower costs per unit were supported by increased automation in the DC network and the delivery of productivity initiatives. In industrial and safety, excluding core gas, revenue increased 1.3% to $869 million, supported by Blackwood's growing share in a challenging market. Earnings were broadly in line after adjusting for $7 million of restructuring costs in the prior corresponding period, supported by proactive actions taken by both Blackwoods and Workwear Group in the 2025 financial year to reset their operating models and reduce their cost base. Pleasingly, Workwear Group secured new strategic customer commitments in the defence sector, with these commitments to commence in the 2027 financial year and expected to support improved financial performance. Turning now to slide 12, our other businesses and corporate overheads reported a loss of $71 million, which was a $17 million improvement on the prior corresponding period. The key driver of this improvement was upward property revaluations in the BWP Trust, and the contribution from BWB increasing from $35 million in the prior corresponding period to $52 million in this half. Group overheads increased by $8 million to $86 million, while other corporate earnings were broadly in line with the prior corresponding period. Other EBIT includes our continued investment in One Digital, including the One Pass membership program, the group's shared data asset and retail media network. This investment was slightly higher for the half, reflecting the establishment costs for the group's retail media business. As noted previously, the benefits from these investments through incremental sales and earnings are reported through our divisional results. Turning to working capital and cash flow on slide 13. Our divisional operating cash flows were broadly in line with the prior corresponding period and divisional cash realisation remained solid at 103% for the half. The divisional cash flow results reflected disciplined networking capital in WESF, which was partially offset by Bunnings' investment in working capital to support the rollout of its new tool shop format and further category expansions. At a group level, operating cash flows decreased 3.3% to just under $2.5 billion, primarily due to higher tax paid. Free cash flows increased 35.6% to $2.75 billion, largely due to the proceeds received from the sale of core gas and the sale of West Farmers 100% interest in BWP Management Limited, which occurred during the half. Moving to capital expenditure on slide 14. The group invested gross capex of $619 million during the half, which was 4.2% higher than the prior period. The increase reflected further investment in new omnichannel supply chain facilities in both Kmart Group and Officeworks, partially offset by reduced spend in WESF following the completion of the construction of the Kwinana lithium hydroxide refinery in the 2025 financial year. Net capital expenditure decreased by 44% to $311 million after allowing for the BPI sale proceeds of $274 million. For the 2026 financial year, we're expecting net capital expenditure for the group excluding BPI sale proceeds of between $1 to $1.3 billion. Turning to balance sheet and debt management on slide 15. Following the capital return to shareholders, which we executed at the end of the half, the group's balance sheet continues to provide significant flexibility and capacity to support investment in growth and productivity initiatives. Net financial debt increased to $4.9 billion, following the distribution of $1.3 billion in fully framed ordinary dividends and a further $1.7 billion associated with the capital management initiative. We continue to actively monitor the group's debt mix and manage our exposure to variable interest rates. The average cost of funds for the year decreased from 3.8% to 3.6% and the weighted average debt term to maturity remained at four and a half years. Other finance costs, including capitalised interest, decreased 14.4%. to $83 million for the half. The reduction in finance costs reflected the lower cost of funds and a lower average debt balance throughout the period. Higher net debt as a result of the capital management initiative paid in December will result in higher average net debt and higher finance costs in the second half. While West Farmer's debt to EBITDA ratio increased from 1.7 to 1.9 times, we retained significant headroom against key credit metrics, and we've maintained our strong investment grade credit ratings with both Standard & Poor's and Moody's. The group retains considerable funding headroom, and at the end of the half, we had available committed unused bank financing facilities of around $1.3 billion. And finally, to shareholder distributions on slide 16. As we've previously noted, the capital management distribution of $1.50 per share was approved during the half and paid in December. This distribution is consistent with our shareholder focus by providing surplus capital back to shareholders in a tax-efficient way and has enabled a more efficient capital structure while still maintaining balance sheet capacity to take advantage of opportunities as they arise. As Rob mentioned, the board has determined to pay a fully franked interim dividend of $1.02 per share, and this is consistent with our dividend policy, which has regard to available franking credits, our balance sheet position, credit metrics, and our cash flow generation. In line with our recent practice, the group does intend to purchase shares on market to satisfy shares issued as part of our dividend investment plan. I'll now hand back to Rob to cover off on Outlook.