Wesfarmers

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Coles now trading on ASX as COL after demerger goes ahead

The Supreme Court of Western Australia has approved the demerger between Coles and Wesfarmers.

By November 21, Coles is expected to commence trading on ASX under the new ASX Code ‘COL’.

The move comes after Wesfarmers shareholders voted in favour of the proposed $20 billion demerger of the supermarket giant.

A total of 601,032,572 votes were cast in favour with 2,900,858 against.

READ: Wesfarmers plans to make Coles a separate company

A scheme booklet, announced in early October, detailed changes the demerger would bring.

With Coles now admitted to the official list of the ASX, the company will consist of three key divisions ­– supermarkets, liquor and convenience.

Coles’ net debt following the demerger will be about $2 billion, and its balance sheet is expected to support strong investment grade credit ratings.

In the booklet, Wesfarmers board chairman Michael Chaney said Coles’ turnaround over the past decade, and its strategy to ensure it remains a trusted brand for Australians, sees it well positioned to continue to grow as a mature defensive business with strong investment characteristics.

“We are committed to ensuring Coles is set up with a strong foundation for success and growth as an independent listed company,” he said.

From its origins in 1914 as a variety store in Collingwood, Victoria, Coles has grown to become a leading Australian retailer.

Sales in the Australian grocery and liquor industry have grown over the period of June 1985 to June 2018 by 6.2 per cent and 7.2 per cent per annum respectively.

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Wesfarmers releases scheme booklet detailing proposed Coles demerger

Wesfarmers Limited has released a scheme booklet detailing its proposed demerger of the Coles business.

The booklet was announced in early October, with the demerger expected to be completed in November 2018.

It is anticipated the proposed demerger will create a new top 30 company listed on the ASX, with leading positions in supermarkets, liquor and convenience.

If the demerger proceeds, and Coles is admitted to the official list of the ASX, new proposed Coles board and committee charters and key policies will apply from the date of listing on the ASX.

READ: Wesfarmers plans to make Coles a separate company

These charters and policies are summarised in the scheme booklet, which sets out the effects of the demerger, certain information required by law and all other information known to the Wesfarmers directors, which is material to the decision of Wesfarmers shareholders to vote in favour of, or against, the demerger resolutions.

Coles will consist of three key divisions ­– supermarkets, liquor and convenience.

Coles’ net debt following demerger will be about $2 billion, and its balance sheet is expected to support strong investment grade credit ratings.

Wesfarmers board chairman Michael Chaney said Coles’ turnaround over the past decade, and its strategy to ensure it remains a trusted brand for Australians, sees it well positioned to continue to grow as a mature defensive business with strong investment characteristics.

“We are committed to ensuring Coles is set up with a strong foundation for success and growth as an independent listed company,” he said.

Wesfarmers plans to retain a minority ownership interest of 15 per cent in Coles and a 50 per cent interest in the flybuys joint venture with Coles.

“This will support strategic alignment between Wesfarmers and Coles in relation to mutually beneficial growth initiatives, including in the areas of data, digital and loyalty, and support the continued development of flybuys by leveraging the combined Coles and Wesfarmers digital and data assets,” said Chaney.

From its origins in 1914 as a variety store in Collingwood, Victoria, Coles has grown to become a leading Australian retailer which sells everyday products including fresh food, groceries, household goods, liquor, fuel and financial services.

Sales in the Australian grocery and liquor industry have grown over the period of June 1985 to June 2018 by 6.2 per cent and 7.2 per cent per annum respectively.

As at 30 June 2018, Coles processed more than 21 million customer transactions on average each week, had more than 112,000 team members and operated 2,507 retail outlets nationally.

For the year ended 30th of June 2018, Coles had pro forma revenue of $39.3b and pro forma EBIT of $1,414 million.

 

 

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Wesfarmers plans to make Coles a separate company

Wesfarmers has announced its intention to demerge its Coles division, subject to shareholder and other approvals.

It is anticipated that the proposed demerger would create a new top 30 company listed on the Australian Securities Exchange, with leading positions in supermarkets, liquor and convenience, strong cash generation capability to underpin dividend distributions, and an earnings profile which is expected to be resilient through economic cycles.

The decision follows a review of the Wesfarmers portfolio and an assessment of the composition of its capital employed to support higher levels of future growth and total shareholder returns. As at 31 December 2017, Coles accounted for approximately 60 per cent of the Group’s capital employed and 34 per cent of Group divisional earnings.

Wesfarmers Managing Director Rob Scott said the Group was repositioning its portfolio to target a higher capital weighting toward businesses with strong future earnings growth prospects.

“Wesfarmers acquired Coles as part of Coles Group in 2007 and since then has successfully turned around the business and restored its position as a leading Australian retailer,” Scott said.

“We believe Coles has developed strong investment fundamentals and is of a scale where it should be operated and owned separately. It is now a mature and cash generative business, which is expected to have a strong balance sheet and dividend paying capacity. Coles will be well positioned to continue to deliver long-term earnings growth, with an earnings profile that is expected to be resilient through economic cycles.

“A demerger of Coles will facilitate greater focus by Wesfarmers on growth opportunities within its remaining businesses and the pursuit of value accretive transactions. The capacity to act opportunistically will be retained through a strong balance sheet and a cash generative portfolio. The Group expects to retain its current strong credit ratings and the dividend policy will remain unchanged.”

Wesfarmers Chairman Michael Chaney said the demerger would extend the Group’s long history of actively managing its portfolio.

“Wesfarmers’ operating model has benefited our shareholders over the long term and will continue to provide the framework for future capital allocation decisions,” Chaney said.

Wesfarmers post the proposed demerger Wesfarmers’ remaining operating divisions include a number of world-class businesses and leading Australian brands, including Bunnings, Kmart, Officeworks, and its Industrials portfolio.

The remaining divisions in Wesfarmers, excluding Resources, delivered compound annual growth in earnings of 8.9 per cent since FY2009 and generated a return on capital, excluding significant items, of 23.6 per cent, as at 31 December 2017. Organic and inorganic growth opportunities position these businesses well to deliver continued growth in earnings and returns.

 

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Wesfarmers profit up as new MD revealed

Wesfarmers half-year profit has increased by 13.2 per cent, while earnings for its Coles supermarkets dropped for the same period.

The company reported a net profit after tax of $1,577 million for the half-year ended 31 December 2016. In addition, earnings per share increased 12.8 per cent to $1.40 per share, and return on equity (R12) increased 20 basis points to 10.2 per cent.

The result reflected good performances by its Bunnings, Kmart and Officeworks chains. In contrast, earnings for Coles supermarkets fell 2.6 per cent to $920 million.

Meanwhile, the company yesterday announced that Rob Scott (pictured) will be the next Wesfarmers Managing Director, succeeding Richard Goyder who will step down towards the end of 2017 after more than 12 years in the role.

Scott becomes the Group’s Deputy Chief Executive Officer effective immediately and will join the Board as Managing Director at the conclusion of the 2017 Annual General Meeting in November. He will maintain his current role as head of Wesfarmers’ Industrials division until 1 July 2017.

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Wesfarmers chief ‘disappointed’ by effects test introduction

The chief of Wesfarmers believes the effects test, introduced by the Government yesterday, is bad policy and has vowed that it will not affect the retail giant’s pricing policy.

As the SMH reports, Prime Minister Malcolm Turnbull said yesterday that the test is designed to stop big businesses from behaving in a way that has "the purpose, effect or likely effect of substantially reducing competition".

However, Wesfarmers chief executive Richard Goyder said that it will not affect the price cutting behaviour of its brands such as Coles, Bunnings and Kmart.

Calling his reaction to the news "disappointment, to a degree disillusionment, he  said, "We will continue to do what we have always done, which is compete aggressively and provide consumers with great outcomes and if that for some reason gets us in hot water then we will deal with that down the track."

And he even suggested that possible legal action would not change this position.

"We'd be doing the wrong thing by our shareholders to say we'd stop investing and stop reducing our prices and if we end up in court we'll deal with it then,” he said.

Elsewhere the new policy was welcomed.

As the ABC reports, Former Australian Competition and Consumer Commission (ACCC) chairman Allan Fels said it will help small businesses compete.

"Small businesses are often stopped from competing by big business just taking actions to crush them and often those small businesses are responsible for innovation and for new ways of doing things,” Fels said.

"Most of the innovation comes from small business, but it is cut down by big business when they discount prices in an often predatory manner, blocking small players from getting into markets by things like exclusivity arrangements.

"This is of huge long-term importance, but tomorrow morning you won't wake up and find you're paying less for goods.

"But in 50 years people will look back and say that's had a big effect over time on preserving competitive small businesses."

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