Wesfarmers Limited (ASX: WES) is a diversified group that deals in retail operations, coal mining; chemicals and fertilizers, and industrial and safety product distribution. The group is focusing to channelizing its efforts to simplify its structure. The group has a Portfolio of some cash generative businesses with good momentum & leading positions in growing markets. Long-term earnings growth delivered through existing businesses & portfolio management and proposed Coles demerger are expected to help the group move towards growth opportunities with the group’s capital employed.

With completion that was slated for 30 June 2018, the agreement to divest Homebase was announced on 25 May 2018. In the Group’s 2018 full-year financial results, Wesfarmers expects to record a loss on disposal of £ 200 million to £ 230 million, subject to finalization of completion accounts and review by Ernst & Young.

Strategic review of Bunnings UK and Ireland business (BUKI) resulting in agreement to divest Homebase, accelerating department store network optimization & target earnings improvement are some of the areas taken up that need to be addressed for underperformance. The demerger of Coles is expected to complete during FY19 while proceeds of $700 million have been received by the sale of Curragh mine.

In terms of growth, the business development team has been strengthened, and the group has divisional focus on long term value creation and the company has established advanced analytics center to be co-located with flybuys, which will comprise 10-20 data scientists & data engineers to support divisional teams.

The divestment of homebase is in the best interest of shareholders, and the new management team’s turnaround plan will continue under Damian McGloughlin. With regards to the BUKI investment, decisive action since strategic review demonstrates commitment to disciplined capital management & this draws a line in the sand on a disappointing investment. The approach to capital allocation is to find opportunities to deliver superior returns from investment in existing growth businesses while leveraging assets & capabilities in adjacent & new opportunities, strict criteria & rigorous financial discipline applied to all investment decisions.

Wesfarmers Limited (ASX: WES) is a consumer staples stock that was sitting at $49.97, as at July 20, 2018, early trade. The annual dividend yield for the stock is 4.48% and is also fully franked. The company has seen a rise of 22.77% over the past 12 months and…

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