Wesfarmers' cash splash: Shareholders to reap $1b special dividend
Retail conglomerate Wesfarmers' will shower shareholders with $1.1 billion in special cash returns after offloading a string of assets including its Coles supermarket chain.
The company announced the $1-per-share special dividend, in addition to a $1 half-year dividend, on Thursday along with its latest results. Net profit jumped 10 per cent to hit $1 billion in the first half as earnings growth at Bunnings made up for weakness at Kmart.
The cash splash became possible as Wesfarmers undergoes a major reshuffling of its portfolio, which has included spinning off its largest business, Coles, on the stock exchange and selling Kmart Tyre and Auto, Quadrant Energy and the Bengalla coal mine.
Market speculation has been high that Wesfarmers would look to buy a new business after the demerger of Coles in November last year, having decided that earnings from that businesss weren't growing fast enough to deliver satisfactory returns for shareholders.
The company said that its balance sheet remained strong even after the $1 billion shareholder splurge announced on Thursday, and remained well positioned to jump on "value-accretive growth opportunities, if and when they arise".
Wesfarmers' shares jumped as much as 5.6 per cent in early trading. They were trading 5 per cent higher at $34.36 as of 10:18am in Sydney.
Housing fall spooks shoppers
At Bunnings, now Wesfarmers' largest business, sales ticked up 5.2 per cent to $6.9 billion in the six months to December 31, and earnings before tax jumped 7.9 per cent.
Wesfarmers chief executive Rob Scott said that growth was achieved despite a "moderation of trading conditions" at the home improvement chain.
At Kmart and Target, sales grew 0.8 per cent to $4.6 billion, but earnings fell by 3.8 per cent to $383 million.
That was driven by weaker apparel sales at Kmart and increased store and supply chain costs, Mr Scott said. At Officeworks, sales were up 8.2 per cent to $1.1 billion and earnings jumped almost 12 per cent to $76 million.
Echoing comments from retail rival Woolworths a day earlier, Wesfarmers said that retail spending was soft as rising household expenses and a slumping property market caused caution among consumers and prompted them to look for value when they went shopping.
"Bunnings, Kmart, Target and Officeworks will remain steadfast in their focus on customers and on managing the businesses for long-term success and value creation," the company said in its statement.
Meanwhile, earnings from Wesfarmers' industrials division fell 2.6 per cent.
At $1.08 billion, Wesfarmer's profit fell $200 million short of the analyst consensus forecast, while earnings before interest tax, depreciation and amortisation came in $30 million ahead at $1.9 billion.
Taking into account a $306 million non-cash write-down to the value of Target in the previous year, net profit was up 59 per cent.
Accounting for proceeds from the discontinued operations of Coles, Kmart Tyre and Auto, Quadrant Energy and the Bengalla coal mine, net profit came in at $4.5 billion.