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1. Introduce Westfarmers group, and the company operation mode of westfarmers group(check the annual report) 350 words

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WESFARMERS ANNUAL REPORT 2018 About Wesfarmers About this report From its origins in 1914 as a Western Australian farmers’ cooperative, Wesfarmers has grown into one of Australia’s largest listed companies. With headquarters in Perth, its diverse business operations cover: supermarkets, liquor, hotels and convenience stores; home improvement; department stores; office supplies; and an Industrials division with businesses in chemicals, energy and fertilisers, industrial and safety products and coal. Wesfarmers is Australia’s largest private sector employer with approximately 217,000 employees (including more than 5,200 Indigenous team members) and is owned by approximately 495,000 shareholders. This annual report is a summary of Wesfarmers and its subsidiary companies’ operations, activities and financial performance and position as at 30 June 2018. In this report references to ‘Wesfarmers’, ‘the company’, ‘the Group’, ‘we’, ‘us’ and ‘our’ refer to Wesfarmers Limited (ABN 28 008 984 049), unless otherwise stated. References in this report to a ‘year’ are to the financial year ended 30 June 2018 unless otherwise stated. All dollar figures are expressed in Australian dollars (AUD) unless otherwise stated. All references to ‘Indigenous’ people are intended to include Aboriginal and/ or Torres Strait Islander people. Wesfarmers is committed to reducing the environmental footprint associated with the production of this annual report and printed copies are only posted to shareholders who have elected to receive a printed copy. This report is printed on environmentally responsible paper manufactured under ISO 14001 environmental standards. CONTENTS Overview 2 2018 year in review 4 Primary objective 5 Group structure 6 Performance overview 8 Chairman’s message 10 Managing Director’s report 12 Leadership Team Operating and financial review 14 Operating and financial review 26 Retail businesses 26 Bunnings 32 Coles 40 Department Stores 42 – Kmart 44 – Target 46 Officeworks 50 Industrials 52 – Chemicals, Energy and Fertilisers 54 – Industrial and Safety 56 – Resources 57 Other activities Sustainability 58 Sustainability Governance 66 Board of directors 68 Corporate governance overview Directors’ report 72 Directors’ report 77 – Remuneration report Financial statements 97 Financial statements 103 Notes to the financial statements Signed reports 145 Directors’ declaration 146 Independent auditor’s report Shareholder and ASX information 152 Shareholder information 153 Investor information 154 Five-year financial history 155 Corporate directory 156 Wesfarmers brands Wesfarmers 2018 Annual Report 1 2018 YEAR IN REVIEW DIVIDENDS PER SHARE $2.23 GOVERNMENT TAXES AND ROYALTIES $2.1B PAYMENTS TO SUPPLIERS LARGEST PRIVATE SECTOR EMPLOYER SALARIES AND WAGES COMMUNITY CONTRIBUTIONS DIVESTED CURRAGH COAL MINE AND HOMEBASE ROB SCOTT BECAME WESFARMERS’ EIGHTH MANAGING DIRECTOR 217K TEAM MEMBERS DEMERGER OF COLES PROPOSED 2 Wesfarmers 2018 Annual Report $9.3B $47.2B $148M Bunnings Continued growth in earnings and sales delivered through strong execution of customer-focused strategy 26 Coles Customer metrics, sales momentum and earnings performance improved over the year Department Stores Record earnings delivered for the year 32 Officeworks Continued growth through a relentless focus on price, range and service 40 Industrials Increased earnings from continuing operations 46 Sustainability Improvements in safety, emissions intensity, ethical sourcing and community contributions 58 50 Wesfarmers 2018 Annual Report 3 THE PRIMARY OBJECTIVE OF WESFARMERS IS TO PROVIDE A SATISFACTORY RETURN TO SHAREHOLDERS We believe it is only possible to achieve this over the long term by: anticipating the needs of our customers and delivering competitive goods and services looking after our team members and providing a safe, fulfilling work environment engaging fairly with our suppliers, and sourcing ethically and sustainably supporting the communities in which we operate taking care of the environment acting with integrity and honesty in all of our dealings 4 Wesfarmers 2018 Annual Report GROUP STRUCTURE RETAIL BUNNINGS COLES DEPARTMENT STORES Bunnings Coles* Kmart Coles Online Kmart Tyre and Auto Service* OTHER CORPORATE BUSINESSES INDUSTRIALS OFFICEWORKS Chemicals, Energy and Fertilisers Industrial & Safety Resources BWP Trust (24.8%) CSBP Blackwoods Curragh* Gresham Partners (50%) Coles Express Australian Vinyls Workwear Group Bengalla* (40%) Wespine Industries (50%) Vintage Cellars Australian Gold Reagents (75%) Coregas First Choice Liquor Queensland Nitrates (50%) Greencap Liquorland EVOL LNG NZ Safety Blackwoods Spirit Hotels Kleenheat Coles Financial Services Quadrant Energy* (13.2%) Target Officeworks * In March 2018, Wesfarmers announced its intention to demerge Coles and the completion of the sale of the Curragh coal mine. In August 2018, Wesfarmers announced that it had entered into agreements to sell Kmart Tyre and Auto Service, its 40 per cent interest in Bengalla, and its indirect interest in Quadrant Energy. Wesfarmers 2018 Annual Report 5 Overview PERFORMANCE OVERVIEW CREATING WEALTH AND ADDING VALUE $47.2b Payments to suppliers $ 9.3b Employees (salaries, wages and other benefits) $2.1b Government (taxes and royalties) Wealth creation1 Value distribution $69.9b $15.7b $7.0b Payments for rent, $0.2b Lenders (borrowed funds) $2.5b Shareholders (dividends) $1.6b Reinvested in the business services and other external costs 1 Includes discontinued operations. Group performance Key financial data 2018 2017 Results from continuing operations¹ Revenue $m 66,883 64,913 Earnings before interest, tax, depreciation and amortisation $m 5,259 5,352 Earnings before interest, tax, depreciation and amortisation (excluding significant items)² $m 5,565 5,352 Earnings before interest and tax $m 4,061 4,177 Earnings before interest and tax (excluding significant items)² $m 4,367 4,177 Net profit after tax $m 2,604 2,760 Net profit after tax (excluding significant items)2 $m 2,904 2,760 Basic earnings per share cents 230.2 244.7 Basic earnings per share (excluding significant items)² cents 256.8 244.7 Earnings before interest and tax $m 2,796 4,402 Earnings before interest and tax (excluding significant items)³ $m 4,288 4,402 Net profit after tax $m 1,197 2,873 Net profit after tax (excluding significant items)³ $m 2,772 2,873 Basic earnings per share cents 105.8 254.7 Basic earnings per share (excluding significant items)³ cents 245.1 254.7 % 11.7 12.4 Operating cash flows $m 4,080 4,226 Net capital expenditure on property, plant and equipment and intangibles $m 1,209 1,028 Free cash flows $m 3,422 4,173 Equity dividends paid $m 2,528 1,998 Operating cash flow per share cents 360.1 374.1 Free cash flow per share cents 302.0 369.5 Dividends per share (declared) cents 223.0 223.0 40,115 Results including discontinued operations¹ Return on average shareholders’ equity (R12) (excluding significant items)³ Cash flow and dividends (including discontinued operations)¹ Balance sheet and gearing Total assets $m 36,933 Net financial debt $m 3,580 4,321 Shareholders’ equity $m 22,754 23,941 Fixed charges cover (R12) (excluding significant items)3 times 3.0 3.1 Interest cover (R12) (cash basis) (excluding significant items)3 times 30.4 25.0 1 Discontinued operations relate to the Curragh coal mine and Bunnings United Kingdom and Ireland (BUKI) which were disposed of during the year. 2017 balances have been restated where necessary to reflect these discontinued businesses. 2 Significant items for continuing operations relate to Target’s non-cash impairment of $306 million pre-tax ($300 million post-tax). 3 2018 excludes the following significant items pre-tax (post-tax) amounts: $931 million ($1,023 million) of impairments, write-offs and store closure provisions in BUKI; a $375 million ($375 million) loss on disposal of BUKI; $306 million ($300 million) of non-cash impairments in Target and a $120 million ($123 million) gain on disposal of Curragh. 6 Wesfarmers 2018 Annual Report Overview Operating and financial review The 2018 financial year was one of significant change for Wesfarmers, with decisive actions taken to reposition the Group’s portfolio to deliver sustainable growth in earnings and improved shareholder returns. Divisional performance Bunnings 12,544 11,514 Earnings before interest and tax $m 1,504 1,334 Segment assets $m 5,025 4,846 Segment liabilities $m 1,875 1,785 Capital employed (R12) $m 3,045 3,192 Return on capital employed (R12) % 49.4 41.8 Capital expenditure $m 497 367 2018 2017 $m 39,388 39,217 Coles Revenue Earnings before interest and tax $m 1,500 1,609 Segment assets $m 21,180 21,140 Segment liabilities $m 4,561 4,245 Capital employed (R12) $m 16,386 16,586 Return on capital employed (R12) % 9.2 9.7 Capital expenditure $m 762 811 20181 2017 8,837 8,528 Revenue $m Earnings before interest and tax $m 660 543 Segment assets $m 3,617 3,928 Segment liabilities $m 1,482 1,423 Capital employed (R12) $m 2,013 2,253 Return on capital employed (R12) % 32.8 24.1 Capital expenditure $m 293 222 2018 2017 2,142 1,964 Earnings before interest and tax $m 156 144 Segment assets $m 1,452 1,401 Segment liabilities $m 532 488 Capital employed (R12) $m 939 980 Return on capital employed (R12) % 16.6 14.7 Capital expenditure $m 45 36 2018 2017 Revenue $m 5,269 5,161 Earnings before interest and tax $m 867 915 Segment assets $m 3,500 4,229 Segment liabilities $m 758 1,125 Capital employed (R12) $m 3,295 3,393 Return on capital employed (R12) % 26.3 27.0 Capital expenditure $m 167 169 Industrials (including Curragh mine) The 2018 earnings before interest and tax for Department Stores excludes Target’s pre-tax non-cash impairment of $306 million. Wesfarmers 2018 Annual Report 7 Shareholder and ASX information 1 Signed reports $m Financial statements Officeworks Revenue Directors’ report Department Stores Governance 2017 $m Sustainability 2018 Revenue Overview CHAIRMAN’S MESSAGE MICHAEL CHANEY AO CHAIRMAN 8 Wesfarmers 2018 Annual Report The 2018 financial year was one of significant change for Wesfarmers, when we took some difficult, but important decisions to restructure the Group’s portfolio of businesses in the interest of long term shareholder returns. On a statutory basis, net profit after tax fell 58.3 per cent to $1.2 billion as a result of impairment charges and closure costs for the Bunnings United Kingdom and Ireland (BUKI) business and a further impairment of the Target business, partially offset by a profit on sale of the Curragh coal business. Excluding significant items and discontinued operations, net profit from continuing operations rose 5.2 per cent to $2.9 billion, a pleasing result which reflected a strong performance in the Group’s businesses, particularly in Bunnings Australia and New Zealand, and Department Stores. The directors declared a fully-franked final dividend of $1.20 per share, bringing the full-year dividend to $2.23 per share, the same as in 2017. The succession from Richard Goyder to Rob Scott as Group Managing Director in November 2017 was one of a number of changes in senior management during a year which also saw Anthony Gianotti appointed as Group Chief Financial Officer and new leaders appointed in the Industrials division and in Business Development. Wesfarmers has also announced a number of further senior leadership changes that will occur in the first half of the 2019 financial year. The Board is confident that the new team assembled by Rob is well equipped to continue the company’s record of success. Our great thanks go to the retiring executives for their dedication and outstanding efforts on behalf of Wesfarmers. These management changes have paralleled a restructuring of the conglomerate’s portfolio of businesses. The BUKI operations and Curragh coal mine were sold and the proposed demerger of Coles was announced during the 2018 year. Further, the sale of Kmart Tyre and Auto Service, our 40 per cent interest in the Bengalla coal mine, and our indirect interest in Quadrant Energy were announced in the months following the close of the year. The Coles demerger is scheduled to be completed in November 2018, subject to shareholder and other approvals. These disposals reflect the determination of the Board and management to prioritise the achievement of Wesfarmers’ stated Overview has been extraordinary. His first involvement with the Group was as principal advisor to the Wesfarmers Cooperative in 1977 in its protracted, company-making takeover of the fertiliser company CSBP and Farmers Ltd. James has provided advice on every strategic move by Wesfarmers since, initially in a professional role, but over the last 20 years in his role as a director. It is no exaggeration to say that the financial success of Wesfarmers described above has been due in no small part to James’ involvement. We are delighted that the shareholders of Coles will benefit similarly through his role as Chair as it begins its journey as a re-listed company. We welcome Sir Bill English to the Wesfarmers Board and look forward to his contribution; and we acknowledge with thanks the substantial contribution which Archie Norman has made as advisor to the Board and management since the Coles takeover in 2007. Archie will continue as advisor to the Coles board and we look forward to welcoming David Cheesewright as advisor to our board and Wesfarmers’ nominee on the Coles board. In closing, I pay tribute to our hard-working team, led by Rob Scott. We look forward to overseeing their efforts to ensure the continued success of the company. Sustainability Governance Directors’ report Michael Chaney AO Chairman Financial statements Signed reports Wesfarmers 2018 Annual Report 9 Shareholder and ASX information such areas. But committee members and the committee chair need to be careful to ensure that they do not default to acting in a management role: employees report through the management hierarchy, not to a board committee. As for the suggestion that focusing on financial outcomes is incompatible with good corporate citizenship, we couldn’t disagree more. The reason listed companies exist is to provide their shareholders with financial returns. People buy shares in Wesfarmers because they hope it will provide them with better returns than if they buy shares in another company; but that does not give a company licence to put profit before good behaviour. The simple fact is that unless a company behaves as a good corporate citizen, it will not achieve financial success over the long term. Poor behaviour will cause many people not to buy shares or to sell their holding, customers will desert it, it will result in fines or bans for the company and the company will not be invited to join in profitable opportunities. In short, the company will lose its ‘licence to operate’. That is why at Wesfarmers we have always qualified our single financial objective with the words you see on page four of this report; words describing our commitment to take care of our employees, customers, suppliers, the environment and the communities in which we operate. The fact that Wesfarmers has adhered to such principles explains why it continues to prosper more than a century after it was formed. It also explains why it has been so successful since its public listing in 1984. A $1,000 investment in the company at the time of listing, with dividends reinvested, is now worth $420,000, compared to $38,000 for a $1,000 investment in the ASX 50. Notwithstanding the uncertainties facing all businesses in our complex world, and the inevitability of making suboptimal decisions, hopefully as well as good ones, we are determined to continue that record of success. Achieving that will require a competent and dedicated board and management team, and I believe shareholders have reason to be confident. I take this opportunity, on behalf of my fellow directors, to thank our outgoing directors Paul Bassat and James Graham for their efforts on behalf of the company. Paul has provided valuable insights during his time on the Board, particularly in respect of issues around digital disruption; James’ contribution to Wesfarmers over 40 years Operating and financial review objective ‘to provide a satisfactory return to shareholders’. They will result in a reduction in the size of the company but leave it with a group of strong businesses each with good growth potential and, importantly, a very strong balance sheet. That financial strength does not mean that we feel any urgency to make new acquisitions. Apart from the fact that there are many opportunities for growth in our existing businesses, new investments will only occur if we assess them to have the potential to deliver superior returns to our shareholders over the long term. The Group Managing Director has reiterated this point on many occasions since his appointment. External events, including the Royal Commission into financial services, gave rise during the past year to extensive commentary about corporate reputation and the role of company boards and management. These have ranged from the suggestion that company directors should be more involved in the details of management; to the contention, on the other hand, that boards are overwhelmed with information; that the establishment of board committees has blurred the lines between governing and management; or that the focus of corporate objectives on financial outcomes is incompatible with good corporate citizenship. Your company’s directors have firm views on these issues. The role of directors is to govern, not to manage. The most important aspect of the role is the appointment of the chief executive officer and ensuring that the CEO assembles a competent management team. Directors whose involvement is part time cannot possibly be across the detail of the business. They delegate the running of the company to management; but the second vital role directors play is holding management’s ‘feet to the fire’ - ensuring that the company’s policies and procedures are directed towards achieving desired outcomes, that management understands and communicates the company’s values and codes of behaviour, that bad news travels upwards as fast as good news, that unacceptable behaviour is dealt with expeditiously and that employee rewards are aligned with performance. Board committees are an important element in achieving these goals. They allow directors to gain a deeper understanding of issues, including audit and risk matters, human resources, safety practices and so on; and to give management the benefit of their own experience in Overview MANAGING DIRECTOR’S REPORT ROB SCOTT MANAGING DIRECTOR 10 Wesfarmers 2018 Annual Report It is my pleasure to provide the 2018 financial year update, my first as Managing Director. This was a year of change for Wesfarmers, with good progress made to reposition the portfolio and ensure we have the right settings in place for sustained value creation. The changes we have made and those in progress have been guided by a steadfast commitment to our core objective to provide a satisfactory return to shareholders. Through these changes, our businesses delivered a strong financial result, with earnings from continuing operations and excluding significant items growing 5.2 per cent. R ...
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School: UIUC




Wesfarmers group
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Wesfarmers Group

Wesfarmers is an Australian farmers’ cooperative. Since its beginning in 1914 as a
cooperative for farmers within Western Australia, Wesfarmers has grwon into one of the leading
listed firms within Australia (, 2018). Wesfarmers was listed in 1984 and
developed in a key retail conglomerate. The firm was founded as a cooperative to offer services
and merchandise to Western Australian Farmers. The company is headquartered in Perth with
diverse business operations. Wesfarmers Group diverse trade operations compr...

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