2023 Annual
2023 Annual
Report
Report
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, Wesfarmers’
diverse businesses today span: home
improvement, outdoor living products and
supply of building materials; general
merchandise and apparel; office and
technology products; health, beauty and
wellbeing products and services;
management of a retail subscription
program and shared data asset; wholesale
distribution of pharmaceutical goods;
manufacturing and distribution of chemicals
and fertilisers; development of an
integrated lithium project, including mine,
concentrator and refinery; industrial and
safety product distribution; gas processing
and distribution; and management of the
Group’s investments.
Wesfarmers is one of Australia’s largest
private sector employers with approximately
120,000 team members and is owned by
more than 510,000 shareholders.
Appendix 4E
For the year ended 30 June 2023
This annual report is a summary of
Wesfarmers and its subsidiary companies’
operations, activities and financial
performance and position for the year
ending and as at 30 June 2023. 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’ or
‘this year’ are to the financial year ended
30 June 2023 (previous corresponding
period to 30 June 2022) unless otherwise
stated. All dollar figures are Australian
dollars (AUD) unless otherwise stated.
References to ‘AASB’ refer to the
Australian Accounting Standards Board
and ‘IFRS’ refers to the International
Financial Reporting Standards. There are
references to ‘IFRS’ and ‘non-IFRS’
financial information in this report.
Non-IFRS financial measures are financial
measures other than those defined or
specified under any relevant accounting
standard and may not be directly
comparable with other companies’
information. Non-IFRS financial measures
are used to enhance the comparability
of information between reporting periods.
Non-IFRS financial information should
be considered in addition to, and is not
intended to be a substitute for, IFRS
financial information and measures.
Non-IFRS financial measures are not
subject to audit or review.
All references to ‘Indigenous’ people
are intended to include Aboriginal and/or
Torres Strait Islander people.
References to Scope 1 and 2 data include
emissions for businesses where we have
operational control under the National
Greenhouse and Energy Reporting Act
2007 (Cth) (NGER Act) and emissions in
international operations. Scope 2
emissions are stated using market-based
accounting, in accordance with the World
Resource Institute’s Greenhouse Gas
Protocol Scope 2 guidance.
References to community contributions
include direct community contributions
from divisions (cash, in-kind and time) and
indirect community contributions (from
team members and customers).
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.
Results for announcement to the market1
2023
2022
Revenue from ordinary activities
Up 18.2% to $43,550 million
$36,838 million
Revenue from ordinary activities - excluding Wesfarmers Health2
Up 7.4% to $38,238 million
$35,598 million
Profit from ordinary activities after tax attributable to members
Net profit for the period attributable to members
Up 4.8% to $2,465 million
Up 4.8% to $2,465 million
$2,352 million
$2,352 million
Net tangible assets per share3
Operating cash flow per share4
$3.17
$3.69
$2.91
$2.03
1 Commentary on the results for the year is included in this report and on the Wesfarmers website.
2 Wesfarmers, through its wholly-owned subsidiary WFM Investments Pty Ltd, completed the acquisition of Australian Pharmaceutical Industries Ltd (API)
on 31 March 2022, forming the Wesfarmers Health division. The results of Wesfarmers Health presented in this report for 2022 are for the period from
31 March 2022 to 30 June 2022.
3 Net tangible assets per ordinary share (excluding reserved shares) calculation includes right-of-use assets and lease liabilities. 2022 has been restated to
reflect the adjustments to the provisional acquisition accounting for API.
4 Operating cash flow per share has been calculated by dividing the net cash flows from operating activities by the weighted average number of ordinary
shares (including reserved shares) on issue during the year.
Dividends
Interim dividend
Final dividend
Total FY2023 dividend
Previous corresponding period:
Interim dividend
Final dividend
Total FY2022 dividend
Amount per security
Franked amount per security
88 cents
103 cents
191 cents
80 cents
100 cents
180 cents
88 cents
103 cents
191 cents
80 cents
100 cents
180 cents
Record date for determining entitlements to the final dividend
5:00pm (AWST) on 31 August 2023
Last date for receipt of election notice for the Dividend Investment Plan
5:00pm (AWST) on 1 September 2023
Date the final dividend is payable
5 October 2023
Acknowledgement
of Country
Wesfarmers proudly acknowledges
the Traditional Owners of Country
throughout Australia and their continuing
connection to lands and waterways
upon which we depend and where
our businesses operate. We pay
our respects to their Elders, past
and present.
Recognising its potential to advance
social, economic and cultural equity
for Aboriginal and Torres Strait Islander
Australians, Wesfarmers supports the
Uluru Statement from the Heart including
the proposal to establish an Aboriginal
and Torres Strait Islander Voice.
Contents
Overview
The Wesfarmers Way
Our businesses
Our performance
Performance overview
Chairman’s message
Managing Director’s report
Leadership Team
Operating
and financial
review
Operating and financial review
Bunnings Group
Kmart Group
Chemicals, Energy and Fertilisers
Officeworks
Industrial and Safety
Wesfarmers Health
Wesfarmers OneDigital
Catch
Other activities
Sustainability
Climate-related disclosures
2
4
6
8
10
12
14
16
22
30
36
42
48
54
60
62
64
65
75
Independent Limited Assurance Statement 87
Governance
Board of Directors
Corporate governance overview
Directors’
report
Directors’ report
Remuneration report
Financial
statements
Financial statements
Notes to the financial statements
Signed
reports
Directors’ declaration
Independent auditor’s report
Shareholder
and ASX
information
Five-year financial performance
and key metrics
Shareholder information
Investor information
Corporate directory
88
90
95
100
131
137
179
180
184
187
188
189
Overview
The
Wesfarmers Way
Our primary objective is to deliver 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
2
Wesfarmers 2023 Annual Report Value-creating strategies
The Group’s primary objective is driven
by four overarching strategies.
Operating excellence
Entrepreneurial initiative
– Strengthening existing businesses
through operating excellence and
satisfying customer needs
– Securing growth opportunities through
entrepreneurial initiative
Renewing the portfolio
Operating sustainably
– Renewing the portfolio through
value-adding transactions
– Ensuring sustainability through
responsible long-term management
Core values
Our core values underpin all of the Group’s
strategies and ways of working.
Integrity
Accountability
– Acting honestly and ethically in all dealings
– Decision-making authority in divisions
– Reinforcing a culture of doing what is right
– Accountability for performance
– Protecting and enhancing reputation
Openness
Entrepreneurial spirit
– Openness and honesty in reporting,
– Adopting an owner mindset
feedback and ideas
– Accepting that people make mistakes and
seeking to learn from them
– Encouraging teams to identify opportunities
and apply commercial and financial acumen
to support calculated risk-taking
– Encouraging teams to take initiative
and pursue new and innovative ways of
delivering value
3
Wesfarmers 2023 Annual ReportOverview Overview
Our
businesses
Bunnings Group
Bunnings Group is the leading retailer of home improvement and
outdoor living and building products in Australia and New Zealand.
Bunnings’ network of 513 locations includes warehouses, trade
centres, Tool Kit Depot stores and Beaumont Tile stores. Bunnings
Group employs more than 52,000 team members.
Kmart Group
Kmart Group comprises Kmart and Target and operates 449 stores
across Australia and New Zealand, employing around 50,000 team
members in Australia, New Zealand and key sourcing markets.
Chemicals, Energy
and Fertilisers
Chemicals, Energy and Fertilisers manages nine businesses in
Australia and employs almost 1,500 team members across its
production and distribution facilities and support offices.
Officeworks
Officeworks is Australia’s leading retailer and supplier of office
products and solutions for small and medium-size businesses,
students and households, operating through a nationwide network of
166 stores. Officeworks employs more than 9,000 team members.
4
Wesfarmers 2023 Annual Report Industrial
and Safety
Industrial and Safety operates three main businesses spanning
safety products, industrial and corporate workwear, and industrial
and medical gases. Industrial and Safety employs approximately
3,600 team members.
Health
OneDigital
The Health division was formed in March 2022, with the acquisition of
API, one of Australia’s leading health and beauty companies. The Health
division includes 76 company-owned Priceline stores, 390 Priceline
pharmacy franchise stores and 92 Clear Skincare clinics and is also a
wholesale distributor of pharmaceutical goods. The division employs
more than 3,000 team members.
from July 2023
Established in 2022, OneDigital brings together the Group’s digitally
native businesses, including the OnePass membership program, the
Catch marketplace, and the Group data asset. OneDigital powers the
Group’s data and digital growth ambitions and provides customers
with a more seamless, rewarding and valuable omnichannel experience
across the Group’s retail businesses. The division employs about
600 team members.
Other activities
Wesfarmers is an investor in Flybuys, the BWP Trust, Gresham Partners
and Wespine Industries.
50%
24.8%
50%
50%
5
Wesfarmers 2023 Annual ReportOverview Overview
Our
performance
Revenue
Net profit after tax
$43.5b
up 18.2%
$2.5b
up 4.8%
Return on equity (R12)
31.4%
Salaries, wages and
other benefits
$6.0b
Dividends per share
Fully franked
$1.91
up 6.1%
Government taxes
and other charges
$1.4b
Well-placed portfolio of businesses with exposure to growth
Strong, value-based
retail offers focused on
everyday products
Strategic manufacturing
capabilities supporting
critical industries
Health division
providing exposure to
growing sectors
Opportunities to
contribute to global
decarbonisation
Underpinned by a strong balance sheet to support disciplined,
long-term investment, and data and digital capabilities that
enable further productivity and efficiency gains
6
Wesfarmers 2023 Annual Report
Focus on long-term sustainable value, consistent with our objective
Environment
Communities
People
11.3
2.4%
total recordable injury frequency
rate, up 23% from 9.2 in FY2022
decrease in Scope 1 and Scope 2
market-based emissions
3.3%
of Wesfarmers’
Australian
workforce
37MW
Indigenous employment
maintaining population
parity
capacity from 165 rooftop
solar systems, with 43 installed
during the year
48%
71.6%
Board and Leadership Team
positions held by women
of operational waste recovered,
and diverted away from landfill
15.5%
of Australian team members
undertook cultural awareness
training
$75m
in direct and indirect
contributions, largely to
community organisations in
Australia and New Zealand
7
Wesfarmers 2023 Annual ReportOverview Overview
Performance
overview
Wealth creation and value distribution
$28.9b to suppliers for raw
materials and inventory
Wealth creation1
Value distribution
$43.7b
$10.6b
$4.2b for rent, freight, services
and other external expenses
$6.0b to team members (salaries, wages and other benefits)
$1.4b to government (taxes and other charges)
$0.1b to lenders (finance costs)
$2.2b to shareholders (FY2023 dividends)
$0.9b reinvested in the business
1 Represents revenue, other income and share of net profits of associates and joint ventures.
Group performance
Financial results
Revenue
Earnings before interest and tax
Earnings before interest and tax (after interest on lease liabilities)
Net profit after tax
Basic earnings per share
Cash flow and dividends
Operating cash flows
Net capital expenditure
Acquisition of subsidiaries, net of cash acquired
Free cash flows
Equity dividends paid
Capital return paid
Operating cash flow per share
Dividends per share
Balance sheet and gearing1
Total assets
Net debt2
Shareholders' equity
Gearing (net debt to equity)
Sustainability
Scope 1 and Scope 2 market-based emissions
Operational waste recovered and diverted from landfill3
Aboriginal and Torres Strait Islander team members3
Safety performance3
Gender balance, board and leadership team
$m
$m
$m
$m
cents
$m
$m
$m
$m
$m
$m
cents
cents
$m
$m
$m
%
ktCO2e
%
TRIFR
% women
2023
43,550
3,863
3,644
2,465
217.8
4,179
1,183
24
3,627
2,132
-
369.2
191
26,546
4,009
8,281
48.4
1,196.7
71.6
3,689
11.3
48
2022
36,838
3,633
3,416
2,352
207.8
2,301
884
773
1,110
1,927
2,267
203.3
180
27,286
4,491
7,981
56.3
1,225.7
69.6
3,601
9.2
48
1 2022 has been restated to reflect the adjustments to the provisional acquisition accounting for API.
2 Interest-bearing loans and borrowings less cash at bank and on deposit and held in joint operation. Excludes lease liabilities.
3 2022 excludes Wesfarmers Health.
8
Wesfarmers 2023 Annual Report Divisional performance
Bunnings Group
Revenue
Earnings before tax
Segment assets
Segment liabilities
Capital employed R12
Return on capital employed R12
Cash capital expenditure
Kmart Group1
Revenue
Earnings before tax
Segment assets
Segment liabilities
Capital employed R12
Return on capital employed R12
Cash capital expenditure
Chemicals, Energy and Fertilisers
Revenue
Earnings before tax
Segment assets
Segment liabilities
Capital employed R12
Return on capital employed R12
Cash capital expenditure
Officeworks
Revenue
Earnings before tax
Segment assets
Segment liabilities
Capital employed R12
Return on capital employed R12
Cash capital expenditure
Industrial and Safety
Revenue
Earnings before tax
Segment assets
Segment liabilities
Capital employed R12
Return on capital employed R12
Cash capital expenditure
Health2
Revenue
Earnings before tax
Segment assets
Segment liabilities
Capital employed R12
Return on capital employed R12
Cash capital expenditure
Catch
Revenue
Earnings before tax
Segment assets
Segment liabilities
Cash capital expenditure
$m
$m
$m
$m
$m
%
$m
$m
$m
$m
$m
$m
%
$m
$m
$m
$m
$m
$m
%
$m
$m
$m
$m
$m
$m
%
$m
$m
$m
$m
$m
$m
%
$m
$m
$m
$m
$m
$m
%
$m
$m
$m
$m
$m
$m
2023
18,539
2,230
8,900
5,593
3,410
65.4
405
2023
10,635
769
5,582
4,359
1,635
47.0
127
2023
3,306
669
3,811
594
3,091
21.6
518
2023
3,357
200
2,141
1,129
1,092
18.3
71
2023
1,992
100
1,787
474
1,257
8.0
73
2023
5,312
45
2,088
908
1,078
4.2
41
2023
354
(163)
209
110
10
1 2022 has been restated to exclude Catch.
2 2022 includes API’s results from 31 March 2022 to 30 June 2022. 2022 has been restated to reflect the adjustments to the provisional acquisition
accounting for API.
2022
17,754
2,204
8,817
6,113
2,854
77.2
349
2022
9,129
505
5,848
4,267
1,569
32.2
105
2022
3,041
540
3,627
771
2,503
21.6
455
2022
3,169
181
2,040
1,041
1,015
17.8
68
2022
1,925
92
1,805
599
1,166
7.9
64
2022
1,240
(25)
2,037
951
n.r.
n.r.
3
2022
510
(88)
271
106
45
9
Wesfarmers 2023 Annual ReportOverview Overview
Chairman’s
message
It is pleasing to report that in a year
marked by significant uncertainty, both
nationally and internationally, Wesfarmers
continued to perform well and provide
good returns to its shareholders.
The Group recorded a net profit after tax
for the 2023 financial year of $2.5 billion,
up five per cent on the previous year. The
directors declared fully-franked dividends
totalling $1.91 per share, comprising an
88 cent interim and a $1.03 final dividend.
This compares with total dividends in the
previous year of $1.80 per share.
As described more fully in the Managing
Director’s report, the strong result arose
from increased earnings in our retail,
chemicals and industrial operations. We
continued to progress significant digital
and data investments – expenditures
which reduce the bottom line but are
essential to the company’s future
success.
It would be no exaggeration to say that
the past three years have been
characterised by more uncertainty than
in any similar period over recent
decades. Consumer demand has been
both unpredictable and volatile, as the
COVID-19 pandemic progressed through
different phases, and as very low interest
rates, designed to counter potential
economic slowdowns, rapidly increased
to higher levels, in response to
inflationary pressures.
Against this backdrop, it is pleasing
that the positioning of Wesfarmers’
businesses together with good efforts by
management have resulted in continued
resilience in our sales. As interest rate
rises took hold, consumers moved
towards lower-priced products and our
Kmart business, for example, was
strongly supported.
A key to operating successfully,
regardless of the external environment,
has been engaging in constant
innovation; and we have seen many
examples in the Group. Apart from rolling
out new stores, Bunnings has expanded
its ranges – in tiles, specialist tools and,
most recently, pet products. Kmart has
focused on expanding its high-quality,
low-priced Anko ranges and converted
a number of Target stores to its brand.
Officeworks has become a leading
retailer of technology products. At a
portfolio level, we have moved into the
lithium and healthcare industries.
The Wesfarmers of today is very different
to the Wesfarmers of a decade ago and,
in fact, of every decade since we listed
on the stock exchange in 1984. That has
undoubtedly resulted from the fact that
we are driven by our single objective to
provide a satisfactory return to
shareholders – an objective that focuses
our strategies on shareholder wealth
creation rather than empire building.
Fundamental to achieving the objective
has been looking after the interests of
our stakeholders – a subject I’ll return
to later in this letter.
A company’s prosperity is obviously a
function of the decisions made by its
management and board, but also of the
environment in which it operates. A
prosperous country enables prosperity
amongst its citizens and organisations
of all types. In this regard, we share the
concern expressed by others about
whether Australia is doing all it must,
to maintain its advantaged place in
the world.
Of specific concern is the question of
the country’s weak productivity growth,
without which our standard of living and
capacity to provide the social services
and infrastructure that Australians
expect, will be threatened. Policies and
actions by the Federal Government have
a major influence on this issue and some
of the industrial relations changes made
and proposed are concerning in this
regard. Some seem to have been
designed to address specific issues,
10
Wesfarmers 2023 Annual Report where there is no apparent cause for
concern and without an appreciation of
potential negative, wider implications and
consequences.
One example is the proposed ‘same job,
same pay’ legislation. A concept like this,
which on the face of it seems fair, may in
practice have detrimental outcomes for
both employees and businesses. It is
important to understand that the proposal
is not about equal pay for men and
women. It focuses on labour hire and
contract workers who are essential and
widely used by governments and private
sector businesses, including to meet
cyclical or seasonal needs, changes in
economic conditions and to access the
specialised skills that they require from
time to time.
The problems with the proposal include
the likely inequity of the outcome and
the potential complexity that would
accompany its implementation. Based
on the information provided to date,
employees with more experience would
get paid the same as those with less
skills and knowledge. The significant
resources required to oversee and
administer such a scheme may also
cause small operators to become
unviable and constrain the expansion
of larger businesses, detrimentally
affecting employment, productivity
and competitiveness on a domestic
or global scale.
Similar problems arise with the
Government’s proposals regarding
casual employment. The devil is in the
detail, but it is unclear what problem is
being addressed. The changes may
impact not just productivity, but also
workers themselves, including young
people and individuals with caring
responsibilities who value the flexibility to
accept the shifts that suit their personal
commitments and higher hourly rates
associated with casual work.
Our hope would be that in contemplating
changes like those described,
governments would engage deeply with
business and others, to assess the
potential wider effects and unintended
consequences of their proposals, and
apply a long-term productivity-
improvement overlay, knowing its
importance for national prosperity.
Productivity is also critical to our
international competitiveness in a world
where global market dynamics and
regional instabilities can affect the
operations of our businesses and demand
for their products and services. What
happens in economies offshore is
obviously outside our control but one
action we can take is to make sure we
continue to have a strong balance sheet.
Combined with maintaining strong
disciplines in our investment activities, this
should ensure that the company continues
to prosper in good times and bad.
In recent times, there has been some
public commentary on the question of
companies focusing on environment,
social and governance (ESG) matters,
rather than on shareholder wealth
creation. Of course, many ESG initiatives
and reporting on them are now mandated
by governments, stock exchange listing
rules and emerging international reporting
standards, but regardless of that, we do
not see any conflict between looking after
the interests of our shareholders and those
of our other stakeholders. You can’t
achieve the former without doing the latter.
Wesfarmers has set out its position on
these issues on many occasions but it is
worth summarising them again here.
As a publicly-listed company we have
one objective: to provide a satisfactory
return to our shareholders. Why?
Because that is why people buy and
hold our shares: with the aim of earning
superior returns. Since our listing,
however, we have consistently stated
that we aim to achieve satisfactory
returns by looking after our employees,
providing attractively-priced, quality
products to our customers, dealing
fairly with our suppliers, protecting the
environment and supporting the
communities in which we operate.
All of those stakeholder-orientated
strategies are essential ingredients for
long-term shareholder wealth creation.
If done well, we’ll be seen as an ethical
company; good people will want to work
for us, customers will buy our products,
suppliers will trust us to pay them on time,
other companies will want to work with
us, and communities and governments
will see us as a company worth
supporting in our growth ambitions.
Wesfarmers has historically been one of
the largest contributors to community
organisations, ranging across health,
education, Indigenous welfare and the
arts. Our businesses are also active
supporters of their local communities. It is
no coincidence, in our view, that we have
also been one of the most successful
financially. The two go hand in hand.
In closing, on behalf of the Board
I convey our thanks to Vicki Robinson,
our Company Secretary, who retires at
this year’s Annual General Meeting. Vicki
has provided outstanding professional
service to the company and Board over
her 20 years of service in legal affairs,
our businesses and governance.
I also acknowledge with gratitude the
efforts of the around 120,000 people
employed in our Group. We thank our
management team led so ably by Chief
Executive, Rob Scott, for their dedication
to the company and its welfare.
We look forward to continuing the
success of the company in the years
ahead.
Michael Chaney AO
Chairman
11
Wesfarmers 2023 Annual ReportOverview Overview
Managing
Director’s report
It’s my pleasure to present this update on
Wesfarmers’ performance for the 2023
financial year.
Wesfarmers’ strong results for the year
demonstrate the strength of our operating
model and the quality of the Group’s
portfolio. During the year, we maintained
our focus on long-term shareholder
returns by driving operating excellence,
securing new growth opportunities,
renewing the portfolio and progressing
our sustainability agenda.
Our businesses continue to respond well
to the challenges and opportunities
presented by changing market conditions.
While this was the first year since the 2019
financial year without interruptions from
COVID-19, rising inflation and changes in
economic conditions necessitated various
operational responses.
As previously reported, Wesfarmers has
been investing in technology and new
business processes to enhance
productivity and create new platforms
for growth. The application of artificial
intelligence (AI) and predictive analytics
continues to develop across our retail
operations and is supporting the delivery
of productivity benefits. This enabled our
businesses to maintain momentum and
performance, which is critical to our future
success in competitive markets.
To support satisfactory returns to
shareholders over the long term, we
understand the importance of anticipating
customer needs, looking after our team
members, collaborating with suppliers,
investing in our local communities and
looking after the environment. What was
good last year won’t be good enough in
the future, and our relentless focus on
improvement creates future value for
our stakeholders.
During the year, our retail and health
businesses reinforced their strong
value credentials, at a time when
households and businesses were
focused on balancing their budgets.
They also expanded into new
categories and markets, providing
opportunities for growth.
Our industrial businesses play a critical
role supporting some of Australia’s key
export industries, and their reliability and
efficiency has delivered another year of
growth. Good progress has been made
with the development of the
Covalent lithium project, which provides
another growth platform for our
Wesfarmers Chemicals, Energy &
Fertilisers (WesCEF) division.
Wesfarmers maintained its commitment
to providing a safe and fulfilling work
environment for team members, and
improvements in safety results were
recorded across most businesses. At a
Group level, TRIFR increased to 11.3, largely
attributable to Bunnings where TRIFR results
were impacted by a change in reporting
methodology to better align with the broader
Group, as well as an increase in manual
handling injuries. Bunnings has implemented
a strategy to improve TRIFR.
We recognise the benefits of maintaining
a diverse, inclusive workforce, and the
Leadership Team and Board remain in
gender balance. The Group also remains
at proportional representation with
approximately 3.3 per cent of Wesfarmers’
Australian team members identifying as
Aboriginal or Torres Strait Islander people.
Increasingly, focus is turning to measures
to support the career progression of
Indigenous leaders across the Group
with 103 team members participating in
the Wesfarmers Indigenous Leadership
Program to date.
During the year, we continued to implement
actions to reduce the impact of the Group’s
businesses on the environment, and to
better understand our dependencies on
nature. We reported a 2.4 per cent reduction
in Scope 1 and Scope 2 market-based
emissions for the year. As the largest emitter
within the Group, WesCEF continued to
make pleasing progress, taking actions
aligned with its net zero roadmap.
12
Wesfarmers 2023 Annual Report Our performance
Portfolio actions
Outlook
The Group’s continuing businesses
generated net profit after tax of
$2.5 billion, an increase of 4.8 per cent,
excluding significant items. Divisional
earnings before tax grew 12.9 per cent
on the prior year.
Across the Group, our financial
performance reflected strong operational
execution. While growth in the retail
businesses moderated in the second half,
with pressure on household budgets
impacting trading conditions, consumers
have increasingly sought value which has
benefited our businesses.
Bunnings delivered solid earnings and
another record result, while continuing
to expand its addressable market and
participation across consumer and
commercial segments.
Kmart Group reported strong growth and
record earnings, with its unique product
development capabilities and scale
providing customers with a compelling
offer at very competitive prices. Kmart’s
investment in technology and digitisation
of business processes is starting to deliver
meaningful commercial benefits and
helping to keep prices low.
WesCEF also delivered record earnings,
supplying industrial products to critical
export industries, achieving very high
levels of operational efficiency and strong
safety performance. WesCEF benefited
from strong global ammonia prices during
much of the year.
It was pleasing to see earnings growth in
Officeworks, which is realising the benefits
of strategic investments in recent years,
and continued improvement in
performance at Industrial and Safety.
With its first full year under Wesfarmers
ownership, the Health division delivered
improved earnings and focused on
accelerating its transformation activities,
with a view to delivering improved
performance and value over time.
It was a year of investment for OneDigital,
and pleasing to see the initial rollout of
the OnePass membership program and
further enhancements in our shared data
platform. Together with the retail divisions,
the OneDigital team have established the
foundations for further improvements in
OnePass in coming months.
The financial performance of Catch for the
year was disappointing. Changes made
throughout the year started to deliver
improved performance in the second half,
and key operational and customer metrics
are on a positive trajectory. Further,
investments in Catch are benefiting Group
digital and e-commerce initiatives, in the
areas of fulfilment, subscription and
customer growth.
Wesfarmers’ approach to portfolio
management supports our objective to
deliver satisfactory returns to shareholders
over the long term. This involves a
disciplined approach to capital allocation
and changes to the portfolio over time.
I’m pleased with the significant progress
during the year on key growth projects.
It has been satisfying to see continued
progress at our Covalent lithium project
which has completed mine construction
and is commissioning the concentrator.
WesCEF expects to sell spodumene
concentrate early in 2024, delivering the
first earnings for our lithium business.
The 2023 financial year was a
foundational year for our Health division.
The division is undergoing a period of
investment to upgrade systems and
processes associated with its
transformation program and establishing
its management team. It completed the
acquisition of InstantScripts in July 2023,
and is progressing a proposal to acquire
SILK Laser Australia.
Wesfarmers sold its remaining
2.8 per cent interest in Coles in April 2023
and finished the year with significant
balance sheet flexibility, providing capacity
to continue to invest in the growth of our
existing businesses and take advantage
of investment opportunities where they
create value for our shareholders.
Leadership team
I’d like to recognise and thank our
outgoing Company Secretary,
Vicki Robinson, who is stepping down
from this role in October, after more than
20 years with Wesfarmers. As Company
Secretary, Vicki has been a valuable
member of the Leadership Team, always
bringing commercial acumen and
Wesfarmers’ values to her work. We
wish Vicki the best for the future.
During the second half of the year, we
were pleased to appoint Michael Britton
as Executive General Manager, Business
Development, joining the Leadership Team.
Michael brings deep experience in mergers
and acquisitions, private equity and
corporate advisory.
I’d also like to thank and congratulate
Aaron Hood who has returned to
WesCEF as Chief Operating Officer,
having led the Business Development
team this year. As a member of the
Leadership Team, Aaron supported our
businesses on a number of strategic
initiatives and new investments.
As we look to the future, Wesfarmers
remains focused on long-term value
creation and continues to invest to
strengthen its existing businesses and
develop platforms for growth.
While overall economic conditions will
continue to present both opportunities
and challenges, we have confidence that
Wesfarmers is well positioned for the
current environment.
Our retail divisions have strong value-
based, omnichannel offers providing
essential and everyday products. They
will continue to benefit from increasing
value-focus among consumers,
expanding addressable markets,
population growth and much-needed
investment in housing.
Our industrial businesses have strategic
domestic manufacturing capabilities
that allow them to support world-class
Australian export industries including
agriculture, iron ore, gold and critical
minerals. The Health division provides
exposure to the growing health and
wellness sector, with opportunities to
deliver more accessible and affordable
healthcare.
Our businesses are delivering on plans
to reduce their emissions profile, which
will strengthen their competitive position.
Production of lithium for battery electric
vehicles in the coming year will further
support our contribution to global
decarbonisation efforts.
Underpinning all of this is a strong balance
sheet which provides flexibility to invest in
our existing businesses and pursue
transactions that create value for
shareholders over the long term.
I express my gratitude to our dedicated
team members across the Group for their
exceptional contributions, as well as the
Board for its invaluable support and
guidance during another challenging
year. I would particularly like to
acknowledge this year’s Leadership
Team, including Emily Amos, Ian Bailey,
Michael Britton, Jenny Bryant, Tim Bult,
Naomi Flutter, Anthony Gianotti,
Ian Hansen, Aaron Hood,
Sarah Hunter, Vicki Robinson,
Mike Schneider, Nicole Sheffield and
Maya vanden Driesen. Your commitment
and support have been instrumental in
our success.
Rob Scott
Managing Director
13
Wesfarmers 2023 Annual ReportOverview Overview
Leadership
Team
1
4
2
5
3
6
1 Rob Scott
MANAGING DIRECTOR AND
CHIEF EXECUTIVE OFFICER
WESFARMERS
Rob was appointed Managing Director and Chief
Executive Officer in November 2017 following his
appointment as Deputy Chief Executive Officer in
February 2017.
Rob joined Wesfarmers in 1993, before moving into
investment banking, where he held various roles in
Australia and Asia. He re-joined Wesfarmers in
Business Development in 2004, was appointed
Managing Director of Wesfarmers Insurance in 2007
and then Finance Director of Coles in 2013. Rob was
appointed Managing Director, Financial Services in
2014 and then Managing Director of the Wesfarmers
Industrials division from August 2015 to August 2017.
Rob is the Chairman of Rowing Australia and a
Director of the Business Council of Australia.
2 Anthony Gianotti
CHIEF FINANCIAL OFFICER
WESFARMERS
Anthony was appointed Chief Financial Officer of
Wesfarmers in November 2017.
Anthony joined Wesfarmers in 2004 in Business
Development and in 2005 was appointed Manager,
Investor Relations and Business Projects. In 2006, he
was appointed Head of Business Development and
Strategy of Wesfarmers Insurance, then its Finance
Director in 2009 and Managing Director in 2013. In
August 2015, Anthony was appointed Finance Director
of the Wesfarmers Industrials division and its Deputy
Managing Director in February 2017. He is also a
director of West Australian Opera.
14
3 Maya vanden Driesen
GROUP GENERAL COUNSEL
WESFARMERS
6 Emily Amos
MANAGING DIRECTOR
WESFARMERS HEALTH
Maya was appointed Group General Counsel in January
2015. Prior to this, Maya held a number of senior roles
in the company including Legal Counsel – Litigation,
Senior Legal Counsel and General Manager Legal –
Litigation. Before joining Wesfarmers, Maya practised
law at Parker & Parker and Downings Legal.
Maya is a Graduate of the Australian Institute of
Company Directors and sits on the Executive
Committee of the GC 100, representing the general
counsel of Australia’s top 100 ASX-listed companies.
Maya is a member of Chief Executive Women,
the UWA Law School’s Advisory Board, Director
for the Committee for Perth and Director of the
Bell Shakespeare Company.
4 Michael Schneider
MANAGING DIRECTOR
BUNNINGS GROUP
Michael was appointed Bunnings’ Managing Director
in 2016.
Michael joined Bunnings in 2005, and prior to this held
a range of senior operational, commercial and human
resource roles across regional and national markets,
in retail and financial services.
Outside Bunnings, Michael supports a range of
not-for-profit and community organisations. He holds
board roles with the Corporate Mental Health Alliance
of Australia, Melbourne United basketball club and
the Global Home Improvement Network. In addition,
Michael chairs FightMND and the Love Me Love You
Foundation.
5 Ian Bailey
MANAGING DIRECTOR
KMART GROUP
Ian was appointed Managing Director of Kmart in
February 2016 and assumed the responsibility for
leading Kmart Group in November 2018. Previously,
Ian was Kmart’s Chief Operating Officer where he
was instrumental in Kmart’s turnaround.
Ian’s national and international experience covers
a number of industries including retail, professional
services, consulting, technology and healthcare in
positions that include general management, sales,
business development and project management.
Emily was appointed Managing Director of Health
in April 2022. She leads the turnaround of the
API business and the development of health-
related opportunities.
Prior to joining Wesfarmers, Emily’s recent roles
include Managing Director of BUPA Health Insurance
and Managing Director of BUPA Health Services in
Australia and New Zealand.
Emily is a former non-executive director of Adore
Beauty and has significant retail experience through
positions in Australia and the UK, in finance and
strategy. Emily is a member of Chief Executive
Women.
7 Sarah Hunter
MANAGING DIRECTOR
OFFICEWORKS
Sarah was appointed Managing Director, Officeworks
in January 2019.
Prior to this, Sarah worked across many areas of the
Coles Group in positions including Financial Controller,
State General Manager Victoria and Demerger Program
Director, overseeing Coles’ implementation of the
demerger from Wesfarmers.
Before joining Coles, Sarah worked in the UK for more
than 10 years, holding several senior commercial
positions in banking and airports including Strategy
and Finance Director for Gatwick Airport from 2004
to 2006.
Sarah is a Council member of the Australian Retailers
Association, a member of Chief Executive Women,
a Fellow of the Association of Chartered Certified
Accountants and a member of the Australian Institute
of Company Directors.
8 Vicki Robinson
EXECUTIVE GENERAL MANAGER,
COMPANY SECRETARIAT
WESFARMERS
Vicki was appointed Executive General Manager,
Company Secretariat in March 2020 and is the
Company Secretary of Wesfarmers.
Prior to this, Vicki was General Manager, Legal
(Corporate), playing a key role in many of
Wesfarmers’ key corporate transactions. Vicki joined
Wesfarmers in July 2003 as a Legal Counsel with the
Corporate Solicitors Office. In 2007, Vicki moved to
the role of General Manager for enGen, and returned
to the Corporate Solicitors Office in 2009.
Vicki is a director of RACWA Holdings Pty Ltd.
Wesfarmers 2023 Annual Report 7
10
13
8
11
14
9
12
15
9 Tim Bult
MANAGING DIRECTOR
WESFARMERS INDUSTRIAL AND SAFETY
Tim was appointed Managing Director of Wesfarmers
Industrial and Safety in April 2020.
Having joined Wesfarmers in 1999, Tim worked in
commercial and business development roles within
the Wesfarmers Energy division, before his
appointment as General Manager of Wesfarmers
Kleenheat Gas in 2005. In 2006, he was appointed
Managing Director of Wesfarmers Energy. From 2009
to 2015, Tim was Executive General Manager,
Business Development. In 2015, he was appointed
Director, Associate Businesses and International
Development and in 2018 was appointed Project
Director for the demerger of Coles. In 2019, he was
appointed Director, Associate Businesses and
Corporate Projects at Wesfarmers.
10 Nicole Sheffield
MANAGING DIRECTOR
WESFARMERS ONEDIGITAL
Nicole was appointed Managing Director of OneDigital
in November 2021, and leads the strategy and
implementation of the Group-wide data and digital
ecosystem. This includes the OnePass membership
program and OneData, and from 1 July 2022, the
Catch business.
Prior to joining Wesfarmers, Nicole held a number of
leadership roles. Nicole was the Executive General
Manager, Community & Consumer, at Australia Post
where she led the Australia Post retail network of
4,400 post offices, all digital channels and the
customer contact centre. Previous roles include Chief
Digital Officer and Managing Director, Digital Networks
at News Corp Australia, overseeing digital strategy,
audience and subscription growth, and Chief
Executive of NewsLifeMedia, leading the lifestyle
publishing division.
Nicole is the President of the Australian Retailers
Association Council and a Member of Chief
Executive Women.
11 Ian Hansen
MANAGING DIRECTOR
WESFARMERS CHEMICALS,
ENERGY & FERTILISERS
Ian has led the Chemicals, Energy and Fertilisers
division since July 2016. Prior to this, Ian was the
Chief Operating Officer of that business. From
October 2007 to July 2010 he was the Managing
Director of the Chemicals and Fertilisers division.
During Ian’s more than 40 years with Wesfarmers, he
has held a wide range of executive, operational and
commercial management roles, primarily within the
chemicals, energy and fertiliser businesses.
Ian is the Chairman of three Wesfarmers joint venture
boards: Covalent Lithium, Queensland Nitrates and
Australian Gold Reagents. He is also a board member
of industry body Chemistry Australia, and Chair of the
Australian Chapter of the Australia-Chile Business
Council. He is a former board member of the
International Fertilizer Association, Kwinana Industries
Council and Australian Institute of Management.
12 Naomi Flutter
EXECUTIVE GENERAL MANAGER
CORPORATE AFFAIRS
WESFARMERS
Naomi joined Wesfarmers as Executive General
Manager, Corporate Affairs in August 2018.
Prior to this, Naomi worked for Deutsche Bank for
20 years, in roles including head of the Global
Transaction Banking division for Australia and New
Zealand and head of the Trust and Agency business
across Asia.
Naomi currently serves on the Council of the
Australian National University where she is the
Pro Chancellor and is a member of Chief Executive
Women.
13 Jenny Bryant
CHIEF HUMAN RESOURCES OFFICER
WESFARMERS
Jenny was appointed Chief Human Resources Officer
of Wesfarmers in October 2016.
Prior to this she worked at Coles Group, Mars Inc
(Europe and USA), Vodafone (global) and EMI Music
(global). Over her career, she has held a variety of roles
including international human resources, data analytics
and technology, operations and sales and marketing.
Jenny is a Director of the Flybuys joint venture with
Coles Group Limited and a member of Chief Executive
Women.
14 Aaron Hood
EXECUTIVE GENERAL MANAGER
BUSINESS DEVELOPMENT
WESFARMERS
Aaron was appointed interim Executive General
Manager, Business Development in July 2022.
Prior to this, Aaron was the Chief Financial Officer
of the Wesfarmers Chemicals Energy & Fertilisers
division from 2019, having joined Wesfarmers in 2017
as General Manager, Business Development. Aaron
started his career with Macquarie Bank in Sydney,
before moving into private equity and leading
investments for a prominent Australian family office.
Aaron was appointed Chief Operating Officer,
Wesfarmers Chemicals, Energy & Fertilisers in July 2023.
15 Michael Britton
EXECUTIVE GENERAL MANAGER
BUSINESS DEVELOPMENT
WESFARMERS
Michael joined Wesfarmers in March 2023 in the role
of Executive General Manager, Business Development.
Before joining Wesfarmers, Michael worked in the
private equity industry with global investment firm The
Carlyle Group. Michael has a background in M&A and
strategic projects, with investment experience across
a range of industries including healthcare, consumer
retail and industrial sectors.
15
Wesfarmers 2023 Annual ReportOverview Operating and financial review
Operating and
financial review
The Wesfarmers Way
The Wesfarmers Way, as shown opposite,
provides a framework for how we manage
the Group to generate superior returns
over the long term and sets out our core
values and value-creating strategies.
Wesfarmers’ model of divisional autonomy
drives accountability and focus within the
divisions, with access to capital, and
specialist support available within the
corporate office. A key focus of the Group
is ensuring that each of our divisions has a
strong and empowered management team
that is accountable for long-term strategy
development and execution, as well as
day-to-day operational performance.
Wesfarmers focuses on seven key
enablers to drive operating performance
to best practice:
− outstanding people
− empowering culture
− commercial excellence
− innovation
− robust financial capacity
− social responsibility, and
− sustainability.
The Group maintains strong commercial
discipline in relation to capital investment
decisions and working capital management.
Measuring performance
The key measure used by the Group to
assess satisfactory returns is total
shareholder return (TSR) over the long
term. We measure our performance by
comparing Wesfarmers’ TSR against that
achieved by the broader Australian market.
Growth in TSR is achieved by improving
returns from invested capital relative to the
cost of that capital and by growing the
capital base at a satisfactory rate of return
on capital (ROC).
Given TSR performance is influenced by
the movement in Wesfarmers’ share price,
which can be affected by factors outside
the control of the company, the Group
focuses on return on equity (ROE) as a key
internal performance indicator.
While ROE is recognised as a fundamental
measure of financial performance at a
Group level, ROC has been adopted as
the principal measure of performance for
the divisions.
At Wesfarmers, our primary objective is to
deliver satisfactory returns to shareholders
over the long term.
It is my pleasure to provide this operating
and financial review, which details our
approach to delivering on this objective.
This review includes an overview of our
operating model, strategies, risks and
prospects, as well as an update on the
Group’s financial position and performance.
For context, the review shares some
detail on the Wesfarmers Way and how
we measure our performance and
allocate capital to deliver long-term
shareholder returns.
Divisional summaries on pages 22 to 64
provide more detail on performance and
strategies for each of the operating
businesses.
I am pleased that we have also continued
to expand and integrate our sustainability
and climate-related disclosures, which are
summarised in this review. Detailed
information, including performance data and
extended case studies, can be found at
www.wesfarmers.com.au/sustainability
This review should be read in conjunction
with the financial statements, which are
presented on pages 131 to 178 of this
annual report.
16
Wesfarmers 2023 Annual Report The Wesfarmers Way
OUR PRIMARY OBJECTIVE
To deliver a satisfactory
return to shareholders
VALUE-CREATING STRATEGIES
Strengthen existing businesses
through operating excellence
and satisfying customer needs
Secure growth
opportunities through
entrepreneurial initiative
Renew the portfolio
through value-adding
transactions
Ensure sustainability
through responsible
long-term management
Integrity
Openness
Accountability
Entrepreneurial spirit
CORE VALUES
ROC focuses divisional businesses on
increasing earnings and/or increasing capital
productivity by managing existing assets
efficiently, as well as making an adequate
return on any new capital deployed.
For those divisions already delivering
strong ROC, key performance measures
also include an earnings growth target.
Divisional targets are reviewed annually
with reference to the performance of the
broader market.
Delivering shareholder returns
As part of Wesfarmers’ approach to
delivering a satisfactory return to
shareholders we seek to:
− drive earnings and cash flow growth
by enhancing the competitive position
of existing businesses
− continue to invest in Group businesses
where capital investment opportunities
exceed return requirements
− acquire or divest businesses where
doing so delivers an increase in long-
term shareholder value, and
− ensure efficient capital management
and the efficient distribution of franking
credits to shareholders.
To support this, the Group endeavours to
maintain balance sheet strength and
flexibility so as to be able to take
advantage of opportunities that arise. This
includes maintaining access to diverse
sources of funding, including bank facilities
and global bond markets, and optimising
funding costs.
The Group maintains strong credit
metrics, in line with strong investment
grade credit ratings, supported by good
cash flow generation and disciplined
capital management. Financial risks are
managed by distributing debt maturities
over time, limiting total repayments due
in any given year.
Capital allocation
Wesfarmers continues to evaluate a broad
range of investment opportunities.
Importantly, in assessing these
opportunities, the Group applies a
long-term horizon to investment decisions
and incorporates a detailed assessment of
sustainability considerations focused on
material sustainability issues.
The Group maintains strong commercial
discipline in its approach to evaluating
opportunities, with the most important
criteria being whether the investment is
going to create value for shareholders
over time.
There are three broad avenues for
incremental capital allocation that are
considered by the Group:
− opportunities to deploy capital in
the existing portfolio to drive growth
and productivity and to build
businesses with unique capabilities
and platforms in expanding markets
− in adjacent opportunities where we
can leverage existing assets and
capabilities to develop new sources
of long-term growth, and
− through value-accretive transactions,
where we remain disciplined and
opportunistic.
Overall the portfolio and balance sheet are
well positioned, with a range of growth
initiatives in train and the flexibility and
capacity to continue to consider new
opportunities.
Anthony Gianotti
Chief Financial Officer
17
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review
Year in review
Overview
The Group reported a statutory net profit
after tax (NPAT) of $2,465 million for the
full year ended 30 June 2023, an increase
of 4.8 per cent on the prior year. Overall,
Wesfarmers’ NPAT growth reflected the
strong combined divisional earnings
growth result, partially offset by a
significant change in non-cash property
revaluations recorded at the Group level.
The results were underpinned by
strong divisional earnings, increasing
12.9 per cent to $3,850 million for
the year, as the Group’s operating
businesses continued to respond well
to trading and market conditions.
Wesfarmers maintained its focus on
long-term shareholder returns and
continued to advance key growth
projects during the year, while also taking
proactive steps to drive productivity and
efficiency across the businesses.
The Group’s largest divisions performed
particularly well during the year, with
solid earnings reported in Bunnings, and
strong earnings growth in Kmart Group
and WesCEF.
It was also pleasing to see significant
earnings growth in Officeworks, which is
realising the benefits from productivity
investments over recent years. Industrial
and Safety continued to improve and
the Health division accelerated its
transformation activities. While the Catch
result was disappointing, investments to
date are benefiting Group digital and
e-commerce initiatives, and actions
taken during the year supported
progress in the second half.
As operating conditions and customer
behaviours continued to normalise during
the year, the Group’s retail businesses
benefited from their well-established
value credentials and strong
omnichannel offers.
Earnings growth across the retail
businesses reflected good operational
execution during the year, in addition to
the impact of cycling COVID-related
lockdowns in the first half of the prior
year. Through the year, retail customers
have increasingly sought out value and
traded down to lower-priced items within
product ranges.
WesCEF delivered another strong
operating performance and a record
earnings result, supported by elevated
global ammonia prices. Construction
was completed at the Mt Holland mine
and concentrator, with commissioning of
the concentrator underway ahead of first
earnings from the project in the first half
of the 2024 calendar year.
The Group continued to advance its data
and digital capabilities during the year,
supported by ongoing investments
across the divisions and in OneDigital.
The application of AI and predictive
analytics continues to develop across
the Group’s retail operations and is
supporting the delivery of productivity
benefits. The OnePass membership
program was expanded through new
partnerships with Bunnings Warehouse,
Disney+, and Flybuys, and additional
member benefits both online and
in stores.
Further details on divisional financial
performance is outlined in pages 22
to 64 of this annual report.
Net profit after tax1
(excluding significant items)
Earnings1, 2
Return on equity (R12)1
(excluding discontinued operations and significant items)
(excluding significant items)
$2,465m $3,644m
31.4%
Includes Coles to November 2018
3,000
2,500
2,000
1,500
1,000
500
0
2023 2,465
2022
2021
2,352
2,421
Post-AASB 16
2020
2,075
Pre-AASB 16
2020
2,091
2019
2,339
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Includes Coles to November 2018
2023 3,644
2022
2021
3,416
3,550
Post-AASB 16
2020
2,942
Pre-AASB 16
2020
2,964
2019
2,974
35
30
25
20
15
10
5
0
19
20
21
22
23
19
20
21
22
23
19
20
21
22
23
2023
2022
2021
Post-AASB 16
2020
Pre-AASB 16
2020
2019
31.4
29.4
26.1
22.1
21.1
19.2
1 2021 excludes post-tax $41 million of restructuring costs in Kmart Group. 2020 excludes post-tax
significant items including: $520 million of non-cash impairments, write-offs and provisions in Kmart
Group, $298 million non-cash impairment of Industrial and Safety, $203 million gain on the sale of
the 10.1 per cent interest in Coles and $154 million revaluation of the retained interest, and a benefit
of $83 million from the finalisation of tax positions on prior year disposals. 2019 excludes post-tax
significant items including: $2,264 million gain on demerger of Coles, $645 million gain on sale of
Bengalla, $244 million gain on sale of Kmart Tyre and Auto Service (KTAS), $120 million gain on sale
of Quadrant Energy and $102 million provision for Coles supply chain automation.
2 EBIT after interest on lease liabilities.
Free cash flow
$3,627m
Includes Coles to November 2018
19
20
21
22
23
18
2023 3,627
2022
2021
1,110
2,741
Post-AASB 16
2020
5,188
Pre-AASB 16
2020
4,239
2019
2,963
Wesfarmers 2023 Annual Report Operating cash flows
Divisional operating cash flows before
interest, tax, and the repayment of lease
liabilities increased 45.6 per cent compared
to the prior year, with divisional cash
generation of 101 per cent. Divisional
cash flow growth was supported by stronger
divisional earnings, the addition of the Health
division, and the continued normalisation
in working capital positions following the
temporarily high balances recorded at the
end of the 2022 financial year. Overall
inventory health is strong, with good stock
availability across the retail divisions, and
inventory cover ratios have returned to
broadly in line with pre-COVID levels.
Reported operating cash flows increased
81.6 per cent to $4,179 million, supported
by higher divisional cash flows and lower
tax paid due to the timing of tax payments.
Capital expenditure
Gross capital expenditure of $1,288 million
was 12.6 per cent higher than the prior
year, largely due to $394 million of capital
expenditure and $42 million of capitalised
interest relating to development of the
Covalent lithium project. Proceeds from
the sale of plant, property and equipment
of $105 million were $155 million below
the prior year, driven by lower proceeds
from property sales in Bunnings. The
resulting net capital expenditure of
$1,183 million was $299 million, or
33.8 per cent, higher than the prior year.
Free cash flows
Free cash flows of $3,627 million reflected
strong divisional cash flow results together
with the proceeds from the sale of the
Group’s remaining interest in Coles. The
$2,517 million increase in free cash flows
for the year also includes the impact
of cash consideration for the acquisitions
of API and Beaumont Tiles in the
prior year.
Balance sheet
The Group recorded a net financial
debt position of $3,984 million as at
30 June 2023. The reduction compared
to the net financial debt position of
$4,296 million as at 30 June 2022 reflects
strong operating cash flows and proceeds
from the sale of the Group’s remaining
interest in Coles, which offset continued
capital investment and the distribution of
$2.1 billion in fully-franked dividends
paid to shareholders during the year.
Divisional earnings summary
Year ended 30 June
Bunnings Group
Kmart Group
WesCEF
Officeworks
Industrial and Safety
Wesfarmers Health
Catch
Total divisional
Other
Total earnings1
1 EBIT after interest on lease liabilities.
Group capital employed
Year ended 30 June2
Inventories
Receivables and prepayments
Trade and other payables
Other
Net working capital
Property, plant and equipment
Goodwill and intangibles
Other assets
Provisions and other liabilities
Total capital employed
Net financial debt3
Net tax balances
Net right-of-use asset/(lease liability)
Total net assets
2023
$m
2,230
769
669
200
100
45
(163)
3,850
(206)
3,644
2023
$m
6,039
2,300
(5,268)
252
3,323
5,365
4,692
1,099
(1,818)
12,661
(3,984)
667
(1,063)
8,281
2022
$m
2,204
505
540
181
92
(25)
(88)
3,409
7
3,416
2022
$m
6,084
2,364
(5,362)
238
3,324
4,750
4,684
1,877
(1,824)
12,811
(4,296)
575
(1,109)
7,981
2 Balances reflect the management balance sheet, which is based on different classifications and groupings
than the balance sheet in the financial statements. 2022 has been restated to reflect the adjustments to the
provisional acquisition accounting for API.
3
Interest-bearing loans and borrowings less cash at bank and on deposit and held in joint operation, net of
cross-currency interest rate swaps and interest rate swap contracts. Excludes lease liabilities.
Cash capital expenditure
Year ended 30 June
Bunnings Group
Kmart Group
WesCEF
Officeworks
Industrial and Safety
Health
Catch
Other
Gross capital expenditure
Sale of property, plant and equipment
Net capital expenditure
2023
$m
405
127
518
71
73
41
10
43
1,288
(105)
1,183
2022
$m
349
105
455
68
64
3
45
55
1,144
(260)
884
19
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review
Year in review
Debt management
and financing
Other finance costs increased
40.6 per cent to $135 million, reflecting
higher average borrowings during the year.
On a combined basis, other finance costs
including the component of interest that
was capitalised increased 36.2 per cent
to $177 million.
The Group retains significant headroom
against key credit metrics and maintained
its strong credit ratings with a rating
from Moody’s Investors Service of
A3 (stable) and a rating from S&P Global
Ratings of A- (stable).
Dividends
A key component of total shareholder
return is dividends paid to shareholders.
The Group’s dividend policy considers
available franking credits, current
earnings and cash flows, future
cash flow requirements and targeted
credit metrics.
The Board has determined to pay a
fully-franked ordinary final dividend of
103 cents per share, taking the full-year
ordinary dividend to 191 cents per
share. Due to the accumulation of
New Zealand franking credits, the final
dividend will also carry a New Zealand
franking credit, in addition to the
Australian franking credit, of 10 cents
(NZD) per share. The final dividend will
be paid on 5 October 2023.
Given the preference of many
shareholders to receive dividends in
the form of equity, the directors have
decided to continue the operation of the
Dividend Investment Plan (the ‘Plan’).
The allocation price for shares issued
under the Plan will be calculated as the
average of the daily volume-weighted
average price of Wesfarmers shares on
each of the 15 consecutive trading days
from and including the third trading day
after the record date.
The last date for receipt of applications
to participate in, or to cease or vary
participation in, the Plan, is
1 September 2023. No discount will
apply to the allocation price and the
Plan will not be underwritten. Shares
to be allocated under the Plan will
be transferred to participants on
5 October 2023. Given the Group’s
strong credit metrics, it is intended that
any shares to be issued under the Plan
will be acquired on-market and
transferred to participants.
20
Fixed financial obligations
Debt maturity profile ($m)1
DRAWN BANK FACILITIES
UNDRAWN BANK FACILITIES
CAPITAL MARKET DEBT
Lease liabilities1
Bank facilities & bonds
$6.7b
$4.4b
2,400
2,100
1,800
1,500
1,200
900
600
300
0
24 25 26 27 28 29 30 31 32 33
1 Represents total discounted lease liabilities
as at 30 June 2023.
1 As at 30 June 2023. Capital market debt is net of
cross-currency interest rate swaps.
Other finance costs ($m)
CAPITALISED INTEREST
OTHER FINANCE COSTS
200
150
100
50
0
19
20
21
22
23
TSR1: Wesfarmers and ASX 100
Dividends per share
(last five years)
WESFARMERS LIMITED TSR INDEX1
ASX 100 ACCUMULATION INDEX
250
200
150
100
50
0
18
19
20
21
22
23
1 Assumes 100 per cent dividend reinvestment
on the ex-dividend date. Source: Bloomberg,
excludes any additional value of franking credits.
ORDINARY DIVIDENDS
SPECIAL DIVIDENDS
191cents
Includes Coles
300
250
200
150
100
50
0
19
20
21
22
23
Ordinary dividends
2023
191
2022
2021
2020
2019
180
178
152
178
Wesfarmers 2023 Annual Report Risk
Wesfarmers recognises the importance
of, and is committed to, the identification,
monitoring and optimal management of
risks associated with its activities across
the Group.
The following information sets out the
material Group-wide risks, not in any
particular order. These do not include
generic risks such as changes to
macroeconomic conditions affecting
businesses and households in Australia,
which would affect all companies with
a large domestic presence, although
Wesfarmers is well positioned in this
regard to meet changing customer
demand.
In line with previous years, information on
climate-related risks is provided on pages
84 to 86 of this annual report.
Strategic risks
− Competition
− Strategy execution
− Business model disruption
− Digital disruption
− Changing customer expectations
− Portfolio management
− Climate-related risks
Operational risks
Regulatory risks
− Risks to the health, safety or
− Compliance with applicable laws,
wellbeing of team members and
customers
regulations and standards
− Regulatory or legislative change
Financial risks
− Currency and commodity price
movements
− Liquidity and access to funding
Further information on risk management,
including policies, responsibility and
certification, can be found on page 94
of this annual report and in the corporate
governance section of the company’s
website at www.wesfarmers.com.au/cg
− Technology, cyber-security and data-
related risks, inclusive of privacy and
data optimisation
− Business disruption, loss of major
infrastructure and physical security
− Risks inherent in distribution and sale
of products, including product safety
− Conduct risk
− Human rights risks, including modern
slavery in own operations and supply
chains
− Climate and nature-related risks,
including emissions management
− Risks inherent in asset management,
including process safety risk
− Talent attraction, retention and
engagement
− Supply chain and inventory
management
− Clinical governance risks in
Wesfarmers Health
− Geopolitical risks including potential
impacts on global supply chains or
input prices
Prospects
Wesfarmers remains focused on
long-term value creation and continues
to invest to strengthen its existing
businesses and develop platforms
for growth.
Following investment over recent years,
the Group’s lithium business is expected
to commence production and sale of
spodumene concentrate during the 2024
financial year. The ongoing development
of Wesfarmers’ lithium operations reflects
the Group’s disciplined focus on
long-term shareholder value creation
and opportunities to contribute to,
and benefit from, global efforts to
reduce emissions.
Elevated inflation and higher interest
rates are expected to continue to impact
demand in parts of the Australian
economy, with many customers
becoming more value conscious and
trading down to lower-priced retailers
and products. Low unemployment and
the recent acceleration in Australian
population growth both support demand,
and contribute to the ongoing need for
construction of additional housing stock.
In the current environment, the strong
value credentials and core offer of
everyday products across the Group’s
retail businesses position them well to
meet changing customer demand,
acquire new customers and profitably
grow market share.
Cost pressures in Australia and
New Zealand are expected to remain
elevated, driven by inflation, labour
market constraints and wage cost
increases, and domestic supply chain
costs. Wesfarmers’ larger businesses are
benefiting from their capacity to leverage
their scale and sourcing capabilities.
Together with benefits from proactive
productivity and efficiency investment
over recent years, this provides
confidence in the Group’s capacity to
adjust costs in line with trading
conditions.
The performance of the Group’s
industrial businesses remains subject to
international commodity prices, foreign
exchange rates, competitive factors and
seasonal outcomes. Earnings from
WesCEF’s existing operating businesses
are expected to decline significantly in
the 2024 financial year, primarily as a
result of lower ammonia prices and
higher input gas costs. First earnings
from WesCEF’s lithium business are
expected in the second half of the 2024
financial year as production of
spodumene concentrate ramps up.
Wesfarmers will continue to invest in
its existing operations and in the
development of platforms for long-term
growth and shareholder value creation.
Wesfarmers will continue to manage its
divisions and the portfolio with carbon
awareness, remaining focused on
delivering progress against its net zero
and renewable electricity targets and
making disciplined investments to
strengthen the climate resilience of its
businesses. The Group sees opportunities
to support the supply of critical minerals
and essential industries, aligned with
customer and community decarbonisation
and energy transition goals.
21
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Bunnings Group
Bunnings Group
Bunnings is one of Australia’s most-trusted
retail brands, supported by its commitment
to lowest prices, widest range and best
experience along with a unique capacity to
expand its addressable market.
22
Wesfarmers 2023 Annual Report Our business
Highlights and outlook
Bunnings is the leading retailer of home
improvement and lifestyle products in
Australia and New Zealand, and a major
supplier to project builders, commercial
tradespeople and the housing industry.
Bunnings operates a network of 513
locations, including large warehouse
stores, smaller format stores, trade
centres, specialist stores, as well as online.
Bunnings employs more than 52,000
team members across Australia and
New Zealand.
Bunnings’ three pillars remain core to
how it delivers for customers; lowest
prices, widest range, and best experience.
These pillars come to life through its
physical and digital presence and the
ways that Bunnings connects and serves
its customers onsite, in the home, on
the phone, instore and online.
Bunnings has evolved from a warehouse
model offering around 34,000 hardware
and home improvement products to an
omnichannel business with over 110,000
home, commercial and lifestyle products
across its instore, online and marketplace
offers.
Bunnings is expanding its brand reach
through the opening and expansion of
stores, growing specialist retail brands,
digital innovation and by deepening its
commercial relationships. The focus is
on creating value for customers and
delivering the best experience while
working to ensure that products are
sourced ethically and responsibly.
Revenue
Earnings before tax
$18,539m $2,230m
2023
18,539
2022
2021
2020
2019
17,754
16,871
14,999
13,166
2023
2,230
2022
2021
2020
2019
2,204
2,185
1,826
1,626
Revenue for Bunnings increased
4.4 per cent to $18,539 million for the
year, with earnings increasing 1.2 per cent
to $2,230 million. Excluding net property
contribution, earnings increased
1.9 per cent. The solid sales and earnings
results reflect the resilience of demand
across its offer and continued strong
execution of Bunnings’ strategic agenda.
Bunnings remains committed to reducing
its environmental footprint and
sustainability is an important part of
ensuring its business continues to make a
positive impact into the future. Bunnings is
actively progressing towards 100 per cent
renewable electricity by 2025 and has made
significant progress towards its Scope 1
and Scope 2 emissions net zero target.
Bunnings’ 52,000 team members are at
the heart of the business and their safety
and wellbeing remain the number one
priority. TRIFR increased to 16.5 for the
period, largely driven by a change in
methodology from 1 July 2022 to align
the classification of recordable injuries
with the Group’s other businesses as well
as an increase in the number of manual
handling injuries for the period. Safety
remains a key focus and a comprehensive
plan to improve safety performance
throughout the business has been
developed and is being rolled out.
Bunnings continues to be well positioned,
benefiting from the breadth and diversity
of its business, its focus on necessity
products, and the strength of its offer
across consumer DIY and commercial
customers.
Inflationary pressure on household
budgets and costs of doing business is
expected to remain elevated during the
2024 financial year.
In this environment, Bunnings will continue
to deliver strong customer value supported
by a sharpened focus on operational
execution, strong cost disciplines and
ongoing progress on key productivity
initiatives.
Bunnings remains focused on delivering
its strategic agenda and will continue to
strengthen its offer across consumer and
commercial customer segments and
across channels instore, online, onsite
and at home.
Bunnings will continue to invest in the
expansion and renewal of its store
network, and maintain its focus on
optimising the use of retail space. Work
on key strategic initiatives will continue,
with actions to:
− further develop the commercial offer
to better service builders, trades and
organisations
− strengthen data and digital capabilities
to allow customers to shop
seamlessly across channels, and
− evolve the supply chain.
Michael Schneider
Managing Director
Bunnings Group
23
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Bunnings Group
Our performance
Key financial indicators
For the year ended 30 June
Revenue ($m)
Earnings before tax ($m)
Capital employed ($m) R12
Return on capital employed (%) R12
Cash capital expenditure ($m)
Sustainability results
Total recordable injury frequency rate (TRIFR)1 R12
Aboriginal and Torres Strait Islander team members
Scope 1 and Scope 2 market-based emissions (ktCO2e)
Operational waste diverted from landfill (%)
Community contributions ($m)
Sites in the ethical sourcing program that were monitored (%)2,3
2023
2022
18,539
17,754
2,230
3,410
2,204
2,854
65.4
405
77.2
349
2023
16.5
1,246
59.9
57.1
47.4
65
2022
11.3
1,288
104.9
54.9
29.8
51
1 TRIFR measures the number of lost time and medical treatment injuries per million hours worked.
2 The frequency of monitoring varies depending on prior audit findings and the level of assessed risk.
3 Ethical sourcing data for the twelve months to 15 June.
Year in review
Revenue for Bunnings increased
4.4 per cent to $18,539 million for the
year, with earnings increasing 1.2 per cent
to $2,230 million. Excluding net property
contribution, earnings increased 1.9 per cent.
Bunnings’ solid financial results continue
a four-year period of significant growth,
during which sales have increased
more than $5.3 billion or 40.7 per cent
and earnings excluding net property
contribution have increased more
than $650 million or 42.2 per cent.
Total store sales increased 3.7 per cent
and store-on-store sales increased
1.8 per cent. Sales growth results for the
year demonstrate the resilience of demand
across the Bunnings offer and continued
strong execution of its strategic agenda.
Growth was recorded in both consumer
and commercial customer segments and
across all trading regions, despite the
impact of prolonged wet weather on
spring trading on the east coast during
the first half of the year.
In the second half, Bunnings total store
sales increased 2.1 per cent and
store-on-store sales increased
0.8 per cent. Second half sales growth
reflected strong demand and activity from
commercial customers partially offset by
lower consumer sales. Robust consumer
demand continued for necessity products
that support recurring home repairs and
maintenance and smaller-scale DIY home
24
Wesfarmers 2023 Annual Report improvement projects. Compared to
the prior corresponding half, consumers
demonstrated more caution in making
big-ticket purchases and commencing
larger DIY projects.
Bunnings maintained its focus on
delivering value to customers through
lowest prices, widest range and best
experience. Product ranges were reviewed
and refreshed during the year, and new
expanded categories were introduced,
including the successful launch of pet food
and durables, as well as the introduction
of additional own-brand products that
provide customers attractive value options.
Bunnings continued to invest to improve
the customer experience instore and
through digital channels. New instore
concepts and layout changes made
Bunnings stores easier to shop and
enabled team members to spend more
time helping customers, while
enhancements to the website, PowerPass
app and Bunnings app improved the way
customers gather information, find
products and transact in digital channels.
Key supply chain, data and technology
projects continued to progress during
the year, supporting improvements in
efficiency, space utilisation and customer
experience. Within the supply chain, this
included enhancements to fulfilment
capabilities such as ongoing pilots using
stores as hubs to deliver an efficient and
low-cost last mile experience for customers.
Advances were made in the commercial
‘Whole of Build’ strategy, with
improvements in the sales and service
model, enabling customers to shop more
efficiently. Bunnings also expanded its
Frame and Truss network creating more
opportunities to connect with builders early
in a project and become a partner of
choice for the whole build. Tool Kit Depot
expanded into Queensland and Victoria
catering to local demand for professional
tools while Beaumont Tiles expanded into
timber flooring.
Earnings growth for the period highlighted
the resilience of Bunnings’ business
model and its ability to adjust operating
costs and drive productivity initiatives to
manage the impact of higher cost inflation
during the year.
As always, Bunnings retained its focus
on ensuring it operates at the lowest cost,
driving operational efficiencies and
productivity across the business.
Technology and process improvements
led to 700,000 hours of team member
time reinvested back into service.
During the year, Bunnings completed 18
upgrades and three store expansions to
improve the local offer and opened three
net new Bunnings warehouses. At the
end of the financial year there were
285 warehouses, 67 smaller format
stores and 31 trade centres in the
Bunnings network, 14 Tool Kit Depots
and 116 Beaumont Tiles stores.
Bunnings expands its
range of pet products
In March 2023, Bunnings launched a
major expansion to its pet product range,
introducing hundreds of new items across
categories such as pet food, toys and
accessories in Australia.
The launch marked the largest category
expansion for Bunnings in almost 20 years
and responded to strong customer
research indicating the growing
importance pets play in families.
Pets is the latest example of Bunnings
applying its proven strategy of listening to
customers and identifying opportunities to
expand its addressable market through
range innovation and expansion.
The product line-up includes household
favourites such as Pedigree and
Supercoat along with Bunnings-exclusive
own brands, including Trusty and
Happy Tails.
Store presentation has always been critical
to Bunnings, and dedicated space was
created across the Australian store
network to merchandise products and
create a one-stop pet owners’ destination.
Team members underwent special training
so they can provide the expert advice
Bunnings customers have come to love
and expect.
At a time when Australian shoppers are
looking to make their household budgets
go further, especially for higher frequency
items like pet food, the expanded range
represents more value and choice for
pet owners.
The new range has resonated strongly
with Bunnings’ loyal customers and
attracted new customers that have not
shopped with the brand previously.
People
Safety, health and wellbeing
Bunnings’ TRIFR was 16.5 for the
period, compared to 11.3 in the prior
corresponding period. Bunnings’
deterioration in safety performance is
predominantly due to a change in
methodology from 1 July 2022 to align
the classification of recordable injuries with
the Group’s other businesses, as well as
an increase in manual handling injuries.
Bunnings developed a comprehensive
plan to improve safety performance
throughout the business, with the aim
of managing injury risk and improving
safety performance.
During the year, Bunnings:
− continued to identify safety risks
in the workplace, implementing
the Life-Threatening Risk Program
which included introducing lifesaving
controls for forklift and pedestrian
interactions across all sites
− launched an early intervention injury
management program for team
members, ensuring prompt advice
and recovery treatment options
for team members are available if
required, and
− commenced a program to improve
capability of leaders and support
team to proactively prevent and
manage mental ill-health and widened
access to counselling and wellbeing
support services.
Bunnings also strengthened incident
investigation processes, with a focus on
learning and improving from near-miss
incidents. Over 50 investigations were
completed, many with business-wide
actions implemented. This change is
intended to reduce the risk of team
member and customer injury as a result
of handling large, bulky items.
Bunnings has seen an increase in the
frequency of violence and aggression
towards retail team members by
customers. In response, Bunnings trialled
increased signage in higher risk areas and
launched a high-risk role working group,
with the aim of accelerating efforts to
protect team members. Bunnings
continues to focus on the mental and
physical health and wellbeing of its team.
Efforts to enhance team member
wellbeing in 2023 included streamlining
access to support, building internal
capability through the redesign and
delivery of training to leaders, and
addressing identified psychosocial
hazards.
25
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Bunnings Group
Aboriginal and Torres Strait Islander. To
better enable recruitment of Aboriginal
and Torres Strait Islander team members,
Bunnings operates programs to support
Indigenous candidates during recruitment
and onboarding. This includes the
Transition to Work program which is
focused on supporting people
experiencing hardship as they progress
into permanent and rewarding work
at Bunnings.
Climate and energy
Reducing energy consumption and
transitioning to renewable electricity
across its network are the foundation of
Bunnings’ efforts to reduce greenhouse
gas emissions. During the year, Bunnings
made significant progress towards its
target to achieve 100 per cent renewable
electricity by 2025, and net zero Scope 1
and Scope 2 market-based emissions
by 2030.
As of June 30, renewable electricity
accounted for 64.4 per cent of all
electricity use by Bunnings and Scope 1
and Scope 2 market-based emissions
reduced by 42.9 per cent.
Bunnings’ progress is largely attributable
to new long-term renewable power
purchase agreements (PPAs). In Victoria,
Bunnings executed a PPA contract that
took effect on 1 July 2022, covering
97.9 per cent of Bunnings’ electricity load
in Victoria. In South Australia, Bunnings’
large sites currently use 57.5 per cent
renewable electricity and expect to
transition to 100 per cent renewable
electricity from 1 July 2024. Bunnings
also executed a new renewable
electricity contract for small sites across
New South Wales, Queensland,
South Australia, the Australian
Capital Territory and Victoria. Bunnings
sites in New Zealand continue to be
powered by 100 per cent renewable
electricity.
During the year, Bunnings rolled out
31 new solar photovoltaic (PV) systems
and as at 30 June 2023, 127 solar PV
systems were installed on Bunnings’
Australian store network. Each solar PV
system provides up to 30 per cent of a
store’s electricity needs.
Circular economy
Reducing operational waste and
increasing resource recovery are key areas
of focus, as Bunnings seeks to reduce its
impact on the natural environment.
This year, Bunnings diverted 57.1 per cent
of its operational waste from landfill, an
improvement of 2.2 percentage points
compared to the previous year.
In September 2022, Bunnings also
launched a uniform recycling program for
all team members.
As a member of the Australian Packaging
Covenant Organisation (APCO), Bunnings
is committed to working towards
100 per cent sustainable packaging.
During the year, Bunnings launched its
Sustainable Packaging Guidelines to
internal teams and selected suppliers
to accelerate this transition.
Bunnings continued to offer instore,
drop-off services to recycle household
and power tool batteries across
Australia and New Zealand, and products
with a power cord in selected South
Australian stores.
Bunnings launches a plant
pot recycling program
As a member of the APCO, Bunnings is
committed to supporting improvements
in recycling plastic packaging. In 2021,
a plastic plant pot recycling program was
trialled in selected stores in New Zealand.
After a successful trial, Bunnings
extended the program which now covers
more than 80 stores across Australia and
New Zealand.
Through the program, Bunnings’
customers can return used plant
packaging, such as plant pots and
stakes, made from polypropylene plastic
(PP5), for reuse and recycling. Given
many recycling facilities cannot readily
accept PP5 packaging, this program
diverts plastic away from landfill.
The plastic packaging collected is recycled
into new items, such as recycled plastic
pots, creating a circular solution.
Additionally, to promote reuse, used
plastic plant pots are available to
customers free-of-charge.
Bunnings supports mental
health in the trade industry
Bunnings believes that suicide prevention
is everyone’s business.
Recognising this responsibility, Bunnings
Trade has partnered with an industry-
based charity, MATES in Construction
(MATES), which is working to reduce the
suicide rate among Australian construction
workers.
In August 2022, Bunnings Trade and
MATES released a limited edition,
co-branded hoodie, with all profits from
sales going directly to MATES. The
campaign helped raise and contribute
$500,000 to support MATES’ vital work.
To celebrate the launch, Bunnings hosted
a National Trade BBQ across all Australian
stores, providing an opportunity for tradies
to engage with MATES and each other, to
raise awareness of mental health and
suicide prevention.
A similar initiative took place in
New Zealand, with Bunnings Trade
partnering with Movember to raise more
than NZ$63,000 for their important work
supporting men’s health and wellbeing.
Diversity and inclusion
Bunnings actively works to ensure
that its team is representative of the
communities in which it operates,
providing employment opportunities for
all, regardless of age, gender, cultural
heritage, sexual orientation or ability.
Bunnings is proud that half of its team
members are women, and team members
speak more than 70 languages. Team
members represent a wide range of ages
with 28 per cent of team members aged
over 50, and 46 per cent aged under
30 years.
Supporting Aboriginal and Torres Strait
Islander people to secure fulfilling jobs with
career and leadership opportunities is a
priority for Bunnings. In Australia, 1,246 or
2.7 per cent of team members identify as
26
Wesfarmers 2023 Annual Report Community contributions
Bunnings supports communities to come
together, through activities such as
sausage sizzles, hands-on programs and
instore fundraising. Bunnings’ community
contributions include cash donations, gift
cards, labour and product contributions,
and indirect contributions, enabled by
Bunnings and donated by team members
and customers.
During the year, Bunnings’ community
contributions totalled $47.4 million,
comprising $6.4 million in direct
contributions and $41.0 million in indirect
contributions.
Bunnings supported more than 70,000
community activities, with team members
assisting local groups (including schools,
nursing homes and hospitals) to build
community gardens, to complete painting
projects and to conduct educational
workshops.
In October 2022, devastating floods in
Victoria, New South Wales and Tasmania
impacted many Bunnings stores, team
members and local communities.
Bunnings assisted relief efforts by
supplying $25,000 in products and
materials, and the Bunnings team
supported The Salvation Army with a
national Reds Run sausage sizzle, raising
over $400,000 for recovery work.
In January 2023, extreme weather and
floods impacted communities across the
Kimberley region, in Western Australia.
To support these communities Bunnings
donated products and hosted a state-
wide Reds Run sausage sizzle, with
volunteer support from The Salvation Army
and Wesfarmers, raising more than
$50,000 for The Salvation Army.
In January and February 2023, Cyclone
Gabrielle caused severe flooding and
destruction in New Zealand. Team
members provided on-the-ground support
in the community, helping with the
clean-up, alongside volunteers and
government agencies. Bunnings
supported community groups, emergency
services and other government agencies
with over NZ$100,000 in products and
materials, including gumboots, clean-up
equipment, personal protective
equipment, storage supplies, water,
batteries, generators and gas cylinders.
The Bunnings team also held a Reds Run
sausage sizzle, with NZ$35,000 raised for
New Zealand Red Cross.
Late in the financial year and for the fifth
consecutive year, Bunnings supported
FightMND to raise $1.5 million from team
members and customers. Funds raised
are directed by FightMND to enable
research into motor neurone disease.
Circular Head
Aboriginal Corporation
partnership
Bunnings recognises the importance of
supporting Indigenous communities and
employment by ranging products that
directly engage and benefit Indigenous
organisations. This includes partnering
with Indigenous organisations and
Traditional Owner groups to support
strategies that enable them to realise
an economic value from Native Title
interests in land.
During 2022, a new collaboration was
established between Circular Head
Aboriginal Corporation (CHAC),
Bunnings and Seasol.
Working together, the collaborators are
developing a Seasol indoor plant liquid
fertiliser made with sea kelp harvested
by CHAC.
CHAC is an Indigenous, not-for-profit
organisation established in 1994, to
represent the Aboriginal people of
Circular Head and the nine Aboriginal
tribes of northwest Tasmania.
Selina Maguire-Colgrave, Chairperson of
CHAC, explains, ‘culture is at the heart
of all we do at CHAC. It informs our
operations and guides our direction’.
CHAC’s vision is to embrace culture,
leverage ancient practice and empower
future Indigenous leaders. It promotes
sustainable management of natural
resources to provide training and
employment opportunities for future
generations.
Together, Bunnings and Seasol are
working with CHAC to bring this product
to life.
The collaboration will enable CHAC to
employ local Indigenous people to
harvest kelp, which will be purchased
by Seasol for use as a key ingredient in
liquid fertiliser.
Bunnings and Seasol have provided
commercial support to CHAC, and the
product will be exclusively sold in
Bunnings stores once the product is
ready for sale to customers. Bunnings
and Wesfarmers have also provided
financial support to CHAC through the
Wesfarmers Building Outstanding
Aboriginal Businesses (BOAB) Fund.
Human rights and ethical
sourcing
Bunnings’ ethical sourcing program is
based on the United Nations Guiding
Principles on Business and Human Rights
and aligns with the minimum standards
set out in Wesfarmers Ethical Sourcing
and Modern Slavery Policy. Key elements
of Bunnings’ ethical sourcing program
include clear guidance in supplier trading
terms, and active monitoring of working
conditions in high-risk supply chains
including through supplier assessments,
third-party audits and worker voice
initiatives.
During the year, Bunnings conducted
more than 950 pre-qualification risk
assessments of suppliers and
manufacturers and supported 530
independent third-party audits. In
response to these activities, Bunnings
supported 235 supplier manufacturing
sites to remediate more than 1,400
identified minor, major and reportable
non-conformances, with the aim of
improving working conditions for more
than 70,000 workers in 18 countries.
See page 73 describing the Your Voice
Grievance Mechanism.
Visit our website to read more:
wesfarmers.com.au/sustainability
27
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Bunnings Group
Strategy
Bunnings’ strategy starts with demonstrating genuine care for its team, customers, suppliers, and the environment every day and
building strong relationships with the communities it serves.
To continue to grow, Bunnings is focused on providing customers the best offer, delivering exceptional value, innovating on range and
pushing into new product categories to expand the addressable market. It is deepening its relationships with commercial customers by
having a service model and product offer to better meet their needs.
Simplicity is core to the Bunnings strategy and supports the business to operate as efficiently as it can to reinvest in lower prices.
This is underpinned by a program of continuous improvement and evolution across supply chain, space management and the use of
data and digital assets.
Strategies
Achievements
Focus for the coming years
Deliver
lowest prices
– Strong investment in maintaining price
– Reinvest in price by simplifying processes and
leadership
systems to lower costs
– Created more value for customers on products
that matter most to them
– Deliver low prices by lowering the cost of goods
– Introduce new own-brand options
– Disciplined focus on lowest cost
– Introduced high quality own-brand products to
provide greater value in selected categories
Deliver
widest range
– Focused on growth across all of our product
categories through a number of range reviews
– Continue to innovate and introduce new products
and categories to expand the addressable market
Deliver best
experience
Making a
positive
difference
– Identified opportunities to achieve step-out
growth by expanding our addressable market,
including launching an expanded pets range
– Strengthened our own-brand offering with the
launch of Citeco
– Expanded Frame and Truss offering
– Opened three net new Bunnings stores, three
Tool Kit Depot stores and one Beaumont Tiles
store and closed one Bunnings Trade Centre
– Expanded three stores to improve the local
offer
– Continued focus on removing non-customer
facing tasks in stores so teams can spend
more time with customers
– Enhanced online search functionality to
improve ease of shop
– Used data more effectively to improve and
personalise the customer experience
– Expand Bunnings Marketplace offering
– Optimise space instore to ensure the right products
in the right locations
– Invest in technology to optimise inventory and supply
chain management to improve stock availability
– Network expansion opportunities across Bunnings,
Tool Kit Depot and Beaumont Tiles
– Innovate and simplify to improve efficiency and
reinvest in service
– More personalised digital communications
– Make instore service even easier and more
convenient for customers
– Continue to develop fulfilment and last mile
capabilities
– Good progress made towards 100 per cent
– Focus on achieving net zero Scope 1 and 2
renewable electricity by 2025
emissions by 2030
– Assistance for local communities and
emergency services following natural disasters
– Continued to support local communities
through community BBQs, hands-on local
projects, DIY workshops and instore
family events
– Continue to strengthen support for local communities
through community BBQs, hands-on local projects,
DIY workshops and instore events
28
Wesfarmers 2023 Annual Report Risk mitigation
Bunnings recognises that taking appropriate business risks is a critical aspect of generating acceptable business returns. In doing so,
it seeks to appropriately manage risks to minimise losses and maximise opportunities.
Risks deemed unacceptable in terms of the business’ risk appetite are subject to appropriate control and mitigation measures to reduce
the potential negative impact on the business. The level of controls implemented is commensurate with the potential impact on the
business from the risk occurring (taking account of likelihood and consequence).
Bunnings recognises climate change as a key risk (and opportunity) which is discussed elsewhere within this annual report.
Risk
Safety
Talent
recruitment
and retention
New and
existing
competitors
Reputation
Supply chain
resilience and
disruptions
Mitigation
– Continued focus on critical safety risks, robust safety systems and targeted training and awareness
campaigns
– Focus on how we move product safely through our supply chains, our warehouses and to the customer
– Strategies, processes and training for protecting team members from threatening situations
– Strategies directed at creating and maintaining status as an employer of choice
– Creating a welcoming environment for everyone through continued focus on diversity and inclusion
programs, and respectful workplace training
– Succession planning, retention and targeted development plans
– Relentless focus on strategic pillars of lowest price, widest range and best experience
– Ongoing strategies to increase customer centricity and deepen customer engagement
– Focus on digital transactional capability
– Strong culture of ‘doing the right thing’ supported by training and policies
– Focus on responsible sourcing and product standards
– Ongoing regulatory compliance training
– Structured range review processes incorporating alternative sources of supply
– Continued development of domestic supply chain capabilities and continued strengthening of processes
and systems
Data, privacy
and cyber
security
– Strategy built around protection, detection and responding to cyber threats
– Use of leading technology to protect against cyber incidents
– Strong internal processes to protect and control data access
29
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Kmart Group
Kmart Group
Kmart Group comprises retail businesses Kmart
and Target, with operations across 449 stores
in Australia and New Zealand and around
50,000 team members. Kmart and Target are
supported by KAS Group Asia through direct
sourcing and global wholesale operations.
30
Wesfarmers 2023 Annual Report Our business
Highlights and outlook
Kmart
Revenue1
Earnings before tax1
Kmart was established in 1969, with the
opening of its first store in Burwood,
Victoria. Kmart is a leading product
development company and trusted brand
that operates 325 stores throughout
Australia and New Zealand, offering
customers a wide range of everyday
products at the lowest prices.
Kmart employs around 40,000 team
members, who are focused on the Kmart
vision of making everyday living brighter
for Australian and New Zealand families.
Kmart executes this vision by being a great
place to shop that is simple to run and
providing customers with better products
at even lower prices.
Target
Target began as a drapery store in 1926
in Geelong, Victoria, and has since grown
to become a destination for apparel and
soft home products. Target operates
124 stores and employs around 10,000
team members across Australia, with a
vision to make great quality products truly
affordable for Australian families.
$10,635m $769m
2023
10,635
2022
2021
2020
2019
9,129
9,982
9,217
8,713
2023
2022
20212
20203
2019
769
505
693
410
550
1 2022 has been restated to exclude Catch. 2021 and 2020 include Catch from 12 August 2019. 2019
includes KTAS until its divestment in November 2018.
2 2021 earnings before tax for Kmart Group excludes $59 million of restructuring costs.
3 2020 earnings before tax for Kmart Group excludes pre-tax impairment of the Target brand name
and other assets of $525 million and restructuring costs and provisions of $110 million, and includes
$9 million of payroll remediation costs relating to Target.
Kmart Group’s revenue increased
16.5 per cent to $10,635 million for
the year. Earnings of $769 million were
52.3 per cent above the prior year and
represented a record for the business.
During the year, Kmart Group worked
with local communities and charity
partners to meet a diverse range of
needs for families and team members.
Significant advances were also made in
ethical sourcing factory compliance and
supply chain traceability, as well as
towards meeting Kmart Group’s public
commitments in the areas of sustainable
operations and products. Safety
performance also improved once again,
with a year-on-year reduction in TRIFR.
Kmart remains uniquely positioned to
extend its low-price leadership and
profitably grow its share of customer
wallet as customers continue to increase
their focus on value in an inflationary
environment.
The focus on driving growth in share of
customer wallet will be supported by
delivery of strategic initiatives, including
leveraging leading product development
capabilities to expand existing categories
and enhance ranges that cater to growing
demographics, developing a winning
omnichannel proposition enabled by
loyalty and personalisation, and seeking
to selectively expand the distribution of
Anko products into new markets globally.
Building on investments over recent
years, Kmart will also pursue
opportunities to drive further efficiencies
in its business through continued
digitisation of sourcing and supply chain
operations, and by digitisation of the
store operating model.
General inflation remains elevated and
cost pressures are expected to persist
across operating expenses despite
moderation in raw material and
international freight costs. Kmart will
leverage the strength of its business
model to focus on productivity and cost
control to mitigate these impacts while
continuing to lead on lowest price.
Target will continue to focus on improving
its product offering, particularly in the
focus categories of apparel and soft
home, and look to further leverage the
scale of the Kmart Group to support
operational and strategic outcomes.
The integration of the Kmart and Target
processes, systems and organisational
structures to achieve one operating model
across the two brands will progress over
the 2024 financial year. The proactive
changes will drive greater operating
efficiencies and better leverage the relative
strengths of the Kmart and Target
propositions.
Ian Bailey
Managing Director
Kmart Group
31
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Kmart Group
Our performance
Key financial indicators
For the year ended 30 June
Revenue ($m)
Earnings before tax ($m)
Capital employed ($m) R12
Return on capital employed (%) R12
Cash capital expenditure ($m)
Sustainability results
Total recordable injury frequency rate (TRIFR)2 R12
Aboriginal and Torres Strait Islander team members
Scope 1 and Scope 2 market-based emissions (ktCO2e)
Operational waste diverted from landfill (%)
Community contributions ($m)
Sites in the ethical sourcing program that were monitored (%)3,4
2023
20221
10,635
9,129
769
505
1,635
1,569
47.0
127
32.2
105
2023
20221
7.4
1,986
218.1
82.0
8.9
84
8.5
1,847
250.9
80.6
6.9
85
1 2022 has been restated to exclude Catch.
2 TRIFR measures the number of lost time and medical treatment injuries per million hours worked.
3 The frequency of monitoring varies depending on prior audit findings and the level of assessed risk.
4
Ethical sourcing data for the twelve months to 15 June.
Year in review
Kmart Group’s revenue increased
16.5 per cent to $10,635 million for
the 2023 financial year. Earnings of
$769 million were 52.3 per cent above the
prior year and a record for the business.
These financial results reflect strong
underlying trading performance as well as
the normalisation of trading conditions
following the significant COVID-19
restrictions in the first half of the 2022
financial year.
Kmart’s total sales increased 22.0 per cent
for the year, with comparable sales
increasing 14.5 per cent. Sales increased
across all categories for the year, with
units sold and transaction volumes also
above the prior year. Kmart accounted for
79 per cent of total Kmart Group sales in
the year.
Target’s total sales increased 1.1 per cent
for the year, with comparable sales
decreasing 0.5 per cent. Target’s trading
performance was in line with the prior year,
but with more variable trading in the
second half, with relatively stronger
performance in apparel compared with
challenging trading conditions in home
and toys.
Earnings growth for the year reflected
strong sales growth and strong execution
of pricing strategies and operational
plans, as well as the continued realisation
of benefits from the significant network
change program undertaken across
32
Wesfarmers 2023 Annual Report Kmart and Target. Kmart Group’s focus
on productivity and cost control helped
mitigate cost of doing business pressures
from inflation, increased shrinkage and
ongoing volatility in exchange rates. Target
maintained a low cost base during the
year and the business remains profitable.
Kmart continued to invest in strategic
initiatives to enhance its omnichannel
customer experience, digitise its
operations, and further develop its data
and digital assets. The rollout of RFID
technology across all Australian Kmart
stores was completed during the year,
increasing stock visibility and improving
replenishment efficiency as well as
providing an important platform for the
further digitisation of the store operating
model.
Kmart opened four new stores and closed
three stores during the year, and Target
closed four stores. There were 449 stores
across Kmart Group as at 30 June 2023.
Kmart partnership
supports an inclusive
workplace
Kmart is a proud member of the Australian
Human Rights Commission –
IncludeAbility Employer Network. As part
of this network, Kmart has partnered with
the Australian Human Rights Commission
and the Disability Trust to provide
employment opportunities for people with
acquired disability across four stores in the
Illawarra region.
In April 2023, Kmart commenced a
dedicated hiring process for participating
stores, which saw seven team members
with a disability hired and onboarded. All
candidates were offered workplace
adjustments as part of the interview and
onboarding processes. These seven team
members are now employed across three
pilot stores, undertaking a variety of roles.
Kmart is continuing to focus on building
disability confidence within its business
across all levels of the team.
People
Kmart Group’s safety performance
continued to improve with Kmart reducing
its TRIFR to 8.4 and Target achieving a
21 per cent TRIFR reduction to 3.8.
Kmart Group maintained its ongoing focus
on the employment of Aboriginal and
Torres Strait Islander people. At Kmart,
Indigenous team member representation
increased from 4.4 per cent last year, to
4.6 per cent this year. At Target,
Indigenous team members represent
3.1 per cent of its workforce.
Community
Kmart Group continued support for
community partners and during the year,
Kmart contributed more than $8 million
and Target contributed almost $900,000
to community partners and charities,
through direct and indirect contributions.
Ethical sourcing
The Kmart Group Ethical Sourcing
Program includes a detailed compliance
framework designed to support suppliers
to meet its Ethical Sourcing Code. There
were 1,200 Tier 1 Kmart Group supplier
factories which were subject to 1,379
third-party ethical sourcing audits in the
financial year.
During the year, Kmart and Target’s social
and environmental transparency efforts
were recognised, with Kmart Group
ranking equal third in the 2023 Fashion
Transparency Index (FTI) out of 250 of
the world’s largest fashion brands and
retailers, and in equal 10th place out of
120 companies in the Baptist World Aid
Ethical Fashion Report.
Environment
Kmart Group’s Scope 1 and Scope 2
market-based emissions reduced by
13.1 per cent to 218.1 kilotonnes of
CO2e, principally due to revised
emissions factors nationally, reflecting
the increased contribution of renewable
energy in the grid. Scope 3 emissions
were 11.3 megatonnes of CO2e. Ongoing
data improvement efforts refined our
Scope 3 emissions calculations this
financial year and prepares Kmart Group
to establish a Scope 3 emissions
reduction roadmap.
Waste diversion from stores and
distribution centres across Kmart Group
improved during the year, from
80.6 per cent in 2022 to 82.0 per cent
in 2023.
Kmart and Target continued to implement
their sustainable materials strategies
to meet commitments in the areas of
Indigenous collaboration
develops new homeware
range
During the year, Kmart was pleased to
collaborate with Waradgerie artist, Judith
Young, to co-develop and launch the
Judith Young | Waluwin collection at
Kmart.
Waluwin is a Waradgerie (Wiradjuri) word
that means healing and good health.
This is the first time Kmart has worked
directly with a First Nations collaborator
to develop an entire home range.
The collection was launched in March
2023, and has performed strongly with
more than 115,000 units sold nationwide
since its inception, delivering income to
both Kmart and Judith Young.
polyester, cellulose and wool. Kmart
has now transitioned approximately
24 per cent of the polyester used in its
own-brand clothing and bedding to
recycled materials. Target has transitioned
approximately 22 per cent of the wool
used in own-brand clothing and bedding
instore from July to December 2022 to
be certified with the Responsible Wool
Standard.
Kmart Group has set a commitment that
by January 2030, 50 per cent of the
plastic used in own-brand merchandise
will be made from recycled or plant-based
materials. This year, it conducted a
baseline assessment of plastic usage and
composition in own-brand products to
progress this target.
Kmart Group, continues to apply the
Australasian Recycling Label (ARL) on
own product packaging in consultation
with APCO. During the year, 1,677
(Kmart) and 709 (Target) Packaging
Recyclability Evaluation Portal
assessments were completed for
Kmart Group products.
Visit our website to read more:
wesfarmers.com.au/sustainability
33
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Kmart Group
Kmart - Strategy
Kmart provides families with everyday products at the lowest prices. The business continues to drive sustainable growth through a
focus on making Kmart a great place to shop that is simple to run and delivering better products at even lower prices. Kmart is also
exploring opportunities for new and profitable channels to market and seeking to selectively expand distribution of Anko products into
new markets globally.
Kmart will enhance customer experience through developing a winning omnichannel proposition, enabled by personalisation and
loyalty. Digitisation, as well as use of data and technology, will drive further efficiencies in Kmart’s sourcing and supply chain operations
and enable it to continue to improve the instore experience for customers. Kmart will continue to leverage its product development
capabilities to look for opportunities to grow share of wallet, including in new markets. This will be supported by Kmart’s market-leading
scale and focus on maintaining its price leadership position while pursuing its sustainability commitments.
Strategies
Achievements
Focus for the coming years
A great place
to shop that
is simple to
run
– Completed national rollout of RFID technology
to all Australian large format stores for apparel,
realising benefits from digitisation of back-fill
processes
– Launched Kmart App and scaled user
numbers, leading to improved online
conversion and customer engagement
– Deepened customer engagement through
– Expand the scope and application of instore
technology (including RFID) to enhance customer
experience and drive further operational efficiencies
– Further develop the Kmart App and web experience
– Continue to focus on instore experiences (e.g.
expansion of our Direct to Boot trial) and increasing
engagement, driven through social and community
content
improved omnichannel experience, leveraging
OnePass, personalisation, social content and
instore capabilities (e.g. four-hour Click and Collect)
– Continue to build the Kmart data asset to increase
engagement with customers through personalisation
and loyalty
– Continued to demonstrate lowest price
– Continue to leverage unique competitive advantages
leadership
– Leveraged product development capabilities to
grow share of wallet in existing categories and
delivered new and expanded ranges
– Further progressed digitisation of Kmart’s
supply chain and sourcing operations delivering
reductions in cost and lead times, and improved
availability
to further extend price leadership position and
diversify product offerings
– Further leverage product development capabilities to
grow share of wallet, broaden existing product ranges,
and enhance offerings in growing demographics
– Continue to digitise the supply chain to reduce lead
times, improve the accuracy of supply and demand
matching, and lower end-to-end costs
– Continue to provide customers with products that are
sustainably and ethically sourced
– Launched Anko in Canada with the
– Explore additional global opportunities for distribution
Hudson Bay Company via a store-in-store
concept with Zellers
of Anko products
Better
products at
even lower
prices
New and
profitable
channels to
market
Target - Strategy
Target’s vision is to make great quality products truly affordable for Australian families. Following the business reset, Target is a smaller,
simpler business, focused on maintaining consistent profitability. Target has a clear category proposition to be a destination for apparel and
soft home, with a core customer focus around ‘mum’ and her growing family. The integration of the Kmart and Target businesses, which
includes introducing select general merchandise Anko ranges into Target stores in early 2024, will enable Target to maintain greater focus
on its core categories and access to Kmart Group technology and data capabilities. ‘Affordable quality’ will remain the key differentiator.
Strategies
Achievements
Focus for the coming years
– Established clear customer value proposition
with a focus on quality, value and style
– Clear customer, product and channel
strategies, targeting ‘mum’ as the core
customer
– Continue to improve customer perception of product
quality, style and range, leveraging an iconic brand
with strong customer awareness
– Continue to provide customers with products that are
sustainably and ethically sourced
– Continued to improve the omnichannel
– Enhance fulfilment capabilities and options to improve
experience through enhancements to the
website and app
– Improved delivery experience through hybrid
store and DC fulfilment capabilities
the customer experience and online profitability
– Increase apparel participation in online by enhancing
product availability and improving the end-to-end
customer experience
– Leveraged Group capabilities to support a
personalised shopping experience through
OnePass, analytics and data assets
– Leverage sourcing, technology, data, advanced
analytics and digital advantages from Kmart Group
and OneDigital
Destination
for apparel
and soft
home, with
‘affordable
quality’
the key
differentiator
Accelerate
digital
capability
and online
growth
34
Wesfarmers 2023 Annual Report Kmart Group Risk mitigation
Kmart Group understands and recognises that rigorous risk management is essential for corporate stability and for sustaining its
competitive market position and long-term performance. Risk identification, assessment and mitigation is an integral part of
Kmart Group’s annual corporate planning and budgeting processes from which the key material risks, opportunities and uncertainties
are derived. Set out below are the key risks and uncertainties that could have a material impact on Kmart Group’s ability to achieve its
stated objectives.
Additionally, Kmart Group recognises climate change as a key risk (and opportunity) which is discussed elsewhere in this annual report.
Risk
Mitigation
International
and domestic
supply chain
disruptions
Cost inflation
– Increased use of digital technologies to reduce supply chain lead times and increase flexibility
– Leverage unique sourcing model to increase diversification of sourcing operations
– Leveraging scale advantages and unique sourcing model to mitigate cost impacts
– Disciplined assessment of cost-reduction opportunities, including through leveraging technology, data,
advanced analytics, digital and sustainability advantages from Kmart Group and OneDigital
– Increased focus on optimising and expanding online fulfilment capabilities to facilitate changing customer
shopping habits at the lowest cost
Competitor
activity
– Maintaining price leadership position in the market by making use of extensive sourcing ranges, in-house
design capabilities and volume-driven efficiencies
– Continuing to leverage technology to enhance customer experience and provide increased personalisation,
product availability and seamless omnichannel experience
– Analysis of business performance and trend forecasting to identify future opportunities and clarify business
proposition and purpose
Exchange rate
volatility
Sustainability,
ethical
sourcing, and
human rights
Data and IT
security
– Hedging and pricing frameworks will be used to effectively manage foreign exchange movements
– Ongoing improvements to environmental compliance across all factories and a commitment to upholding
ethical sourcing standards, which include protecting and respecting human rights
– Continued operation and promotion of the Speak Up program to channel and support a culture of honesty,
transparency and good governance
– Dedicated team and threat intelligence partnerships responsible for oversight of cyber security and
monitoring of evolving cyber threats
– Regular reporting provided to executive management and the board to govern cyber security
35
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Chemicals, Energy and Fertilisers
Chemicals, Energy
and Fertilisers
WesCEF manages a portfolio of leading, sustainable
businesses that operate in domestic, national and
international markets. Our businesses are recognised
as safe, reliable and innovative industry leaders driven
by around 1,500 diverse and skilled team members
who are committed to meeting our customers’ needs.
36
Wesfarmers 2023 Annual Report Our business
Highlights and outlook
WesCEF manages nine businesses in
Australia across the chemicals, energy,
fertilisers and lithium sectors with a shared
services model that supports businesses
across the portfolio.
Chemicals includes:
– CSBP Chemicals, which manufactures
and supplies ammonia, ammonium
nitrate and industrial chemicals primarily
to the Western Australian mining,
agricultural and industrial sectors
– Australian Gold Reagents (AGR),
CSBP’s 75 per cent owned joint venture
with Coogee Chemicals, which
manufactures and supplies sodium
cyanide to the Australian and
international gold mining sectors
– Queensland Nitrates (QNP), CSBP’s
50 per cent owned joint venture with
Dyno Nobel Asia Pacific, which
manufactures and supplies ammonium
nitrate to the mining sector in the
Bowen Basin
– Australian Vinyls, which supplies PVC
resin and specialty chemicals to the
Australian industrial sector, and
– ModWood, which manufactures
wood-plastic composite decking and
screening products.
Energy includes:
– Kleenheat, which extracts LPG
from natural gas and distributes
bulk and bottled LPG to the
residential and commercial markets
in Western Australia and the
Northern Territory. Kleenheat is also a
retailer of natural gas to residential and
commercial markets, and
– EVOL LNG, which distributes bulk LNG
primarily to the remote power
generation market in Western Australia.
CSBP Fertilisers manufactures, imports
and distributes nitrogen, phosphate and
potassium-based fertilisers for the
Western Australian agricultural sector.
It also provides technical support and
nutritional service offerings for growers
through a network of employees and
accredited partners in regional
Western Australia.
Covalent Lithium, Wesfarmers’ 50 per cent
joint venture with Chilean-based lithium
producer, Sociedad Química y Minera
(SQM), is progressing with the
development of the Covalent lithium
project. Once complete, the joint operation
will include a mine and concentrator
producing spodumene concentrate at
Mt Holland and a lithium hydroxide
refinery at Kwinana, Western Australia.
Commissioning of the concentrator has
begun with first ore mined in December
2022 and crushed in May 2023.
Revenue
Earnings before tax
$3,306m $669m
2023
3,306
2022
2021
2020
2019
3,041
2,146
2,085
2,078
2023
2022
2021
2020
2019
669
540
384
394
438
Revenue for WesCEF increased
8.7 per cent to $3,306 million from the
prior year, and earnings increased
23.9 per cent to $669 million. Strong
revenue and earnings growth during the
period reflected favourable global ammonia
prices and strong plant performance.
WesCEF’s TRIFR improved to 3.8,
underpinned by an ongoing focus on
investigating high potential incidents.
Emissions for the year increased
6.8 per cent but remain 11.1 per cent
below the 2020 baseline, due to WesCEF’s
continued investment in optimising
secondary nitrous oxide abatement
catalyst performance. The increase in
emissions for the period was largely
attributable to a 13 per cent increase in
ammonia production as operations
normalised following the planned major
maintenance shutdown in the prior year.
Emissions associated with ammonia
production account for approximately half
of WesCEF’s total Scope 1 and 2
emissions.
Going forward, Chemicals’ earnings are
anticipated to be adversely impacted by
lower global ammonia pricing. Demand
for ammonium nitrate from the WA mining
and agricultural sectors is expected to
remain robust, and demand for sodium
cyanide is anticipated to be supported by
increasing global gold production and
declining ore grades.
Increasing WA natural gas costs are
expected to impact both Chemicals and
Kleenheat earnings, with domestic market
supply constraints likely to lead to continued
elevated prices over the medium term.
In the Fertilisers business, successive
strong harvests, moderating input costs
and an improved grain pricing outlook are
contributing to a generally positive grower
sentiment, but earnings will remain
dependent on seasonal conditions.
Earnings from the Lithium business are
expected to commence in the first half of
the 2024 calendar year from the sale of
interim spodumene concentrate.
Spodumene concentrate offtake
agreements with tier-one customers are
well progressed, with contracted pricing
expected to broadly reflect movements in
Asia lithium hydroxide spot market prices.
Construction of the Kwinana refinery
continues to progress with Covalent
managing a challenging environment.
Expectations for production timing and
capital expenditure remain in line with
prior guidance.
The feasibility study evaluating the
opportunity to increase the production
capacity of the Mt Holland lithium mine and
concentrator will continue to be progressed,
with regulatory approvals expected to be
submitted over the coming months.
Expansion studies for major growth
projects across the portfolio continue to
progress, as does the evaluation of
abatement technologies and initiatives to
drive the division’s decarbonisation
strategy. Investment in systems such as
the new Enterprise Resource Planning
(ERP) system will also support WesCEF’s
long-term growth.
Overall, earnings for WesCEF will remain
subject to international commodity prices,
exchange rates, competitive factors and
seasonal outcomes.
Ian Hansen
Managing Director
Wesfarmers Chemicals,
Energy & Fertilisers
37
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Chemicals, Energy and Fertilisers
Our performance
Key financial indicators
For the year ended 30 June
Revenue ($m)
Earnings before tax ($m)
Capital employed ($m) R12
Return on capital employed (%) R12
Cash capital expenditure ($m)
Sustainability results
Total recordable injury frequency rate (TRIFR)1 R12
Aboriginal and Torres Strait Islander team members
Scope 1 and Scope 2 market-based emissions (ktCO2e)
Operational waste diverted from landfill (%)
Community contributions ($m)
Sites in the ethical sourcing program that were monitored (%)2,3
2023
2022
3,306
3,041
669
540
3,091
2,503
21.6
518
21.6
455
2023
2022
3.8
50
849.5
87.4
0.7
75
4.2
48
795.4
85.9
0.5
100
1 TRIFR measures the number of lost time and medical treatment injuries per million hours worked.
2 The frequency of monitoring varies depending on prior audit findings and the level of assessed risk.
3 Ethical sourcing data for the twelve months to 15 June.
Year in review
Chemicals’ earnings increased significantly
on the prior year. Strong earnings were
driven by favourable global ammonia
pricing in the first half of the financial year,
coupled with a timing benefit due to the
pricing lag in pass-through mechanisms
for some customer contracts as the
ammonia price declined in the second
half. Ammonium nitrate earnings benefited
from robust demand from WA mining
customers. Record production volumes in
Chemicals were supported by strong plant
performance resulting from asset
maintenance activities and investment in
incremental process improvements.
Kleenheat’s earnings declined on the prior
year, driven by a lower Saudi Contract
Price, the international benchmark
indicator for LPG price, and higher WA
domestic natural gas costs. The natural
gas retailing business continued to grow
its residential customer base in WA,
resulting in higher sales volumes for
the year.
Fertilisers’ earnings decreased significantly
on the prior year, affected by a declining
global commodity price environment,
together with a later seasonal break which
resulted in delayed grower commitments,
reduced sales volumes and lower margins.
The business continued to invest in data
and digital capabilities, product innovation
38
Wesfarmers 2023 Annual Report and upgrading storage and despatch
assets to provide further improvements
in reliability, experience and advice
for growers.
The WesCEF result includes costs
associated with the development and
management of its 50 per cent interest
in the Covalent lithium project.
Construction was recently completed at
the Mt Holland mine and concentrator.
Mining operations have commenced,
triggering depreciation of the mine from
May 2023, and commissioning of the
concentrator is underway. Good progress
was made on construction of the Kwinana
refinery and lithium hydroxide offtake
agreements with tier-one customers were
executed during the year. WesCEF’s share
of capital expenditure, excluding
capitalised interest, for the development
of the project was $394 million during
the year.
Little science geniuses
program
This year, CSBP funded a series of
primary school workshops for female
students to inspire and empower them
to participate in science, technology,
engineering, and mathematics (STEM).
More than 80 girls participated in
workshops held over eight weeks.
Topics such as the laws of motion,
science of light, chemistry, the ecology of
coral reefs, hydraulics, and palaeontology
were packaged together in a fun,
hands-on approach to encourage the
girls to become ‘little science geniuses’.
Volunteer CSBP team members, who
have each built a successful career in
differing fields, shared their knowledge
of working in science.
CSBP has always been a strong supporter
of increasing female representation in
STEM. These initiatives encourage
students to think about their future and
what they could do when they grow up.
People
WesCEF focuses on operating safely,
continually monitoring and adjusting
processes and procedures to minimise
risk to team members, assets, and
neighbouring communities. Inherently,
WesCEF operations present several high
potential (HiPo) risks which cannot be
eliminated and require a comprehensive
system of layers of protection to manage
and mitigate.
This year, WesCEF’s TRIFR was 3.8 and
there were 26 HiPo incidents, 20 of which
relate to risks associated with dropped
objects.
WesCEF welcomes recent changes to
work health and safety regulations that
focus on preventing or minimising
psychosocial risks.
During the year, WesCEF continued to
provide training to support team member
wellbeing, with 96.8 per cent of all team
members completing resilience and
mental health awareness training, and
82.3 per cent of supervisors completing
‘Managing Workplace Mental Health’
training.
Environment
An integral part of WesCEF’s
environmental management program is
undertaking activities to monitor, assess,
and remediate physical, chemical, or
biological processes.
At CSBP’s Kwinana site, design and
construction began on a small-scale pilot
groundwater remediation system.
The supply of water and management of
wastewater are business-critical issues at
CSBP’s Kwinana site. A review of water
source options for both daily operations
and future growth projects was
undertaken, identifying two potentially
viable solutions:
• To receive an increase in water
allocation from the Kwinana Water
Reclamation Plant (KWRP); or
• To build an additional reverse osmosis
plant onsite that removes contaminants
from wastewater for operational re-use.
WesCEF continues to evaluate both
options to manage its water requirements
and wastewater.
Progress against Net Zero Roadmap
WesCEF continues to avoid approximately
850,000 tonnes of carbon dioxide
equivalent of emissions annually as a
result of the implementation of
abatement technology prior to 2020.
These investments included secondary
nitrous oxide abatement catalysts,
electricity generation from process heat
recovery, and the capture and sale of
carbon dioxide.
WesCEF’s Net Zero Roadmap presents
how it expects to achieve its targets of a
30 per cent Scope 1 and Scope 2
reduction in emissions by the end of
financial year 2030, relative to a financial
year 2020 baseline, and net zero Scope 1
and Scope 2 emissions by 2050. While
the technologies that underpin the 2030
target are well established, there is greater
uncertainty around the optimal
combination of technology that will be
deployed from 2030 onwards.
This year’s Scope 1 and Scope 2
market-based emissions were
11.1 per cent below baseline, reflecting
good progress towards the 2030 target.1
This is primarily due to additional
investment to optimise secondary nitrous
oxide abatement catalysts in CSBP’s three
nitric acid plants.
WesCEF continued to reduce the
uncertainty around its pathway beyond
2030 with a focus on collaboration,
partnerships, and transparency.
Workstreams are focused on studying and
testing low-carbon hydrogen technologies
and project configurations.
Supporting communities
WesCEF continues to support youth
organisations, environmental initiatives,
Aboriginal health programs and STEM
education, chiefly in the Kwinana and
Rockingham areas of Western Australia.
This includes support of the local Clontarf
Academy at Gilmore College for young
Indigenous students.
Diversity and inclusion
WesCEF made progress improving gender
balance across its workforce with an
increase in the representation of women
from 36.0 per cent to 36.8 per cent
this year.
To retain Indigenous team members,
WesCEF offers culturally appropriate
support including access to mentors, skill
development and healing workshops, and
support with responding to personal and
work-related issues. Aboriginal and Torres
Strait Islander team member
representation at 30 June 2023 was
3.4 per cent, in line with the prior year.
1 The FY2020 baseline was established using the
Scope 2 location-based accounting method
and has not been restated using the Scope 2
market-based method as they were not
materially different for the baseline year.
Visit our website to read more:
wesfarmers.com.au/sustainability
39
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Chemicals, Energy and Fertilisers
Strategy
WesCEF’s vision is to grow a portfolio of leading, sustainable businesses. WesCEF has a high-quality portfolio of assets and seeks to
grow these through incremental investment and innovation to meet the needs of its customers. WesCEF also focuses on investment in
adjacent opportunities where it can add value through utilising its infrastructure, manufacturing and processing expertise and the project
management capabilities of its people.
Strategies
Achievements
Focus for the coming years
Safe person,
safe process,
safe place
– Improvement in TRIFR through dedication to investigating high
– Ongoing focus on team member health and
potential incidents and identifying hazards
wellbeing
– Continued deployment and assurance of high potential risk
management program to reduce injury risk
– Ongoing utilisation of checklists to verify critical controls in place
for high-risk tasks
– Increased focus on psychosocial risk hazards with expanded
range of initiatives, resources and training to support team
members
– Complete major maintenance program of
chemicals plants with no safety incidents
occurring
– Ongoing commitment to improve safety
performance, maintenance planning and
corrosion control across assets
Enhance our
reputation
– Ongoing reviews of high-risk suppliers in line with WesCEF’s
ethical sourcing framework
– Maintain focus on regulatory compliance
– Further investment in cyber security and data
– Ongoing community partnerships and grants that focus on
governance
Indigenous, youth, STEM education and environmental initiatives
– Introduction of a data governance framework focused on
customer data privacy and security
– Continued investment in sustainable water
sources and wastewater management
– Investigate further opportunities for Indigenous
– Improvements to cyber threat monitoring of operational
procurement relationships
technology platforms
Investing for
growth
– Continued to support the Covalent lithium project
– Kwinana ammonia expansion proposal submitted to the Western
Australian Environmental Protection Agency
– Progressed studies for potential expansion of ammonium nitrate
and sodium cyanide production capacity
– Commenced expansion study to evaluate doubling the production
capacity of the Mt Holland mine and concentrator
– Executed agreements for lithium hydroxide offtake with tier one
customers
– Enhance local community investment
strategies with a focus on STEM education and
environmental responsibility
– Progress construction of Covalent lithium
project including Kwinana refinery and
commercialise interim spodumene concentrate
– Consider opportunities to leverage existing
infrastructure and expand capacity across
chemical plants
– Assess opportunities for additional fertiliser
storage and despatch capacity
– Investigate low carbon fuel and renewable
energy opportunities
– Continue to investigate investment opportunities
in existing or adjacent markets
– Continued to progress efforts on abatement projects that underpin
– Continue to investigate and implement
Deliver
progress
against net
zero 2050
Scope 1 and
2 emissions
target
the accomplishment of interim 2030 and net zero 2050 targets
– Completed pre-feasibility study with APA Group into hydrogen
production via electrolysis
– Progressed carbon capture and storage and blue ammonia
concept study in partnership with Mitsui & Co
– Investment in optimising performance of existing abatement
catalysts in chemical manufacturing processes to reduce
emissions
– Commenced supplier engagement to enhance Scope 3 emissions
reporting relating to WesCEF’s most material purchased goods
– Completed materiality assessment of WesCEF’s Scope 3 footprint
– Launched carbon neutral natural gas product for Kleenheat
customers
Maintain
world-class
performance
– Continued strong plant availability due to robust asset
maintenance and incremental process improvements
– Strong operational performance and customer service resulting in
increased demand
– Commenced multi-year program to implement a single integrated
Enterprise Resource Planning (ERP) solution to optimise business
processes
– Progressed divisional Asset Management Improvement Program
to mitigate risk, reduce cost and maximise asset performance
40
technologies and opportunities to support
achievement of net zero 2050 Scope 1 and 2
emissions target
– Collaborate and invest in relationships with key
research institutions and industry participants
to advance climate-related technology
opportunities
– Explore a range of climate change-related
growth opportunities across the division
– Continue progress in reducing emissions
intensity and meeting commitments made as
part of sustainability-linked financing
– Engage and collaborate with key supply chain
partners and customers to enable development
of Scope 3 decarbonisation roadmap
– Continued focus on operational excellence,
including through implementation of a new
ERP system
– Maintain market-leading customer service and
investigate expanding service offerings
Wesfarmers 2023 Annual Report Risk mitigation
WesCEF recognises that effective risk management practices at both an enterprise and operational level are crucial to informed
decision-making, and effective management of our operations to drive commercial outcomes. Risk identification, assessment and
management is an integral part of the annual corporate planning, quarterly risk review processes, and the way in which our business
units manage risk as an intrinsic part of their daily operations. WesCEF is committed to conducting activities in a way that generates
sustainable growth while enhancing its reputation. Risks deemed unacceptable in terms of the risk appetite of the relevant business
are transferred through contractual arrangements or insurance, mitigated or avoided.
WesCEF continues to actively manage the impacts of its key risk areas through the implementation of appropriate control and mitigation
measures outlined below. Additionally, WesCEF recognises climate change as a key risk (and opportunity) which is discussed elsewhere
within this annual report.
Risk
Mitigation
Serious injury,
safety or
environmental
incident
Sustained
competition
Economic
and political
uncertainty
Sustainability
and meeting
community
expectations
– Continue to invest in improving safety culture and asset maintenance for the safe operation of facilities and
distribution of products in a way that minimises any adverse effect on team members, contractors, local communities
or the environment
– Focus on consistently satisfying the needs of customers and continued investment in initiatives that further improve
customer experience or differentiate service/product offering
– Effective allocation of resources to optimise existing operations and capitalise on growth opportunities in existing or
adjacent markets
– Ongoing focus on cost of operations and security of supply of key raw materials to ensure sustainable cost curve
positioning
– Focus on employee retention and training and contractor relationships to support workforce availability and business
continuity
– Proactive contract management, continued investment in diverse supplier relationships and ongoing monitoring of
inventory holdings
– Ensure commercial agreements account for economic risks where possible to limit inflation or supply chain risks to
acceptable levels
– Ongoing engagement with government representatives in relation to approvals processes and key energy policies
– Ongoing investigation of emissions abatement technologies and decarbonisation opportunities to support delivery of
WesCEF’s commitment to net zero Scope 1 and 2 emissions by 2050
– Minimise the risk of modern slavery occurring in the businesses or supply chains through a risk-based ethical
sourcing framework
– Grow workplace diversity with focus on improving gender balance and growing the number of Indigenous team
members to reflect the communities in which we operate
– Ongoing positive contributions to the communities in which we operate
Governance and
cyber security
– Continue to focus on enhancing cyber and information security risk controls
– Continue to invest in systems and processes to ensure responsible use of data and security of information
Major project
execution
– Ongoing communication and collaboration with regulators to ensure timely approvals
– Creation of dedicated major projects team and develop processes and major project capability
– Diligent and robust financial investment decision processes
41
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Officeworks
Officeworks
Officeworks, established in 1994,
operates across Australia with a network
of 166 stores, a significant online business
and a national business-to-business
specialist sales team, as well as owning
and operating the Geeks2U business.
42
Wesfarmers 2023 Annual Report Our business
Highlights and outlook
Officeworks is Australia’s leading retailer
of stationery, technology, furniture, art
supplies, and learning and development
resources, with more than 40,000
products available online as well as
services like Print and Create, and
Geeks2U.
The products and services at Officeworks
provide solutions to address changing
customer needs, and inspire Australians
to work, learn, create and connect. Its
customers include households, students,
those working from home, small and
medium-sized businesses and schools.
Officeworks’ offering is strengthened by its
everyday low price credentials, supported
by its price beat guarantee, widest range
and great service. Irrespective of how
customers choose to shop, Officeworks
is committed to providing customers with
easy, engaging, personalised every-
channel experience, including instore,
online, via a national call centre or through
the support of business specialists.
Officeworks is focused on the safety,
health, wellbeing, and career progression
of more than 9,000 team members.
Aboriginal and Torres Strait Islander
employment in Officeworks exceeds
employment parity of three per cent of
its Australian workforce.
Officeworks is committed to ensuring the
long-term sustainability of the business,
including building and maintaining
meaningful connections with the
communities in which it operates,
fundraising for national partners and local
community groups, reducing its impact on
the environment, and sourcing products
and services responsibly and sustainably.
Revenue
Earnings before tax
$3,357m $200m
2023
3,357
2022
2021
2020
2019
3,169
3,029
2,787
2,314
2023
2022
2021
2020
2019
200
181
212
197
167
Officeworks’ revenue increased
5.9 per cent for the year to $3,357 million.
Earnings of $200 million were
10.5 per cent higher than the prior year.
The safety, health and wellbeing of team
members and customers remains a
priority for Officeworks, and continued
investment in team member safety,
supported an improvement in TRIFR to
5.4 for the year. Officeworks understands
that its stakeholders expect action to
address complex issues such as climate
change and resource use. During the
year, Officeworks reduced its Scope 1
and Scope 2 market-based emissions by
12 per cent to 27.1 kilotonnes of CO2e.
Officeworks’ sales growth was supported
by improved Back to School trading,
significant growth in business-to-business
(B2B) sales, and continued above-market
growth in technology categories. Sales
also benefited from increased demand
across stationery, art, office supplies and
Print and Create, as foot traffic to stores
continued to normalise following the
impacts of COVID-19 in the prior period.
The pleasing earnings growth result
was supported by higher sales and the
realisation of benefits from recent
investments to drive productivity and
efficiency across the business.
Officeworks’ widest range, low prices,
great service, and well-established
every-channel offer make it well positioned
to support value-conscious personal and
business customers in continued
challenging economic conditions.
Officeworks maintains its focus on driving
profitable growth in key markets by solving
customer missions to work, learn, create
and connect. This will be supported by
the continued evolution of its core offer,
expansion of market share with B2B
and education customers, and further
investment in the every-channel offer and
personalisation to deliver an even easier
and more engaging customer experience.
Officeworks remains focused on delivering
further benefits from productivity and
efficiency initiatives across stores and
modernising the supply chain and the
support centre to help mitigate the impact
of cost inflation.
Sarah Hunter
Managing Director
Officeworks
43
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Officeworks
Our performance
Key financial indicators
For the year ended 30 June
Revenue ($m)
Earnings before tax ($m)
Capital employed ($m) R12
Return on capital employed (%) R12
Cash capital expenditure ($m)
Sustainability results
Total recordable injury frequency rate (TRIFR)1 R12
Aboriginal and Torres Strait Islander team members
Scope 1 and Scope 2 market-based emissions (ktCO2e)
Operational waste diverted from landfill (%)
Community contributions ($m)
Sites in the ethical sourcing program that were monitored (%)2,3
2023
2022
3,357
3,169
200
181
1,092
1,015
18.3
71
17.8
68
2023
2022
5.4
302
27.1
87.8
6.0
50
5.8
323
30.8
88.0
7.3
45
1 TRIFR measures the number of lost time and medical treatment injuries per million hours worked.
2 The frequency of monitoring varies depending on prior audit findings and the level of assessed risk.
3 Ethical sourcing data for the twelve months to 15 June.
Year in review
Officeworks’ revenue increased
5.9 per cent for the year to
$3,357 million. Earnings of $200 million
were 10.5 per cent higher than the
prior year.
Sales growth of 6.0 per cent reflected
improved Back to School trading results,
including a benefit from the NSW
Government’s back-to-school voucher
program, as well as significant growth in
B2B sales and continued above-market
growth in technology categories. Sales
results also benefited from increased
demand across stationery, art, office
supplies and Print and Create as foot
traffic to stores continued to normalise
following the impacts of COVID-19 in the
prior period.
Strong earnings growth of 10.5 per cent
for the period was supported by higher
sales together with the realisation of
benefits from proactive investment over
recent years to drive productivity and
efficiency across stores, supply chain
and in the support centre.
Officeworks continued to invest in
everyday low prices and value for
customers, expanded private label ranges
and the every-channel offer, including
enhanced delivery options. Investments in
technology delivered strong net promoter
score improvements during the year, while
programs such as Flybuys and 30-day
44
Wesfarmers 2023 Annual Report business accounts enabled more
personalised experiences and targeted
offers for both personal and business
customers.
Officeworks completed the transition to
a new Victorian Import Distribution Centre
and progressed the development of a new
WA Customer Fulfilment Centre, which is
on track to be completed in the 2024
financial year.
Officeworks completed its store renewal
program during the year, opened one new
store, and closed three stores, including
the temporary closure of the Underwood,
Queensland store. As at 30 June 2023,
there were 166 Officeworks stores
across Australia.
Safety, health
and wellbeing
Officeworks improved its safety
performance, with TRIFR reducing to
5.4 from 5.8 in 2022.
Officeworks’ safety behaviour program,
Switch On, provided training and
resources to help develop and sustain a
culture of safety awareness, accountability
and courage. The program engaged
Officeworks leaders, store operations and
supply chain team members and provided
resources to help embed a safety mindset
through workshops, team talks and by
including Switch On moments in
Leadership Team business updates.
In November 2022, at the National Safety
Council of Australia’s National Safety
Awards of Excellence, Officeworks’
wellbeing programs were recognised with
awards for Best Health and Wellbeing
Program and Best Mental Health Program.
Community
Officeworks’ annual Make a Difference
Appeal allows customers to donate by
rounding up the cost of their purchases.
Together with its customers, Officeworks
raised more than $920,000. This year,
the appeal focused on supporting 15
organisations and charities with a strong
focus on education, sustainability
and biodiversity.
One of Officeworks’ strategic priorities is
promoting strong educational outcomes
for all Australian students, no matter their
circumstances. Through its 'Literacy is
Freedom' and 'Back to School' appeals,
Officeworks team members and
customers raised more than $2.1 million,
helping 7,640 Australian students with
sponsorships and educational resources.
Ethical sourcing
Officeworks is committed to establishing
a culture of integrity and accountability
where everyone, including workers in its
global supply chain, can raise a concern
and have their voices heard.
The business continues to implement its
worker survey program at supplier
factories, which captures worker sentiment
across wages and working hours, workplace
wellbeing, environment, health and safety,
and productivity and stability.
Based on worker feedback, Officeworks
collaborated with factory management
across eight sites to implement actions
to address worker concerns. Six months
after the first survey, follow-up surveys
showed a 13 per cent improvement in
worker sentiment.
To date, Officeworks has mapped over
28,400 products to the primary site of
manufacturing, with 1,131 sites in its
ethical sourcing program. More than 600
third-party ethical sourcing audits were
reviewed, and 940 major non-
conformances were remediated.
Environment
Officeworks reduced its Scope 1 and
Scope 2 market-based emissions from
30.8 to 27.1 kilotonnes of CO2e, a
12 per cent reduction on the 2022
financial year. Officeworks continues to
transition to 100 per cent renewable
electricity by the end of 2025, including
through its procurement of renewable
electricity and the installation of rooftop
solar PV systems in 26 stores across
Australia.
In June 2023, Officeworks announced the
installation of its first 100 kilowatt hour
(kWh) lithium battery and 100 kilowatt (kW)
solar PV system in Warana, Queensland.
When fully charged, the battery will meet
approximately 70 per cent of the store’s
electricity needs, equivalent to around 35
residential homes.
Forests play a critical role in biodiversity,
providing vital ecosystems to 80 per cent
of the Earth’s land animals. Through its
People and Planet Positive commitments,
by December 2025, all products sold and
procured by Officeworks that contain
paper and wood must demonstrate that
they are deforestation-free.
Officeworks is committed to planting two
million trees on behalf of its customers
based on the weight of paper and wood
products sold. Since 2017, through its
Restoring Australia initiative, Officeworks
has supported land restoration activities
by planting 1.4 million trees. This year
nearly 250,000 trees were planted.
Officeworks repair trial
champions circularity with
Circonomy
Officeworks partnered with Circonomy,
Australia’s first recovery, repair and resale
service, to achieve its People and Planet
Positive commitment to contribute to a
more circular economy and repair,
repurpose, and recycle 17,000 tonnes
of unwanted products by 2025.
Officeworks together with Circonomy,
completed a 10-week furniture repair trial
across 10 stores in Victoria. A key
objective of the program was to develop
an approach to handling imperfect
products and eliminate some of the costly
and inefficient processes that come with
managing unsellable or damaged furniture,
while reducing waste to landfill.
Repairs were made onsite with spare
parts and returned to the shop floor for
resale at a reduced price or to use as
display stock. Stock unable to be repaired
in store was taken offsite to a Circonomy
facility to be refurbished and resold by
Circonomy, providing a circular solution
for unwanted or damaged stock.
During the trial, Officeworks diverted
5.5 tonnes and 271 furniture items from
landfill. Participating stores saw a
reduction in time and labour costs used to
deal with damaged items. In total, 191
pieces were repaired onsite and 80 pieces
were diverted to Circonomy for resale.
Officeworks has committed to repairing,
repurposing, and recycling 17,000 tonnes
of unwanted products by 2025. Its Bring it
Back program saves waste from going to
landfill by recycling, repurposing, or
repairing over 9,000 tonnes of unwanted
products at the end of their life since 2017.
Visit our website to read more:
wesfarmers.com.au/sustainability
45
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Officeworks
Strategy
Officeworks is committed to delivering sustainable long-term growth for its shareholders by addressing changing customer needs and
enhancing its solutions across its work, learn, create and connect customer missions.
The division continues to leverage its every-channel experience, breadth of range and data-driven personalisation to enable a
differentiated experience. Officeworks will continue to drive profitable growth and productivity by executing its strategy, centred around
five key areas.
Strategies
Achievements
Focus for the coming years
Our team
We are skilled,
committed
and healthy
– Improved safety performance, with a TRIFR of 5.4
– Invested in the physical and mental wellbeing of the team
– Participation rate of Aboriginal and Torres Strait Islander
team members at 3.3 per cent
– Opened a newly refurbished support office in Chadstone,
Victoria
– More than 1,600 team members were seconded to another
role, promoted or transferred into another opportunity
– Continue to invest in team member safety, health
and wellbeing
– Strengthen position as an employer of choice,
attracting, retaining and upskilling the team
– Strengthen engagement across the team, their
connection to Officeworks and sense of belonging
– Continue to invest in diversity and inclusion programs
– Continue building on principles of collaboration and
connection supporting hybrid ways of working
Customer
experience
We make
things easy
and engaging
– Enabled broader customer missions through an expanded
– Continue investment instore and online to improve
offer
the every-channel customer experience
– Invested in developing new personalised customer offers
– Create more relevant and personalised customer
and communications
experiences and rewarding offers
– Enhanced online shopping experience through ongoing
– Acquire new customers, increase frequency of shop
improvements to digital platforms
and build loyalty through OnePass and Flybuys
– Invested in new Print and Create self-service offer in stores,
– Continue to create simple and easy ways for customers
improving the experience and productivity
to engage with Geeks2U experts for tech support
– Launched online booking for Geeks2U
– Enhanced delivery offer with two-hour delivery, increased
– Continue investment in new ways for products to be
delivered at speed
same day and next day coverage
– Continue to invest in efficiencies to improve instore
services and productivity
Growing our
business
We are
ambitious in
driving growth
– Expanded ranges, including premium commercial
technology hardware and accessories, and private-label
products and services
– Completed renewal of the store network including increased
ranges of art, craft, education and furniture
– Continue investment in expanding and improving
the store network and enhancing digital platforms
– Continue to improve the range of products and
services to meet changing customer needs
– Invest in OnePass to enable more personalised
– Enhanced market penetration in the education segment
shopping experiences
enabled by a national B2B sales team
– Continue to invest in the B2B segment, growing
Officeworks’ range of educational products and
platforms to provide value and choice
– Continue to invest in infrastructure to provide the
flexibility and scale to support long-term growth
ambitions in a cost-effective way
Operational
excellence
We strive to
do things
better
– Continued investment in modernising and optimising the
– Customer fulfilment centre relocation in Western
supply chain
Australia
– Continued focus on stock loss and availability for customers
– Transform inventory management and demand
through improved processes
– Increased operational capability, capacity and productivity
in customer fulfilment centres
– Investment in new technology to improve the efficiency of
store processes
– Invested in demand planning and inventory management
capabilities
planning system and processes to improve product
availability and speed of delivery
– Continue investment in technology and optimise
workplace planning to improve customer experience
and team member productivity
– Simplify and modernise technology systems,
architecture and infrastructure
Connecting
with our
communities
We are a part
of where we
live
– Recycled 87.8 per cent of all operational waste
– Reduced Scope 1 and Scope 2 market-based emissions by
12 per cent and installed PV solar on 26 sites across stores,
customer fulfilment centres, import distribution centres and
support centres
– Installed first 100 kWh lithium battery and 100 kW solar PV
– Continue to invest in renewable energy to support
transition to 100 per cent renewable electricity by the
end of 2025
– Continue to expand circular economy solutions,
including through the partnership with Circonomy
– Deepen connections in communities through local
in Warana, Queensland
and national programs
– Planted more than 247,600 trees across 195.6 hectares of land
– Continued to support disadvantaged Australian students
– Continue to invest in the Restoring Australia initiative
to plant two million trees on behalf of customers
and helping small business customers
46
Wesfarmers 2023 Annual Report Risk mitigation
Officeworks recognises that taking appropriate business risks is a critical aspect of driving profitable business returns. We encourage our
team to understand risk as it relates to their roles, and in doing so, we maximise their ability to identify and seize opportunities.
Additionally, Officeworks recognises climate change as a key risk (and opportunity) which is discussed elsewhere within this annual report.
Risk
Mitigation
Competition and
business model
disruption
– Leverage existing and developing competitive advantages, including our portfolio of businesses, every-channel
capability, and the Group data and digital ecosystem
– Continue to strengthen everyday low prices credentials supported by our extensive range, great service and
convenient every-channel offer strategic pillars to enable differentiation
– Productivity improvements including leveraging the investments made to date in modernising the supply chain,
optimising rostering and stock management processes, and expansion and diversification of global sourcing
– Continue to invest in strategic partnerships and leverage existing relationships to become a first-choice supplier
and develop and differentiate our offers
Changing
customer
behaviours
Cyber
security
– Further diversify our offering and deliver more value to customers by expanding own-branded ranges to address
customer needs across work, learn, create and connect customer missions
– Monitor trends and respond with data-driven range reviews, new products (e.g. Geeks2U cyber security product)
and new customer propositions (e.g. Flexiworks - a hybrid working platform for businesses and their employees)
– Continued investment in data, digital and e-commerce capabilities to deepen understanding of customers to
provide more timely, personalised and engaging experiences
– Cyber security framework and strategy in place
– Dedicated team responsible for operational management of cyber security
– Regular reporting provided to executive management and the Board to govern cyber security
– Introduce new product offers through Geeks2U including security, networking and data services and repairs
Ethical sourcing
and sustainability
– Published five-year sustainability strategy (People and Planet Positive Plan 2025) to identify and mitigate
sustainability risks and opportunities
– Responsible sourcing policies supported by investment in detailed compliance programs including ethical sourcing
and modern slavery
47
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Industrial and Safety
Industrial and Safety
Industrial and Safety is a leading supplier of industrial,
safety and workwear products to a wide range of
customers, including Australia and New Zealand’s
largest corporate and government entities. The
division operates three main businesses:
Blackwoods, Workwear Group and Coregas.
48
Wesfarmers 2023 Annual Report Our business
Highlights and outlook
The Industrial and Safety portfolio of
businesses services customers across
diverse industries such as mining,
manufacturing, construction, retail, food
and beverage, utilities, transport, facilities
maintenance, health and government.
The businesses service a wide range of
customer groups including large corporate
enterprises, government organisations and
small- to medium-sized businesses.
Industrial and Safety operates three main
businesses: Blackwoods, Workwear
Group and Coregas, and employs
approximately 3,600 team members.
Blackwoods is the largest business in
terms of revenue and is a distributor of
tools, workplace safety and personal
protective equipment, workwear and
electrical and industrial supplies. It services
a wide variety of customers of different
sizes across Australia and New Zealand
through an extensive supply chain, branch
network and online platforms. It includes
the trading businesses Blackwoods
Australia, NZ Safety Blackwoods,
Bullivants and Cm3.
Workwear Group is a leading workwear
solutions provider, featuring iconic
Australian brands Hard Yakka and King
Gee. Workwear Group also supplies
bespoke and catalogue uniforms to large
organisations in professional services,
health, industrial and emergency services
segments through its NNT and Workwear
Group Uniforms brands.
Coregas is a supplier of industrial, specialty
and medical gases in Australia and
New Zealand, serving customers of all
sizes through multiple sales channels and
distribution networks.
Revenue
Earnings before tax
$1,992m $100m
2023
1,992
2022
2021
2020
2019
1,925
1,855
1,745
1,752
2023
2022
2021
20201
2019
100
92
70
39
86
1 2020 earnings before tax for Industrial and Safety excludes pre-tax impairments of $310 million, and
includes $15 million of payroll remediation costs.
Industrial and Safety revenue of
$1,992 million was 3.5 per cent above the
prior year. Earnings increased 8.7 per cent
to $100 million for the year.
Industrial and Safety’s results were
supported by sales growth across
the division. Earnings increased in
Workwear Group and Coregas, while
Blackwoods’ earnings were impacted by
inflationary cost pressures and the timing
lag in changes to customer contract
pricing, as well as continued investment in
customer service and digital capabilities
during the year.
Industrial and Safety has made positive
progress against its sustainability
commitments. The key safety measure,
TRIFR, improved with a reduction to 3.3,
continuing its long-term positive trend.
The division continued to build climate
resilience across its businesses, lowering
Scope 1 and Scope 2 market-based
emissions by 6.8 per cent excluding
Coregas. Coregas increased its overall
emissions during the period due to
increased production of gases to meet
business demand. Positive progress has
also been made on other core initiatives,
including the continuation of end-of-life
garment partnerships, better identification
of waste streams and recycling avenues,
continued collaboration and spend with
Indigenous businesses and supporting a
variety of community events and charities.
Near-term market conditions in Australia
and New Zealand are expected to be
impacted by ongoing economic pressures,
particularly from the continued inflationary
cost environment.
The Industrial and Safety businesses
will continue to actively manage cost
inflation, labour availability constraints and
product availability pressures, and each
business remains focused on delivering
continued improvements in performance
in this environment.
Blackwoods is focused on strengthening
its customer value proposition and
enhancing core operational capabilities,
including in data and digital.
Workwear Group remains focused on
driving growth in its industrial brands
and uniforms business, improving
operational excellence and strengthening
its digital offer.
Coregas is expected to benefit from
continued strong demand in the
healthcare and industrial segments,
despite ongoing competitive pressures
and rising input and distribution costs.
Tim Bult
Managing Director
Wesfarmers Industrial and Safety
49
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Industrial and Safety
Our performance
Key financial indicators
For the year ended 30 June
Revenue ($m)
Earnings before tax ($m)
Capital employed ($m) R12
Return on capital employed (%) R12
Cash capital expenditure ($m)
Sustainability results
Total recordable injury frequency rate (TRIFR)1 R12
Aboriginal and Torres Strait Islander team members
Scope 1 and Scope 2 market-based emissions (ktCO2e)
Operational waste diverted from landfill (%)
Community contributions ($m)
Sites in the ethical sourcing program that were monitored (%)2,3
2023
2022
1,992
1,925
100
92
1,257
1,166
8.0
73
7.9
64
2023
2022
3.3
97
27.2
40.4
0.8
55
3.5
92
26.4
41.6
0.8
53
1 TRIFR measures the number of lost time and medical treatment injuries per million hours worked.
2 The frequency of monitoring varies depending on prior audit findings and the level of assessed risk.
3 Ethical sourcing data for the twelve months to 31 May.
Year in review
Industrial and Safety revenue of
$1,992 million was 3.5 per cent above
the prior year. Earnings of $100 million
were 8.7 per cent above the prior year.
Blackwoods’ revenue increased on
the prior year, with growth underpinned
by demand from strategic customers in
Australia, particularly those in the mining,
utilities and manufacturing sectors.
Pleasingly, sales growth was recorded
across major trading regions in
Australia as well as in New Zealand.
Blackwoods’ earnings were below the
prior year, with sales growth offset by
the margin impact of inflationary cost
pressures and the timing lag in
corresponding changes to customer
contract pricing. Earnings were also
impacted by continued investment in
customer service and digital capabilities,
including the completion of the ERP
system implementation, along with some
costs associated with domestic supply
chain disruptions during the year.
Workwear Group’s revenue and
earnings increased on the prior year,
driven by higher customer demand for
corporate, emergency and defence
uniforms. Revenues from the industrial
workwear brands, including KingGee
and Hard Yakka, increased on the
prior year. Earnings were partially offset
50
Wesfarmers 2023 Annual Report
by costs associated with domestic
supply chain disruptions in both
Australia and New Zealand.
Coregas’ revenue and earnings
increased on the prior year, driven by
higher demand from industrial and
healthcare customers. Earnings growth
was partially offset by higher material,
energy and distribution costs.
On 1 August 2022, the Industrial and
Safety division completed the sale of
the Greencap consulting business to
WSP Global Inc, impacting revenue
growth. The modest gain on sale is
included within the division’s earnings
result in the first half.
Blackwoods’ Stop, Assess,
Move program improves
safety behaviour
In 2020, Blackwoods conducted a study
into its injury trends and identified that
most injuries were soft tissue, and directly
associated with manual handling of heavy,
long, sharp or awkward products.
To help reduce these injuries, Blackwoods
introduced S.A.M. — Stop, Assess, Move
— to empower team members to make
safer choices when undertaking manual
handling. S.A.M. is a simple catchphrase
unique to Blackwoods that gives team
members ownership of their actions. The
behavioural-based program asks team
members to do a quick mental
assessment of a task prior to it being
undertaken.
Since the program was introduced,
Blackwoods has seen a reduction in its
TRIFR. Stories that showcase how S.A.M.
was applied are discussed at Blackwoods’
daily pre-starts, team meetings, customer
meetings, displayed on workplace
noticeboards and broadly circulated to
team members.
People
The Industrial and Safety division TRIFR
trended positively, reducing from 3.5 last
year to 3.3 in the 2023 financial year.
Blackwoods and Bullivants continued to
implement the Stop Assess Move (SAM)
initiative, and NZ Safety Blackwoods rolled
out a variation of SAM. Workwear Group
trialled a training program for three new
mobile handling equipment operators
during March to May 2023. Coregas
launched a Safety Refresh event in
October 2022, to align with Safe
Work Month.
Representation of women in senior
manager roles remains within the target
range at 35.3 per cent. In Australia,
Aboriginal and Torres Strait Islander
representation continues to trend positively
at 3.3 per cent, up 0.3 percentage points
from last year. In NZ Safety Blackwoods,
124 team members identify as either
Maori or Pasifika, making up 21 per cent
of the workforce.
Product quality and safety
Industrial and Safety is committed to zero
own-brand product recalls and this year
there were no recalls.
Ethical sourcing
As a supplier to government and
business, the division engages with
customers and provides them with
increased transparency concerning its
supply chains and ethical sourcing
program. We believe this also delivers
additional value to our customers.
This year, Blackwoods, Bullivants and
Workwear Group embedded grievance
mechanisms across selected suppliers
sites in China, Taiwan, Vietnam and
Indonesia. The division closed the
reporting period covering more than
100 manufacturing sites and about
24,000 workers. The grievance
mechanism includes a helpline that allows
workers to raise concerns which are
investigated by a third party and reported
to the Industrial and Safety business.
Environment
To support emissions reduction targets,
Workwear Group implemented LED
lighting and a solar PV system at its
Port Melbourne office and Blackwoods
has scheduled warehouse LED lighting
upgrades for 2024. NZ Safety
Blackwoods is transitioning its fleet to
hybrid vehicles by the end of 2024, with
88 hybrid and 17 non-hybrid vehicles in
the business currently. Coregas prioritised
several hydrogen projects, supporting the
Coregas works toward
clean energy transition
With the support of the NSW Government,
Coregas commissioned Australia’s first
heavy vehicle refuelling station, known as
the ‘Coregas H2Station’. The facility is
equipped with a high-pressure hydrogen
dispenser with capacity to refuel up to ten
prime movers per day.
Coregas’ involvement in the Hydrogen
Energy Supply Chain project, Australia’s
most advanced clean hydrogen initiative,
has positioned the company as a key
player in advancing liquefied hydrogen
competence. Coregas is now preparing
the pilot facility for hydrogen research,
market development, and training.
transition to a low-emissions economy.
The division is establishing long-term
transition plans away from petrol/diesel for
its vehicle fleet.
Blackwoods continues to strive towards
zero waste to landfill by 2032, diverting
approximately 30 per cent of operational
waste from landfill this year. NZ Safety
Blackwoods diverted waste by reviewing
waste streams within its Trade Centres
and introduced soft plastic recycling in
25 out of 32 sites through its waste
management provider.
Workwear Group developed a packaging
standard that uses no plastic clips or
kimble tags, only one swing ticket, a
recyclable plastic garment bag, and
recycling instructions.
Coregas’ initiatives include phasing out
single-use cylinders and ensuring the
appropriate disposal and recycling of
cylinders at end of life through third-party
providers.
Visit our website to read more:
wesfarmers.com.au/sustainability
51
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Industrial and Safety
Strategy
Industrial and Safety continues to focus on performance improvement activities to enhance growth initiatives including investment in
digital capabilities.
Across Blackwoods and Workwear Group, this includes focusing on data, e-commerce, product and service capabilities and cost
improvement initiatives aimed at deepening customer relationships while improving operating efficiencies. Coregas is focused on
expanding in key sectors including mining and healthcare, enhancing its product offer and renewable opportunities.
Strategies
Achievements
Focus for the coming years
Implementation
of a market-
leading offer in
the Australian
and New Zealand
industrial
distribution market
Digital
transformation of
Workwear Group
and targeting
growth from
uniforms and
industrial brands
Grow Coregas
market share
– Strengthened relationships with strategic
– Continue to enhance customer value
customers
– Progressed integrated supply program
delivering end-to-end procurement solution
– Increased digital engagement and improved
customer experience across the digital
offerings
– ERP deployment fully completed
– Continued investment in Cm3, a leading
digital contractor management platform in
Australia and New Zealand, operating within
Blackwoods
proposition through unbeatable range,
reliability, expertise and ease of doing business
– Transform business modelling, including
through increased use of data and digital tools
– Leverage scale from operations and benefits
of the ERP system to improve operating
efficiencies
– Engineering range growth and ongoing trade
store refresh program in New Zealand
– Strengthened market position of industrial
brands through product innovation, improved
service levels and brand desirability
– Growth in new distribution channels, including
international for the KingGee and Hard Yakka
brands
– Continue investment in digital transformation
including full deployment of e-commerce
platform that will enhance the customer offer
and simplify the business
– Realise new business opportunities for
uniforms
– Targeted focus on winning and retaining
– Accelerate growth from industrial and
uniforms contracts
corporate brands
– Part-deployment of significant e-commerce
– Enhance service levels through logistical
platform
excellence and investment in planning systems
– Continued revenue growth and increased
– Key customer growth, including in major
market share, particularly strong in mining,
healthcare and LNG
– Continued growth in disruptive Trade N Go
Gas offer
– Increasing activity in hydrogen projects
customers
– Invest in production capacity and supply chain
– Invest in digital projects including an ERP
system upgrade
– Continue to explore renewable opportunities
and leverage expertise in the hydrogen
supply chain
52
Wesfarmers 2023 Annual Report Risk mitigation
As a supplier of industrial, safety and workwear products, the business is exposed to the performance of customers’ industry sectors,
new and existing competitor activity and trends, as well as macroeconomic factors such as capital investment, employment, exchange
rates and interest rates.
Industrial and Safety recognises climate change as a key risk (and opportunity) which is discussed elsewhere within this
annual report.
Risk
Mitigation
Supply chain
disruptions and
labour availability
– Implementation of strategies such as supplier engagement and sourcing visibility, enhanced
customer engagement and alternative sourcing options
– Enhance recruitment capabilities and team member value proposition
– Investment in planning systems to further optimise stock availability
– Strengthen partnerships with local manufacturers for Workwear Group to support local production
Subdued profitable
growth and
margin pressure,
particularly as
a result of the
inflationary and
uncertain economic
environment
Growth of new
and existing
competitors,
including digital
market entrants
Safety or
environmental
incident
– Enhance Blackwoods’ customer value proposition through unbeatable range, reliability, expertise
and ease of doing business
– Target new growth opportunities, strengthen brand positioning and enhance service level excellence
in Workwear Group
– Continue to develop distribution channels for Coregas, expand large customer segments by
leveraging Blackwoods’ relationships and diversify product offering
– Enhance pricing and contract management, including cost tracking activities, across all Industrial
and Safety businesses, as well as focus on initiatives that improve the cost to serve model
– Build data and digital capabilities to deepen customer relationships and improve operating
efficiencies
– Continue to optimise range, price and supply chains
– Continue to focus on quality control systems and ensuring compliance with regulatory requirements
and standards
– Fully operational safety program including regular monitoring and the continuation of the safety
culture
– Active safety engagement by senior management
– Regular review of appropriate emergency response and crisis management plans, including in the
event of environmental incidents
Data and IT security
– Developing cyber-resilient workforce through increased training
– Continue to focus on enhancing security monitoring systems
53
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Wesfarmers Health
Wesfarmers Health
In its first full year as part of the Wesfarmers Group,
the Health division has focused on developing and
executing a transformation program to drive
profitable growth following the acquisition of its
foundation asset, Australian Pharmaceutical
Industries (API).
54
Wesfarmers 2023 Annual Report Our business
Highlights and outlook
The Health division was formed in
March 2022, with the acquisition by
Wesfarmers of API, a health, wellbeing
and beauty company that has served
Australians for more than 100 years.
Wesfarmers Health operates as a
wholesale distributor to over
2,500 pharmacies across Australia and
offers additional retail support services
through its Priceline Pharmacy and other
franchise partners. Wesfarmers Health
also owns and operates non-pharmacy
Priceline stores, the Sister Club loyalty
program and Clear Skincare clinics.
The wholesale business provides
pharmaceutical and related goods to
community pharmacies. This includes the
distribution of Pharmaceutical Benefits
Scheme (PBS) items under the Australian
Government’s Community Service
Obligation (CSO) arrangements.
Priceline is one of Australia’s leading
pharmacy, health and beauty retailers with
more than 460 stores across Australia.
Priceline partners with community
pharmacists through franchise
arrangements and owns non-pharmacy
Priceline stores. Priceline’s Sister Club
loyalty program has over eight million
members, making it Australia’s largest
health and beauty loyalty program.
Wesfarmers Health’s other major franchise
banner, Soul Pattinson, has over 40 stores
and has provided pharmacy services,
professional care and value for money to
Australian communities for over 130 years.
Through the Club Premium program the
division also offers a suite of flexible
programs, tools and services to
independent pharmacies.
Clear Skincare is one of Australia and
New Zealand’s most experienced skin,
acne, cosmetic injecting and laser hair
removal clinics. Established in 1999 and
developed by Doctor Philippa McCaffery,
Clear Skincare has been a changemaker
in Australian skincare by making the most
advanced clinical treatments and effective
skincare accessible and affordable to
millions of people in more than 90 clinics.
Clear Skincare’s team of highly trained
therapists, nurses and doctors are
passionate about helping clients live their
best skin.
Revenue
Earnings before tax
$5,312m
$45m
2023
20221
5,312
1,240
2023
20221
45
(25)
1 2022 results are for the period of 31 March to 30 June 2022.
Wesfarmers Health reported revenue of
$5,312 million and earnings of $45 million
for the year. Earnings were $58 million
excluding depreciation and amortisation
expenses of $13 million relating to assets
recognised as part of Wesfarmers’
acquisition of API. The Health division’s
results were supported by strong sales
growth in the Pharmaceutical Wholesale
business, supported by net customer
acquisition, along with elevated sales of
COVID-19 antiviral products.
The Health division recognises that human
health is inextricably linked to a healthy
planet and healthy communities. During its
first full financial year in the Group, the
business invested in understanding its
material sustainability issues and baseline
performance, which provides a platform
for management of sustainability priorities
into the future.
Wesfarmers Health has a complementary
portfolio of health, wellbeing and beauty
assets and is well positioned to deliver
long-term growth and capitalise on health
sector tailwinds.
Near-term market conditions are expected
to remain challenging, and the division
continues to actively manage the impact
of cost inflation and increasing
competition, along with changes to the
Pharmaceutical Benefits Scheme and
implications of the recent announcement
of 60-day dispensing of PBS medicines.
The division remains focused on delivering
on the ‘Accelerate’ transformation plan
and will continue to invest to strengthen
the Priceline offer, expand the franchise
store network, reset the wholesale
proposition and optimise the supply chain.
Development of the new fully-automated
fulfilment centre in Brisbane will continue,
with construction commenced in
May 2023.
The Health division continues to pursue
logical expansion opportunities across
digital health, medical aesthetics and
pharmaceutical wholesale, including the
recently completed acquisition of
InstantScripts and the proposed
acquisition of SILK Laser Australia.
On 26 June 2023, API entered into a
Scheme Implementation Deed to acquire
skin treatment franchise SILK Laser
Australia (ASX: SLA) for approximately
$180 million. SILK is one of the largest
non-surgical aesthetics clinic operators in
Australia and New Zealand with a network
of over 140 clinics. It will complement the
existing Clear Skincare clinic network,
providing greater scale and efficiency
benefits through an expanded presence in
a growing market. The Scheme is subject
to conditions including the completion of
due diligence, Wesfarmers and SILK
Board approvals, Court approval and SILK
shareholder approval.
Emily Amos
Managing Director
Wesfarmers Health
55
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Wesfarmers Health
Our performance
Key financial indicators
For the year ended 30 June
Revenue ($m)
Earnings before tax ($m)
Capital employed ($m) R12
Return on capital employed (%) R12
Cash capital expenditure ($m)
Sustainability results
Total recordable injury frequency rate (TRIFR)2 R12
Aboriginal and Torres Strait Islander team members
Scope 1 and Scope 2 market-based emissions (ktCO2e)3
Operational waste diverted from landfill (%)4
Community contributions ($m)
Sites in the ethical sourcing program that were monitored (%)5,6
2023
20221
5,312
1,240
45
1,078
4.2
41
(25)
n.r.
n.r.
3
2023
2022
6.6
3
11.6
73.0
0.8
100
n.r.
n.r.
13.8
n.r.
n.r.
n.r.
1 Results are for the period 31 March to 30 June 2022.
2 TRIFR measures the number of lost time and medical treatment injuries per million hours worked.
3 2022 full year emissions estimated for comparison purposes.
4 2023 operational waste data is for distribution centres only.
5 The frequency of monitoring varies depending on prior audit findings and the level of assessed risk.
6 Ethical sourcing data for the twelve months to 15 June.
Year in review
Wesfarmers Health revenue was
$5,312 million for the year, with earnings
of $45 million. Earnings were $58 million
excluding depreciation and amortisation
expenses of $13 million relating to assets
recognised as part of Wesfarmers’
acquisition of API.
The Pharmaceutical Wholesale business
delivered strong sales growth for the year,
underpinned by increased demand from
trading partners and net customer
acquisition. Sales also reflect the impact
of over $300 million in sales of COVID-19
antiviral products, and price inflation in
some categories.
Priceline recorded solid sales results for
the year, with increased sales across both
health and beauty categories. Sales
growth was supported by more normal
operating conditions following the impact
of COVID-related restrictions in the prior
year, partially offset by a moderation in
trading conditions in the second half as
customers responded to cost-of-living
pressures.
Clear Skincare saw an increase in sales
as customer traffic continued to normalise,
while earnings results were impacted by
higher costs to attract and retain clinic
team members during the year.
56
Wesfarmers 2023 Annual Report Earnings reflected the acceleration of
transformation activities, additional costs
associated with the transition to the new
Sydney fulfilment centre and the impact of
higher operating costs in Clear Skincare.
As at 30 June 2023, the Health division
included 76 company-owned Priceline
stores, 390 Priceline Pharmacy franchise
stores and 92 Clear Skincare clinics.
As part of its transformation strategy,
Wesfarmers Health strengthened its
e-commerce capabilities with the launch
of the new Priceline website in
February 2023.
In addition, supporting the digital health
strategy, the Health division increased its
ownership in the digital health business
SiSU to 60 per cent. SiSU owns and
operates a network of more than 300
medical-grade health stations in the
Priceline network and third-party locations.
The health stations deliver health checks
and provide key biometric data to users,
adding an alternative health delivery
channel to enhance the current healthcare
system infrastructure. SiSU provided more
than 355,000 digital health checks across
Australia this year, passing a global health
check milestone of 4.5 million checks.
Ethical sourcing training
builds workplace capability
Delivering training that provides greater
awareness of ethical sourcing and modern
slavery risks is a focus of Wesfarmers
Health’s Ethical Sourcing Program. The
training material is relevant for team
members in the context of their
operational roles, such as for those in
Category, Supplier Relationship
Management, Indirect Procurement, and
Logistics teams. It shows team members
how their actions may improve the lives of
workers in the upstream supply chain and
enables them to better support suppliers.
The training sessions covered ethical
sourcing requirements, best industry
practice and international standards,
and how to identify ethical sourcing risks.
Safety, health
and wellbeing
This year Wesfarmers Health focused
on psychosocial risk management and
mitigation, to address the risk of mental
harm to team members, and to promote
positive mental health outcomes. The
division’s mental health and wellbeing
strategy offers a suite of services for team
members, including the Employee
Assistance Program, Mental Health
Partners network, and NewAccess by
Beyond Blue. Each service focuses on
the different mental health and wellbeing
challenges that team members may face
in their professional or personal lives.
Wesfarmers Health had a TRIFR of 6.6.
Manual handling is the primary cause of
recordable injuries across the business
and a key focus area. In the 2022 financial
year, two manual handling safety
programs were launched in the wholesale
business, which resulted in a 30 per cent
reduction in musculoskeletal injury claims.
Based on this success, the Participative
Ergonomics for Manual Handling (PErforM)
and Manual Task Risk Assessment
(ManTRA) programs were launched in the
retail network this year.
Climate resilience
Wesfarmers Health acknowledges
it has a role to play accelerating the
decarbonisation of its operations and
supply chains.
During the year, the Health division adopted
a Climate Policy and reported actual
emissions for the first time. Scope 1 and
Scope 2 market-based emissions were
11.6 kilotonnes of CO2e, and Scope 3
emissions were 2.1 megatonnes of CO2e.
To reduce emissions, abatement initiatives
will be focused on electricity use and may
involve energy efficiency projects (such as
LED lighting upgrades), solar PV systems
and procurement of renewable electricity.
Human rights
Wesfarmers Health expects its operations
and supply chains to prioritise ethical
sourcing practices and to operate in
accordance with legal obligations and
community expectations.
During the year, the division established its
ethical sourcing and supplier due diligence
program. The division also commenced
mapping its own-brand product suppliers
and services suppliers.
Wesfarmers Health takes a risk-based
approach to assess and mitigate human
rights in its operations and supply chains.
The division uses Sedex Members Ethical
Trade Audit to monitor manufacturing
facilities of own-brand product suppliers.
Goods not for resale that contain cotton,
Priceline partnerships
support families
During the year, the Priceline Sisterhood
Foundation partnered with three charities:
Perinatal Anxiety & Depression Australia
(PANDA), Raise Foundation, and
Motherless Daughters Australia, donating
more than $700,000 to these
organisations.
PANDA supports women, men and
families across Australia to recover from
perinatal anxiety and depression, and
postnatal psychosis during the first twelve
months of a new baby’s life.
With the Foundation’s funding, PANDA
has upgraded its Learning Hub, which
includes materials for health professionals,
including evidence and practice-based
information and tools.
latex or polysilicon are considered high risk,
and suppliers are risk-assessed on a
manufacturing facility level.
Community
Providing care and support to the
communities in which it operates is a
priority for Wesfarmers Health. The
division’s direct and indirect community
contributions totalled nearly $800,000 in
the 2023 financial year.
The Priceline Sisterhood Foundation was
formed in 2011, with the purpose of
supporting the community, particularly
women and their families. This year the
Foundation raised almost $1.7 million
which allows the Foundation to provide
essential funding for on-the-ground support
services, medical research and sustainable
programs through its charity partners.
Priceline directly contributes to wellbeing
and women’s health through sports
sponsorships, including with the Western
Bulldogs Australian Football League
Women’s team and MiniRoos which
introduces soccer to kids of all abilities.
Visit our website to read more:
wesfarmers.com.au/sustainability
57
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Wesfarmers Health
Strategy
Wesfarmers Health’s goal is to make Australians’ health, beauty and wellness experiences simpler, more affordable and easier to access.
Wesfarmers Health is focused on delivering winning propositions for pharmacists and consumers and will continue to drive growth
through the following strategies.
Strategies
Achievements
Focus for the coming years
Win in
wholesale
– Continued customer acquisition growth
– Strengthened sales force capability
– Expand category management and invest in
technology to better serve customers
– Improve service levels: availability, on-time delivery,
consistency of performance
Reinvigorate
the customer
proposition in
Priceline
– Strengthened retail network
– Continued to optimise pricing and improve
promotional effectiveness
– Sister Club is now one of Australia’s largest
loyalty programs with 8.3 million members
– Rationalise range, improve on-shelf availability and
space allocation
– Improve private label penetration
– Optimise and refurbish franchise store network
– Expand Sister Club benefits
Expand
health and
wellness
Deliver
operational
excellence
– Leading team of highly trained therapists,
– Strengthen the customer and employee value
nurses and doctors
– Established physical network
proposition
– Explore partnerships and synergies with other
Wesfarmers Health businesses and brands
– Sydney fulfilment centre in operation and
– Continue to invest in automation and optimisation of
improving effectiveness
distribution centre network
– Development of the new Brisbane distribution
– Drive competitive advantage through leading service
centre has commenced, expected to be
operational in calendar year 2024
and efficiency levels
Develop
world-class
digital
systems
– Launch of new Priceline.com.au website
– Investment in SiSU, providing digital
health services and proprietary population
health data
– Accelerate API’s e-commerce capabilities and
performance and drive enhanced loyalty and
personalisation
58
Wesfarmers 2023 Annual Report Risk mitigation
Wesfarmers Health’s risk management is a fundamental part of daily operations. The division encourages its teams to understand and
mitigate risks, noting that taking appropriate business risks is an essential aspect of generating acceptable business returns.
Additionally, Wesfarmers Health recognises climate change is a key risk (and opportunity) which is discussed elsewhere in this
annual report.
Risk
Mitigation
Competitor
activity
– Continue to innovate and maintain high standards of quality and safety
– Position as one of only four Community Service Obligation pharmaceutical wholesalers, supported by a
national network of seven distribution centres
Changing
macro-
economic
conditions,
including
sustained high
inflation
Data and IT
security
– Leverage Priceline’s strong brand, its well-known beauty-led offering, and large national network
– Opportunities arising from increasing consumer focus on health and wellbeing
– Investment in differentiated and digital health offerings
– Continued modernisation of technology infrastructure, ensuring systems are fit for purpose, and have
been assessed as featuring strong cyber security
– Continue to invest in systems and processes to ensure responsible use of data
Supply chain
disruptions
– Continue to automate and modernise supply chain facilities
– Proactively manage inventory position to support the efficient use of capital and align with customer demand
Talent
recruitment
and retention
– Ability to leverage benefits of the Wesfarmers Group
– Investments to strengthen the employee value proposition to ensure that the right talent is attracted and
retained by the division
59
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Wesfarmers OneDigital
Wesfarmers
OneDigital
Wesfarmers OneDigital supports the Group’s data and digital
ambitions by providing customers with a more seamless,
rewarding and valuable omnichannel experience across the
Group’s retail businesses, and using data analytics to
support each Wesfarmers division’s growth agenda and
emerging cross-divisional opportunities.
60
Wesfarmers 2023 Annual Report OnePass and supporting capabilities
Our business
Highlights and outlook
Wesfarmers OneDigital was established in
April 2022 and brings together the Group’s
digitally native businesses, including the
OnePass membership program, the Group
shared data asset and Catch, which
moved into the division from Kmart Group
on 1 July 2022.
OneDigital supports the Group’s data
and digital ambitions by providing
customers with a more seamless,
rewarding and valuable omnichannel
experience across the Group’s retail
businesses, and using data analytics to
support each division’s growth agenda and
emerging cross-divisional opportunities.
The OnePass program provides members
with additional benefits and convenience
when shopping with the Group’s retail
businesses, and appeals to their most
valuable customer cohorts. OnePass
partners include Bunnings, Kmart, Target
and Catch, alongside a multi-year strategic
partnership and streaming bundle with
Disney+.
OneDigital enables deeper customer
insights through the shared data asset,
providing a single view of the customer
and enabling the divisions to deliver a more
compelling offer to customers.
Critically, underpinning this is a strong
privacy, security and data governance
framework driving the use of customer
and divisional data across the Wesfarmers
ecosystem.
OneDigital is uniquely placed to leverage
the Group’s trusted retail brands, and its
near-term priority is to deliver enhancements
to the OnePass customer value proposition
and scale the membership base.
The development of the Group’s data and
digital capabilities continued during the
year, with initiatives and investment across
the divisions and through OneDigital.
These capabilities support each division’s
growth agenda, as well as emerging
cross-divisional opportunities to support
incremental growth. The use of data
analytics and increased digitisation of
operations supports productivity and
efficiency improvements. Use cases
continue to develop through the
application of more sophisticated AI and
predictive analytics models that are
delivering improved outcomes in areas
such as demand forecasting, product
design, instore and online availability, and
marketing effectiveness.
The Group has large-scale digital reach
across its portfolio of retail brands through
a diverse range of digital assets and
unique and complementary membership,
programs. Investment in the divisions’
digital channels continued during the year,
and the Group delivered more than
210 million digital interactions with
customers per month on average in the
2023 financial year.
These touchpoints support the divisions
to drive deeper customer connections
through stronger instore and digital
engagement, improved personalisation
and targeted offers. As connectivity and
engagement have increased, the Group’s
share of sales to known customers has
grown from 34 per cent in the 2018
financial year to 56 per cent in the 2023
financial year.
Investment in the OnePass membership
program and the Group’s customer
and data insight capabilities continued
during the year, with an operating loss of
$82 million for the year, broadly in line with
the prior period.
During the year, OneDigital established a
sustainability framework identifying six
material sustainability issues and
representative baseline performance to
inform future decarbonisation strategies.
Bunnings Warehouse joined the OnePass
membership program during the year, and
OnePass launched a multi-year strategic
partnership and streaming bundle with
Disney+. Instore activation of OnePass
benefits increased during the year through
new offers allowing members to redeem
‘spend and save’ vouchers at Kmart and
Target, and the OnePass app was
launched on both Android and iOS.
Early indications are that OnePass
members are valuable, and increasingly
engaged and connected across the
Group. Around 70 per cent of members
have linked their account across two or
more Group brands and OnePass
transactions represented an increasing
share of retail partners’ online transactions
during the year, with penetration rising in
the second half. OnePass members are
also typically younger, digitally native
and also spend more online than
non-members, with more than twice as
many online transactions per year and
higher conversion rates of online baskets.
The Group’s shared data asset and
insight capabilities continued to develop
during the year, with the launch of new
products for the retail divisions including
customer life-stage and affluence
analytics products and use cases for
AI, including exploratory use cases
for generative AI.
During the year Wesfarmers also made
a non-controlling investment in Tecsa,
a UK-based specialist customer data
and loyalty analytics consultancy.
Investments in data and digital will
continue through the expansion of
divisional capabilities and ongoing
development of the OnePass membership
program and shared data asset.
In the 2024 financial year, OnePass
will launch an enhanced omnichannel
customer value proposition, with a strong
focus on instore benefits and an improved
delivery offer for members. In addition,
Officeworks is expected to join the
OnePass program as a partner in the
first half of the 2024 financial year.
Nicole Sheffield
Managing Director
Wesfarmers OneDigital
61
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Wesfarmers OneDigital
Catch
Our business
Highlights and outlook
Catch is an e-commerce marketplace
which commenced operations in 2006
and was acquired by Wesfarmers in
August 2019. From 1 July 2022, Catch
moved from the Kmart Group and joined
Wesfarmers OneDigital.
Catch operates an online business
model offering branded products on a
first-party basis and a third-party online
marketplace. Its online operations are
supported by fulfilment centres located
in Victoria and New South Wales.
Catch’s gross transaction value declined
by 25.9 per cent for the year to
$733 million, impacted by a moderation
in sales as the business cycled
elevated demand as a result of COVID-19
restrictions in the prior year. Catch’s
reported loss of $163 million for the year
includes restructuring costs of $40 million
relating to inventory provisions, team
member redundancies and asset write-offs.
Catch’s disappointing financial
performance was impacted by weak
margin outcomes in its in-stock range, due
to increased clearance activity following
poor range expansion choices in prior
years. Catch also incurred additional
supply chain costs associated with the
commissioning and ongoing developments
at the Moorebank automated fulfilment
centre in New South Wales, as well as
higher transport and fuel costs.
In response to disappointing operating
and financial results, Catch announced
restructuring actions and changes to
management to strengthen the business’
leadership capabilities during the year.
Performance in the second half indicates
signs of progress from restructuring
activities, with losses excluding
restructuring costs reducing relative to
the first half, but significant further
progress is still required. Initial
improvements have been supported by
lower employee costs from reduced
headcount, the exit of unprofitable ranges
and a significant reduction in SKU count
in the in-stock business, and significant
reduction in inventory balances. Marketing
spend efficiency increased during the
second half, and initiatives to improve
fulfilment processes supported
significantly reduced labour costs per unit
and average days
to despatch.
Investments made in Catch in recent
years are being leveraged across the
Group to provide some centralised
e-commerce fulfilment capabilities and
strengthen digital marketing programs.
The business is focused on continuing its
progress to address operational challenges
and reduce costs as part of ongoing
restructuring activities.
Our performance
Key financial indicators
For the year ended 30 June
Gross transaction value ($m)
Revenue ($m)
Earnings before tax ($m)1
Cash capital expenditure ($m)
Sustainability results
Total recordable injury frequency rate (TRIFR)2 R12
Scope 1 and Scope 2 market-based emissions (ktCO2e)
2023
733
354
(163)
10
4.7
2.8
2022
989
510
(88)
45
2.1
3.0
1 2023 includes restructuring costs of $40 million.
2 TRIFR measures the number of lost time and medical treatment injuries per million hours worked.
62
Wesfarmers 2023 Annual Report Strategy
The OneDigital ecosystem creates network effects to develop deeper connections with customers. This is driven by the OnePass
membership program which builds deeper engagement with the retail partners’ most valuable customers through a compelling
omnichannel customer experience.
Catch remains focused on building on recent decisive actions and results to address underperformance, improve its customer value
proposition and support sustainable growth.
Strategies
Achievements
Focus for the coming years
Accelerate
growth in
membership
program
Continuation
of key
initiatives
to improve
Catch
performance
– Addition of Bunnings as a OnePass partner
– Launched Disney+ bundle product in an
Australian-first streaming partnership
– Began to launch instore rewards, recognising
the importance of an omnichannel proposition
as a key point of differentiation for OnePass
– Launched the OnePass app on iOS and Android
– Formalised relationship with Flybuys through a
new partnership agreement
– Further enhance the OnePass value proposition through
new partners, features and benefits
– Leverage OnePass and OneDigital to enhance the
omnichannel customer experience and deliver more
personalised interactions
– Maintain growth discipline through focus on customer
lifetime value relative to customer acquisition cost
– Changes to leadership with new Managing
Director of Catch and new heads of retail,
technology, and supply chain
– Material reduction in headcount to lower costs
– Clearing of unprofitable first-party range and
– Further reduce in-stock range to create a more
profitable proposition
– Optimise performance of fulfilment centres
– Further reduce costs through lower discretionary spend
– Leverage benefits and traffic from OnePass
excess stock
– Initiatives to optimise fulfilment costs at the
Moorebank fulfilment centre
– Optimising marketing spend
Risk mitigation
OneDigital recognises that taking appropriate business risks is a critical aspect of generating acceptable business returns. In doing so,
it seeks to appropriately manage risks to minimise losses and maximise opportunities. OneDigital’s operations are underpinned by a
mature risk culture that includes a strong privacy, security and data governance framework driving the responsible use of customer
and divisional data across the ecosystem.
Risk
Mitigation
Data and IT
security
– Threat intelligence partnerships in place to monitor evolving cyber threats
– Dedicated team responsible for operational management and oversight of cyber security
– Regular reporting provided to executive management and the Board to govern cyber security
Competitor
activity
– Monitoring of competitor activity and consumer trends
– Pipeline of planned investment to improve the OnePass customer value proposition
– Using data analytics to drive insights across the retail divisions and improve customer experience and
personalisation
– Continuing to maintain high standards of product quality and safety
– Leveraging Wesfarmers’ retail assets to provide a differentiated customer experience
Execution
of Catch
turnaround
– Executing key initiatives to drive continued improvement in performance including first-party range
optimisation, improving performance of fulfilment centres, cost reduction initiatives, and benefits from
OnePass member volume growth
– Reshaping first-party range with consideration of the categories that matter most to Catch’s most
valuable customer cohorts to ensure a sustainable proposition
63
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Other activities
Other activities
Wesfarmers is an investor in Flybuys, the BWP Trust, Gresham Partners
and Wespine Industries.
Flybuys
BWP Trust
Wespine Industries
Wesfarmers owns a 50 per cent
shareholding in leading loyalty and data
company Flybuys, with Coles holding the
other 50 per cent. Formerly part of Coles,
following the demerger of Coles in
November 2018, the Flybuys business
was set up as an independent,
stand-alone business.
As at 30 June 2023, there were nine million
active members in the Flybuys loyalty
scheme. For more information on Flybuys,
please visit www.flybuys.com.au
Gresham Partners
Wesfarmers has a 50 per cent
shareholding in Gresham Partners Group
Limited, the holding company for the
Gresham Partners operations. Gresham
Partners is a leading independent financial
services business with activities in
corporate advisory, funds management,
property, and capital solutions.
For more information on Gresham
Partners, please visit
www.gresham.com.au
Wesfarmers’ investment in the
BWP Trust (the Trust) contributed
earnings of $9 million for the financial
year compared to $121 million in
the prior year, reflecting negative
property revaluations.
The Trust was established in 1998 with
a focus on large format retailing properties
and, in particular, properties leased
to Bunnings. BWP Management Limited,
the responsible entity for the Trust, is a
wholly-owned subsidiary of Wesfarmers
Limited. Units in the Trust are listed on
the Australian Securities Exchange and
Wesfarmers holds, through a wholly-
owned subsidiary, 24.8 per cent of the
total units issued by the Trust as at
30 June 2023.
The Trust’s portfolio as at 30 June 2023
consisted of a total of 73 properties.
For more information on the Trust, please
visit www.bwptrust.com.au
The 50 per cent-owned Wespine
Industries (Wespine) operates a
plantation softwood sawmill in Dardanup,
Western Australia. Wespine
manufactures structural timber used
for the construction, landscaping and
packaging industries. Wespine is also
continuing to develop an import wholesale
operation under the brand Staxa.
Following unprecedented demand
through the COVID-19 pandemic,
the level of demand for sawn timber
products has moderated as home buyer
incentives and other government
stimulus has tapered. Timber sales of
$140 million were achieved, only slightly
behind last year’s record result of
$145 million. This continued strong sales
performance reflects the addition of
imported supply to the Wespine offer
and wider recognition of the benefits of
timber for construction relative to more
carbon intensive alternatives.
Safety continues to be a focus for
management with ongoing investment
and operational initiatives to ensure a
strong safety performance.
For more information on Wespine,
please visit www.wespine.com.au
64
Wesfarmers 2023 Annual Report Sustainability
2023 highlights
Safety
performance
11.3
23% increase in
total recordable
injury frequency
rate from 9.2
in FY20221
Ethical sourcing
program
4,563
supplier sites
in the ethical
sourcing program,
a 4.8% increase
from FY2022
Indigenous
employment
3.3%
Indigenous
employment
maintaining
population
parity
Sustainability is core to the
Wesfarmers Way. Our primary
objective, values, and value-
creating strategies embed care
for people and planet, and a
focus on the long term across
the Group.
We understand that it is
essential that our businesses
look after our team members,
anticipate the needs of our
customers, treat our suppliers
ethically and fairly, invest in our
local communities, take care of
the environment, and behave
with honesty and integrity.
These sustainability pillars
underscore our work including
management of the divisions,
Group strategy and capital
allocation, knowing this
approach aligns with long-term
sustainable value creation.
1 Excludes Wesfarmers Health in FY2022.
This section of the annual report
includes information about those
sustainability issues that we and our
stakeholders have identified as most
material to the Group. Most importantly,
our approach to the management of
these issues is focused on driving
positive, sustainable long-term outcomes.
We report progress in safety and
inclusion, which remains ongoing work.
Our climate-related disclosures detail
how Wesfarmers’ businesses are
contributing to global decarbonisation
efforts, supporting the transition to net zero.
We remain focused on eliminating
modern slavery in our network of
suppliers, and our ethical sourcing
program invests in our teams and
training, increased transparency in our
supply chains and grievance mechanisms.
Data and cyber security are material
issues for our divisions, as are the
concerns regarding the environment and
circular economy. This year, we
completed a nature-based pilot in
readiness for future reporting using the
Taskforce on Nature-related Financial
Disclosures (TNFD) framework.
Our approach to governance and
corporate conduct is detailed in the
Corporate Governance Overview and
in the climate-related disclosures in this
annual report.
This year, the Health division’s
sustainability performance is included in
our Group sustainability disclosures.
Wesfarmers’ sustainability disclosures
are prepared in accordance with the
Global Reporting Initiative (GRI) and
linked to the United Nations Sustainable
Development Goals. Further information
on our sustainability disclosures,
including performance data, is set out at
www.wesfarmers.com.au/sustainability
65
Wesfarmers 2023 Annual ReportOperating and Financial Review How our approach creates value for Wesfarmers stakeholders
Sustainability has long been integrated into Wesfarmers’ approach to capital allocation, and the oversight and management of our
businesses. We invest considerable resources, including human and financial capital, often alongside partners, consistent with our
value-creating strategies, to support the delivery of satisfactory returns to shareholders.
Each year, we determine our most material sustainability issues, with input from internal and external stakeholders. We monitor
these issues closely and our approach embeds them into decision-making, creating sustainable long-term value, as detailed in the
following pages. For more information on our approach to materiality assessment see www.wesfarmers.com.au/sustainability
Our resources
Our value-creating strategies
Our sustainability pillars
Team
members
Team
members
Capital and assets
Suppliers
Our partners and
supply chains
Operating
excellence
Entrepreneurial
initiative
Communities
Natural
and sustainable
resources
Renewing
the portfolio
Operating
sustainably
Customers
Diverse businesses
Environment
Reputation and
capabilities
Integrity
and honesty
66
Operating and financial review | SustainabilityWesfarmers 2023 Annual Report Our approach
Our material issues
Selected FY2023 outcomes
Looking after our team members and providing
a safe, fulfilling work environment
Safe and fulfilling workplaces strengthen business
productivity and performance and team member
retention and engagement. We support gender
balance, and employment parity for Indigenous team
members because diverse teams perform better.
PEOPLE DEVELOPMENT,
DIVERSITY AND INCLUSION
ADVANCING
RECONCILIATION
HEALTH, SAFETY AND
WELLBEING
23%
increase in total
recordable injury
frequency rate to 11.3
15.5%
of Australian team
members completed
cultural awareness
training
4,563
supplier sites in the ethical
sourcing program with
3,050 or 67% monitored
during the year
88%
of reportable breaches
identified during the
year, were or are being
remediated, improving
working conditions for
workers in our supply
chains
$75.2m
in direct and indirect
contributions to
community organisations,
primarily in Australia and
New Zealand
124,000
visitors to Ever Present:
First Peoples Art of
Australia, showcasing
178 artists in Australia
and Singapore
10
own-brand product
recalls supporting
customer confidence
and safety
>1,200
retail outlets in
Australia and New
Zealand supporting an
omnichannel offering
which included more
than 210 million digital
interactions per month
2.4%
reduction in Scope 1 and
Scope 2 market-based
emissions relative to
FY2022
71.6%
of operational waste
recovered and diverted
from landfill
Engaging fairly with our suppliers, and sourcing
ethically and sustainably
By sourcing products and services in a responsible,
sustainable way, we strengthen critical supplier
relationships and support workers in our supply
chains. Customers value our ethical approach.
ETHICAL SOURCING
AND HUMAN RIGHTS
Supporting the communities in which
we operate
By being connected to and invested in local
communities, we help them to succeed. Connected
and creative communities are more agile, inclusive
and innovative.
ECONOMIC AND
COMMUNITY
CONTRIBUTION
DATA AND CYBER
SECURITY
PRODUCT SAFETY
CLIMATE
RESILIENCE
CIRCULAR
ECONOMY
Anticipating the needs of our customers and
delivering competitive goods and services
Our businesses perform better when providing
customers with affordable, safe and reliable products
and services. By investing to ensure products and
services are safe, we build confidence among
customers which strengthens our businesses.
Taking care of the environment
Being nature- and climate-aware builds resilience
and creates opportunities for our businesses.
Managing resources responsibly resonates with
team members, customers and others, reduces
our environmental impact, supports regeneration
and enhances our reputation.
Acting with integrity and honesty in all
our dealings
Accountability, transparency and achievement
of sustainable outcomes is supported through
Board oversight of risks and opportunities, robust
governance systems, investment in data integrity
and systems, and engagement with government
on policy.
GOVERNANCE,
CORPORATE CONDUCT
AND ETHICS
GOVERNMENT POLICY
AND REGULATORY
COMPLIANCE
Remuneration for
senior executives
includes consideration
of financial and other
matters (including
safety and sustainability
performance)
Group Risk Compliance
project delivered a
Group-wide system to
improve the efficiency
and effectiveness of risk
management processes
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Wesfarmers 2023 Annual ReportOperating and Financial Review Team members
Looking after our team members
and providing a safe and fulfilling
work environment
Safety, health and
wellbeing
People, development
and diversity
Integrity, openness and accountability are
Wesfarmers values. Our Code of Conduct
details our commitment to treating
everyone with respect, valuing diversity
and providing a safe work environment.
By offering open, inclusive workplaces,
we attract and retain outstanding teams
with diverse capabilities and experiences.
This is critical to strengthening our existing
divisions, executing our value-creating
strategies, renewing the Wesfarmers
portfolio and ensuring long-term
sustainability.
A respectful culture helps ensure our
diverse team members provide valuable
insights into the evolving needs and
expectations of our customers,
communities and stakeholders.
Across the Group, we focus on providing
sustainable employment for Aboriginal and
Torres Strait Islander people.
To support our focus on diversity,
inclusion and respectful workplaces,
Wesfarmers engages leading individuals
and organisations, with relevant expertise,
to support the development and sharing
of best practice.
Training and development
We are committed to providing opportunities
to enhance the approximately 120,000
team members’ performance at work,
promoting a learning culture and investing
in training and development, to help
advance careers.
Wesfarmers’ divisions have primary
responsibility for training and developing
their team members. This may include
job-specific training, or technical and
career development training for full-time,
part-time and casual team members.
Building data and digital skills have been
a key focus, alongside investment in
technologies to enable flexible working
(for those in suitable roles) and
on-demand learning.
Wesfarmers is focused on team
member safety and wellbeing. While we
acknowledge that there is always more
work to do, we are pleased with the
Group’s overall safety performance.
Wesfarmers maintained its commitment
to providing a safe and fulfilling work
environment for team members, and
improvements in safety were recorded
across most businesses. At a Group level,
TRIFR increased to 11.3, largely
attributable to Bunnings where TRIFR
results were impacted by a change in
methodology to better align with the
broader Group, as well as an increase
in manual handling injuries. Bunnings has
implemented a strategy to improve TRIFR.
This year, Wesfarmers had 4,681 workers’
compensation claims compared to
8,651 last year.
The Group has maintained its focus on
enhancing mental health, conducting a
baseline mental health survey across all
businesses to identify opportunities to
further support team members.
During the year, we completed an external
safety review, identifying leading safety and
wellbeing practices including measurement
and risk management. The review validated
many of the Group’s safety and wellbeing
strategies and identified opportunities to
enhance wellbeing measurement and
develop new indicators which will be
introduced in FY2024.
Safety performance
TOTAL RECORDABLE INJURY
FREQUENCY RATE (TRIFR)1
11.3
2023
11.3
2022
2021
2020
2019
9.2
9.6
10.4
13.5
1 TRIFR measures the number of lost time and
medical treatment injuries per million hours worked.
68
In recent years, the Group added training
for leaders and team members on
wellbeing and mental health.
Wesfarmers Corporate Office partners
with each division to develop executive
leaders. We train leaders from across
the Group together, to encourage
collaboration and align with our
objective.
Gender balance
Across the Group, we promote
gender balance, with all team members
offered equal access to employment,
compensation and benefits, development
and career opportunities.
We strive for a minimum 40 per cent
female and 40 per cent male, with the
remaining 20 per cent being any gender
or gender diverse. The Wesfarmers Board
maintains a composition of not less than
30 per cent female.
The Wesfarmers Leadership Team is
gender balanced, with 50 per cent female
and 50 per cent male team members.
The Wesfarmers workforce is 57 per cent
female and 42 per cent male.
Female representation
Total
workforce
Wesfarmers
non-executive
directors
Wesfarmers
Leadership Team
Senior executive
positions
All management
and professional
positions
2023
2022
57% 57%
44% 44%
50% 50%
34% 35%
40% 39%
Operating and financial review | SustainabilityWesfarmers 2023 Annual Report 50% women
Wesfarmers Leadership Team is
gender balanced
17,000+
team members participated in
cultural awareness training
We understand that achieving and
maintaining gender balanced teams
requires constant vigilance including from
our most senior leaders. There remain
opportunities to strengthen female
participation in senior executive positions.
Currently female team members hold
34 per cent of senior executive roles and
at management and professional levels
they hold 40 per cent of roles.
Advancing reconciliation
Wesfarmers’ vision for reconciliation is an
Australia that affords equal opportunities
to all. Our businesses are focused on
ensuring Aboriginal and Torres Strait
Islander people feel welcome as team
members, customers, suppliers and visitors.
week, we recognise the opportunity to
advance reconciliation in the wider
community. To build cultural competency
in our organisation, Wesfarmers is
making a significant commitment to
online and facilitated cultural awareness
training for all team members. During the
year, 15.5 per cent of Australian-based
team members participated in cultural
awareness training across the Group.
With our extensive supply chains,
Wesfarmers recognises that increasing
our spend with Indigenous suppliers can
strengthen the economic prosperity of
Aboriginal and Torres Strait Islander
communities. This year, our spend with
Aboriginal and Torres Strait Islander
businesses totalled $47.5 million, of
which 94 per cent was with certified
Supply Nation businesses.
After eight Reconciliation Action Plans
(RAPs), in 2022 Wesfarmers produced
its first Elevate RAP. The RAP guides the
Group’s Indigenous affairs strategy in the
following areas:
We awarded a Building Outstanding
Aboriginal and Torres Strait Islander
Business (BOAB) Fund grant to Circular
Head Aboriginal Corporation, as detailed
on page 27.
Taken together, these actions support
reconciliation, add strength and resilience
to our businesses, and are aligned with
our Group purpose.
Aboriginal and Torres Strait
Islander team members1
3.3%
2023
3,689
of Wesfarmers’
Australian
workforce
2022
2021
2020
2019
3,601
2,994
1,858
1,6661
1 Restated to account for casual team
members who have worked in the last
30 days (previously 90 days).
− increasing the number of Aboriginal
and Torres Strait Islander team
members in our businesses
− ensuring Aboriginal and Torres
Strait Islander team members
access career development and
progression opportunities, increasing
representation at all levels
− increasing our procurement from
Aboriginal and Torres Strait Islander
businesses
− investing in partnerships with
organisations that are focused on
improving the lives of Aboriginal and
Torres Strait Islander people, and
− celebrating Aboriginal and Torres
Strait Islander cultures.
We were pleased that the Group
maintained Indigenous employment
parity, with Aboriginal and Torres Strait
Islander team members representing
3.3 per cent of Wesfarmers’ Australian
workforce at the end of the period.
As one of Australia’s largest private
sector employers, with a presence in
communities across Australia and
serving millions of customers every
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Indigenous
Leadership program
The Wesfarmers Indigenous Leadership
Program is a ground-breaking initiative
which aims to develop a generation of
new Indigenous business leaders from
across the Group.
The program was launched in 2022,
because despite the Group regaining
Indigenous employment parity, Indigenous
team members remained under-represented
in senior roles.
The program aligns with the Group’s
strategic focus on career progression for
Indigenous team members, consistent
with the Wesfarmers Elevate RAP.
Wesfarmers partnered with the Australian
Indigenous Leadership Centre (AILC) to
deliver the program, which to date has
enabled 103 Indigenous team members
from across the Group to embark upon
a Certificate II or Certificate IV in
Indigenous Leadership.
The 12-month program is focused
on building personal, cultural and
professional leadership capacity. It
provides practical management training
through a blended learning model that
includes challenging, fun and hands-on
experiences. The program includes
online and face-to-face training modules,
with participants receiving monthly
one-on-one and tutorial group support,
and is aligned with existing divisional
leadership programs.
Of the Indigenous team members who
have participated in the program, 42
have graduated, securing a Certificate II
or Certificate IV credential.
To date, 24 per cent of participants have
been promoted or secured expanded
roles; and through the program the
Group has retained 96 per cent of
participants in ongoing employment
within Wesfarmers’ businesses.
69
Wesfarmers 2023 Annual ReportOperating and Financial Review
Communities
Supporting the communities
in which we operate
Collectively, the divisions also facilitated
more than $51 million in indirect
community contributions, raised from
team members and customers. Around
$41 million in indirect contributions was
enabled by Bunnings, through activities
such as community sausage sizzles and
instore fundraising.
Kmart customers and team members
supported the Salvation Army with cash
and gifts as part of the Kmart Wishing
Tree Appeal, now in its thirty-fifth year.
Officeworks raised more than $3 million
via its Make a Difference, Literacy is
Freedom and Back to School appeals,
for the Smith Family and the Australian
Literacy and Numeracy Foundation.
During the year, the Priceline Sisterhood
Foundation, managed by Health, raised
almost $1.7 million, providing essential
funding for community partners, primarily
supporting women and their families.
The Wesfarmers Corporate Office
contributed more than $10 million to more
than 44 community organisations during
the year, focused in three key areas:
medical research and wellbeing, education
and the arts. Across these areas, we
endeavour to support organisations that
are Indigenous-led or that have meaningful
outcomes for First Nations people.
Wesfarmers has been a leading supporter
of the arts for more than four decades.
During the year, among other projects,
we supported a major Western Australian
regional tour of the acclaimed Wesfarmers
Arts’ commission Koolbardi wer Wardong
– Australia’s first work of musical theatre
developed in Indigenous language by
Nyoongar musician Gina Williams AM and
Guy Ghouse, for West Australian Opera.
Our long-standing support for Bell
Shakespeare Company, the Australian
Chamber Orchestra and Musica Viva
Australia also enabled regional Australian
communities to enjoy performances and
education programs with leading
Australian and world artists.
During the year, we celebrated 30 years
in partnership with West Australian
Symphony Orchestra, bringing world-class
music to the people of Western Australia.
Community contributions
Wesfarmers connects and invests in the
communities where we operate. We know
that connected, creative communities are
more agile, inclusive and innovative, and
provide the best opportunity for the Group
and its businesses to succeed over the
long term.
Having strong, high performing businesses
allows us to make significant financial and
other contributions to local, regional and
national community organisations, with the
capacity to drive meaningful impact.
Wesfarmers is a significant contributor
to the Australian and New Zealand
economies. During the year, the Group
generated wealth of $43.7 billion, of which
$28.9 billion related to suppliers for raw
materials and inventory, $4.2 billion for rent,
freight, services and other external costs,
$6.0 billion related to salaries, wages and
other benefits for our team members and
$1.4 billion for taxes and other charges.
During the year, the Group contributed
$75.2 million to community organisations
in Australia and New Zealand comprising
$23.7 million in direct community
contributions and $51.5 million in indirect
contributions, facilitated by our divisions,
from our customers and team members.
Our divisions continued to support a
positive impact in the communities where
they operate, making $13.2 million in
direct community contributions.
Bunnings contributed $6.4 million in
cash, gift cards, labour and products,
including to support Australian
communities impacted by flooding
events and New Zealand communities
affected by Cyclone Gabrielle.
Kmart Group and Officeworks both
maintain significant community programs
which contributed, respectively,
$2.6 million and $2.8 million to diverse
local and national charities and
community organisations.
WesCEF provided $700,000 in funding,
focusing on youth organisations,
environmental initiatives, Aboriginal
health and STEM education, while
Industrial and Safety also donated
$700,000 to community partners.
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Community contributions
DIRECT
INDIRECT
$75.2m
2023
23.7
51.5
2022
2021
2020
2019
22.6
24.8
25.0
19.9
31.1
30.5
43.1
52.2
EverPresent
A Wesfarmers Arts highlight for the year
was our partnership with the National
Gallery of Australia.
Ever Present: First Peoples Art of
Australia is a touring exhibition, in
development since 2018, taking the
art of Australia’s First Peoples, our
country’s greatest gift to global culture,
to an international audience. Ever
Present is one of three leadership
projects identified in the Wesfarmers
Elevate RAP. It showcases more than
a century of Aboriginal and Torres Strait
Islander art, through 170 iconic works.
Ever Present toured to the National
Gallery Singapore in 2022, where it
was seen by 85,000 people, after a
premiere in Western Australia in 2021.
Ever Present is next presented at the
Auckland Art Gallery Toi o Tamaki
from July to October 2023.
Operating and financial review | SustainabilityWesfarmers 2023 Annual Report Customers
Anticipating the needs of our
customers and delivering competitive
goods and services
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Product safety
Data and cyber security
All Wesfarmers divisions are committed
to the health and safety of our customers
and to providing products that are safe.
By ensuring the products we sell are safe
and comply with all relevant standards,
we build trusting relationships with
customers.
Compliance with Australian and
New Zealand product safety consumer
laws is taken seriously. As part of our
product safety due diligence, we work
closely with suppliers to ensure that
relevant product testing and quality
checks are performed. For those
products our businesses design and
procure directly from suppliers under
their own brand, they ensure that:
− the products comply with relevant
product safety standards, mandatory
standards and Australian and
New Zealand consumer laws
− they promptly recall and withdraw
products if notified of a safety
defect, complying with our policies
and Australian Competition and
Consumer Commission (ACCC)
Guidelines (additional information
on product recalls is available on
the Wesfarmers website)
− where customers suffer loss caused
by defective products, they work with
manufacturers and suppliers so that
customers are compensated where
appropriate, and
− they report product safety incidents
in compliance with law.
Our businesses also collaborate to
share developments, learnings and best
practice in product quality and safety.
We meet quarterly through our divisional
Product Safety Forum and engage with
regulators on product safety issues.
This year, Wesfarmers participated in
the ACCC Product Safety Consultative
Committee.
As expectations on the protection of
data evolve rapidly, Wesfarmers remains
committed to being a trusted and
responsible custodian of the customer
and team member data we hold.
We are continuing to invest in data and
digital assets and capabilities, with this
investment underpinned by our core
values of integrity, accountability and
openness. Across the Group, our teams
collaborate on data privacy, cyber
security, information technology and
advanced analytics, including with
external innovators, researchers and
strategic partners.
During the year, the Group enhanced its
privacy frameworks, processes and
resourcing, including through initiatives to:
− update privacy policies, privacy hubs
and preference centres
− improve privacy impact assessments,
de-identification frameworks and
controls, and
− increase focus on privacy-by-design
including during digital product
development.
The Group maintains a data governance
framework, including a data governance
policy. This policy aligns standard
foundational data types to a Group data
classification scheme. This approach
helps to support the strategic value of
our data assets while balancing security,
integrity, compliance and reputational
issues inherent in collecting, using,
retaining, sharing and destroying or
deleting data.
Where customer cardholder data is
managed or handled, the divisions
continue to demonstrate Payment
Card Industry Data Security Standard
assurance. During the year, our
businesses implemented various
customer data initiatives. These included
enhancements to security monitoring
through security operations centres and
web security protective controls.
Wesfarmers has enhanced
technology-related governance to
include the appropriate use of generative
AI, new cyber security awareness
programs and introduced an algorithmic
impact assessment process.
Kmart Group
manages chemical
use
Kmart and Target are working to
minimise and restrict chemicals used in
apparel and textile production, such as
dyes, colourants and solvents. They are
members of the Zero Discharge of
Hazardous Chemicals (ZDHC) program,
a coalition of fashion retailers and
brands, value chain affiliates and
associates working to ensure safe and
responsible management of chemicals
in the global textile, leather, apparel and
footwear value chain.
As part of this alliance, Kmart Group
is working to implement the ZDHC
manufacturing restricted substance list
(MRSL) with all wet processing facilities
used in the production of Kmart Group
own-brand clothing, towel and bedding
products. Kmart Group publishes
progress of its wet processors on Detox
Live, which shows businesses that meet
the wastewater guidelines and those
with work to do on corrective actions.
We continue to participate in industry
and government consultations to support
cyber security resilience and enable safe
use of emerging technologies.
Across our businesses and supply
chains, we continue to observe and
respond to a heightened, active cyber
threat landscape, globally and locally –
with a focus on geopolitical tensions,
rapid technology development and
increased regulator interest.
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Wesfarmers 2023 Annual ReportOperating and Financial Review
Suppliers
Engaging fairly with our suppliers
and sourcing ethically and
sustainably
Ethical sourcing and
human rights
Wesfarmers has nearly 31,000 suppliers
producing goods and providing services
in more than 40 countries. For
Wesfarmers, long-term success requires
that we engage fairly with these
suppliers, sourcing ethically and
sustainably, and that we work with them
to ensure that human rights are
understood and respected.
Through our actions, often in cooperation
with our suppliers, we can reduce the
risk of modern slavery.
For almost a decade, we have reported
on human rights risks and our supply
chains, including on the findings of our
ethical sourcing programs.
Our Approach to Human Rights details
Wesfarmers’ most salient human rights
issues. The Wesfarmers Ethical Sourcing
and Modern Slavery Policy sets out
minimum standards which seek to
ensure that the Group sources products
and services in accordance with legal
obligations and community expectations,
while working with suppliers to improve
their social and environment practices.
Our minimum standards prohibit forced
and bonded labour, require adherence to
laws governing working ages and hours,
seek to ensure safe and healthy working
conditions and transparent record
keeping, recognise the rights to freedom
of association, and collective bargaining
and support the implementation of
trusted grievance mechanisms.
Wesfarmers’ ethical sourcing program,
including actions taken to address
modern slavery risks, is overseen by the
Wesfarmers Audit and Risk Committee.
This year, our divisions monitored
3,050 supplier sites and 1,895 suppliers
(recognising that a supplier may source
through many sites), from a total
4,563 sites and 2,880 suppliers in the
ethical sourcing program. Approximately
67 per cent of sites and 66 per cent of
suppliers in the program were monitored,
a pleasing increase from 61 per cent of
sites and 63 per cent of suppliers in the
prior year.
Monitoring activities include supplier
pre-qualifications, supplier visits, and
third-party monitoring (including
independent and extensive audits) and
grievance mechanisms. For suppliers
in the ethical sourcing program, the
frequency of third-party audits varies
from three to 24 months, depending
on prior audit findings and the level of
assessed risk.
Where supplier monitoring identifies
non-conformance with our standards,
these are classified as minor, major and
reportable breaches.
Ethical sourcing program
Sites in the
ethical sourcing
program
Sites monitored
this year
Sites in the
program with
reportable
breaches
4,563
4,355
3,050
2,651
226
307
2023
2022
Our supply chains
Across the Group, our divisions
directly source products from about
15,500 suppliers, with the majority
located in Australia, Bangladesh,
China, India, Indonesia and the
Republic of Korea.
Our divisions’ supply chains are often
complex with multiple tiers, sometimes
spanning multiple countries. The divisions
do not own the supplier sites and
factories where own-brand products
are manufactured, rather we engage
suppliers to manufacture goods for us.
Across the Group, we work with about
15,500 service providers, including
suppliers of transport and logistics,
maintenance and repair, cleaning and
waste removal, property and security,
and training and other professional
consulting services.
Our ethical sourcing programs
Our divisions take a pro-active,
risk-based approach to managing
human rights risks in their operations
and supply chains, each implementing
their own ethical sourcing and supplier
due diligence programs, consistent
with Wesfarmers’ minimum standards
in the Wesfarmers Ethical Sourcing and
Modern Slavery Policy, and in line with
leading international practice.
While divisional ethical sourcing due
diligence programs vary, consistent with
their diverse operations and industries,
they share a broadly common
methodology to assess, identify, manage
and mitigate human rights risks.
Risk assessment is influenced by factors
including the nature of the product being
sourced, the complexity of supply
chains, raw materials used, the location
and type of manufacturing process
involved, and the value of spend.
In the event a supplier is unwilling to
meet minimum standards or is unwilling
to implement required improvements
within mutually agreed timeframes,
arrangements with the supplier may be
suspended or terminated.
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This year, the reportable breaches
identified by the ethical sourcing program
include:
− health, safety and hygiene violations
(30 per cent of reportable breaches)
− working hours (28 per cent of
reportable breaches)
− wages and compensation
(20 per cent of reportable breaches)
− management systems, and
− environmental management.
Further details will be found in the
Wesfarmers Modern Slavery Statement,
due for release in late 2023.
Remediation
When a non-conformance is identified,
a remediation process is activated.
We work with our suppliers to remedy
reportable breaches. In certain very rare
circumstances, we may suspend or
terminate our arrangements with that
supplier. The response depends on the
severity of harm (or potential harm).
It may include immediate rectification
or making good any harm experienced
by an individual, and work to prevent
future harm.
All sites with non-conformances,
whether minor, major or reportable
breaches, are subject to ongoing due
diligence monitoring. The type of
non-conformance also determines
the follow-up.
This year, 39 per cent of reportable
breaches identified have been
remediated and 49 per cent are in the
process of being remediated.
It is rare for divisions to exit a site or
supplier for non-conformances including
a reportable breach. Instead, we seek to
engage closely with the supplier to
support remediation, through a
corrective action plan.
This year, we exited seven suppliers or
their sites where remediation of a
reportable breach could not be achieved.
Training and capacity building
Training team members is a key strategy
to increase alignment with our minimum
standards and reduce the risk of
non-conformances.
This year, more than 3,300 hours of
training were delivered on human rights,
ethical sourcing risks and ethical buying
practices. Training and capacity building
was also provided to selected suppliers
throughout the year, with approximately
26,000 hours delivered to supplier
employees.
399
more sites were monitored
through Wesfarmers’ ethical
sourcing programs this year
1,600
sites in 10 countries are
now covered by grievance
mechanisms
Worker grievance
helpline extended to
more workers
This year, Bunnings, Blackwoods,
Bullivants, Officeworks and Workwear
Group extended their worker
grievance helplines. Introduced in
2021, the Your Voice, Worker Helpline
complements the Group’s ethical
sourcing program by providing additional
visibility of issues beyond the regular
cadence of ethical sourcing audits.
The helpline aligns with the United
Nations Effectiveness Criteria for
Operational Grievance Mechanisms
and provides supply chain workers with
support to secure remediation.
This year, the helpline was implemented
at an additional 180 supplier sites
covering more than 43,000 workers in
China, Indonesia, Taiwan, and Vietnam.
The service now provides workers at
more than 350 manufacturing sites with
access to the helpline, to confidentially
raise concerns about their working
conditions.
The helpline is independently managed
by dedicated in-country teams, and
investigation and remediation activities
are conducted in a way that protects
the confidentiality of the person raising
the grievance.
To support the expansion of the helpline,
Bunnings delivered training to direct and
indirect supplier factory management
teams in English, Mandarin and
Vietnamese. To ensure factory workers
are aware of the helpline, on-site training
was also delivered to more than 2,900
workers in China and Indonesia.
In the past year, nine contacts were
received, with eight of those consisting of
general questions or otherwise deemed
out of scope (such as originating from
sites outside Wesfarmers’ supply chain).
One grievance was substantiated,
relating to worker access to social
insurance payments.
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Wesfarmers 2023 Annual ReportOperating and Financial Review
Environment
Taking care of
the environment
Wesfarmers is committed to taking care
of the environment, developing and
implementing strategies to manage and
reduce material environmental impacts
and risks. These include strategies to
better understand our impact and
dependence on nature and manage
resources and waste.
Circular economy
We recognise that there are limited
natural resources in the world, and that
our divisions can reduce their impact and
dependence, and create long-term value,
by becoming more circular.
Across the Group, we are focused on the
sustainability of supply chains and, where
possible, are working to support the use
of more sustainable raw materials and to
design out future waste.
Cross-functional teams are key to the
development and deployment of circular
solutions. During the year, Kmart Group
hosted circular design workshops for
apparel and Bunnings launched
team member and supplier training to
support the uptake of new sustainable
packaging guidelines.
Waste
We recognise the linkages between
consumption and waste, including waste
from manufacturing, packaging and
disposal of products at end of life.
Across the Group, our businesses are
taking action to minimise waste, and to
respond to growing customer interest in
reuse, recycling and regeneration.
Our businesses have strategies to reduce
operational waste and operational waste
disposed to landfill, and to increase
waste recovered including for recycling.
This year, approximately 72 per cent of
Group operational waste was recovered
and diverted from landfill, up two per cent
on the prior year, driven principally by
increased waste recovery at Bunnings.
Highlights include:
− Bunnings and Officeworks operate
market-leading recycling programs
to enable customers to divert diverse
waste from landfill (including toner
cartridges, pens, batteries and
devices).
− Workwear Group has collaborated
with Brisbane-based BlockTexx
to turn uniforms at end of life into
reusable raw materials.
− Bunnings introduced a uniform
recycling program.
− Kmart Group completed a
feasibility study in partnership with
The Salvation Army, which identified
two viable technologies that could be
used for textile recycling in Australia.
Packaging and plastic
As members of APCO, Bunnings,
Officeworks, Workwear Group, Blackwoods,
Kmart and Target are working towards
100 per cent reusable, recyclable or
compostable packaging for own-brand
products.
During the year, Wesfarmers Health
signed up to APCO and expects to
report against APCO targets in the 2024
financial year.
While satisfactory progress has been
made replacing plastic packaging,
significant focus is required to meet
these 2025 targets.
Operational waste
RECOVERED
DISPOSED
191.8kt
2023 137.3
54.5
2022
2021
2020
2019
124.3
116.2
120.5
107.4
54.2
54.5
55.5
58.2
74
Wesfarmers
completes pilot
study using TNFD
framework
The Group’s exposure to nature is varied
and extensive. Its businesses rely upon
nature (including as a source of raw
materials in goods purchased) and impact
nature (for example, through the use of
water in operations).
This year, Wesfarmers completed a pilot
study using the Taskforce on Nature-
related Financial Disclosures (TNFD)
framework, to test and provide feedback
on the draft framework.
The pilot deepened our understanding
and advanced our readiness to report
against the final TNFD framework which
is expected to come into effect in the
2025 financial year.
The pilot focused on selected timber
products sold in Bunnings, with timber
sourced in Australia and Southeast Asia.
Through the pilot, we identified that nature
reporting will be challenging for certain
Wesfarmers businesses, because complex
retail supply chains mean it is difficult
to access nature-based source data.
The pilot also confirmed that the use of
certifications for raw material inputs (like
Forest Stewardship Council® certification of
timber and pulp products) is an important
risk control.
Operating and financial review | SustainabilityWesfarmers 2023 Annual Report Climate-related
disclosures
2023 highlights
2.4%
reduction in Group
greenhouse
gas emissions
First ore
mined at Covalent lithium
project, supporting
the transition to a
low‑emissions economy
37MW
capacity from 165
rooftop solar systems,
with 43 installed during
the year
As a large, diversified organisation, we understand that Wesfarmers plays an important role
supporting global efforts to transition to a low-emissions economy.
Our approach
At Wesfarmers, our focus on managing
the impacts of climate change aligns with
our purpose. We recognise climate
change is a material risk to our divisions
and we work in a disciplined way to
manage our exposures to climate change,
invest in opportunities and support the
global goal of transitioning to a low-
emissions economy.
Climate change impacts our operations,
team members, supply chains, customers
and the communities where we operate.
The divisions have long been managed
with climate and carbon awareness,
focusing on reducing operational
(Scope 1 and Scope 2) greenhouse
gas emissions. During the year, we
implemented strategies to further embed
climate-related considerations into our
strategic planning processes and
continued to invest in decarbonisation
initiatives.
Our divisions have begun engaging
across their global value chains, to
address climate risks and opportunities
and to mitigate Scope 3 emissions.
During the year, we focused on improving
the quality of our Scope 3 emissions
inventory. For further information, see
page 81.
We continue to monitor and report on our
climate-related performance and progress
against greenhouse gas emissions
reduction and net zero Scope 1 and
Scope 2 targets. Since 2018, we have
structured our climate disclosures using
the recommendations of the Task Force
on Climate-related Financial Disclosures
(TCFD), under the four reporting pillars of
governance, strategy, risk and
opportunities, and metrics and targets.
Our disclosures have evolved as our
response to climate change has matured.
We recognise the link between climate
and nature and during the year completed
a pilot to test and learn from the
framework being developed by the
Taskforce on Nature-related Financial
Disclosures (TNFD), to better understand
the Group’s nature impacts and
dependencies.
Further information on Wesfarmers'
approach to climate is available at
www.wesfarmers.com.au/
sustainability
Group greenhouse gas emissions
1,196.7 kilotonnes CO2e
1,500
1,000
500
0
1,308.9
1,225.7
1,196.7
Scope 1
Scope 2
2021
2022
2023
Our reporting boundary is based on operational
control as defined by the National Greenhouse and
Energy Reporting Act 2007 (Cth). Scope 2
emissions are stated using market-based
accounting, in accordance with the World Resource
Institute’s Greenhouse Gas Protocol Scope 2
guidance. Supplementary location-based
data can be found from page 185 and at
www.wesfarmers.com.au/sustainability
75
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Climate‑related disclosures
Governance
Effective governance is central to our approach to managing climate change including
climate-related risks and opportunities. Climate change is recognised as a material risk
across the Group.
Wesfarmers Board
Leadership framework
Executive remuneration
The Wesfarmers Board has ultimate
responsibility for overseeing the Group’s
approach to managing climate-related
issues. The Wesfarmers Board considers
and endorses the Group’s approach to
managing climate-related risks and
opportunities, the Wesfarmers Climate
Policy (Climate Policy), divisional emissions
reduction and renewable electricity
targets, strategic climate-related decisions
and public disclosures. Climate change
risk management is a standing item in the
divisional reporting framework and in
FY2023, the Wesfarmers Board reviewed
the Climate Policy, strategic initiatives,
performance against the Climate Policy
including divisional targets and other
climate-related issues. Through the Audit
and Risk Committee, the Wesfarmers Board
receives updates at least twice annually
on diverse climate-related issues.
Climate Policy
The Climate Policy establishes the
minimum standards to manage
climate-related risks and opportunities for
the Group. The Climate Policy is reviewed
annually to ensure that it remains relevant
and reflects changing circumstances.
During the year, it was amended to
address emerging climate-related risks
and opportunities. While most divisions
are advanced in their implementation of
the Climate Policy, our newest divisions,
Wesfarmers Health and OneDigital, are
making progress implementing the policy.
The Climate Policy is available at
www.wesfarmers.com.au/cg
The Wesfarmers Leadership Team and
divisional leadership teams lead the
implementation of climate-related
strategies, review new and emerging
climate-related risks and opportunities,
engage diverse stakeholders and share
expertise. Each divisional board and
management team is responsible for
identifying and managing material risks
and opportunities relevant to its
businesses, in accordance with the
Group’s Risk Management Framework
and Risk Appetite Statement.
Through the annual strategic planning
process, each division forecasts
emissions and details decarbonisation
strategies in its corporate plan, for
consideration and approval by the
Wesfarmers Board. Implementation of
climate-related programs is generally
coordinated through sustainability or
climate teams, with support from
Corporate Affairs, Finance, Risk,
Environment and Operations teams.
The Wesfarmers Corporate Office
convenes a quarterly Carbon and Energy
Forum for the Group, involving Group and
divisional subject matter experts with
day-to-day responsibility for the
coordination and management of
climate-related programs. These forums
provide our businesses with an
opportunity to share knowledge to
accelerate progress.
The Wesfarmers Board, through the
Remuneration Committee, takes account
of various environmental, social and
governance considerations (including
climate) when determining the
remuneration of Key Management
Personnel. It also makes recommendations
to the Board regarding performance
goals linked to the Climate Policy
including divisional emissions reduction
targets. Further information on the
Group's Key Executive Equity
Performance Plan (KEEPP) can be
found in the remuneration report.
Internal shadow carbon price
Since 2014, Wesfarmers has incorporated
an internal shadow carbon price into
capital allocation and capital expenditure
decisions, through the Wesfarmers Project
Expenditure and Disposals Policy. The
internal shadow carbon price assigns a
value to emissions over the life of an
investment. It ensures that investment
decisions apply a cost to projects with
associated emissions and supports
investments that reduce emissions.
Regular reviews are undertaken of the
internal shadow carbon price to ensure it
remains appropriate and reflects potential
future carbon costs. Further information
on the Wesfarmers shadow carbon price
is at www.wesfarmers.com.au/
sustainability/our‑priorities/climate‑
change‑resilience/shadow‑carbon‑price
Responsibilities
Corporate office
− Establishes the Climate Policy which sets minimum
standards for the Group
− Convenes and facilitates cross-divisional collaboration
and expertise
Wesfarmers Board, supported by the Audit and Risk
Committee and Remuneration Committee
− Approves the Climate Policy and carbon price
− Provides governance over climate-related risks and determines
− Reviews the shadow carbon price
risk appetite
− Supports Group-wide climate scenario analysis and reporting
− Coordinates corporate plan, incorporating divisional emissions
forecasts and decarbonisation strategies
− Sets performance goals and remuneration
− Approves strategies in corporate plans
Divisional responsibilities
Boards and audit, risk and
compliance committees
− Provide governance over divisional
climate-related risks and support the
prioritisation of opportunities
− Monitor climate-related performance and
implementation of climate-related strategies
Senior management
Carbon and energy teams
− Detail strategy and risks/risk
management in corporate plans,
for implementation
− Implement the Climate Policy
− Maintain systems for monitoring
and reporting
− Provide and manage resourcing to
support climate-related strategies
− Report through divisional and Group
− Implement strategies and actions
− Participate in the quarterly, cross-
divisional Carbon and Energy Forum
governance structure
76
Wesfarmers 2023 Annual Report Our strategy
We recognise our climate-related responsibilities and that climate resilience will deliver long-term
value for our shareholders, including as we invest in opportunities aligned with the transition to a
low-emissions economy. The Group continues to work in a disciplined way to embed carbon
awareness into our culture, operations and strategy.
With the diversity of businesses across the Group, our divisions have a mix of decarbonisation strategies and transition plans.
Consistent with Wesfarmers’ model of divisional autonomy, divisional strategies are underpinned by the Climate Policy, with each
division developing its own strategy that reflects its emissions profile. For the Group’s operational (Scope 1 and Scope 2) emissions,
Scope 1 emissions are material for WesCEF and Coregas, and Scope 2 emissions are more material for other divisions. Where
relevant, divisional strategies are aligned, connected and scaled.
During the 2023 financial year, the divisions progressed the actions identified in prior years, to build climate resilience and create
long-term value. While taking actions to support their decarbonisation, Kmart Group, Bunnings and Officeworks collaborated on
renewable electricity procurement and knowledge sharing. Scenario analysis continued to help us understand Group risks and
opportunities, and the divisions continued to incorporate energy efficiency and climate-resilience into facility design, to mitigate
future physical risks. Our divisions also deepened their understanding of Scope 3 emissions and continued to consider, and to
invest in growth opportunities in new industries, including adopting circular business models.
Focus areas for our divisions include reducing operational Scope 1 and Scope 2 emissions, mapping and reducing Scope 3
emissions, investing in growth opportunities and developing partnerships in the transition to a low-emissions economy.
Climate scenario analysis
Our enablers
Our transition levers
Climate scenarios provide insights
into different plausible climate futures.
Climate scenario analysis helps to
challenge and develop our
understanding of the implications
of different climate futures for our
businesses and stakeholders.
It supports the development of our
strategy (responding to climate-
related risks and opportunities) and
the assessment of our climate
resilience, across different climate
scenarios.
Importantly, climate scenario analysis
must be treated with caution.
Climate scenarios are not forecasts,
rather they are based on climate and
socio-economic models. Future
climate outcomes may differ from
scenarios for many reasons including
changes in policy, the market and
technology.
Accordingly, care should be taken
when considering forward-looking
statements associated with climate
scenario analysis (including around
strategy and the impact or
effectiveness of strategy).
Building climate resilience requires an
integrated and disciplined approach,
to develop and implement strategies
that address complex and
interconnected issues
Our focus is on embedding climate
considerations into our businesses with
responsibilities across the Group to lead,
support and deliver measures that
embed carbon awareness
Lead
Wesfarmers Leadership Team, including
divisional Managing Directors, sets the
Group vision and targets to support a
culture of climate resilience
Support
Corporate Office establishes and
supports policies, climate governance,
knowledge sharing and risk management
Deliver
Divisions integrate climate-related
considerations into their strategic plans
and operations
Across the Group, we have identified
five transition levers to support the
divisions to deliver their climate strategies
and transition plans
1. Embed climate resilience
Integrate the management of
climate-related risks and opportunities
into our culture and strategies
2. Leverage data and digital
Implement systems and solutions to
support the use of data and digital
strategies to inform decision-making
3. Mitigate physical impacts
Continue to reduce our emissions,
understanding and managing our
response to the physical impacts
associated with climate change
4. Focus on supply chains
Collaborate and build strength in supply
chains, to address the complexity and
challenges of decarbonising global
value chains
5. Invest for the future
Identify and pursue opportunities that
support our growth as we transition to
a low-emissions economy
77
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Climate‑related disclosures
Our progress and focus areas
Our operational Scope 1 and Scope 2 market-based emissions in the 2023 financial year were 2.4 per cent lower
than the prior year. We continue to make good progress reducing our Scope 2 emissions, while our Scope 1
emissions increased as WesCEF’s ammonia production normalised after a planned shutdown in the prior period.
With our commitment to reducing our operational emissions, Bunnings, Kmart Group, WesCEF, Officeworks and Industrial and Safety have set
interim and net zero operational Scope 1 and Scope 2 emissions targets.¹
Group performance
During the year, Group Scope 1 and Scope 2 market-based emissions
were approximately 1,196.7 kilotonnes of carbon dioxide equivalent (CO2e),
a 2.4 per cent reduction relative to FY2022.
Scope 1 emissions increased by 6.3 per cent to approximately
845.9 kilotonnes of CO2e, due to WesCEF’s ammonia production normalising
after a significant planned ammonia plant shutdown in the prior period.
Scope 2 market-based emissions decreased by 18.4 per cent to
350.8 kilotonnes of CO2e, achieved through continued energy efficiency
measures, rooftop solar electricity generation and renewable electricity
procurement, principally led by Bunnings. Our businesses also benefited
from lower electricity emission factors, which reflects an increase in
renewable electricity in the grid.
Scope 1 – Reducing our direct emissions
Group Scope 1 and Scope 2 market‑based emissions
(kilotonnes CO2e) and main divisional contributions in FY2023.
1,300
1,225
1,150
1,075
1,000
54
(45)
1,225.7
(33)
(5)
1,196.7
FY2022
WesCEF
Bunnings Kmart
Group
Other
divisions
FY2023
Our Scope 1 direct emissions arise from our operations through industrial processes, combustion of fuels and use of refrigerants.
Some divisions operate in sectors that are hard to abate, and decarbonisation requires the development and commercialisation of
low-emissions technologies.
Operational Scope 1 emissions
Scope 1 emissions account for
approximately 71 per cent of the Group’s
total operational emissions.
WesCEF contributes around 96 per cent
of the Group’s Scope 1 emissions.
These emissions arise predominantly
from the manufacture and processing of
ammonia, ammonium nitrate, sodium
cyanide, liquefied natural gas (LNG) and
liquefied petroleum gas (LPG), producing
nitrous oxide, carbon dioxide and methane.
WesCEF net zero roadmap2,3
The other divisions contribute the
remaining four per cent which arise
largely from the use of fuels in vehicles,
natural gas for heating and refrigerants in
cooling systems.
Across the Group, capital investments,
partnerships, new technologies and
energy substitutions will be required
to reduce our Scope 1 emissions.
WesCEF’s net zero roadmap is central to
reducing the Group’s Scope 1 emissions.
Scope 1 emissions by division
Other
divisions
Scope 1
emissions
845.9
ktCO2e
WesCEF
Phase 1 – prior to 2020
Phase 2 – 2020 to 2030
Phase 3 – 2030 to 2050
WesCEF implemented technology
solutions to avoid over 40 per cent of its
operational emissions, principally from
nitrous oxide catalytic abatement.
FY2020 baseline emissions by source
In this phase, WesCEF is focused on
achieving its interim 30 per cent
emissions reduction target by FY2030.
This FY2030 target is relative to an
FY2020 baseline and incorporates
abatement already achieved.
WesCEF will focus on deploying
low-emissions ammonia technologies, as
ammonia accounts for more than half of
WesCEF’s emissions. This is expected to
include electrolysis and carbon capture,
utilisation and storage (CCUS).
Scope 2
6%
Nitrous
oxide 25%
Other Scope 1
4%
CO2 Natural gas
for H2 (ammonia
feedstock) 34%4
CO2 Natural gas
for H2 (process
heating) 15%
CO2 Other 16%
Meeting the FY2030 target is expected
to be largely achieved through
additional investment in catalytic
abatement in its nitric acid plants.
Phase 2 will also involve actions that
reduce Scope 2 emissions, and seek to
establish foundational partnerships to
support the scale-up of low-emissions
technologies required to meet its 2050
net zero roadmap.
In setting its net zero targets, WesCEF
has assumed that these technologies
continue to advance and become
commercially viable and capable of
operating at scale, well before 2050.
WesCEF also assumes government policy
remains supportive of climate action.
Around ten per cent of WesCEF’s
remaining emissions may require the use
of carbon offsets, if no commercially viable
technological solutions emerge.
¹ Baselines of our targets may be adjusted for significant changes to our businesses including material acquisitions, divestments or changes to greenhouse gas reporting
methodologies. Wesfarmers Health and OneDigital are currently in the process of establishing baselines to support future targets.
2 Further information on WesCEF’s net zero roadmap is available at https://Wescef.com.au/Wescefs-roadmap-to-net-zero/
3 The assumptions underpinning WesCEF’s targets will be regularly tested to ensure that they are reasonable. Adjustments to targets will be made as required, if the
technologies do not advance at the required pace.
4 This is high purity CO2 and presented net of volumes captured and sold to third parties.
78
Wesfarmers 2023 Annual Report Scope 2 – Reducing our indirect emissions from electricity use
Scope 2 indirect emissions arising from electricity use are the principal emissions source for most of our businesses. Our Scope 2 reduction
strategies include on-site operational solutions which are within our control (including energy efficiency, climate resilient design and
behind-the-meter electricity generation) and off-site procurement solutions (such as renewable electricity purchased from third parties).
Operational Scope 2 emissions
Scope 2 market-based emissions
account for approximately 29 per cent
of the Group’s operational emissions
and relate to the use of grid-supplied
electricity.
Bunnings, Kmart Group and Officeworks
contribute approximately 80 per cent of
the Group’s Scope 2 market-based
emissions. Recognising the importance
of transitioning to renewable electricity to
meet their net zero targets, these
divisions have committed to sourcing
100 per cent renewable electricity by
the end of 2025. Their Scope 2
market-based emissions are expected to
be substantially reduced as they progress
towards these renewable electricity
targets.
The divisions continue to focus on
deploying operational solutions such as
more efficient new store formats, building
management systems, LED lighting and
efficient heating and cooling.
Where feasible, Bunnings, Kmart Group
and Officeworks expect to increase their
investment in on-site solar photovoltaic
(PV) systems and to procure additional
offsite renewable electricity (through
power purchase agreements,
GreenPower and renewable energy
certificates).
Scope 2 market‑based emissions by division
Scope 2
emissions
350.8
ktCO2e
Kmart Group
Bunnings
WesCEF
Officeworks
Other
divisions
During the year, Bunnings celebrated the
installation of its hundredth on-site solar
PV system at its Palmerston Warehouse
in the Northern Territory.
Since 2014, Bunnings has progressively
installed on-site solar PV systems across
its Australian network to support the
decarbonisation of its operations by
generating renewable electricity on-site.
In 2020, Bunnings, with Kmart Group and
Officeworks, adopted a target to use
100 per cent renewable electricity by the
end of 2025 across its operations. This
target is expected to be achieved through
a combination of strategies, with on-site
solar PV systems playing an important
role. Each installation provides up to
30 per cent of each store's energy needs.
Across the Bunnings network, solar PV
systems cover around 310,000 square
metres of rooftop space, and annually
generate the equivalent electricity
required to power over 7,000 Australian
households for one year.
Bunnings’ hundredth
on-site solar PV system
Becoming more energy efficient with
onsite solutions
Transitioning to offsite renewable electricity
Improve energy efficiency of existing stores and facilities
Power Purchase Agreements
Opportunities exist to improve the energy efficiency of the
divisions’ stores and facilities. For example, the divisions retrofit
and optimise operating conditions by introducing building
management systems, LED lighting, and efficient heating and
cooling systems.
Efficient new stores and facilities
The divisions adopt sustainable design principles for new
stores and facilities to materially improve energy efficiency,
reduce emissions and deliver cost savings. For example,
Bunnings’ new store format can deliver emissions efficiencies
of around 30 per cent.
Generate electricity to reduce grid‑electricity use
The divisions invest in behind-the-meter electricity generation
from renewable and waste-heat sources to power their
operations. Generally, this is on-site solar, although WesCEF
generates electricity through waste heat recovery.
The divisions source renewable electricity and their
associated large-scale generation certificates (LGCs) through
power purchase agreements and other wholesale
agreements with electricity retailers and/or generators.
GreenPower
The divisions source renewable electricity through retail
products such as GreenPower to meet electricity needs in
those markets where there are limited options including for
some of their small sites.
Renewable energy certificates
Unbundled renewable energy certificates including LGCs and
New Zealand Energy Certification System certificates are
expected to be required, as part of our overall portfolio of
off-site procurement solutions.
79
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Climate‑related disclosures
Divisional progress against Scope 1 and Scope 2 targets¹
kilotonnes CO2e
Bunnings Group
259.7
Scope 1 and Scope 2
net zero by 2030
100 per cent renewable
electricity by the end
of 2025
Kmart Group2
Scope 1 and Scope 2
net zero by 2030
100 per cent renewable
electricity by the end
of 2025
WesCEF3
Scope 1 and Scope 2
net zero by 2050
Interim target –
30 per cent reduction
by 2030
Officeworks
Scope 1 and Scope 2
net zero by 2030
100 per cent renewable
electricity by the end
of 2025
WIS4
(excluding Coregas)
Scope 1 and Scope 2
net zero by 2035
Interim target –
45 per cent reduction
by 2025
Coregas4
Scope 1 and Scope 2
net zero by 2050
Interim target –
30 per cent reduction
by 2035
Health
Yet to establish
net zero target
OneDigital
(including Catch)
Yet to establish
net zero target
110.3
104.9
59.9
Bunnings achieved a 42.9 per cent emissions reduction relative
to FY2022, and a 76.9 per cent emissions reduction relative to its
FY2018 baseline. Bunnings continues to exceed its interim 2025
emissions reduction target of 10 per cent and has made significant
progress towards its Scope 1 and Scope 2 net zero target.
FY2021 FY2022 FY2023
During the year, Bunnings sourced 64.4 per cent of electricity
from renewable sources.
262.5
250.9
218.1
Kmart Group achieved a 13.1 per cent emissions reduction
relative to FY2022, and a 34.1 per cent emissions reduction
relative to its FY2018 baseline. Kmart Group exceeds its interim
2025 target of 20 per cent and is making progress towards its
Scope 1 and Scope 2 net zero target.
FY2021 FY2022 FY2023
During the year, Kmart Group sourced 18.6 per cent of electricity
from renewable sources.
Baseline
FY2018
330.8
Baseline
FY2018
955.5
873.9
795.4
849.5
668.8
30%
by 2030
Baseline
FY2020
Interim
target
FY2021 FY2022 FY2023
WesCEF’s emissions increased 6.8 per cent in FY2023 and are
11.1 per cent below its FY2020 baseline. The increase relates
principally to increased ammonia production in FY2023, due to a
significant planned maintenance shutdown in FY2022, as carbon
dioxide is generated as a byproduct of ammonia production.
Consistent with its net zero roadmap, during the year, WesCEF
advanced partnerships with Mitsui, APA and Jupiter Ionics.
49.1
Baseline
FY2018
14.8
34.4
30.8
27.1
Officeworks achieved a 12.0 per cent emissions reduction relative
to FY2022, and a 44.8 per cent emissions reduction relative to its
FY2018 baseline. Officeworks exceeds its interim 2025 emissions
reduction target of 25 per cent and is making good progress
towards its Scope 1 and Scope 2 net zero target.
FY2021 FY2022 FY2023
During the year, Officeworks sourced 23.8 per cent of electricity
from renewable sources.
11.0
10.3
9.6
WIS (excluding Coregas) achieved a 6.8 per cent reduction in
emissions relative to FY2022, and a 35.1 per cent emissions
reduction relative to its FY2018 baseline.
8.1
45%
by 2025
Baseline
FY2018
Interim
target
FY2021 FY2022 FY2023
16.1
16.4
16.1
17.6
11.3
30%
by 2035
Baseline
FY2022
Interim
target
FY2021 FY2022 FY2023
This has been achieved through the implementation of energy
efficiency measures at its branches, site consolidations and
procurement of renewable electricity in New Zealand.
Coregas' Scope 2 emissions increased 25.9 per cent in FY2023
due to increased electricity usage as a result of increased
production of gases to meet business demand.
This increase was moderated by a reduction in Scope 1
emissions due to efficiencies in its logistics network which
reduced fuel usage. Coregas’ emissions intensity based on
revenue has continued to decline.
13.8
11.6
FY2022 FY2023
3.0
2.9
FY2022 FY2023
Our newest divisions, Wesfarmers Health and OneDigital, have
not yet established net zero targets, and are focused on
establishing representative baselines to inform future
decarbonisation strategies and pathways. FY2022 Health
emissions have been estimated for comparison purposes.
OneDigital’s emissions are principally associated with Catch.
OneDigital (excluding Catch) emissions only relate to electricity use
in its offices.
1 Baselines were generally set in 2019, based on the Scope 2 location-based accounting method and have not been restated using the Scope 2 market-based
accounting method as they were not materially different during the baseline year.
FY2022 has been restated to exclude Catch. FY2021 includes Catch.
2
3 WesCEF’s 2020 Scope 1 and 2 location-based emissions baseline is 955.5 ktCO2e, and differs from the reported value of 983.3 ktCO2e due to adjustments
for the current global warming potentials of relevant greenhouse gases.
Interim and net zero targets assume that emission reduction technologies relating to distribution assets (including heavy vehicle distribution) will continue to develop
in the coming years, and that in time they will become commercially viable and operate at scale to meet these targets. Baselines may be updated in the event of
significant portfolio changes and changes to greenhouse gas emission reporting protocols including changes in reporting (including operational control) definitions.
Should changes to baselines occur, then adjustments may be made to interim Scope 1 and 2 emissions reduction targets or may be made to the net zero targets.
4
80
Wesfarmers 2023 Annual Report Scope 3 - Mapping and reducing our value chain emissions
Scope 3, or value chain, emissions are indirect greenhouse gas emissions that arise from activities upstream and downstream of the
divisions' operations and outside their direct control. They represent the Scope 1 and Scope 2 emissions of their direct and indirect
suppliers, customers and team members.
Our businesses have diverse and complex global value chains, and Scope 3 emissions are a material source of our total emissions
inventory. During the year, our Scope 3 emissions were approximately 37.3 megatonnes of CO2e, or 31 times our operational
emissions.
The following chart details Scope 3 emissions, by division (on the left) and by Scope 3 emissions category1 (on the right). As shown,
Bunnings and Kmart Group have the largest Scope 3 emissions profiles, and the most material categories are Category 1 (purchased
goods and services), Category 11 (use of sold products) and Category 12 (end-of-life treatment of sold products), making up almost
93 per cent of Group Scope 3 emissions.
Divisional Scope 3 emissions by category
% by division
Bunnings
34.9
Kmart
30.3
WesCEF
13.2
Officeworks 7.5
Health
WIS
(ex Coregas)
Coregas
OneDigital
Corporate
5.7
2.6
4.0
1.7
0.1
% by category
57.9 Category 1
Purchased
goods and
services
30.1 Category 11
Use of sold
products
4.9 Category 12
End-of-life treatment
of sold products
7.1 Other
categories
Most material Scope 3
categories across the Group
Other categories
Cat 1 Purchased goods and services
Cat 2 Capital goods
Cat 6 Business travel
Cat 10 Processing sold products
Cat 11 Use of sold products
Cat 3 Fuel- and energy-related
Cat 7 Employee commuting
Cat 13 Downstream leased assets
emissions
Cat 12 End‑of‑life treatment of
sold products
Cat 4 Upstream transportation
and distribution
Cat 8 Upstream leased assets
Cat 14 Franchises
Cat 5 Waste generated in operations
Cat 9 Downstream transportation
Cat 15 Investments
and distribution
1 There are 15 Scope 3 categories listed in the WRI’s Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Standard.
Scope 3 emissions inventory
Bunnings and Kmart Group are the
largest contributors to our Scope 3
emissions, accounting for 65.2 per cent
of Group Scope 3 emissions.
Scope 3 emissions are predominantly
linked to the production of goods in our
supply chains, the use of products by the
divisions’ customers and the end-of-life
treatment of products. These emissions
are outside the divisions' direct control but
sit within their global value chains. The
volume of Scope 3 emissions relates
principally to the volume of goods sold
by our businesses.
Our divisions’ initial focus is on Category 1
and Category 11.
Category 1 — Purchased goods and
services: This category is the largest
contributor to Group Scope 3 emissions
and totalled 21.6 megatonnes of CO2e
during the year. Emissions in this category
result from upstream activities related to
the extraction, manufacture and
production, of goods and services that
our businesses purchase.
Category 11 — Use of sold products:
This category contributed
11.2 megatonnes of CO2e to our
emissions inventory. Emissions in this
category arise from customers’ energy
consumption when using our products
and includes electricity used for electrical
goods or energy used to launder apparel.
Emissions may also arise from the
combustion of fuels or the release of
greenhouse gases into the atmosphere,
such as nitrous oxide from fertilisers.
Our progress
Engaging and supporting suppliers,
customers and others in the divisions’
value chains to decarbonise will be
important to achieve a reduction in
Scope 3 emissions.
Several divisions across the Group have
begun this process, with an initial
assessment of supplier emissions profiles.
Bunnings have assessed that around half
of their Scope 3 emissions come from
twelve product categories. Kmart Group
gathered energy data from 172 supplier
sites, highlighting opportunities for future
engagement with suppliers.
WesCEF has commenced supplier
engagement with a focus to initially
improve its supplier-specific
emissions data.
Bunnings and Officeworks currently
operate recycling programs to support
the recovery of raw materials from
products at end of life, which also deliver
Scope 3 reduction benefits. Other
strategies, such as more sustainable
product ranges and product repurposing
and repairing, can reduce Scope 3
emissions by extending product life and
reducing upstream demand for resources.
As we better understand the impact of
these strategies, we expect
to measure associated Scope 3
emissions avoided.
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Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Climate‑related disclosures
Scope 3 management focus areas
Value chain decarbonisation requires a collaborative, whole-of-economy
approach. It is essential to understand where our emissions are concentrated,
to help focus our efforts.
As suppliers and customers implement their own decarbonisation initiatives,
Scope 3 emissions will reduce. With only indirect influence over these
emissions, decarbonisation across the divisions value chain remains challenging.
We are focused on three key areas of Scope 3 management.
Improving the quality of our Scope 3 data
Calculating Scope 3 emissions is complex and we use the spend-, activity-,
supplier- and life cycle-based Scope 3 emissions evaluation methods.
In recent years, the divisions have deepened their understanding of their
Scope 3 emissions inventory, which is helping to establish the foundational
data to support engagement with their value chains. We expect to quantify
and disclose emissions avoided associated with Scope 3 actions, as the
divisions continue to iterate and mature their approach to Scope 3 data.
Engaging with suppliers
For the Group, Category 1— Purchased goods and services is the most
material Scope 3 category. Some of the divisions have begun engaging with
suppliers to understand and support their emissions reduction opportunities
and initiatives.
Supporting our customers
With customers, opportunities exist to support efficient and extended product
use and responsible disposal at end of life, to deliver Scope 3 emissions
improvements. Bunnings and Officeworks operate large recycling programs
to support the recovery of embedded resources in products at end of life.
Kmart Group
takes key steps
to reduce Scope 3
emissions
With more than 90 per cent of
Kmart Group’s emissions outside its
operations, obtaining accurate
Scope 3 data among suppliers is an
important first step to long-term
emissions reduction.
Kmart Group is a member of the
Sustainable Apparel Coalition (SAC),
a global, multi-stakeholder non-profit
alliance for the fashion industry, focused
on sustainable production.
In 2011, SAC launched the Higg Index,
an assessment tool to standardise
the measurement of value chain
sustainability including the
measurement of Scope 3 emissions.
Energy use in fabric production, dyeing
and finishing is a significant source of
Scope 3 emissions in the apparel sector.
Using the Higg Index, Kmart Group
gathered energy use data from 172
wet processing facilities in its value chain.
This identified that very few facilities
use renewable energy, highlighting an
opportunity for improvement.
By gathering data from suppliers,
Kmart Group can identify and
transparently report on Scope 3
decarbonisation strategies.
With time, as it improves its
understanding of its value chain
emissions, Kmart expects to evaluate
its approach to supplier and materials
selection and product design to reduce
Scope 3 emissions.
82
CSBP Fertilisers
research delivers
Scope 3 emissions
benefits
In 2023, CSBP Fertilisers celebrates
its centenary of agricultural trials
and research in Western Australia
(WA). With its track record of driving
innovation, CSBP Fertilisers has
contributed to improved productivity
among WA growers, supporting
the success of the local agriculture
industry.
With its introduction of Urea Sustain,
a coated nitrogen fertiliser, CSBP
Fertilisers has helped to optimise
nutrient absorption by crops and
lower the risk of nutrient loss to the
environment. Products like Urea
Sustain can improve emissions
intensity of crop production,
contributing to the long-term
sustainability of this key WA
export industry.
In 2022, a CSBP trial in Three
Springs, WA, demonstrated that
relative to conventional urea,
application of Urea Sustain increased
wheat production by approximately
25 per cent, and reduced the
emissions intensity of crop production
by approximately 20 per cent.
CSBP Fertilisers’ field research
team is undertaking further trials to
demonstrate the effectiveness of
Urea Sustain in a range of soil types
and geographical regions.
Wesfarmers 2023 Annual Report Operating and financial review | Climate‑related disclosures
Growth opportunities for Wesfarmers
As the world decarbonises, there will
be investment opportunities to support
Wesfarmers’ long-term performance.
These may include opportunities for
new industries, businesses, products
and services.
Evolving our product range to address
changing customer preferences.
For WesCEF and Coregas, there may
be opportunities for products such as
low-emissions ammonia and hydrogen.
For our other businesses, there may be
opportunities to adopt circular business
models including to increase the use of
recyclable and recycled inputs and to
improve product reuse.
Investing in adjacent businesses
There may be opportunities to invest in
businesses that are adjacent or aligned
to our divisions, such as Officeworks'
investment in Circonomy which supports
circular business models.
Investing in new industries
There may be opportunities to invest
in new industries that support a
low-emissions economy. To support
electrification and growth in electric
vehicles, Wesfarmers has made
significant investments in lithium
production through the Covalent lithium
project.
Partnerships in the transition
Partnering and collaborating with suppliers,
customers, industry, governments and
others will be essential to support the
development of emissions reduction
technologies, examine circular economy
business models and reduce Scope 3
emissions across our value chains.
For WesCEF, partnerships will initially
support the decarbonisation of its
industrial processes, as emissions
reductions from those processes will
require new technologies to be deployed
at scale.
For our other divisions partnerships will
primarily support Scope 3 emissions
reduction initiatives, as these emissions
occur across complex global value chains.
Wesfarmers’
Covalent lithium
project
The future demand for lithium is driven
by a 100-fold increase in the adoption
of electric vehicles. Electric vehicles
powered by low-emissions electricity are
the largest decarbonisation opportunity
for land-based transport.
Covalent Lithium is a 50/50 joint venture
between Wesfarmers and SQM.
Together, Wesfarmers and SQM are
investing over $2 billion in the joint
venture, which is expected to produce
battery-quality lithium hydroxide in
Australia in 2025.
Since the final investment decision was
taken in 2021, Covalent Lithium has
managed the construction of a mine
and concentrator at Mt Holland,
400 kilometres east of Perth. When fully
operational, the mine and concentrator
are expected to produce approximately
380,000 tonnes of spodumene
concentrate each year.
The bulk of the spodumene concentrate
will be refined at an integrated refinery,
being built at Kwinana, near WesCEF’s
existing operations. Construction of the
refinery is continuing with first production
of lithium hydroxide expected in the first
half of calendar 2025. When fully
operational, the refinery is expected to
produce 50,000 tonnes of battery-grade
lithium hydroxide each year which is enough
to power one million electric vehicles.
In December 2022, the first lithium ore
was mined at Mt Holland. This first ore
was crushed in May 2023, and
spodumene concentrate production is
expected to commence late 2023, for
sale in the 2024 financial year.
To capitalise on the high demand for
lithium, Covalent Lithium is currently
undertaking a feasibility study to
double the production capacity at the
Mt Holland mine and concentrator.
WesCEF’s
partnerships and
collaboration
By partnering and collaborating with
organisations that face similar
decarbonisation challenges and ambitions,
WesCEF is helping to advance the
development of solutions in difficult-to-
abate, emission intensive operations.
In industry, WesCEF has partnered with
Mitsui & Co. Ltd on carbon capture and
storage and low-carbon ammonia, and
with APA Group to assess the feasibility of
transporting hydrogen along the southern
portion of the Parmelia Gas Pipeline.
WesCEF is also part of a consortium
developing breakthrough green ammonia
technology, led by Jupiter Ionics.
WesCEF sponsored CSIRO’s CO2
Utilisation Roadmap in 2021 and is a
member of the Australian Industry
Energy Transitions Initiative and the
Australian Hydrogen Council.
These partnerships with industry, research
organisations and governments are
central to WesCEF’s decarbonisation
journey, helping to develop and test
emerging technologies for commercial-
scale adoption, in Phase 3 of its
decarbonisation journey from 2030.
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Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Climate‑related disclosures
Risks and opportunities
Climate-related risks and opportunities are managed as part of the Wesfarmers Group Risk
Management Framework. We recognise that the transition to a low-emissions economy presents
both business risks and opportunities which support future growth.
The Group Risk Management Framework provides a consistent methodology for identifying, evaluating and managing material risks.
It supports appropriate escalation and reporting processes for risks across the Group.
Climate-related risks are business risks and are included in our Group Risk Profile. Climate-related risks are addressed in the Group’s
risk appetite statements, which are regularly assessed to ensure accuracy and respond to changing circumstances. The Wesfarmers
Audit and Risk Committee and Wesfarmers Board regularly review the Group Risk Profile and climate-related risks are updated at
least annually. For further information on Wesfarmers’ approach to risk management see page 94 of this annual report.
Acute and chronic physical risks
Under all three climate scenarios (see opposite), physical climate
risks may directly impact our businesses, through damage to
assets, infrastructure or supply chains in regions where we
operate.
In recent years, our divisions, communities and team members
have experienced the physical impacts of climate change, with
increased frequency and intensity of extreme weather events
such as floods, fire and storm surges. In certain locations, these
events have disrupted store networks and supply chains, causing
physical damage, including losses and infrastructure damage,
along with indirect adverse impacts on team members and
local communities.
Although impacts vary across geographic regions, the modelling
generally shows that with every degree of warming, there will be
a disproportionate change in magnitude, intensity and frequency
of individual and concurrent extreme weather events. This could
increase the frequency and intensity of physical impacts across
our businesses.
Transitional risks and opportunities
We anticipate a range of transitional risks and opportunities, with
the transition to a low-emission economy. Transitional risks stem
from changes in policy, regulation, technology, reputation and
markets, to enable, and as a result of the transition to a
low-emissions economy. Our exposures depend on the speed
of the transition, with aggressive mitigation (1.5°C) and current
pledges (2°C), likely to have the most material transition risk
impact on our businesses, as a result of more rapid shifts in
policy, regulation, technology, reputation and markets.
Across the Group, our exposure to transitional risks will be
uneven. For our industrial businesses (WesCEF and Coregas),
changes to policy, regulation, markets and customer
expectations, and emerging technologies may significantly
impact our operations. For our retailers, transition risks include
policy and regulatory change regarding products, impacts in
upstream (including raw materials) suppliers and shifting
stakeholder perceptions.
Our industrial businesses have opportunities to invest in
emerging and future industries, such as hydrogen,
low-emissions ammonia and lithium. For our retailers,
opportunities include circular business models and products
with enhanced sustainability attributes.
Physical risks under 1.5°C, 2°C and 4°C climate
scenarios1
1.5°C
2°C
4°C
1.5°C
2°C
4°C
4°C
1.5°C
2°C
4°C
2°C
4°C
4°C
Extreme heat (by 2030)
Between 7 and 10 additional hot days over
35ºC across northern Australia
Droughts and long‑term rainfall deficits
(by 2030)
2.8% to 4.3% longer dry spells across Victoria
and New South Wales
Bushfires (by 2030) for
Approximately 7 additional severe fire weather
days in Queensland, New South Wales and
Victoria
Floods (by 2030)
7.0% to 10.7% increase in extreme rain days
and between 3.1% and 4.0% increase in
extreme rain intensity across southern Australia
Storm surge (by 2050)
1-in-100-year present day storm surge
(up to 2m) occurring every year in key ports
servicing our supply chain in Indonesia,
Malaysia and Sri Lanka
Cyclones (by 2050)
More intense category 5 cyclones in the
North Atlantic (+11.3%), North-East Pacific
(+22.6 per cent) and North and South Indian
Oceans (+4.5 to +5.3 %)
Scenario analysis
Every two years, we use scenario analysis to evaluate and
respond to physical and transitional climate risks and
opportunities across our operations and value chains. We
use climate scenario analysis to assess resilience under
different future global warming scenarios.
In early 2022, we assessed our exposure under three
warming scenarios (1.5°C, 2°C and 4°C) and across two
time horizons (2030 and 2050). These climate scenarios
represent, respectively, three corresponding pathways of
global climate action (aggressive mitigation, current pledges,
and no climate action).
1
IPCC AR6, World Climate Research Programme Coupled Model Intercomparison Project (Phase 6), Vousdoukas et al. (2018), NASA Earth Data Knutson et al.
(2020) and Copernicus Fire Weather Index Abatzoglou et al. (2019).
84
Wesfarmers 2023 Annual Report Acute and chronic physical risks
Description and impact
Response and potential mitigation strategies
Damage to physical assets and store network disruption
Scenario: 2°C and 4°C Time horizon: Current to short (1 to 5 years) Financial impact: Direct costs
Wesfarmers is exposed to increased risk from extreme wet
conditions including more frequent and intense flooding, storm
surge and more tropical cyclones, especially across northern
and eastern Australia and New Zealand.
- Redesign or retrofit stores and warehouses to adapt to
increasing extreme weather conditions. Our divisions give
careful consideration to store locations for new stores and
for store renewals.
Increased intensity and frequency of extreme wet conditions
may disrupt and damage our physical assets and store networks.
A rise in the frequency of hot days (over 35ºC) and drought,
particularly in 2°C and 4°C scenarios, may impact the reliability
and performance of our assets, reducing efficiency and
increasing operational costs, and may impact sales in certain
businesses (including CSBP Fertilisers).
- Invest in measures to maintain adequate comfort for team
members and customers.
- Invest in omnichannel capabilities, to meet customer needs
if our physical store network is disrupted.
- Ensure that we undertake a detailed assessment of our
approach to insurance taking into account potential climate
impacts in our risk assessments.
Climate-related claims may lead to increased insurance
premiums for certain locations.
Acute weather events may disrupt Wesfarmers’ supply chain
Scenario: 2°C and 4°C Time horizon: Short (1 to 5 years) to medium (5 to 15 years) Financial impact: Direct and indirect costs
Wesfarmers' divisions and supply chains could be exposed to
increased hot days (over 35ºC) across most of Australia.
Relevant regions that are most vulnerable to severe dry spells
(approximately 100 days) and frequent hot days are WA
(in Australia), India, the Middle East, the Mediterranean and
Pakistan (internationally).
Flooding, storm surge and cyclone events may result in
disruptions to our freight networks and supply chains, due to
flooding, coastal inundation from storm surges and tropical
cyclones affecting port, road and rail operations. These could
result in transport delays and supply chain bottlenecks.
Longer and more intense dry spells or wet weather events
can affect the quality and yield of raw materials in our supply
chains (especially impacting our retail businesses). For
WesCEF and Coregas, this may also impact the demand for
their products.
- Diversify supplier base and geographic sourcing regions.
- Hold additional inventory to help buffer delays from disruption.
- For Bunnings, Kmart Group and Officeworks, deploy
strategies to reduce dependence on virgin raw materials, with
greater use of recycled raw materials and by reducing
reliance on raw materials that are more likely to be impacted
by climate change.
- For WesCEF, it may be important to identify alternative
markets which are less impacted by the physical impacts of
climate change (for products like fertilisers).
- Collaborate and build partnerships (within supply chains) to
help suppliers build their own climate resilience.
Impacts on the health, safety and wellbeing of team members and the communities in which we operate
Scenario: 2°C and 4°C Time horizon: Medium (5 to 15 years) Financial impact: Direct and indirect costs
As a very large employer, the physical and psychological
health, safety and wellbeing of our team members is a critical
business issue.
Environmental hazards such as heat stress and related illnesses,
and poor air quality and flooding may impact team members’
wellbeing, productivity and business performance.
Our suppliers, customers and local communities may also be
impacted by environmental hazards.
- Continue to invest in energy management systems to support
team member and customer comfort.
- Continue to improve the design of our stores and other
facilities including their energy efficiency.
- Adapt shift hours, introduce additional breaks, implement
further automation and adopt other measures to help
manage heat stress at our distribution centres and
manufacturing facilities.
- Assess new store locations and designs, taking into account
future climate scenarios.
85
Wesfarmers 2023 Annual ReportOperating and Financial Review Operating and financial review | Climate‑related disclosures
Transitional risks and opportunities
Description and impact
Response and potential mitigation strategies
Changing preferences of customers
Scenario: 2°C and 4°C Time horizon: Medium (5 to 15 years) Financial impact: Direct costs
Changing customer preferences and expectations may impact
existing product ranges as customers favour lower-emissions,
circular, locally sourced and more sustainable alternatives.
For some products and market segments, customers may be
unwilling to pay higher prices for these features.
- Adjust product and service ranges to reflect emerging customer
needs and offer more sustainable products and services.
- Explore new markets and investment opportunities that support
a low-emissions economy such as low-emissions hydrogen,
ammonia and lithium.
OPPORTUNITY – Leverage our scale and expertise to respond
to emerging customer needs, by leading the development
and offering of more sustainable, low-emissions products.
- Seek partnerships and invest in new technologies that
accelerate the transition to a low-emissions economy.
Carbon policies and pricing impact our competitiveness
Scenario: 1.5°C and 2°C Time horizon: Short (1 to 5 years) Financial impact: Direct and indirect costs
Policies and strategies which accelerate decarbonisation may
add to manufacturing cost. Access to some products may also
be limited as regulations may impact on their availability or the
availability of certain raw materials.
This risk extends to our value chains as products with high
emissions footprints or long transport distances may become
more expensive, impacting margins.
- Implement an internal shadow carbon price on investments
which attaches a cost to emissions, in the absence of
regulatory pricing.
- Adopt emissions reduction and net zero targets, consistent
with the Climate Policy. Depending on timeframes, this action
may mitigate possible future exposure to direct carbon
pricing.
If imports are not subject to similar policies, these policies may
disproportionately impact our competitiveness.
- Advocate and engage with policymakers to support policies
which maintain our competitiveness against imports.
- Diversify our supplier base and our geographic sourcing
regions to manage our exposures.
Stranded assets in the global transition to a low‑emissions economy
Scenario: 1.5°C and 2°C Time horizon: Long (15+ years) Financial impact: Indirect costs
Emissions intensive operations may be at risk of becoming
stranded or obsolete, if they are not able to cost-effectively
transition or decarbonise, as policies and regulations change to
accelerate the transition to a low-emissions economy. Certain
existing technologies may also become less competitive.
The development of emerging solutions such as CCUS may be
difficult or face challenges or take time (including to overcome
regulatory issues or provide access to pipelines), potentially
delaying their deployment further exacerbating these risks.
OPPORTUNITY – Partner and invest in emerging markets for
low-emissions ammonia and hydrogen and lithium,
leveraging our expertise to support the global transition to a
low-emissions economy.
Erosion of our reputation
- Collaborate with partners to repurpose existing assets, to
support emerging solutions such as CCUS.
- Investigate the introduction of low-emissions hydrogen and
ammonia into WesCEF’s existing production processes.
- Explore new investment opportunities aligned with new
products, markets and industries aligned with the transition to
a low-emissions economy.
- Continue to progress to achieve net zero targets and apply
our internal shadow carbon price on all new capital
expenditures to mitigate potential exposures.
Scenario: 1.5°C and 2°C Time horizon: Short (1 to 5 years) to medium (5 to 15 years) Financial impact: Direct and indirect costs
There may be a risk of negative and unfavourable impacts on our
reputation due to our exposure to emissions intensive or
hard-to-abate businesses or fossil fuel consumption, with
increasing scrutiny for greater action at greater pace.
OPPORTUNITY – Invest for the future in low-emissions
technologies, and resources for the energy transition.
- Set emissions reduction and net zero targets to decarbonise
our operations and assess our impact and ability to influence
our value chains.
- Regularly disclose our performance with best practice
standards and frameworks to provide our stakeholders with
consistent, comparable and transparent information on our
climate-related issues.
- Proactively leverage our expertise, and financial capability to
partner, and invest for the future in low-emissions
technologies, solutions and resources.
86
Wesfarmers 2023 Annual Report Independent Limited Assurance Statement to the Management
and Directors of Wesfarmers Limited
Our Conclusion:
Ernst & Young (‘EY’, ‘we’) were engaged by Wesfarmers Limited (‘Wesfarmers’) to undertake a limited assurance engagement as defined by Australian Auditing
Standards, hereafter referred to as a ‘review’, over the Subject Matter defined below for the year ended 30 June 2023. Based on the procedures we have performed
and the evidence we have obtained, nothing has come to our attention that causes us to believe the Subject Matter has not been prepared, in all material respects,
in accordance with the Criteria defined below.
What our review covered
We reviewed the following Subject Matter:
• Wesfarmers’ approach to defining report content
(‘materiality assessment’)
• Risk-based check of disclosures in Annual Report
and related website content
• Taskforce for Climate-Related Financial Disclosures
(‘TCFD’) Reporting
• Wesfarmers’ reported alignment to ‘in accordance
with’ requirements of the Global Reporting
Initiative’s (GRI) Sustainability Reporting Standards
(‘GRI Standards’)
• Selected material performance metrics set out in
the table below, presented on Wesfarmers’ website
under wesfarmers.com.au/sustainability as at 24
August 2023.
Performance metrics
• Scope 1, Scope 2, and Scope 3 greenhouse
gas emissions in tonnes of carbon dioxide
equivalent (ktCO2e)
• Energy consumption (petajoules)
• Waste disposed and recovered (kt)
• Water consumption (megalitres)
• Workplace health and safety data (Total
Recordable Injury Frequency Rate (‘TRIFR’) and
workers compensation claims)
• Community contributions (AUD)
• Aboriginal and Torres Strait Islander team
members
• Aboriginal and Torres Strait Islander
procurement spend (AUD)
• Ethical sourcing program data
• Employment and People data
• Cultural Awareness Training data
Criteria applied by Wesfarmers Limited
In preparing its sustainability disclosures, Wesfarmers
applied the following criteria:
• GRI Standards, including the Reporting Principles
for defining report quality and report content
• National Greenhouse and Energy Reporting Act
2007
• National Greenhouse and Energy Reporting
Regulations 2008
• National Greenhouse and Energy Reporting
(Measurement) Determination 2008 as amended
• GHG Protocol Standards
• Other selected Criteria, as determined by
Wesfarmers, and as set out in its Sustainability
Reporting.
Key responsibilities
EY’s responsibility and independence
Our responsibility is to express a conclusion on the
Subject Matter based on our review.
We have complied with the independence and
relevant ethical requirements, which are founded
on fundamental principles of integrity, objectivity,
professional competence and due care, confidentiality
and professional behaviour.
The firm applies Auditing Standard ASQM 1 Quality
Management for Firms that Perform Audits or Reviews
of Financial Reports and Other Financial Information,
or Other Assurance or Related Services Engagements,
which requires the firm to design, implement and
operate a system of quality management including
policies or procedures regarding compliance with
ethical requirements, professional standards and
applicable legal and regulatory requirements.
Wesfarmers’ responsibility
Wesfarmers’ management is responsible for
selecting the Criteria, and for presenting the selected
sustainability disclosures and related information in
the Annual Report in accordance with that Criteria,
in all material respects. This responsibility includes
establishing and maintaining internal controls,
maintaining adequate records and making estimates
that are relevant to the preparation of the subject
matter, such that it is free from material misstatement,
whether due to fraud or error.
Our approach to conducting the review
We conducted our review in accordance with the
Australian Auditing and Assurance Standards Board’s
Australian Standard on Assurance Engagements
Other Than Audits or Reviews of Historical Financial
Information (‘ASAE 3000’), Assurance Engagements
on Greenhouse Gas Statements (‘ASAE 3410’), and
the terms of reference for this engagement as agreed
with Wesfarmers on 25 January 2023 and amended on
11 August 2023. That standard requires that we plan
and perform our engagement to express a conclusion
on whether anything has come to our attention that
causes us to believe that the Subject Matter is not
prepared, in all material respects, in accordance with
the Criteria, and to issue a report.
Summary of review procedures performed
A review consists of making enquiries, primarily
of persons responsible for preparing the selected
sustainability disclosures and related information in
the Annual Report and applying analytical and other
review procedures.
The nature, timing, and extent of the procedures
selected depend on our judgement, including an
assessment of the risk of material misstatement,
whether due to fraud or error. The procedures we
performed included, but were not limited to:
• Evaluating Wesfarmers’ adherence to the GRI
Standards Reporting Principles for defining report
quality and report content, including the processes
involved at a divisional and corporate level
•
• Assessing whether material topics and performance
issues identified during our procedures had been
adequately disclosed
Interviewing selected personnel from divisional
and corporate offices, to understand the key
sustainability issues related to the subject matter and
processes for collecting, collating and reporting the
performance data during the reporting period
• Where relevant, gaining an understanding of
systems and processes for data aggregation and
reporting
• Performing analytical tests and detailed substantive
testing to source documentation for material
qualitative and quantitative information
• Assessing the accuracy of calculations performed
• Obtaining evidence to support key assumptions
in calculations and other data
• Obtaining evidence for selected management
information supporting assertions made in the
Subject Matter
• Assessing that data and statements had been
accurately transcribed from corporate systems
and/or supporting evidence
• Assessing the presentation of claims, case studies
and data against the relevant GRI principles
contained in the Criteria.
We believe that the evidence obtained is sufficient
and appropriate to provide a basis for our review
conclusion.
Inherent Limitations
Procedures performed in a review engagement vary in
nature and timing from, and are less in extent than for
a reasonable assurance engagement. Consequently,
the level of assurance obtained in a review engagement
is substantially lower than the assurance that would
have been obtained had a reasonable assurance
engagement been performed. Our procedures were
designed to obtain a limited level of assurance on
which to base our conclusion and do not provide
all the evidence that would be required to provide a
reasonable level of assurance.
While we considered the effectiveness of
management’s internal controls when determining the
nature and extent of our procedures, our assurance
engagement was not designed to provide assurance on
internal controls. Our procedures did not include testing
controls or performing procedures relating to checking
aggregation or calculation of data within IT systems.
The greenhouse gas quantification process is
subject to scientific uncertainty, which arises
because of incomplete scientific knowledge about
the measurement of greenhouse gases. Additionally,
greenhouse gas procedures are subject to estimation
and measurement uncertainty resulting from the
measurement and calculation processes used to
quantify emissions within the bounds of existing
scientific knowledge.
Other matters
We have not performed assurance procedures in
respect of any information relating to prior reporting
periods, including those presented in the Subject
Matter. Our report does not extend to any disclosures
or assertions made by Wesfarmers relating to future
performance plans and/or strategies disclosed in
Wesfarmers' report and supporting disclosures online.
Use of our Assurance Report
We disclaim any assumption of responsibility for any
reliance on this assurance report to any persons other
than management and the Directors of Wesfarmers,
or for any purpose other than that for which it was
prepared.
Our review included web-based information that was
available via web links as of the date of this statement.
We provide no assurance over changes to the content
of this web-based information after the date of this
assurance statement.
Terence Jeyaretnam FIEAust
Partner
Ernst & Young
Melbourne, Australia
24 August 2023
A member firm of Ernst & Young Global Limited.
Liability limited by a scheme approved under Professional Standards Legislation
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Wesfarmers 2023 Annual ReportOperating and Financial Review Governance
Board of
Directors
88
Michael Chaney AO
CHAIRMAN
BSc, MBA, Hon. LLD W.Aust, FAICD
Age 73
Term: Chairman since November 2015;
Director since June 2015.
Skills and experience: After an early career in
petroleum geology and corporate finance, Michael
joined Wesfarmers in 1983 as Company Secretary and
Administration Manager. He became Finance Director
in 1984 and was appointed Managing Director in July
1992. He retired from that position in July 2005.
Directorships of listed entities (last three years),
other directorships/offices (current and recent):
- Director of Australians for Indigenous Constitutional
Recognition Ltd (since December 2022)
- Chairman of Northern Star Resources Limited
(since July 2021)
- Chairman of the National School Resourcing Board
(since November 2017)
- Director of the Centre for Independent Studies
(retired July 2022)
- Member of the Gresham Resources Royalties Fund
Investment Committee (retired October 2022)
Rob Scott
MANAGING DIRECTOR
B.Comm, MAppFin, CA, GradDipAppFin, OLY
Age 54
Term: Director since November 2017.
Skills and experience: Rob joined Wesfarmers in
1993 before moving into investment banking in various
roles in Australia and Asia. Rob rejoined Wesfarmers in
2004 in Business Development before being appointed
Managing Director of Wesfarmers Insurance in 2007
and then Finance Director of Coles in 2013. He was
Managing Director, Financial Services in 2014 and
Managing Director of the Wesfarmers Industrials
division in 2015. Rob became the Group’s Deputy Chief
Executive Officer in February 2017 and assumed the
role of Managing Director and Chief Executive Officer at
the conclusion of the 2017 Annual General Meeting in
November 2017.
Directorships of listed entities (last three years),
other directorships/offices (current and recent):
- Director of Brisbane 2032 Olympic Organising
Committee (since April 2022)
- Director of Business Council of Australia
(since November 2021)
- Director of Gresham Partners Group Limited
(since November 2020)
- Director of Gresham Partners Holding Limited
(since November 2020)
- Chairman of flybuys joint venture with Coles Group
Limited (since May 2023, Director since December 2018)
- Member of UWA Business School Advisory Board
(since August 2017)
- Chairman of Rowing Australia (since October 2014)
Mike Roche
DIRECTOR
Sharon Warburton
DIRECTOR
BSc, GAICD, FIA (London), FIAA (Australia)
Age 70
BBus (Accounting & Business Law), FCA, FAICD
Age 53
Term: Director since February 2019.
Term: Director since August 2019.
Skills and experience: Mike has more than 40 years’
experience in the finance sector where he held senior
positions firstly as an actuary with National Mutual/
AXA and then in investment banking where he provided
strategic, financial, merger and acquisition, and capital
advice to major corporations, private equity and
government clients. Mike spent more than 20 years with
Deutsche Bank including 10 years as Head of Mergers
and Acquisitions where he advised on major takeovers
and privatisations. He stepped down as Deutsche
Bank’s Chairman of Mergers and Acquisitions (Australia
and New Zealand) in 2016 and was a member of the
Takeovers Panel for two terms from 2008 to 2014.
Directorships of listed entities (last three years),
other directorships/offices (current and recent):
- Director of Macquarie Bank (since January 2021)
- Director of Macquarie Group (since January 2021)
- Director of MaxCap Group Pty Ltd (since April 2019)
- Director of Te Pahau Management Ltd
(since November 2017)
- Founder and Director of Sally Foundation
(since April 2013)
Skills and experience: Sharon has extensive board and
executive experience in corporate strategy, business
operations, finance, accounting and risk management,
particularly in the resources, construction, infrastructure
and property sectors, along with significant expertise
in governance and remuneration. She was previously
Executive Director Strategy and Finance at Brookfield
Multiplex and held senior management roles with
ALDAR Properties PJSC in the United Arab Emirates,
Citigroup in Sydney and Rio Tinto Limited in London
and Perth.
Directorships of listed entities (last three years),
other directorships/offices (current and recent):
- Director of Mirvac Funds Management Australia
Limited (since July 2022)
- Director of Northern Star Resources Limited
(since September 2021)
- Director of Thiess Group Holdings Pty Limited
(since July 2021)
- Director of Blackmores Limited (resigned August 2023)
- Director of Worley Limited (since February 2019)
- Director of Karlka Nyiyaparli Aboriginal Corporation
- Trustee Director of Energy Industries Superannuation
RNTBC (since December 2020)
Scheme Pty Ltd (retired September 2021)
- Member of the Australia Takeovers Panel (since May
- Panel member of Adara Partners (Aust) Pty Ltd
2015)
(retired December 2022)
- Director of Gold Road Resources Limited
- Director of Six Park Asset Management
(retired September 2021)
(retired February 2023)
Wesfarmers 2023 Annual Report Vanessa Wallace
DIRECTOR
Jennifer Westacott AO
DIRECTOR
B.Comm (UNSW), MBA (IMD Switzerland), MAICD
Age 59
BA (Honours), FAICD, FIPAA, FANZSOG
Age 63
Term: Director since July 2010.
Term: Director since April 2013.
Skills and experience: Vanessa is an experienced
board director, strategy management consultant, and
innovative, early stage business investor and founder.
She was a Senior Partner at Strategy& (formerly Booz &
Company), a member of the global board and finished
her 27-year career as Executive Chairman of the business
in Japan. Vanessa’s industry experience was focused
on financial services across the spectrum of wealth
management, retail banking and insurance as well as the
health providers and consumer products companies.
Her functional depth is in risk management, post-merger
integration and business growth associated with revenue
levers of channels, customers, and markets.
Directorships of listed entities (last three years),
other directorships/offices (current and recent):
- Chairman of Ecofibre Limited (since November 2021,
Director since July 2021)
- Director of SEEK Limited (since March 2017)
- Director of Doctor Care Anywhere PLC
(retired March 2023)
- Director of Palladium Global Holdings Inc
(since January 2021)
- Co-founder and Chairman of Drop Bio Limited
(since December 2018)
- Member of University of NSW Business School
Advisory Council (since April 2021)
- Director of O’Connell Street Associates (since June 2018)
- Managing Director of MF Advisory, providing advisory
services into Japan (since 2015)
Skills and experience: Jennifer is Chief Executive
of the Business Council of Australia. Prior to that,
she was a Board director and lead partner at KPMG.
Jennifer has extensive experience in critical leadership
positions in the New South Wales and Victorian
governments.
Directorships of listed entities (last three years),
other directorships/offices (current and recent):
- Chancellor of Western Sydney University
(since January 2023)
- Patron of Fairbreak Global Pty Ltd (since December
2021)
- Chair of Studio Schools of Australia (since July 2019)
- Patron of The Pinnacle Foundation (since March 2019)
- Chair of the Western Parkland City Authority (since
February 2019)
- Board member of Cyber Security Research Centre
(CSRC) Ltd (since February 2018)
- Co-Patron of Pride in Diversity (since November 2017)
- Adjunct Professor at the City Futures Research Centre
of the University of New South Wales (since 2013)
The Right Honourable
Sir Bill English KNZM
DIRECTOR
BA(Hons), BCom (Otago)
Age 61
Term: Director since April 2018.
Skills and experience: Bill was Minister of Finance and
Deputy Prime Minister of New Zealand from October
2008 to December 2016, and Prime Minister until the
change of government in October 2017. He retired
from parliament in March 2018.
Bill now invests with his family in technology and data
businesses and consults with government
and business in Australia and New Zealand.
Directorships of listed entities (last three years),
other directorships/offices (current and recent):
- Director of Paul Ramsay Foundation
(since December 2021)
- Chairman of Jarden Wealth Investment Committee
(since June 2021)
- Director of The Todd Corporation Limited
(since May 2021)
- Director of Centre for Independent Studies
(since March 2021)
- Director of The Instillery (since August 2019)
- Director of Impact Lab Ltd (since May 2019)
- Director of Manawanui Support Ltd (since April 2019)
- Chairman of Mount Cook Alpine Salmon
(since July 2018)
- Member of Macquarie Infrastructure and Real Assets’
Impact Advisory Group (resigned March 2022)
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Anil Sabharwal
DIRECTOR
BMath, BCompSc
Age 45
Alison Watkins AM
DIRECTOR
BCom, FCA, FAICD, F FIN
Age 60
Alan Cransberg
DIRECTOR
BEng(Civil Eng) (Hons)
Age 64
Term: Director since February 2021.
Term: Director since September 2021.
Term: Director since October 2021.
Skills and experience: Anil is Vice President of
Product Management at Google and the company’s
most senior product and engineering leader in Asia
Pacific. He is also an advisor to venture capital firm
AirTree Ventures. Anil’s 14+ years at Google have
included founding and leading the product, strategy
and team behind Google Photos, which reached
more than one billion active users in less than four
years. He’s also led product, design and engineering
for Google Chrome and ChromeOS, and was on
the founding team that built and launched Google
Drive. Of Google’s nine products with more than a
billion active users, Anil has built and led three of
them. Before joining Google, Anil co-founded online
learning company Desire2Learn, headquartered in
Canada, and was General Manager of the knowledge
management division in Australia for human resources
company, Talent2. He holds an Honors Bachelor of
Mathematics in Computer Science from the University
of Waterloo.
Directorships of listed entities (last three years),
other directorships/offices (current and recent):
- Advisor to AirTree Ventures (since March 2017)
- Vice President of Product Management at Google
(since April 2016, various other roles held at Google
since January 2009)
Skills and experience: Alison holds a Bachelor of
Commerce (University of Tasmania), is a Fellow of
Chartered Accountants ANZ, the Financial Services
Institute of Australasia, and the Australian Institute
of Company Directors. She is an experienced Chief
Executive and Non-executive Director. Alison’s previous
roles include Group Managing Director of Coca-Cola
Amatil, Chief Executive Officer of GrainCorp Limited
and Berri Limited, and Managing Director of Regional
Banking at ANZ. She spent 10 years at McKinsey &
Company from 1989 to 1999 and became a partner of
the firm in 1996 before moving to ANZ as Group General
Manager, Strategy.
Directorships of listed entities (last three years),
other directorships/offices (current and recent):
- Director of PGA Australia (since December 2022)
- Director of The Geoff Ogilvy Foundation
(since September 2022)
- Director of CSL Limited (since August 2021)
- Chancellor of the University of Tasmania (since July 2021)
- Member of Reserve Bank of Australia Board
(since December 2020)
- Member of Low Emissions Technology Roadmap
Ministerial Reference Panel (retired May 2023)
- Director of Centre for Independent Studies
Skills and experience: Alan holds an Honours Degree in
Civil Engineering from The University of Western Australia
(UWA). He has 36 years of experience from roles in the
mining, processing and resources. Alan joined Alcoa in
1980 and worked in a variety of assignments and locations
across their Australian and international businesses, prior
to being appointed as Chairman and Managing Director of
Alcoa Australia, and President of Alcoa Refining in 2008.
He retired from these positions in 2016. Alan was previously
a Director and Chairman of the West Coast Eagles Football
Club. He was also a founding member of the Foundation
to Prevent Violence Against Women and Their Children, as
well as being a founding member of the CEO’s for Gender
Equity in Western Australia.
Directorships of listed entities (last three years),
other directorships/offices (current and recent):
- Chairman of the Waalitj Foundation (since November 2017)
- Member of the UWA Business School Board (since
October 2016)
- Director and Lead Investment Committee member of SAS
Resources Trust (since October 2016)
- Ambassador to the Foundation to Prevent Violence to
Women and Their Children (since September 2016)
- Director of John Swire and Sons Pty Ltd (resigned June
2023)
(since December 2011)
- Deputy Chairman of Peel Development Commission
- Director of Business Council of Australia
(retired October 2021)
- Group Managing Director of Coca-Cola Amatil
(retired May 2021)
(retired December 2021)
- Director of Stealth Global Industries Ltd (retired April 2020)
89
Wesfarmers 2023 Annual Report Governance
Corporate governance overview
The Board of Wesfarmers Limited
The Board of Wesfarmers Limited is committed to providing a
satisfactory return to its shareholders and fulfilling its corporate
governance obligations and responsibilities in the best interests of the
company and taking into account the interests of its stakeholders.
The 2023 Corporate Governance Statement details the key aspects
of the governance framework and practices of Wesfarmers.
Wesfarmers regularly reviews its governance framework and practices
so as to ensure that they consistently reflect market practice and
stakeholder expectations.
The Board believes that the governance policies and practices
adopted by Wesfarmers during the reporting period for the year
ended 30 June 2023 follow the recommendations contained in the
fourth edition of the ASX Corporate Governance Council’s Corporate
Governance Principles and Recommendations (ASX Principles).
Roles and responsibilities of the Board
and management
The role of the Board is to:
wholesale distribution of pharmaceutical goods; manufacturing and
distribution of chemicals and fertilisers; development of an integrated
lithium project, including mine, concentrator and refinery; industrial
and safety product distribution; gas processing and distribution; and
management of the Group's investments.
In fulfilling its roles and responsibilities, the key focus areas of the
Board during the 2023 financial year are set out below.
Key focus areas of the Board during the 2023
financial year included:
– Overseeing the continuing development of the Covalent lithium
project.
– Overseeing the continuing development of the Group's retail
subscription program and shared data asset.
– Reviewing and providing input into the business operations and
the strategic plans of each division likely to impact long-term
shareholder value creation.
• approve the purpose, values and strategic direction of the Group;
– Monitoring changes in the domestic and global external
• guide and monitor the management of Wesfarmers and its
businesses in accordance with the purpose, values and strategic
plans;
• oversee good governance practice; and
environment, including inflationary and supply chain pressures,
and overseeing management’s strategies in relation to these
areas.
– Overseeing management’s performance in strategy
• set the Group’s risk appetite and monitor and review the Group’s
implementation.
financial and non-financial risk management systems.
The Board aims to protect and enhance the interests of its
shareholders, while taking into account the interests of other
stakeholders, including team members, customers, suppliers and
the wider community. In performing its role, the Board is committed
to a high standard of corporate governance practice and to fostering
a culture of compliance which values ethical behaviour, personal
and corporate integrity, accountability, transparency and respect for
others. The Group Managing Director has responsibility for the
day-to-day management of Wesfarmers and its businesses, and is
supported in this function by the Wesfarmers Leadership Team.
Details of the members of the Wesfarmers Leadership Team are set
out on pages 14 and 15 of this annual report and in the corporate
governance section of the company’s website at
www.wesfarmers.com.au/cg
– Overseeing the implementation of strategy to address areas of
underperformance and reposition the portfolio to deliver growth
in shareholder returns.
– Monitoring and evaluating growth opportunities to complement
the existing portfolio, including opportunities in the Health
division.
– Monitoring the Group’s operating and cash flow performance,
financial position and key metrics, including financial covenants
and credit ratings.
– Reviewing the Group’s risk management framework, overseeing
the implementation of strategies to improve the Group’s risk
management framework and monitoring that the Group is
operating with due regard to the risk appetite set by the Board.
The Board maintains ultimate responsibility for strategy and control of
Wesfarmers and its businesses.
– Reviewing and updating the Group’s risk appetite statement to
reflect new and emerging risks and changing circumstances.
– Monitoring the Group’s safety performance and overseeing
implementation of strategies to improve safety performance and
enhance workplace safety awareness.
– Monitoring the Group’s performance on key ESG metrics
and overseeing implementation of strategies to improve ESG
performance and enhance ESG awareness.
– Overseeing the Group’s remuneration framework and
remuneration outcomes for senior management.
– Reviewing the processes in place to attract, develop, motivate
and retain talent.
– Reviewing and updating policies, reporting and processes to
improve the Group’s system of corporate governance and
compliance.
Structure and composition of the Board
Wesfarmers is committed to ensuring that the composition of the
Board continues to include directors who collectively bring an
appropriate mix of skills, commitment, experience, expertise and
diversity (including gender diversity) to Board decision-making.
The Board currently comprises ten directors, including nine
non-executive and independent directors. Detailed biographies of the
directors as at 30 June 2023 are set out on pages 88 and 89 of this
annual report.
The Board is of the view that the current directors possess an
appropriate mix of skills, commitment, experience, expertise (including
knowledge of the Group and the relevant industries in which the
Group operates) and diversity to enable the Board to discharge its
responsibilities effectively and deliver the company’s strategic priorities
as a diversified corporation with current businesses operating in
home improvement, outdoor living products and supply of building
materials; general merchandise and apparel; office and technology
products; health, beauty and wellbeing products and services;
management of retail subscription program and shared data asset;
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Wesfarmers 2023 Annual Report
Corporate governance overview
The Board skills matrix set out below describes the combined skills, experience and expertise presently represented on the Board.
To the extent that any skills are not directly represented on the Board, they are augmented through management and external advisors.
The Board benefits from the experience of David Cheesewright who has extensive experience in international retailing and manufacturing,
including 19 years with Walmart. He was appointed as an advisor to the Wesfarmers Board in August 2018.
Skills and experience
Board
Leadership
Experience in a senior management position in a listed company, large or complex
organisation or government body.
Corporate governance
Experience in and commitment to the highest standards of corporate governance, and
includes experience as a director or senior executive in a listed company, large organisation
or government body.
Financial acumen
Understanding of financial statements and reporting, key drivers of financial performance,
corporate finance and internal financial controls.
Risk management
Experience in identification, monitoring and management of material financial and non-
financial risks and understanding, implementation and oversight of risk management
frameworks and controls.
Digital, data and technology
Experience and expertise in identifying, assessing, implementing and leveraging digital
technologies and other innovations, understanding the use of data and analytics and
responding to digital disruption.
People and culture
Experience in overseeing workplace culture, people management, development and
succession planning, setting remuneration frameworks and promoting diversity and
inclusion.
Strategy
Experience in corporate planning, including identifying and analysing strategic opportunities
and threats, developing, implementing and delivering strategic objectives and monitoring
performance against strategic objectives.
Corporate transactions
Experience in assessing and completing complex business transactions, including
mergers, acquisitions, divestments, capital management, major projects and business
integration.
Retail markets
Knowledge and experience in the retail and consumer goods industry, including
merchandising, brand development, customer relationships and supply chain.
Industrial, resources and infrastructure
Senior executive or non-executive director experience and expertise in the industrial,
resources or infrastructure sectors, including project construction.
Regulatory and public policy
Experience in the management and oversight of compliance with legal and regulatory
requirements and/or experience in the development, implementation and review of
regulatory and public policy, including professional experience working or interacting with
government and regulators.
Corporate sustainability and community engagement
Understanding and experience in sustainability best practices to manage the impact of
business operations on the environment and community and the potential impact
of climate change on business operations, and expertise in community and
stakeholder relations.
International experience
Experience in international business, trade and/or investment at a senior executive level
and exposure to global markets and a range of different political, regulatory and business
environments.
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10
10
10
6
10
10
9
5
8
8
10
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Wesfarmers 2023 Annual Report
91
Governance
Corporate governance overview
Director independence
Role of the Remuneration Committee
Full details of the remuneration paid to non-executive directors and
executive key management personnel (KMP), along with details of
Wesfarmers’ policy on the remuneration of the executive KMP are
set out in the Remuneration Report on pages 100 to 130 of this
annual report.
The executive KMP, comprising the Group Managing Director, the
Group Chief Financial Officer and those executives who have authority
and responsibility for planning, directing and controlling the activities
of a major profit generating division of Wesfarmers, have a variable
or ‘at risk’ component as part of their total remuneration package via
participation in the Key Executive Equity Performance Plan (KEEPP).
The mix of remuneration components and the performance measures
used in the KEEPP have been chosen to ensure that there is a strong
link between remuneration earned and the achievement of the Group’s
strategic and business objectives, alignment with the Group’s values,
management of risk in accordance with the Group’s risk appetite, and
ultimately, generating satisfactory returns for shareholders.
Annual performance reviews of each member of the Wesfarmers
Leadership Team, including the Group Managing Director, for the 2023
financial year have been undertaken. More details about Wesfarmers'
performance and development review process for the executive KMP
are set out in the 2023 Corporate Governance Statement.
Key focus areas of the Remuneration Committee
during the 2023 financial year included:
– Reviewing and making recommendations to the Board in
relation to the fixed and variable remuneration of the Group
Managing Director and the other executive KMP.
– Reviewing and, where appropriate, approving management’s
recommendations in relation to the fixed and variable
remuneration of the other members of the Wesfarmers
Leadership Team, in accordance with the Board-approved
delegated authority for remuneration-related approvals.
– Reviewing and making recommendations to the Board in
relation to the Wesfarmers variable remuneration plans.
– Reviewing and making recommendations to the Board for
the vesting outcomes of the 2019 KEEPP Performance
Shares based on the assessment of performance against the
performance targets.
– Reviewing the succession and transition plans for the
Wesfarmers Leadership Team.
– Reviewing and making a recommendation to the Board on
non-executive director fees.
– Reviewing and monitoring of diversity and inclusion matters,
including gender pay equity.
Directors are expected to bring views and judgement to Board
deliberations that are independent of management and free of
any interest, position, association, business or other relationship
or circumstance that could materially interfere with the exercise of
objective, unfettered or independent judgement, having regard to the
best interests of the company as a whole.
The Board’s assessment of independence and the criteria against
which it determines the materiality of any facts, information or
circumstances is formed having regard to the ASX Principles. In
particular, the Board focuses on the factors relevant to assessing the
independence of a director set out in recommendation 2.3 of the
ASX Principles and the materiality guidelines applied in accordance
with Australian Accounting Standards.
The Board has reviewed the position and relationships of all directors
in office as at the date of this annual report and considers that all nine
non-executive directors are independent.
Committees of the Board
The Board has established a Nomination Committee, a Remuneration
Committee, and an Audit and Risk Committee as standing
committees to assist with the discharge of its responsibilities. Details
of the current membership and composition of each committee
are set out in the 2023 Corporate Governance Statement on the
company’s website at www.wesfarmers.com.au/cg
Role of the Nomination Committee
As part of the Nomination Committee’s oversight of Board succession
planning, it is responsible for identifying suitable candidates to fill
Board vacancies as and when they arise, or to identify candidates to
complement the existing Board, and to make recommendations to the
Board on their appointment. Where appropriate, external consultants
are engaged to assist in searching for candidates.
The Nomination Committee is responsible for ensuring that there is
a robust and effective process for evaluating the performance of the
Board, its committees and individual non-executive directors.
In relation to the re-appointment of a non-executive director, the
Nomination Committee reviews the performance of the relevant
non-executive director during their term of office and makes
recommendations to the Board. The form of the Board, committee
and individual non-executive director performance reviews are
considered and determined each year. The outcomes of each Board
and committee performance review are discussed by the Board
and each respective committee. The outcomes of the performance
review for each non-executive director are discussed between the
non-executive director and the Chairman (and in the case of the
performance review of the Chairman, between the Chairman and a
nominated senior director). From time to time, the evaluation process
may be facilitated by an external consultant. More details are available
in the 2023 Corporate Governance Statement.
Key focus areas of the Nomination Committee
during the 2023 financial year included:
– Consideration of feedback from major shareholders during the
Chairman’s Roadshow conducted prior to the 2022 Annual
General Meeting.
– Recommending to the Board the process for the Board,
committee and individual non-executive director performance
reviews, considering and discussing the outcomes and
recommendations from these review processes and agreeing
actions to be implemented.
– Considering and making recommendations to the Board
regarding director independence, tenure and succession
planning.
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Wesfarmers 2023 Annual Report
Corporate governance overview
Role of the Wesfarmers Audit and Risk
Committee
The Wesfarmers Audit and Risk Committee assists the Board in
fulfilling its responsibilities in overseeing the company’s financial
reporting, compliance with legal and regulatory requirements, setting,
articulating and reviewing the risk appetite of the Wesfarmers Group,
and proactively overseeing the Group’s systems of internal control
and its financial and non-financial risk management framework in
accordance with the Group’s purpose, values and strategic direction.
Key focus areas of the Wesfarmers Audit and
Risk Committee during the 2023 financial year
included:
– Reviewing and assessing the Group’s processes which ensure
the integrity of financial statements and reporting, and associated
compliance with accounting, legal and regulatory requirements.
– Reviewing and recommending to the Board amendments to the
Group's data governance framework including setting out the
requirements for data collection, classification, integrity, access,
security, use, retention and disposal.
– Overseeing the Group's technology and cyber security governance
framework including the evolution of the Group's maturity
assessment processes.
– Overseeing the development of reporting and limited assurance reviews in
relation to emissions reduction and other key ESG matters.
– Monitoring the ethical sourcing of products and services throughout
the Group to ensure that there are appropriate processes and
controls in place.
Role of the external auditor
The company’s external auditor is Ernst & Young. The effectiveness,
performance and independence of the external auditor is reviewed
annually by the Audit and Risk Committee. The lead audit partner is
required to rotate after a maximum of five years. Mr Trevor Hammond
is the lead audit partner and was appointed on 1 July 2019.
Ernst & Young has provided the required independence declaration
to the Board for the financial year ended 30 June 2023. The
independence declaration forms part of the directors’ report and is
provided on page 99 of this annual report.
Governance policies
The corporate governance section of the company’s website at
www.wesfarmers.com.au/cg contains access to all relevant
corporate governance information, including Board and committee
charters, and Group policies referred to in the 2023 Corporate
Governance Statement.
Ethical and responsible behaviour
The Wesfarmers Way is the framework for the company’s business
model and comprises its values of integrity, openness, accountability
and entrepreneurial spirit, details of which are published on the
company’s website at www.wesfarmers.com.au
The Wesfarmers Way, together with the Code of Conduct and
other policies, guide the behaviour of everyone who works at or for
Wesfarmers as the company strives to achieve its primary objective.
The Board and senior executives of the Group strive to ensure that
their own actions and decisions reference and reinforce Wesfarmers’
values, and that they instil and reinforce a culture of acting lawfully,
ethically and responsibly.
– Monitoring the retail shrinkage control measures and reporting
procedures in the Group’s divisions.
Investor engagement
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– Reviewing the Group’s risk management framework, overseeing
the implementation of strategies to improve the Group’s risk
management framework and monitoring that the Group is operating
with due regard to the risk appetite set by the Board.
– Reviewing and recommending to the Board amendments to the
Group’s risk appetite statement to reflect new and emerging risks
and changing circumstances.
– Reviewing and evaluating the adequacy of the Group’s insurance
arrangements to ensure appropriate cover for identified operational
and business risks.
– Monitoring the Group’s tax compliance program both in Australia
and overseas, including cross-border intra-Group transactions, to
ensure its obligations are met in the jurisdictions in which the Group
operates.
– Overseeing the Group’s compliance program, supported
by approved guidelines and standards, covering safety, the
environment, legal liability, compliance with key governance policies,
including the Wesfarmers Code of Conduct, whistleblower reporting,
information technology, data privacy and human rights.
– Overseeing the Group’s internal audit program, including approving
the annual internal audit plan.
– Monitoring the Group’s payment terms for small suppliers and
associated reporting under the Payment Times Reporting Scheme.
– Overseeing the payroll assurance and remediation activities of the
relevant Group businesses.
– Reviewing and assessing the performance of the Group's external
auditor including their independence, objectivity and professional
scepticism, quality of the engagement team and quality of
communications.
Wesfarmers recognises the importance of providing its shareholders
and the broader investment community with facilities to access
up-to-date, high-quality information, participate in shareholder
decisions of the company and provide avenues for two-way
communication between the company, the Board and shareholders.
Wesfarmers has developed an investor engagement program
for engaging with shareholders, debt investors, the media and
the broader investment community. In addition, the company’s
shareholders have the ability to elect to receive communications and
other shareholding information electronically.
Wesfarmers 2023 Annual Report
93
Governance
Corporate governance overview
Risk management
Risk management framework
Wesfarmers believes that good risk management practice is crucial
for informed decision-making, effective management of operations to
drive commercial outcomes and ultimately underpins the objective of
delivering shareholder value over the long term.
Robust, integrated and effective risk management is central to
Wesfarmers’ broader governance framework and is fully supported by
the Board and the Wesfarmers Leadership Team. This commitment
is outlined in the Wesfarmers Board-approved Risk Management
Policy which is available in the corporate governance section of the
company’s website at www.wesfarmers.com.au/cg
The Board recognises that a values-based culture is fundamental
to an effective risk management framework. Wesfarmers, through
the Board, instils and promotes a culture which is underpinned by
the Wesfarmers Way, including Wesfarmers’ core values of integrity,
openness, accountability and entrepreneurial spirit.
Wesfarmers’ approach to risk management is aligned with the
principles and requirements of International Standard
ISO 31000:2018 – Risk Management Guidelines and is depicted
diagrammatically below. These elements are necessary to maintain
a risk-aware culture and inform professional judgements about
risk-taking within the parameters and risk appetite set by the Board.
C o m munication
Continual
improvement
Integrated
The Wesfarmers Risk Management Framework is reviewed by the
Board on an annual basis to satisfy itself that it is sound, continues to
operate effectively, and that the Group is operating with due regard to
the risk appetite set by the Board, or that appropriate action is taken
should performance fall outside the risk appetite.
The framework was last comprehensively reviewed in May 2023.
The Group Risk Appetite Statement was reviewed and updated
in June 2023 to reflect new and emerging risks and changing
circumstances.
Diversity and inclusion
Wesfarmers considers building a diverse and inclusive workforce a key
enabler for delivering its objective of satisfactory returns to shareholders.
Wesfarmers’ customers and stakeholders are diverse and to gain the
best insight into their needs and expectations, and how to meet them,
diverse and inclusive teams are essential. A diversity of perspectives and
backgrounds also strengthens creativity in teams. Moreover, creating
an environment that attracts, retains, and develops team members with
a wide range of strengths and experiences ensures that Wesfarmers is
best equipped for future growth.
Wesfarmers' Diverse, Inclusive and Respectful Workplaces Policy
encourages an inclusive work environment where everybody feels
respected and safe at work and includes fostering diversity in all its
facets at all levels across the Group.
Further details on diversity and inclusion are set out on
pages 68 and 69 of this annual report and in the 2023 Corporate
Governance Statement.
Human and
cultural factors
Current
R i s k a ppetite
a d ership
L e
Wesfarmers
Way
Structured and
comprehensive
C
o
mmi t m e
nt
Customised
Dynamic
and
responsive
Inclusive
Performa n c e
Wesfarmers has adopted a three-lines approach to risk management
whereby all team members have an important role in the operation of
the risk framework. The three-lines approach:
• promotes accountable decision-making; and
•
reinforces the responsibility of divisional management and Group
management in:
–
–
–
identifying, understanding and managing the risks within their
respective realms of responsibility;
seeking to ensure that business operations and risk-taking
remain within the risk appetite; and
that appropriate action is taken if risk exposure is deemed to
be either too conservative or outside risk appetite.
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Wesfarmers 2023 Annual Report
Directors' report
Wesfarmers Limited and its controlled entities
The information appearing on pages 6 to 94 forms part of the directors’ report for the financial year ended 30 June 2023 and is to be read in
conjunction with the following information:
Results and dividends
Year ended 30 June
Profit
Profit attributable to equity holders of the parent
Dividends
The following dividends have been paid or are payable* by the company or have been determined to be paid by
the directors since the commencement of the financial year ended 30 June 2023:
(a) out of the profits for the year ended 30 June 2022 and retained earnings on the fully-paid ordinary shares:
(i) fully-franked final dividend of 100 cents (2021: 90 cents) per share paid on 6 October 2022 (as disclosed in
last year’s directors’ report)
(b) out of the profits for the year ended 30 June 2023 on the fully-paid ordinary shares:
(i) fully-franked interim dividend of 88 cents (2022: 80 cents) per share paid on 28 March 2023
(ii) fully-franked final dividend of 103 cents (2022: 100 cents) per share to be paid on 5 October 2023
2023
$m
2022
$m
2,465
2,352
1,134
1,020
998
1,169
907
1,134
*
The payment of dividends for the 2021 and 2022 KEEPP Deferred Shares and Performance Shares are delayed until either the shares vest (with the dividends paid to the
participant) or upon forfeiture (with the dividends paid to the trustee). This means no component of any dividend will be paid to the executive KMP unless and until the vesting
outcome is known. For further details, please see the remuneration report on pages 100 to 130 of this annual report.
Principal activities
The principal activities of the entities within the consolidated Group during the year were:
•
•
•
•
retailing of home improvement and outdoor living products and supply of building materials;
retailing of general merchandise and apparel products;
retailing of office and technology products;
retailing of health, beauty and wellbeing products and services;
• management of retail subscription program and shared data asset;
• wholesale distribution of pharmaceutical goods;
• manufacturing and distribution of chemicals and fertilisers;
• development of an integrated lithium project, including mine, concentrator and refinery;
D
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•
industrial and safety product distribution;
• gas processing and distribution; and
• management of the Group's investments.
Directors
The directors in office at the date of this report are:
• M A Chaney (Chairman)
• R G Scott (Group Managing Director)
• A J Cransberg
• S W English
• M Roche
• A Sabharwal
• V M Wallace
• S L Warburton
• A M Watkins
• J A Westacott
All directors served on the Board for the period from 1 July 2022 to 30 June 2023.
The qualifications, experience, special responsibilities and other details of the directors in office as at the date of this report appear on
pages 88 and 89 of this annual report.
Wesfarmers 2023 Annual Report
95
Directors' report
Directors' report
Wesfarmers Limited and its controlled entities
Directors' shareholdings
Securities in the company or in a related body corporate in which directors had a relevant interest as at the date of this report are:
M A Chaney
A J Cransberg
S W English
M Roche
A Sabharwal
R G Scott*
V M Wallace
S L Warburton
A M Watkins
J A Westacott
BWP Trust
Wesfarmers Limited
Units
–
–
–
–
–
–
–
–
–
–
Shares
87,597
4,473
5,175
12,060
6,293
1,074,041
13,983
7,536
9,000
6,788
* R G Scott holds 380,375 Deferred Shares (previously referred to as Restricted Shares) and 165,086 Performance Shares under the Key Executive Equity
Performance Plan (KEEPP). For further details, please see the remuneration report on pages 100 to 130 of this annual report.
Directors’ meetings
The following table sets out the number of directors’ meetings (including meetings of Board committees) held during the year ended
30 June 2023 and the number of meetings attended by each director.
Board
Audit and Risk
Committee
Remuneration
Committee
Nomination Committee
Eligible to
attend1
9
9
9
9
9
9
9
9
9
9
Attended2
9
9
9
9
9
9
9
9
9
9
Eligible to
attend1
-
-
8
-
8
-
-
8
-
8
Attended2
-
-
8
-
8
-
-
8
-
8
Eligible to
attend1
9
9
-
9
-
-
9
-
9
-
Attended2
9
9
-
9
-
-
9
-
9
-
Eligible to
attend1
2
2
2
2
2
-
2
2
2
2
Attended2
2
2
2
2
2
-
2
2
2
2
M A Chaney3
A J Cransberg
S W English
M Roche
A Sabharwal
R G Scott
V M Wallace
S L Warburton4
A M Watkins
J A Westacott
1 Number of meetings held while the director was a member of the Board/Committee.
2 Number of meetings attended.
3 Notwithstanding he is not a member, M A Chaney attended all meetings of the Audit and Risk Committee held during the year.
4 Notwithstanding she is not a member, S L Warburton attended all meetings of the Remuneration Committee held during the year.
Insurance and indemnification of directors and officers
During or since the end of the financial year, the company has paid premiums in respect of a contract insuring all directors and officers of
Wesfarmers Limited and its related entities against certain liabilities incurred in that capacity. Disclosure of the nature of the liability covered by
the insurance and premiums paid is subject to confidentiality requirements under the contract of insurance.
In accordance with the company’s constitution, the company has entered into Deeds of Indemnity, Insurance and Access with each of the
directors of the company. These Deeds:
•
indemnify a director to the full extent permitted by law against any liability incurred by the director:
– as an officer of the company or of a related body corporate; and
–
to a person other than the company or a related body corporate, unless the liability arises out of conduct on the part of the director
which involves a lack of good faith;
• provide for insurance against certain liabilities incurred as a director; and
• provide a director with continuing access, while in office and for a specific period after the director ceases to be a director, to certain
company documents which relate to the director’s period in office.
In addition, the company’s constitution provides for the indemnity of officers of the company or its related bodies corporate from liability incurred
by a person in that capacity to the full extent permitted by law.
No indemnity payment has been made under any of the documents referred to above during, or since the end of, the financial year.
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Wesfarmers 2023 Annual Report
Directors' report
Wesfarmers Limited and its controlled entities
Directors’ and other officers’ remuneration
Discussion of the Board’s policy for determining the nature and amount of remuneration for directors and senior executives and the relationship
between such policy and company performance are contained in the remuneration report on pages 100 to 130 of this annual report.
Options
No options over unissued shares in the company were in existence at the beginning of the financial year or granted during, or since the end of,
the financial year.
Company Secretary
Vicki Robinson was appointed as Executive General Manager, Company Secretariat and Company Secretary of Wesfarmers Limited on
2 March 2020. Prior to this, Vicki was General Manager, Legal (Corporate) and has played a key role in many of the Group's merger and
acquisition transactions. Vicki joined Wesfarmers in July 2003 as a Legal Counsel with the Corporate Solicitors Office. In 2007, she moved to
the role of General Manager for enGen, and she returned to the Corporate Solicitors Office in 2009. Vicki holds a Bachelor of Laws (Honours)
and a Bachelor of Commerce from The University of Western Australia and was admitted to practise as a barrister and solicitor in 1999. Vicki is
a member of the Methodist Ladies College Council, and was a director of the Black Swan State Theatre company from 2009 to 2018. She is a
Fellow of the Governance Institute of Australia. On 26 June 2023, Wesfarmers announced that Vicki will retire as Company Secretary effective
30 October 2023, with Sheldon Renkema succeeding her as Company Secretary from this date.
Significant changes in the state of affairs
Particulars of the significant changes in the state of affairs of the consolidated entity during the financial year are as follows:
•
revenue from ordinary activities up from $36,838 million to $43,550 million
• net profit for the year up from $2,352 million to $2,465 million
• dividends per share of $1.91 (2022: $1.80 per share)
•
total assets down from $27,286 million to $26,546 million
• shareholders’ equity up from $7,981 million to $8,281 million
• net debt down from $4,491 million to $4,009 million
• net cash flows from operating activities up from $2,301 million to $4,179 million
Review of results and operations
The operations, financial position, business strategies and prospects for future financial years of the consolidated entity are detailed in the
operating and financial review on pages 16 to 87 of this report.
Events after the reporting period
The following significant event has arisen since the end of the financial year:
Dividends
A fully-franked final dividend of 103 cents per share resulting in a dividend payment of $1,169 million was determined with a payment date of
5 October 2023. The final dividend will also carry a New Zealand franking credit, in addition to the Australian franking credit, of 10 cents (NZD)
per share. The final dividend has not been provided for in the 30 June 2023 full-year financial statements.
Acquisition of InstantScripts Pty Ltd
On 13 June 2023, Wesfarmers announced that Australian Pharmaceutical Industries Pty Ltd (API), a wholly-owned subsidiary of Wesfarmers,
entered into an agreement to acquire InstantScripts Pty Ltd (InstantScripts), one of Australia’s leading telehealth businesses for cash
consideration of approximately $135 million. The transaction completed on 3 July 2023.
Due to the timing of the completion of the acquisition and the restriction on access to the books and records of InstantScripts until after
completion, the accounting for the business combination has not yet been determined. Further information in relation to this acquisition is unable
to be provided due to the limited time between completion and the release of this report.
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Directors' report
Directors' report
Wesfarmers Limited and its controlled entities
Non-audit services
Ernst & Young provided non-audit services to the consolidated entity during the year ended 30 June 2023 and received, or is due to receive, the
following amounts for the provision of these services:
Tax compliance
Other
Total
$’000
703
94
797
The total non-audit services fees of $797 thousand represents 11.9 per cent of the total fees paid or payable to Ernst & Young
and related practices for the year ended 30 June 2023. Total non-audit services fees and other assurance and agreed-upon procedures fees
were $1,527 thousand. Further details of amounts paid or payable to Ernst & Young and its related practices are disclosed in note 27 to the
financial statements.
The Audit and Risk Committee has, following the passing of a resolution of the Committee, provided the Board with written advice in relation to
the provision of non-audit services by Ernst & Young.
The Board has considered the Audit and Risk Committee’s advice, and the non-audit services provided by Ernst & Young, and is satisfied
that the provision of these services during the year by the auditor is compatible with, and did not compromise, the general standard of auditor
independence imposed by the Corporations Act 2001 for the following reasons:
•
the non-audit services provided do not involve reviewing or auditing the auditor’s own work or acting in a management or
decision-making capacity for the company;
• all non-audit services were subject to the corporate governance procedures and policies adopted by the company and have been
reviewed by the Audit and Risk Committee to ensure they do not affect the integrity and objectivity of the auditor; and
•
there is no reason to question the veracity of the auditor’s independence declaration (a copy of which has been reproduced on the
following page).
External auditor quality review assessment
Wesfarmers conducts an external auditor quality review process annually following the completion of the audit of the Group's financial
statements and remuneration report. The quality review process considers a range of external and internal information sources to assess the:
• external auditor's independence, objectivity and professional scepticism;
• quality of the audit engagement team; and
• quality of the communications with the external auditor.
The findings of the review are considered by the Audit and Risk Committee as part of its consideration of the external auditor's appointment and
the feedback provided is used to improve the external audit process.
The review following the completion of the audit of the financial statements and remuneration report for the year ended 30 June 2022 reaffirmed
the Group's position that, while there are some opportunities for improvement, the quality of Ernst & Young's service in their performance of
the external audit is sound. The internal review findings were supported by ASIC's audit inspection program, which reaffirmed the quality of
Ernst & Young's audits and relative performance compared to its peers.
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Wesfarmers 2023 Annual Report
Directors' report
Wesfarmers Limited and its controlled entities
The directors received the declaration below from Ernst & Young:
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
Fax: +61 8 9429 2436
ey.com/au
ey.com/au
Auditor’s independence declaration to the directors of Wesfarmers Limited
IInnddeeppeennddeenntt aauuddiittoorr''ss rreeppoorrtt ttoo tthhee mmeemmbbeerrss ooff WWeessffaarrmmeerrss LLiimmiitteedd
As lead auditor for the audit of the financial report of Wesfarmers Limited for the financial year ended 30 June 2023,
I declare to the best of my knowledge and belief, there have been:
IInnddeeppeennddeenntt aauuddiittoorr''ss rreeppoorrtt ttoo tthhee mmeemmbbeerrss ooff WWeessffaarrmmeerrss LLiimmiitteedd
a. no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
b. no contraventions of any applicable code of professional conduct in relation to the audit; and
Report on the audit of the financial report
Report on the audit of the financial report
c. no non-audit services provided that contravene any applicable code of professional conduct in relation to the audit.
OOppiinniioonn
This declaration is in respect of Wesfarmers Limited and the entities it controlled during the financial year.
OOppiinniioonn
We have audited the financial report of Wesfarmers Limited (‘the Company’) and its subsidiaries (collectively, ‘the Group’),
We have audited the financial report of Wesfarmers Limited (‘the Company’) and its subsidiaries (collectively, ‘the Group’),
which comprises the consolidated balance sheet as at 30 June 2023, the consolidated income statement, consolidated
which comprises the consolidated balance sheet as at 30 June 2023, the consolidated income statement, consolidated
statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for
statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for
Ernst & Young
T S Hammond
the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the
the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the
Partner
24 August 2023
directors' declaration.
directors' declaration.
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In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
A member firm of Ernst & Young Global Limited
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
Liability limited by a scheme approved under Professional Standards Legislation
a.
b.
a.
Environmental regulation and performance
giving a true and fair view of the consolidated financial position of the Group as at 30 June 2023 and of its consolidated
financial performance for the year ended on that date; and
giving a true and fair view of the consolidated financial position of the Group as at 30 June 2023 and of its consolidated
financial performance for the year ended on that date; and
The activities of the consolidated entity are subject to environmental regulation by various authorities throughout Australia and the other
countries in which the Group operates.
complying with Australian Accounting Standards and the Corporations Regulations 2001.
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Licences granted to the consolidated entity regulate the management of air and water quality and quantity, the storage and carriage of
hazardous materials, the disposal of wastes and other environmental matters associated with the consolidated entity’s operations.
b.
BBaassiiss ffoorr ooppiinniioonn
BBaassiiss ffoorr ooppiinniioonn
During the year, there have been no known material breaches of the consolidated entity’s licence conditions.
Proceedings on behalf of the company
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are
further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent
further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent
No proceedings have been brought on behalf of the company, nor have any applications been made in respect of the company, under
of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical
of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical
section 237 of the Corporations Act 2001.
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia.
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia.
We have also fulfilled our other ethical responsibilities in accordance with the Code.
We have also fulfilled our other ethical responsibilities in accordance with the Code.
In recognising the need for high standards of corporate behaviour and accountability, the directors of Wesfarmers Limited believe that the
governance policies and practices adopted for the year ended 30 June 2023 follow the recommendations contained within the fourth edition of
the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations. An overview of the company’s corporate
governance statement can be found on pages 90 to 94 of this annual report. The full corporate governance statement is available in the
corporate governance section of the company’s website at www.wesfarmers.com.au/cg
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Corporate governance
KKeeyy aauuddiitt mmaatttteerrss
KKeeyy aauuddiitt mmaatttteerrss
Corporate information
Rounding
Wesfarmers Limited is a company limited by shares that is incorporated and domiciled in Australia. The company’s registered office and principal
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
place of business is Level 14, Brookfield Place Tower 2, 123 St Georges Terrace, Perth, Western Australia.
report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in
forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description
of how our audit addressed the matter is provided in that context.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in
forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description
of how our audit addressed the matter is provided in that context.
The amounts contained in this report and in the financial statements have been rounded to the nearest million dollars unless otherwise stated
(where rounding is applicable) under the option available to the company under ASIC Corporations (Rounding in Financial/Directors’ Reports)
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of
Instrument 2016/191. The company is an entity to which the instrument applies.
our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to
99
respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures,
including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying
financial report.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of
our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to
respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures,
including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying
financial report.
Wesfarmers 2023 Annual Report
11..
IInnvveennttoorryy vvaalluuaattiioonn aanndd eexxiisstteennccee
IInnvveennttoorryy vvaalluuaattiioonn aanndd eexxiisstteennccee
11..
WWhhyy ssiiggnniiffiiccaanntt
WWhhyy ssiiggnniiffiiccaanntt
HHooww oouurr aauuddiitt aaddddrreesssseedd tthhee kkeeyy aauuddiitt mmaatttteerr
HHooww oouurr aauuddiitt aaddddrreesssseedd tthhee kkeeyy aauuddiitt mmaatttteerr
A member firm of Ernst & Young Global Limited
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Liability limited by a scheme approved under Professional Standards Legislation
Directors' report
Remuneration report
Message from the Chairman of
the Remuneration Committee
Dear Shareholders,
On behalf of the Board, I am pleased to
present the 2023 Remuneration Report.
Amidst the backdrop of an increasingly uncertain retail environment,
Group NPAT for the 2023 financial year increased by 4.8 per cent to
the highest level in the past five years (excluding significant items).
This was driven by 12.9 per cent divisional earnings growth, partially
offset by a significant change in non-cash property revaluations
recorded at the Group level. We have continued to deliver long-term
shareholder returns, with dividends (determined) in the 2023 financial
year increasing by six per cent to $1.91, and our five-year TSR of
12.5 per cent per annum outperforming the ASX 100 over the same
period (7.7 per cent per annum). In this report we explain how our
remuneration for the executive KMP reflects this performance, as
well as the decisions the Board has taken to recognise external
impacts on longer-term remuneration outcomes.
Our approach and framework
The Key Executive Equity Performance Plan (KEEPP), which
was introduced in 2016, is the variable incentive plan for the
executive KMP. It is heavily weighted to long-dated equity, creating
a strong relationship between executive KMP remuneration and
performance, as well as alignment with shareholder outcomes.
The Board incorporates shareholder feedback into the approach to
remuneration, and shareholders have supported our framework, with
over 96 per cent of votes in favour of the Remuneration Report at
the 2022 Annual General Meeting. This is due to two core features:
– 100 per cent of variable remuneration is delivered in equity for
the Group Managing Director and Group Chief Financial Officer
(the portion is slightly lower for other executive KMP). This equity
is restricted for up to six years, thereby directly linking long-term
shareholder value and the value of current and prior year share
grants; and
– At least 50 per cent of all share awards are subject to further
performance testing over a four-year period subsequent to
grant against a range of measures including Wesfarmers' TSR
performance relative to that of the S&P/ASX 100.
The Board continues to be satisfied that the KEEPP is fit for purpose
but made two optimisation changes during the year associated with
vesting of prior year awards:
–
In 2020, the Board replaced a cumulative EBT measure for
the divisional managing directors’ KEEPP Performance Shares
with a weighted annual EBT measure, weighted 40, 30, 20 and
10 per cent over years one to four of the performance period
respectively. The ROC gate continued to be calculated on a
simple average basis. For consistency, in the 2023 financial year
the Board approved that the ROC gate for future KEEPP grants
would be a weighted average calculation; and
– Where a significant event has occurred over the four-year
performance period and, in the Board’s view, has been
adequately dealt with within a scorecard outcome or prior year
vesting level, the Board would remove the item from relevant
Performance Share assessments, to avoid double impact.
Company performance
The Board is pleased with the Group's overall financial performance
for the 2023 financial year, in changing trading and market
conditions. Our retail businesses responded well to these conditions
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Wesfarmers 2023 Annual Report
and benefited from their strong value credentials and focus on
everyday products as consumers responded to household budget
pressures. Significant investments were made to progress the Group
data and digital ecosystem enabling the rollout of the OnePass
membership program. Catch, which was acquired in the 2020
financial year, has proved challenging and resulted in a higher loss
than was budgeted. The Board supports the decisive action taken
with regard to Catch during the year and is looking forward to seeing
improvements in 2024. The transformation within API is continuing
as anticipated and WesCEF delivered record earnings for the year.
The Board is disappointed with the safety outcomes within
Bunnings. For the second year, the required improvements in
safety were not achieved. Due in part to a reclassification of
injuries in 2023, the total recordable injury frequency rate (TRIFR)
in Bunnings deteriorated to an unacceptable level. Bunnings has
implemented a strategy to improve TRIFR. The 2023 financial
year safety result in Bunnings meant there was no award made
to the Group Managing Director, Group Chief Financial Officer,
and Managing Director, Bunnings Group in respect of the safety
component in their 2023 KEEPP scorecards.
Remuneration outcomes
The budget and target setting process returned to its usual cycle
for the 2023 financial year following a modified planning and target
setting cycle for 2021 and 2022 due to the impacts of COVID-19.
Consistent with the approach taken in the 2022 financial year, the
financial component of the KEEPP scorecards was reduced to
55 per cent to partly accommodate a 15 per cent weighting to the
Group ecosystem. This meant that there was more Board judgement
applied to the KEEPP scorecard outcomes, given the greater
weighting to non-financial measures of 45 per cent in total.
In relation to financial measures, the Group’s published financial
results were again adopted for remuneration purposes with a small
exception - a positive NPAT adjustment to reflect the economic gain
on the sale of the remaining stake in Coles Group in April 2023,
consistent with the approach outlined in the 2020 Remuneration
Report.
At the divisional level, the Board exercised discretion in relation
to the Bunnings EBT financial measure in the 2023 KEEPP
scorecard for the Managing Director, Bunnings Group. The
minimum ROC performance gate of 67.1 per cent was not
applied to this measure as it was considered that the EBT
achieved for the year - a record level for Bunnings - should still
entitle the Managing Director, Bunnings Group to an award for
that component, having achieved a 65.4 per cent ROC. The
Board considered this adjustment to the outcome to be fair and
reasonable. Given the ROC performance and the sales growth
performance were below the minimum performance threshold, the
Managing Director, Bunnings Group did not receive any outcome in
his 2023 KEEPP scorecard for these components.
Considering both the individual contributions from each of the
executive KMP alongside the business performance over the 2023
financial year measured against the demanding and ambitious
targets within the 2023 KEEPP scorecards, the Board has approved
below target KEEPP outcomes for all participants, except for the
Managing Director, Kmart Group, as discussed below, and set out in
more detail in sections 5.2 to 5.4.
Remuneration report
Group Managing Director
The Board continues to be pleased with the performance of the
Group Managing Director. The year has presented new challenges
which the Group Managing Director has successfully navigated and
he has provided strong leadership of the Group.
For the Group Managing Director the financial component of the
2023 KEEPP scorecard (measured against profit and return on
equity targets for combined results for the Group as a whole) was
slightly above target for Group NPAT and slightly below target for
Group ROE and therefore 67.3 per cent of the maximum KEEPP
award was made for the financial component.
TRIFR for the Group deteriorated as a consequence of the Bunnings
Group result to a level below the threshold level of performance set
by the Board in the 2023 KEEPP scorecard - resulting in no award
for that component.
Overall, the 35 per cent non-financial component excluding safety
was awarded at an average level of 80 per cent of the maximum.
The total 2023 KEEPP scorecard outcome represents 65.0 per cent
of the Group Managing Director's maximum variable remuneration
opportunity. This increased to 65.8 per cent including the minimum
grant of KEEPP Performance Shares.
Other executive KMP
The total 2023 KEEPP awards for the other executive KMP as a
percentage of their maximum variable incentive opportunities were
65.8 per cent for the Group Chief Financial Officer, 97.4 per cent
for the Managing Director, Kmart Group, and 57.0 per cent for the
Managing Director, Bunnings Group, including the minimum grant of
KEEPP Performance Shares, where applicable.
Vesting of 2019 KEEPP Performance Shares
Following 30 June 2023, the Board assessed the vesting outcomes
of the 2019 KEEPP Performance Shares against the performance
conditions set for each participant.
For the 2019 KEEPP, the TSR result accounts for 60 per cent
of the vesting result for the Group Managing Director and
Group Chief Financial Officer, and 50 per cent of the vesting result for
the divisional managing directors.
Over the four-year performance period, Wesfarmers Limited shares
achieved top quartile performance with a total shareholder return
(TSR) of 64.4 per cent, placing it at the 84th percentile relative to
peer companies in the S&P/ASX 100. As a result, the component
subject to the relative TSR performance condition vested in full.
For the Group Managing Director and the Group Chief Financial
Officer, the Board assessed performance in relation to their portfolio
management and investment outcomes and strategic objectives
components (each with 20 per cent weighting) over the four-year
period, with greater importance placed on the earlier years. The
assessment resulted in vesting of the portfolio management and
investment outcomes component at 50.0 per cent and the strategic
objectives component at 85.0 per cent. Further details of these
results are provided in section 5.5. The 2019 KEEPP was the final
KEEPP award with a strategic objectives component, with the TSR
component rising from 60 to 80 per cent for subsequent awards.
For the divisional managing directors, the remaining 50 per cent
of the award is based on cumulative EBT over the four-year
performance period against the 2019 Corporate Plan, subject to an
average ROC gate. The Corporate Plan performance hurdles were
set on a pre-COVID-19 basis. Consistent with the approach taken to
the KEEPP scorecard targets in the 2021 and 2022 financial years,
the Board determined it was appropriate to make a corresponding
COVID-19 adjustment to the respective EBT and ROC performance
targets for both Bunnings Group and Kmart Group. This resulted
in an upward revision to the component targets for 2021 and a
downward revision for 2022.
Following assessment, Kmart Group exceeded the minimum
cumulative EBT target, resulting in this component vesting
at 84.4 per cent for the Managing Director, Kmart Group.
Bunnings Group exceeded the cumulative EBT target resulting
in this component vesting in full at 100 per cent for the
Managing Director, Bunnings Group. Further details of these results,
including adjustments made to the targets in relation to COVID-19,
are provided in section 5.5.
Vesting of 2020 Kmart-related Performance-tested
Shares
Performance-tested shares were allocated in 2020 to the
Group Managing Director, Group Chief Financial Officer and
Managing Director, Kmart Group relating to the restructuring of the
Target and Kmart networks, with a cumulative converted store profit
target and a capital expenditure gate. These targets were similarly
adjusted for COVID-19 and were tested as at 30 June 2023. The
Board approved that 100.0 per cent of the shares vested, as the
targets were exceeded with lower capital expenditure. Further details
of these results, including adjustments made to the targets in relation
to COVID-19, are provided in section 5.5.
Fixed annual remuneration for executive KMP
There were no changes to the fixed remuneration for executive KMP
during the 2023 financial year.
In July 2023, as part of the annual remuneration review cycle, the
Board considered the fixed remuneration for the executive KMP. The
Board approved a four per cent increase to the fixed remuneration
of the Group Managing Director to $2,600,000, effective
1 October 2023, the first increase in Mr Scott's fixed remuneration
since his appointment in November 2017. No changes were made
to the fixed remuneration for any of the other executive KMP. Further
details are provided in section 5.1.
Non-executive director fees
In June 2023, the Board reviewed the fees payable to the
non-executive directors having regard to benchmark data, market
position and relative fees. Following consideration, no changes were
made to the Chairman's fee, the main Board fee or any of the Board
committee fees for the 2024 financial year.
The table on the following page summarises the remuneration
outcomes for the executive KMP for 2023. Please refer to the
relevant section of this report as indicated for further information.
Thank you for your continued support of Wesfarmers. We look
forward to our ongoing engagement with you and sharing in the
company's future success.
Mike Roche
Chairman, Remuneration Committee
Wesfarmers 2023 Annual Report
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Remuneration report
Executive KMP 2023 remuneration outcomes summary
The information in the tables below summarises the remuneration outcomes for the executive KMP in 2023. Refer to the relevant section in this
report for further information.
Rob Scott
Group Managing
Director
Anthony
Gianotti
Group Chief
Financial Officer
Ian Bailey
Mike Schneider Section
Managing Director,
Kmart Group
Managing Director,
Bunnings Group
Fixed remuneration
Fixed annual remuneration (FAR)
In July 2023, the Board conducted the annual review of fixed
remuneration for the executive KMP, including benchmarking to
peer companies and roles.
Remained
unchanged at
$2,500,000
Effective
1 October 2023, Board
approved increase to
$2,600,000
Remained
unchanged at
$1,450,000
Remained
unchanged at
$1,550,000
Remained
unchanged at
$1,700,000
5.1
To determine the 2023 KEEPP outcomes, executive KMP performance for the 2023 financial year was measured against the performance
hurdles in the 2023 KEEPP scorecards. 2023 KEEPP outcomes for each executive KMP are summarised below.
2023 KEEPP Scorecard outcomes
Scorecard
measures
(weightings)
Financial (55%)
Group ecosystem (15%)
Safety (10%)
Business enhancing (10%)
and Sustainability (10%)
67.3% of
maximum
66.7% of
maximum
0% of
maximum
90.0% of
maximum
67.3% of
maximum
66.7% of
maximum
0% of
maximum
90.0% of
maximum
100% of
maximum
88.9% of
maximum
99.2% of
maximum
95.8% of
maximum
36.2% of
maximum
66.7% of
maximum
0% of
maximum
87.5% of
maximum
2023 KEEPP scorecard outcome
Amount available for allocation, including minimum Performance
Shares
2023 KEEPP cash amount
To be paid in August 2023
2023 KEEPP Deferred Shares
To be allocated later in FY24, subject to vesting and
restrictions for up to 6 years
2023 KEEPP Performance Shares
To be allocated later in FY24 and subject to vesting and
performance conditions for 4 years
$4,938,390
65.8% of maximum
$2,864,266
65.8% of maximum
$4,529,970
97.4% of maximum
$2,908,755
57.0% of maximum
N/A
KEEPP delivered
N/A
KEEPP delivered
entirely in shares
entirely in shares
30.0% of FAR
30.0% of FAR
5.2
to
5.4
97.5% of FAR1
97.5% of FAR
131.1% of FAR
56.1% of FAR
100.0% of FAR1
100.0% of FAR
131.1% of FAR
85.0% of FAR
Following the end of the 2023 financial year, performance share awards from prior years were tested and vested to the executive KMP, as set
out in the table below.
Vesting of prior year performance share awards
2019 KEEPP
Performance Shares
vesting result
2020 Kmart-related
Performance-tested
shares vesting result
Vesting result
87.0%
Number of shares vested
69,595
Number of shares forfeited
10,400
Vesting result
100%
87.0%
38,936
5,818
100%
92.2%
15,946
1,350
100%
Number of shares vested
25,774
13,918
20,877
100%
31,016
0
N/A
Other information for the 2023 financial year is shown in the table below.
Vested and unrestricted shareholdings
Pre-vesting and pre-release risk and conduct check
completed by the Audit and Risk Committee for all
equity grants.
As at the date of this report, the market value of
shareholding (direct or beneficial) for each executive
KMP is at least equal to or greater than FAR
1 Allocation for the Group Managing Director is subject to shareholder approval at the 2023 Annual General Meeting.
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5.5
4(b)
5.8
Directors' report
Remuneration report (audited)
Contents
1. 2023 Key management personnel
2. Overview of Group performance
3. KEEPP history for the Group Managing Director
Executive remuneration
4. Executive KMP remuneration framework and policy
5. Executive KMP remuneration
5.1 Fixed annual remuneration (FAR)
5.2 2023 KEEPP award outcomes
5.3 Details of the 2023 KEEPP scorecards
5.4 Assessment and outcome of the 2023 KEEPP scorecards
5.5 Performance share awards that vested during the 2023 financial year
5.6 Executive KMP remuneration (statutory presentation)
5.7 Details of equity allocated during the 2023 financial year
5.8 Executive KMP share ownership
5.9 Executive service agreements
Non-executive director remuneration
6. Non-executive directors
6.1 Overview of non-executive director remuneration policy and arrangements
6.2 Non-executive director fees and other benefits
6.3 Non-executive director remuneration
6.4 Non-executive director share ownership
Other remuneration information
7. Remuneration governance
7.1 Role of the Board and the Remuneration Committee
7.2 Non-executive director remuneration
7.3 Use of remuneration consultants
8. Further information on remuneration
8.1 Share trading restrictions
8.2 Other transactions and balances with key management personnel
9.
Independent audit of remuneration report
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Directors' report
Remuneration report (audited)
1. 2023 Key management personnel
The key management personnel (KMP) include the directors of Wesfarmers Limited and the executive KMP (the Group Managing Director and
the Group Chief Financial Officer and those executives who have authority and responsibility for planning, directing and controlling the activities
of a major profit generating division of Wesfarmers). The KMP for the 2023 financial year are as follows:
Current directors
Michael Chaney AO (Chairman)
Vanessa Wallace
Jennifer Westacott AO
The Right Honourable Sir Bill English KNZM
Mike Roche
Sharon Warburton
Anil Sabharwal
Alison Watkins AM
Alan Cransberg
Current executive KMP
Rob Scott, Group Managing Director
Anthony Gianotti, Group Chief Financial Officer
Ian Bailey, Managing Director, Kmart Group
Michael Schneider, Managing Director, Bunnings Group
There have been no changes to KMP since 30 June 2023.
These directors were members of the Board of Wesfarmers Limited
throughout the whole of the 2023 financial year.
These executive KMP held their positions throughout the whole of
the 2023 financial year.
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2. Overview of Group performance
The Wesfarmers results for the year were underpinned by the strong divisional earnings growth of 12.9 per cent for the year, as the Group’s
operating businesses continued to respond well to trading and market conditions. Wesfarmers maintained its focus on long-term shareholder
returns and continued to advance key growth projects during the year, while also taking proactive steps to drive productivity and efficiency
across the businesses. The Group’s largest divisions performed particularly well during the year, with solid earnings reported in Bunnings, and
strong earnings results delivered by Kmart Group.
There was significant earnings growth in Officeworks. Wesfarmers Industrial and Safety continued to improve and the new Health division
accelerated its transformation activities during the year. While the Catch result was disappointing, actions taken during the year supported
progress during the second half.
Wesfarmers Chemicals, Energy and Fertilisers (WesCEF) delivered another strong operating performance and record earnings result for the year,
supported by higher global ammonia prices. Construction has completed at the Mt Holland mine and concentrator. The Group continued to
advance its data and digital capabilities during the year, supported by ongoing investments across the divisions and in OneDigital. The OnePass
membership program was expanded through new partnerships with Bunnings Warehouse and Disney+ and Flybuys, and additional member
benefits both online and in stores.
The Group reported statutory NPAT of $2,465 million for the 2023 financial year.
Five-year statutory results
Five-year statutory results
Financial year ended 30 June (as reported)1
Net profit after tax (NPAT) ($m)
NPAT (excluding significant items) ($m)2
Return on equity (ROE) (rolling 12 months) (%)3
ROE (excluding significant items) (rolling 12 months) (%)2
Earnings per share (EPS) (cents)
EPS (excluding significant items) (cents)2
2019
5,510
2,339
2020
1,697
2,075
38.74,5
17.84
19.2
22.1
2021
2,380
2,421
25.84
26.1
487.24
150.04
210.44
206.8
183.4
214.1
2022
2,352
2,352
29.4
29.4
207.8
207.8
2023
2,465
2,465
31.4
31.4
217.8
217.8
1 The Group applied AASB 16 Leases (AASB 16) from 1 July 2019 using the modified retrospective approach.
2 These are considered non-IFRS measures. 2021 post-tax significant items include restructuring costs of $41 million in the Kmart Group. 2020 post-tax significant
items include the gain on sale of Wesfarmers' 10.1 per cent interest in Coles Group Limited (Coles) completed in February 2020 (4.9 per cent) and March 2020
(5.2 per cent) of $203 million, gain from revaluation of the retained Coles investment of $154 million and the benefit from the finalisation of tax positions on prior year
disposals of $83 million, offset by the $298 million non-cash impairment of the Wesfarmers Industrial and Safety division, and the $520 million non-cash impairment
of the Target brand name and other assets and associated restructuring costs and provisions in the Kmart Group. 2019 post-tax significant items include
$2,264 million gain on demerger of Coles, $645 million gain on sale of Bengalla, $244 million gain on sale of KTAS, $120 million gain on sale of Quadrant Energy,
partially offset by a $102 million provision for supply chain automation in Coles. The Board exercises its discretion in determining whether these significant items are
adjusted for when determining remuneration outcomes.
3 This is considered a non-IFRS measure.
4 2019, 2020, 2021 EPS and ROE include the items outlined in footnote 2 above.
5 2019 ROE was 17.7 per cent when adjusted to remove the increase in the ROE as a result of the Coles demerger.
Five-year shareholder returns
Financial year ended 30 June (as reported)
Total dividends per share (determined) (cents)
Closing share price ($ as at 30 June)1
Five-year rolling Total Shareholder Return (%, per annum)2
ASX 100 five-year rolling Total Shareholder Return (%, per annum)2
2019
2783
2020
1704
2021
178
2022
180
2023
191
36.16
44.83
59.10
41.91
49.34
9.8
8.9
15.9
5.8
21.5
11.2
13.8
7.1
12.5
7.7
1 The opening share price on 2 July 2018 was $49.19. The opening share price on 2 July 2018 adjusted for the proportional impact of the Coles demerger, based on
the volume-weighted average share price of Coles Group Limited on the first five days of trading post-listing was $35.14.
2 Source: Bloomberg.
3 2019 total dividends per share includes the 100 cent special dividend.
4 2020 total dividends per share includes the 18 cent special dividend reflecting the distribution of profits on the sale of the 10.1 per cent interest in Coles.
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Remuneration report (audited)
3. KEEPP history for the Group Managing Director
The table below summarises the KEEPP scorecard outcomes, the associated awards of KEEPP Deferred Shares and KEEPP Performance
Shares, and the vesting levels for the KEEPP Performance Shares for the Group Managing Director.
The financial measures for the Group Managing Director in the KEEPP scorecards have been NPAT and ROE and these accounted for
60 per cent of the weighting for the scorecard in the 2018 to 2021 financial years and 55 per cent of the weighting for the scorecard in the
2022 and 2023 financial years.
Relative TSR accounted for 60 per cent of the performance conditions for the 2018 and 2019 KEEPP Performance Shares.
Percentage of opportunity granted
Deferred
Shares
Performance
Shares1
KEEPP
scorecard
performance
period
2017 KEEPP2
1 July 2016 – 30 June 2017
2018 KEEPP
1 July 2017 – 30 June 2018
2019 KEEPP
1 July 2018 – 30 June 2019
2020 KEEPP
1 July 2019 – 30 June 2020
2021 KEEPP
1 July 2020 – 30 June 2021
2022 KEEPP
1 July 2021 – 30 June 2022
(%)
100.0
84.4
86.6
37.0
98.3
91.4
KEEPP
Performance
Shares performance
period
(%)
100.0
1 July 2017 – 30 June 2021
84.4
1 July 2018 – 30 June 2022
86.6
1 July 2019 – 30 June 2023
37.0
1 July 2020 – 30 June 2024
Percentage of
Performance
Shares
vested
(%)
95.5
95.0
87.0
98.3
1 July 2021 – 30 June 2025
91.4
1 July 2022 – 30 June 2026
Not yet vested
2023 KEEPP
1 July 2022 – 30 June 2023
65.03
66.73
1 July 2023 – 30 June 2027
1 Including minimum Performance Shares.
2 The scorecard outcome relates to Mr Scott's performance as Managing Director, Wesfarmers Industrials, and the Performance Shares period relates to his time as
Group Managing Director.
3 Allocation of 2023 Performance Shares is subject to shareholder approval at the 2023 Annual General Meeting.
The charts below summarise the performance of the Group for two key performance measures under the KEEPP over the same time frames as
above.
ROE (%, R12)
(from total operations)
45
TSR: Wesfarmers and ASX100
(3 month moving average)
300
40
35
30
25
20
15
10
5
0
2017
2018
2019
2020
2021
2022
2023
Excluding significant items
Including significant items
250
200
150
100
0
2017
2018
2019
2020
2021
2022
2023
WES
+142%
ASX100
+87%
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Executive remuneration
4. Executive KMP remuneration framework and policy
Wesfarmers’ primary objective is to provide satisfactory returns to shareholders over the long term. Wesfarmers considers that it can only
achieve its primary objective by: looking after its team members, customers and suppliers; taking care of the environment; by acting ethically
and honestly in all of its dealings; and by making meaningful contributions to the communities in which the Group operates.
The guiding remuneration principles are focused on driving leadership performance and behaviours consistent with this objective, as well as with
the Wesfarmers Way (as explained on page 17 of this annual report) and the Group’s overall strategies. The Board also believes that embedding
the right culture and ensuring that the Group operates within effective risk management protocols are enablers of strategic execution over the
long term.
Our guiding remuneration principles
1
2
3
4
5
6
Attract, motivate and retain world-class talent and outstanding people to drive outcomes
Align executive and stakeholder interests through share ownership while strengthening focus on Group results through
awards of long-term, at-risk deferred equity
Be transparent and fit for purpose, recognising our operating model of divisional autonomy by linking rewards to the
achievement of objectives for which executives are directly accountable and responsible while retaining a direct link to
Group performance
Recognise and reward high performance with a strong focus on the long term
Align effective risk management and demonstration of appropriate behaviours, ethics and values with rewards
Drive strategic achievement which aligns with long-term shareholder interests
The Board considers these principles in setting the executive KMP remuneration framework.
(a) Remuneration mix
The charts below show each component of the remuneration framework for the executive KMP as a percentage of total remuneration.
Group Managing Director and Group Chief Financial Officer1
Total
minimum
remuneration2
Total
target
remuneration
Total
maximum
remuneration
FIXED
REMUNERATION
50.0%
GUARANTEED REMUNERATION
KEEPP
PERFORMANCE SHARES
50.0%
AT-RISK REMUNERATION
FIXED
REMUNERATION
33.3%
GUARANTEED REMUNERATION
FIXED
REMUNERATION
25.0%
GUARANTEED REMUNERATION
KEEPP
DEFERRED SHARES
33.3%
KEEPP
PERFORMANCE SHARES
33.3%
AT-RISK REMUNERATION
KEEPP
DEFERRED SHARES
37.5%
KEEPP
PERFORMANCE SHARES
37.5%
AT-RISK REMUNERATION
Other Executive KMP (divisional managing directors)1
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minimum
remuneration2
Total
target
remuneration
Total
maximum
remuneration
FIXED
REMUNERATION
54.1%
GUARANTEED REMUNERATION
KEEPP
PERFORMANCE SHARES
45.9%
AT-RISK REMUNERATION
FIXED
REMUNERATION
33.3%
GUARANTEED REMUNERATION
KEEPP
CASH
10.0%
KEEPP
DEFERRED SHARES
28.3%
KEEPP
PERFORMANCE SHARES
28.3%
FIXED
REMUNERATION
25.0%
GUARANTEED REMUNERATION
KEEPP
CASH
7.5%
AT-RISK REMUNERATION
KEEPP
DEFERRED SHARES
33.8%
AT-RISK REMUNERATION
KEEPP
PERFORMANCE SHARES
33.8%
1 The sum of the components of total remuneration shown above do not equal 100 per cent in some instances, due to rounding.
2 Under the KEEPP scorecard process, 100 per cent of FAR as Performance Shares is the minimum allocation for the Group Managing Director and the
Group Chief Financial Officer, and 85 per cent of FAR for the divisional managing directors. These Performance Shares vest only to the extent the performance
conditions are met over the following four years. This ensures that variable remuneration is sufficiently tied to performance over time. Notwithstanding this, the Board
has discretion to reduce the number of Deferred Shares and/or Performance Shares to be allocated, or to award no Deferred Shares and/or Performance Shares if,
in its view, this outcome is fair and reasonable.
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Remuneration report (audited)
(b) Remuneration framework
The remuneration framework for the executive KMP comprises fixed annual remuneration (FAR) and variable at-risk remuneration (through
participation in the KEEPP). Total remuneration is set at a competitive level to attract, retain and engage key talent, with FAR set at a level that is
appropriate for the requirements of the role.
Fixed annual remuneration (FAR)
FAR comprises salary and other benefits (including statutory superannuation). FAR, along with the other elements of executive remuneration, including
total remuneration and each component of remuneration, is benchmarked to our external peers and levels vary between the executive KMP. FAR for
each executive KMP is based upon: role and responsibility; business and individual performance; internal and external relativities; and contribution,
competencies and capabilities. FAR is not varied by reference to inflation or indexation as a matter of course. Changes are based on merit, a material
change in role or responsibility, the market rate for comparable roles varying materially, or as a result of internal relativities, while protecting the significant
investment of Wesfarmers in developing its key talent.
Variable remuneration - KEEPP
Opportunity
The KEEPP is a single total incentive established for each executive KMP, with each cycle operating over seven years.
The quantum of the KEEPP award is determined against an individually personalised 12-month scorecard. For the 2023 financial year, this was split
into financial performance measures, safety performance measures, Group ecosystem performance measures (including data and digital initiatives)
and individual performance objectives, weighted 55 per cent, 10 per cent, 15 per cent and 20 per cent respectively. The scorecard sets out the
threshold, 'at target' and stretch level of performance required for each measure.
The Remuneration Committee and the Board set the scorecards at the beginning of the financial year following consultation with the Group Managing
Director (however the Group Managing Director is not involved in setting his own KEEPP scorecard). The KEEPP award can vary up to a maximum of
300 per cent of FAR and is delivered through up to three delivery vehicles. See section 5.2 to 5.4 for further information on the KEEPP scorecards. The
Board has discretion to adjust the scorecard measures or objectives where, in its opinion, it is appropriate to do so.
Delivery vehicles
Cash: There is no cash component for the Group Managing Director and the Group Chief Financial Officer, with their awards delivered solely in equity.
For the other executive KMP, cash is zero for awards at or below 100 per cent of FAR, excluding any Performance Shares awarded to ensure the
minimum Performance Shares level is achieved. For awards above this level, a maximum of 30 per cent of FAR may be awarded in cash.
Equity: KEEPP equity awards are delivered as long-dated equity, with the ‘at target’ awards split equally between Deferred Shares and Performance
Shares. Deferred Shares are restricted up to a total of six years once granted and can be subject to additional conditions if set by the Board at
allocation. Performance Shares are subject to further performance conditions over a future four-year performance period.
KEEPP equity awards are satisfied in unquoted Wesfarmers shares. These shares are identical to other ordinary Wesfarmers shares except that they
are not quoted (i.e. tradeable) on the ASX and the payment of dividends during the vesting period is delayed until either the shares vest (with the
dividends then paid to the participant), or upon forfeiture (with the dividends then paid to the trustee). No component of any dividend will be paid to the
executive KMP unless and until the vesting outcome is known. Upon the vesting or forfeiture of the Deferred Shares and the Performance Shares, as
applicable, the company will apply for the relevant unquoted shares to be quoted on the ASX.
Where the KEEPP scorecard process results in an award of Performance Shares lower than 100 per cent of FAR (or 85 per cent of FAR for the
divisional managing directors), additional Performance Shares (which vest only to the extent the performance conditions are met over the following
four years) will be allocated to achieve that level. This ensures variable remuneration is sufficiently tied to performance over time. Notwithstanding
this, the Board has discretion to reduce the number of Deferred Shares and/or Performance Shares to be allocated, or to award no Deferred
Shares and/or Performance Shares if, in its view, this outcome is fair and reasonable.
Determining outcomes
Performance outcomes against the KEEPP scorecard:
Vesting outcomes for KEEPP Performance Shares:
The financial performance measures and safety performance
measures are assessed after the preparation and audit of the
relevant results each year. The Group ecosystem performance
measures and individual performance outcomes are
simultaneously assessed after a review against the measures and
objectives set. If performance against any measure or objective
is assessed as below threshold, no outcome is awarded for that
measure or objective.
Performance Shares allocated as a result of KEEPP scorecard outcomes are
subject to further performance conditions over a four-year performance period.
Performance against measures including relative Total Shareholder Return (rTSR),
divisional financial performance and Wesfarmers portfolio management and
investment outcomes is measured over a four-year performance period. Vesting
of Performance Shares occurs only to the extent that performance conditions
are met. These are tested following the availability of audited results at the end of
the performance period, independent calculation of rTSR and assessment of any
non-financial performance conditions.
Board consideration of other factors
Prior to the Remuneration Committee recommending any variable remuneration outcomes to the Board (for example, for the KEEPP scorecards or the
vesting or release of KEEPP shares), the Audit and Risk Committee completes a risk and audit check for each executive KMP.
Prior to finalising the KEEPP scorecard outcome, the Board calibrates the scorecard result with the personal performance and behaviours of each
participant and the consideration of whether the calculated outcome is fair and reasonable, including that it is not inappropriate or simply formulaic.
Prior to finalising the vesting result for KEEPP Performance Shares, the Board considers whether the outcomes are fair and reasonable rather than
simply formulaic. Further, the Board has discretion to adjust the performance conditions in appropriate circumstances, so that participants are not
unfairly advantaged or disadvantaged by, for example, portfolio management or external events.
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(c) 2022 KEEPP life cycle
The life cycle for each element of the 2022 KEEPP is set out below. The 2022 KEEPP follows this life cycle and was awarded in the 2023
financial year, based on performance during the 2022 financial year. For further information on the timing for the 2022 KEEPP award, see
section 5.7.
Scorecards established
Scorecards are established at the beginning of the 12-month period. Scorecards are set for each executive KMP,
and include both financial and non-financial performance measures.
Scorecard period
Performance assessed
Performance was assessed after
the end of the 2022 financial year
Award determined
KEEPP awards were determined
following performance
assessment in August 2022,
after the end of the 12-month
scorecard period
Deferred Shares and
Performance Shares
allocated
Deferred Shares and
Performance Shares were
allocated following the 2022
Wesfarmers AGM
Final number of vested
Performance Shares
determined
Performance Shares will vest
to the participant four years
after grant, to the extent that
performance conditions are met
Deferred Shares released
Deferred Shares will be released
to the participant after four, five
and six years
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The financial and safety performance measures are assessed after the preparation and audit of the relevant
results each year. The Group ecosystem performance measures and individual performance outcomes are
simultaneously assessed after a review against the measures and objectives set.
If the assessment determines that performance on any measure is below threshold, the amount of the award
for that measure is zero. If performance for a measure is assessed as at threshold, the award is 50 per cent
of the target opportunity for that measure. If performance for a measure is assessed as at or above threshold,
there is a straight-line calculation up to the target level and then a straight-line calculation up to the maximum
level. The target opportunity across all measures is 200 per cent of FAR and the maximum award opportunity is
300 per cent of FAR.
To reduce dependence on performance over the initial 12-month period, where the scorecard process results
in an allocation of Performance Shares lower than 100 per cent of FAR (or 85 per cent of FAR for the divisional
managing directors), additional Performance Shares (which vest only to the extent they meet the performance
conditions over the four-year performance period) will be allocated to achieve that level.
Once the scorecard is assessed and the award amount is calculated, the Board then considers whether the
proposed award is fair and reasonable in the circumstances. This assessment is a deliberate consideration by
the Board as to whether to exercise its discretion to apply modifiers to decrease or increase the amount of the
award. Prior to finalising the scorecard outcome, the Board calibrates the scorecard result with the personal
performance and behaviours of each participant alongside the consideration of whether the calculated outcome
is fair and reasonable, including that it is not inappropriate or simply formulaic.
KEEPP awards are then delivered as follows:
– Equity: The Group Managing Director and the Group Chief Financial Officer receive all of their KEEPP
awards in equity and are not eligible to receive any cash under the KEEPP. For 'on target' or above awards,
equity is allocated equally in unquoted Deferred Shares and Performance Shares at no cost to participants.
The number of shares allocated is determined using a face value calculated based upon the 10-day,
volume-weighted average price (VWAP) of Wesfarmers shares typically over the period following the full-year
results announced in August of that year. Where required, the 10-day period will be delayed to include shares
trading ex dividend or ex entitlement only. The 10-day period for the 2022 KEEPP award was 31 August to
13 September 2022. The allocation of equity generally occurs shortly after the Annual General Meeting. While
the equity is unquoted, the payment of any dividends on these shares during the vesting period is delayed.
Upon the vesting or forfeiture of the Deferred Shares and the Performance Shares, the company will apply for
the associated unquoted shares to be quoted on the ASX. Once quoted, the delayed dividend is paid to the
participant on the vested shares only, with no dividends ever having been paid to the participant on shares
subsequently forfeited.
– Cash: KEEPP participants other than the Group Managing Director and the Group Chief Financial
Officer may receive a cash component where the award exceeds 100 per cent of FAR, excluding any
Performance Shares allocated to achieve the minimum award of Performance Shares. An award above
that level is paid in cash up to a maximum of 30 per cent of FAR, with the remainder then delivered in
equity. Any cash is generally paid in August, following the release of Wesfarmers’ full-year results.
Deferred Shares: Deferred Shares are subject to a 12-month service condition (the forfeiture period) and any
additional conditions that may be set by the Board at the date of allocation. Deferred Shares are also subject to
trading restrictions which are lifted in three equal tranches over four, five or six years.
Performance Shares: Performance Shares remain at risk and will vest only to the extent further performance
conditions are met when tested over a future four-year performance period.
Deferred Shares and Performance Shares are granted as newly-issued, unquoted securities. An application to
quote the shares is made upon vesting or forfeiture of the shares.
Performance Shares: four-year performance period
Performance Shares are held in trust and can only be transferred to the executive KMP once vested. The
performance conditions relating to the 2022 Performance Shares are role-specific and will be tested over a
four-year period ending 30 June 2026. The Performance Shares will only vest to the extent that these conditions
are met. At the end of the 2026 financial year, the Board has discretion to adjust the vesting result for the 2022
Performance Shares to ensure that participants are not unfairly advantaged or disadvantaged, by, for example,
portfolio management or external events.
Deferred Shares: 12-month forfeiture and four-, five- and six-year trading restrictions
Deferred Shares are held in trust and can only be transferred to the executive KMP once all trading restrictions
and any other conditions are met. For the 2022 Deferred Shares, one-third will be released from the trading
restriction in August 2026, one-third will be released in August 2027 and the remainder released in August 2028.
Wesfarmers 2023 Annual Report
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Directors' report
Remuneration report (audited)
5. Executive KMP remuneration
5.1 Fixed annual remuneration (FAR)
Fixed remuneration levels are set so as to sufficiently reward the executive KMP for performing the key requirements of their roles, having regard
to the competitive environment for talent and other internal and external factors.
There were no changes to FAR for the executive KMP in the 2023 financial year.
In July 2023, the Board undertook a review of the remuneration for the executive KMP. Following this review, the Board concluded there
was a need to increase the FAR for the Group Managing Director. The Board approved an increase of $100,000 per annum for Mr Scott,
taking his FAR to $2,600,000, to take effect from 1 October 2023. This increase is the first change in FAR since Mr Scott's appointment as
Group Managing Director in November 2017.
The Board considered Mr Scott's performance and leadership since his appointment as Group Managing Director, the strong company
performance and shareholder value created and the competitiveness of his remuneration package, across both internal and external
comparators. In addition, the Board continues to acknowledge that Mr Scott's variable remuneration opportunity under the KEEPP is lower in
comparison to some peer companies, and is delivered in long-dated equity, with no cash component. Further, the KEEPP is subject to more
rigorous testing than most other plans in the market (with the initial award determined by annual performance and then at least half of the equity
subject to further performance conditions over the following four years). After considering these factors, the Board firmly believes the increase in
fixed remuneration for the Group Managing Director is justified and in the best interests of the company.
There were no changes to FAR approved for the other executive KMP for the 2024 financial year.
5.2 2023 KEEPP award outcomes
The 2023 KEEPP award outcomes relate to performance from 1 July 2022 to 30 June 2023. The table below sets out specific information
relating to the actual award outcomes for the 2023 financial year.
Name
R G Scott
A N Gianotti
I Bailey
M D Schneider
($)
2,438,390
1,414,266
2,032,485
953,755
Balance available for allocation
for Deferred
Shares
for Performance
Shares1
for cash
award
($)
($)
2,500,000
Not eligible
1,450,000
Not eligible
2,032,485
1,445,000
465,000
510,000
Percentage of
maximum 2023 KEEPP
opportunity awarded
Percentage of
maximum 2023 KEEPP
opportunity forfeited
%
65.8
65.8
97.4
57.0
%
34.2
34.2
2.6
43.0
1 Inclusive of the minimum KEEPP Performance Shares award for Mr Scott, Mr Gianotti and Mr Schneider.
The cash component for the 2023 KEEPP award is expected to be paid to Mr Bailey and Mr Schneider on 29 August 2023. The KEEPP
Deferred Shares and KEEPP Performance Shares are expected to be allocated in November 2023 once performance conditions are set, subject
to shareholder approval in the case of the Group Managing Director. Details of these grants will be provided in the 2024 Remuneration Report.
5.3 Details of the 2023 KEEPP scorecards
The 2023 KEEPP scorecards comprise financial performance measures, safety performance measures, Group ecosystem performance
measures (including measures relating to the Group's data and digital initiatives) and individual performance objectives relevant to the role of
each executive KMP. In the KEEPP scorecards, the performance measures set by the Board are designed to drive strategic outcomes that
benefit the Group and its shareholders. The Board takes a balanced approach to setting the performance range for objectives, including setting
the threshold and stretch performance targets, as well as in assessing the outcomes. The maximum outcome under the KEEPP scorecards can
only be achieved if all of the financial performance measures, safety performance measures, the Group ecosystem performance measures and
the individual performance objectives are assessed at stretch performance and the Board judges this outcome to be fair and reasonable.
Targets set by the Board are assessed to seek to ensure that they are suitably risk-adjusted in accordance with the risk management framework
so as to avoid inappropriate customer, team member or financial risk in the pursuit of the KEEPP outcomes. In assessing performance against
the KEEPP scorecards, the Board also considers how the outcomes have been achieved, for example, through the demonstration of behaviours
aligned with appropriate ethics, values and culture, including a focus on team member safety and wellbeing, and consideration of any actions
impacting Group reputation. Section 5.4 contains further information on the KEEPP scorecards for the 2023 financial year.
Following an altered target-setting process and timing for 2021 and 2022 due to the extended high levels of uncertainty surrounding business
performance as a result of the COVID-19 pandemic, target-setting for 2023 KEEPP scorecards returned to the normal schedule.
Financial performance measures (55 per cent weighting)
Scorecard financial targets are set in relation to the annual budgets. Group NPAT and ROE were chosen for the Group Managing Director
and the Group Chief Financial Officer because they reflect how Wesfarmers uses capital to generate earnings, manages total costs within
the business and ultimately generates a profit to provide shareholder returns. Group NPAT and ROE performance is assessed following the
preparation and audit of the annual financial statements. Group NPAT and ROE may be adjusted, where the Board considers it appropriate, to
ensure that participants are not unfairly advantaged or disadvantaged by, for example, portfolio management activity.
Divisional financial measures of EBT, ROC (calculated as divisional EBT divided by divisional rolling 12 months capital employed, where capital
employed excludes right-of-use assets and lease liabilities) and sales growth were chosen for the divisional managing directors because they
are key financial measures directly linked to accountability at a divisional level that align with the Group financial measures and drive successful
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and sustainable financial business outcomes. Divisional performance is assessed following the preparation and audit of the annual financial
statements. Similar to Group NPAT and ROE, divisional financial measures may be adjusted, where the Board considers it appropriate, to ensure
that participants are not unfairly advantaged or disadvantaged by, for example, portfolio management activity.
Threshold performance is required for both EBT and ROC before any award is made in respect of either of these measures. Threshold EBT
performance is also required before any award is made in respect of sales growth.
Safety performance measures (10 per cent weighting)
Safety targets are generally based upon an improvement on the previous year’s result. Safety performance is measured through the total
recordable injury frequency rate (TRIFR) at the Group or divisional level, as relevant to the executive KMP, and was chosen to reflect the Group's
relentless focus on providing safe workplaces for all team members, in addition to the priority placed on the health and safety of the Group's
customers and the community. TRIFR performance is assessed following completion of the annual sustainability assurance process. No award
will be made in respect of the relevant safety measure if there is a fatality or a significant incident, for example, a workplace event that resulted in
serious harm or a life-altering injury or illness (physical or psychological) within a managed entity.
Group ecosystem performance measures (including data and digital initiatives) (15 per cent weighting)
Following the introduction of the Group ecosystem measures in the 2022 KEEPP scorecards, the Board again approved that the scorecard
measures should have an appropriate focus on the Group ecosystem and other data and digital initiatives. As a result, to ensure that the
executive KMP are incentivised to deliver suitable returns from the Group ecosystem and other data and digital initiatives, the Board approved
the continuation of the 15 per cent weighting to the Group ecosystem performance measures in the 2023 KEEPP scorecards.
The Group ecosystem targets are customised based upon the participant’s role and the specific circumstances and strategic priorities of the
Group and/or division, as appropriate. Where the Board considers that it is appropriate to do so, the scorecard targets will be adjusted so that
participants are not unfairly advantaged or disadvantaged, for example, following portfolio management activity.
Performance in relation to the Group ecosystem measures is assessed against the success of key strategies within OneDigital including the
shared data asset and the OnePass membership program as well as the value-add delivered through various data and digital initiatives at both
the Group and divisional level. These measures were chosen to directly incentivise the executive KMP to contribute to and lead these initiatives,
specifically given their cross-divisional nature. The Group ecosystem measures are designed to maximise Group and divisional opportunities
within the data and digital environment. Progress against the Group ecosystem measures is assessed by the Board following a review of
performance against the objectives by the Group Managing Director or Chairman, as appropriate, as part of the performance review cycle.
Individual performance objectives (20 per cent weighting)
Individual performance objectives are specific to the participant’s role and the Group/division's circumstances and strategic priorities. Where
the Board considers that it is appropriate to do so, the scorecard targets will be adjusted so that participants are not unfairly advantaged or
disadvantaged, for example, following portfolio management activity.
The individual performance objectives are split into two categories, comprising business enhancing objectives and sustainability objectives,
each with 10 per cent weighting. The individual performance objectives were chosen because they are key focus areas in enabling the Group
to achieve its primary objective of generating satisfactory returns to shareholders over the long term. Focusing on the strategic priorities set
as objectives within the KEEPP scorecards will enable our divisions to retain and improve their leading positions in their respective markets
as well as generating long-term growth. Progress against the individual performance objectives is assessed by the Board following a review
of performance against the individual performance objectives by the Group Managing Director or Chairman, as appropriate, as part of the
performance review cycle.
Business enhancing objectives are designed to maximise business and growth opportunities over the long term. Examples include assessing
growth and investment opportunities and operational optimisation projects. Sustainability objectives are set in several interrelated areas where
strong performance is recognised as a driver of long-term shareholder value. This includes our corporate reputation as well as Group-wide
initiatives such as emissions reduction targets and operational risk controls, including cyber security. Sustainability objectives also have regard
to team diversity measures such as gender balance and indigenous employment, recognising that maintaining diverse teams, which reflect the
diversity of the communities they serve, makes our businesses more resilient and provides incremental growth opportunities.
5.4 Assessment and outcome of the 2023 KEEPP scorecards
In assessing the 2023 KEEPP scorecards, the Board reviewed performance against the financial measures and the non-financial measures in
the scorecard, plus any other factors it considers relevant, before determining the scorecard outcome and the allocation of any KEEPP Deferred
Shares and KEEPP Performance Shares. The divisional managing directors may also receive an allocation of cash where applicable.
Assessment and consideration of other factors
In assessing performance against the scorecards, the Board considers the behaviours demonstrated by each executive KMP and, if the Board
considers it appropriate, the outcome is modified. This includes, for example, behaviours in relation to risk management and demonstration of
appropriate ethics, values and culture, actions negatively impacting the Group's reputation, and team member safety and wellbeing. Further, the
Board considers whether the calculated outcome is fair and reasonable, and may decrease or increase the outcome where appropriate. The
results of the performance against the 2023 KEEPP scorecard and final outcome for each of the executive KMP for the 2023 KEEPP allocation
are outlined on the following pages.
In assessing performance during the 2023 financial year against the 2023 KEEPP scorecards, the Board exercised discretion in relation to the
Bunnings EBT for the Managing Director, Bunnings Group. The minimum ROC performance gate was not applied to this measure as it was
considered that the absolute EBT achieved for the year was significant and should still entitle the Managing Director, Bunnings Group to an
award for that component, given the ROC achieved was 65.4 per cent. The Board considered this adjustment to the outcome to be fair and
reasonable. Further, as per standard practice, the Board exercised its judgement in assessing the individual performance objectives, taking into
account all factors it considered relevant.
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Rob Scott – Group Managing Director, Wesfarmers Limited
2023 Performance highlights
Mr Scott’s total 2023 KEEPP outcome, being 65.8 per cent of the maximum opportunity, will be allocated as:
• $2,438,390 in Deferred Shares
• $2,500,000 in Performance Shares
Financial (55% weighting)
Mr Scott's financial targets, were as follows:
• Group NPAT: $2,455.6m
• Group ROE: 31.7%
Outcome: 67.3% of maximum opportunity / 111.1% of FAR
Threshold performance was set at 92.5% of target and stretch performance would be achieved at 110% of target (consistent with the prior year).
• The Group achieved reported Group NPAT of $2,465.0m and reported Group ROE of 31.4%. Consistent with the approach outlined in the
2020 Remuneration Report that the Board considered it was appropriate to take any gain into account for remuneration purposes when and
if the stake was disposed of for economic gain, following the final sell down of the remaining stake in Coles Group Limited in April 2023, the
adjusted Group NPAT of $2,479.0m and adjusted Group ROE of 31.5% were used in the assessment of Mr Scott's 2023 KEEPP scorecard.
• The Board continues to be very pleased with the performance and strategic leadership of Mr Scott in achieving the Group’s financial results for
the 2023 year after a number of years of disruption due to COVID-19 and the more recent softening of economic conditions.
Group ecosystem (15% weighting)
Outcome: 66.7% of maximum opportunity / 30.0% of FAR
• The Board is pleased with the work and progress made across the year in relation to the Group ecosystem, specifically the shared data
asset and the OnePass subscription program. There is strong alignment amongst the retail divisions across the Group in continuing
to develop and deliver the subscription and digital offering. The Board is satisfied that the investment in relation to the Group ecosystem
continues to be justified and that the foundations for future successes are being set for additional impacts in future years.
• The results to date in relation to customer spend and frequency for OnePass have been pleasing.
Safety (10% weighting)
Outcome: 0% of maximum opportunity / 0% of FAR
Group TRIFR target: 8.39
• The Group TRIFR result was 11.33, representing a deterioration in safety outcomes for the year. There were no fatalities and no significant
incidents (being a workplace event that resulted in serious harm or a life-altering injury or illness, either physical or psychological) across
managed entities. As this result was below the minimum performance level set by the Board, no award was made in respect of safety.
• The safety and wellbeing of all team members across the Group continues to be the highest priority and therefore the Board is disappointed
with the TRIFR result, but acknowledges this was due in part to a reclassification of injuries within Bunnings.
Business enhancing (10% weighting)
Outcome: 90.0% of maximum opportunity / 27% of FAR
Mr Scott was set a number of business enhancing objectives for the performance period, each of which has been assessed by the Board.
• Business growth: The Board assessed Mr Scott on a number of business growth objectives for the financial year, including the growth and
investment opportunities recommended by Mr Scott to the Board, such as the acquisition of InstantScripts, the proposed acquisition of
SILK Laser Australia Limited and the continued development of businesses across the Group, including the Mt Holland lithium project.
• Turnaround/newly acquired businesses: The Health division ended the year with financial performance ahead of budget and overall the Board
is pleased with its progress. The Blackwoods ERP project was largely completed in December 2022 and performance continues to improve.
Performance within Officeworks also continued to improve, with good growth over the year.
Sustainability (10% weighting)
Outcome: 90.0% of maximum opportunity / 27% of FAR
• The Board is pleased with the progress being made across the Group in relation to emissions reduction, longer term planning for
decarbonisation and measurement of scope 3 emissions. Across the year, there was a 2.4% decrease in Scope 1 and Scope 2 emissions.
Further, the Board is pleased with the work and continuing achievements in relation to ethical sourcing. Indigenous employment remains
above parity for the Group's Australian team members, and more than 100 team members participated in the Indigenous Leadership
Program, with almost a quarter of these team members achieving promotion or an expansion in responsibilities.
2023 KEEPP outcome
Scorecard measure
Financial
Group ecosystem
Safety
Business enhancing
Business growth
Turnaround/newly acquired businesses
Sustainability
Reputation
Risk management
People and culture
Climate change-related initiatives
Weighting
(%)
Threshold
not met
Threshold
achieved
Threshold
exceeded
Target
achieved
Target
exceeded
Maximum
achieved
55
15
10
10
10
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Remuneration report (audited)
Anthony Gianotti – Group Chief Financial Officer, Wesfarmers Limited
2023 Performance highlights
Mr Gianotti’s total 2023 KEEPP outcome, being 65.8 per cent of the maximum opportunity, will be allocated as:
• $1,414,266 in Deferred Shares
• $1,450,000 in Performance Shares
As Group Chief Financial Officer, Mr Gianotti’s Group financial performance measures and safety performance measures and outcomes are
the same as those of the Group Managing Director, and were as follows:
– Financial - 67.3 per cent of maximum opportunity, 111.1 per cent of FAR
– Safety - 0 per cent of maximum opportunity, 0 per cent of FAR
Mr Gianotti has had another successful year. During the 2023 financial year, Mr Gianotti has played a key role in navigating the Group
through the issues associated with the softening of economic conditions by providing both direction and guidance, for example with
inflation and costs of doing business, as well as inventory management. In addition, Mr Gianotti has remained focused on strengthening
the finance, commercial and risk teams across the Group and building robust succession plans. Further to his role as Group Chief Financial
Officer, Mr Gianotti continued to provide strong strategic support to the Group Managing Director and led strategic projects, as identified by
the Group Managing Director, and also has responsibility for the oversight of Wesfarmers Industrial and Safety.
• Group ecosystem: Mr Gianotti has provided significant support to the Group’s data and digital ecosystem, providing strong financial
management and controls, risk oversight and talent management during the 2023 financial year.
• Business enhancing: Mr Gianotti continued to deliver very effective management of the Group's balance sheet, and Wesfarmers’
relationships with the capital markets, particularly debt providers, investors, analysts and rating agencies, continues to be very positive.
Further, Mr Gianotti has overseen improved financial performance within the Industrial and Safety division and supported various projects
and improvement initiatives across Blackwoods, Officeworks and the Health division. Further, Mr Gianotti has also overseen various
successful business development projects during the 2023 financial year.
• Sustainability: Group risk, especially cyber risk, has continued to be a significant focus for Mr Gianotti and, throughout the year, there
has been continued maturing of the risk and compliance frameworks at both the Group and divisional level. The talent management of the
finance teams and business development teams has again been a focus for Mr Gianotti, with a number of cross divisional moves as well
as external hires announced during the year. In addition, the Group continued to comply with targets in sustainability-linked financing.
2023 KEEPP outcome
Scorecard measure
Financial
Group ecosystem
Safety
Business enhancing
Balance sheet and capital management
Business growth
Turnaround/newly acquired businesses
Sustainability
Reputation
Risk management
People and culture
Climate change-related initiatives
Weighting
(%)
Threshold
not met
Threshold
achieved
Threshold
exceeded
Target
achieved
Target
exceeded
Maximum
achieved
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Ian Bailey – Managing Director, Kmart Group
2023 Performance highlights
Mr Bailey’s total 2023 KEEPP outcome, being 97.4 per cent of the maximum opportunity, will be allocated as:
• $465,000 in cash
• $2,032,485 in Deferred Shares
• $2,032,485 in Performance Shares
Mr Bailey's financial targets were set in relation to the achievement of Kmart Group EBT, Kmart ROC and comparable sales growth.
Threshold performance for the EBT and ROC measures was set at 90% of target and stretch performance would be achieved at 107.5% of
target. The ranges were narrowed for the 2023 financial year relative to the 2022 financial year in reflection of there being less uncertainty
as the Group transitioned from the direct impacts of the COVID-19 pandemic.
• The performance of Kmart Group throughout the 2023 financial year has been very strong, reflecting Mr Bailey’s strong leadership and
effective transformation of Kmart Group over this year and recent years, including the optimisation of the Target and Kmart store networks
as well as other digitisation and productivity initiatives across a number of areas.
• Kmart Group has delivered strong financial results for the year with EBT of $768.9m which was above target by between 10% to 15%.
Kmart ROC was above target by more than 15%.
• Kmart's comparable sales growth was 14.5% which was also above target by more than 15%.
• As a result, the maximum 2023 KEEPP outcome on financial measures was achieved by Mr Bailey.
• Group ecosystem: Mr Bailey has continued in a major leadership role within the Group ecosystem and the rollout of OnePass. He
provides ongoing key strategic support to the Group Managing Director and to both the OneDigital and Flybuys boards.
• Safety: Kmart Group TRIFR for the year was 7.44. This represents a 12.7% improvement on the prior year (excluding Catch) and is 5.1%
above target for the 2023 financial year.
• Business enhancing: Mr Bailey continued the transformative agenda within Kmart Group throughout the 2023 financial year. These
initiatives have been well executed, contributing to strong return on investment and financial results for the year, as well as providing a
strong platform to support strong future performance. In addition, Mr Bailey has continued the strategic focus on analytics and digitisation
in a number of key areas across both Kmart and Target.
• Sustainability: Strong performance has continued in ethical sourcing and Aboriginal and Torres Strait Islander employment, and
Kmart Group has maintained gender balance. Climate-related initiatives continued to progress.
2023 KEEPP outcome
Scorecard measure
Financial
Group ecosystem
Safety
Business enhancing
Business growth
Turnaround/newly acquired businesses
Sustainability
Reputation
Risk management
People and culture
Climate change-related initiatives
Weighting
(%)
Threshold
not met
Threshold
achieved
Threshold
exceeded
Target
achieved
Target
exceeded
Maximum
achieved
55
15
10
10
10
114
Wesfarmers 2023 Annual Report
Remuneration report (audited)
Michael Schneider – Managing Director, Bunnings Group
2023 Performance highlights
Mr Schneider’s total 2023 KEEPP outcome, being 57.0 per cent of the maximum opportunity, will be allocated as:
• $510,000 in cash
• $953,755 in Deferred Shares
• $1,445,000 in Performance Shares
Mr Schneider’s financial targets were set in relation to the achievement of Bunnings Group EBT, ROC and total sales growth. Threshold
performance for the EBT and ROC measures was set at 92.5% of target and stretch performance would be achieved at 107.5%. As
detailed below, the return on capital for the year was more than 65%, which the Board considered a strong result, albeit this was below
the threshold performance set by the Board at the start of the financial year. The cause of this result was largely due to higher inventory at
the start of the year coupled with the impact of poor weather impacting sales on the east coast of Australia. The minimum performance
level was particularly sensitive to these relatively modest moves in stock despite improvements by the end of the financial year. While this
outcome means Mr Schneider does not receive any 2023 KEEPP outcome directly in relation to ROC, the Board determined that it would
be appropriate to lift the ROC threshold performance requirement on the 2023 KEEPP scorecard EBT measure.
•
In the post-COVID-19 environment, Bunnings has continued to deliver pleasing financial results under the leadership of Mr Schneider, and
significant work has been undertaken to support Bunnings’ competitiveness and growth.
• Bunnings delivered record EBT for the year of $2,230.1m and ROC of 65.4%, although both of these were below the Board-approved
budget for the 2023 financial year. EBT was between 0 and 5% below target and ROC was between 5 and 10% below target.
• Total sales growth (including trade centres) was 4.4%, and below threshold for the year. The Board acknowledges that the Bunnings sales
budget for the 2023 financial year was ambitious.
In total, Mr Schneider's 2023 KEEPP outcome on financial measures was 59.7% of FAR.
•
• Group ecosystem: Mr Schneider continues to play an active leadership and advocacy role within the Group ecosystem, including
OneDigital and OnePass. OnePass was successfully extended into Bunnings during the year.
• Safety: Bunnings TRIFR was disappointing at 16.54, having deteriorated for the year, due in part to a change in methodology to align
with other businesses in the Group. As this result was below the minimum performance level set by the Board, no payment was made in
respect of safety.
• Business enhancing: A number of positive strategic initiatives were implemented throughout the 2023 financial year, including for
example, the launch of the pet range. In addition, a number of productivity initiatives were implemented across operations and technology.
• Sustainability: There has been continued good progress during the year in relation to Bunnings' climate change-related initiatives, for
example in the use of renewable electricity, expansion of the solar PV program and emissions reduction. Focus has continued in relation
to Aboriginal and Torres Strait Islander employment and gender balance. Further, the focus on risk, in particular cyber risk, has continued
throughout the year. Mr Schneider continues to show strong leadership for Bunnings in the community and with key external stakeholders,
and this is reflected in Bunnings’ strong brand and reputation.
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2023 KEEPP outcome
Scorecard measure
Financial
EBT
ROC
Sales growth
Group ecosystem
Safety
Business enhancing
Business growth
Turnaround/newly acquired businesses
Sustainability
Reputation
Risk management
People and culture
Climate change-related initiatives
Weighting
(%)
Threshold
not met
Threshold
achieved
Threshold
exceeded
Target
achieved
Target
exceeded
Maximum
achieved
55
15
10
10
10
Wesfarmers 2023 Annual Report
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Directors' report
Remuneration report (audited)
5.5 Performance share awards that vested during the 2023 financial year
At the end of the 2023 financial year, the performance conditions were tested for the 2019 KEEPP Performance Shares and the
2020 Kmart-related Performance-tested Shares. The table below sets out the vesting outcomes for each executive KMP for each of these
awards. Further detail on the performance conditions for each award follows.
2019 KEEPP
scorecard outcome
(percentage
of maximum
opportunity)
Number of
performance
shares granted
Vesting outcome
(percentage
vesting)
Number of
performance
shares to vest
Percentage
of maximum
2019 KEEPP
Performance
Shares opportunity
achieved
2019 KEEPP Performance Shares1
R G Scott
A N Gianotti
I Bailey
M D Schneider
86.6%
89.6%
33.3%
67.1%
2020 Kmart-related Performance-tested Shares2
R G Scott
A N Gianotti
I Bailey
N/A
N/A
N/A
79,995
44,754
17,296
31,016
25,774
13,918
20,877
87.0%
87.0%
92.2%
100.0%
100%
100%
100%
69,595
38,936
15,946
31,016
25,774
13,918
20,877
75.3%
78.0%
30.7%
67.1%
N/A
N/A
N/A
1 Refer to section 5.5(c) of the 2020 Remuneration Report for the terms applying to the 2019 KEEPP Performance Shares.
2 Refer to section 5.7(b) of the 2021 Remuneration Report for the terms applying to the 2020 Kmart-related Performance-tested Shares.
2019 KEEPP Performance Shares
In 2019, eligible executive KMP were awarded Deferred Shares and Performance Shares under the 2019 KEEPP. The four-year performance
period for the 2019 KEEPP Performance Shares ended on 30 June 2023. Further details of the terms of the 2019 KEEPP are set out in the
2020 Remuneration Report. All of the current executive KMP participated in the 2019 KEEPP. The table below summarises the applicable
performance conditions and the vesting outcome of the 2019 KEEPP Performance Shares for each, as approved by the Board in August 2023.
Due to the significant impact of COVID-19, the cumulative segment result targets for Kmart Group and Bunnings Group were adjusted by the
Board prior to assessment, as set out on the following page. In addition to adjusting the targets, prior to approval of the vesting outcome, the
Board considered whether it needed to exercise any discretion to amend entitlements, however, concluded it should not. Further information on
each performance condition is provided below.
Performance condition result
(2019-2023)
% of
maximum
opportunity
Total % of
Performance
Shares vested
Number of
Performance
Shares vested
4-year TSR of 64.4% ranked at the
83.9 percentile of the ASX 100
100%
Met expectations
50%
87.0%
69,595
Above expectations
85%
4-year TSR of 64.4% ranked at the
83.9 percentile of the ASX 100
100%
Met expectations
50%
87.0%
38,936
Above expectations
85%
4-year TSR of 64.4% ranked at the
83.9 percentile of the ASX 100
100%
$2,256.8m
96.9% of target
84.4%
4-year TSR of 64.4% ranked at the
83.9 percentile of the ASX 100
100%
$8,471.6m
105.9% of target
100%
92.2%
15,946
100%
31,016
Vesting condition
rTSR (60% of the award)
Portfolio management and
investment outcomes (20% of
the award)
Strategic objectives (20% of
the award)
rTSR (60% of the award)
Portfolio management and
investment outcomes (20% of
the award)
Strategic objectives (20% of
the award)
rTSR (50% of the award)
Cumulative segment result
(50% of the award)
rTSR (50% of the award)
Cumulative segment result
(50% of the award)
R G Scott
A N Gianotti
I Bailey
M D Schneider
116
Wesfarmers 2023 Annual Report
Remuneration report (audited)
Relative total shareholder return (rTSR) condition
This condition measures the performance of Wesfarmers' TSR relative to the TSR of the constituents of the S&P/ASX 100 Index. The Group
outperformed the majority of its peers over the performance period with regard to rTSR and was ranked at the 84th percentile in the ASX 100.
Portfolio management and investment outcomes condition
The Board assessed Mr Scott’s contribution and outcomes over the four-year performance period. Greater emphasis was placed on the
contribution of the decisions and actions in the early years of the performance period to allow the outcomes to be assessed over a longer
term, in particular, the acquisition of Catch and the acquisition of Kidman Resources. The Board also considered the portfolio management
and investment opportunities that had been considered but not pursued over the period. Overall, after weighing up the varying success of the
decisions over this period, and that the lithium development is yet to be completed, the Board assessed Mr Scott as having achieved outcomes
that met their expectations.
In addition, the Group Managing Director and the Board assessed Mr Gianotti's outcomes and Mr Gianotti was also deemed to have achieved
outcomes that met expectations.
Strategic objectives condition
The Board assessed Mr Scott’s contribution and outcomes over the four-year performance period against strategic goals across five specific
areas:
• Accelerating the data and digital agenda
• Environmental, Social and Governance (ESG) strategies
• Risk management
• Corporate reputation
• Talent management and leadership development
Greater emphasis was placed on strategic activity in the earlier years of the performance period to enable assessment over a longer term.
Across the Group, the Board rated Mr Scott as having achieved significant positive results in each of these areas, with the various businesses
within the Group being at different stages under the Group's autonomous operating model. Specifically, the Board was pleased with progress
in accelerating the data and digital agenda over the four years, on the advances in setting and achieving the Group's ESG strategies, and
encouraging and supporting deeper focus on talent, particularly with regard to diversity and succession.
Separately the Group Managing Director and the Board assessed Mr Gianotti’s outcomes against similar areas of focus, using personalised
strategic goals tailored to his role. In addition to the substantial support Mr Gianotti provides to Mr Scott in relation to long-term Group strategy,
Mr Gianotti was assessed as having performed strongly in relation to his personalised strategic objectives over the performance period.
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Cumulative segment result condition
This condition measures the cumulative segment result against the 2019 Corporate Plan for the relevant division, subject to an average ROC
gate (noting ROC for the 2021, 2022 and 2023 financial years was calculated as divisional EBT divided by divisional rolling 12 months capital
employed, where capital employed excludes right-of-use assets and lease liabilities). The relevant Corporate Plan was approved by the Board
prior to the end of the 2019 financial year. The EBT and ROC targets in the Corporate Plan are not typically adjusted subsequently. The Board
can, however, adjust these targets where it considers it appropriate, so that participants are not unfairly advantaged or disadvantaged, for
example, due to major external events or portfolio management activity.
Due to the significant and unforeseen impact of COVID-19 during the performance period, the Board approved adjustments to the performance
condition for both Kmart Group and Bunnings Group, reflective of the relative impact of COVID-19 in the 2021 and 2022 financial years. To
ensure a consistent approach, the Board considered the relevant relative increase or decrease to the financial targets within the Board-approved
KEEPP scorecards for the 2021 and 2022 financial years for Kmart Group and Bunnings Group. These scorecard targets were set to drive a
reasonable but still demanding level of performance. The same relative increase or decrease was then applied to the 2019 Performance Share
performance conditions for Kmart Group and Bunnings Group for the 2021 and 2022 financial years respectively. For Mr Bailey, the Board
determined to increase the target Kmart Group EBT for 2021 by 8.3 per cent and to reduce the target EBT for 2022 by 39.6 per cent. For
Mr Schneider, the Board determined to increase the Bunnings Group target EBT for 2021 by 20.0 per cent and that there be no change to the
EBT target for 2022.
In addition, in accordance with the Board's view that where significant one-off events, for example, significant non-trading items, have been
appropriately recognised in prior year remuneration outcomes, it is appropriate that the impact of these one-off items is not reflected in future
Performance Share vesting outcome assessments. The Board recognises that due to the multi-testing approach that applies to the KEEPP, a
one-off event (that has a significant impact on the scorecard outcomes and associated equity grants) will impact up to four years of Performance
Shares on foot unless adjusted for. Accordingly, the Target impairment and the restructuring costs and provisions in relation to the Target and
Kmart network adjustments approved in the 2020 financial year that significantly impacted the 2020 KEEPP scorecard outcome for Mr Bailey
were not again counted in the 2020 segment of the four-year cumulative EBT test. In addition, the 2023 financial year costs recognised for the
recently announced restructure within Kmart Group have been excluded from the 2019 KEEPP Performance Share outcomes for Mr Bailey.
Over the four-year performance period, Kmart Group reported an average ROC of 35.0 per cent which was above the required average ROC
condition of 24.9 per cent. The cumulative segment EBT result was $2,256.8m which was above the adjusted four-year Corporate Plan
performance condition of $2,329.6m. These targets and results include Catch for the 2020, 2021 and 2022 financial years but it is excluded for
the 2023 financial year given it was no longer within the Kmart Group from 1 July 2022.
Wesfarmers 2023 Annual Report
117
Directors' report
Remuneration report (audited)
Over the four-year performance period, the Bunnings Group reported an average ROC of 71.7 per cent which was above the required
average ROC condition of 48.4 per cent. The cumulative segment EBT result was $8,471.6m which was above the four-year Corporate Plan
performance condition of $8,001.5m.
2020 Kmart-related Performance-tested Shares
As reported in the 2021 Remuneration Report, in the 2020 financial year, a decision was made to substantially reduce the size of the Target
network and invest to convert many of its stores to Kmart stores which were expected to perform more strongly. The associated restructuring
costs and provisions, along with the one-off costs expected to be incurred in the 2021 financial year, impacted the Group and Kmart Group
financial results as measured and assessed under the 2020 KEEPP scorecards, resulting in smaller 2020 KEEPP awards. The Board did not
make any adjustments to the size of these awards.
In order to ensure continued management focus on delivering future shareholder benefit from the changes to the Kmart and Target network, and
to enable management to be rewarded for the decision only to the extent it adds value in the future, an additional grant of performance-tested
shares of 50 per cent of FAR was provided to the Group Managing Director and the Group Chief Financial Officer and 75 per cent of FAR for the
Managing Director, Kmart Group. This grant would vest only to the extent that the level of total store profit for the stores converted to Kmart is
achieved without exceeding the capital expenditure budget, relative to the Board-approved proposal, over a three-year performance period.
The 2020 Kmart-related Performance-tested Shares were granted on 12 November 2020 and were subject to performance conditions until
30 June 2023. Further details of the terms of the 2020 Kmart-related Performance-tested Shares are set out in the 2021 Remuneration Report.
The performance condition (being total cumulative converted store profit for the 2022 and 2023 financial years subject to the capital expenditure
gate, as set out in the original Board-approved proposal) was tested as at 30 June 2023. Consistent with the approach applied to 2019 KEEPP
Performance Share performance conditions for Kmart Group, the Board approved adjustments to the 2022 financial year targets for converted
store profit reflecting the significant and unforeseen impacts of COVID-19 store closures during the performance period. Following the store
conversions, the cumulative converted store profit over the 2022 and 2023 financial years was $225.0 million, which exceeded the target,
as adjusted, by more than seven per cent and capital expenditure was materially below the original budget. As a result, all the performance
conditions were fully achieved and the Board approved that 100 per cent of shares awarded under this plan would vest.
118
Wesfarmers 2023 Annual Report
Remuneration report (audited)
5.6 Executive KMP remuneration (statutory presentation)
(a) Statutory executive KMP remuneration table
In the following table, remuneration outcomes are presented based on the requirements of the Corporations Act 2001 and accounting
standards (which has the benefit of being readily comparable with other companies) rather than a take-home pay basis (generally being cash
and benefits and the value of equity received during the financial year). In this regard:
• The KEEPP cash component is recognised for the year in which it is earned. The KEEPP Deferred Shares are recognised as an expense
over a 12-month period typically spanning two financial years and the KEEPP Performance Shares are recognised over the performance
period (four years) based on the assessed value when originally granted to the executive KMP. The value recognised for the KEEPP
Deferred Shares and KEEPP Performance Shares may be significantly different to their value if and/or when the incentive vests to the
executive KMP. Note, as at 30 June 2023, the service and performance conditions to determine vesting of the 2023 KEEPP Deferred
Shares and 2023 KEEPP Performance Shares had not yet been finalised and therefore the following table does not include the expensing
of these grants.
•
In some circumstances, amounts are recorded as remuneration even when no equity vests to the executive KMP and in other cases
there can be negative remuneration from equity awards in a given year, for example, due to non-vesting.
Short-term benefits
Cash
salary
($)
KEEPP
cash5
($)
Non-
monetary
benefits6
($)
Long-
term
benefits1
Post-
employment
benefits2
Share-
based
payments3
Termination
benefits
Performance
related4
Total
Other7
($)
Leave
($)
Super-
annuation
($)
KEEPP
and other
equity
($)
Termination
payments
($)
($)
(%)
Executive director
R G Scott – Group Managing Director, Wesfarmers Limited
2023
2022
2,323,1948
2,259,485
Senior executives
-
-
203,364
217,880
-
-
41,666
41,666
25,292
5,581,883
23,568
5,337,813
A N Gianotti – Group Chief Financial Officer, Wesfarmers Limited
2023
2022
1,371,182
1,348,266
-
-
63,885
54,477
I Bailey – Managing Director, Kmart Group
2023
2022
1,522,500
465,000
6,973
1,476,426
465,000
3
M D Schneider – Managing Director, Bunnings Group
2023
2022
Total
2023
2022
1,589,418
510,000
137,236
1,535,027
510,000
92,724
6,806,294
975,000
411,458
6,619,204
975,000
365,084
-
-
-
-
-
-
-
-
24,166
23,750
25,833
25,000
28,333
27,500
25,292
3,151,563
23,568
2,786,596
27,500
3,336,233
23,568
1,829,037
27,500
3,229,011
23,568
3,161,473
-
-
-
-
-
-
-
-
8,175,399
7,880,412
4,636,088
4,236,657
5,384,039
3,819,034
5,521,498
5,350,292
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68.3
67.7
68.0
65.8
70.6
60.1
67.7
68.6
-
-
119,998
105,584
15,298,690
- 23,717,024
117,916
94,272
13,114,919
- 21,286,395
1 Long-term benefits relate to leave entitlements earned during the year.
2 Post-employment benefits relate to superannuation contributions made on behalf of the executive KMP in accordance with Wesfarmers’ statutory superannuation
obligations. Also included is any part of the executive KMP’s salary that has been sacrificed into superannuation.
3 The amounts included in share-based payments relate to the KEEPP and 2020 Kmart-related Performance-tested Shares, as applicable.
– The portion of the 2019 KEEPP, 2020 KEEPP and 2021 KEEPP that continue to be expensed in the 2023 financial year based on probability of vesting (i.e.,
achieving service or non-market conditions), as these shares are subject to performance and service conditions, together referred to as the service period. The
amounts included for the 2022 KEEPP are detailed in section 5.7.
– The portion of the 2020 Kmart-related Performance-tested Shares that were expensed in the 2023 financial year, based on probability of vesting, as these shares
were subject to performance and service conditions.
– The expensing for the Deferred Shares and Performance Shares that are yet to be granted under the 2023 KEEPP will be included in the remuneration table in the
2024 Remuneration Report.
4 The percentage performance related to the 2023 financial year is the sum of the KEEPP cash and share-based payments divided by the total remuneration,
reflecting the actual percentage of remuneration at risk for the year. The percentage of total remuneration that consists of KEEPP shares only, being the amount
expensed in the 2023 financial year for the 2019, 2020, 2021 and 2022 KEEPP shares, as applicable, is as follows – R G Scott 68.3 per cent, A N Gianotti
68.0 per cent, I Bailey 62.0 per cent, and M D Schneider 58.5 per cent.
5 Cash payments expected to be made in August 2023 to eligible participants in relation to the KEEPP for the 2023 financial year.
6 Short-term benefits, ‘Non-monetary benefits’ (inclusive of FBT where applicable), include the cost to the company of providing vehicles, travel and the fair value of
discounts received for goods and services acquired by the executive KMP below retail price, under the general team member discount schemes (noting that these
purchases are on the same terms and conditions as those entered into by other Group team members or customers and are minor or domestic in nature).
7 Short-term benefits, ‘Other’, previously included the cost of directors’ and officers’ liability insurance. The cost of directors' and officers' insurance is no longer
included here, and has also been removed for 2022 to allow for comparison on a like-for-like basis.
8 The increase in Mr Scott's 2023 'Cash salary' compared with 2022 was the result of changes to his election to salary package vehicle costs. There was no change
to his FAR during the year.
Wesfarmers 2023 Annual Report
119
Directors' report
Remuneration report (audited)
(b) Summary of KEEPP shares and Kmart-related Performance-tested Shares that were expensed during the 2023
financial year
The table below sets out details of the KEEPP shares and the 2020 Kmart-related Performance-tested Shares that were expensed during the
2023 financial year. In addition, this table shows the KEEPP shares and 2020 Kmart-related Performance-tested Shares that vested during the
year.
Deferred Shares vested
during the year2
Performance Shares vested
during the year3,4
Year1
Number
%
Number
Name
R G Scott
A N Gianotti
I Bailey
M D Schneider
2019 KEEPP
2020 Performance-tested Shares
2020 KEEPP
-
-
-
-
2021 KEEPP
63,273
100
2022 KEEPP
2019 KEEPP
2020 Performance-tested Shares
2020 KEEPP
-
-
-
-
-
-
2021 KEEPP
31,559
100
2022 KEEPP
2019 KEEPP
2020 Performance-tested Shares
2020 KEEPP
-
-
-
-
-
-
2021 KEEPP
27,412
100
2022 KEEPP
2019 KEEPP
2020 KEEPP
-
-
-
2021 KEEPP
29,943
2022 KEEPP
-
-
-
-
100
-
Range that
could be
expensed over
the remaining
performance
period5
($)
-
-
-
-
-
0 to 258,765
0 to 1,210,216
0 to 2,963,806
%
87.0
100.0
69,595
25,774
-
-
-
38,936
13,918
87.0
100.0
-
-
-
-
-
-
-
-
0 to 146,336
0 to 698,424
0 to 1,665,714
15,946
20,877
92.2
100.0
-
-
-
-
-
-
-
-
0 to 173,390
0 to 719,927
0 to 1,339,757
31,016
100.0
-
-
-
-
-
-
-
0 to 401,415
0 to 768,006
0 to 1,792,593
1 The EBIT and ROC performance conditions of the 2019 KEEPP Performance Shares have been amended to post-AASB 16 EBT and ROC metrics. There has been
no incremental change in the fair value of the awards. The share price on which the amendment was communicated to participants was $59.10.
2 The 2019 Deferred Shares were subject to a 12-month service condition and vested in December 2020, although these remain subject to a five- and six-year
trading restriction until August 2024 and August 2025 respectively. The 2020 Deferred Shares were subject to a 12-month service condition and vested in
December 2021, although these remain subject to a four-, five- and six-year trading restriction until August 2024, August 2025 and August 2026 respectively. The
2021 Deferred Shares were subject to a 12-month service condition and vested in December 2022, although these remain subject to a four-, five- and six-year
trading restriction until August 2025, August 2026 and August 2027 respectively. The 2022 Deferred Shares remain unvested. The Deferred Shares are held in trust
and can only be transferred to the executive KMP once all trading restrictions and any other conditions are met.
3 The 2019 KEEPP Performance Shares were subject to a four-year performance period that ended on 30 June 2023 (see section 5.5 for further information). The
2020 KEEPP Performance Shares, 2021 KEEPP Performance Shares and 2022 KEEPP Performance Shares will reach the end of the four-year performance period
on 30 June 2024, 30 June 2025 and 30 June 2026 respectively. KEEPP Performance Shares are held in trust and can only be transferred to the executive KMP
once vested.
4 The 2020 Kmart-related Performance-tested Shares were granted on 12 November 2020 and were subject to a performance period that ended on 30 June 2023
(see section 5.5 for further information).
5 Should the executive KMP resign prior to vesting, the KEEPP Deferred Shares and KEEPP Performance Shares would be forfeited. Accordingly, the minimum value
of the unvested award would be nil. The fair value at the grant date represents the maximum possible total fair value of the shares. See the relevant Remuneration
Report in the year of grant for further details.
120
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Remuneration report (audited)
5.7 Details of equity allocated during the 2023 financial year
The 2022 KEEPP outcomes were presented in section 5.2 of the 2022 Remuneration Report, including the percentage of the 2022 KEEPP
award opportunity that was forfeited.
The 2022 KEEPP Deferred Shares and Performance Shares were granted during the 2023 financial year, with any cash component paid on
30 August 2022. Approval from Wesfarmers shareholders for the issuance of these shares to the Group Managing Director was obtained under
ASX Listing Rule 10.14 at the 2022 Annual General Meeting.
The terms applicable to the grant of Deferred Shares and Performance Shares for the 2022 KEEPP are set out on the following pages. Details of
prior year grants are set out in the Remuneration Report for the relevant year.
Deferred Shares
allocated (subject
to a four-, five- and
six-year restriction from
trading)1, 3
Performance Shares
allocated (vesting
subject to performance
conditions over a
four-year performance
period)2, 3
73,204
41,142
30,584
39,917
73,204
41,142
30,584
39,917
Fair value of Deferred
Shares at grant date4
Fair value of
Performance Shares at
grant date4
($)
3,260,506
1,832,465
1,362,211
1,777,903
($)
2,396,687
1,346,983
1,136,654
1,483,508
Name
R G Scott
A N Gianotti
I Bailey
M D Schneider
1 The 2022 KEEPP Deferred Shares were granted on 27 October 2022 and are still subject to restrictions, in accordance with the relevant service conditions and
ongoing tenure. No 2022 KEEPP Deferred Shares vested or were forfeited during the reporting period.
2 The 2022 KEEPP Performance Shares were granted on 27 October 2022 and are still subject to performance conditions until 30 June 2026. Accordingly, no 2022
KEEPP Performance Shares vested or were forfeited during the reporting period.
3 The number of Deferred Shares and Performance Shares allocated was determined using the face value of Wesfarmers shares, based upon the 10-day VWAP of
Wesfarmers shares over the period following the commencement of trading ex dividend (i.e. 31 August to 13 September 2022) being $46.81538.
4 For accounting purposes, the fair value at grant date is shown above, in accordance with AASB 2 Share-Based Payment. The Performance Shares subject to
market conditions (rTSR condition) have been independently valued using the Monte Carlo simulation using the Black-Scholes framework. The Deferred Shares
and the Performance Shares subject to non-market conditions (e.g. divisional EBT and ROC) have been valued with reference to the Wesfarmers share price on
grant date. The value per Performance Share for the rTSR performance condition is $29.79 and the value per Deferred Share and per Performance Share subject
to the portfolio management and investment outcomes condition or the divisional financial performance condition is $44.54, valued as at 27 October 2022 following
approval of the grant at the Wesfarmers 2022 Annual General Meeting. The fair value at the grant date represents the maximum possible total fair value of the
shares. The minimum value of unvested shares is nil.
2022 KEEPP Deferred Shares
The 2022 KEEPP Deferred Shares were allocated in November 2022 and did not have further conditions applied but did have a 12-month
service condition (the forfeiture period) from the date they were allocated to participants and continue to be subject to trading restrictions as
outlined below. Prior to allocation, the executive KMP had the option of voluntarily applying a longer restriction period to their 2022 KEEPP
Deferred Shares of up to 15 years.
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2022 KEEPP Deferred Shares
One-third of Deferred Shares are restricted from trading for six years
12-month
performance
period
One-third of Deferred Shares are restricted from trading for five years
One-third of Deferred Shares are restricted from
trading for four years
July 2021
June 2022
2023
2024
2025
2026
2027
2028
Unquoted
Deferred Shares
allocated in
November 2022
Forfeiture period ends
in November 2023.
Shares to be quoted
and dividends to be
paid to the participant
on vested shares
Restriction lifts
on one-third of
Deferred Shares
in August 2026
Restriction lifts
on one-third of
Deferred Shares
in August 2027
Restriction lifts
on one-third of
Deferred Shares
in August 2028
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2022 KEEPP Performance Shares
The 2022 KEEPP Performance Shares were allocated in November 2022. These have performance conditions over a four-year performance
period, from 1 July 2022 to 30 June 2026. The performance conditions will be tested shortly after the end of the performance period.
KEEPP Performance Shares will only vest based on the extent of the satisfaction of the performance conditions outlined below. Following
testing, any KEEPP Performance Shares that do not vest will be forfeited. The performance conditions applicable to the 2022 KEEPP
Performance Shares vary as set out below and on the following page.
2022 KEEPP Performance Shares
12-month
performance
period
Group Managing Director and Group Chief Financial Officer:
rTSR (80% weighting) and portfolio management and investment
outcomes (20% weighting)
Divisional managing directors:
rTSR (50% weighting) and divisional financial performance1
(50% weighting)
July 2021
June 2022
2023
2024
2025
2026
2027
Four-year
performance
period begins
1 July 2022
Unquoted
Performance
Shares allocated
in November 2022
1 Set at a divisional level through annual Corporate Planning processes.
2 Accumulated dividends on any unvested (forfeited) shares are paid to the trustee.
Performance
period ends and
conditions tested
as at 30 June 2026
Board approves testing
and vesting outcome,
expected to be in August
2026. Shares to be
quoted and accumulated
dividends to be paid to
the participant on vested
shares2
Assessment of the performance conditions and achievement against the performance conditions will be determined by the Board having regard
to any matters that it considers relevant.
Specific divisional financial performance conditions have been set with regard to each divisional managing director and the relevant key financial
measures for their respective division:
• The portion of Mr Bailey’s 2022 Performance Shares subject to divisional financial performance (being 50 per cent of his overall
Performance Shares allocation) will be wholly assessed against Kmart Group EBT and ROC.
• The portion of Mr Schneider’s 2022 Performance Shares subject to divisional financial performance (being 50 per cent of his overall
Performance Shares allocation) will be wholly assessed against Bunnings Group EBT and ROC.
The table below provides further detail on the performance conditions including how the testing and vesting, if applicable, will occur:
Measure
Detail
Relative TSR
For the Group Managing Director and the Group Chief Financial Officer, 80 per cent of their 2022 KEEPP Performance
Shares will be tested against the rTSR condition. For the divisional managing directors, 50 per cent of their 2022
KEEPP Performance Shares are tested against the rTSR condition.
The rTSR condition measures the performance of an ordinary Wesfarmers share (including the value of any dividend
and any other shareholder benefits paid during the performance period) against TSR performance of a comparator
group of companies, comprising the S&P/ASX 100 Index, over the same period.
TSR performance is independently assessed over the performance period against the constituents of the S&P/ASX
100 Index as at the start of the performance period.
Vesting schedule against rTSR:
Percentile ranking
Percentage of awards vesting
Below the 50th percentile
Equal to the 50th percentile
0% vesting
50% vesting
Between the 50th and 75th percentile
Straight-line vesting between 50% and 100%, i.e. an additional 2% of
awards vest for each percentile increase
Equal to the 75th percentile or above
100% vesting
Wesfarmers’ rTSR was chosen because it provides a relative external market performance measure having regard
to Wesfarmers’ ASX 100 peers and ensures that all executive KMP are remunerated in relation to Group results.
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Wesfarmers’
portfolio
management
and investment
outcomes
For the Group Managing Director and the Group Chief Financial Officer, 20 per cent of their 2022 KEEPP Performance
Shares will be tested against the Wesfarmers' portfolio management and investment outcomes condition.
Wesfarmers' portfolio management and investment outcomes were chosen to recognise the criticality of decision-making
with regards to potential acquisitions, investments and disposals on shareholder value creation.
At the end of the four-year performance period, the Board will consider the performance of the Group Managing
Director and the Group Chief Financial Officer in relation to the acquisition, investment and disposal activities of the
Group over that period.
Throughout the performance period, the Board maintains a log of the portfolio management and investment
decisions and rationale, including the decisions not to proceed with portfolio changes or investments. At the end
of the performance period, the Board will consider the validity of these decisions from a shareholder value creation
perspective, with a greater weighting placed upon decisions made in the first year of the performance period.
Divisional financial
performance
For the divisional managing directors, 50 per cent of the 2022 KEEPP Performance Shares are tested against the
divisional financial performance condition.
The EBT condition measures the respective division’s before tax profit against its profit targets, subject to achieving an
average ROC gate over the four-year performance period. For the 2023 awards onwards, ROC will be calculated as a
weighted average rather than a simple average.
ROC is calculated as divisional EBT divided by divisional rolling 12 months capital employed, where capital employed
excludes right-of-use assets and lease liabilities. Both the EBT targets and average ROC gate have been calculated
using the budget and targets in the respective division’s 2022 Corporate Plan.
The ROC gate has been set at 90 per cent of the average ROC target over the four-year performance period. Subject
to the ROC gate being passed, a portion of the KEEPP Performance Shares will vest for achievement against the
annual EBT targets. The annual EBT target is individually weighted for each year of the performance period, with a 40
per cent weighting to the first year of the performance period, followed by 30 per cent, 20 per cent and 10 per cent
weighting for years two, three and four respectively.
The EBT and ROC results are calculated after the preparation and audit of the financial statements following the end
of the final year of the performance period and assessed against the targets set.
Vesting schedule against EBT and ROC:
Subject to achieving the four-year average ROC gate,
Annual EBT result
Below 90% of target
Equal to 90% of target
Percentage of awards vesting
0% vesting
50% vesting
Between 90% and 100% of target
Straight-line vesting between 50% and 100%
Equal to 100% of target or above
100% vesting
Divisional annual EBT, subject to average ROC, was chosen to ensure that the remuneration of divisional managing
directors is directly linked to the achievement of long-term financial returns for the business for which they are directly
accountable.
The EBT and ROC targets may be adjusted, where the Board considers it appropriate to do so, so that participants
are not unfairly advantaged or disadvantaged, for example, due to significant external events or portfolio management
activity.
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Further terms of the 2022 KEEPP
The table below sets out further terms applying to Deferred Shares and Performance Shares granted under the 2022 KEEPP.
Cessation of
employment
If an executive KMP ceases employment with Wesfarmers before the end of the forfeiture period, restriction period
or performance period (as applicable), their entitlement to the shares (if any) will depend on the circumstances
of their departure. The table below summarises the treatment that will generally apply, subject to the Board's
discretion to determine a different treatment to the treatment outlined below.
Reason
Resignation
Dismissal by the
Board for cause
or significant
underperformance
or in circumstances
justifying 'bad leaver'
treatment
Breach of restraint
under the executive’s
service contract
All other reasons
(including due to
death, disability or
serious injury)
Deferred Shares
Performance Shares
During the forfeiture period (i.e. within
12 months of allocation) – the Deferred
Shares will be forfeited.
After the forfeiture period has ended –
the Deferred Shares will remain on foot
and subject to the original conditions.
The Deferred Shares will be forfeited.
The Performance Shares will be
forfeited.
The Performance Shares will be
forfeited.
The Deferred Shares will be forfeited.
The Performance Shares will be
forfeited.
The Deferred Shares will remain on foot
and subject to the original conditions.
Vesting outcomes will be assessed by
the Board at the conclusion of the service
period.
The Performance Shares will remain
on foot and subject to the original
conditions. Testing and vesting (if
applicable) outcomes will be assessed
by the Board at the conclusion of the
performance period.
Following cessation of employment (where Deferred Shares remain on foot):
If, following cessation of employment, the Board determines in good faith that:
–
the executive KMP has breached any restriction or undertaking owed to the Wesfarmers Group or any
compromise or arrangement in relation to their cessation of employment; or
the executive KMP’s circumstances have changed making it no longer appropriate for them to retain the
benefit of their award,
–
Change of control
Clawback and
adjustment
the Board may determine that:
–
–
some or all of the executive KMP’s vested or unvested KEEPP Deferred Shares will be forfeited; and/or
the executive KMP is required to pay or repay as a debt the net proceeds of the sale of shares or dividends
provided to them.
If a change of control event occurs, the Board has broad discretion to determine the treatment of KEEPP
Deferred Shares and KEEPP Performance Shares, having regard to any matter that the Board considers
relevant.
The terms of the KEEPP allow for the Board to clawback or adjust any incentive awards (including cash or shares)
which were granted, vest or may vest, or are released or may be released (as applicable). For example, these
powers can be exercised as a result of a material misstatement in, or omission from, the financial statements or
otherwise as a result of fraud, dishonesty or breach of obligations. In such circumstances, the Board may, up to
the value of the overpaid remuneration, reduce or defer or otherwise require the repayment of any amount paid or
payable to the executive to ensure that no inappropriate benefit is derived. The Board has discretion to adjust any
conditions applicable to an award, if considered appropriate.
Dividend and voting
rights
The KEEPP Deferred Shares and the KEEPP Performance Shares carry both dividend and voting rights. While
the shares are unquoted shares, any dividends determined are accumulated and are not paid until the shares are
quoted. Where the KEEPP Deferred Shares and the KEEPP Performance Shares vest, the dividends are paid to the
participant and where the KEEPP Deferred Shares and the KEEPP Performance Shares are forfeited, the dividends
are paid to the trustee. The participant does not therefore receive any dividends on unvested KEEPP Deferred
Shares or KEEPP Performance Shares.
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5.8 Executive KMP share ownership
The Board considers it an important foundation of the Wesfarmers remuneration framework that the executive KMP hold or have a beneficial
interest in a significant number of Wesfarmers shares to encourage them to behave like long-term owners and, as at the date of this report, all
current executive KMP hold or have a beneficial interest in significantly more than their respective FAR in Wesfarmers shares.
The following table sets out the number of shares held directly, indirectly or beneficially by the current executive KMP (including their related
parties), and provides a summary of the number of shares available to the executive and the number of shares that remain under restriction. For
details of shares that vested and for which final expensing occurred during the 2023 financial year, refer to section 5.6(b).
Breakdown of balance at year-end
Name
Opening
balance
(at 1 July
2022)1
Allocated
under a
remuneration
framework2
Net change3
Closing
balance
(at 30 June
2023)4
Not vested5
Vested6
R G Scott
1,112,416
146,408
(184,783)
1,074,041
238,290
A N Gianotti
482,725
82,284
(25,818)
539,191
130,022
I Bailey
219,957
61,168
(9,350)
271,775
102,498
M D Schneider
336,237
79,834
(67,702)
348,369
148,545
402,540
of which 307,171
are restricted
217,951
of which 165,097
are restricted
138,303
of which 101,480
are restricted
198,445
of which 167,429
are restricted
Ordinary
shares7
433,211
191,218
30,974
1,379
Total
2,151,335
369,694
(287,653)
2,233,376
619,355
957,239
656,782
1 This number reflects the fully-paid ordinary shares held directly, vested equity under the incentive plans as well as unvested equity under the incentive plans. The
unvested equity may include the 2019 KEEPP Performance Shares and the 2020 KEEPP Performance Shares and the Performance-tested Shares, and the 2021
KEEPP Deferred Shares and Performance Shares, as appropriate.
2 The number of KEEPP Deferred Shares and KEEPP Performance Shares allocated under the 2022 KEEPP, as appropriate. Refer to section 5.7 for details.
3 Includes personal trades, shares received under the dividend investment plan or other corporate actions.
4 The total number of fully-paid ordinary shares held directly or nominally, and vested and unrestricted equity held within the equity plan.
5 The unvested equity includes the 2020 KEEPP Performance Shares, the 2021 KEEPP Performance Shares and the 2022 KEEPP Deferred Shares and Performance
Shares, as appropriate.
6 Vested equity reflects any share-based awards received by the executive KMP that are now fully vested, and includes shares which have vested but which remain
subject to a restriction within the incentive plans.
7 This number reflects the fully-paid ordinary shares held directly outside of an equity plan by the executive KMP including their related parties.
5.9 Executive service agreements
The remuneration and other terms of employment for the Group Managing Director, the Group Chief Financial Officer and other executive
KMP are covered in formal employment contracts. All service agreements are for unlimited duration and may be terminated immediately for
serious misconduct. All executives are entitled to receive pay in lieu of any accrued but untaken annual and long service leave on cessation of
employment.
The executive KMP must give a minimum 12 months’ notice should they wish to resign and Wesfarmers must give 12 months’ notice should it
wish to terminate employment (other than for cause).
The Group Managing Director and the Group Chief Financial Officer may terminate their employment within 30 days of an event giving rise
to fundamental change. This includes Mr Scott ceasing to be the most senior executive of the Group, a delisting of Wesfarmers or a material
reduction in role, status or delegated authority.
In addition, and upon further payment (where required), Wesfarmers may invoke a restraint period of up to 12 months following separation,
preventing the executive KMP from engaging in any business activity with competitors of the Group.
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Non-executive director remuneration
6. Non-executive directors
6.1 Overview of non-executive director remuneration policy and arrangements
Our policy objective
To provide market-competitive remuneration for non-executive directors
Aggregate fees approved by shareholders
The current maximum aggregate fee pool for non-executive directors of $3,600,000 was approved by shareholders at the 2015 Annual General
Meeting. Fees paid to Wesfarmers’ non-executive directors for membership of the Wesfarmers Board and committees and superannuation
contributions made on behalf of the non-executive directors in accordance with Wesfarmers’ statutory superannuation obligations, are included
in this aggregate fee pool.
Regular reviews of remuneration
The Board periodically reviews the level of fees paid to the non-executive directors, including consideration of external benchmarking. There was
no change to the fees paid during the 2023 financial year.
In June 2023, the Board reviewed the Board fees and the committee fees payable to the non-executive directors and the Chairman of the Board
having regard to benchmark data, market position and relative fees to apply from 1 July 2023. After consideration, there were no changes to the
Chairman's fee, Board fees or committee fees for the 2024 financial year.
6.2 Non-executive director fees and other benefits
The fees shown in the table below (inclusive of superannuation) took effect from 1 January 2021 and applied throughout the 2023 financial year.
Fees/benefits
Description
Board fees
Chairman – M A Chaney
Members – all non-executive directors
Committee fees
Audit and Risk Committee
Chairman – S L Warburton
Members – J A Westacott, S W English, A Sabharwal
Remuneration Committee
Chairman – M Roche
Members – M A Chaney1, V M Wallace, A M Watkins, A J Cransberg
Nomination Committee
Chairman – M A Chaney
Members – all non-executive directors
1 The Chairman of the Board does not receive a separate fee for membership of any of the Board’s committees.
2023 ($)
770,000
240,000
70,000
40,000
60,000
30,000
No fees
No fees
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6.3 Non-executive director remuneration
The fees paid or payable to the non-executive directors in relation to the 2023 financial year are set out below:
T
Non-executive directors
M A Chaney
A J Cransberg3
S W English
M Roche
A Sabharwal
V M Wallace
S L Warburton
A M Watkins4
J A Westacott
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
Fees –
Wesfarmers
Limited Superannuation1
Total fees
($)
($)
($)
744,708
746,432
244,708
184,824
254,708
256,432
300,000
294,108
254,708
280,000
244,708
246,432
284,708
286,432
244,708
205,279
280,000
280,000
25,292
23,568
25,292
17,676
25,292
23,568
-
5,892
25,292
-
25,292
23,568
25,292
23,568
25,292
19,721
-
-
770,000
770,000
270,000
202,500
280,000
280,000
300,000
300,000
280,000
280,000
270,000
270,000
310,000
310,000
270,000
225,000
280,000
280,000
Other
benefits2
($)
16,120
11,511
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Grand total
($)
786,120
781,511
270,000
202,500
280,000
280,000
300,000
300,000
280,000
280,000
270,000
270,000
310,000
310,000
270,000
225,000
280,000
280,000
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W G Osborn5
2022
82,144
7,856
90,000
15,052
105,052
Total
2023
2022
2,852,956
2,862,083
177,044
145,417
3,030,000
3,007,500
16,120
26,563
3,046,120
3,034,063
1 Superannuation contributions are made on behalf of non-executive directors in accordance with Wesfarmers’ statutory superannuation obligations, except where
approval was obtained from the Australian Taxation Office by individual non-executive directors to be exempt from making superannuation contributions due to
obligations being met by other employers. Also included is any part of a non-executive director’s fees that have been sacrificed into superannuation.
2 Other benefits include the cost of other expenses, such as travel or retirement gifts for retired directors. The cost of directors' and officers' insurance is no longer
included here, and has also been removed for 2022 to allow for comparison on like-for-like basis.
3 A J Cransberg was appointed as a non-executive director on 1 October 2021.
4 A M Watkins was appointed as a non-executive director on 1 September 2021.
5 W G Osborn retired from the Board, effective 21 October 2021.
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6.4 Non-executive director share ownership
The Board considers it an important foundation of the Wesfarmers remuneration framework that the directors hold a significant number of
Wesfarmers shares to encourage them to behave like long-term owners. Directors are required to hold a minimum of 1,000 Wesfarmers shares
within two months of appointment and are also expected to increase their holdings in Wesfarmers shares to the equivalent of their annual main
board fee within a five-year period of appointment.
The following table sets out the number of shares held directly, indirectly or beneficially by directors (including their related parties).
Name
M A Chaney
A J Cransberg
S W English
M Roche
A Sabharwal
V M Wallace
S L Warburton
A M Watkins
J A Westacott
Total
Balance at beginning
of year
Net change1
Balance at year-end
Minimum shareholding
requirement compliance
87,597
4,226
3,509
9,510
6,050
13,983
7,536
9,000
6,788
-
247
1,666
2,550
243
-
-
-
-
87,597
4,473
5,175
12,060
6,293
13,983
7,536
9,000
6,788
Compliant
Compliant2
Compliant
Compliant2
Compliant2
Compliant
Compliant2
Compliant2
Compliant
148,199
4,706
152,905
1 The net change includes changes due to personal trades.
2 As at 30 June 2023, these directors were appointed to the Board within the last five years and therefore their minimum shareholding requirement is 1,000 shares.
For all other directors, the minimum shareholding requirement is to hold shares equivalent in value to their annual main Board fee.
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Other remuneration information
7. Remuneration governance
7.1 Role of the Board and the Remuneration Committee
The diagram below illustrates the roles of the Board, its Committees, and Wesfarmers management in making executive KMP remuneration
decisions.
Wesfarmers Board
The Board is responsible for setting remuneration policy and
determining non-executive director, executive director and
executive KMP remuneration and ensuring that policy is aligned
with the Group’s purpose, values, strategic objectives, and risk
management framework. In addition, the Board is responsible for
approving the remuneration of and overseeing the performance
review of the Group Managing Director, for approving the
remuneration of the other executive KMP and approving all
targets and performance conditions set under the KEEPP.
Remuneration Committee
Management
The Remuneration Committee makes recommendations
to the Board in relation to the overall approach to
remuneration for the Group, and regarding all aspects of
executive KMP remuneration.
In relation to the KEEPP, this includes making
recommendations in relation to the targets (including
threshold and stretch performance targets) to be included
in the KEEPP scorecards and in relation to setting
performance conditions that attach to KEEPP Performance
Shares (both the financial conditions and the other
non-financial performance conditions). As part of setting
performance conditions on the KEEPP Performance
Shares for the divisional managing directors (currently
the Managing Director, Kmart Group and the Managing
Director, Bunnings Group), the Remuneration Committee
makes recommendations to the Board on whether the
conditions should be set at a divisional or business level.
Additional information and data is sought from management
and remuneration consultants, as required.
Further information regarding the objectives and role of
the Remuneration Committee are contained in its charter,
which is available in the corporate governance section of
the company’s website at www.wesfarmers.com.au/cg
The Group Managing Director provides updates and
makes recommendations to the Remuneration Committee
on remuneration and performance matters in relation to
his direct reports throughout the year, but is not involved
in making recommendations in relation to his own
remuneration. The Group Managing Director provides formal
updates to the Remuneration Committee on a six-monthly
basis.
Additional information and data is sought from management
and remuneration consultants, as required.
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Audit and Risk Committee Chairman
The Audit and Risk Committee Chairman attends the
Remuneration Committee meetings and is formally
involved in the remuneration outcomes recommendations,
ensuring that there is a tight linkage between behaviour,
risk management and remuneration outcomes.
7.2 Non-executive director remuneration
In the event of any proposed increase in non-executive directors' fees, including committee fees, a reasonableness opinion is obtained from an
external remuneration consultant. The Remuneration Committee and the Board (or only the Board if this relates to Remuneration Committee
fees) consider this benchmarking and external remuneration consultant opinion, along with other factors such as the reasonableness of any
change to the fees in the context of the external environment and any regulatory changes impacting Board accountability, before proposing any
increase in fees. See section 6 for further information on non-executive director remuneration.
7.3 Use of remuneration consultants
To inform the Board and Remuneration Committee, and to assist with their decision-making processes, additional information and data is
sought from management and remuneration consultants, as required.
No remuneration recommendations as defined in section 9B of the Corporations Act 2001 were obtained from external remuneration
consultants during the financial year ended 30 June 2023.
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8. Further information on remuneration
8.1 Share trading restrictions
Wesfarmers’ Securities Trading Policy reflects the Corporations Act 2001 prohibition on KMP and their closely related parties entering into any
arrangement that would have the effect of limiting the KMP’s exposure to risk relating to an element of their remuneration that remains subject to
restrictions on disposal.
Wesfarmers directors, the Wesfarmers Leadership Team, and certain members of their immediate family and controlled entities are also required
to obtain clearance from the Wesfarmers Company Secretary for the sale, purchase or transfer of Wesfarmers and BWP Trust securities and for
short selling, short-term trading, security interests, margin loans and hedging relating to Wesfarmers and BWP Trust securities. The Wesfarmers
Company Secretary refers all requests for clearance to at least two members of the Disclosure Committee. Clearance from the Chairman is also
required for requests from Wesfarmers directors. Clearance cannot be requested for dealings that are subject to the Corporations Act 2001
prohibition referred to above.
The policy is available in the corporate governance section of the company’s website at www.wesfarmers.com.au/cg
Breaches of the policy are subject to disciplinary action, which may include termination of employment.
8.2 Other transactions and balances with key management personnel
From time to time, the executive KMP and directors of the company or its controlled entities, or their related entities, may purchase goods
or services from the Group. These purchases are on the same terms and conditions as those entered into by other Group team members or
customers and are minor or domestic in nature.
There were no loans made during the year, or remaining unsettled at 30 June 2023, between Wesfarmers and its directors or executive KMP
and/or their related parties.
9.
Independent audit of remuneration report
The remuneration report has been audited by Ernst & Young. Please see page 183 of this annual report for Ernst & Young’s report on the
remuneration report.
The directors’ report, including the remuneration report, is signed in accordance with a resolution of the directors of Wesfarmers Limited.
M A Chaney AO
Chairman
Perth
24 August 2023
R G Scott
Managing Director
130
Wesfarmers 2023 Annual Report
Financial statements
For the year ended 30 June 2023 – Wesfarmers Limited and its controlled entities
Financial statements
Income statement
Statement of comprehensive income
Balance sheet
Cash flow statement
Statement of changes in equity
Notes to the financial statements
About this report
Segment information
Group performance
1. Revenue and other income
2. Expenses
3. Tax expense
Group balance sheet
Inventories
4. Cash and cash equivalents
5. Receivables
6.
7. Other financial assets
8. Property, plant and equipment
9. Goodwill and intangible assets
10. Leases
11. Provisions
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134
135
136
137
139
142
143
144
145
145
146
146
147
148
150
152
Capital
12. Capital management
13. Dividends and distributions
14. Equity and reserves
15. Earnings per share
16.
Interest-bearing loans and borrowings
Risk
17. Financial risk management
18. Hedging
19.
Impairment of non-financial assets
Group information
20. Associates and joint arrangements
21. Subsidiaries
22. Parent disclosures
23. Deed of Cross Guarantee
24. Related party transactions
Other
25. Commitments and contingencies
26. Events after the reporting period
27. Auditors’ remuneration
28. Other accounting policies
29. Tax transparency disclosures
30. Director and executive disclosures
31. Share-based payments
154
155
155
156
157
158
163
165
166
168
172
172
173
174
174
174
175
176
176
177
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Wesfarmers 2023 Annual Report
131
Financial statements
Income statement
For the year ended 30 June 2023
Revenue
Expenses
Raw materials and inventory
Employee benefits expense
Freight and other related expenses
Occupancy-related expenses
Depreciation and amortisation
Impairment expenses
Other expenses
Total expenses
Other income
Share of net profits of associates and joint ventures
Earnings before finance costs and income tax expense
Interest on lease liabilities
Other finance costs
Profit before income tax expense
Income tax expense
Profit for the year attributable to equity holders of the parent
Earnings per share attributable to equity holders of the parent
Basic earnings per share
Diluted earnings per share
Note
1
2
2
2
2
2
1
20
10
2
3
15
Consolidated
2023
$m
2022
$m
43,550
36,838
(28,905)
(6,333)
(704)
(505)
(1,701)
(36)
(1,677)
(39,861)
165
9
174
3,863
(219)
(135)
3,509
(1,044)
2,465
cents
217.8
217.6
(23,438)
(5,840)
(668)
(442)
(1,575)
(33)
(1,549)
(33,545)
167
173
340
3,633
(217)
(96)
3,320
(968)
2,352
cents
207.8
207.6
132
Wesfarmers 2023 Annual Report
Statement of comprehensive income
For the year ended 30 June 2023
Profit for the year
Other comprehensive income
Items that may be reclassified to profit or loss:
Foreign currency translation reserve
Exchange differences on translation of foreign operations
Cash flow hedge reserve
Unrealised gains on cash flow hedges
Realised gains on cash flow hedges
Share of associates and joint ventures reserves
Tax effect
Items that will not be reclassified to profit or loss:
Financial assets reserve
Changes in the fair value of financial assets designated at
fair value through other comprehensive income
Share of associates and joint ventures reserves
Tax effect
Other comprehensive (loss)/income for the year, net of tax
Note
14
14
3
14
3
Consolidated
2023
$m
2,465
2022
$m
2,352
5
(11)
229
(328)
2
29
24
6
(7)
(40)
286
(175)
11
(40)
43
(6)
(13)
95
Total comprehensive income for the year, net of tax, attributable to equity holders of the parent
2,425
2,447
Wesfarmers 2023 Annual Report
133
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Financial statements
Balance sheet
As at 30 June 2023
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Income tax receivable
Derivatives
Other
Total current assets
Non-current assets
Investments in associates and joint ventures
Other financial assets
Deferred tax assets
Property, plant and equipment
Goodwill and intangible assets
Right-of-use assets
Derivatives
Other
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Lease liabilities
Income tax payable
Provisions
Derivatives
Other
Total current liabilities
Non-current liabilities
Interest-bearing loans and borrowings
Lease liabilities
Provisions
Derivatives
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Equity attributable to equity holders of the parent
Issued capital
Reserved shares
Retained earnings
Reserves
Total equity
134
Wesfarmers 2023 Annual Report
Consolidated
2023
Note
$m
2022
$m
705
2,094
6,084
-
452
264
9,599
934
677
581
4,750
4,684
6,014
8
39
17,687
27,286
5,362
988
1,100
6
1,163
2
287
8,908
3,970
6,023
374
30
10,397
19,305
7,981
13,574
(102)
485
(5,976)
7,981
4
5
6
18
20
7
3
8
9
10
18
16
10
11
18
16
10
11
18
14
14
14
673
2,046
6,039
43
116
237
9,154
943
15
624
5,365
4,692
5,676
27
50
17,392
26,546
5,268
-
1,135
-
1,117
10
327
7,857
4,430
5,604
374
-
10,408
18,265
8,281
13,574
(102)
818
(6,009)
8,281
Cash flow statement
For the year ended 30 June 2023
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Dividends and distributions received from associates
Dividends received from other investments
Interest received
Interest component of lease payments
Borrowing costs
Income tax paid
Net cash flows from operating activities
Cash flows from investing activities
Payments for property, plant and equipment and intangibles
Payments for mineral exploration
Proceeds from sale of property, plant and equipment and intangibles
Net proceeds from sale of businesses
Net proceeds from disposal of other investments
Investments in associates and joint ventures
Acquisition of subsidiaries, net of cash acquired
Payments for other financial assets
Net cash flows used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Net proceeds from revolving facilities
Principal component of lease payments
Dividends paid
Capital return paid
Net cash flows used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
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Consolidated
2023
Note
$m
2022
$m
48,253
(42,684)
48
25
16
(219)
(140)
(1,120)
4,179
(1,286)
(2)
105
13
686
(42)
(24)
(2)
(552)
-
(765)
380
(1,142)
(2,132)
-
(3,659)
(32)
705
673
40,557
(36,754)
48
54
5
(217)
(92)
(1,300)
2,301
(1,140)
(4)
260
-
501
(28)
(773)
(7)
(1,191)
938
(1,166)
2,023
(1,029)
(1,927)
(2,267)
(3,428)
(2,318)
3,023
705
4
4
4
4
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Wesfarmers 2023 Annual Report
135
Financial statements
Statement of changes in equity
For the year ended 30 June 2023
Consolidated
Note
$m
$m
$m
$m
Attributable to equity holders of the parent
Issued Reserved
shares
capital
Retained Reserves
earnings
Balance at 1 July 2022
Net profit for the year
Other comprehensive income
Exchange differences on translation of foreign operations
Changes in the fair value of cash flow hedges, net of tax
Changes in the fair value of financial assets designated at
fair value through other comprehensive income, net of tax
Total other comprehensive loss for the year, net of tax
Total comprehensive income for the year, net of tax
Share-based payment transactions
Dividends
Other
Balance at 30 June 2023
Balance at 1 July 2021
Net profit for the year
Other comprehensive income
Exchange differences on translation of foreign operations
Changes in the fair value of cash flow hedges, net of tax
Changes in the fair value of financial assets designated at
fair value through other comprehensive income, net of tax
Total other comprehensive income for the year, net of tax
Total comprehensive income for the year, net of tax
Share-based payment transactions
Dividends
Capital return
Balance at 30 June 2022
13,574
-
(102)
-
485
2,465
(5,976)
-
14
14
14
14
13
14
14
14
14
13
13,14
-
-
-
-
-
-
-
-
-
13,574
15,826
-
-
-
-
-
-
16
-
(2,268)
(2,252)
13,574
-
-
-
-
-
-
-
-
-
(102)
(102)
-
-
-
-
-
-
-
-
-
-
(102)
-
-
5
(68)
-
-
2,465
-
(2,132)
-
(2,132)
818
60
2,352
23
(40)
(40)
14
-
(7)
7
(6,009)
(6,069)
-
-
-
(11)
82
-
-
2,352
-
(1,927)
-
(1,927)
485
24
95
95
(2)
-
-
(2)
(5,976)
Total
equity
$m
7,981
2,465
5
(68)
23
(40)
2,425
14
(2,132)
(7)
(2,125)
8,281
9,715
2,352
(11)
82
24
95
2,447
14
(1,927)
(2,268)
(4,181)
7,981
136
Wesfarmers 2023 Annual Report
Notes to the financial statements: About this report
For the year ended 30 June 2023
About this report
Key judgements and estimates
In the process of applying the Group’s accounting policies,
management has made a number of judgements and applied
estimates of future events.
Judgements and estimates which are material to the financial report
are found in the following notes:
Page
142
144
145
146
147
148
150
152
165
166
Note 1
Note 3
Revenue and other income
Tax expense
Note 5
Receivables
Note 6
Note 8
Note 9
Inventories
Property, plant and equipment
Goodwill and intangible assets
Note 10
Leases
Note 11
Provisions
Note 19
Impairment of non-financial assets
Note 20
Associates and joint arrangements
Foreign currency
The functional currencies of overseas subsidiaries are listed in
note 21. As at the reporting date, the assets and liabilities of overseas
subsidiaries are translated into Australian dollars at the rate of
exchange ruling at the balance sheet date and the income statements
are translated at the average exchange rates for the year. The
exchange differences arising on the translation are taken directly to a
separate component of equity.
Transactions in foreign currencies are initially recorded in the functional
currency at the exchange rates ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are
translated at the rate of exchange ruling at the balance sheet date.
Exchange differences arising from the application of these procedures
are taken to the income statement, with the exception of differences
on foreign currency-denominated borrowings that provide a hedge
against a net investment in a foreign entity, which are taken directly to
equity until the disposal of the net investment and are then recognised
in the income statement. Tax charges and credits attributable to
exchange differences on those borrowings are also recognised
in equity.
Other accounting policies
Significant and other accounting policies that summarise the
measurement basis used and are relevant to an understanding of
the financial statements are provided throughout the notes to the
financial statements.
Wesfarmers Limited (referred to as ‘Wesfarmers’) is a for-profit
company limited by shares incorporated and domiciled in Australia
whose shares are publicly traded on the Australian Securities
Exchange (ASX). The nature of the operations and principal activities
of Wesfarmers and its subsidiaries (referred to as ‘the Group’) are
described in the segment information.
The consolidated financial report of the Group for the financial year
ended 30 June 2023 (FY2023) was authorised for issue in accordance
with a resolution of the directors on 24 August 2023. The Directors
have the power to amend and reissue the financial report.
The financial report is a general purpose financial report which:
• has been prepared in accordance with the requirements of the
Corporations Act 2001, Australian Accounting Standards and
other authoritative pronouncements of the Australian Accounting
Standards Board (AASB) and International Financial Reporting
Standards (IFRS) as issued by the International Accounting
Standards Board (IASB);
• has been prepared on a historical cost basis, except for
investment properties held by associates and joint ventures and
certain financial instruments, which have been measured at fair
value. The carrying values of recognised assets and liabilities
that are the hedged items in fair value hedge relationships,
which are otherwise carried at amortised cost, are adjusted to
record changes in the fair values attributable to the risks that are
being hedged;
•
is presented in Australian dollars with all values rounded to the
nearest million dollars ($’000,000) unless otherwise stated, in
accordance with ASIC Corporations (Rounding in Financial/
Directors’ Reports) Instrument 2016/191;
• presents reclassified comparative information where required for
consistency with the current year’s presentation;
• adopts all new and amended Accounting Standards and
Interpretations issued by the AASB that are relevant to the
Group and effective for reporting periods beginning on or before
1 July 2022. Refer to note 28 for further details; and
• does not early adopt Accounting Standards and Interpretations
that have been issued or amended but are not yet effective.
Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Group. A list of controlled entities (subsidiaries) at
year-end is contained in note 21.
The financial statements of subsidiaries are prepared for the same
reporting period as the parent company, using consistent accounting
policies. Adjustments are made to bring into line any dissimilar
accounting policies that may exist.
In preparing the consolidated financial statements, all intercompany
balances and transactions, income and expenses and profits and
losses resulting from intra-Group transactions have been eliminated.
Subsidiaries are consolidated from the date on which control is
obtained to the date on which control is disposed. Acquisitions of
subsidiaries which qualify as business combinations are accounted for
using the acquisition method of accounting.
If the Group loses control over a subsidiary, it derecognises the related
assets (including goodwill), liabilities, non-controlling interest and other
components of equity, while any resultant gain or loss is recognised in
the income statement. Any investment retained is initially recognised
at fair value.
Wesfarmers 2023 Annual Report
137
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Financial statements
Notes to the financial statements: About this report
For the year ended 30 June 2023
Notes to the financial statements
The notes include information which is required to understand the
financial statements and is material and relevant to the operations,
financial position and performance of the Group. Information is
considered material and relevant if, for example:
• Group balance sheet: provides a breakdown of individual
line items in the balance sheet that the directors consider most
relevant and summarises the accounting policies, judgements
and estimates relevant to understanding these line items;
the amount in question is significant because of its size
or nature;
• Capital: provides information about the capital management
practices of the Group and shareholder returns for the year;
it is important for understanding the results of the Group;
it helps to explain the impact of significant changes in the
Group’s business – for example, acquisitions, disposals and
impairment writedowns; or
it relates to an aspect of the Group’s operations that is
important to its future performance.
The notes are organised into the following sections:
• Group performance: provides a breakdown of individual line
items in the income statement that the directors consider most
relevant and summarises the accounting policies, judgements
and estimates relevant to understanding these line items;
• Risk: discusses the Group’s exposure to various financial risks,
explains how these affect the Group’s financial position and
performance and what the Group does to manage these risks;
• Group information: explains aspects of the Group structure
and how changes have affected the financial position and
performance of the Group, as well as disclosing related party
transactions and balances; and
• Other: provides information about items that are not recognised
in the financial statements but could potentially have a significant
impact on the Group’s financial position and performance;
and provides information on items which require disclosure
to comply with Australian Accounting Standards and other
regulatory pronouncements.
•
•
•
•
Significant items impacting the current reporting period
Acquisition of Australian Pharmaceutical
Industries Ltd
On 31 March 2022, Wesfarmers, through its wholly-owned
subsidiary WFM Investments Pty Ltd, completed the acquisition of
Australian Pharmaceutical Industries Ltd (API). API is the foundation
business of the Wesfarmers Health (Health) segment. The Health
results presented for 2022 are for the period from 31 March 2022 to
30 June 2022.
On 31 March 2023, the provisional acquisition accounting period
ended for the acquisition of API. Adjustments were made in
finalising the acquisition accounting, resulting in the fair value
of identifiable assets recognised on acquisition decreasing by
$46 million compared to the provisional fair value amounts previously
reported at 30 June 2022. This decrease is due to a reduction in
the fair value of property, plant and equipment ($21 million), an
increase in provisions recognised ($9 million) and as a result of
finalising tax effect accounting (net tax adjustments of $3 million).
A reclassification between the indefinite life intangible assets of
brand and goodwill ($13 million) also occurred. The decrease in
the fair value of identifiable assets resulted in a corresponding
increase of $46 million to the goodwill recognised on acquisition.
2022 has been restated to reflect the adjustments to the provisional
acquisition accounting for API.
Restructure of the Group's operating segments
In April 2022, the Group determined that from 1 July 2022, Catch
will move from the Kmart Group segment and join a newly-formed
division, Wesfarmers OneDigital (OneDigital). The OneDigital division
includes Catch, OnePass and supporting capabilities.
In accordance with AASB 8 Operating Segments, Catch is reported
as a segment, reflecting its operating nature, while the results for
OnePass and supporting capabilities continue to be reported within
Other. The Group has restated amounts presented in the prior period
to reflect the new reporting structure. Refer to Segment Information
for further details.
Impact of COVID-19 in the previous reporting period
The impact of COVID-19 on the Group’s operational and financial
performance decreased during FY2023. Many of the Group’s
operational responses to the pandemic are integrated into normal
processes. The Group's retail businesses were impacted by
widespread COVID-related lockdowns in the first half of FY2022.
Sale of remaining 2.8 per cent interest in
Coles Group Limited
On 12 April 2023, Wesfarmers sold all of its remaining interest
(37,193,541 shares) in Coles Group Limited (Coles) for proceeds
of $686 million, net of transaction costs. As a result of the sale,
Wesfarmers’ minority interest in Coles reduced from 2.8 per cent to
nil. The interest in Coles was held as a financial asset at fair value
through other comprehensive income (FVOCI). The realised gain on
sale is recognised in other comprehensive income.
Acquisition of InstantScripts Pty Ltd
On 13 June 2023, Wesfarmers announced that API, a wholly-owned
subsidiary of Wesfarmers, entered into an agreement to acquire
InstantScripts Pty Ltd (InstantScripts), one of Australia’s leading
telehealth businesses for cash consideration of approximately
$135 million. The transaction was completed on 3 July 2023. Refer to
note 26 for further details.
Proposal to acquire SILK Laser Australia Limited
On 26 June 2023, Wesfarmers announced that API had entered into
a Scheme Implementation Deed with SILK Laser Australia Limited
(SILK, ASX: SLA) to acquire 100 per cent of the shares outstanding
for $3.35 cash per share, by way of a Scheme of Arrangement
(the Scheme).
The consideration represents an implied equity value for SILK of
approximately $180 million. If the transaction proceeds, it will be
funded through Wesfarmers’ existing balance sheet capacity and
debt facilities. The Scheme is subject to conditions including Court
and SILK shareholder approval. Subsequent to year end, conditions
relating to regulatory clearances have been satisfied (subject
to the regulators not withdrawing, suspending or revoking their
confirmations).
There is no certainty as to whether the proposed transaction will
proceed.
138
Wesfarmers 2023 Annual Report
Notes to the financial statements: Segment information
For the year ended 30 June 2023
Segment information
Wesfarmers Health (Health)
The Group’s operating segments are organised and managed
separately according to the nature of the products and
services provided.
Each segment represents a strategic business unit that offers
different products and operates in different industries and markets.
The Board and executive management team (the chief operating
decision-makers) monitor the operating results of the business units
separately for the purpose of making decisions about resource
allocation and performance assessment.
The types of products and services from which each reportable
segment derives its revenues are disclosed below. Segment
performance is evaluated based on operating profit or loss (segment
result) which, in certain respects, is presented differently from
operating profit or loss in the consolidated financial statements.
Interest income and other finance costs are not allocated to operating
segments, as this type of activity is managed on a Group basis.
Transfer prices between business segments are set on an arm’s length
basis in a manner similar to transactions with third parties. Segment
revenue, expenses and results include transfers between business
segments. Those transfers are eliminated on consolidation and are
not considered material.
The operating segments and their respective types of products and
services are as follows:
Bunnings Group
• Retailer of building materials and home, garden and lifestyle
improvement products; and
• Servicing households and commercial customers including
builders, tradespeople and businesses.
Kmart Group
• Kmart: Retailer of apparel and general merchandise, including
toys, leisure, entertainment, home and consumables.
• Target: Retailer of apparel and general merchandise, including
toys and soft home products.
Chemicals, Energy and Fertilisers (WesCEF)
• Manufacturer and marketer of chemicals for industry, mining and
mineral processing;
• Manufacturer and marketer of broadacre and horticultural
fertilisers;
• Marketer and distributor of LPG and LNG;
• Manufacturer of wood-plastic composite decking and screening
products; and
• Wholesaler and retailer of pharmaceutical goods, health,
wellbeing and beauty products;
• Provider of clinical cosmetic and skin care treatments; and
• Provider of retail support services to pharmacies through
Priceline Pharmacy franchises and banner brands.
Catch
• Online retailer offering branded products on a first-party basis
and a third-party online marketplace.
Other
Includes:
• Food and staples retailing: 2022 included a 2.8 per cent
interest in Coles that was sold in April 2023;
• Forest products: non-controlling interest in Wespine Industries
Pty Ltd;
• Property: non-controlling interest in BWP Trust and joint control
of BPI No 1 Pty Ltd;
•
Investment banking: non-controlling interest in Gresham
Partners Group Limited;
• Loyalty program: joint control of loyalty and data company
Loyalty Pacific Pty Ltd (Flybuys);
• OneDigital: includes OnePass and supporting capabilities; and
• Corporate: includes treasury, central and administrative support
functions and other corporate entity expenses. Corporate is not
considered an operating segment and includes activities that are
not allocated to other operating segments.
Revenue from contracts with customers
by segment for FY2023
$m
%
Bunnings Group
18,537
42.7
Kmart Group
10,563
24.3
WesCEF
Officeworks
3,303
3,342
Industrial and Safety
1,992
7.6
7.7
4.6
Health
Catch
Other
Total
5,312
12.2
348
20
0.8
0.1
43,417
• 50 per cent joint operator of the Mt Holland lithium project.
Segment result for FY2023
Officeworks
• Retailer and supplier of office products and solutions for
households, small-to-medium sized businesses, and the
education sector.
Industrial and Safety
• Supplier and distributor of maintenance, repair and operating
products;
• Manufacturer and marketing of industrial, specialty and medical
gases and equipment;
• Supplier, manufacturer and distributor of workwear clothing in
Australia and internationally;
• Specialised supplier and distributor of industrial safety products
and services; and
• Provider of risk management and compliance services.
$m
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
(500)
Bunnings Group
2,230
61.2
$m
%
Kmart Group
WesCEF
Officeworks
Industrial and Safety
Health
Catch
Other
Total
769
21.1
669
18.4
200
100
45
5.5
2.7
1.2
(163)
(4.5)
(206)
(5.6)
3,644
Total segment result
Wesfarmers 2023 Annual Report
139
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Financial statements
Notes to the financial statements: Segment information
For the year ended 30 June 2023
Segment information
Revenue from contracts with customers
Other revenue
Segment revenue
EBITDA
Depreciation and amortisation
Interest on lease liabilities
Segment result
Other finance costs
Profit before income tax expense
Income tax expense
Profit attributable to equity holders of the parent
Other segment information
Segment assets
Investments in associates and joint ventures
Tax assets
Total assets
Segment liabilities
Tax liabilities
Interest-bearing loans and borrowings
Total liabilities
Segment net assets
Other net assets5
Net assets
BUNNINGS GROUP1
KMART GROUP
WesCEF
OFFICEWORKS
INDUSTRIAL AND
HEALTH2
CATCH3
OTHER4
CONSOLIDATED
SAFETY
2023
$m
2022
$m
2023
$m
2022
$m
2023
$m
2022
$m
2023
$m
2022
$m
2023
$m
2022
$m
2023
$m
2022
$m
2022
$m
2023
$m
2022
$m
2023
$m
2022
$m
18,537
2
18,539
17,751
3
17,754
10,563
72
10,635
3,127
(782)
(115)
2,230
3,057
(740)
(113)
2,204
1,347
(498)
(80)
769
9,054
75
9,129
1,088
(496)
(87)
505
3,303
3
3,306
3,038
3
3,041
769
(99)
(1)
669
634
(93)
(1)
540
3,342
3,153
1,992
1,925
5,312
1,240
15
16
-
-
-
-
3,357
3,169
1,992
1,925
5,312
1,240
335
(124)
(11)
200
303
(113)
(9)
181
184
(80)
(4)
100
171
(75)
(4)
92
124
(74)
(5)
45
(2)
(22)
(1)
(25)
8,900
17
8,817
17
5,582
-
5,848
-
3,811
83
3,627
85
2,141
2,040
1,787
1,805
2,088
2,037
3
3
1
2
-
-
209
-
271
-
(5,593)
(6,113)
(4,359)
(4,267)
(594)
(771)
(1,129)
(1,041)
(474)
(599)
(908)
(951)
(110)
(106)
3,324
(3,463)
(139)
2,721
(2,896)
(175)
1,223
699
1,922
1,581
280
1,861
3,300
(2,084)
1,216
2,941
(1,737)
1,204
1,015
1,002
1,314
1,208
1,180
1,086
54
61
1,069
1,063
(938)
376
(847)
361
(421)
759
(351)
735
Capital expenditure6
Share of net profit or loss of associates and joint ventures
included in segment result7
405
349
135
98
519
455
-
-
-
-
13
14
71
68
-
-
73
-
64
2
40
-
4
-
1 The 2023 Bunnings Group segment result includes a net property contribution of $38 million (2022: $52 million).
2 The 2023 Health segment result includes depreciation and amortisation expenses of $13 million relating to assets recognised as part of Wesfarmers' acquisition of
API. The 2022 Health segment result includes non-cash expenses of $11 million relating to amortisation and trade through of the incremental asset value recognised
as part of the acquisition and impairment costs of $21 million relating to Priceline company owned stores.
3 The 2023 Catch segment result includes costs of $40 million in relation to inventory provisions, team member redundancies and asset write-offs.
4 The 2023 Other result includes an operating loss of $82 million (2022: $80 million) in relation to OnePass and supporting capabilities.
5 Other net assets relate predominantly to intercompany financing arrangements and segment tax balances.
6 Capital expenditure, inclusive of capitalised interest, includes accruals for costs incurred during the year. The amount excluding movements in accruals is
$1,288 million (2022: $1,144 million). Refer to note 4 for further details.
7 The movement from 2022 to 2023 in the share of net profit or loss of associates and joint ventures included in Other is predominantly driven by property revaluations
in BWP Trust and BPI No 1 Pty Ltd.
2023
$m
348
6
354
(133)
(28)
(2)
(163)
502
8
510
(58)
(29)
(1)
(88)
20
35
55
(189)
(16)
(1)
(206)
16
54
70
15
(7)
(1)
7
43,417
36,679
133
159
43,550
36,838
5,564
(1,701)
(219)
3,644
(135)
3,509
(1,044)
2,465
5,208
(1,575)
(217)
3,416
(96)
3,320
(968)
2,352
418
839
667
1,326
24,936
25,771
827
581
943
667
934
581
26,546
27,286
(668)
-
(493)
(13,835)
(14,341)
(6)
-
(6)
(4,430)
(4,958)
(4,430)
(4,958)
(18,265)
(19,305)
(3,174)
(2,723)
8,281
7,981
6,375
3,201
5,663
2,940
-
-
8,281
7,981
29
(4)
73
1,281
1,159
157
9
173
99
(222)
(123)
9
-
165
(173)
(8)
48
-
140
Wesfarmers 2023 Annual Report
Notes to the financial statements: Segment information
For the year ended 30 June 2023
BUNNINGS GROUP1
KMART GROUP
WesCEF
OFFICEWORKS
INDUSTRIAL AND
SAFETY
HEALTH2
CATCH3
OTHER4
CONSOLIDATED
Revenue from contracts with customers
18,537
17,751
10,563
9,054
3,303
3,038
2023
$m
2022
$m
2023
$m
2022
$m
2023
$m
2022
$m
2023
$m
2022
$m
2023
$m
2022
$m
2023
$m
2022
$m
2
3
72
75
3
3
18,539
17,754
10,635
9,129
3,306
3,041
3,127
3,057
1,347
1,088
(782)
(115)
(740)
(113)
2,230
2,204
(498)
(80)
769
(496)
(87)
505
769
(99)
(1)
669
634
(93)
(1)
540
3,342
15
3,357
335
(124)
(11)
200
3,153
16
3,169
303
(113)
(9)
181
1,992
-
1,992
1,925
-
1,925
5,312
-
5,312
1,240
-
1,240
184
(80)
(4)
100
171
(75)
(4)
92
124
(74)
(5)
45
(2)
(22)
(1)
(25)
2023
$m
348
6
354
(133)
(28)
(2)
(163)
502
8
510
(58)
(29)
(1)
(88)
20
35
55
(189)
(16)
(1)
(206)
16
54
70
15
(7)
(1)
7
2022
$m
2023
$m
2022
$m
2023
$m
2022
$m
8,900
8,817
5,582
5,848
3,811
3,627
17
17
-
-
83
85
2,141
3
2,040
3
1,787
1
1,805
2
2,088
-
2,037
-
209
-
271
-
418
839
667
1,326
827
581
(5,593)
(6,113)
(4,359)
(4,267)
(594)
(771)
(1,129)
(1,041)
(474)
(599)
(908)
(951)
(110)
(106)
3,324
(3,463)
(139)
2,721
(2,896)
(175)
1,223
699
1,922
1,581
280
1,861
3,300
(2,084)
1,216
2,941
(1,737)
1,204
1,015
54
1,069
1,002
61
1,063
1,314
(938)
376
1,208
(847)
361
1,180
(421)
759
1,086
(351)
735
Share of net profit or loss of associates and joint ventures
included in segment result7
405
349
135
98
519
455
-
-
-
-
13
14
71
68
-
-
73
-
64
2
40
-
4
-
99
(222)
(123)
9
-
165
(173)
(8)
48
-
(668)
-
(4,430)
(3,174)
6,375
3,201
29
(4)
(493)
(6)
(4,958)
(2,723)
5,663
2,940
73
1,281
1,159
157
9
173
Other revenue
Segment revenue
EBITDA
Depreciation and amortisation
Interest on lease liabilities
Segment result
Other finance costs
Profit before income tax expense
Income tax expense
Profit attributable to equity holders of the parent
Other segment information
Segment assets
Investments in associates and joint ventures
Interest-bearing loans and borrowings
Tax assets
Total assets
Segment liabilities
Tax liabilities
Total liabilities
Segment net assets
Other net assets5
Net assets
Capital expenditure6
Total revenue
FROM CONTINUING OPERATIONS
$43,550m
18.2%
Geographical information
The table below provides information on the geographical location of
revenue from contracts with customers and non-current assets (other
than financial instruments, deferred tax assets and pension assets).
Revenue from contracts with customers and non-current assets are
allocated to a geography based on the location of the operation in
which revenue was derived and assets relate.
$m
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
FY19
FY20 FY21 FY22 FY23
FY23
FY22
FY21
FY20
FY19
$m
43,550
36,838
33,941
30,846
27,920
Revenue
Non-current assets
2023
$m
2022
$m
2023
$m
2022
$m
Australia
New Zealand
Other
Total
40,587
2,786
44
43,417
34,107
2,559
13
36,679
15,954
720
24
16,698
15,718
674
12
16,404
Wesfarmers 2023 Annual Report
141
43,417
133
43,550
36,679
159
36,838
5,564
(1,701)
(219)
3,644
(135)
3,509
(1,044)
2,465
24,936
943
667
26,546
(13,835)
-
(4,430)
(18,265)
8,281
-
8,281
5,208
(1,575)
(217)
3,416
(96)
3,320
(968)
2,352
25,771
934
581
27,286
(14,341)
(6)
(4,958)
(19,305)
7,981
-
7,981
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Financial statements
Notes to the financial statements: Group performance
For the year ended 30 June 2023
1. Revenue and other income
Revenue from contracts with customers
Sale of retail goods in store
Sale of retail goods online
Sale of wholesale goods
Sale of fertilisers, chemicals, speciality
gases, LPG and LNG
Sale of industrial products
Services revenue
Other revenue
Interest revenue
Dividend revenue
Other
Total revenue
Consolidated
2023
$m
2022
$m
30,166
2,686
5,024
3,294
1,988
259
43,417
16
25
92
133
43,550
26,958
3,440
1,167
3,031
1,878
205
36,679
5
54
100
159
36,838
The Group's contracts with customers for the sale of retail goods
generally incorporate a single performance obligation. Cash payment
is generally received at the point of sale. Revenue from lay-by
transactions is recognised on the date when the customer completes
payment and takes possession of the merchandise. Any cash
received in advance of the completion of the performance obligation is
recognised on the balance sheet as a contract liability.
Where satisfaction of a performance obligation is completed over
time, revenue is recognised in line with the progress towards complete
satisfaction of the performance obligation.
A right of return is not a separate performance obligation and the
Group recognises revenue net of estimated returns. A refund liability
and a corresponding asset in inventory representing the right to
recover the returned products from the customer is also recognised.
Other revenue
Interest revenue
Revenue is recognised as the interest accrues on the related financial
asset. Interest is determined using the effective interest rate method,
which applies the interest rate that exactly discounts estimated future
cash receipts over the expected life of the financial instrument.
Other income
Gains on disposal of property, plant and
equipment and other assets
Other
Total other income
Dividend revenue
41
124
165
58
109
167
Revenue from dividends, other than those arising from associates,
is recognised when the Group’s right to receive the payment
is established.
Recognition and measurement
Revenue from contracts with customers
Revenue from contracts with customers is recognised when control of
the goods or services is transferred to the customer at an amount that
reflects the consideration to which the Group expects to be entitled in
exchange for those goods or services.
The Group generates a significant proportion of its revenue from
the following:
• Sale of retail goods in store: relates to merchandise sold
direct to customers through the Group’s in store retail operations.
Control of goods typically passes at the point of sale.
• Sale of retail goods online: relates to merchandise sold direct
to customers through online platforms. Control of goods typically
passes upon delivery, or when collected by the customer.
• Sale of wholesale goods: includes revenue from wholesale
distribution of building materials, pharmaceutical, household
and other retail goods. Control of goods typically passes upon
delivery of goods to the customer.
• Sales of products to commercial customers:
i. Produced or purchased by the Group including fertilisers,
chemicals, speciality gases, LPG and LNG; and
ii. For which the Group has distribution rights, principally related
to industrial maintenance and industrial safety.
• Services revenue: includes revenue received from services
provided to customers, such as clinical treatments, franchise
services, marketing and brand support. Revenue is recognised
as the performance obligations are satisfied.
Key estimate: gift cards
Revenue from the sale of gift cards is recognised when the
card is redeemed and the customer purchases goods by
using the card, or when the gift card is no longer expected
to be redeemed (breakage). At 30 June 2023, $165 million of
revenue is deferred in relation to gift cards (2022: $155 million).
Gift card liabilities are contract liabilities as payment has been
received for a performance obligation to be completed at a
future point in time.
The key assumption in measuring the contract liability for
gift cards and vouchers is the expected breakage, which
is reviewed annually based on historical information. Any
reassessment of expected breakage in a particular year
impacts on the revenue recognised from expiry of gift
cards and vouchers (either increasing or decreasing). Any
reasonably possible change in the estimate is unlikely to have
a material impact.
Key judgements: Flybuys
The Group is a participant in the Flybuys loyalty program
whereby eligible customers are granted loyalty points
based on the dollars they spend. The Group is an agent
in this arrangement as the nature of the loyalty program is
that Flybuys is responsible for supplying the awards to the
customer and as such the Group’s role is only to arrange for
Flybuys to provide the goods or services.
142
Wesfarmers 2023 Annual Report
Notes to the financial statements: Group performance
For the year ended 30 June 2023
Employee benefits expense by segment
$m
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
FY23
FY22
Bunnings Group
Kmart Group
WesCEF
Officeworks
Industrial and Safety
Health
Catch
Other
Depreciation and amortisation
Refer to notes 8, 9 and 10 for details on depreciation and
amortisation.
Impairment
Refer to note 5 for details on the impairment of trade and other
receivables, including a reconciliation of the allowance for
credit losses, and note 19 for further details on impairment of
non-financial assets.
Other finance costs
Other finance costs are recognised as an expense when they are
incurred, except for interest charges attributable to major projects with
substantial development and construction phases.
Provisions and other payables are discounted to their present value
when the effect of the time value of money is significant. The impact of
the unwinding of these discounts and any changes to the discounting
is shown as a discount rate adjustment in finance costs.
Capitalisation of borrowing costs
To determine the amount of borrowing costs to be capitalised as
part of the costs of major construction projects, the Group uses
the weighted average interest rate applicable to its outstanding
borrowings, including lease liabilities, during the year. The weighted
average interest rate applicable for FY2023 was 3.25 per cent
(2022: 3.13 per cent) and $42 million (2022: $34 million) of interest
was capitalised to property, plant and equipment for the Mt Holland
lithium project. Capitalised borrowing costs are included within
WesCEF's capital expenditure.
2. Expenses
Remuneration, bonuses and on-costs
Superannuation expense
Share-based payments expense
Employee benefits expense
Short-term and low-value lease payments
Contingent rental payments
Outgoings and other
Occupancy-related expenses
Depreciation
Depreciation of right-of-use assets
Amortisation of intangibles
Amortisation of leasehold improvements
Depreciation and amortisation
Impairment of property, plant and equipment
Impairment of goodwill and intangible assets
Impairment of right-of-use assets
Impairment of trade and other receivables
Impairment expenses
Repairs and maintenance
Utilities and office expenses
Insurance expenses
Merchant fees
Other
Other expenses
Interest on interest-bearing loans and
borrowings, net of borrowing costs
capitalised
Discount rate adjustment
Amortisation of debt establishment costs
Other finance-related costs
Other finance costs
Consolidated
2023
$m
2022
$m
5,795
447
91
6,333
35
51
419
505
423
1,087
118
73
1,701
9
4
1
22
36
315
608
52
143
559
1,677
117
6
4
8
135
5,351
403
86
5,840
28
30
384
442
397
1,020
85
73
1,575
17
-
4
12
33
268
546
34
140
561
1,549
72
2
5
17
96
Recognition and measurement
Employee benefits expense
The Group’s accounting policy for liabilities associated with employee
benefits is set out in note 11. The policy relating to share-based
payments is set out in note 31.
The majority of employees in Australia and New Zealand are party
to a defined contribution superannuation scheme and receive fixed
contributions from Group companies and the Group’s legal or
constructive obligation is limited to these contributions. Contributions
to defined contribution funds are recognised as an expense as they
become payable. Prepaid contributions are recognised as an asset to
the extent that a cash refund or a reduction in the future payment is
available. The Group also operates a defined benefit superannuation
scheme, the membership of which is now closed.
Wesfarmers 2023 Annual Report
143
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i
a
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Financial statements
Notes to the financial statements: Group performance
For the year ended 30 June 2023
3. Tax expense
Recognition and measurement
The major components of tax expense are:
Income statement
Current income tax expense
Current year (paid or payable)
Adjustment for prior years
Deferred income tax expense
Temporary differences
Adjustment for prior years
Consolidated
2023
$m
2022
$m
994
(3)
50
3
869
29
82
(12)
Income tax expense reported in the
income statement
1,044
968
Statement of changes in equity
Net movement on revaluing cash flow hedges
Net movement on revaluing financial assets
Income tax reported in equity
Tax reconciliation
Profit before tax
Income tax rate at the statutory rate of 30%
Adjustments relating to prior years
Non-deductible items
Share of results of associates and joint
ventures
Non-assessable dividends
Utilisation of previously unrecognised tax
losses
Other
(29)
7
(22)
40
13
53
3,509
1,053
-
9
3,320
996
17
5
(7)
(8)
(2)
(1)
Income tax on profit before tax
1,044
Deferred income tax in the balance
sheet relates to the following:
Provisions
Employee benefits
Accruals and other payables
Interest-bearing loans and borrowings
Leases
Derivatives
Inventories
Property, plant and equipment
Other individually insignificant balances
Deferred tax assets
Accelerated depreciation for tax purposes
Derivatives
Accrued income and other
Intangible assets
Other individually insignificant balances
Deferred tax liabilities
Net deferred tax asset
Deferred income tax in the income
statement relates to the following:
Provisions, employee benefits and leases
Depreciation, amortisation and impairment
Investments in associates and joint
ventures
Other individually insignificant balances
Deferred tax expense
144
Wesfarmers 2023 Annual Report
95
296
73
63
322
3
81
249
36
1,218
222
43
155
37
137
594
624
26
14
(15)
28
53
Current taxes
Current tax assets and liabilities are measured at the amount expected
to be recovered from or paid to taxation authorities at the tax rates
and tax laws enacted or substantively enacted by the balance
sheet date.
Deferred taxes
Deferred income tax is provided using the full liability balance sheet
method. Deferred income tax assets are recognised for all deductible
temporary differences, carried forward unused tax assets and unused
tax losses, to the extent it is probable that future taxable profits will be
available to utilise them.
Deferred income tax assets and liabilities are measured at the tax rates
that are expected to apply to the year when the asset is realised or
the liability is settled, based on tax rates and tax laws that have been
enacted or substantively enacted at the balance sheet date.
Deferred income tax is provided on temporary differences at the
balance sheet date between accounting carrying amounts and the tax
bases of assets and liabilities, other than for the following:
• Where they arise from the initial recognition of an asset or liability
in a transaction that is not a business combination and at the
time of the transaction, affects neither the accounting profit nor
taxable profit or loss.
• Where taxable temporary differences relate to investments in
subsidiaries, associates and interests in joint ventures:
i. Deferred tax liabilities are not recognised if the timing of the
reversal of the temporary differences can be controlled and it
is probable that the temporary differences will not reverse in
the foreseeable future.
ii. Deferred tax assets are not recognised if it is not probable
that the temporary differences will reverse in the foreseeable
future and future taxable profits will not be available to utilise
the temporary differences.
Income taxes relating to items recognised directly in equity are
recognised in equity and not in the income statement.
Offsetting deferred tax balances
Deferred tax assets and deferred tax liabilities are offset only if a legally
enforceable right exists to set off current tax assets against current tax
liabilities and the deferred tax assets and liabilities relate to the same
taxable entity and the same taxation authority.
Key judgement: unrecognised deferred tax
assets
Capital losses: The Group has unrecognised benefits relating
to carried forward unused capital losses. Currently, it is not
certain that the Group will generate sufficient future taxable
capital gains required to recognise a deferred tax asset
for these carried forward capital losses. The unrecognised
deferred tax assets of $11 million (2022: $10 million) relate
wholly to capital losses in Australia.
Key judgement: unrecognised deferred tax
liability
A deferred tax liability has not been recognised on indefinite
life intangibles for which the carrying value has been assessed
as recoverable through sale, consistent with the Group’s
practice and strategy to maximise shareholder returns
through value-adding transactions.
Refer to note 29 for tax transparency disclosures.
3
(16)
(25)
(12)
968
106
330
110
115
322
10
60
235
54
1,342
208
138
240
37
138
761
581
20
3
40
7
70
Notes to the financial statements: Group balance sheet
For the year ended 30 June 2023
4. Cash and cash equivalents
4. Cash and cash equivalents (continued)
For the purposes of the cash flow statement,
cash and cash equivalents comprise the
following:
Cash on hand and in transit
Cash at bank and on deposit
Cash held in joint operation
Reconciliation of net profit after tax to
net cash flows from operations
Net profit
Adjusted for
Depreciation and amortisation
Impairment of assets
Net gain on disposal of non-current assets
including investments and associates
Share of net profits of associates and joint
ventures
Dividends and distributions received from
associates
Discount adjustment in other finance costs
Amortisation of debt establishment costs
Other
(Increase)/decrease in assets
Trade and other receivables
Inventories
Current tax receivable
Prepayments
Deferred tax assets
Other assets
Increase/(decrease) in liabilities
Trade and other payables
Current tax payable
Provisions
Other liabilities
Net cash flows from operating activities
Consolidated
2023
$m
2022
$m
252
254
167
673
238
279
188
705
2,465
2,352
1,701
36
1,575
33
(32)
(53)
(9)
48
6
4
18
13
57
(40)
28
(37)
(1)
(48)
-
(62)
32
4,179
(173)
48
2
5
13
(212)
(1,183)
-
(60)
29
(10)
322
(360)
(68)
41
2,301
Recognition and measurement
Cash at bank and on deposit
Cash and short-term deposits in the balance sheet comprise cash at
bank and on hand, and short-term deposits with an original maturity
of three months or less and are classified as financial assets held at
amortised cost.
Cash at bank earns interest at floating rates based on daily bank
deposit rates. Short-term deposits are made for varying periods of
between one day and three months, depending on the immediate
cash requirements of the Group, and earn interest at the respective
deposit rates.
Cash at bank and on deposit is held with banks and financial
institutions with investment grade credit ratings. Refer to note 17(D)
for credit risk disclosures.
Cash held in joint operation
Cash held in joint operation is only available for use within the
joint operation.
Cash capital expenditure
Payments for property
Payments for plant and equipment
Payments for intangibles
Payments for mineral exploration
Proceeds from sale of property, plant,
equipment and intangibles
Net cash capital expenditure
Consolidated
2023
$m
2022
$m
100
1,054
132
2
1,288
(105)
1,183
97
869
174
4
1,144
(260)
884
Cash capital expenditure by segment
for FY2023
Bunnings Group
Kmart Group
WesCEF
Officeworks
Industrial and Safety
Health
Catch
Other
Total
$m
%
405
31.4
127
9.9
518
40.2
5.5
5.7
3.2
0.8
3.3
71
73
41
10
43
1,288
5. Receivables
Trade and other
Trade receivables
Allowance for credit losses
Other debtors
Allowance for credit losses
Movements in the allowance account for
expected credit losses were as follows:
Carrying amount at beginning of year
Allowance for credit losses recognised
Acquisition of controlled entities
Write-offs
Unused allowance for credit losses reversed
Carrying amount at the end of the year
Consolidated
2023
$m
2022
$m
1,892
(63)
217
2,046
1,938
(55)
211
2,094
(55)
(26)
-
14
4
(63)
(33)
(17)
(16)
6
5
(55)
Recognition and measurement
Trade receivables and other debtors are all classified as financial
assets held at amortised cost on the basis they are held with
the objective of collecting contractual cash flows and the cash
flows relate to payments of principal and interest on the principal
amount outstanding.
Wesfarmers 2023 Annual Report
145
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a
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i
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S
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m
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p
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f
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m
a
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G
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b
a
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a
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s
h
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G
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C
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a
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s
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a
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Financial statements
Notes to the financial statements: Group balance sheet
For the year ended 30 June 2023
5. Receivables (continued)
Trade receivables
Trade receivables generally have terms of up to 30 days, extending
up to 120 days in relation to the Health segment. They are
recognised initially in accordance with the Group's revenue policy and
subsequently measured at amortised cost using the effective interest
method, less an allowance for credit losses. Refer to note 17(D) for a
description of the application of the simplified approach to determine
lifetime expected credit loss (ECL) on trade receivables and details of
the Group's credit risk exposure.
Other debtors
These amounts generally arise from transactions with the Group's
suppliers. It is expected that other debtors' balances will be received
when due.
6. Inventories (continued)
Costs incurred in bringing each product to its present location and
condition are accounted for as follows:
• Raw materials: purchase cost on a weighted average basis.
• Manufactured finished goods: cost of direct materials and
labour and a proportion of manufacturing overheads based on
normal operating capacity.
• Retail and wholesale finished goods: purchase cost on
a weighted average basis, after deducting any settlement
discounts and supplier rebates, and including logistics expenses
incurred in bringing the inventories to their present location
and condition.
Volume-related supplier rebates, and supplier promotional rebates
where they exceed spend on promotional activities, are accounted for
as a reduction in the cost of inventory and recognised in the income
statement when the inventory is sold.
Key estimate: recoverability of trade and other
receivables
Management judgement is applied in assessing the
recoverability of trade and other receivables on an ongoing
basis. Recoverability of specific debtors is assessed with
reference to the debtor's ability to repay, which includes:
• The anticipated liquidity of the debtor;
• The estimated value of security held by the Group over
the debtor's property and assets;
• The estimated value of other security held, including
retention of title of the inventory; and
• The ranking of the Group's debt compared to other
creditors of the debtor.
The Group's exposure to potential bad debts is not significant
and default rates have historically been very low. Trade
receivables are written off when there is no reasonable
expectation of recovery, which may be indicated by the
debtor failing to engage in a payment plan or failing to make
timely contractual payments. Reasonably possible changes in
these estimates are unlikely to have a material impact on the
trade and other receivables balance.
Key estimate: net realisable value
The key assumptions, which require the use of management
judgement, are the variables affecting costs recognised in
bringing the inventory to their location and condition for sale,
estimated costs to sell and the expected selling price. These
key assumptions are reviewed at least annually. The total net
expense relating to inventory writedowns during the year was
$50 million (2022: $20 million). Reasonably possible changes
in these estimates are unlikely to have a material impact.
Key estimate: supplier rebates
The recognition of certain supplier rebates in the income
statement requires management to estimate both the volume
of purchases that will be made during a period of time and
the related product that was sold and remains in inventory
at the reporting date. Management’s estimates are based
on existing and forecast inventory turnover levels and sales.
Reasonably possible changes in these estimates are unlikely
to have a material impact.
Refer to note 17(D) for further information on the Group's
ECL matrix.
7. Other financial assets
6. Inventories
Raw materials
Finished goods
Right-of-return assets
Consolidated
2023
2022
$m
$m
34
5,997
8
6,039
28
6,047
9
6,084
Recognition and measurement
Inventories are valued at the lower of cost and net realisable value.
The net realisable value of inventories is the estimated selling price in
the ordinary course of business less estimated costs to sell.
Financial assets measured at FVOCI
Other
Consolidated
2023
2022
$m
$m
14
1
15
675
2
677
On 12 April 2023, Wesfarmers sold its remaining 2.8 per cent interest
(37,193,541 shares) in Coles. Dividends received from Coles for
the year ended 30 June 2023 prior to the sale totalled $25 million
(2022: $40 million).
Recognition and measurement
The Group's other financial assets primarily comprise equity
instruments measured at fair value through other comprehensive
income (FVOCI). Fair value gains and losses are presented in other
comprehensive income and there is no subsequent reclassification of
fair value gains and losses to the income statement on derecognition.
Dividends are recognised in the income statement as other revenue
when the Group's right to payment is established.
146
Wesfarmers 2023 Annual Report
Notes to the financial statements: Group balance sheet
For the year ended 30 June 2023
8. Property, plant and equipment
PROPERTY
PLANT AND EQUIPMENT
Land Buildings
$m
$m
Leasehold
improvements
$m
Plant,
vehicles and
equipment1
$m
Mine
properties1
$m
Consolidated
Year ended 30 June 2023
Gross carrying amount - at cost
Accumulated depreciation and impairment
Net carrying amount
Movement
Net carrying amount at the beginning of the year
Additions2
Disposals and write-offs
Impairment
Depreciation and amortisation
Acquisition/(disposal) of controlled entities
Other including foreign exchange movements
Net carrying amount at the end of the year
Assets under construction included above
Year ended 30 June 2022
Gross carrying amount - at cost
Accumulated depreciation and impairment
Net carrying amount
Movement
Net carrying amount at the beginning of the year
Additions2
Disposals and write-offs
Impairment
Depreciation and amortisation
Acquisition of controlled entities
Transfers
Other including foreign exchange movements
Net carrying amount at the end of the year
Assets under construction included above
323
-
323
321
7
(6)
-
-
-
1
323
-
321
-
321
369
37
(87)
-
-
4
-
(2)
321
-
535
(206)
329
297
93
(46)
-
(15)
-
-
329
87
489
(192)
297
324
60
(93)
-
(15)
3
18
-
297
46
954
(599)
355
394
39
(4)
(1)
(73)
-
-
355
28
934
(540)
394
377
86
(1)
(9)
(73)
15
-
(1)
394
17
8,490
(5,061)
3,429
2,868
978
(5)
(8)
(408)
2
2
3,429
1,033
7,648
(4,780)
2,868
2,458
739
(1)
(8)
(382)
84
(18)
(4)
2,868
614
Total
$m
11,231
(5,866)
5,365
4,750
1,176
(61)
(9)
(496)
2
3
5,365
929
-
929
870
59
-
-
-
-
-
929
-
1,148
870
-
870
833
37
-
-
-
-
-
-
870
870
10,262
(5,512)
4,750
4,361
959
(182)
(17)
(470)
106
-
(7)
4,750
1,547
1 The mine under construction of $1,150 million, as disclosed in 2022, has been reclassified to plant, vehicles and equipment ($280 million) and mine properties
($870 million).
2 The 2023 additions include the capitalisation of $42 million of borrowing costs (2022: $34 million).
Recognition and measurement
The carrying value of property, plant and equipment is measured as
the cost of the asset, less accumulated deprecation and impairment.
The cost of the asset also includes the cost of replacing parts that are
eligible for capitalisation, and the cost of major inspections. The cost
of mine properties comprises the transferred value of mineral rights
(exploration and evaluation expenditure), subsequent construction
costs, any costs directly attributable to bringing the asset into
operation, and, for qualifying assets, borrowing costs.
Depreciation and amortisation
Items of property, plant and equipment are depreciated on a
straight-line basis over their useful lives. The estimated useful life
of buildings is between 20 and 40 years and plant, vehicles and
equipment is between three and 40 years. Land is not depreciated.
Mine properties are depreciated over the life of mine, based on
the rate of depletion of economically recoverable reserves, once
production has commenced.
Leasehold improvements are amortised over the period of the lease or
the anticipated useful life of the improvements, whichever is shorter.
Derecognition
An item of property, plant and equipment is derecognised when it is
sold or otherwise disposed of, or when its use is expected to bring
no future economic benefits. Any gain or loss from derecognising
the asset (the difference between the proceeds of disposal and the
carrying amount of the asset) is included in the income statement in
the period the item is derecognised.
Impairment
Refer to note 19 for details on impairment testing.
Wesfarmers 2023 Annual Report
147
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Financial statements
Notes to the financial statements: Group balance sheet
For the year ended 30 June 2023
8. Property, plant and equipment (continued)
Key estimates: property, plant and equipment
Key judgement: assets under construction
The estimations of useful lives, residual value and depreciation
and amortisation methods require management judgement
and are reviewed annually. If they need to be modified, the
change is accounted for prospectively from the date of
reassessment until the end of the revised useful life (for both
the current and future years). Such revisions are generally
required when there are changes in economic circumstances
impacting the specific assets or groups of assets, such as a
change in store performance or the life of mine.
These changes are limited to specific assets and as such, any
reasonably possible change in the estimate is unlikely to have
a material impact on the estimations of useful lives, residual
values or depreciation and amortisation methods.
9. Goodwill and intangible assets
Consolidated
Year ended 30 June 2023
Gross carrying amount - at cost
Accumulated amortisation and impairment
Net carrying amount
Movement
Net carrying amount at the beginning of the year
Additions
Disposals and write-offs
Impairment
Amortisation
Acquisition/(disposal) of controlled entities
Net carrying amount at the end of the year
Year ended 30 June 2022
Gross carrying amount - at cost
Accumulated amortisation and impairment
Net carrying amount
Movement
Net carrying amount at the beginning of the year
Additions
Disposals and write-offs
Amortisation
Acquisition of controlled entities
Net carrying amount at the end of the year
148
Wesfarmers 2023 Annual Report
The Mt Holland lithium project (the Project) consists of
mine properties, and plant, vehicles and equipment. The
determination of when the individual components of the
Project are substantially complete and ready for intended
use, requires management judgement, which considers the
following factors:
• The level of capital expenditure incurred to date
compared with the original construction cost estimates;
• Whether the majority of the assets are substantially
complete and ready for use;
• Whether the completion of a reasonable period of testing
each asset has occurred;
• Whether the ability to produce mineral resources
in a saleable form (within specifications) has been
demonstrated; and
• Whether the ability to sustain ongoing production has
been demonstrated.
As at 30 June 2023, the Project’s mine properties
were determined to be in production and commenced
depreciation. The concentrator and refinery continue to be
classified as assets under construction within plant, vehicles
and equipment.
Goodwill
$m
Brand
$m
Contractual and
non-contractual
relationships
$m
Software
$m
Total
$m
3,846
(494)
3,352
3,337
-
-
-
-
15
3,352
3,831
(494)
3,337
2,967
-
-
-
370
3,337
1,321
(498)
823
824
-
-
-
(1)
-
823
1,321
(497)
824
617
1
-
(1)
207
824
131
(55)
76
84
-
-
-
(8)
-
76
131
(47)
84
29
-
-
(10)
65
84
1,013
(572)
441
439
112
(6)
(4)
(109)
9
441
896
(457)
439
289
195
(3)
(74)
32
439
6,311
(1,619)
4,692
4,684
112
(6)
(4)
(118)
24
4,692
6,179
(1,495)
4,684
3,902
196
(3)
(85)
674
4,684
Notes to the financial statements: Group balance sheet
For the year ended 30 June 2023
Consolidated
2023
$m
2022
$m
877
856
2
816
418
383
3,352
876
856
2
816
421
366
3,337
14
415
160
22
194
18
-
823
14
415
160
22
194
18
1
824
9. Goodwill and intangible assets (continued)
Recognition and measurement
Allocation of goodwill to groups of cash
generating units
Carrying amount of goodwill
Bunnings Group
Kmart Group
WesCEF
Officeworks
Industrial and Safety
Health
Allocation of indefinite life intangible assets to
groups of cash generating units
Carrying amount of indefinite life
intangibles
Bunnings Group
Kmart Group
Officeworks
Industrial and Safety
Health
Catch
Other
Goodwill
Goodwill acquired in a business combination is initially measured at
cost. Cost is measured as the cost of the business combination minus
the net fair value of the acquired and identifiable assets, liabilities and
contingent liabilities. Following initial recognition, goodwill is measured
at cost less any accumulated impairment losses.
Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired in a
business combination is their fair value at the date of acquisition.
Following initial recognition, intangible assets are carried at cost less
accumulated amortisation and any impairment losses. Intangible
assets with finite lives are amortised on a straight-line basis over their
useful lives and tested for impairment whenever there is an indication
that they may be impaired.
The amortisation period and method are reviewed at each financial
year-end. Intangible assets with indefinite useful lives are tested for
impairment in the same way as goodwill.
A summary of the useful lives of intangible assets is as follows:
Intangible asset
Useful life
Brand1
Indefinite and finite (up to 20 years)
Contractual and non-contractual
relationships2
Finite (up to 15 years)
Software
Finite (up to 10 years)
1 Includes trade names and other intangible assets with characteristics of a
brand.
2 Contractual and non-contractual relationships are intangible assets that have
arisen through business combinations. They represent the value of pre-existing
customer relationships in the acquired company.
Assets with an assumed indefinite useful life are reviewed at each
reporting period to determine whether this assumption continues to
be appropriate. If not, it is changed to a finite life and accounted for
prospectively as a change in accounting estimate.
Impairment
Refer to note 19 for details on impairment testing.
Key judgement: useful lives of intangible assets
Certain brands have been assessed as having indefinite useful
lives on the basis of strong brand strength, ongoing expected
profitability and continuing support. The brand incorporates
complementary assets such as store formats, networks and
product offerings.
Key judgement: capitalisation of software costs
Configuration and customisation costs incurred in a
Software-as-a-Service (SaaS) arrangement, that is a service
agreement, are recognised as an operating expense. The
exception is where the Group has the power to obtain the
future economic benefits flowing from the underlying resource
and to restrict the access of others to those benefits. Under
this scenario, an intangible asset that the Group controls is
created and therefore capitalised.
Wesfarmers 2023 Annual Report
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Financial statements
Notes to the financial statements: Group balance sheet
For the year ended 30 June 2023
10. Leases
Group as a lessee
The Group has leases primarily in relation to retail and distribution properties, in addition to offices, motor vehicles and office equipment. The
lease terms vary significantly and can include escalation clauses, renewal or purchase options and termination rights. Escalation clauses vary
between fixed rate, inflation-linked, market rent and combination reviews. Changes to rental terms linked to inflation or market rent reviews
typically occur on an annual or five-yearly basis.
Set out below are the carrying amounts of the right-of-use assets and the movements during the year.
RIGHT-OF-USE ASSETS
Vehicles
and other
$m
Buildings
$m
Total
$m
9,442
(3,906)
5,536
5,896
709
(1)
(1,072)
(3)
7
5,536
8,804
(2,908)
5,896
5,949
756
(4)
(1,008)
216
(13)
5,896
73
(22)
51
46
14
-
(8)
(1)
-
51
62
(16)
46
38
12
-
(6)
2
-
46
9,626
(3,950)
5,676
6,014
747
(1)
(1,087)
(4)
7
5,676
8,953
(2,939)
6,014
6,035
798
(4)
(1,020)
218
(13)
6,014
Consolidated
Year ended 30 June 2023
Gross carrying amount - at cost
Accumulated depreciation and impairment
Net carrying amount
Movement
Net carrying amount at the beginning of the year
Net additions1
Impairment, net of reversals
Depreciation
Acquisition/(disposal) of controlled entities
Other including foreign exchange movements
Net carrying amount at the end of the year
Year ended 30 June 2022
Gross carrying amount - at cost
Accumulated depreciation and impairment
Net carrying amount
Movement
Net carrying amount at the beginning of the year
Net additions1
Impairment, net of reversals
Depreciation
Acquisition of controlled entities
Other including foreign exchange movements
Net carrying amount at the end of the year
1 Includes new leases, reassessments and remeasurements, net of terminated leases.
Land
$m
111
(22)
89
72
24
-
(7)
-
-
89
87
(15)
72
48
30
-
(6)
-
-
72
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Notes to the financial statements: Group balance sheet
For the year ended 30 June 2023
10. Leases (continued)
Set out below are the carrying amounts of the lease liabilities and the
movements during the year.
Consolidated
2023
$m
2022
$m
1,135
5,604
6,739
1,100
6,023
7,123
Current
Non-current
Total lease liabilities
Movement
Net carrying amount at the beginning of the year
Net additions1
Accretion of interest
Gross lease payments
Acquisition/(disposal) of controlled entities
Other including foreign exchange movements
Net carrying amount at the end of the year
7,123
755
219
(1,361)
(4)
7
6,739
7,105
818
217
(1,246)
244
(15)
7,123
1 Includes new leases, reassessments and remeasurements, net of terminated
leases.
The maturity profile of the Group's lease liabilities based on contractual
undiscounted payments is provided in note 17(B).
The Group has a number of lease contracts that include
extension options. Management exercises significant judgement
in determining whether these extension options are reasonably certain
to be exercised. Further details on this key judgement are provided on
the following page.
Lease extension options are available in respect of 75 per cent
(2022: 76 per cent) of the Group’s land and building leases. The
number and extent of available lease extension options differs
considerably between leases. Where the Group has deemed
the exercise of available option periods to be reasonably certain,
those option periods have been included in the lease term and are
therefore incorporated in the recorded lease liability of $6,739 million
(2022: $7,123 million). A number of available option periods, which
are exercisable at the discretion of the Group as lessee, have not
been included in the recorded lease liability on the basis that they are
not reasonably certain to be exercised, and do not represent liabilities
of the Group at 30 June 2023.
The following are the lease-related amounts recognised in the income
statement.
Depreciation of right-of-use assets
Interest on lease liabilities
Included in occupancy-related expenses:
Consolidated
2023
2022
$m
$m
1,087
219
1,020
217
Short-term and low-value lease payments
Contingent rental payments
Outgoings and other
35
51
419
28
30
384
Total amount recognised in the income
statement
1,811
1,679
Recognition and measurement
The Group assesses at contract inception whether a contract is,
or contains, a lease. That is, if the contract conveys the right to
control the use of an identified asset for a period of time in exchange
for consideration.
Right-of-use assets
Right-of-use assets are recognised at the commencement date of the
lease (i.e. the date the underlying asset is available for use). Right-of-
use assets are measured at cost, less any accumulated depreciation
and impairment losses, and adjusted for any remeasurement of
lease liabilities. The initial cost of right-of-use assets includes the
amount of lease liabilities recognised, initial direct costs incurred,
any restoration costs and lease payments made at or before the
commencement date less any lease incentives received. Right-of-
use assets are depreciated on a straight-line basis over the shorter
of the lease term and the estimated useful lives of the assets. The
estimated useful lives of the right-of-use land and building assets
are between one and 42 years and right-of-use vehicles and other
assets are between one and 20 years. The right-of-use assets are
also subject to impairment, assessed in accordance with the Group’s
impairment policy.
Lease liabilities
Lease liabilities are recognised by the Group at the commencement
date of the lease. Lease liabilities are measured at the present value of
lease payments to be made over the lease term.
The lease payments include fixed payments (including in-substance
fixed payments) less any lease incentives receivable, variable lease
payments that depend on an index or rate, and amounts expected
to be paid under residual value guarantees. The lease payments
also include the exercise price of a purchase option reasonably
certain to be exercised by the Group. Variable lease payments that
do not depend on an index or a rate are recognised as expenses
in the period in which the event or condition that triggers the
payment occurs.
In calculating the present value of lease payments, the Group uses its
incremental borrowing rate (IBR) at the lease commencement date
where the interest rate implicit in the lease is not readily determinable.
After the commencement date, the lease liability is increased to reflect
the accretion of interest and reduced for lease payments made. In
addition, the carrying amount of lease liabilities is remeasured if there
is a modification, a change in the lease term, a change in the lease
payments (e.g. changes to future payments resulting from a change in
an index or rate used to determine such lease payments) or a change
in the assessment to purchase the underlying asset.
Short-term leases and lease of low-value assets
The Group applies the short-term lease recognition exemption to
its short-term leases, which are defined as those leases that have a
lease term of 12 months or less from the commencement date. It also
applies the lease of low-value assets recognition exemption to leases
that are considered to be low value. Lease payments on short-term
leases and leases of low-value assets are recognised as expenses on
a straight-line basis over the lease term.
Lease liabilities by segment
as at 30 June 2023
$m
%
Bunnings Group
3,568
53.0
Kmart Group
2,341
34.7
WesCEF
Officeworks
Industrial and Safety
Health
Catch
Other
Total
0.9
6.1
1.9
2.3
0.8
0.3
61
413
130
156
53
17
6,739
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Financial statements
Notes to the financial statements: Group balance sheet
For the year ended 30 June 2023
10. Leases (continued)
11. Provisions
Key judgements and estimates: leases
Lease term
The lease term is considered to be a key judgement. At lease
commencement, Wesfarmers considers an option to extend a
lease to be reasonably certain when there is a clear economic
incentive for extension, such as:
•
•
favourable contractual terms and conditions in the option
period compared to market rates;
leasehold improvements have recently been undertaken
and are likely to have significant residual value at the end
of the current lease period;
• significant termination costs exist; or
•
the underlying asset is important to the Group’s
operations.
After lease commencement, options to extend are reassessed
upon the occurrence of a significant event or change
in circumstance.
Discount rate
The discount rates applied in measuring the lease liability are
a key estimate. As at 30 June 2023, the rates were between
1.0 and 5.9 per cent (2022: between 0.8 and 5.0 per cent) for
the Group's land and buildings leases. On commencement of
a lease, the future lease payments are discounted using the
IBR where the interest rate implicit in the lease is not readily
available. The lessee's IBR reflects the Group's IBR adjusted
for lease tenure and the currency of the lease. Where there
is a lease modification, a revised discount rate is applied in
remeasuring the lease liability.
Stand-alone price of lease and non-lease
components
As applicable, the calculated lease liability excludes an
estimate of the gross lease payments allocated to non-lease
components. This estimate is determined on a lease-by-lease
basis on inception of the lease.
In determining the stand-alone price of the lease and
non-lease components, consideration is given to benchmark
property outgoings and historical information of the Group's
lease portfolio.
Current
Employee benefits
Self-insured risks
Restoration and restructuring
Other
Non-current
Employee benefits
Self-insured risks
Restoration and restructuring
Other
Total provisions
Consolidated
2023
$m
2022
$m
869
123
48
77
1,117
101
111
161
1
374
1,491
900
126
48
89
1,163
110
109
154
1
374
1,537
Recognition and measurement
Provisions are recognised when:
•
•
the Group has a present obligation (legal or constructive) as a
result of a past event;
it is probable that resources will be expended to settle the
obligation; and
• a reliable estimate can be made of the amount of the obligation.
Key estimate: discounting
Provisions, other than employee benefits, are determined by
discounting the expected future cash flows at a pre-tax rate
that reflects current market assessments of the time value of
money and the risks specific to the liability to the extent they
are not included in the cash flows.
Employee benefits provision balances are calculated using
discount rates derived from the high-quality corporate bond
(HQCB) market in Australia provided by Milliman Australia.
As at 30 June 2023, the rates were between
5.2 and 5.6 per cent (2022: between 3.6 and 5.3 per cent).
152
Wesfarmers 2023 Annual Report
Notes to the financial statements: Group balance sheet
For the year ended 30 June 2023
11. Provisions (continued)
Employee benefits
The provision for employee benefits represents annual leave, long
service leave entitlements and incentives accrued by employees.
Wages and salaries
Liabilities for wages and salaries, including non-monetary benefits
expected to be settled within 12 months of the reporting date, are
recognised in provisions and other payables in respect of employees’
services up to the reporting date. They are measured at the amounts
expected to be paid when the liabilities are settled.
Annual leave and long service leave
The liability for annual leave and long service leave is recognised in
the provision for employee benefits. The obligation is measured using
the projected unit credit method. Expected future payments are
discounted using market yields at the reporting date on HQCB with
terms to maturity and currencies that match, as closely as possible,
the estimated future cash outflows.
Key estimate: self-insured risks
The self-insured risk liability is based on a number of
management estimates including, but not limited to:
•
•
future inflation;
investment return;
• average claim size;
• claim development; and
• claim administration expenses.
These assumptions are reviewed periodically and any
reassessment of these assumptions will affect workers’
compensation or claims expense (either increasing or
decreasing the expense). Any reasonable change in these
assumptions will not have a significant impact on the Group.
Key estimate: long service leave
Make good
Restoration and restructuring
Management judgement is required in determining the
following key assumptions used in the calculation of long
service leave at the balance sheet date:
•
•
•
future increases in salaries and wages;
future on-cost rates; and
future probability of employee departures and period
of service.
The total long service leave liability is $426 million
(2022: $422 million). Given the magnitude of the liability and
the nature of the key assumptions, any reasonably possible
change in one or a combination of the assumptions is unlikely
to have a material impact.
The Group recognises the present value of the estimated costs that
may be incurred in restoring leased premises to their original condition
at the end of the respective lease terms as a provision for make
good. The costs are recognised as the obligation is incurred either at
commencement of the lease or as a consequence of using the asset
and are included in the cost of the right-of-use assets. This estimate is
reviewed at each reporting date and adjusted for any known changes
in the initial cost estimate.
Mine and plant rehabilitation
The Group's mining activities create obligations for site closure or
rehabilitation when the environmental disturbance occurs. Provisions
for closure and rehabilitation have been measured by calculating the
present value of future rehabilitation costs using a risk-free discount
rate over a period of up to 50 years.
Self-insured risks
Restructuring
The Group is self-insured for workers’ compensation and general
liability claims. Provisions are recognised based on claims reported,
and an estimate of claims incurred but not reported. These provisions
are determined on a discounted basis, using an actuary valuation
performed at each reporting date.
Provisions for restructuring are recognised where steps have been
taken to implement a detailed plan, including discussions with those
impacted by it and relate principally to:
•
•
the closure of retail outlets or distribution centres;
restructuring; and
• associated redundancies.
Consolidated
Carrying amount at 1 July 2022
Net provisions arising during the year
Utilised
Acquisition/(disposal) of controlled entities
Carrying amount at 30 June 2023
Carrying amount at 1 July 2021
Net provisions arising during the year
Utilised
Acquisition of controlled entities
Carrying amount at 30 June 2022
Self-insured
risks
$m
Restoration and
restructuring
$m
Other
$m
235
61
(62)
-
234
269
19
(53)
-
235
202
16
(8)
(1)
209
204
13
(23)
8
202
90
20
(32)
-
78
59
30
(38)
39
90
Total
$m
527
97
(102)
(1)
521
532
62
(114)
47
527
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Financial statements
Notes to the financial statements: Capital
For the year ended 30 June 2023
12. Capital management
The primary objective of Wesfarmers is to provide a satisfactory return
to its shareholders. The Group aims to achieve this objective by:
•
improving returns on invested capital relative to the cost
of capital;
• ensuring a satisfactory return is made on any new capital
invested; and
•
returning capital to shareholders when appropriate.
Capital is defined as the combination of shareholders’ equity, reserves
and net debt (exclusive of lease liabilities). The Board is responsible
for monitoring and approving the capital management framework
within which management operates. The purpose of the framework
is to safeguard the Group’s ability to continue as a going concern
while optimising its debt and equity structure to improve returns.
Wesfarmers aims to maintain a capital structure that is consistent with
a stable investment grade credit rating.
Consolidated
2023
2022
$m
$m
Note
Equity and reserves
Issued capital
Reserved shares
Retained earnings
Reserves
Net debt (exclusive of lease
liabilities)
Total interest-bearing loans and
borrowings
Less:
Cash and cash equivalents
Total capital
14
14
14
16
4
13,574
(102)
818
(6,009)
8,281
13,574
(102)
485
(5,976)
7,981
4,430
4,958
Consolidated
2023
$m
2022
$m
4,179
2,301
(1,288)
631
(1,144)
(307)
105
3,627
260
1,110
4,430
6,739
4,958
7,123
Free cash flow
Net cash flows from operating
activities
Less:
Capital expenditure
Net disposals/(acquisitions)
Add:
Proceeds from sale of property,
plant and equipment and
intangibles
Free cash flow
Debt to EBITDA1
Total interest-bearing loans and
borrowings
Total lease liabilities
Less:
Cash and cash equivalents
(673)
(705)
Net debt (inclusive of lease
liabilities) (A)
Profit before income tax
Interest on lease liabilities
Other finance costs
Depreciation and amortisation
EBITDA (B)
Debt to EBITDA (times) (A/B)
10,496
11,376
3,509
219
135
1,701
5,564
1.9
3,320
217
96
1,575
5,208
2.2
(673)
3,757
12,038
(705)
4,253
12,234
Group credit ratings
S&P Global Ratings
Moody's Investors Service
A-(stable)
A3(stable)
A-(stable)
A3(stable)
The Group manages its capital through various means, including:
• adjusting the amount of dividends paid to shareholders;
1 The calculation of debt to EBITDA may differ from the metrics calculated
by the credit rating agencies, which each have their own methodologies
for adjustments.
• maintaining a dividend investment plan;
•
•
raising or returning capital; and
raising or repaying debt for working capital requirements, capital
expenditure and acquisitions.
Wesfarmers regularly monitors its capital requirements using various
benchmarks, with the main internal measures being free cash flow
and debt to EBITDA. The principal external measures are the Group’s
credit ratings from S&P Global Ratings and Moody’s Investors Service.
154
Wesfarmers 2023 Annual Report
Notes to the financial statements: Capital
For the year ended 30 June 2023
14. Equity and reserves
The nature of the Group’s contributed equity
Ordinary shares are fully paid and have no par value. They carry
one vote per share and the right to dividends. They bear no special
terms or conditions affecting income or capital entitlements of the
shareholders and are classified as equity.
Reserved shares are ordinary shares that have been repurchased by
the company and are being held for future use. They include employee
reserved shares, which are shares issued to employees under the
share loan plan. Once the share loan has been paid in full, they are
converted to ordinary shares and issued to the employee.
Incremental costs directly attributable to the issue of new shares are
shown in equity as a deduction, net of tax, from the proceeds. There
are no shares authorised for issue that have not been issued at the
reporting date.
Movement in shares
on issue
Ordinary Shares
$m
'000
Reserved Shares
$m
'000
At 1 July 2022
Exercise of
in-substance options
KEEPP1 vested during
the year
Issue of unquoted
fully-paid ordinary
shares for the
purposes of KEEPP
At 30 June 2023
At 1 July 2021
Exercise of
in-substance options
KEEPP vested during
the year
Issue of unquoted
fully-paid ordinary
shares for the
purposes of KEEPP
Transfer from other
reserves
Capital return
At 30 June 2022
1,134,145 13,574
(2,349)
(102)
-
-
-
-
939
339
-
-
369
-
1,134,514 13,574
(369)
(1,440)
-
(102)
1,133,840 15,826
(2,483)
(102)
-
-
-
-
94
345
-
-
305
-
(305)
-
16
-
(2,268)
-
1,134,145 13,574
-
-
(2,349)
-
-
(102)
1 Key Executive Equity Performance Plan.
13. Dividends and distributions
Determined during the year (dividends
fully-franked at 30 per cent)
Interim dividend for 2023: $0.88
(2022: $0.80) per share
Final dividend for 2022: $1.00
(2021: $0.90) per share
Capital return for 2021: $2.001 per share
Proposed and unrecognised as a liability
(dividends fully-franked at 30 per cent)
Final dividend for 2023: $1.03
(2022: $1.00) per share
Franking credit balance
Franking credits available for future years at
30 per cent adjusted for debits and credits
arising from the payment of income tax
payable/(receivable) and from recognised
dividends receivable or payable
Impact on the franking account of dividends
proposed before the financial report was
issued but not recognised as a distribution to
equity holders during the year
Consolidated
2023
$m
2022
$m
998
907
1,134
-
2,132
1,020
2,268
4,195
1,169
1,169
1,134
1,134
884
768
(501)
(486)
1 A capital return to shareholders of 200 cents per share was paid on
2 December 2021.
Wesfarmers’ dividend policy considers availability of franking credits,
current earnings and future cash flow requirements and targeted
credit metrics.
The Group operates a dividend investment plan which allows eligible
shareholders to elect to invest their dividends in ordinary shares. All
holders of Wesfarmers ordinary shares with addresses in Australia
or New Zealand are eligible to participate in this plan. The allocation
price for shares is based on the average of the daily volume-weighted
average price of Wesfarmers ordinary shares sold on the ASX,
calculated with reference to a pricing period as determined by
the directors.
An issue of shares under the dividend investment plan results in an
increase in issued capital unless the Group elects to purchase the
required number of shares on-market.
Shareholder distributions
Interim dividend
Final dividend (FY23: proposed)
Special dividend
Capital return
$/share
4.0
3.0
2.0
1.0
0.0
2019
2020
2021
2022
2023
Wesfarmers 2023 Annual Report
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Financial statements
Notes to the financial statements: Capital
For the year ended 30 June 2023
14. Equity and reserves (continued)
Consolidated
2023
$m
2022
$m
Nature and purpose
Cash flow hedge reserve
38
106 The hedging reserve is used to record the portion of the unrealised gain or loss on
a hedging instrument in a cash flow hedge that is determined to be in an effective
hedge relationship. The change in cash flow hedge reserve for the year ended
30 June 2023 includes the after-tax net movement in the market value of cash
flow hedges from 30 June 2022, and comprised a $(55) million (2022: $72 million)
movement in foreign exchange rate contracts, a $(22) million (2022: $8 million)
movement in cross-currency interest rate swaps, an $8 million movement in interest
rate swaps (2022: nil), a $1 million (2022: $5 million) movement in associates and
joint ventures reserves and a nil movement (2022: $(3) million) in commodity swaps.
Demerger reserve
(5,860)
(5,860) The demerger reserve is used to recognise the gain on demerger of Coles and the
demerger dividend.
Financial assets reserve
Foreign currency
translation reserve
71
39
48 The financial assets reserve is used to record fair value changes on financial assets
measured at fair value through other comprehensive income.
34 The foreign currency translation reserve is used to record exchange differences arising
from the translation of the financial statements of foreign subsidiaries.
Leasing reserve
(518)
(518) The leasing reserve is used to recognise the cumulative effect of applying
AASB 16 Leases at the date of initial application.
Share-based
payments reserve
54
40 The share-based payments reserve is used to recognise the value of equity-settled
share-based payments provided to employees, including key management personnel,
as part of their remuneration.
Other reserves
167
174 The other reserves consists of the restructure tax reserve, capital reserve and general
Total reserves
(6,009)
(5,976)
reserve.
15. Earnings per share
Profit attributable to ordinary equity holders
of the parent ($m)
WANOS1 used in the calculation of
basic EPS (shares, million)2
WANOS1 used in the calculation of
diluted EPS (shares, million)2
- Basic EPS (cents per share)
- Diluted EPS (cents per share)
Consolidated
2023
2022
2,465
2,352
1,132
1,132
1,133
217.8
217.6
1,133
207.8
207.6
1 Weighted average number of ordinary shares.
2 The variance in the WANOS used in the calculation of the basic EPS and the
diluted EPS is attributable to the dilutive effect of in-substance options and
restricted shares.
There have been no transactions involving ordinary shares between
the reporting date and the date of completion of these financial
statements, apart from the normal conversion of employee reserved
shares (treated as in-substance options) to unrestricted
ordinary shares.
Basic EPS
Basic EPS is calculated as net profit attributable to equity holders of
the parent, adjusted to exclude any costs of servicing equity (other
than dividends), divided by the weighted average number of ordinary
shares, adjusted for any bonus element.
Diluted EPS
Diluted EPS is calculated as basic earnings per share with an
adjustment for the weighted average number of ordinary shares
that would be issued on conversion of all dilutive potential ordinary
shares. Dilution arises as a result of the employee reserved shares
issued under the employee share plan being accounted for as
in-substance options and unvested restricted shares.
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Basic earnings per share
217.8 cents
cents/share
500
400
300
200
100
0
Reported
basic EPS
Adjusted
basic EPS
217.8
207.8
210.4
150.0
487.2
217.8
207.8
214.1
183.4
206.8
FY23
FY22
FY211
FY202
FY193
FY19 FY20 FY21 FY22 FY23
Reported basic EPS
Basic EPS adjusted for significant items
1 FY2021 EPS of 210.4 cents per share includes significant items relating to the
restructure of the Kmart Group. Excluding these items, adjusted basic EPS is
214.1 cents per share.
2 FY2020 EPS of 150.0 cents per share includes significant items relating to
non-cash impairments, write-offs and provisions for the Kmart Group, the
non-cash impairment of Industrial and Safety, the finalisation of tax positions on
prior year disposals and the gain on sale of 10.1 per cent interest in Coles and
subsequent revaluation of the retained interest. Excluding these items, adjusted
basic EPS is 183.4 cents per share.
3 FY2019 EPS of 487.2 cents per share includes significant items relating
to the gains on disposal of Bengalla, Kmart Tyre and Auto Service and
Quadrant Energy, the gain on demerger of Coles and the provision for Coles'
supply chain automation. Excluding these items, adjusted basic EPS is
206.8 cents per share.
Notes to the financial statements: Capital
For the year ended 30 June 2023
16. Interest-bearing loans and borrowings
Consolidated
2023
$m
2022
$m
Funding strategies (continued)
In August 2022, EUR650 million (A$764 million, net of cross-currency
interest rate swaps) of bonds matured and were repaid from available
cash balances and bank debt facilities. Additionally, throughout the
period, a number of bilateral bank agreements have been extended
or entered into to maintain the Group’s debt capacity and average
maturity profile.
-
-
988
988
The Group had unused bank financing facilities available at
30 June 2023 of $2,625 million (30 June 2022: $2,099 million).
Current
Unsecured
Capital markets debt
Non-current
Unsecured
Bank debt
Capital markets debt
Total interest-bearing loans and borrowings
2,452
1,978
4,430
4,430
2,067
1,903
3,970
4,958
Recognition and measurement
Capital markets debt includes foreign and domestic corporate
bonds. All loans and borrowings are initially recognised at fair value,
less directly attributable transaction costs. After initial recognition,
interest-bearing loans and borrowings are subsequently measured
at amortised cost using the effective interest method. Gains and
losses are recognised in the income statement when the liabilities
are derecognised.
The carrying values of liabilities that are the hedged items in fair
value hedge relationships, which are otherwise carried at amortised
cost, are adjusted to record changes in the fair values attributable
to the risks that are being hedged. Fair value gains and losses are
recognised in the income statement.
Funding strategies
The Group’s funding strategy is to maintain diversity of funding
sources and a presence in key financing markets, maintain an
appropriate average maturity, and balance exposures to fixed and
floating rates.
Sustainability and climate targets in
sustainability-linked bonds and loans
As at 30 June 2023, the Group has outstanding AUD and
Euro denominated sustainability-linked bonds (SLBs) totalling
A$1,978 million (2022: A$1,903 million). The SLBs highlight
the significance of the Group’s sustainability priorities in
supporting long-term funding and value creation.
The interest rates payable on the SLBs are linked to two
sustainability performance targets (SPT). The SPTs relate to
achieving 100 per cent renewable electricity in Bunnings,
Kmart, Target and Officeworks by 31 December 2025 and
limiting the CO2e emissions intensity in ammonium nitrate
production in the WesCEF division for the 24 months to
31 December 2025. If the SPTs are not met, there will be
a maximum coupon step-up of 25 basis points (12.5 basis
points per SPT).
The Group has sustainability-linked loans (SLLs) totalling
$400 million (2022: $400 million). As at 30 June 2023, the
Group had drawn $50 million (2022: $400 million). The
interest rates payable on the SLLs are linked to the Group’s
progress on Indigenous employment and emissions intensity
in ammonium nitrate production in the WesCEF division
consistent with the SLBs.
Consolidated
Balance as at 1 July 2022
Cash inflows
Cash outflows
Acquisition of controlled entities
Foreign exchange adjustments
Other non-cash movements
Balance as at 30 June 2023
Balance as at 1 July 2021
Cash inflows
Cash outflows
Transfers
Acquisition of controlled entities
Foreign exchange adjustments
Other non-cash movements
Balance as at 30 June 2022
Liabilities from financing activities
Borrowings due
within one year
$m
988
-
(765)
1
(224)
-
-
Borrowings due
after one year
$m
3,970
380
-
-
78
2
4,430
Derivatives
held to hedge
borrowings
$m
(195)
-
-
-
149
32
(14)
950
-
(1,166)
1,028
300
(126)
2
988
2,072
2,961
-
(1,035)
-
(25)
(3)
3,970
(335)
-
-
-
-
152
(12)
(195)
Total
$m
4,763
380
(765)
1
3
34
4,416
2,687
2,961
(1,166)
(7)
300
1
(13)
4,763
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Financial statements
Notes to the financial statements: Risk
For the year ended 30 June 2023
17. Financial risk management
The Group holds financial instruments for the following purposes:
• Financing: to raise finance for the Group’s operations or, in the case of short-term deposits, to invest surplus funds. The types of
instruments used include bank debt, capital markets debt, cash and short-term deposits.
• Operational: the Group’s activities generate financial instruments, including cash, trade receivables, trade payables and finance
advances.
• Risk management: to reduce risks arising from the financial instruments described above, including foreign exchange contracts, interest
rate swaps and cross-currency interest rate swaps.
It is, and has been throughout the year, the Group’s policy that no speculative trading in financial instruments shall be undertaken.
The Group’s holding of these financial instruments exposes it to risk. The Board reviews and agrees the Group’s policies for managing each of
these risks, which are summarised in the table below:
Risk
Exposure
Liquidity risk (note 17(B))
Management
The Group's exposure to liquidity risk arises
through volatility of cash flows due to trading
patterns or conditions, interruptions to cash
flows due to technological incidents or
banking system incidents, or interruptions to
funding sources and markets.
The Group's exposure also includes a risk
that the Group may not be able to repay
or refinance its interest-bearing loans and
borrowings when due.
Liquidity risk is managed centrally by Group Treasury through detailed
forecasting of the operating cash flows of the underlying businesses and
maintenance of appropriate cash and bank facility arrangements to cover
reasonably foreseeable events.
The Group maintains diversity of funding sources and an appropriate average
maturity. The Group aims to spread maturities to avoid excessive refinancing
in any period. The Group also maintains investment grade credit ratings from
S&P Global Ratings and Moody's Investors Service, which support its ability
to raise additional debt in capital markets when necessary.
Market risk (note 17(C))
Foreign
currency
risk
The Group’s primary currency exposure
is to the US dollar and arises from sales or
purchases by a division in currencies other
than the division’s functional currency. The
Group is also exposed to the Euro through
its capital markets debt.
As a result of operations in New Zealand,
the Group’s balance sheet can also be
affected by movements in the AUD/NZD
exchange rate.
Interest
rate risk
The Group’s exposure to the risk of changes
in market interest rates relates primarily
to the Group's debt obligations that have
floating interest rates.
Commodity
price risk
The Group’s exposure to commodity price risk
is operational and arises from changes in the
prices of inputs and inventory used by divisions,
including where the division must reimburse
a third party for costs incurred by that party
(for example, fuel costs as part of transport
services), which may negatively impact the
Group's cash flow or profitability.
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The objective of the Group's policy on foreign exchange hedging is to protect
the Group from adverse currency fluctuations. Hedging is implemented for the
following reasons:
• protection of competitive position; and
• greater certainty of earnings due to protection from sudden currency
movements.
The Group manages foreign exchange risk centrally by hedging material
foreign exchange exposures for firm sales or purchases or when highly
probable forecast transactions have been identified (including funding
transactions).
The level of hedging is higher for near-term forecast transactions than for
longer term forecast transactions. The Group also aims to hedge 100 per cent
of capital expenditure-related foreign currency purchases to match expected
payment dates and these may extend beyond 12 months.
The Group mitigates the effect of its translational currency exposure to its
New Zealand operations by borrowing in New Zealand dollars.
The Group maintains a balance of exposure to floating and fixed rate debt,
and aims to spread debt renewals to avoid all renewals occurring in the
same period.
The Group may hedge borrowings to fixed or floating rates as appropriate to
manage exposure levels. These swaps are designated to hedge interest costs
associated with underlying debt obligations.
When appropriate and effective, the Group manages commodity price risk
centrally by hedging material commodity exposures.
The Group does not currently enter into any financial instruments that
vary with movements in commodity prices. The foreign exchange risk
component may be managed as part of the Group's foreign exchange risk
management policies.
The Group's other commodity 'own use contracts' are outside the scope of
AASB 9 Financial Instruments.
Notes to the financial statements: Risk
For the year ended 30 June 2023
17. Financial risk management (continued)
Risk
Exposure
Credit risk (note 17(D))
Management
The Group is exposed to credit risk from its
operating activities (primarily from customer
receivables) and from its financing activities,
including deposits with financial institutions,
foreign exchange transactions and other
financial instruments.
Customer credit risk is managed by each division subject to established
policies, procedures and controls relating to customer credit risk
management. The Group trades primarily with recognised, creditworthy third
parties. Customers who wish to trade on credit terms are subject to credit
verification procedures, including an assessment of their independent credit
rating, financial position, past experience and industry reputation.
Credit risk is the risk that a contracting
entity will not complete its obligation under a
financial instrument or customer contract
that will result in a financial loss to the Group.
Receivables
Credit risk management practices include reviews of trade receivables aging
by days past due, the timely follow-up of past due amounts and the use of
credit securities such as credit insurance, retention of title and letters of credit.
Financial instruments and cash deposits
Credit risk from deposits with banks and financial institutions is managed
by Group Treasury in accordance with Board-approved policy. Deposits are
made within credit limits assigned to each counterparty according to their
credit rating which must be an investment-grade credit rating.
The carrying amount of financial assets represents the maximum credit
exposure. There are no significant concentrations of credit risk within
the Group.
17(A) Offsetting financial instruments
The Group presents its derivative assets and liabilities on a gross basis. Derivative financial instruments entered into by the Group are subject
to enforceable master netting arrangements, such as an International Swaps and Derivatives Association (ISDA) master netting agreement. In
certain circumstances, for example, when a credit event such as a default occurs, all outstanding transactions under an ISDA agreement are
terminated, the termination value is assessed and only a single net amount is payable in settlement of all transactions.
The amounts set out in note 18 represent the derivative financial assets and liabilities of the Group, that are subject to the above arrangements,
and are presented on a gross basis.
17(B) Liquidity risk
As at 30 June 2023, the Group had unused bank financing facilities available of $2,625 million (2022: $2,099 million).
The table on the following page classifies the Group’s financial liabilities, including net and gross settled financial instruments and lease liabilities,
into relevant maturity periods based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the
tables are the contractual undiscounted cash flows and will not necessarily reconcile with the amounts disclosed in the balance sheet.
Trade and other payables and lease liabilities are recognised at the gross contractual cash flows to be paid using the spot currency exchange
rates applicable at the reporting date. Expected future interest payments on loans and borrowings exclude accruals recognised in trade and
other payables at the reporting date and have been estimated using forward currency exchange rates and forward interest rates applicable at
the reporting date. For loans and borrowings before swaps, cross-currency interest rate swaps, hedge interest rate swaps and hedge forward
exchange contracts, the amounts disclosed are the gross contractual cash flows to be paid estimated using forward currency exchange rates
and forward interest rates applicable at the reporting date.
Early payment facility for suppliers
The Group has a facility in place to assist its suppliers to manage their cash flows. Suppliers can elect to receive early payment of some or all
of their invoices by electing to sell their invoices to third party financiers. They typically receive payment the same business day, or within one
business day, of election. Supplier participation in the program is optional and the Group does not use this as an opportunity to extend payment
terms or obtain any commission or financial benefit. The relevant invoices continue to be payable on their original due dates and continue to
be classified as trade and other payables in the balance sheet, as the prepayment arrangement is between the supplier, the financiers and the
third-party platform provider. The value of invoices sold by suppliers under the facility as at 30 June 2023 is $727 million (2022: $737 million).
Wesfarmers 2023 Annual Report
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Financial statements
Notes to the financial statements: Risk
For the year ended 30 June 2023
17(B) Liquidity risk (continued)
on demand or
< 3 months 3-12 months
$m
$m
1-5 years
$m
>5 years
$m
Total
contractual
cash flows
$m
Carrying
amount
(assets)/
liabilities
$m
4,906
-
35
292
-
-
(37)
5,196
5,017
989
22
285
(223)
(91)
5,999
362
-
129
1,034
(5)
-
3,105
193
4,311
(10)
-
1,552
92
1,946
-
5,268
4,657
449
7,583
(15)
5,268
4,430
-
6,739
(11)
20
75
(172)
(77)
(14)
(69)
1,471
(2)
7,672
-
3,418
(108)
17,757
(108)
16,304
345
-
97
1,000
-
2,073
323
4,393
-
2,151
121
2,312
5,362
5,213
563
7,990
5,362
4,958
-
7,123
20
77
(100)
(226)
(195)
(142)
1,320
(9)
6,857
-
4,484
(242)
18,660
(233)
17,015
Consolidated
As at 30 June 2023
Trade and other payables
Loans and borrowings before swaps
Expected future interest payments on loans and
borrowings
Lease liabilities
Hedge interest rate swaps (net settled)
Cross-currency interest rate swaps
(gross settled)
Hedge forward exchange contracts
(gross settled)
Total
As at 30 June 2022
Trade and other payables
Loans and borrowings before swaps
Expected future interest payments on loans and
borrowings
Lease liabilities
Cross-currency interest rate swaps
(gross settled)
Hedge forward exchange contracts
(gross settled)
Total
17(C) Market risk
Foreign exchange risk
The Group's exposures to the US dollar and Euro (prior to hedging contracts) at the reporting date were as follows:
2023
2022
USD
A$m
EUR
A$m
USD
A$m
EUR
A$m
21
40
-
118
(1,305)
-
-
(10)
(1,136)
-
-
14
-
35
40
-
235
-
-
225
-
(10)
(987)
-
-
(983)
(1,449)
-
-
(2)
(1,141)
(32)
(1,900)
(30)
-
(1,737)
Consolidated
Financial assets
Cash and cash equivalents
Trade and other receivables
Cross-currency interest rate swaps
Hedge foreign exchange derivative assets
Financial liabilities
Trade and other payables
Interest-bearing loans and borrowings
Cross-currency interest rate swaps
Hedge foreign exchange derivative liabilities
Net exposure
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Notes to the financial statements: Risk
For the year ended 30 June 2023
Actual
+10% (2022: +10%)
-10% (2022: -10%)
0.66
0.73
0.60
0.61
0.67
0.55
0.69
0.76
0.62
0.66
0.73
0.59
Floating rate
Cash at bank, on deposit and held in joint
operation
17(C) Market risk (continued)
Group's sensitivity to foreign exchange movements
The sensitivity analysis below shows the impact that a reasonably
possible change in foreign exchange rates over a financial year would
have on profit after tax and equity, based solely on the Group’s foreign
exchange risk exposures existing at the balance sheet date. The
Group has used the observed range of actual historical rates for the
preceding five-year period, with a heavier weighting placed on recently
observed market data, in determining reasonably possible exchange
movements to be used for the current year’s sensitivity analysis.
Past movements are not necessarily indicative of future movements.
The following exchange rates have been used in performing the
sensitivity analysis.
Consolidated
USD
EUR
USD
EUR
2023
2022
The impact on profit and equity is estimated by applying the
hypothetical changes in the US dollar and Euro exchange rate to the
balance of financial instruments at the reporting date.
The below sensitivity analysis does not include the impact on the
Group's equity from the translation of subsidiaries with differing
functional currencies (primarily the New Zealand dollar) to the Group's
presentation currency.
The results of the foreign exchange rate sensitivity analysis are driven
by three main factors, as outlined below:
•
•
the impact of applying the above foreign exchange movements
to financial instruments that are not in hedge relationships will be
recognised directly in profit;
to the extent that the foreign currency-denominated derivatives
on the balance sheet form part of an effective cash flow hedge
relationship, any fair value movements caused by applying the
above sensitivity movements will be deferred in equity and will
not affect profit; and
• movements in financial instruments forming part of an effective
fair value hedge relationship will be recognised in profit. However,
as a corresponding entry will be recognised for the hedged item,
there will be no net impact on profit.
At 30 June 2023, had the Australian dollar moved against the
US dollar and Euro, as illustrated in the table above, with all other
variables held constant, the Group’s profit after tax and other equity
would have been affected by the change in value of its financial assets
and financial liabilities as shown in the table below.
Consolidated
AUD/USD +10% (2022: +10%)
- impact on profit
- impact on equity
AUD/USD -10% (2022: -10%)
- impact on profit
- impact on equity
AUD/EUR +10% (2022: +10%)
- impact on profit
- impact on equity
AUD/EUR -10% (2022: -10%)
- impact on profit
- impact on equity
2023
A$m
2022
A$m
7
(151)
(8)
182
-
7
-
(9)
4
(144)
(5)
150
-
7
-
(12)
Interest rate risk
As at the reporting date, the Group had financial assets and liabilities
with exposure to interest rate risk as shown in the table below.
Interest on financial instruments classified as floating rate is repriced
at intervals of less than one year. Interest on financial instruments
classified as fixed rate is fixed until maturity of the instrument. The
classification between fixed and floating interest takes into account
applicable hedge instruments.
Consolidated
Financial assets
Fixed rate
Finance advances and loans
Financial liabilities
Fixed rate
Capital markets debt
Unsecured bank debt
Floating rate
Unsecured bank debt
2023
$m
2022
$m
3
3
421
467
1,978
500
2,891
-
1,952
2,067
At 30 June 2023, after taking into account the effect of interest
rate swaps and economic hedging relationships, approximately
45 per cent of the Group’s borrowings are exposed to movements in
variable rates (2022: approximately 43 per cent).
Group's sensitivity to interest rate movements
The following sensitivity analysis shows the impact that a reasonably
possible change in interest rates over a financial year would have on
profit after tax and equity. The impact is determined by assessing
the effect that such a reasonably possible change in interest rates
would have had on interest income and expense and the impact on
financial instrument fair values existing at the balance sheet date. This
sensitivity is based on reasonably possible changes over a financial
year, determined using observed historical interest rate movements for
the preceding five-year period, with a heavier weighting given to more
recent market data.
The results of the sensitivity analysis are driven by three main factors,
as outlined below:
•
•
for unhedged floating rate financial instruments, any increase or
decrease in interest rates will impact profit;
to the extent that derivatives form part of an effective cash flow
hedge relationship, there will be no impact on profit and any
increase/(decrease) in the fair value of the underlying derivative
instruments will be deferred in equity; and
• movements in the fair value of derivatives in an effective fair value
hedge relationship will be recognised directly in profit. However,
as a corresponding entry will be recognised for the hedged item,
there will be no net impact on profit.
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Financial statements
Notes to the financial statements: Risk
For the year ended 30 June 2023
17(C) Market risk (continued)
The following sensitivity analysis is based on the Australian variable
interest rate risk exposures in existence at the balance sheet
date. If interest rates had moved by +/- 100bps (basis points)
(2022: +/- 100bps) and with all other variables held constant, the
Group's profit after tax and equity would have been affected as shown
in the table below.
17(E) Fair values
The carrying amounts and estimated fair values of all the Group's
financial instruments carried at amortised cost in the financial
statements are materially the same with the exception of the following:
Consolidated
2023
$m
2022
$m
Capital markets debt: carrying amount
Capital markets debt: fair value
2023
$m
2022
$m
1,978
1,563
2,891
2,443
Consolidated
+100bps (2022: +100bps)
- impact on profit
- impact on equity
-100bps (2022: -100bps)
- impact on profit
- impact on equity
17(D) Credit risk
(12)
57
12
(63)
(13)
52
13
(58)
The carrying amount of current receivables represents the Group's
maximum credit exposure.
The Group applies the simplified approach in measuring ECLs for
trade receivables and other short-term debtors, whereby an allowance
for impairment is considered across all trade receivables and other
short-term debtors, regardless of whether a credit event has occurred,
based on the expected losses over the lifetime of the receivable.
Therefore, the Group does not track changes in credit risk but instead
recognises a loss allowance based on lifetime ECLs at each reporting
date. The Group has established the following provision matrix
that is based on its historical credit loss experience, adjusted for
forward-looking factors specific to debtors and the economic climate.
Consolidated
Trade and other
receivables days
past due
Estimated total
gross carrying
amount at default
Expected
credit
loss rate
Lifetime
expected
credit
loss
$m
%
$m
2023
Current
Under one month
One to two months
Two to three months
Over three months
Total
2022
Current
Under one month
One to two months
Two to three months
Over three months
Total
1,762
200
56
34
57
2,109
1,592
313
110
20
114
2,149
0.5
2.0
1.8
29.4
70.2
0.6
1.3
3.6
30.0
28.1
8
4
1
10
40
63
9
4
4
6
32
55
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Wesfarmers 2023 Annual Report
The methods and assumptions used to estimate the fair value of
financial instruments are as follows.
Cash
The carrying amount is fair value due to the asset's liquid nature.
Receivables/payables
Due to the short-term nature of these financial rights and obligations,
carrying amounts are estimated to represent fair values.
Derivatives
The Group enters into derivative financial instruments with various
counterparties, principally banks and financial institutions with
investment grade credit ratings. Foreign exchange forward contracts,
interest rate swap contracts, cross-currency interest rate swaps and
commodity futures contracts are all valued using forward pricing
techniques. These include the use of market observable inputs,
such as foreign exchange spot and forward rates, yield curves of the
respective currencies, interest rate curves and forward rate curves of
the underlying commodity. Accordingly, these derivatives are classified
as Level 2 in the fair value measurement hierarchy.
Interest-bearing loans and borrowings
The fair value of capital markets debt as outlined above have been
calculated using quoted market prices or dealer quotes for similar
instruments. The fair value of bank debt is calculated by discounting
the expected future cash flows at prevailing interest rates using
market observable inputs and is not materially different to the
carrying amount.
Valuation of financial instruments
For all fair value measurements and disclosures, the Group uses the
following to categorise the method used:
• Level 1: the fair value is calculated using quoted prices in
active markets.
• Level 2: the fair value is estimated using inputs other than quoted
prices included in Level 1 that are observable for the asset or
liability, either directly (as prices) or indirectly (derived from prices).
• Level 3: the fair value is estimated using inputs for the asset or
liability that are not based on observable market data.
The Group’s financial instruments were primarily valued using market
observable inputs (Level 2), with the exception of financial assets
measured at FVOCI (Level 1) and shares in unlisted companies
at fair value (Level 3) which were $14 million at 30 June 2023
(2022: $13 million).
For financial instruments that are carried at fair value on a recurring
basis, the Group determines whether transfers have occurred
between levels in the hierarchy by reassessing categorisation
(based on the lowest level input that is significant to the fair value
measurement as a whole) at the end of each reporting period. There
were no transfers between Level 1 and Level 2 during the year. There
were no Level 3 fair value movements during the year.
Notes to the financial statements: Risk
For the year ended 30 June 2023
18. Hedging
Types of hedging instruments
The Group is exposed to risk from movements in foreign exchange,
interest rates and commodity prices. As part of its risk management
strategy set out in note 17, the Group holds the following types of
derivative instruments:
Forward exchange contracts: contracts denominated in US dollars,
Euro and other foreign currencies to hedge highly probable sale and
purchase transactions (cash flow hedges).
Interest rate swaps: to manage the Group’s exposure to fixed
and floating interest rates arising from borrowings. These hedges
incorporate cash flow hedges, which fix future interest payments, and
fair value hedges, which reduce the Group’s exposure to changes
in the value of its assets and liabilities arising from interest rate
movements.
Cross-currency interest rate swaps: to manage the Group’s
exposure to foreign exchange rate variability in its interest repayments
on foreign currency-denominated borrowings (cash flow hedges) or
to hedge against movements in the fair value of those liabilities due
to foreign exchange and interest rate movements (fair value hedges).
The borrowing margin on cross-currency interest rate swaps has been
treated as a ‘cost of hedging’ and deferred into equity. These costs
are then amortised to the income statement as a finance cost over the
remaining life of the borrowing.
Brent oil futures contracts: to manage the Group’s exposure
to price variability in its forecast purchase of natural gas (cash flow
hedge). The Group's Brent oil contracts matured in 2022. As at
30 June 2023, the Group had no Brent oil futures contracts.
Consolidated
Foreign exchange contracts
Notional
m
2023
Weighted
average
hedged rate
Asset Liability
Notional
A$m
A$m
m
2022
Weighted
average
hedged rate
Asset
Liability
A$m
A$m
Cash flow hedge - sales (AUD)
US$34
Cash flow hedge - purchases (AUD)
US$2,204
Cash flow hedge - purchases (NZD)
US$188
Cash flow hedge - purchases (AUD)
€ 19
Asset: 0.66;
Liability: 0.68
Asset: 0.69;
Liability: 0.65
Asset: 0.63;
Liability: 0.59
Asset: 0.62;
Liability: 0.60
-
(1)
US$36
109
(8) US$2,256
9
-
(1)
US$149
-
€ 7
Asset: nil
Liability: 0.72
Asset: 0.74
Liability: 0.69
Asset: 0.69
Liability: 0.62
Asset: 0.66
Liability: 0.64
-
(2)
214
21
-
-
-
-
Cross-currency interest rate swaps
Cash flow hedge
Interest rate swaps
Cash flow hedge
Total derivative asset/(liability)
€ 600
3.04% fixed
14
-
€ 1,250
4.51% fixed
225
(30)
A$500
3.42% fixed
11
143
-
(10)
-
-
-
460
-
(32)
Recognition and measurement
Recognition
Derivative financial instruments are initially recognised at fair value
on the date on which a derivative contract is entered into and are
subsequently remeasured to fair value as set out in note 17(E). The
method of recognising any remeasurement gain or loss depends on
the nature of the item being hedged. For hedging instruments, any
hedge ineffectiveness is recognised directly in the income statement in
the period in which it is incurred.
Hedge accounting
At the start of a hedge relationship, the Group formally designates and
documents the hedge relationship, including the risk management
strategy for undertaking the hedge. This includes identification of
the hedging instrument, the hedged item or transaction, the nature
of the risk being hedged and how the entity will assess the hedging
instrument’s effectiveness (including the analysis of sources of hedge
ineffectiveness and how the hedge ratio is determined). Hedge
accounting is only applied where there is an economic relationship
between the hedged item and the hedging instrument and the hedge
ratio of the hedging relationship is the same as that resulting from
actual quantities of the hedged item and hedging instrument used.
For the purposes of hedge accounting, hedges are classified as:
• Fair value hedges when they hedge the exposure to changes in
the fair value of a recognised asset, liability or firm commitment
that could affect profit or loss; or
• Cash flow hedges when they hedge a particular risk associated
with the cash flows of recognised assets and liabilities and highly
probable forecast transactions. A hedge of the foreign exchange
risk of a firm commitment is accounted for as a cash flow hedge.
The Group will discontinue hedge accounting prospectively only when
the hedging relationship, or part of the hedging relationship no longer
qualifies for hedge accounting, which includes where there has been a
change to the risk management objective and strategy for undertaking
the hedge and instances when the hedging instrument expires or is
sold, terminated or exercised. For these purposes, the replacement
or rollover of a hedging instrument into another hedging instrument
is not an expiration or termination if such a replacement or rollover is
consistent with our documented risk management objective.
Wesfarmers 2023 Annual Report
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Financial statements
Notes to the financial statements: Risk
For the year ended 30 June 2023
18. Hedging (continued)
Hedges that meet the criteria for hedge accounting are classified and accounted for as follows:
Fair value hedges
The Group uses fair value hedges to mitigate the risk of changes in the fair value of foreign currency-denominated borrowings from foreign
currency and interest rate fluctuations over the hedging period. Where these fair value hedges qualify for hedge accounting, gains or losses from
remeasuring the fair value of the hedging instrument are recognised within finance costs in the income statement, together with gains or losses
in relation to the hedged item where those gains or losses relate to the risk intended to be hedged. The net amount recognised in the income
statement in FY2023 was less than $1 million (2022: less than $1 million).
If the hedged item is an unrecognised firm commitment, the subsequent cumulative change in the fair value of the hedged risk is recognised as
an asset or liability with a corresponding gain or loss recognised in profit or loss. The changes in the fair value of the hedging instrument are also
recognised in profit or loss.
The accumulated amount of fair value adjustments which are included in the carrying amount of interest-bearing loans and borrowings in the
balance sheet as at 30 June 2023 was less than $1 million (2022: less than $1 million):
Consolidated
Face value at inception
Change arising from revaluation to spot rates at 30 June
Balance of unamortised discount/premium
Carrying amount at amortised cost
2023
2022
Foreign
bonds
$m
938
48
986
(4)
982
Domestic
bonds
$m
1,000
-
1,000
(4)
996
Foreign
bonds
$m
1,702
198
1,900
(5)
1,895
Domestic
bonds
$m
1,000
-
1,000
(4)
996
There was no material ineffectiveness relating to financial instruments in designated fair value hedge relationships during the year (2022: nil).
Cash flow hedges
The Group uses cash flow hedges to mitigate the risk of variability of future cash flows attributable to foreign currency fluctuations over the
hedging period associated with our foreign currency-denominated borrowings and ongoing business activities, predominantly where we have
highly probable purchase or settlement commitments in foreign currencies. The Group also uses cash flow hedges to hedge variability in cash
flows due to interest rates on some of our borrowings.
For cash flow hedges, the portion of the gain or loss on the hedging instrument that is effective is recognised directly in equity, while the
ineffective portion is recognised in profit or loss. The maturity profile of these hedges is shown in note 17(B) with the recognition of the gain or
loss expected to be consistent with this profile.
Consolidated
Change in the fair value of the hedged item
2023
Foreign
bonds
$m
(181)
Trade
$m
(125)
Domestic
bonds
$m
Trade
$m
2022
Foreign
bonds
$m
Commodity
hedge1
$m
11
183
(140)
(4)
1 The 2022 commodity hedge movement relates to the change in fair value before the hedged item matured. The Group had no commodity hedges at 30 June 2023.
Amounts recognised in equity are transferred to the income statement when the hedged transaction affects profit or loss, such as when hedged
income or expenses are recognised or when a forecast sale occurs. When the hedged item is the cost of a non-financial asset or liability, the
amounts taken to equity are transferred to the initial carrying amount of the non-financial asset or liability.
If the forecast transaction is no longer expected to occur, amounts previously recognised in equity are transferred to the income statement. If
the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked,
amounts previously recognised in equity remain in equity until the forecast transaction occurs.
164
Wesfarmers 2023 Annual Report
Notes to the financial statements: Risk
For the year ended 30 June 2023
19. Impairment of non-financial assets
Testing for impairment
Reversal of impairment
The Group tests property, plant and equipment, goodwill and
intangibles, and right-of-use assets for impairment:
• at least annually for indefinite life intangibles and goodwill; and
• where there is an indication that the asset may be impaired
(which is assessed at least at each reporting date); or
• where there is an indication that conditions causing a previously
recognised impairment (on assets other than goodwill) may
have changed.
Where there is an indication that previously recognised impairment
losses may no longer exist or have decreased, the asset is tested for
impairment reversal. Impairments recognised against goodwill are
not reversed.
There were no material reversals of impairment during FY2023. In light
of the current economic conditions and associated uncertainty, there
was not sufficient evidence available to indicate that conditions giving
rise to previously recognised impairment have reversed.
Annual impairment testing of intangibles and goodwill is performed
at 31 March each year to coincide with the timing of the annual
corporate plan and business forecast process.
If the asset does not generate independent cash inflows and its value
in use cannot be estimated to be close to its fair value, the asset is
tested for impairment as part of the cash generating unit (CGU) to
which it belongs.
Assets are impaired if their carrying amount exceeds their recoverable
amount. The recoverable amount of an asset or CGU is determined as
the higher of its fair value less costs of disposal (FVLCOD) and value
in use (VIU).
Impairment calculations
In assessing VIU, the estimated future cash flows are discounted to
their present value using a discount rate that reflects current market
assessments of the time value of money and the risks specific to
the asset or CGU. In determining FVLCOD for CGUs, a discounted
cash flow model is used based on a methodology consistent with
that applied by the Group in determining the value of potential
acquisition targets, maximising the use of market observed inputs.
These calculations, classified as Level 3 on the fair value hierarchy, are
compared to valuation multiples, or other fair value indicators where
available, to ensure reasonableness.
Inputs to impairment calculations
For VIU calculations and FVLCOD discounted cash flow models,
cash flow projections are based on Wesfarmers’ corporate plans and
business forecasts prepared by management and approved by the
Board. The corporate plans are developed annually with a five-year
outlook and, for the VIU calculations, are adjusted to exclude the
costs and benefits of expansion capital and on the understanding that
actual outcomes may differ from the assumptions used.
In determining FVLCOD for CGUs, these projections are discounted
using a risk-adjusted discount rate commensurate with a typical
market participant’s assessment of the risk associated with the
projected cash flows. When calculating the FVLCOD of a CGU,
forecast cash flows also incorporate reasonably available market
participant assumptions.
Cash flows beyond the five-year corporate plan period are
extrapolated using estimated growth rates, which are based on Group
estimates, taking into consideration historical performance as well as
expected long-term operating conditions. Growth rates do not exceed
the consensus forecasts of the long-term average growth rate for the
industry in which the CGU operates.
Discount rates used in both calculations are based on the weighted
average cost of capital determined by prevailing or benchmarked
market inputs, risk adjusted where necessary. Other assumptions are
determined with reference to external sources of information and use
consistent estimates for variables such as terminal cash flow multiples.
Recognised impairment
During FY2023, impairment of $14 million, net of reversals, was
recognised in respect of non-financial assets (2022: $21 million).
Key estimates: impairment of non-financial
assets
The Group has assessed the recoverable amounts of CGUs
with material goodwill and other indefinite life intangible
assets using FVLCOD calculations. Post-tax discount rates
applied in the impairment testing for these CGUs ranged from
8.4 per cent to 11.3 per cent and terminal growth rates ranged
from 2.0 per cent to 3.0 per cent. Key assumptions in the
CGU's cash flow projections include growth rates and gross
margins which are based on corporate plans that take into
consideration historic performance, forecast macroeconomic
conditions and the estimated effect of strategies.
For all CGUs with material goodwill or indefinite life
intangible assets, other than Health, FVLCOD calculations
determined headroom in excess of 25 per cent of the CGU's
carrying amount. Based on current economic conditions
and CGU performance, no reasonably possible change in a
key assumption used in the determination of the recoverable
value of these CGUs would result in a material impairment to
the Group.
The Health CGU was formed following the acquisition of
API on 31 March 2022. The recoverable amount has been
assessed as part of the Group's annual impairment testing,
applying a post-tax discount rate of 9.6 per cent and a terminal
growth rate of 3.0 per cent. The carrying amount continues to
approximate its fair value. The recoverable amount is sensitive
to changes in the discount rate and the terminal growth rate.
A 50 basis point increase in discount rate or a seven per cent
reduction in its forecast terminal cash flow eliminates the
headroom in the recoverable amount.
Store CGUs are reviewed for indicators of impairment using
both external and internal sources of information. Detailed
impairment testing is completed when the existence of
an indication of impairment is identified. Where detailed
impairment testing is required, the recoverable amount of the
store CGU is determined using VIU calculations, based on
forecast cash flows for the store over its remaining life.
Climate-related risks
The Group's assessment of the potential financial impacts
of climate-related risks, including the associated costs of
achieving net zero Scope 1 and Scope 2 emissions targets for
Bunnings, Kmart Group and Officeworks by 2030, Industrial
and Safety (excluding Coregas) by 2035 and WesCEF and
Coregas by 2050, continues to mature. The potential financial
impacts of climate-related risks have been considered in the
CGU's impairment tests through the inclusion of the impact of
committed initiatives or through downside scenario analysis. As
at 30 June 2023, this analysis did not indicate a climate-related
risk of material impairment due to the current headroom in
each of the Group's affected CGUs. The financial impact of this
risk will continue to be assessed.
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Financial statements
Notes to the financial statements: Group information
For the year ended 30 June 2023
20. Associates and joint arrangements
Investment in associates
Investment in joint ventures
Movement in investment in associates
Net carrying amount at the beginning of the
year
Share of net profits of associates
Dividends
Associates acquired during the year
Additional investment
Movements in reserves
Net carrying amount at the end of the year
Total comprehensive income from associates
and joint ventures
Share of net profits from associates
Other comprehensive income/(loss) from
associates
Share of net (losses)/profits from joint
ventures
Other comprehensive income from joint
ventures
Total comprehensive income for the year
Consolidated
2023
$m
2022
$m
812
131
943
787
42
(48)
15
10
6
812
787
147
934
660
159
(48)
22
-
(6)
787
42
159
BWP Trust
The Group has a 24.8 per cent interest in BWP Trust. The Group's
interest in BWP Trust is accounted for using the equity method in
the consolidated financial statements. The fair value of the Group's
interest, by reference to the closing share price of BWP Trust on
30 June 2023, approximated its carrying value (Level 1 in the fair value
hierarchy). The following table summarises the financial information of
the Group's investment in BWP Trust.
Summarised balance sheet
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Group's share of BWP Trust's net assets
Fair value adjustment
Carrying amount at end of year
6
(33)
2
17
(6)
14
11
178
Summarised income statement
Revenue
Expenses
Unrealised (losses)/gains in fair value
Profit attributable to the unit holders of
BWP Trust
Group's share of profit for the year
2023
$m
2022
$m
23
2,937
(86)
(468)
2,406
595
(15)
580
158
(45)
(76)
37
9
21
3,001
(80)
(456)
2,486
615
(15)
600
153
(39)
372
486
121
Interests in joint arrangements
Joint operations
The Group recognises its share of the assets, liabilities, income and
expenses from the use and output of its joint operations.
Joint ventures
The Group’s investments in its joint ventures are accounted for using
the equity method.
Recognition and measurement
Investment in associates
The Group’s investments in its associates, being entities in which the
Group has significant influence and are neither subsidiaries or joint
arrangements, are accounted for using the equity method. Under this
method, the investment in the associates are carried in the balance
sheet at cost plus any post-acquisition changes in the Group’s share
of the net assets of the associate.
Goodwill relating to associates is included in the carrying amount of
the investment and is not amortised. After application of the equity
method, the Group determines whether it is necessary to recognise
any additional impairment loss with respect to the Group’s investment.
The income statement reflects the Group’s share of the results of the
operations of the associate.
Where there has been a change recognised directly in the equity of
the associate, the Group recognises its share of any changes and
discloses this in the statement of comprehensive income.
Where the reporting dates of the associates and the Group vary,
the associates' management accounts for the period to the Group’s
balance date are used for equity accounting. The accounting policies
of associates are consistent with those used by the Group for like
transactions and events in similar circumstances.
Investment properties owned by associates are initially measured at
cost, including transaction costs. Subsequent to initial recognition,
investment properties are stated at fair value, which reflects market
conditions at the balance sheet date. Gains or losses arising from
changes in the fair values of investment properties are recognised in
profit or loss of the associate, in the year in which they arise. This is
consistent with the Group’s policy.
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Notes to the financial statements: Group information
For the year ended 30 June 2023
20. Associates and joint arrangements (continued)
Key judgement: control and significant influence
The Group has a number of management agreements with associates and joint arrangements it considers when determining whether
it has control, joint control or significant influence. The Group assesses whether it has the power to direct the relevant activities of the
investee by considering the rights it holds to appoint or remove key management and the decision-making rights and scope of powers
specified in the contract.
Where the Group has the unilateral power to direct the relevant activities of an investee, the Group then assesses whether the power
it holds is for its own benefit (acting as principal) or for the benefit of others (acting as agent). This determination is based on a number
of factors including an assessment of the magnitude and variability of the Group’s exposure to variable returns associated with its
involvement with the investee. In an agency capacity, the Group is considered to be acting on behalf of other parties and therefore
does not control the investee when it exercises its decision-making powers.
Interests in associates and joint arrangements
Associates
Principal activity
Reporting date
Ownership
2023
2022
Country of incorporation/
place of business
%
%
Property investment
Industrial workwear supplier
Investment trust
Investment banking
BWP Trust
Geared Up Culcha Pty Ltd
Gresham AC Trust No. 2
Gresham Partners Group Limited
Queensland Nitrates Management Pty Ltd Chemical manufacture
Chemical manufacture
Queensland Nitrates Pty Ltd
Data consultants
Tecsa Limited
Pine sawmillers
Wespine Industries Pty Ltd
Restoration and resale
World's Biggest Garage Sale Pty Ltd
of used goods
30 June
30 June
30 June
30 September
30 June
30 June
30 September
30 June
30 June
Australia
Australia
Australia
Australia
Australia
Australia
United Kingdom
Australia
Australia
Joint operations
Sodium Cyanide
Mt Holland Lithium
Joint ventures
BPI No 1 Pty Ltd
Covalent Lithium Pty Ltd
Loyalty Pacific Pty Ltd1
Sodium cyanide manufacture
Lithium development
30 June
31 December
Australia
Australia
Property management
Management company
Loyalty programs
30 June
31 December
25 June
Australia
Australia
Australia
24.8
49.0
(a)
50.0
50.0
50.0
30.0
50.0
21.4
24.8
49.0
(a)
50.0
50.0
50.0
-
50.0
21.4
75.0
50.0
75.0
50.0
(b)
50.0
50.0
(b)
50.0
50.0
1 A wholly-owned subsidiary, Wesfarmers Loyalty Management Pty Ltd, has a 50.0 per cent interest in Loyalty Pacific Pty Ltd (Flybuys).
(a) Gresham AC Trust No. 2: While the Group's interest in the unit holders' funds of Gresham AC Trust No.2 amounts to greater than 50.0 per cent, it is not a
controlled entity as the Group does not have the practical ability to direct its relevant activities.
(b) BPI No 1 Pty Ltd: While the Group owns the only equity share in BPI No 1 Pty Ltd, the Group’s effective interest approximates 50.0 per cent and joint control is
effected through contractual arrangements with the joint venture partner.
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h
s
r
e
p
o
r
t
A
b
o
u
t
i
n
f
o
r
m
a
t
i
o
n
S
e
g
m
e
n
t
p
e
r
f
o
r
m
a
n
c
e
G
r
o
u
p
b
a
l
a
n
c
e
s
h
e
e
t
G
r
o
u
p
C
a
p
i
t
a
l
i
R
s
k
i
n
f
o
r
m
a
t
i
o
n
G
r
o
u
p
O
t
h
e
r
Financial statements
Notes to the financial statements: Group information
For the year ended 30 June 2023
21. Subsidiaries
The consolidated financial statements include the financial statements of Wesfarmers Limited and the subsidiaries listed in the following table:
Entity
A.C.N. 003 921 873 Pty Limited
A.C.N. 004 191 646 Pty Ltd
A.C.N. 007 870 484 Pty Ltd
A.C.N. 061 462 593 Pty Ltd
A.C.N. 092 194 904 Pty Ltd
A.C.N. 112 719 918 Pty Ltd
A.C.N. 645 670 711 Pty Ltd
A.C.N. 645 674 102 Pty Ltd
ANKO Global Holdings Pty Ltd
ANKO Retail Incorporated
API (Canberra) Pty Ltd
API Financial Services Australia Pty
Limited
API Healthcare Holdings (NZ) Limited
API Leasing Pty Ltd
API Owned CSC Pty Ltd
API Services Australia Pty Ltd
API Victoria Pty Ltd
Australian Gold Reagents Pty Ltd
Australian Graphics Pty Ltd
Australian International Insurance
Limited
Australian Light Minerals Pty Ltd
Australian Pharmaceutical Industries
(Queensland) Pty Ltd
Australian Pharmaceutical Industries
Pty Ltd (formerly Australian
Pharmaceutical Industries Ltd)
Australian Underwriting Holdings
Limited
Australian Underwriting Services Pty
Ltd
Australian Vinyls Corporation Pty Ltd
AVC Holdings Pty Ltd
AVC Trading Pty Ltd
BBC Hardware Limited
BBC Hardware Properties (NSW) Pty
Ltd
BBC Hardware Properties (Vic) Pty
Ltd
Beaumont Australia Pty Limited
Beaumont Bathrooms Renovator (SA)
Pty Limited
Beaumont Tiles (Vic) Pty Limited
Beaumont Tiles NZ Pty Limited
n
Beaumont's Discount Tile Warehouse
Pty Limited
Blacksmith Jacks Pty Ltd
Blackwoods 4PL Pty Ltd
168
Wesfarmers 2023 Annual Report
2023
%
2022
%
Entity
2023
%
2022
%
Blackwoods Xpress Pty Ltd
~
-
100
100
-
100
-
100
100
100
100
100
100
100
100
100
100
100
100
75
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
75
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
~
~
+
z
n
Ú
~
+
Ú
Ú
Ú
+
+
+
+
+
BPI Management Pty Ltd
BrandsExclusive (Australia) Pty Ltd
Brenahan Exploration Pty Ltd
Bresnahan Exploration Pty Ltd
BUKI (Australia) Pty Ltd
Bullivants International Pty Ltd
Bullivants Pty Limited
Bunnings (NZ) Limited
Bunnings Group Limited
Bunnings Joondalup Pty Ltd
Bunnings Limited
Bunnings Management Services Pty
Ltd
Bunnings Properties Pty Ltd
Bunnings Technologies India Private
Limited
BWP Management Limited
C S Holdings Pty Limited
Campbells Hardware & Timber Pty
Limited
Canberra Pharmaceutical Supplies
Trust
Catch Essentials Pty Ltd
Catch Group Holdings Limited
Catch Group Share Holdings Pty Ltd
Catch.com.au Pty Ltd
CGNZ Finance Limited
Chemical Holdings Kwinana Pty Ltd
Clearskincare Adelaide Street Pty Ltd
Clearskincare Bendigo Pty Ltd
Clearskincare Bondi Beach Pty Ltd
Clearskincare Bondi Junction Pty Ltd
Clearskincare Brighton Pty Ltd
Clearskincare Canberra City Pty Ltd
Clearskincare Carindale Pty Ltd
100
100
Clearskincare Carousel Pty Ltd
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Clearskincare Chatswood Pty Ltd
Clearskincare Chermside Pty Ltd
Clearskincare Chirnside Park Pty Ltd
Clearskincare City Square Pty Ltd
Clearskincare Claremont Pty Ltd
Clearskincare Clarence Street Pty Ltd
Clearskincare Clinics Australia Pty Ltd
Clearskincare Clinics Payroll Pty Ltd
Clearskincare Clinics Pty Ltd
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
+
+
n
+
n
+
+
# l
<
+
+
~
+
n
+
Ú
Ú
Notes to the financial statements: Group information
For the year ended 30 June 2023
21. Subsidiaries (continued)
Entity
Clearskincare Cockburn Gateway
Pty Ltd
Clearskincare Collins Street Pty Ltd
Clearskincare Cremorne Pty Ltd
Clearskincare Cronulla Pty Ltd
Clearskincare Doncaster Pty Ltd
Clearskincare Fremantle Pty Ltd
Clearskincare Hurstville Pty Ltd
Clearskincare Leichhardt Pty Ltd
Clearskincare Macarthur Square Pty
Ltd
Clearskincare Macquarie Centre Pty
Ltd
Clearskincare Miranda Pty Ltd
Clearskincare Moonee Ponds Pty Ltd
Clearskincare Mt Lawley Pty Ltd
Clearskincare Newmarket Limited
n
Clearskincare Northland Pty Ltd
Clearskincare Norwood Pty Ltd
Clearskincare Parramatta Pty Ltd
Clearskincare Quentin Ave Pty Ltd
Clearskincare QV Melbourne Pty Ltd
Clearskincare Robina Pty Ltd
Clearskincare Rockdale Pty Ltd
Clearskincare South Australia Pty Ltd
Clearskincare South Yarra Pty Ltd
Clearskincare Southland Pty Ltd
Clearskincare Southport Pty Ltd
Clearskincare Sunshine Plaza Pty Ltd
Clearskincare Takapuna Limited
n
Clearskincare Toowong Pty Ltd
Clearskincare Ventures Pty Ltd
Clearskincare Warringah Mall Pty Ltd
Clearskincare West End Pty Ltd
CM3 Contractor Management Pty Ltd
(formerly A.C.N. 655 875 620 Pty Ltd)
CMNZ Investments Pty Ltd
ConsortiumCo Pty Ltd
Coo-ee Investments Pty Limited
Coregas NZ Limited
Coregas Pty Ltd
Crosby Tiles Pty Ltd
Crowl Creek Exploration Pty Ltd
CSBP Ammonia Terminal Pty Ltd
CSBP Limited
CSC Ashfield Mall Pty Ltd
CSC Auckland Limited
n
+
~
+
n
2023
%
2022
%
Entity
2023
%
2022
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
CSC Bayside Frankston Pty Ltd
CSC Camberwell Pty Ltd
CSC Forest Hill Pty Ltd
CSC Forrest Chase Pty Ltd
CSC Franchising Pty Ltd
CSC Holdings Australia Pty Ltd
CSC Holdings New Zealand Limited
CSC Joondalup Pty Ltd
CSC Manuka Pty Ltd
CSC Mordialloc Pty Ltd
CSC Mt Ommaney Pty Ltd
CSC North Sydney Pty Ltd
CSC Northbridge Pty Ltd
CSC Ponsonby Limited
CSC Port Melbourne Pty Ltd
CSC Products Pty Ltd
CSC Riverton Pty Ltd
CSC Shared Services Pty Ltd
CSC West Lakes Pty Ltd
CSC Whitford Pty Ltd
CTE Pty Ltd
Ú
n
n
Cuming Smith and Company Limited
+
Dairy Properties Pty Ltd
Dowd Corporation Pty Ltd
Eastfarmers Pty Ltd
FIF Investments Pty Limited
Fosseys (Australia) Pty Ltd
Garrett Investments Limited
Geeks2U Holdings Pty Limited
Geeks2U International Pty Limited
Geeks2U IP Pty Limited
Geeks2U NZ Limited
Geeks2U Pty Limited
GPML Pty Ltd
Greencap Holdings Limited
Greencap Pty Ltd
HouseWorks Co Pty Ltd
Howard Smith Limited
J Blackwood & Son Pty Ltd
James Patrick & Co Pty Ltd
(in liquidation)
+
n
n
~
~
+
+
KAS Direct Sourcing Private Limited
KAS Global Trading Pty Limited
# l
# t
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
KAS International Sourcing
Bangladesh Pvt Ltd
x
100
100
KAS International Trading (Shanghai)
Company Limited
# u
100
100
Wesfarmers 2023 Annual Report
169
s
t
a
t
e
m
e
n
t
s
i
F
n
a
n
c
i
a
l
i
t
h
s
r
e
p
o
r
t
A
b
o
u
t
i
n
f
o
r
m
a
t
i
o
n
S
e
g
m
e
n
t
p
e
r
f
o
r
m
a
n
c
e
G
r
o
u
p
b
a
l
a
n
c
e
s
h
e
e
t
G
r
o
u
p
C
a
p
i
t
a
l
i
R
s
k
i
n
f
o
r
m
a
t
i
o
n
G
r
o
u
p
O
t
h
e
r
Financial statements
Notes to the financial statements: Group information
For the year ended 30 June 2023
21. Subsidiaries (continued)
Entity
KAS Pty Limited
KAS Services India Private Limited
# t
# l
KGA Sourcing (Singapore) Pte. Ltd
@ # z
Kidman Barrow Creek Pty Ltd
Kidman Gold Pty Ltd
Kleenheat Pty Ltd
Kmart Australia Limited
Kmart Group Asia Pty Ltd
Kmart Holdings Pty Ltd
Kmart NZ Holdings Limited
Kwinana Nitrogen Company
Proprietary Limited
Lawvale Pty Ltd
Life's Tiles Pty Ltd
Liftco Pty Limited
Loggia Pty Ltd
Making Life Easy - Mobility and
Independent Living Superstore Pty Ltd
Manacol Pty Limited
Meredith Distribution (NSW) Pty Ltd
Meredith Distribution Pty Ltd
MH Gold Pty Limited
Millars (WA) Pty Ltd
M.L.E. Unit Trust
Modwood Technologies Pty Ltd
Montague Resources Australia Pty Ltd
Moonyoora Minerals Pty Ltd
Mumgo Pty Ltd
Neat N' Trim Uniforms Pty Ltd
New Price Retail Finance Pty Ltd
New Price Retail Pty Ltd
New Price Retail Services Pty Ltd
New South Wales Hardwarehouse
Unit Trust
Nitrates Investments Pty Ltd
NZ Finance Holdings Pty Limited
Officeworks Businessdirect Pty Ltd
Officeworks Holdings Pty Ltd
Officeworks Ltd
Officeworks NZ Limited
Officeworks Property Pty Ltd
One Data Pty Ltd
One Digital Pty Ltd (formerly
Wesfarmers One Digital Pty Ltd)
Pailou Pty Ltd
Patrick Operations Pty Ltd
Petersen Bros Pty Ltd
Pharma-Pack Pty Ltd
~
+
+
n
+
+
+
Ú
Ú
Ú
@
n
+
+
n
+
+
170
Wesfarmers 2023 Annual Report
2023
%
100
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
2022
%
100
100
Entity
Premier Power Sales Pty Ltd
Priceline (NZ) Pty Limited
-
Priceline Proprietary Limited
n
Ú
n
m
+
@
Ú
+
# u
# t
+
Protector Alsafe Pty Ltd
PSM Healthcare Limited
PT Blackwoods Indonesia
R & N Palmer Pty Ltd
Relationship Services Pty Limited
Retail Australia Consortium Pty Ltd
Retail Investments Pty Ltd
RJ Beaumont & Co Pty Ltd
Scones Jam n Cream Pty Ltd
Second Priceline Unit Trust
Sellers (SA) Pty Ltd
Share Nominees Limited
SiSU Wellness Pty Ltd
Sotico Pty Ltd
Soul Pattinson (Manufacturing) Pty Ltd
Synapse Finance Pty Ltd
Target Australia Pty Ltd
Target Australia Sourcing (Shanghai)
Co Ltd
Target Australia Sourcing Limited
Target Holdings Pty Ltd
The Builders Warehouse Group Pty
Limited
The Franked Income Fund
The Priceline Unit Trust
The Westralian Farmers Limited
The Workwear Group HK Limited
+
# t
The Workwear Group Holding Pty Ltd
The Workwear Group Pty Ltd
TheActive Pty Ltd
Tilers Plus Pty Limited
Tilewerx Pty Limited
Tincorp Holdings Pty Ltd
Trimevac Pty Ltd
Tyremaster (Wholesale) Pty Ltd
Ucone Pty Ltd
Valley Investments Pty Ltd
Victorian Hardwarehouse Unit Trust
Viking Direct Pty Limited
W4K.World 4 Kids Pty Ltd
Wesfarmers Agribusiness Limited
Wesfarmers Bengalla Management
Pty Ltd
Wesfarmers Bengalla Pty Ltd
Wesfarmers Bunnings Limited
+
+
~
~
+
+
+
+
+
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
2023
%
2022
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
60
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
11
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Notes to the financial statements: Group information
For the year ended 30 June 2023
21. Subsidiaries (continued)
Entity
Wesfarmers Chemical US Holdings
Corp
Wesfarmers Chemicals, Energy &
Fertilisers Limited
Wesfarmers Coal Resources Pty Ltd
Wesfarmers Department Stores
Holdings Pty Ltd
Wesfarmers Emerging Ventures Pty
Ltd
Wesfarmers Energy (Gas Sales)
Limited
Wesfarmers Energy (Industrial Gas)
Pty Ltd
Wesfarmers Fertilizers Pty Ltd
Wesfarmers Gas Limited
Wesfarmers Holdings Pty Ltd
Wesfarmers Industrial & Safety
Holdings NZ Limited
Wesfarmers Industrial & Safety NZ
Limited
Wesfarmers Industrial and Safety Pty
Ltd
Wesfarmers Insurance Investments
Pty Ltd
Wesfarmers International Holdings
Pty Ltd
Wesfarmers Investments Pty Ltd
Wesfarmers Kleenheat Gas Pty Ltd
Wesfarmers Lithium Pty Ltd
Wesfarmers LNG Pty Ltd
Wesfarmers Loyalty Management
Pty Ltd
Wesfarmers LPG Pty Ltd
Wesfarmers New Energy Holdings
Pty Ltd
Wesfarmers Oil & Gas Pty Ltd
Wesfarmers One Pass Pty Ltd
(formerly Wesfarmers A Plus Pty Ltd)
Wesfarmers Online Retail Holdings
Pty Ltd
Wesfarmers Provident Fund Pty Ltd
Wesfarmers Resources Pty Ltd
Wesfarmers Retail Holdings Pty Ltd
Wesfarmers Retail Pty Ltd
Wesfarmers Risk Management
(Singapore) Pte Ltd
Wesfarmers Securities Management
Pty Ltd
Wesfarmers Superannuation Pty Ltd
Wesfarmers TCS Investments Pty Ltd
Wesfarmers Transport Limited
Weskem Pty Ltd
z
+
+
+
+
+
+
n
n
+
+
+
Ú
+
+
+
Ú
+
+
+
+
+
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
# z
100
100
100
100
100
100
100
100
100
-
100
100
@
+
2023
%
2022
%
Entity
2023
%
2022
%
100
100
100
100
100
100
100
100
100
100
Westralian Farmers Superphosphates
Limited
WEV Capital Investments Pty Ltd
WFCL Investments Pty Ltd
WFM Investments Pty Ltd
WIS International Pty Ltd
WIS Solutions Pty Ltd
WIS Supply Chain Management
(Shanghai) Co Ltd
100
100
WPEQ Pty Ltd
WPP Holdings Pty Ltd
WW E-Services Australia Pty Limited
WWG Middle East Apparel Trading
LLC
Yakka Pty Limited
+
+
# u
~
100
100
100
100
100
100
100
100
100
-
49
100
Entity acquired, incorporated or control obtained
during the year
Entity disposed, dissolved or deregistered during
the year
Audited by firms of Ernst & Young International
Audited by other firms of accountants
An ASIC-approved deed of cross guarantee has been
entered into by Wesfarmers Limited and these entities
Entity added to the Closed Group by way of an
Assumption Deed during the year, refer to note 23 for
further details
All subsidiaries are incorporated in Australia unless
identified by one of the following symbols:
Bangladesh
China
Hong Kong
India
Indonesia
New Zealand
Singapore
United Arab Emirates
United States of America
All entities utilise the functional currency of the country
of incorporation with the exception of Wesfarmers Risk
Management (Singapore) Pte Ltd and WIS Supply Chain
Management (Shanghai) Co Ltd, which utilise the Australian
dollar and KAS International Trading (Shanghai) Company
Limited, PT Blackwoods Indonesia and Wesfarmers Oil &
Gas Pty Ltd, which utilise the US dollar.
Wesfarmers 2023 Annual Report
171
100
100
100
100
100
100
100
100
100
100
49
100
@
~
#
<
+
Ú
x
u
t
l
m
n
z
z
s
t
a
t
e
m
e
n
t
s
i
F
n
a
n
c
i
a
l
i
t
h
s
r
e
p
o
r
t
A
b
o
u
t
i
n
f
o
r
m
a
t
i
o
n
S
e
g
m
e
n
t
p
e
r
f
o
r
m
a
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c
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G
r
o
u
p
b
a
l
a
n
c
e
s
h
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t
G
r
o
u
p
C
a
p
i
t
a
l
i
R
s
k
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n
f
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m
a
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G
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r
Financial statements
Notes to the financial statements: Group information
For the year ended 30 June 2023
22. Parent disclosures
23. Deed of Cross Guarantee
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Equity attributable to equity holders of the parent
Issued capital
Employee reserved shares
Retained earnings
Dividends reserve
Restructure tax reserve
Hedging reserve
Share-based payments reserve
Demerger reserve
Total equity
Parent
2023
$m
2022
$m
10,877
5,742
16,619
11,271
5,735
17,006
234
4,362
4,596
12,023
1,231
4,007
5,238
11,768
13,467
-
1,839
292
150
(13)
52
(3,764)
12,023
13,467
3
1,582
292
150
1
37
(3,764)
11,768
Profit attributable to members of the parent
2,389
2,084
Total comprehensive income for the year, net
of tax, attributable to members of the parent
2,375
2,094
The subsidiaries identified with a ‘+’ in note 21 are parties to a Deed
of Cross Guarantee under which each party has guaranteed to pay
any deficiency in the event of the winding up of any of the members
in the Closed Group. By entering into the Deed, the wholly-owned
entities have been relieved from the requirement to prepare a financial
report and directors’ report under ASIC Corporations (Wholly-owned
companies) Instrument 2016/785.
These subsidiaries and Wesfarmers Limited together referred to
as the ‘Closed Group’, either originally entered into the Deed on
27 June 2008, or have subsequently joined the Deed by way of an
Assumption Deed. Entities which joined the Group by way of an
Assumption Deed throughout the year are identified with a 'Ú' in
note 21.
The consolidated income statement and retained earnings of the
entities that are members of the Closed Group is as follows:
Consolidated income statement and
retained earnings
Profit before income tax expense
Income tax expense
Net profit for the year
Retained earnings at beginning of year
Adjustment for companies transferred into/out
of the Closed Group
Total available for appropriation
Dividends provided for or paid
Retained earnings at end of year
Contingencies1
Trading guarantees
159
167
Consolidated statement of comprehensive
income
Profit for the year
Other comprehensive income
Items that may be reclassified to profit or loss:
Changes in the fair value of cash flow hedges,
net of tax
Items that will not be reclassified to profit or loss:
Changes in the fair value of financial assets
designated at FVOCI, net of tax
Other comprehensive (loss)/income for the
year, net of tax
Total comprehensive income for the year,
net of tax
1 Contingent liabilities at balance date are not included in the balance sheet.
Wesfarmers is party to various legal actions that have arisen in the
normal course of business. It is expected that any liabilities arising
from such legal action would not have a material adverse effect on the
Group’s financial report.
Dividends reserve
The dividends reserve was created by the parent entity for the
purposes of segregating profits from which dividends to shareholders
can be paid.
Guarantees
Wesfarmers Limited and certain Australian controlled entities are
parties to a Deed of Cross Guarantee (the Deed).
Parent entity financial information
The financial information for the parent entity has been prepared on
the same basis as the consolidated financial statements, except as
set out below.
Investments in subsidiaries, associates and joint venture
entities
Investments in subsidiaries, associates and joint venture entities
are accounted for at cost in the financial statements of the parent.
Dividends received from associates are recognised in the parent
entity’s profit or loss when its right to receive the dividend is
established.
172
Wesfarmers 2023 Annual Report
Deed
2023
$m
3,367
(963)
2,404
(32)
(48)
2,324
(2,132)
192
2022
$m
3,125
(859)
2,266
(360)
(11)
1,895
(1,927)
(32)
Deed
2023
$m
2022
$m
2,404
2,266
(68)
82
23
24
(45)
106
2,359
2,372
Notes to the financial statements: Group information
For the year ended 30 June 2023
23. Deed of Cross Guarantee (continued)
24. Related party transactions
The consolidated balance sheet of the entities that are members of
the Closed Group is as follows:
Consolidated balance sheet
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Related party receivables
Inventories
Income tax receivable
Derivatives
Other
Total current assets
Non-current assets
Investment in controlled entities
Investment in associates and joint ventures
Other financial assets
Deferred tax assets
Property, plant and equipment
Goodwill and intangible assets
Right-of-use assets
Derivatives
Other
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Related party payables
Interest-bearing loans and borrowings
Lease liabilities
Income tax payable
Provisions
Derivatives
Other
Total current liabilities
Non-current liabilities
Related party payables
Interest-bearing loans and borrowings
Lease liabilities
Provisions
Derivatives
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserved shares
Retained earnings
Reserves
Total equity
Deed
2023
$m
2022
$m
388
1,638
162
5,525
68
116
204
8,101
3,142
318
7
685
5,033
4,575
5,201
27
45
19,033
27,134
4,309
79
-
1,026
-
1,037
10
297
6,758
1,019
4,233
5,144
363
-
10,759
17,517
9,617
13,574
(102)
192
(4,047)
9,617
230
1,297
1,912
5,215
-
452
175
9,281
3,812
318
664
709
3,231
4,002
5,404
8
80
18,228
27,509
4,085
68
988
979
18
1,019
2
247
7,406
1,081
3,846
5,439
352
30
10,748
18,154
9,355
13,574
(102)
(32)
(4,085)
9,355
Consolidated
2023
$'000
2022
$'000
137,592
133,096
(18,217)
(16,457)
34,560
47,767
(59,206)
(48,250)
60,628
45,548
(3,003)
(1,086)
45,914
43,495
Transactions with related parties
Associates
Lease rent paid
Receipts from associates
Payments to associates
Joint ventures
Receipts from loyalty program
Payments for loyalty program
Receipts from joint ventures
Payments to joint ventures
Outstanding balances with related
parties
Associates
Amounts receivable from associates
Amounts owing to associates
10,764
(4,426)
9,684
(738)
Joint ventures
Amounts receivable from joint ventures
8,114
13,525
Amounts owing to joint ventures
(236,852)
(230,104)
The Group entered into transactions with related parties during the
year as follows:
• Rent for retail stores and warehouses has been paid by
the Group to an associated entity, BWP Trust, and to a joint
venture, BPI No 1 Pty Ltd.
• Amounts have been paid to and received from
Loyalty Pacific Pty Ltd for the operation of the Flybuys
loyalty program.
• Purchase of goods from an associated entity,
Wespine Industries Pty Ltd, on normal commercial terms
and conditions.
• Management fees have been received from an associated entity,
BWP Trust, on normal commercial terms and conditions for staff
and other services provided to associates.
• Management fees have been paid to Covalent Lithium Pty Ltd on
normal commercial terms and conditions for the management of
the Mt Holland lithium project.
• Partly-owned subsidiaries of an associate of the Group,
Gresham Partners Group Limited, have provided advisory
services to Wesfarmers and were paid fees of $5 thousand in
FY2023 (2022: $5,522 thousand).
Wesfarmers 2023 Annual Report
173
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Financial statements
Notes to the financial statements: Other
For the year ended 30 June 2023
25. Commitments and contingencies
27. Auditors’ remuneration
Fees to Ernst & Young (Australia)
Fees for the audit and review of the financial
reports of the Group and any controlled
entities
Fees for other assurance and agreed-upon-
procedures services1
Fees for other services
- tax compliance
- other
Fees to other overseas network firms of
Ernst & Young (Australia)
Fees for the audit and review of the financial
reports of the Group and any controlled
entities
Fees for other assurance and agreed-upon-
procedures services
Fees for other services
- tax compliance
Total auditors' remuneration
Consolidated
2023
$'000
2022
$'000
4,602
4,667
730
634
539
94
5,965
559
94
5,954
582
613
-
56
164
746
6,711
128
797
6,751
1 The 2023 fees for other assurance and agreed-upon-procedures includes
$469 thousand (2022: $374 thousand) relating to the provision of limited
assurance services of the Group’s sustainability reporting.
Other assurance and agreed-upon-procedures services and other
services represent 22.8 per cent (2022: 21.8 per cent) of the total fees
paid or payable to Ernst & Young and related practices for the year
ended 30 June 2023.
Auditors’ remuneration includes amounts reimbursed to the auditors
for incidental costs incurred in completing their services.
Capital commitments1
Within one year
Greater than one year but not more than
five years
Commitments for leases not yet
commenced (undiscounted)1, 2
Within one year
Greater than one year but not more than
five years
More than five years
Consolidated
2023
$m
2022
$m
364
15
379
12
125
271
408
485
49
534
8
121
208
337
Contingencies1
Trading guarantees
162
171
1 Capital commitments, commitments for leases not yet commenced
(undiscounted) and contingencies at balance date are not included in the
balance sheet.
2 The commitments relate to lease agreements associated with new stores,
distribution centres and offices.
Guarantees
The Group has issued a number of bank and other guarantees to third
parties for various operational and legal purposes. It is not expected
that these guarantees will be called on.
Contingent liabilities
Certain companies within the Group are party to various legal actions
that have arisen in the normal course of business. It is expected that
any liabilities arising from such legal action would not have a material
effect on the Group.
26. Events after the reporting period
Dividends
A fully-franked final dividend of 103 cents per share resulting in
a dividend payment of $1,169 million was determined with a payment
date of 5 October 2023. The final dividend will also carry a New
Zealand franking credit, in addition to the Australian franking credit, of
10 cents (NZD) per share. The final dividend has not been provided for
in the 30 June 2023 full-year financial statements.
Acquisition of InstantScripts Pty Ltd
On 13 June 2023, Wesfarmers announced that API, a wholly-owned
subsidiary of Wesfarmers, entered into an agreement to acquire
InstantScripts, one of Australia’s leading telehealth businesses for
cash consideration of approximately $135 million. The transaction
completed on 3 July 2023.
Due to the timing of the completion of the acquisition and the
restriction on access to the books and records of InstantScripts until
after completion, the accounting for the business combination has not
yet been determined. Further information in relation to this acquisition
is unable to be provided due to the limited time between completion
and the release of this report.
174
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Notes to the financial statements: Other
For the year ended 30 June 2023
28. Other accounting policies
(A) New and amended accounting standards and interpretations adopted from
1 July 2022
All new and amended Australian Accounting Standards and Interpretations mandatory to the Group as at 1 July 2022 have been adopted,
including as disclosed below. Other new and amended Australian Accounting Standards and Interpretations adopted in the current period were
not material to the Group.
Reference
Description
AASB 2023-2
Amendments to Australian
Accounting Standards-
International Tax Reform-
Pillar Two Model Rules
This amendment introduces a mandatory temporary exception to accounting for deferred taxes arising from
the implementation of the Pillar Two Model Rules published by the Organisation for Economic Co-operation
and Development (OECD) in relation to the global minimum top-up taxes. This relief is effective immediately and
entities are required to include disclosure in the financial statements when applying this relief. In addition, this
amendment introduces targeted disclosure requirements to assist financial statement users better understand
an entity’s income taxes arising from the reform, particularly in the period before legislation implementing the
rules is in effect. The application of this amendment is effective from 1 January 2023, and will be adopted by
the Group on 1 July 2023. The Group has applied the relief to recognising and disclosing information about
deferred tax assets and liabilities related to Pillar Two income taxes. The Group is in the process of assessing
the impact of the Pillar Two Model Rules and the disclosure requirements contained in this amendment.
(B) New and amended standards and interpretations issued but not yet effective
The following new and amended accounting standards and interpretations issued but not yet effective are relevant to current operations. They
are available for early adoption but have not been applied by the Group in this financial report.
Reference
Description
The effects of these standards and interpretations are not expected to be material:
AASB 2021-2 Amendments
to Australian Accounting
Standards - Disclosure of
Accounting Policies
The application of this amendment is effective from 1 January 2023, and will be adopted by the Group on
1 July 2023. The amendments aim to help entities provide accounting policy disclosures that are more useful
by replacing the requirements for entities to disclose their ‘significant’ accounting policies with a requirement to
disclose their ‘material’ accounting policies and adds guidance on how entities apply the concept of materiality
in making decisions about accounting policy disclosures.
AASB 2021-2 Amendments
to Australian Accounting
Standards - Definition of
Accounting Estimates
The application of this amendment is effective from 1 January 2023, and will be adopted by the Group on
1 July 2023. The amended standard clarifies that the effects on an accounting estimate of a change in an input
or a change in a measurement technique are changes in accounting estimates if they do not result from the
correction of prior period errors.
AASB 2014-10
Amendments to Australian
Accounting Standards - Sale
or Contribution of Assets
between an Investor and its
Associate or Joint Venture
The application of this amendment is effective from 1 January 2025 (as deferred by AASB 2021- 7
Amendments to AASs – Effective Date of Amendments to AASB 10 and AASB 128 and Editorial Corrections),
and will be adopted by the Group on 1 July 2025. The amendments require a full gain or loss to be recognised
when a transaction involves a business (whether it is housed in a subsidiary or not) and partial gain or loss to
be recognised when a transaction involves assets that do not constitute a business, even if these assets are
housed in a subsidiary.
AASB 2020-1 Amendments
to Australian Accounting
Standards - Classification
of Liabilities as Current or
Non-current
AASB 2022-6 Amendments
to AASs – Non-current
Liabilities with Covenants
AASB 2021-5 Amendments
to Australian Accounting
Standards - Deferred Tax
related to Assets and
Liabilities arising from a
Single Transaction
The application of this amendment is effective from 1 January 2024 (as deferred by AASB 2020- 6
Amendments to AASs – Classification of Liabilities as Current or Non-current – Deferral of Effective Date),
and will be adopted by the Group on 1 July 2024. This amendment to AASB 101 Presentation of Financial
Statements clarifies the requirements for classifying liabilities as current or non-current.
The application of this amendment is effective from 1 January 2023, and will be adopted by the Group on
1 July 2023. The amendments clarify specific situations in which an entity does not have a right to defer
settlement for at least 12 months after the reporting date and adds presentation and disclosure requirements
for non-current liabilities subject to compliance with future covenants within the next 12 months.
The application of this amendment is effective from 1 January 2023, and will be adopted by the Group on
1 July 2023. The amendments narrow the scope of the initial recognition exemption so that it does not apply to
transactions that give rise to equal and offsetting temporary differences and clarifies that the exemption does
not apply to transactions such as leases and decommissioning obligations.
AASB 2022-5 Amendments
to Australian Accounting
Standards - Lease Liability in
a Sale and Leaseback
The application of this amendment is effective from 1 January 2024, and will be adopted by the Group on
1 July 2024. The amendments specify the requirements that a seller-lessee uses in measuring the lease liability
arising in a sale and leaseback transaction, to ensure that the seller-lessee does not recognise any amount of
the gain or loss that relates to the right of use it retains.
AASB 2023-1 Amendments
to Australian Accounting
Standards - Supplier
Financing Arrangements
The application of this amendment is effective from 1 January 2024, and will be adopted by the Group on
1 July 2024. The amendments clarify the characteristics of supplier finance arrangements. The amendments
require information about the impact of supplier finance arrangements on liabilities and cash flows, including
terms and conditions of those arrangements as at the beginning and end of the reporting period and the type
and effect of non-cash changes in the carrying amount of those arrangements.
Wesfarmers 2023 Annual Report
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Financial statements
Notes to the financial statements: Other
For the year ended 30 June 2023
28. Other accounting policies (continued)
(C) Tax consolidation
Wesfarmers and its 100 per cent owned Australian resident subsidiaries have formed a tax consolidated group with effect from 1 July 2002.
Wesfarmers is the head entity of the tax consolidated group. Members of the group have entered into a tax sharing agreement in order to
allocate income tax expense to the wholly-owned subsidiaries on a stand-alone basis. The tax sharing arrangement provides for the allocation
of income tax liabilities between the entities should the head entity default on its tax payment obligations. The possibility of such a default is
considered remote at the date of this report.
Members of the tax consolidated group have entered into a tax funding agreement. The group has applied the group allocation approach in
determining the appropriate amount of current taxes to allocate to members of the tax consolidated group. The tax funding agreement provides
for each member of the tax consolidated group to pay a tax equivalent amount to or from the parent in accordance with their notional current
tax liability or current tax asset. Such amounts are reflected in amounts receivable from or payable to the parent company in their accounts and
are settled as soon as practicable after lodgement of the consolidated return and payment of the tax liability.
29. Tax transparency disclosures
30. Director and executive disclosures
A reconciliation of Wesfarmers’ accounting profit to its tax expense
and material temporary and permanent differences are disclosed in
note 3.
A reconciliation of accounting profit to income tax paid or payable and
the effective company tax rates for Australian and global operations of
the Group are tabled below.
Tax paid or payable reconciliation
Accounting profit
Income tax at the statutory rate of 30%
Non-deductible items
Temporary differences: deferred tax
Associates and other
Utilisation of previously unrecognised tax
losses
Current year tax paid or payable
Consolidated
2023
$m
2022
$m
3,509
1,053
9
(50)
(16)
(2)
994
3,320
996
5
(82)
(25)
(25)
869
Effective tax rate
Effective tax rate for Australian operations
Effective tax rate for global operations
29.9%
29.8%
29.1%
29.2%
Compensation of key management personnel
The remuneration disclosures are provided in sections one to nine of
the remuneration report on pages 100 to 130 of this annual report
designated as audited and forming part of the directors’ report.
Short-term benefits1
Long-term benefits
Post-employment benefits
Share-based payments
Consolidated
2023
$'000
2022
$'000
11,061
120
283
15,299
26,763
10,848
118
240
13,115
24,321
1 The cost of directors’ and officers’ insurance is no longer included within
short-term benefits. 2022 has been restated to allow for comparison on a
like-for-like basis.
Other transactions with key management personnel
From time to time, directors of Wesfarmers or its controlled entities,
or their director-related entities, may purchase goods or services from
the Group. These purchases are on the same terms and conditions as
those entered into by other Group employees or customers and are
trivial or domestic in nature.
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Wesfarmers 2023 Annual Report
Notes to the financial statements: Other
For the year ended 30 June 2023
31. Share-based payments
The Group provides benefits to employees (including the executive
director) of the Group through share-based incentives. Employees
are paid for their services or incentivised for their performance in
part through shares or rights over shares. The expense arising from
these transactions is shown in note 2. The total number of ordinary
Wesfarmers shares acquired on-market during FY2023 to satisfy
employee incentive schemes was 2,710,637 (2022: 1,635,002) at an
average price of $46.35 (2022: $57.45) per share.
Cash-settled transactions
The ultimate expense recognised in relation to cash-settled
transactions will be equal to the actual cash paid to the employees,
which will be the fair value at settlement date. The expected cash
payment is estimated at each reporting date and a liability recognised
to the extent that the vesting period has expired and in proportion to
the amount of the awards that are expected to ultimately vest.
Recognition and measurement
Share-based payments can either be equity-settled or cash-settled.
If the employee is provided a choice of settlement options then the
scheme is considered to be cash-settled.
Equity-settled transactions
The cost of equity-settled transactions with employees is measured
using their fair value at the date at which they are granted. In
determining the fair value, only performance conditions linked to the
price of the shares of Wesfarmers Limited (market conditions) are
taken into account.
The cost of equity-settled transactions is recognised, together with
a corresponding increase in equity, over the period in which any
performance conditions (excluding market conditions) are met,
ending on the date on which the employees become fully entitled
to the award (vesting date). The cumulative expense recognised for
equity-settled transactions at each reporting date until vesting date
reflects the extent to which the vesting period has expired and the
proportion of the awards that are expected to ultimately vest. No
expense is recognised for awards that do not ultimately vest due to
a non-market performance condition not being met. The expense is
recognised in full if the awards do not vest (or are not exercised) due
to a market performance condition not being met.
Where the terms of an equity-settled award are modified, as a
minimum, an expense is recognised as if the terms had not been
modified. In addition, an expense is recognised for any increase in the
value of the transaction as a result of the modification, as measured at
the date of modification.
Where an equity-settled award is cancelled, it is treated as if it
had vested on the date of cancellation, and any expense not yet
recognised for the award is recognised immediately. However, if a
new award is substituted for the cancelled award, and designated as
a replacement award on the date that it is granted, the cancelled and
new award are treated as if they were a modification of the original
award, as described above.
Additional information on award schemes
Key Executive Equity Performance Plan (KEEPP)
KEEPP was introduced in September 2016. Under the 2022 KEEPP,
eligible executive key management personnel (KMP) were invited to
receive performance shares and deferred shares in the company.
From the 2021 KEEPP, newly issued unquoted fully-paid ordinary
shares are allocated under the KEEPP. The company will apply for
quotation of the shares upon vesting or forfeiture of the shares.
KEEPP is a single total incentive established for each executive KMP
that operates over seven years. The quantum of the KEEPP award is
determined against an individually personalised 12-month scorecard,
split into financial, safety and Group ecosystem performance
measures and individual performance objectives.
In FY2021, the earnings before interest and tax and return on
capital (ROC) conditions of the 2019 and 2020 KEEPP performance
shares were amended to post-AASB 16 earnings before tax and
ROC metrics. There was no incremental change in the fair value of
the awards. The share price on the date which the amendment was
communicated to participants was $59.10 per share.
Performance shares - 2022 KEEPP
For the Group Managing Director and the Group Chief Financial
Officer, the performance conditions are Wesfarmers’ total shareholder
return (TSR) relative to the TSR of the ASX 100 (80 per cent weighting)
and portfolio management and investment outcomes (20 per cent
weighting). For the divisional managing directors, the performance
conditions are Wesfarmers’ TSR relative to the TSR of the
ASX 100 (50 per cent weighting) and divisional financial performance
(50 per cent weighting).
The fair value of the performance shares with a TSR condition is
determined using an option pricing model with the following inputs:
Grant date
Grant date share price ($)
Volatility (%)
Risk-free rate (%)
Fair value ($)
Group CFO, Group MD
and Divisional MD
27 Oct 2022
44.54
25.09
3.43
29.79
Equity-settled awards outstanding
Weighted average share price in FY2023 was $47.83 (2022: $52.74). The following table includes shares subject to trading restrictions.
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Lapsed during the year
Other adjustments
Outstanding at the end of the year
Exercisable at the end of the year
KEEPP
(shares)
WESAP
(shares)
WLTIP
(shares)
WESP
(options)
1,842,933
369,694
(426,419)
(75,689)
-
1,710,519
50,038
4,959,818
2,801,469
(2,045,971)
(139,722)
(13,281)
5,562,313
5,492,040
151,835
-
(47,464)
-
-
104,371
153,447
135,824
-
(135,532)
-
-
292
843,489
Wesfarmers 2023 Annual Report
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Financial statements
Notes to the financial statements: Other
For the year ended 30 June 2023
31. Share-based payments (continued)
Key Executive Equity Performance Plan (KEEPP)
(continued)
Deferred shares - 2022 KEEPP
The 2022 KEEPP deferred shares are subject to a 12-month service
condition (the forfeiture period). If an executive resigns or is terminated
for cause during the forfeiture period, the Board may decide to cancel
that share allocation. The fair value of the award at grant date is
expensed over the one-year forfeiture period.
The grant date share price is the fair value of both the performance
shares and the deferred shares with divisional financial performance
conditions or the portfolio management and investment
outcomes condition.
Further details of the KEEPP and of the terms of the grants made
during FY2023 are provided in the remuneration report.
Wesfarmers Employee Share Acquisition Plan
(WESAP)
The WESAP was introduced in October 2009. Under the plan, all
eligible employees are invited to acquire fully-paid ordinary shares in
the company. The shares are either acquired under a salary sacrifice
arrangement or are granted as an award, subject to the Group
achieving a net profit after tax performance condition. Eligibility for
an award of shares is dependent upon an in-service period with
a participating division and being a permanent employee.
The plan qualifies as a non-discriminatory employee share
scheme complying with the requirements of Division 83A of the
Income Tax Assessment Act 1997 (as amended) for Australian
resident employees.
Executives
In November 2016, WESAP was introduced to eligible executives.
Under the 2022 offer, eligible executives are invited to receive
performance shares and deferred shares in the company.
Performance shares - 2022 WESAP
The performance condition (with 100 per cent weighting) is
Wesfarmers’ TSR relative to the TSR of the ASX 100 over a four-year
performance period.
The fair value of the performance shares with a TSR condition is
determined using an option pricing model with the following inputs:
Grant date
Grant date share price ($)
Volatility (%)
Risk-free rate (%)
Fair value ($)
3 Oct 2022
42.80
24.99
3.62
29.36
Deferred shares - 2022 WESAP
Deferred shares are subject to a three-year forfeiture period. If an
executive resigns or is terminated for cause within three years, the
deferred shares will be forfeited.
The grant date share price is the fair value of the deferred shares and
the award is expensed over the forfeiture period.
Annual incentive
In August 2022, eligible executives received a restricted (mandatory
deferred) share award under the WESAP as part of their annual
incentive. If an executive resigns or is terminated for cause within
one year of the share allocation, the Board may decide to cancel that
share allocation. The fair value of the award at grant date is expensed
over the forfeiture period.
Wesfarmers Long Term Incentive Plan (WLTIP)
2020 Kmart-related Performance-tested Shares
The Board approved a one-off performance-tested share grant for
the Group Managing Director, the Group Chief Financial Officer and
the Managing Director, Kmart Group in relation to the restructure of
Kmart Group, which was allocated in FY2021 under the WLTIP.
The performance condition (with 100 per cent weighting) is based on
the conversion of Target stores to Kmart stores and measured through
total cumulative converted store profit for the relevant stores, against
the targeted store contribution in the Board-approved proposal.
The fair value of the equity instruments granted was $48.78 and was
determined with reference to the share price on the date of grant.
Further details of the vesting outcome of the 2020 Kmart-related
Performance-tested Shares are provided in the remuneration report.
Wesfarmers Employee Share Plan (WESP)
The last issue under the WESP was made in December 2004.
Under the plan, employees were invited to apply for ordinary shares
in the company, funded by an interest-free loan from the Group. The
employees’ obligation for repayment of the loans is limited to the
dividends paid and capital returns by the company and, in the event
the employee ceases employment, the market price achieved on the
sale of the shares.
The plan is accounted for as an in-substance equity-settled award,
with the contractual life of each option equivalent to the estimated loan
life and no maximum term.
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Wesfarmers 2023 Annual Report
Directors' declaration
Wesfarmers Limited and its controlled entities
In accordance with a resolution of the directors of Wesfarmers Limited, we state that:
1.
1.1
1.2
1.3
2.
3.
In the opinion of the directors:
the financial statements, notes and the additional disclosures included in the directors’ report designated as audited,
of the consolidated entity for the full-year ended 30 June 2023 are in accordance with the Corporations Act 2001, including:
(a)
(b)
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2023 and of its performance
for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001; and
the financial statements and notes comply with International Financial Reporting Standards as disclosed in the notes
to the financial statements on page 137 of the 2023 Annual Report; and
there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.
This declaration has been made after receiving the declaration required to be made to the directors in accordance with section 295A
of the Corporations Act 2001 for the financial year ended 30 June 2023.
In the opinion of the directors, as at the date of this declaration, there are reasonable grounds to believe that the members of the
Closed Group comprising the company and the controlled entities marked ‘+’ as identified in note 21 will be able to meet any
obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee referred to in note 23.
On behalf of the Board:
M A Chaney AO
Chairman
Perth
24 August 2023
R G Scott
Managing Director
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Wesfarmers 2023 Annual Report
179
Signed reports
Independent auditor's report
To the Members of Wesfarmers Limited
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
Fax: +61 8 9429 2436
ey.com/au
ey.com/au
Independent auditor's report to the members of Wesfarmers Limited
IInnddeeppeennddeenntt aauuddiittoorr''ss rreeppoorrtt ttoo tthhee mmeemmbbeerrss ooff WWeessffaarrmmeerrss LLiimmiitteedd
Report on the audit of the financial report
IInnddeeppeennddeenntt aauuddiittoorr''ss rreeppoorrtt ttoo tthhee mmeemmbbeerrss ooff WWeessffaarrmmeerrss LLiimmiitteedd
Opinion
OOppiinniioonn
performance for the year ended on that date; and
Report on the audit of the financial report
Report on the audit of the financial report
We have audited the financial report of Wesfarmers Limited (‘the Company’) and its subsidiaries (collectively, ‘the Group’), which comprises
the consolidated balance sheet as at 30 June 2023, the consolidated income statement, consolidated statement of comprehensive income,
consolidated statement of changes in equity and consolidated cash flow statement for the year then ended, notes to the financial statements,
including a summary of significant accounting policies, and the directors' declaration.
OOppiinniioonn
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
a) giving a true and fair view of the consolidated financial position of the Group as at 30 June 2023 and of its consolidated financial
We have audited the financial report of Wesfarmers Limited (‘the Company’) and its subsidiaries (collectively, ‘the Group’),
We have audited the financial report of Wesfarmers Limited (‘the Company’) and its subsidiaries (collectively, ‘the Group’),
b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
which comprises the consolidated balance sheet as at 30 June 2023, the consolidated income statement, consolidated
which comprises the consolidated balance sheet as at 30 June 2023, the consolidated income statement, consolidated
statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for
statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for
Basis for opinion
the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the
the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in
directors' declaration.
directors' declaration.
the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with
the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
a.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
a.
giving a true and fair view of the consolidated financial position of the Group as at 30 June 2023 and of its consolidated
financial performance for the year ended on that date; and
Key audit matters
giving a true and fair view of the consolidated financial position of the Group as at 30 June 2023 and of its consolidated
financial performance for the year ended on that date; and
b.
BBaassiiss ffoorr ooppiinniioonn
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current
b.
complying with Australian Accounting Standards and the Corporations Regulations 2001.
year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do
not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in
that context.
BBaassiiss ffoorr ooppiinniioonn
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report, including
in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are
of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters
below, provide the basis for our audit opinion on the accompanying financial report.
further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent
further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent
of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical
of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia.
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia.
We have also fulfilled our other ethical responsibilities in accordance with the Code.
We have also fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
KKeeyy aauuddiitt mmaatttteerrss
KKeeyy aauuddiitt mmaatttteerrss
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in
forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description
of how our audit addressed the matter is provided in that context.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in
forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description
of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of
our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to
respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures,
including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying
financial report.
A member firm of Ernst & Young Global Limited
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of
Liability limited by a scheme approved under Professional Standards Legislation
our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to
respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures,
including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying
180
financial report.
Wesfarmers 2023 Annual Report
11..
IInnvveennttoorryy vvaalluuaattiioonn aanndd eexxiisstteennccee
IInnvveennttoorryy vvaalluuaattiioonn aanndd eexxiisstteennccee
11..
WWhhyy ssiiggnniiffiiccaanntt
WWhhyy ssiiggnniiffiiccaanntt
HHooww oouurr aauuddiitt aaddddrreesssseedd tthhee kkeeyy aauuddiitt mmaatttteerr
HHooww oouurr aauuddiitt aaddddrreesssseedd tthhee kkeeyy aauuddiitt mmaatttteerr
A member firm of Ernst & Young Global Limited
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Liability limited by a scheme approved under Professional Standards Legislation
Independent auditor's report
To the Members of Wesfarmers Limited
1.
Inventory valuation and existence
Why significant
How our audit addressed the key audit matter
At 30 June 2023, the Group held inventory balances of $6,039 million,
as disclosed in Note 6 Inventories (‘Note 6’).
Inventories are valued at the lower of cost and net realisable value
(‘NRV’). The NRV of inventories is the estimated selling price in
the ordinary course of business less estimated costs to sell, the
determination of which requires significant judgement by the Group.
Key matters of judgement include:
• The estimated costs to bring the inventory to its location and
condition for sale
• Estimated costs to sell
• The expected selling price.
In addition, the distribution of the Group’s inventory across a high
number of locations and the quantum of the inventory balances may
result in an increased risk in relation to existence.
2.
Supplier rebates
Why significant
Rebates associated with the Group’s retail operations are received
from suppliers.
The value and timing of supplier rebates recognised requires
judgement and the consideration of a number of factors including:
• The commercial terms of each individual rebate
• The appropriate timing of recognition
• Consideration of the nature of the rebate and whether the rebate
amount should be applied against the carrying value of inventory
or recognised in the income statement
• The accurate recognition and measurement of rebates in
accordance with Australian Accounting Standards and the
Group’s related processes and controls.
Disclosures relating to the measurement and recognition of supplier
rebates can be found in Note 6.
Our audit procedures included the following:
• We assessed the inventory management, procurement and
commercial income processes, including an evaluation of the
effectiveness of relevant controls
• We tested the accuracy of the weighted average costing
systems and performed overhead allocation testing on a sample
of inventory
• We attended stocktakes at a sample of locations and reviewed
stocktake processes for compliance with internal policies
• We tested the subsequent reconciliation of the stock count
results into the inventory records and general ledger
• We tested the estimated costs to bring the inventory to its
location and condition for sale, the estimated costs to sell and
the pricing assumptions in the NRV testing
• We evaluated management’s assessment of stock obsolescence
provisions through attendance at stocktakes, enquiries and
analytical procedures
• We performed inventory cut-off testing on a sample of
transactions either side of year-end
• We reviewed key stock statistics, including sell-through rates,
stock aging and stock turnover
• We performed analysis of shrinkage results and provision
calculations
• We considered the adequacy of the financial report disclosures.
How our audit addressed the key audit matter
Our audit procedures included the following:
• We gained an understanding of the nature of each material type
of supplier rebate, including reading the significant agreements
in place
• We tested the effectiveness of relevant controls in place relating
to the recognition and measurement of rebate amounts
• We performed comparisons of the various rebate arrangements
against the prior year and budget, including analysis of aging
profiles and where material variances were identified, obtained
supporting evidence
• We selected a sample of supplier rebates and tested whether
documentation existed supporting the recognition and
measurement of the rebates in the 30 June 2023 financial
statements
• We inspected a sample of material new contracts entered into
before and after the balance date and assessed whether the
treatment adopted by the Group in respect to rebates arising
under these contracts was appropriate
• We inquired of legal counsel and business representatives
including product category merchandisers, supply chain
managers and procurement staff as to the existence of any
non-standard agreements or side arrangements
• We considered the adequacy of the financial report disclosures.
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Liability limited by a scheme approved under Professional Standards Legislation
Wesfarmers 2023 Annual Report
181
Signed reports
Independent auditor's report
To the Members of Wesfarmers Limited
Information other than the financial report and auditor’s report thereon
The directors are responsible for the other information. The other information comprises the information included in the Company’s 2023 Annual
Report, but does not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion
thereon, with the exception of the Remuneration Report and our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with
Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable
the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as
applicable, matters relating to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the
Group or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether
due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain professional
scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal control
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made
by the directors
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on
the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to
continue as a going concern
• Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report
represents the underlying transactions and events in a manner that achieves fair presentation
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to
express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We
remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings,
including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to
communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable,
actions taken to eliminate threats or safeguards applied.
From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial report
of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes
public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in
our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
182
Wesfarmers 2023 Annual Report
Independent auditor's report
To the Members of Wesfarmers Limited
Report on the audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 103 to 130 of the directors’ report for the year ended 30 June 2023.
In our opinion, the Remuneration Report of Wesfarmers Limited for the year ended 30 June 2023, complies with section 300A of the
Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A
of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Ernst & Young
T S Hammond
Partner
Perth
24 August 2023
J K Newton
Partner
Perth
24 August 2023
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Liability limited by a scheme approved under Professional Standards Legislation
Wesfarmers 2023 Annual Report
183
Shareholder and ASX information
Five-year financial performance and key metrics
Group performance
All figures in $m unless shown otherwise1
2023
Post-AASB 16
20222
20213
Pre-AASB 16
20195
20204
Summarised income statement
Revenue from contracts with customers
Other revenue
Total revenue
Operating profit before depreciation and amortisation,
finance costs and income tax
Depreciation and amortisation
Interest on lease liabilities
EBIT (after interest on lease liabilities)
Other finance costs
Income tax expense
Profit after tax from discontinued operations
Operating profit after income tax attributable to members of
Wesfarmers Limited
Capital and dividends
Ordinary shares on issue (number) 000's as at 30 June
Paid up ordinary capital as at 30 June
Fully-franked dividend per ordinary share (determined) (cents)
Fully-franked special dividend per ordinary share (determined)
(cents)6
Capital return per ordinary share (cents)7
Financial performance
Earnings per share (weighted average) (cents)
Earnings per share growth (%)
Return on average ordinary shareholders' equity (R12)
(excluding significant items) (%)
Financial position as at 30 June
Total assets
Total liabilities
Net assets
Net tangible asset backing per ordinary share ($)
Net debt to equity (%)8
Total liabilities/total assets (%)
43,417
133
43,550
36,679
159
36,838
33,797
144
33,941
30,753
93
30,846
44,485
199
44,684
5,564
(1,701)
(219)
3,644
(135)
(1,044)
-
5,208
(1,575)
(217)
3,416
(96)
(968)
-
5,226
(1,509)
(226)
3,491
(118)
(993)
-
4,272
(1,528)
(237)
2,507
(133)
(677)
75
7,627
(809)
-
6,818
(175)
(1,133)
3,570
2,465
2,352
2,380
1,697
5,510
1,134,514
13,574
191
1,134,145
13,574
180
1,133,840
15,826
178
1,133,840
15,818
152
1,133,840
15,809
178
-
-
-
-
-
200
18
-
100
-
217.8
4.8
207.8
(1.2)
210.4
40.3
150.0
(69.2)
487.2
360.5
31.4
29.4
26.1
22.1
19.2
26,546
18,265
8,281
3.17
48.4
68.8
27,286
19,305
7,981
2.91
56.3
70.8
26,214
16,499
9,715
5.14
2.3
62.9
25,425
16,081
9,344
4.89
(0.9)
63.2
18,333
8,362
9,971
5.21
25.1
45.6
Market capitalisation as at 30 June
55,977
47,532
67,010
50,830
41,000
1 All figures are presented as last reported, including discontinued operations.
2 2022 has been restated to reflect the adjustments to the provisional acquisition accounting for API.
3 The summarised income statement for 2021 includes pre-tax (post-tax) restructuring costs of $59 million ($41 million) in the Kmart Group.
4 The summarised income statement for 2020 includes significant items relating to the following pre-tax (post-tax) items: $525 million ($437 million) impairment of the
Target brand name and other assets, $110 million ($83 million) restructuring costs and provisions in the Kmart Group and a $310 million ($298 million) impairment
to Industrial and Safety, offset by a gain of $290 million ($203 million) on the sale of 10.1 per cent of the interest in Coles, a gain of $220 million ($154 million) on the
revaluation of the retained 4.9 per cent interest in Coles and a benefit of $83 million from the finalisation of tax positions on prior year disposals.
5 The summarised income statement for 2019 includes significant items relating to the following pre-tax (post-tax) items: $2,319 million ($2,264 million) gain
on demerger of Coles, the $679 million ($645 million) gain on disposal of Bengalla, the $267 million ($244 million) gain on disposal of KTAS, the $138 million
($120 million) gain on disposal of Quadrant Energy and $146 million ($102 million) provision for Coles supply chain automation.
6 The 2020 fully-franked special dividend reflects the distribution of after-tax profits on the sale of the Group's 10.1 per cent interest in Coles.
7 A capital return to shareholders of 200 cents per share was paid on 2 December 2021.
8 Net debt balance includes interest-bearing loans and borrowings less cash at bank and on deposit and held in joint operation. Excludes cash in transit and lease
liabilities.
184
Wesfarmers 2023 Annual Report
Five-year financial performance and key metrics
Divisional performance
All figures in $m unless shown otherwise
2023
Post-AASB 16
2022
2021
2020
Pre-AASB 16
2019
Bunnings Group
Revenue
Earnings before tax1
Return on capital employed (R12) (%)1
Capital expenditure (cash basis)
Safety (R12, TRIFR)
Scope 1 and 2 emissions, market-based (ktCO2e)
Scope 1 and 2 emissions, location-based (ktCO2e)
Aboriginal and Torres Strait Islander team members
Operational waste diverted from landfill (%)
Kmart Group2
Revenue
Earnings before tax3
Return on capital employed (R12) (%)3, 4
Capital expenditure (cash basis)
Safety (R12, TRIFR)
Scope 1 and 2 emissions, market-based (ktCO2e)
Scope 1 and 2 emissions, location-based (ktCO2e)
Aboriginal and Torres Strait Islander team members
Operational waste diverted from landfill (%)
WesCEF
Revenue
Earnings before tax5, 6
Return on capital employed (R12) (%)5, 6
Return on capital employed (R12) (%) (excluding ALM)5, 6
Capital expenditure (cash basis)7
Safety (R12, TRIFR)
Scope 1 and 2 emissions, market-based (ktCO2e)8
Scope 1 and 2 emissions, location-based (ktCO2e)8, 9
Aboriginal and Torres Strait Islander team members
Operational waste diverted from landfill (%)
18,539
2,230
65.4
405
16.5
59.9
187.5
1,246
57.1
10,635
769
47.0
127
7.4
218.1
239.1
1,986
82.0
3,306
669
21.6
39.7
518
3.8
849.5
846.4
50
87.4
17,754
2,204
77.2
349
11.3
104.9
220.5
1,288
54.9
9,129
505
32.2
105
8.5
250.9
277.3
1,847
80.6
3,041
540
21.6
36.3
455
4.2
795.4
804.3
48
85.9
16,871
2,185
82.4
445
11.3
110.3
234.5
1,026
52.5
9,982
693
52.1
185
9.2
262.5
292.6
1,512
78.8
2,146
384
17.7
28.6
137
3.0
873.9
880.5
43
71.4
14,999
1,826
58.0
511
10.3
n.r.
262.6
853
53.1
9,217
410
20.4
142
12.8
n.r.
303.7
708
80.5
2,085
394
20.3
30.5
110
3.3
n.r.
983.3
33
89.7
13,166
1,626
50.5
470
11.2
n.r.
269.5
687
52.7
8,713
550
29.4
207
19.4
n.r.
318.6
674
78.5
2,078
438
32.6
32.6
58
4.2
n.r.
897.3
28
74.4
1 Includes net property contribution for 2023 of $38 million; 2022 of $52 million; 2021 of ($10) million; 2020 of $16 million post-AASB 16 ($36 million pre-AASB 16)
and 2019 of $85 million.
2 2022 has been restated to exclude Catch. 2021 and 2020 includes Catch from 12 August 2019. 2019 financial information includes KTAS until its divestment in
November 2018.
3 Earnings excludes pre-tax restructuring costs and provisions in 2021 of $59 million and 2020 of $110 million and pre-tax non-cash impairments relating to Target in
2020 of $525 million.
4 ROC includes the impact of lower capital employed as a result of pre-tax non-cash impairments relating to Target in 2020 of $525 million.
5 2019 includes Quadrant Energy.
6 2020 and 2019 includes $18 million and $30 million of insurance proceeds respectively, relating to the five-month ammonia plant production disruption that
commenced in February 2018. 2019 includes a $19 million provision for the removal of redundant equipment.
7 Includes WesCEF's share of capital expenditure in relation to the Covalent lithium project of $394 million in 2023; $304 million in 2022; $52 million in 2021 and
$24 million in 2020. 2023 and 2022 also includes $42 million and $34 million respectively of capitalised interest.
8 2022 Scope 1 and 2 emissions includes the impact of the scheduled ammonia plant shutdown.
9 2020 Scope 1 and 2 location-based emissions baseline is 955.5 ktCO2e, and differs from the reported value of 983.3 ktCO2e due to adjustments for the current
global warming potentials of relevant greenhouse gases. The 2020 baseline was established using the Scope 2 location-based accounting method and has not
been restated using the Scope 2 market-based method as they were not materially different for the baseline year.
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Shareholder and ASX information
Five-year financial performance and key metrics
Divisional performance (continued)
All figures in $m unless shown otherwise
2023
Post-AASB 16
2022
2021
2020
Pre-AASB 16
2019
Officeworks
Revenue
Earnings before tax
Return on capital employed (R12) (%)
Capital expenditure (cash basis)
Safety (R12, TRIFR)
Scope 1 and 2 emissions, market-based (ktCO2e)
Scope 1 and 2 emissions, location-based (ktCO2e)
Aboriginal and Torres Strait Islander team members
Operational waste diverted from landfill (%)
Industrial and Safety1
Revenue
Earnings before tax2
Return on capital employed (R12) (%)2
Capital expenditure (cash basis)
Safety (R12, TRIFR)
Scope 1 and 2 emissions, market-based (ktCO2e)
Scope 1 and 2 emissions, location-based (ktCO2e)
Aboriginal and Torres Strait Islander team members
Operational waste diverted from landfill (%)3
Health
Revenue4
Earnings before tax4
Return on capital employed (R12) (%)
Capital expenditure (cash basis)4
Safety (R12, TRIFR)
Scope 1 and 2 emissions, market-based (ktCO2e)5
Scope 1 and 2 emissions, location-based (ktCO2e)5
Aboriginal and Torres Strait Islander team members
Operational waste diverted from landfill (%)6
Catch7
Gross transaction value
Revenue
Earnings before tax8
Capital expenditure (cash basis)
Safety (R12, TRIFR)
Scope 1 and 2 emissions, market-based (ktCO2e)
Scope 1 and 2 emissions, location-based (ktCO2e)
Aboriginal and Torres Strait Islander team members
Operational waste diverted from landfill (%)
3,357
200
18.3
71
5.4
27.1
31.5
302
87.8
1,992
100
8.0
73
3.3
27.2
26.9
97
40.4
5,312
45
4.2
41
6.6
11.6
12.1
3
73.0
3,169
181
17.8
68
5.8
30.8
37.2
323
80.8
1,925
92
7.9
64
3.5
26.4
26.4
92
41.6
1,240
(25)
n.r.
3
n.r.
13.8
15.0
n.r.
n.r.
3,029
212
22.3
65
6.1
34.4
40.1
328
91.1
1,855
70
6.2
62
4.3
27.4
27.4
83
38.5
n.r.
n.r.
n.r.
n.r.
n.r.
n.r.
n.r.
n.r.
n.r.
2,787
197
20.2
40
7.9
n.r.
43.2
190
85.6
1,745
39
2.7
59
4.8
n.r.
27.1
72
n.r.
n.r.
n.r.
n.r.
n.r.
n.r.
n.r.
n.r.
n.r.
n.r.
Reported separately
733
354
(163)
10
4.7
2.8
3.4
2
66.2
989
510
(88)
45
2.1
3.0
3.8
-
72.7
Included in Kmart Group
973
528
(46)
n.r.
n.r.
n.r.
n.r.
n.r.
n.r.
632
364
1
n.r.
n.r.
n.r.
n.r.
n.r.
n.r.
2,314
167
17.0
42
8.5
n.r.
45.8
198
82.0
1,752
86
5.8
83
6.9
n.r.
25.9
77
n.r.
n.r.
n.r.
n.r.
n.r.
n.r.
n.r.
n.r.
n.r.
n.r.
n.r.
n.r.
n.r.
n.r.
n.r.
n.r.
n.r.
n.r.
n.r.
1 Includes results from Greencap prior to its divestment on 1 August 2022.
2 2020 earnings excludes a $310 million pre-tax non-cash impairment and includes $15 million of payroll remediation costs.
3 Due to improved methodology, the years prior to 2021 are no longer comparable and therefore not reported in this table.
4 2022 includes API's results from 31 March 2022 to 30 June 2022.
5 2022 full year emissions estimated for comparison purposes.
6 2023 operational waste data is for distribution centres only.
7 Catch is included in Kmart Group for 2021 and 2020 includes Catch from 12 August 2019.
8 2023 includes $40 million of restructuring costs.
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Shareholder information
Substantial shareholders
As at the date of this report, the following shareholders are substantial shareholders for the purposes of Part 6C.1 of the Corporations Act 2001:
• BlackRock Group (BlackRock Inc. and subsidiaries) holding 6.04 per cent;
• The Vanguard Group, Inc. holding 6.00 per cent; and
• State Street Corporation (and subsidiaries) holding 5.00 per cent.
Voting rights
Wesfarmers fully-paid ordinary shares carry voting rights of one vote per share.
Distribution of members and their holdings
Size of holdings
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
There were 14,094 shareholders that held less than a marketable parcel of Wesfarmers ordinary shares.
There were 0.93 per cent of shareholders with registered addresses outside Australia.
Twenty largest shareholders
The 20 largest shareholders of ordinary shares on the company’s register as at 24 August 2023 were:
Name
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Noms Pty Ltd (DRP)
BNP Paribas Nominees Pty Ltd (Agency Lending DRP A/C)
HSBC Custody Nominees (Australia) Limited (Nt-Comnwlth Super Corp A/C)
Australian Foundation Investment Company Limited
Citicorp Nominees Pty Limited (Colonial First State Inv A/C)
Argo Investments Limited
Netwealth Investments Limited (Wrap Services A/C)
BNP Paribas Nominees Pty Ltd HUB24 Custodial Serv Ltd (DRP A/C)
Citicorp Nominees Pty Limited (Citibank NY ADR DEP A/C)
Washington H Soul Pattinson and Company Limited
Mutual Trust Pty Ltd
IOOF Investment Services Limited (IPS Superfund A/C)
Mr Peter Alexander Brown
BNP Paribas Noms (NZ) Ltd (DRP)
Navigator Australia Ltd (MLC Investment Sett A/C)
BKI Investment Company Limited
The percentage holding of the 20 largest shareholders of Wesfarmers ordinary shares was 53.40.
Number of
shareholders
% of issued
capital
403,904
91,977
10,377
5,145
138
11.31
16.98
6.35
9.13
56.24
Number of
shares
255,167,454
163,255,717
80,086,543
21,067,476
19,474,237
19,204,514
7,724,476
7,372,000
5,494,415
5,040,027
4,735,740
3,613,855
2,120,269
2,104,278
1,979,132
1,793,854
1,556,000
1,308,352
1,250,182
1,218,156
% of issued
capital
22.50
14.40
7.06
1.86
1.72
1.69
0.68
0.65
0.48
0.44
0.42
0.32
0.19
0.19
0.17
0.16
0.14
0.12
0.11
0.11
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Shareholder and ASX information
Investor information
Managing your shareholding
The company’s share registry is managed by Computershare Investor
Services Pty Limited (Computershare).
The Investor Centre website is the fastest, easiest and most
convenient way to view and manage your shareholding. Investor
Centre enables a shareholder to:
• view the company share price;
• change your banking details;
• change your address (for non-CHESS sponsored holdings);
• update your dividend instructions;
• update your Tax File Number (TFN), Australian Business Number
(ABN) or exemption;
• select your email and communication preferences;
• view your transaction and dividend history; and
• generate a holding balance letter.
Visit www.wesdirect.com.au and click on ‘Login’ for portfolio
membership or click on ‘Single Holding’ to view your Wesfarmers
shareholding information.
When communicating with Computershare or accessing your holding
online you will need your Securityholder Reference Number (SRN)
or Holder Identification Number (HIN) as shown on your Issuer
Sponsored/CHESS statements.
Change of name or consolidation of
holdings
Name changes or consolidation of multiple holdings into one single
holding must be made in writing by using the required forms, which
can be downloaded from www.wesdirect.com.au and clicking on
the ‘Printable Forms’ button.
Uncertificated Share Register: The Wesfarmers share register is
uncertificated. Two forms of uncertificated holdings are available to
shareholders:
•
Issuer-sponsored holdings – these holdings are sponsored
by Wesfarmers and there is no need for shareholders to be
sponsored by a stockbroker; and
• Broker-sponsored holdings – shareholders may arrange
to be sponsored by a stockbroker who will require a signed
sponsorship agreement.
Holding statements are issued to shareholders within five business
days after the end of any month in which transactions occur that alter
the balance of their holding. Shareholders can also access details of
their shareholdings and dividends paid on their holdings by visiting
www.wesdirect.com.au
Information on Wesfarmers
Wesfarmers website
You can also contact Computershare by:
Post GPO Box 2975 Melbourne, Victoria 3001 Australia
Up-to-date information on the company can be obtained from the
company’s website www.wesfarmers.com.au
Telephone Australia 1300 558 062
Telephone International (+61 3) 9415 4631
Website www.investorcentre.com/contact
Tax File Numbers
While it is not compulsory to provide a TFN, if shareholders have not
provided a TFN and Wesfarmers pays an unfranked or partly-franked
dividend, the company will be required to deduct tax from the
unfranked portion of the dividend at the top marginal rate plus the
Medicare Levy. Shareholders can go online to update their TFN by
visiting www.wesdirect.com.au
Securities Exchange listing
Wesfarmers shares are listed on the Australian Securities Exchange
under the code WES.
Share prices can be accessed from major Australian newspapers, on
the Wesfarmers website or at www.asx.com.au
Dividend investment plan
The company’s dividend investment plan was reinstated with effect
from 27 February 2007. Details of the plan can be obtained from
Computershare or the Wesfarmers website.
Privacy
A copy of the Wesfarmers Privacy Policy is available on the
Wesfarmers website.
Wesfarmers Corporate Affairs department
Further information and publications about the company’s
operations are available from the Corporate Affairs department on
(08) 9327 4428 (within Australia) or (+61 8) 9327 4428 (international)
or from the Wesfarmers website.
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Wesfarmers 2023 Annual Report
Corporate directory
Wesfarmers Limited ABN 28 008 984 049
Registered office
Level 14, Brookfield Place Tower 2
123 St Georges Terrace
Perth, Western Australia 6000
Telephone (+61 8) 9327 4211
Facsimile (+61 8) 9327 4216
Website www.wesfarmers.com.au
Email info@wesfarmers.com.au
Executive director
Rob Scott
Group Managing Director and Chief Executive Officer
Non-executive directors
Michael Chaney AO
Chairman
Alan Cransberg
The Right Honourable Sir Bill English KNZM
Mike Roche
Anil Sabharwal
Vanessa Wallace
Sharon Warburton
Alison Watkins AM
Jennifer Westacott AO
Chief Financial Officer
Anthony Gianotti
Company Secretary
Vicki Robinson
Share registry
Computershare Investor Services Pty Limited
Yarra Falls, 452 Johnston Street
Abbotsford, Victoria 3067
Telephone Australia 1300 558 062
Telephone International (+61 3) 9415 4631
Facsimile Australia (03) 9473 2500
Facsimile International (+61 3) 9473 2500
Website www.investorcentre.com/wes
This annual report has been printed utilising solar electricity onto
sustainable FSC-certified paper. Both printer and paper manufacturer
are ISO 14001 certified, the highest environmental standard.
Designed by Clarity Communications
Financial calendar+
Record date for final dividend
Final dividend paid
Annual general meeting
Half-year end
Half-year profit announcement
Record date for interim dividend
Interim dividend payable
Year-end
+ Timing of events is subject to change.
31 August 2023
5 October 2023
26 October 2023
31 December 2023
February 2024
February 2024
March 2024
30 June 2024
Annual General Meeting
The 42nd Annual General Meeting of Wesfarmers Limited will be
held on Thursday 26 October 2023 at 1:00pm (Perth time) at the
Perth Exhibition and Convention Centre and shareholders will also be
able to participate in the meeting through an online platform. Further
details will be provided in the 2023 Notice of Meeting.
Website
To view the 2023 Annual Report, shareholder and company
information, news announcements, background information
on Wesfarmers’ businesses and historical information, visit the
Wesfarmers website at www.wesfarmers.com.au
Wesfarmers 2023 Annual Report
189
wesfarmers.com.au