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HY results out


Resources contributed 39% of Group EBIT up $574M from pcp


Reversion to below the trend for coal prices will see that removed


At least they used that windfall to continue the Coles turnaround spendng over $200M with much more to come in 2H


Coles Transformation still in the years 1-2 with 3yrs to run --- but cash flow to fund capex is drying up


Proforma debt down from $9.7Bn to $6.8Bn , proforma net debt to equity reduced to 29%


Management is still diverted - 9 divisions - (Home Improvement & Office supplies, Coles, Target. Kmart) = 63.5% of EBIT

Yet they still seem to think that they are the "old" Wesfarmers and the Coles Group was just a medium sized conglomerate "bolt on"


retail offer closes 23/2/09 - how much will small holders put up ?

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What do you mean by:


"Management is still diverted - 9 divisions - (Home Improvement & Office supplies, Coles, Target. Kmart) = 63.5% of EBIT

Yet they still seem to think that they are the "old" Wesfarmers and the Coles Group was just a medium sized conglomerate "bolt on""


Are you inferring that management are not diverting enough attention to the Coles aquisition?


If this is the case I suggest you stop commenting on WES until you start keeping up with what's really going on.


You can start be researching Keith Gordon's appointment specifically made to free up more time for Richard Goyder to focus on turning around Coles. You may then check out the salary package of the new Coles CEO in respect to Richard Goyders package to see how serious they are about getting the right people in the right positions to manage their turnaround strategy.


The other thing you might look at is the current shareprice relative to the retail capital raising price to see if the market agrees with your analysis.


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the fact is that Wesfarmers is now virtually the Coles Group + Bunnings


you cant argue with the fact that it is now 63.5% of EBIT


the other divisions in WES are practically irrelevant as Resources will be once lower Coal prices are reflected


so if you own WES from long ago you dont really own a conglomerate any more - you own a retail group


I will continue to comment as long as I have an interest in WES


I agree the share price is reflecting a positive perception but as I said in previous posts when a capital raising is on, the share price often trends back to the offer level $13.50


whether it does this time we will see


if you bought their last capital raising at $29 you may be a little apprehensive about this one


When I want to see how WES Retail is going I go to the stores


Thanks for the Keith Gordon lead - I will read up on it



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from CitiSB



1H09 Result Preview: Cash Flow Strength

To report on 16 February 2009 - We forecast 1H09e core NPAT of $1,006 million, growth of 67%. We forecast reported NPAT, after abnormals, of $866 million. There will be few surprises in the profit result following guidance given on 14 January 2009. We do not expect any asset impairment charge. Key issues - 1) Cash flow and capex: We forecast a 30% increase in operating cash flow. We estimate capex of $850 million, below the guidance run-rate given a lack of store refurbishments. 2) Is goodwill impaired? WES has conducted asset impairment testing. We expect no writedown of goodwill or any other intangibles. 3) Finance costs: The inferred interest rate for 1H09e could be greater than 10.5% given discount adjustments for provisions.


No impairment - We do not expect a writedown of goodwill in 1H09e. The methodology used to assess fair value is based on long-term cash flow projections and a market-based cost of capital. Debt costs have fallen given lower base rates and long-run cash flow projections are likely to be unchanged.


Rights issue still in focus - The retail component of the rights issue remains open until 23 February 2009. As a result, the final EPS dilution is still unknown. At our estimate of 25% retail take-up, the EPS dilution from the rights issue is 15%. At 100% take-up the dilution is 21%.


Our view - WES share price will be increasingly driven by Coles. We expect the focus in the 1H09e result to be about the progress Coles is making in refurbishing stores, improving the fresh food offer and overhauling its supply chain. We expect noticeable signs of progress on these fronts in 2009.



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