Ladies and gentlemen, thank you for standing by, and welcome to the Wesfarmers 2020 Full Year Results Briefing. Your lines will be muted during the briefing. However, you will have an opportunity to ask questions immediately afterward, and instructions will be provided on how to do this at this time. This call is also being webcast live on the Wesfarmers website and can be accessed from the homepage of wesfarmers.com.au. I would now like to hand the call over to the Managing Director of Wesfarmers Limited, Mr. Rob Scott.

Hello, everyone, and welcome to Wesfarmers 2020 full year results briefing. I'm joined today on the line with each of our divisional managing directors and our CFO, Anthony Gianotti. I'll start on Slide 2. To begin, I'd like to provide an overview of the group's performance including the impact of COVID-19, following which Anthony will provide some commentary on the group's other businesses, balance sheet and cash flows. The divisional managing directors will then provide an overview of the performance and outlook of their respective businesses. And I'll then finish up with comments on the outlook for the group and there'll be an opportunity to ask questions. I'll also provide some brief comments on recent trading, but the focus of today is very much on the 2020 financial year result. So turning to Slide 4, this is a slide that we always put in our results, just to remind everyone what our corporate objective is, and that is to deliver a satisfactory return to shareholders over the long-term. This remains our primary focus. And we realized that we can only achieve this over the long-term, if we continue to anticipate the needs of our customers, look after our team, treat suppliers fairly, contribute in a positive way in the communities where we operate, take care of the environment and act with integrity and honesty in all of our dealings. And these values continue to guide our decisions, and very much they guided our response this year through the Australian bushfires and COVID-19. If you turn to the next Slide 5, I guess this really provides some of the proof points of how we are living our values and staying consistent to our objective. And this year's result is a testament to the dedication of team members and leaders across Wesfarmers, who are living the values in our businesses and who have been highly effective responding to the changing needs of customers and supporting their local communities. And I do want to thank all of that team for their significant contribution in a challenging year. So some of the proof points we're showing on this slide that we are very proud of is, continuing to improve our safety performance with a 23% decrease in the group's total recordable injury frequency rate. It's also important to note that through COVID, we've increased the focus on supporting the mental health of our teams, that continues to be a real challenge, particularly for many of our team members and their families that are living through lockdowns. We're continuing to support our suppliers both in Australia and offshore. You'll see and you'll see this when we report out our annual report that we've increased our disclosures around emissions reduction, and we've also taken some positive steps to further reduce our environmental footprint. And then finally, supporting the communities where we operate is always really important to our teams. And over the past year, the contributions that we've made together with our team and our customers are in the order of $68 million. So turning to Slide 6, we did want to just focus in and provide some transparency on the impact of COVID-19 on our operations and our financial results. So let the divisional managing directors talk to the operational responses in their particular sections. But in summary, what was at the forefront of our response was protecting the health and safety of our team and our customers. And this also involves supporting the government's efforts to limit the spread of the virus. In many ways, it was our businesses and teams that led the way in adopting safe work practices, that were all about protecting our team and our customers and providing confidence with people trading with us. The group has also provided paid pandemic leave to permanent and casual team members, which is an important initiative to help reduce the risk of the spread of COVID. As was announced earlier this month, all permanent team members and casual team members regularly working more than 12 hours a week in Victoria, have been advised that they will remain employed and paid fully for the duration of the current six week lockdown, if the group's businesses do not have meaningful work for them. In the second-half of FY ‘20, the group's retail businesses experienced significant volatility in sales, due to changes in foot traffic as a result of government restrictions and physical distancing requirements. Customers spent more time working, learning and relaxing at home, and this led to very strong demand in some of our product categories, particularly in Bunnings and Officeworks. The significant investment in digital capabilities that the group has undertook in recent years, combined with the continued change in customer preferences towards online shopping, has resulted in online sales growth of 60% during the year, excluding Catch. The government stimulus measures designed to provide income support to households and businesses, also had a positive impact on the group's retail sales. Wesfarmers did not receive material government support payments and is not currently part of the federal government's JobKeeper program. The group received approximately $40 million in wage subsidies, outside of Australia, almost exclusively in New Zealand, where the government mandated temporary store closures and trading restrictions. These payments were passed on in full to team members and represented less than 1% of the total team member payments during the year. Now, turning to Slide 7, the financial overview. As at the first-half, our statutory results reflect the adoption of the new accounting standards AASB 16. To facilitate comparison with the 2019 results, the presentation material that we will discuss today will focus on the performance, excluding the impact of AASB 16. The group's net profit after tax from continuing operations excluding significant items, increased 8.2% to $2.1 billion, a result that was underpinned by strong performances in Bunnings and an increased contribution from Officeworks. Group revenue increased 10.5%. The statutory results include a number of significant items in line with what we announced in May. And Anthony will talk more to this in a moment. The group's directors have determined to pay a fully-franked final dividend of $0.77 per share, which is in line with the prior year and reflects the group's solid underlying net profit after tax performance. The directors have also determined to pay a fully-franked special dividend of $0.18 a share, which reflects the distribution of after tax profits on the gain on the slowdown about 10.1% stake in Coles this year. Now, together, these dividends bring the total full year dividend to $0.170 per share. We’ve recognized the importance that many of our shareholders placed on fully-franked dividends, especially our retail shareholders, where many rely on Wesfarmers dividends as a key source of their income. Turning to Slide 8, and the sales performance across our divisions. As I noted, there was very strong sales performance across Bunnings and Officeworks. Kmart also delivered a solid performance with sales growth accelerating relative to the prior year. The group's retail divisions, as I said, delivered online growth of 60% in the year, excluding Catch. And when we add on the gross transaction value of Catch, the group delivered total online sales of $2.1 billion, making us one of the largest online retailers in Australia. And it's important to note that our e-commerce sales and our digital operations, we see as a way of complementing our stores, and a way of helping our customers have a much deeper engagement with our businesses. Turning to Slide 9, the divisional earnings performance. I’ll let each of the divisional managing directors touch on this in more detail, but just a few points to call out. I've mentioned a number of times the acquisition of Catch. Now, this obviously occurred in August last year, so this is the first year that Catch has been part of the Wesfarmers reported earnings and revenues. Over the year we have undertaken a number of issues to strengthen the relationship between Catch and some of our other businesses, notably Target and Kmart. And more recently, Catch has announced a partnership with flybuys, which is another way of delivering even more value to members and customers of Catch. There was a significant restructuring of Kmart and Target that we announced in May, and this was all about accelerating the growth of Kmart and addressing the unsustainable financial performance of Target. Now this change involves the conversion of a significant number of Target stores to Kmart and restructuring of the Target store support office. We expect these changes will enhance the overall value of the Kmart Group, but in line with accounting standards, we're still required to recognize an impairment of the assets within Target, particularly associated with the conversion of stores. Turning to Slide 10, return on capital. Bunnings and Officeworks delivered a higher return on capital as a result of the strong earnings growth, as well as favorable working capital balances at yearend. Capital employed within Kmart and WesCEF increased following the acquisition of Catch and the investment in Kidman Resources during the year. At WesCEF the return on capital was 30.4% excluding the investment in Kidman. Our commitment to disciplined capital allocation has not changed, and our focus on achieving a satisfactory return on capital remains a key focus of divisions. Slide 11, I just wanted to reinforce the strategies across the group for long-term value creation. Now each of our businesses have their own unique strategies, but all remain focused on delivering sustainable growth over the long-term. Now, while the last financial year has necessitated an ongoing crisis response to deal with the challenges of bushfires and COVID, I'm really pleased with the progress made across the group that has set us up to deliver new revenue streams and stronger performances in the years ahead. This has guided by a relentless focus on our customers, investing for the long-term and building on unique capabilities and platforms. Turning to Slide 12, I'll now hand over to Anthony, who will talk in more detail to the balance sheet and cash flows.

Thanks, Rob and hello, everyone. As Rob mentioned, our statutory results for the year reflected the adoption of AASB 16. I'll focus on our pre-AASB 16 results to align with the basis of preparation of our prior period results, which have not been restated. We've included further detail highlighting the differences between the pre and post-AASB 16 results in the supplementary information. With that breakdown, I'll start on Slide 14 to provide an overview of significant items and discontinued operations. As we highlighted in May, the group recorded a number of significant items from continue operations for the year. On a pre-tax basis, these included firstly a $525 million non-cash impairment of assets within Kmart Group, which included a reduction in the carrying value of the Target brand name, and the write-down of property, plant and equipment and capitalized leased assets in conjunction with a restructure of the Target Network. We've also recognized $110 million of restructuring costs and provisions, reflecting Target store closure costs, inventory write-downs and restructuring costs. Within the industrial and safety division, we've recognized the $310 million non-cash impairment, primarily related to goodwill. And lastly, in relation to the group's investment in Coles, we've recorded a $290 million gain on the sale of the group's 10.1% interest, as well as a one off $220 million gain from a revaluation of the group's remaining 4.9% interest. The group also recorded a post-tax contribution from discontinued operations of $75 million, which related to the finalization of tax impacts associated with prior year asset sales. Turning to other businesses on Slide 15. In total, other businesses and corporate overheads reported a net profit of $76 million for the year, and this compared to a profit of $122 million in the prior period. Within this result, earnings from associates and joint ventures were $201 million, a decrease of $14 million, which largely reflects a lower share of profit from Coles, offset by a positive contribution from stronger property revaluations. Interest revenue for the year declined $17 million as a result of lower interest rates on a lower average cash balance. Higher corporate overheads reflected continued investment in advanced analytic center and higher levels of project activity during the year. Following the sale of the group's 10.1% interest in Coles, the group will no longer record any share of Coles net profit after tax, as the remaining 4.9% shareholding has been reclassified as a financial asset. As a result, the group only expects to record dividends received from Coles going forward. Turning now to operating and free cash flows on Slide 16. Divisional cash generation during the year increased 38 percentage points to 135%, reflecting strong divisional cash flow performance and favorable but temporary working capital movements across the retail businesses, associated with COVID-19. Group operating cash flows increased 32% for the year to $3.6 billion benefiting from strong divisional cash generation, as well as higher dividends received from associates. With these items more than offsetting the non-repeat of operating cash flows in the prior period from Coles and other discontinued operations. Overall free cash flows increased 43% to $4.2 billion. This result included gross proceeds of approximately $2.1 billion from the sale of the 10.1% interest in Coles, offset by acquisition costs of approximately $1 billion relating to Kidman and Catch. It is worth highlighting that the changes to reported operating cash flows under double AASB 16, this will result in a component of leasing costs now being reported as financing cash flows. In this period the impact of this reclassification is that reported operating cash flows are $949 million higher, with no net impact on total cash flows. Further detail on this impact is included in the supplementary information on Slide 55. I'll turn now to working capital on Slide 17. During the year the group recorded a significant working capital inflow of $723 million. This increase was supported by strong working capital disciplines and favorable but temporary movements in our retail businesses, reflecting the impact of COVID-19 on our closing inventory and payables positions. Bunnings, Kmart and Officeworks recorded lower than usual inventory levels, due to elevated demand in certain product categories. In some cases, this resulted in stock availability issues towards the end of the financial year, particularly in Kmart and Target. Inventory management remains a key focus for the group's businesses with adjustments being made to ensure that stock level are appropriate to accommodate demand fluctuations from COVID-19. This may result in our retail businesses holding higher levels of inventory in the short-term. Higher working capital in our industrials businesses reflected stamp duty payments made in relation to the Kidman acquisition, as well as the timing of shipments in fertilizers and chemicals. While it's important to note the temporary impact of COVID-19 on the working capital result, it was pleasing to see our businesses continuing to maintain good working capital disciplines and strong underlying cash generation, throughout the year. Turning to capital expenditure on Slide 18. Gross capital expenditure from continuing operations of $867 million was in line with the prior year. Proceeds from disposals was well below the prior year at just under $300 million, which included $274 million of property disposals in Bunnings. As we noted at the time, the level of Bunnings property disposals in the 2019 financial year were elevated, which reflected changes in the property network and the favorable commercial property market. For the 2021 financial year, we expect net capital expenditure for the group to be between $550 million and $750 million, which includes capital expenditure associated with the conversion of Target stores to Kmart. The estimate will be subject to the timing and outcome of the final investment decision in relation to Covalent, as well as the level of property activity in Bunnings. Turning now to net financial debt on Slide 19. As you can see from the chart, the group's net financial debt position was significantly strengthened through the year, with the group reporting a final net cash position of $471 million. This compares to a net financial debt position of $2.1 billion at the end of the prior period, and reflects the strong operating cash flow performance as well as the proceeds from the sale of the 10.1% interest in Coles. Turning now to Slide 20, and the group's balance sheet and debt management. The group continued its focus on maintaining balance sheet flexibility to respond to a range of economic scenarios, while supporting the group's businesses, shareholder distributions and disciplined investment. As reported in April, in response to the considerable uncertainty presented by COVID-19, the group extended its available bank debt facilities by $1.95 billion to $5.3 billion. These facilities were secured on acceptable terms, with pricing well below the group's current weighted average cost of debt. Finance costs decreased $42 million due to lower average debt levels, following the $350 million maturity of a domestic bond in March, and a decrease in our weighted average cost of debt to approximately 4.9%. Overall, the group maintained strong credit ratings and a robust balance sheet to respond to the rapidly changing trading environment, and capitalize on opportunities for growth across the portfolio. Turning to Slide 21 and management of our lease portfolio. Wesfarmers undiscounted lease liabilities totaled $8.5 billion at the end of the year, with approximately 95% of leases by value, having a lease term of less than 10 years. Across the group, our focus remains on optimizing our lease portfolio to balance network flexibility with security of tenure. In assessing property leasing decisions, we continue to emphasize the lease adjusted return on capital as a key metric, and our approach to leasing decisions remains unchanged by AASB 16. Turning now to Slide 22 and dividends. As Rob mentioned, the board determined to pay a final dividend of $0.77 per share, as well as a special Coles selldown dividend of $0.18 per share, bringing the total full year dividend to $1.70 per share, fully-franked. The determination of these dividends is consistent with our dividend policy, which seeks to maximize the value of franking credits to shareholders, while having regard to current year earnings, credit metrics and our forecast cash flow requirements. The group will again provide shareholders with the opportunity to participate in the dividend investment plan. And given our strong cash flow performance and credit metrics, it's our expectations that shares for the plan will be acquired on market. And with that, I’ll now hand over to Mike Schneider.

Thanks, Anthony, and hi, everyone. I'd like to start by acknowledging the incredible efforts of the Bunnings team in a year that's undoubtedly been incredibly challenging. As I mentioned at our half year results call, many of our team and their local communities were impacted by the bushfires in late 2019 and early 2020, and many took paid time away from work to fight fires, as members of volunteer emergency services and Defence Force reserves. Following this, our team have also dealt with an incredibly tough six months, as the COVID-19 situation has unfolded. And I'm so proud of everything they have done and continue to do to look after each other and create a safe environment for themselves and their customers. Now, starting on Slide 24 and looking first at our safety results. Our number one team measure, TRIFR, or total reportable injury frequency rate continue to improve down 8% to 10.3% from 11.2% last year. As always, the safety of our team is our number one focus, and we want to make sure that every one of our team members goes home safely every day. Operating revenue increased 13.9% to almost $15 billion this year, with earnings also increasing 13.9% to $1.85 billion. Turning now to Slide 25. Total store sales growth of 14.7% was achieved during the year, with store-on-store sales also increasing by 14.7%. Total sales were particularly strong in the second-half, increasing 23.4% and store-on-store sales were up 25.8%, as customers spent more time at home during COVID-19 restrictions. During this period of increased sales, our in-stock position remains strong, reflecting the resilience of our operating model and unique supply chain to cater for the increased demand, and this was helped greatly with strong support from our many suppliers. Now over to Slide 26. As I mentioned, earnings increased 13.9% with a lower net property contribution throughout the year. When the contribution from property is excluded, earnings increased by 17.8%. As always, we continued our strong focus on disciplined cost control. To respond to the challenges of COVID-19, there were a number of additional costs in the second-half, as mentioned at the trading update in June. These costs included in-store cleaning, safety and security measures that are in place across Australia and New Zealand, trading restrictions and store closures in New Zealand and the fast-tracking and rollout of online offer. Solid earnings, the continuation of the property recycling program and strong focus on working capital management underpinned a return on capital of 61.8%. Turning to Slide 27. Bunnings solid trading performance reflected good execution of our strategic agenda throughout the year, as we remain focused on driving an even stronger offer, innovating through data and digital and accelerating trade growth. We also continue to optimize our store network with nine new warehouses and two smaller format stores opened, and six stores added from the Adelaide Tools acquisition completed earlier this year. These improvements to our store network ensure that we reach new markets and create the best possible experiences for our customers. Through our supply partnerships, we remain focused on expanding our product range and investing in innovation, to ensure we keep meeting our customer's ever evolving needs. We also continue to invest in customer to value deliver a highly competitive offer. And as always, this is underpinned by our strong commitment to a clear policy of lowest prices, backed up by a price guarantee. We expanded a number of ranges including bathroom, power garden, smart home and flooring to name just a few, and added heavy lifting equipment to our trade range. We have also added more in-store displays to showcase this wider offer, particularly across the bathroom and kitchen ranges. Over 3,000 additional team members were trained throughout the year, to ensure they have the knowledge and skills to provide expert advice to customers about their product and project choices. And we now have over 15,000 trained experts across our team. We also introduced new ways of training our team, incorporating the use of digital technology and live streaming learning modules where face to face contact was not possible. Innovation through data and digital was accelerated throughout the year, and a number of initiatives were introduced to enhance the customer experience, both in-store and online. Particularly throughout the second-half, our focus was on providing great service and making our digital offer relevant and convenient for customers, and making it even easier for them to access the products they needed during extended periods of time at home. We now have a fully transactional website across the Australia and New Zealand, offering both click and collect, click and deliver and drive and collect, a contactless option for customers to pick up their products. We also launched the Product Finder app to help our customers research and find the products they need in store, and to help them get in and out of their stores as quickly as possible. We strengthened our commitments offering the widest range of products to customers, introducing new categories to our online range, including tinted paint and timber, and launching our online marketplace Bunnings Market Link, which allows us to deliver a curated range of home and lifestyle products through our trusted sellers program, everything from the front gate to the back fence. Our relationship with our trade customers further deepened throughout the year, as we focused on delivering them greater convenience, and a better service experience. As I mentioned earlier, we completed the acquisition of South Australian retailer Adelaide Tools in April this year, which includes six specialist stores and an online store. Adelaide Tools will continue to operate as a standalone business and we're looking forward to developing the business further over time, to enhance the trade proposition for our customers. I'd like to take this opportunity to again welcome the Adelaide Tools team to the Bunnings family. We also continue to focus on connecting with our trade customers and making things even easier for them. The PowerPass app was downloaded over 180,000 times throughout the year, and we saw a noticeable increase in these downloads during the second-half, as our trade customers and small businesses serve their customers with essential products and services. The app includes a digital self-checkout option that enables trade customers to get in and out of stores and back on the road more quickly. More trailer parking is being added in the trade and landscape yards at our stores to increase convenience for customers. And the load-and-go service initiative has helped to ensure we have team members rostered at peak times, to assist trade customers and get them back on the road. We have also grown our trade specialists and account management teams to support various customer segments that we serve, including the industry and government customers and specialist builders. Now turning to Slide 28, where I'd like to take a couple of minutes to talk through our approach and adaptation in the new COVID-19 environment. Our focus has been on four very specific areas, the welfare and safety of our team and customers, putting strong measures in place to support this. Staying in stock to ensure customers have access to essential items to keep their home safe, make urgent repairs will keep their businesses running. Providing materials for physical and mental distraction during extended periods of time at home. And supporting the domestic economy and hundreds of thousands of jobs nationally that form path of our extended supply chain. Another key aspect has been to continue our local support to communities. Unfortunately, we had to suspend our community barbecues earlier this year, and we donated $500 gift cards to those community groups that were impacted, due to the cancellation of these barbecues due to COVID-19. We also found different ways to continue to support local communities in the absence of the hands on projects that our team members would normally participate in. We did this in large part through internal competitions, and team member nominations for local community groups. And this was also a great way to energize and engage I've seen. To sum up our community support for the year, our team participated and supported more than 72,000 community activities, which helped raise and contribute close to $43 million for local community groups across Australia and New Zealand. Now turning to Slide 29 and Bunnings outlook. The outlook remains highly uncertain. Our trading performance is expected to moderate in the 2021 financial year, particularly following extraordinary growth in the second-half, and the likelihood that some customer purchases may have been brought forward. Weaker economic conditions are expected across Australia and New Zealand with the gradual removal of financial support measures from the government banks and landlords, and this is likely to impact housing and renovation activity. We also expect to continue to incur costs associated with operating safely in a COVID-19 environment. We remain focused on investing in future growth, broadening commercial markets, expanding digital capabilities and strengthening our offer. I'd again like to thank our incredible team and suppliers for their efforts serving customers during this year, and their contribution to this year's results. We'd also like to thank our customers for their continued support and respect for our team and their fellow customers. That's it from me, and I'll now hand over to Ian Bailey.

Thanks, Mike, and hi, everyone. Please turn to Page 31 for an overview of Kmart Group's performance summary. FY '20 was a volatile year with the impacts of COVID-19 in the second-half, resulting in unprecedented levels of change to all aspects of Kmart's operations. There are material changes in the way in which customers shop, the types of products that they shop for and how the business serves customers. During this period, we executed on three key priorities and these were, number one being there for our customers, two, keeping our team members and customers safe, and three, making the right decisions to set their business up for future success. Kmart Group delivered revenue of $9.2 billion for the year a 7.2% increase on last year, driven by the continued strong performance of Kmart and the acquisition of Catch in August of 2019. Earnings before significant items and payroll remediation costs declined by 21.9% on last year to $422 million. Significant items of $635 million were primarily related to the previously announced actions to improve the financial viability of the Target business and accelerate the growth of Kmart, which will deliver improved shareholder returns over time. Safety performance in the year was good with the total recordable inventory frequency rate decreasing 34% to 12.8 in FY '20. This reflects good progress on ongoing initiatives to improve safety. Turning the Slide 32. Kmart sales grew 5.4% in FY '20, reflecting consistently strong performance for the first three quarters of the year and a more volatile fourth quarter, due to the impacts of COVID-19. With many retailers around the world suffering excessive inventory, as markets incurred increasing levels of restrictions, Kmart adjusted demand forecast down in anticipation of similar outcomes. In New Zealand this proved to be accurate. However, Australia is faster than anticipated recovery resulted in inventory shortages in June, and moderated sales in that month. Inventory availability has now improved. Sales and Target were below expectations declining 2.6% during the year, driven by declining customer transactions. On the 22nd of May, announcements were made to significantly restructure and simplify the business in order to improve its commercial viability. With social distancing measures in place more customers chose to shop online, and in the second-half online sales grew by 136% and 116% for Kmart and Targets, respectively. Combined earnings to Kmart and Target were $421 million, excluding significant items and payroll remediation costs. This represented a 22% decline from the prior year, predominantly driven by Target. Target's earnings performance reflected lower sales and higher seasonal clearance activity. Earnings in both Kmart and Target were affected by higher operational costs associated with online fulfillment, in-store cleaning, and additional security measures to regulate the number of customers within stores, as well as lower foreign exchange rate. Kmart's earnings were also affected by a deterioration in shrinkage performance, and increased store remuneration from the new enterprise agreement. In Kmart, technology will be a significant enabler of improvements in the business, and a customer proposition by unlocking further operational efficiencies. The first phase of technology acceleration commenced in FY '20 with $30 million invested in technology foundations, including the research undertaken with Anko U.S.A. Turning now to Slide 33. Catch was acquired in August 2019, and since then it has generated revenue of $364 million. Gross transaction value increased 49.2% since acquisition and 75.5% in the second-half, supported by strong growth in both in-stock and marketplace offerings, and the ongoing growth in Club Catch subscriptions. COVID-19 has accelerated Catch’s growth, and the business has doubled its active customer base by acquiring 1.1 million new customers, with a total of 2.3 million active customers at the end of FY ‘20. I was pleased to appoint Pete Sauerborn as Managing Director of Catch. Pete has extensive experience running online marketplaces, and is a great addition to Kmart Group to lead Catch to his next phase of growth. To support future growth, during the year investments were made and expanding the team and building capabilities, expansion of fulfillment capacity and automation, and supplier relationships to improve the in-stock and marketplace offers. Catch also implemented a number of customer driven initiatives during the year, including offering click and collect across our select number of Target stores and introduced Target to its marketplace in July. Turning now to Slide 34. FY ‘21 will be a year of investment for the Kmart Group, as the foundations are set for a significantly bigger Kmart and a rapidly growing Catch. Kmart group is well-positioned to realize the benefits from these investments in FY ‘22 and beyond. There will be an ongoing focus on ensuring that it is a business that's very well-placed for the long-term. Kmart will continue accelerating its core strategies of a great place to shop that is simple to run and better products at even lower prices. The business will be investing for the future growth by developing its technology and data capabilities. In FY ’21 we will implement a number of technologies in the business, including advanced data analytics, migration of elements of the mainframe cycle [ph] and the build out of customer data assets and RFID. The successful conversion of a number of Target stores in FY ‘21 will deliver future growth in Kmart and further fractionalize Kmart's fixed cost base. To-date, commercial agreement has been reached on 24 large store conversions, with the conversion of up to 16 additional large stores dependent on the outcome of lesser negotiations. An additional 50 small Target stores will also be converted to the new K Hub format. The second phase of the Target review has now concluded. And after evaluating a number of different options, we believe the best commercial outcome is to continue to operate Target as a largely standalone business within the Kmart group. The strategy for Target will continue to focus on style and quality at an affordable price and priorities on line growth, while a very disciplined approach to capital allocation will result in a progressive reduction in the size of the store network and associated lease liabilities. Target, as a result, will be a simpler business run at a much -- and a much smaller contributor to the Kmart group. By FY ’22, Target's sales contribution is forecast to be approximately 20% of Kmart and Target's combined sales, and its relative contribution is forecast to reduce further over time. As per the previous guidance, Kmart Group expects to incur one-off non-operating costs of approximately $120 million to $140 million in FY ‘21, relating to the conversion and closure of Target stores. The Catch, there is a great opportunity to invest in the online market, and we're accelerating our investment to rapidly grow the business. In FY ’21 we will focus on growing Catch’s GTV by the expansion and improvement of its customer value proposition. Significant investments will be made in technology, marketing and team capabilities which will impact earnings in FY ‘21. Topline growth will be the key priority for the business. Catch will continue to broaden the range of categories and brands available in both its in-stock and marketplace offerings and leverage assets across the Wesfarmers group. Finally, I'd like to take this opportunity to thank the team members across Kmart Group for their hard work and dedication across the year. Looking after our team has been a priority for us and I'm pleased that we've been able to support our team members through this period with policies to pay our team, through COVID-related absences and through the full shutdowns in Australia and New Zealand. During such a difficult year, we have been continually challenged and pushed with change on multiple fronts, but our team members continue to stand up to the task, and I couldn't be prouder with their resilience. Thank you, and I'll now hand over to Sarah.

Thanks, Ian, and hi, everyone. I'm pleased to report that Officeworks has delivered strong growth and positive progress against our strategic agenda over the past 12 months. Even with the extraordinary operating environment of the second-half, with both bushfires and COVID-19. This is a direct reflection of the team's safety first focus, and their agility and passion to help our customers make good things happen. The safety, health and well-being of our team members and customers remains the priority for Officeworks. In response to COVID-19, we implemented best practice measures across our operations, such as protecting screens at points of sale, physical distancing measures, mask usage, and new planning standards to make sure our team in stores and in our supply chain were protected and felt safe coming to work. These safety measures coupled with investment in capacity across every channel, ensure that customers felt confident that they could shop safely for the essential they needed, when and how they wanted to shop, whether in-store or online, delivered to their door or through contactless click and collect. We were able to play an important role providing essential products and services to Australians, as they adjusted to new ways of working, learning and running their businesses. And in a year when the community needed us more than ever, together with our customers, we were able to donate more than $3.1 million to our national partners, Bushfire Relief and a number of local health and education groups. Moving to the next slide. Our continued focus from providing a safe workplace for all team members was reflected in the delivery of our safest year yet, with TRIFR decreasing from 8.5 to 7.9. Officeworks delivered revenue of $2.8 billion for the year an increase of 20.4% on the prior year. Earnings increased 13.8% to $190 million and return on capital increased by 260 basis points to 19.6%. Moving to the next slide. We delivered strong sales growth for the year of 20.4%, as we remained focused on creating an easy and engaging experience for our customers. Ongoing investment in our every channel offer, including our established online capability, enabled us to adapt and scale quickly to shifting customer shopping behavior. Our online sales penetration, including click and collect sales for the year was approximately 30%. Building on our strong sales momentum in the first-half, total sales growth of 28.5% in the second-half was underpinned by our most successful back-to-school trading period ever, as well as significant increase in demand due to customers establishing and maintaining their work and learning spaces at home. Throughout the year, we attracted new customers to Officeworks, while existing customers explored more of our range. As a result, we saw a significant acceleration in technology and furniture sales, as people set up their home office. Our art and education ranges also resonated strongly with customers, with many households spending more time at home learning and pursuing creative hobbies. The expansion of our safety and hygiene range enabled our business customers to operate in a COVID safe manner. Our print and copy business, however, was challenged in the second-half, as COVID safety measures meant our capacity to serve customers was limited. We delivered strong earnings growth of 13.8% despite gross margin compression from a significant change in the sales mix towards lower margin technology products, and ongoing price investment throughout the year. Disciplined operational cost control partially offset investments in team member recognition, COVID safety measures and our expanding customer offer. Earnings growth combined with effective working capital management produced an increase in return on capital to 19.6%. Moving to the next slide. We made positive progress delivering on our strategic agenda over the year. The safety, health and well-being of our more than 8,000 team members has never been more important than over the past 12 months. I am so proud of how the team looked after each other, kept each other safe and enabled our customers to shop safely through what continues to be an incredibly challenging time. Now more than ever, we need to listen to our customers and be agile in our approach to meet their ever evolving needs. With this in mind, we've continued to invest in our data and analytics platform, which will enable us to increase our marketable customer base, and puts us in a better position to personalize their experience. We redefined our back-to-school offer by launching in October to attract a new customer group, upgrading our marketing and evolving our online store list status to enable customers to upload and compare their book list, a tool that strongly demonstrated the value of shopping with Officeworks. As part of operating, a responsible and sustainable business, we are pleased to report that we recycled 86% of our operational waste, and reduced waste sent to landfill by 26%. We reduced carbon emissions by 6% through further investment in energy efficiency initiatives. We invested in a new payroll and people management system to help streamline and improve the way we work. Launched in June, the system is an important evolution for Officeworks, centered on making the small things easier for our team. Geeks2U achieved strong organic growth over the year, following the launch of a number of services in our national store network. In the second-half, we introduced our new subscription service to help customers remain connected, whilst working and learning from home, which has resonated well. During the year, progress was also made to re-platform our print and copy business. We expect this to deliver a significantly improved online experience, particularly for our B2B customers. It is due to launch this calendar year. We also continued to invest in our store network, upgrading 72 stores and expanding our Townsville store to be the second largest in the fleet. Turning to the next slide. Notwithstanding the strong momentum built throughout the 2020 financial year, the outlook for the 2021 financial year is uncertain, with changes to customer shopping patterns and COVID-19 measures expected to impact trading. Despite an uncertain environment, Officeworks is focused on remaining agile and adaptable to manage changes as they eventuate, including investment to ensure our operations remain COVID safe. We will continue to drive growth by executing our strategy, and creating investing in programs to support the health and well-being of our team members. We are committed to ensuring we provide them a safe and rewarding place to work. Excitingly, the first phase of the Officeworks customer data and analytics platform will be completed this year, enabling us to have far greater understanding of our customers and to improve personalization. We will further build our position in the education market by expanding into the B2B market, and have recently launched a classroom essential service for primary schools. We will continue to invest in our CFCs and supply chain, as well as our online capability in store network to enable future sales growth and improve productivity. We also look forward to seeing increasing numbers of Geeks2U subscribers during the year, as awareness of this new offer grows. There are many opportunities in front of us as we accelerate our strategy in the year ahead. We remain committed to helping make bigger things happen for our team, our customers and our local communities, in order to deliver a satisfactory return to shareholders over the long-term. I would like to take this opportunity to recognize and thank the Officeworks team, for rising to the many challenges over the past 12 months, with an amazing spirit and huge energy. I will now hand over to Ian Hansen.

Thanks Sarah, and hello, everyone. I'd like to start by acknowledging and thanking all the WesCEF staff for their hard work over the year, including during some very trying times more recently. Despite facing unique challenges, they continue to focus on safety with a strong commitment to serve our customers and keep all of our sites and plants operating. We have a very dedicated and hardworking team across our businesses, and I am particularly proud of them. Turning to Slide 41 for review of the financials. You can see the division overall achieved a slight increase in revenue over the period, with growth in chemicals and fertilizer revenue, offset by a decline in energy, which was primarily driven by weaker prices and volumes. Earnings for the year were $393 million compared to the prior year of $433 million on the same basis. The result includes the costs associated with the ongoing management of the lithium investment. Turning to Slide 42. I'd like to highlight the strong and safety performance as shown in the chart on the top left of the slide. Our total recordable injury frequency rate or TRIFR has declined to 3.3 from 4.2 in the prior year. It's so very pleasing to see a continued declining trend in TRIFR over the years and that WesCEF safe person, safe process, safe place campaign is resonating across all our businesses and locations. The plant operating performance was strong with improved availability in our chemicals portfolio of 96%, as shown in the chart on the top right. This has been a strong focus and is the result of recent investments in reliability and operability, as well as utilizing data and digital capabilities to drive improvement. Turning to Slide 43 to comment on the business units. The ammonia business performed strongly with high plant availability and record production rates, partially offset by weaker global ammonia process. The ammonium nitrate earnings were impacted by continued work to refine the emulsion product offering, and we saw the annualized impact of renegotiated long-term customer contracts. Sodium cyanide earnings increased due to higher production volumes and the strength in the gold mining market. Now to energy, earnings were significantly down in the prior period. This was primarily due to lower energy prices, in particular the Saudi Contract Price, which is a key international benchmark indicator for LPG pricing, down some 17.3% on average versus the prior period. In fertilizers, the business achieved solid sales volume growth, but experienced margin compression with higher operational and logistics costs. I'll now comment on the outlook. Please turn to Slide 44. Within the chemicals business, we expect conditions to remain robust for the core mining segments that we serve. There's likely to be in moderation in EGAN sales, now that the Burrup plant is operational. This will see us divert more production to fertilizers and export markets. There's likely to be ongoing impact from weakness in price for the energy business. Fertilizer earnings will be dependent upon harvest outcomes and seasonal conditions. It should be noted that recent years in Western Australia has been above average. The Mt Holland lithium project will complete optimization studies this calendar year, and the joint ventures will consider a final investment decision in the first quarter of calendar year '21. WesCEF's earnings will continue to be influenced by international commodity prices, currency exchange rates, competitive factors, and seasonal weather and harvest outcomes. As the COVID-19 situation continues to play out globally, the business may also be affected by ship availability and fluctuating freight and input costs. Thank you. And now to Tim Bult.

Thanks, Ian. Before I begin, I just want to say how pleased I am to have joined industrial and safety in April and to be part of the team to grow value over time. Like others, I would also like to commend the hard work by all of the teams in the past year, particularly in recognition of the critical supplies and services that the industrial and safety teams provided to our customers and communities, during the Australian bushfire crisis, and indeed that they continue to supply during this period so impacted by COVID-19. This included personal protective equipment, hygiene and cleaning products, critical medical oxygen supply to hospital groups, and additional risk consulting services. Our team members have shown tremendous capacity to navigate through the challenges the year brought, and to main surety of supply to our customers often where suppliers of certain products were critically short. I'm proud of how our teams have responded and contributed so far, and I thank them for their effort and commitment. Now turning to the annual results on Slide 46. Industrial and safety's earnings declined from $86 million to $55 million, before payroll remediation costs and significant items. The earnings performance was below expectations due to the disappointing performance of Blackwoods in the first-half, and lower customer demand in Workwear Group in the second-half arising from the impact of COVID-19. After the payroll remediation costs and significant items, industrial and safety recorded a loss of $270 million. This including $15 million of one-off payroll remediation costs incurred, and the $310 million impairment to the carrying value of the industrial and safety division, primarily relating to goodwill. This is a disappointing outcome and clearly one we are all committed to building from. Safety remains a key priority for us, and pleasingly the total recordable injury frequency rate declined to 4.8 over the period. And I congratulate our teams on achieving this. In relation to the specific performance of businesses within industrial and safety, on Slide 47, revenues grew in Blackwoods due to demand from critical products in the second-half. Continued growth in strategic customers and in Western Australia, partly offset by some sales declines in New Zealand and in other segments. Earnings for the year were impacted by a continued investment in customer service and in digital capabilities, including the ERP system, and in other remediation and strategic initiatives. Encouragingly, earnings in Blackwoods were higher in the second-half than in the first, as the team worked on implementing the turnaround plan. Earnings declined in Workwear Group due to lower revenue from corporate uniform sales in Australia and the United Kingdom, as a result of the impact on COVID-19 on some customer segments, including airlines, retail and hospitality, which became very evident in the fourth quarter. Prior period earnings in Workwear Group benefited from one-off insurance proceeds and profit from divestment of retail stores. Revenues in Coregas increased during the period, but earnings were impacted by higher raw material and freight costs. Earnings in GreenCap were lower during the period driven by lower customer demand from the impact of COVID-19, particularly on its expert services and Trimevac business units. Turning to the outlook for industrial and safety on Slide 48. Market conditions in Australia and New Zealand are expected to remain uncertain and more challenging in financial year 2021. Blackwoods continues to focus on improving its customer value proposition, including continued investment in data, digital and the implementation of the ERP system. Workwear Group will continue to be impacted by COVID-19. The business is focused on new opportunities, growth from key brands, cost improvement initiatives and continued investment in its digital offering and operating efficiencies. Finally Coregas earnings are expected to be impacted by lower demand along with continued competitive pressures. Thank you. I'll now pass back to Rob.

Thanks, Tim. I'll now finish up the presentation on Slide 50, and acknowledge that we've gone into a lot more detail this year. So thanks for your patience, but we felt it was important to provide more detail on the issues that the divisions are facing from a COVID perspective. Now the continued impact of COVID-19 on customer demand operations in the broader economy, presents significant uncertainty with the Group's businesses. While consumer spending more time at home is likely to support higher demand in some of the Group's businesses, retail sales will be impacted by any further trading restrictions and the gradual removal of government stimulus measures, particularly if unemployment remains elevated. Given Wesfarmers strong balance sheet and the diversity and resilience of the Group's portfolio, we remain well-positioned for a range of economic conditions. The Group's retail businesses will maintain their focus on making changing customer needs and delivering even greater value, quality and convenience for customers. Raising investments into the Group's digital capabilities will continue and are expected to support enhancements to the customer value proposition, expansion of addressable markets and delivery of operational efficiencies. Actions have been taken to address the unsatisfactory performance in Target and industrial and safety, and the Group will remain focused on a successful implementation of these actions. Group will also continue to develop and enhance its portfolio, building on its unique capabilities and platforms to take advantage of growth opportunities within existing businesses, within recently acquired businesses and to pursue investments that create value for shareholders over time. That brings us to the end of the briefing. We will now be happy to take questions.

Thank you very much. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Shaun Cousins from JPMorgan. Your line is open. Please ask your question.

Thanks. Good afternoon, guys. Maybe just a question, I've got two questions. They relate to sort of online and digital, an increasing part of the business. I was hoping that we'd be able to get some consistency in maybe second-half, or full year growth rates of online, and online as a proportion of sales across Bunnings, Kmart, Target and Officeworks. There we've got 30% as a share of sales for Officeworks, a big number in, -- Ian if you could repeat what the growth in the second-half was? But maybe if you could sort of tell us what the divisional performance is growth rates and percentage of sales please?

So Ian, do you want to touch on that? We might just quickly, Ian, Mike and then Sarah.

Yes, sure. I'm happy to go first. So in terms of the numbers I quoted shown, the second-half Kmart grew by 136%. So that’s 136% and Target grew by 116%. And to give you a sense of what that is as a proportion of as you look across the course of the year or let's just keep it in the second-half to keep it simple. We don't go to the specifics, because the in-store sales and the online sales both kick from the same location. In Kmart it's still a single digit number and Target it's a double digit number in terms of proportion of the business.

Maybe a full year? Sorry, Officeworks, you give us a full year number, you guys give the second-half. I'm just really seeking some consistency, please.

The numbers grow with the nature of COVID-19 and obviously the migration towards online. The numbers were smaller in the first-half, so it's obviously less than that if you look on a full year basis.

Shaun, I'm happy to give you the split, if you like, in terms of contribution to total sales for the first-half, second-half.

Okay.

So, for Kmart, just to give you an idea, for Kmart, first-half was around 3.7%, and that lifted in the second-half to 6.7%. So overall, for FY ‘20 it was about 5% of sales.

I'm sorry, Anthony, that's Kmart, the business not all Kmart?

Yes, that's Kmart the business, yes.

Yes, please. Yes. Thanks. Target, please?

Target, it lifted from 7.2% in the first-half to 11.5% in the second-half, and then finish the year at 9% overall.

Great. This is fantastic. The other businesses, please?

Yes. Hi, Shaun, it's Mike Schneider here. How you’re doing? So as you'd imagine, we've been seeing a steady increase in online, and obviously in the second-half, we were able to bring the whole business fully online, which was with the three forms of online that I talked about. So, it's going to be a massive percentage that’s coming off an almost zero base, and it's sitting at around about 2% total at the moment.

As in today's number, or that was the second-half or sorry, [Indiscernible]at the moment please?

Yes, it's about 2% of -- we sort of finished the year at about 2% of overall revenue with online obviously picked up significantly in the second-half, because we had markets like New Zealand that didn't have online at all. We had markets like Western Australia that only had a click and collect, not click and deliver. So the percentage growth probably skewed significantly purely, because of the fact that it's off a low base, but it's sort of sitting at about 2% at the moment.

Today, okay. Yes, alright. And for the full year, what would that have been in, so 1% of sales or?

Yes, probably about 1% of sales, I would say.

Fantastic. Great. Sarah?

Hey, Shaun, obviously we've got the reverse of Bunnings in the sense that we've had a very well-established online business for a long time. So the equivalent about 30% sales, online sales penetration I called out for FY ‘19 was 27%. So year-on-year, we saw a 30% increase in online sales across our business. And we saw strong growth in stores as well.

And maybe sort of the first-half, second-half split?

I don't have them to hand, but I can [Indiscernible].

You guys are well-advanced. But my second question is also around online and maybe back to you Mike. Can you just talk a little bit about part of the $70 million one-off costs relate to accelerating the online rollout. And it looks like there's a degree of tidying up going on in terms of riding off some legacy systems. Should we anticipate, given the costs that have been incurred in the second-half ‘20, that there shouldn't be any negative channel mix shift, weighing on margins as online grows fast and that you now are able to handle well any sort of incremental costs that come with online? I'm just curious about channel mix hurting margins.

Yes, we don't anticipate channel mix hurting margins. We've got a pretty -- we obviously have a lot of opportunity to really refine the process through the second-half in all the markets. So I don't anticipate any sort of significant sort of shift there. And some of those costs are obviously just getting something set up, just because we obviously saw a pickup in demand for online, particularly in parts of the market where we had restrictions in place like New Zealand coming out of lockdown. We had a sort of a couple of week period where you could sort of sell purely online, like you do in Victoria. So there are a few set up costs, but we don't see an impact to mix -- based on mix.

Great, thank you very much.

Your next question comes from a line of Michael Simotas from Jefferies. Please ask your question.

Hi, everyone. I've actually got a couple of follow-on questions from the previous discussion. The first one is just generally how should we be thinking about the trajectory of the incremental costs that you've called out in FY '20 for Bunnings into FY'21? So in total, it's $90 million in FY '20. You clearly got some COVID-related issues in '21as well. How much of that will continue? And also just if you can confirm if the cost number that you've provided is net of the New Zealand waste subsidies?

Yes. Hi, Michael. I'll answer the first. Some of those costs will continue. They're probably not going to be anyway near sort of substantial as the numbers that we've pulled out, because some of those were, as I said to Shaun some of those were in establishing different things. But clearly, it's a moving feast and governments imposing restrictions and changes very quickly and more generally without a lot of consultation with business. So we obviously just have to react and respond to those. And obviously, we'll do everything we possibly can to keep team members and customers safe, because that's the number one priority and then clearly to stay trading. So, it's really hard to sort of quantify, but it's certainly a little bit of a challenge for us to sort of understand that. And on New Zealand, those costs were net of the subsidy.

Okay, great. Thank you. And the second question, while I've got you. Can you just comment generally on the performance of the Bunnings Digital business? And I guess demand is one side of the equation. But also, how you're going at handling the volume that's coming through the system, particularly given I imagine you would have had some very busy weeks in Victoria recently?

Yes. I think the team have done an amazing job. The ability to fast-track New Zealand by almost six months to be online was a real credit to the team, bringing in categories like tinted paint and timber. There is real complexities in the code needed to be able to do the things that need to be done there along with managing products like dangerous goods, things like gas and solvents and those sorts of things. So, on the operational side, the store teams have been fantastic. The digital team have really accelerated that and done an incredible job. So I think all up, they've responded really, really well. Clearly in some areas, the volumes have lifted. We saw big lifts of volume in Northwest Tasmania when they went into that level of lockdown we saw that in New Zealand. But the process that we built, when we designed the model was actually done very closely, in very close consultation with our store team. So the process that we've established in sort of [Indiscernible] into the team, from a process point of view is very, very good. So their ability to sort of handle the uptake has been really impressive. And I think the customer experience is one that we've received plenty of positive feedback on, particularly around the contactless drive and collect, not only in Victoria, but in other regions. And the speed of that you can get your products pretty much within the same day. And that's a really strong position to be in for the sort of products that we're selling.

Great. Thank you.

Your next question comes from the line of Grant Saligari from Credit Suisse. Please ask your question.

Good afternoon. Thanks. First one, could you please just elaborate on where you're at with the turnaround of Blackwoods and ERP implementation, which seems to be really dragging out, please?

Yes. Thank you, Grant. Just in relation to the turnaround with Blackwoods, I guess, as I called out there is some momentum building within the business, and the second-half was better than the first-half from an earnings point of view. There's a long way to go, and the team are really focused on that. And we recognize that improvement is important to have a short timeframe around getting that going. On the ERP project, that I guess we're confident that the system we're putting in to Blackwoods is the right system. It's fair to say that there were some components of the plan that weren't going according to the timeline or to the scope. And that we've set a new plan. We have transitioned implementation partners. And we now have a project leadership and also a governance framework and a plan that I think puts us in good stead to see the ERP successfully delivered this year, but we've had to adjust our plan accordingly.

So do you expect Blackwoods to be returning to earnings growth by timeframe FY ’22? I mean, what sort of expectation should we have?

Look, I think there's enormous uncertainty in the market at the moment, so it's really difficult to forecast exactly the rate of growth of earnings that we can achieve on the business, when there's uncertainty around the overall market outlook. The things we're focused on, improving profitability, improving our market share, whatever that market might bring in terms of volatility. And I think the team is on track to do that. And, I see a good runway for improvement and we're pursuing that very actively.

Okay. If I could ask a second question, please. I guess Rob or Anthony, if you could comment. I mean, you're obviously accumulating significant amounts of cash and debt availability. I'm just intrigued to understand, what scenario do you sort of envisage sort of playing out to be able to utilize that type of capability or to provide some defense to the business? I'm just intrigued and I don't want to comment specifically on anything, and I wouldn't expect you to, but I am intrigued to understand what sort of macro scenario you actually are planning for with the capacity that you're accumulating on the balance sheet?

Grant Rob here. Fair to say, if we were in a very normal operating environment, you'd look at our balance sheet and say, gee, you have incredibly conservative gearing. But having regard to the broader environment that we're in, it just feels to us like now is a really good time to have an unquestionably strong balance sheet. And that just gives us maximum financial flexibility. It gives us the flexibility to keep investing in our businesses at a critical time, investing in new growth initiatives, adapting to the volatility that we may well see, being opportunistic if the right opportunities come along. So, yes, our strategy around balance sheet is very much a function of the uncertain environment that we're in. And we'll just continue to reassess that as there's more clarity on what the economic outlook is going to be through COVID.

All right. Well, thank you. We'd all look forward to seeing what that future holds.

Your next question comes from the line of David Errington from Bank of America. Please ask your question.

Afternoon or morning, team. Anthony, it's probably you and Ian that I address this question to. I'm looking at your inventory levels, fantastic performance, depends which way you want to look at it. We had an $800 million saving in inventory. I'm assuming the majority of that inventory, given Mike's comments that inventory, I think he stated that inventory were at pretty good levels. I'm assuming the majority of the reduced inventory was probably in the Kmart business? Can you quantify what -- where -- if that is true and what sort of saving in inventory? And I suppose the observation, the first question following on from that, is there a supply chain problem in Kmart? I know that Ian called out that, yes, you've got -- you underestimated demand pick up. And I certainly, you weren't alone in that. I mean, we thought we were heading toward the abyss. So I can understand that you underestimated demand. But is there something a little deeper in Kmart with the supply chain? Because I remember a year or two ago you did have difficulties meeting volumes, and it really caused stress. I noticed your CapEx is down, so you haven't obviously been investing in that back end as much as you probably should. How much -- you seem like your back end has got some stress there. So there's two prongs to that question, if you wouldn't mind having a go at them.

Yes. David, perhaps I'll have a go at the first part of your question in relation to inventory. So, yes, we pointed that out in terms of the big swing in inventory, and that is likely to be temporary. When you look at it across the business, it's actually across all of the retail businesses. So it's not just came out in Target. Clearly, it's been more visible in Kmart and Target with stock outs in the store. But as you would know, in Bunnings, we typically carry higher weights of stock. So we have seen in some categories it has been more difficult to get stock, and that's resulted in the overall stock levels being lower than they were last year. And similarly in Officeworks. So you will see in Officeworks, there were stock issues in some categories, and that's resulted in some lower stock levels. And you've got to remember David, that was the position as at 30, June and that's -- the danger with this is it's at a point in time, that will change. And we're going through some quite heavy fluctuations in trading, which might means that that movement is quite volatile, and it's why we've called it out in the cash flow result.

You understand the question, Anthony, with that answer. Because most of us have had experiences and we've seen photos that have been doing the wise, and there's press reports. I think one article said that they thought Kmart was actually closing down, which I thought was a bit harsh, as you know, because that was the position of the stock. But you can understand my skepticism that the majority of that improvement in inventory is actually Kmart. So has Kmart got a supply chain problem?

I'll let Ian answer that, David.

Yes, I'll have a go. Yes, obviously to drop that much inventory in just Kmart alone David would mean we were negative inventory. So…

It looked like that in some of the stores -- if I've got to tell you. There wasn't much stock on the shelves.

I'll look at and I -- no one feels that pain more than I do. It was what we described -- I described on the way through. We made a call when COVID hit and we looked around the world particularly at like retailers who own brand, retailers whether they’re in a general merchandise in the apparel space and we could see issues with inventory and too much of it. And what we know in our business is too much inventory is a difficult problem for us to manage, and it lasts for a long period of time. So we backs off volume. So this was us overriding our systems and lowering demand in anticipation that would play out. And as I said it played out pretty accurately in New Zealand, and our inventory position in New Zealand has held up very well. We did not anticipate the speed of improvement that we got within Australia, and we went from April, which was a tough month for us to May, which was extraordinary in terms of its turnaround, and the way that customers purchased. And they shopped with a vengeance in that period, and they cleaned our shelves, as you saw. Now that's fixed. So, as soon as we saw that of course, we placed more orders and we're now fully back in stock across our business. And ready to go. And we've got lots of more inventory on the way. So I think that that one was a temporary issue which peaked in June that has been progressively getting better since that point. And we're now in good shape. So I don't see this is -- this is a different issue from the one that we had when we talked about it previously, which remains fixed. This was very much as manipulating demand in anticipation of a broader slowdown than actually occurred.

Okay, okay. Hopefully, we'll start to see some improvement, particularly on stock availability on shelves and pick up in the sales. So yes, I look forward to that. The second question, I don't want to hold the call too much, but Mike, Mike Schneider, you made a call, which I find quite interesting that you thought -- well, you're being conservative, I know you too well, but you're being -- but it brought forward sales. You know what stocks been selling in that, but I know my personal behavior has been -- I haven't brought forward sales. It's just been changed behavior in this new world. I've actually enjoyed buying more home improvement stuff. What is your view? Why do you say it's brought forward sales rather than changing consumer patents? Is there something people are buying? Because I can imagine Sarah saying brought forward sales in Officeworks, so I get that. But, my observation is Bunnings is just enjoying a new world with this sales could be a sustained. So as far as the question is, what are you going to do? What are you looking to do to make sure that this isn't just brought forward sales but this is actually systemic?

Thanks, David. I think it's a case. It's a bit of both probably. I think, where we've seen sales going forward potentially and we don't -- we haven't had the opportunity with everything going on to sort of spend a little time market researching, customer sentiment, but few of the categories, like paint where sales have been particularly strong and you sort of think about the project nature of that probably don't paint the house twice in quick succession. So there's some categories like that, where we certainly have -- and potentially in areas like furniture and barbecues, where traditionally some of those things might have waited for the spring season. I think, we had people who were at home. And when we were -- it depends on where you are in Australia or New Zealand and when you were allowed to have people come to your home, but you couldn't go and aid out, upgrading those outdoor entertaining areas. Some of the areas where we think there's pull forward. That being said, we're very focused on growth and I think the strategic agenda of the business has for the year ahead is very focused on that. We've made some really good inroads in those categories that I called out, power gardening, plumbing, some of that changes to layout in store, some of these new product, new range and clearly a strong focus on trade. So, we're very focused on offering, wider range and a better assortment to customers to choose from. But we are conscious that in some areas, and just depending on the projects that people are doing. You're not going to necessarily go back and do the project over again, just because you've got the time. But, there are other areas that, as you've said, people are doing more on gardening. There's been a good lifting in gardening activity, and we're heading to spring and that's a great time to gardening as well. So it'll just be category based. I think, hopefully that covers it all for you.

We're not also going on overseas trips anymore. So that's going on and sort of product that, like the decking, I've done decking and I'm a fan of the decking. This could be more permanent. I suppose my point is, I think that you are probably being a bit unfair to yourself saying it brought forward.

I would just obviously, forming the best view that we can. And yes, there's things that people aren't going to be able to do for the foreseeable future. And if we continue to drive the strong winning offer that they we want to have, and do all the right things to keep people safe, then we'll earn the right to be chosen by customers. And then that's what we'll go after very hard.

Thanks, Mike. Thanks, Rob.

Thanks, David.

Your next question comes from the line of Bryan Raymond from Citi. Please ask your question.

Good afternoon. My first one's on Kmart and Target. I'm just interested in the decision not to progress with the conversions and closures. How would you characterize the discussions with landlords you've had to date in terms of how constructive they've been? Has that contributed to the decision not to go further in phase 2 of the store closure program?

Ian, do you want to talk to that?

Yes, sure. I think a couple of things Bryan. On the conversation we've had with landlords, we have a wide variety of landlords and we've had some really positive conversations. And obviously, we called out 24 of the large store conversions, which we've now agreed with the landlords to undertake. And we're still working on another 16 or so to try and reach agreement. Some of those negotiations are well progressed, some of them have a little bit further to go. So I certainly expect that number 24 is going to continue to rise, as we go through the second-half, or go through the rest of this half before we get to the second-half execution. I think as a broader topic of other conversions that could be done, I think this comes back to the economics of the conversion of making sure we get an adequate return. So what we're not doing is we're not going to close the Target store or convert it to a Kmart, if we don't think the return is going to be better than continuing to trade it as a Target. And so we'll constantly reassess that on the way through. And of course, when you start getting situations over time, where you've got a Kmart store and a Target store in the same center and one of those stores comes up for renewal, that gives us the opportunity to undertake conversions in that moment. So we'll continue to explore those events as they occur in the years ahead. But outside of that, we're just taking a purely commercial view as to what the right decision is for each store.

Sure. So then should we be thinking about Target going forward as a bit of a runoff portfolio in a sense? Like you're not going to obviously open the Target stores as like offer a new you'll close them. And then in five to 10, 15 years, whenever how long it takes based on the lease profile, you'd be left with a small cohort of stores and then you can make a decision around that? Is that the most likely path to you?

That's the indicative path that we're on. So what we're doing with landlords currently is, if we have a Target store that's coming up for renewal, we're not extending that as a long-term lease. So, what we are doing now is, if the store it makes a positive contribution will work with the landlord to see whether or not we can continue trading there on a on a year-to-year basis. So again, it's a highly commercial approach. But what we're very focused here on reducing the lease tail of the business, and start making long-term lease commitments is not something we're looking at.

Okay. And then just on Bunnings. You guys have -- at this time I can remember anyway, excluding the Adelaide Tools acquisition, your store numbers actually went backwards this year as you've been closing smaller stores and opening warehouses. Is this something we could expect to continue in terms of you're going to look obviously that rolling out Adelaide Tools, I think is a sort of a small format tools offer and then keep the warehouses going? What sort of growth should we be expecting in the core business and then in the Adelaide Tools product offer, as you look to nationalize that business?

Yes. Thanks, Brian. Yes, we obviously announced the closure of a number of small stores in New Zealand this year, which underperforming and not what we thought were representative of the brand. The other flip side of that is we opened -- we have like Westgate Christchurch Airport and we've got Queenstown coming as well, which I think are a much stronger offer. And I think it demonstrates to both to Wesfarmers in the market. We're an active manager of our portfolio. And we want to make sure we've got the best possible experience for customers. So our sort of view of net five to 10 new stores a year, we will continue. But we're also improving the network. And if you think in Melbourne, we've got a new Milton warehouse coming, a new Montague warehouse coming to replace existing stores in those networks, as well as tackling strategically important sites like Gladesville in Sydney, which opened recently, or Padstow or Doncaster in Melbourne, which is under construction. And on Adelaide Tool, we've bought a great family business. It's well run. We're learning a lot from it since we've had it in the portfolio, obviously would be great to be able to go to South Australia to see it for a little while. But the team is doing a great job understanding that. And we'll open a new store at Parafield in South Australia, which will let us understand and test a few of the thoughts we've got. And then we'll sort of form a view on what the network looks like, both between the physical store network and the online store. But yes, the aspiration is to take it across Australia. We'll brand it. We'll develop that over time. But we haven't sort of set ourselves on a specific number at the moment for Adelaide Tool stores and on the core Bunnings portfolio, It continues to be that five to 10 stores. But, obviously looking at different ones in the network that we'll need to keep open or closed depending on what's going on in the market. Hopefully that covers it for you.

Yes. So final one for me is just on capital management. Obviously seeing that [Indiscernible] special today is helpful for investors. In terms of how you're thinking about it from here, you've obviously talked about a small Coles stake and you've got a very good balance sheet position, not a lot of excess franking credits. So just came on to get an update on where you see the balance sheet position and excess capital?

Yes. So, Bryan, I think, as Rob mentioned, I think now's a good time to be having a strong balance sheet. So there's a lot of uncertainty in the market as we go forward. As you say, our focus on dividends has always been to get franking credits back to our shareholders, so that we took the opportunity to take the profit from the Coles sale and give that back to shareholders in a fully-franked way. And as you rightly point out, we don't have a huge number or amount of excess franking credits going forward. But that's as per our policy in terms of getting those back to shareholders as quickly as possible. So I think we'll continue to assess options as we go forward. But I think, now is a very good time to have a strong balance sheet and some excess debt capacity that we have.

Okay, excellent. Thanks.

Your next question comes from the line of Andrew McLennan from Goldman Sachs. Please ask your question.

Hi, everyone. Look, it's just a follow-on around Target. I was just wondering Ian or Rob, whether or not you were disappointed with the outcomes with the landlords. I know they've got a lot on their hands at the moment, but pretty much sounds like Target's now being confirmed as in rundown. It sort of sounded as though that was going to be the trajectory. But just wondering if you can talk about, whether you need to go back in a year or so time to step that up again, because it doesn't sound like you're flagging it's going to be shut down, it didn’t sound like the sales are going to be that easy to hold up over the coming years? So I'd just be interested in your thoughts there.

Andrew, its Rob here. I'll just touch on the first bit and then Ian can add to it. I think Ian described things well from the perspective of a capital allocation point of view. And when you think about long-term lease commitments, well, that is a drain on the capital of the organization. So Ian spot on in that we're adopting a very rational approach to how allocating capital there and being reluctant to enter into long-term leases. The other thing we're doing is not only adopting a rational approach from a capital allocation point of view, but we're also adopting a rational approach from a customer point of view, and that is ensuring that the Target offer is resonating to customers and through the channels in which customers want to engage with us. And there's no shortage of commitment and investment that's going into the Target digital offer. And the recent partnership with Catch is a great example of the growth orientation of that business. So, we would like to think that over time there is still a strong future for the Target brand and business. But frankly, it's going to look very different to what it's looked like in the past. And I think to do anything other than acknowledge that would be to have our head in the sand. Ian might be able to add more detail to the landlord discussions.

Yes. I've might say a couple of points. I think just describing Target as a rundown is probably not the best description. I think, do we need the same number of stores in the future as we have today? No. So, definitely there is going to be an ongoing reduction in the number of stores that we have. But we still say being a valuable brand. And the brand is still super popular with many, many customers. Growing online is a very big part of what we're doing and that's obviously already commenced to a degree that's been accelerated through this COVID-19 period. But we see that as a key part of the strategy going forward. And then of course, we will continue to see the numbers of stores reduce over time. But on the current plans we're going to be in the order of 125 or 130 stores at the end of FY '21, after we've completed the closures that we called out and the conversions that we called out as well. So it's still a meaningful fleet of stores. And even if you cast that forward a number of years, that's still a meaningful number of stores that will have trading, and the brand will remain relevant. But when you look at it in the context, the Kmart Group, as we called out, it's just going to be an increasingly small percentage. I think when it comes to the landlords, I think what we're having is, as you'd expect robust commercial discussions. The landlords have a job to do, and they've got to generate a return to their shareholders as do we. And where we've got long-term contracts in place, then there needs to be good commercial reasons why those get adjusted. And we're continuingly working with our landlords to try and negotiate mutually beneficial outcomes. And as I said, I think we've actually accomplished a great deal in a relatively short period of time since late May, where we made the announcement to have got 24 of the stores signed up and so we're a long way through some of the other negotiations as well. But I see it being a continuing debate. Every time we get a lease for renewal, I can assure you it's an intense negotiation and just rolling over on consistent terms is very unlikely to be the way the future I think. I think all of us as tenants are looking for ways to make sure that we can really balance out the environment. So if you do get a situation as we've had when COVID-19 comes and stores get closed, and we're still obliged to pay for rent because of the leases, that's really made us wise to that fact, including we're very much looking for leases that can go down, as well as up in terms of their costs. So, it's definitely a changing landscape. But I'd say it's going to be just part of the normal commercial negotiations that we'll have with landlords over time.

Okay. No, thanks for clarifying some pretty important distinction. Just to then move across to the online piece. You mentioned some of the online penetration stats. I assume that's all independent to came out on Target and separate from the Catch sales. But can you just update on how you are leveraging the Catch infrastructure? And how its capacity has stood up to the momentous sort of last six to 12 months, please?

Yes, it's been an extraordinary time. I mean, obviously, we've given you the average growth rate for the second-half, as I'm sure you can imagine, the fourth quarter has been stronger than the third quarter with the advent of COVID-19. Obviously, really taking effect most heavily in that quarter. The business has done phenomenally well, to cope with such an increasing growth rate and being able to maintain service quality. And in many times, in fact, improving service quality, so at time products being ordered to customers, until we hit the latest round of lockdowns in Melbourne and then some of the Australia post and delays that I think everyone's suffering. We've seen incredible speed of turnaround by the team. So I've been full of admiration for the business that we've acquired. And, of course, we are now putting in a lot of incremental capability and resources so that we can expand that capacity. So, we have started investing in our existing facilities to add more automation, so that we can expand the capacity, which will give us the ability to add more skews, as well as to pick more quickly. And likewise, we're adding a lot of capability in the office as well, both from a technology and a marketing and a merchandise viewpoint, so that we have the capacity to grow that business at an incredible speed for a long period of time.

And sorry, the utilization of the Catch infrastructure for like I guess, Target specifically but Kmart also, is there any overlap at all?

This is something we're going to continue to explore and we're going to try to figure out how do we get that value. It's been such an intense period of time, the focus has been on how do we serve Catch customers to the best of our ability in Catch. And certainly, we've started exploring some of those potential options with how do we do things together in the future, but we noted the point where we would publicize any of those because they're still very much working hypotheses versus being solid plans. We have taken sort of some early steps. So we have now about Target on the marketplace a Catch. So it's a marketplace provider, although that products still being kicked out of Target stores currently. But clearly the opportunity around fulfillment is a big one. And it's one we're going to continue to explore the extent to which we can leverage that across the businesses. But of course, at the same time the last thing we want to do is to certainly share those facilities and find we're constrained in our ability to grow Catch. So growing Catch is an absolute priority. I'd say that's priority number one. And then optimizing across the group becomes priority number two.

Got it. Okay, thanks very much.

Your next question comes from the line of Ross Curran from Macquarie. Please ask your question.

Hi, team. Thanks for taking the question. Just quickly, Michael, you've talked about the removal of fiscal stimulus potentially being a headwind into FY '21. How do you think about the $25,000 homebuilder grant? Have you thought about the modeling of data, how that's going to drive demand? And potentially, it's actually more of a tailwind into '21? And then maybe the fiscal headwinds are actually an FY '22 story rather than FY '21?

Yes, we haven't. You obviously need to sort of see how that grant sort of flows through, is a little bit like the renovation grant that came out. There's so many hurdles with some of these. We just need to wait and see, how it sort of flows off. Obviously, it's a really unique period of time where banks are differing linear requirements. You've got government stimulus payments. You got landlords giving businesses here rent rebates, and those things inevitably wind out they're going to wind out as we know differently in each jurisdiction. But yes, it's a little bit earlier for us to sort of say. But I think, JobKeeper and things like that coming to an end in September, certainly in many parts of the country, I think we will shift earning patterns for people. And I think we've certainly benefited from people being in their homes for longer and looking for things to do and renewing their [Indiscernible] skills and having an income to be able to support that. But obviously, that changes out, we sort of have a good degree of uncertainty what that's going to look like. And I think yes, still with the sort of construction stimuli it's a case of sort of seeing how they sort of flow through. So I think by half you will have a better sense of being able to comment on that.

Thank you.

Your next question comes from the line of Richard Barwick from CLSA. Please ask your question.

Hello, everyone. Just a quick one from me around your CapEx guidance $550 million to $750 million. Obviously, it depends little on the final investment decision around the Mt Holland project. Can you just remind us of detail perhaps what CapEx would be captured within the Mt Holland for at least for FY '21? And how significant that is of the $550 million to $750 million?

Yes. So, Richard, happy to give you some guidance on that. It's probably not a huge amount, because we're looking at FID towards the end of this calendar year and then making a decision in the first quarter of 2021 calendar year. So there will only be a portion of the CapEx in there. It's probably between $50 million to $70 million that's included in that number, hence the range that we put in there between $550 million and $750 million. And of course, we've also got the Kmart Target conversions in there as well.

And that's just reliant on the physical number of conversions to take it?

That's right. Yes. So, as Ian's mentioned, there'll be a number that happened in the first-half. There'll be more that happen in the second, but the definitive timing that may change around a little bit depending on timing.

And can you remind us -- you actually given a number -- what sort of value do we attach per conversion is? Can we think of it that way so we can sort of track that through?

Look, I think they're different. Clearly, most of the conversion -- the heavier conversion costs are on the large stores, not the Target country conversions, which will be quite light. I think as it took a broad indication from capital that we would have allowed for in the project is probably around $100 million in that estimate.

Alright. That's all for me. Thanks, Anthony.

Your next question comes from the line of Phillip Kimber from Evans & Partners. Please ask your question.

Thanks, guys. I'll just keep it to one. A question for Kmart, with some of your longer lead time product and so much uncertainty out there, as you just mentioned, with fiscal stimulus coming off. How have you planned for FY ‘21 and in particular the second-half in terms of your purchasing? Are you planning for a material reduction in sales and then hope to flex up if it proves to be better? I just sort of wanted to get a sense, it must be hard to plan for such volatility and when you have to cycle such a big base.

Yes. Thanks. I mean, it's a big -- it's a significant question that we're considering working through. I think a couple of things that we're approaching. I think if you look at how the Kmart business is positioned and on the assumption we do go into a period of time where there's less stimulus and it's a tougher economic environment, we think the flight to value is going to be significant. And Kmart's price position is exceptionally good, and has remained so throughout the last period of time. So we think we're very well-placed in that perspective. And to how are we going to manage the volatility that's out there? On our basic lines, our 365 lines, which is a big proportion of our business. We're going to carry more inventory and we're going to stage in different parts of our network, so that we can effectively buffer as a buffer and allocate later in the process with more agility than we've had historically. So that's capability we've always had. But we're just putting in a little bit more inventory into the system, very little risk for markdown in that product because it doesn't go out of date. On the seasonal side of the equation, particularly very high seasonal. So if you think about the second-half of the year, as we go into winter, winter is the shortest season and particularly heavy winter, things like winter coats. Those types of products where they've got a short selling season, we will keep those qualifications quite tight. And we'll probably take the risk of selling out of some of the high seasonal, but we'll carry a deeper wit for the trans-seasonal products. So more hoodies less coats, if I use that example to let that play out. And those principles will take costs.

Okay. That's great. Thank you.

Your next question comes from the line of Aryan Norozi from UBS. Please ask your question.

Hi, team. Just want to make some binding, please. Can you just remind us what the split is between trade and retail? And how each category has performed during maybe the full year and the second-half as well please? Thanks.

Yes, look we've never really sort of gone down the path of sort of breaking that out. But broadly, I think we've said that commercial is about 35% of their overall revenue, and that hasn't really shifted through the year.

Got it. Thank you.

There are no further questions at this time.

Well, thank you very much, everyone. Any further questions, please contact the IR team and have a good day.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your attendance. You may now disconnect.