Richard Goyder – Managing Director and Chief Executive Officer Terry Bowen – Group Finance Director John Durkan – Managing Director, Coles Mike Schneider – Managing Director, Bunnings Australia & New Zealand Guy Russo – Chief Executive Officer, Department Stores Ian Bailey – Managing Director, Kmart Mark Ward – Managing Director, Officeworks Rob Scott – Deputy Chief Executive Officer

Andrew McLennan – Macquarie Bank David Errington – Merrill Lynch Tom Kierath – Morgan Stanley Phil Kimber – Evans & Partners Ben Gilbert – UBS Grant Saligari – Credit Suisse Shaun Cousins – JPMorgan Michael Simotas – Deutsche Bank Bryan Raymond – Citigroup Barwick – CLSA

Ladies and gentlemen, thank you for holding, and welcome to the Wesfarmers 2017 Full Year Results Briefing. [Operator Instructions] 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, Mr. Richard Goyder.

Hello. Good afternoon, everyone, or good morning, if you’re in the west, and welcome to the Wesfarmers 2017 Full Year Results Briefing. To begin, I’ll cover off the group’s performance overview, following which, Terry will provide commentary on the group’s other businesses, balance sheet and cash flows, and then the divisional managing directors will provide a performance summary and outlook for their respective businesses. And as usual, to conclude, I’ll provide an outlook for the group. And as always, you’ll have plenty of opportunity for questions at the end of the briefing. So if you turn to Slide 4, I’m pleased to report a record level of earnings and operating cash flows for the group for the 2017 financial year. The results again demonstrated the strength of our conglomerate model and focus on cash generation and capital efficiency. The group reported net profit after tax of just under $2.9 billion, which was up 22.1% on last year after excluding significant items in the prior financial year. The result was driven by strong momentum in investments across customer value, merchandising and store networks in Bunnings Australia and New Zealand, Kmart and Officeworks, along with higher earnings across all the group’s Industrial businesses. Earnings per share at $2.55 per share were 21.6% higher than the prior year after excluding significant items in the prior financial year. And return on equity improved to 12.4%. The board has declared a fully franked final dividend of $1.20 per share, bringing the full year dividend to $2.23 per share, fully franked. The dividend reflected the record earnings and strong cash flow performance for the year. Turning to Slide 5, and Terry will talk more to this, but net capital expenditure was lower by 23% as we continue to maintain strong financial discipline, ensuring satisfactory incremental returns are achieved on capital deployed. This focus on financial discipline was reflected in strong operating and free cash flows for the year. Turning to Slide 6. Each of the divisional managing directors will cover their businesses in more detail, but I want to make a few comments. On Coles, Coles’ earnings decreased by 13.5% as the business significantly invested in its offering to provide customers with better value, quality, availability and service. We’re doing the things we think we need to do at Coles to ensure that we’re able to grow the business and returns over the long term, responding rationally to a competitive market where one player rebased its earnings, investing approximately $1 billion in price and service in recent times and another has expanded geographically into South Australia and West Australia. Pleasingly, the liquor transformation is progressing well. Bunnings in Australia and New Zealand recorded strong earnings growth of 10% after expensing a number of matters relating to the store network. Homebase’s trading performance in the UK and Ireland was affected by the pace of repositioning the business. Pleasingly, the four Bunnings pilot stores opened during the year have been trading well as gas the fifth, just recently opened. We continue to be excited about the opportunity in the UK and Ireland, albeit trading in the Homebase stores is weaker than we would like. We are strengthening the team and working hard to make this a good investment over time. Kmart’s growth momentum was sustained through improvements in range and end-to-end productivity, leading to a 17.7% increase in earnings for the year and a strong improvement in return on capital. As you’ll have seen, Target has reported a loss of $10 million, which included a one-off cost of $13 million to relocate the head office to Williams Landing. On an underlying basis, earnings grew by $53 million to $3 million as a result of improved cost control and inventory management. Officeworks continues to grow from strength to strength, delivering 7.5% earnings growth driven by successful execution of its every channel strategy in a year where there’s a pretty – a fair bit of dislocation for Mark and the team, and it was a great result from Officeworks. Our Chemicals, Energy & Fertilizers division achieved earnings growth across all three business units driven by strong operational performance and lower input costs in ammonium nitrate. Pleasingly, our Industrial and Safety division reported an earnings increase of 17.3% on an underlying basis, which is a good result. And finally, Resources reported a significant increase in earnings as a result of the significant increase in export coal prices and strong production. That’s a great turnaround for that business, and Craig McCabe and his team running it should be very pleased about that. Turning to Slide 7. In terms of return on capital, the group continues its strong focus on generating an acceptable return on capital to deliver satisfactory returns to shareholders. Turning to Slide 8. As a large Australian company, we recognize the significant impact that we have on the broader economy and our diverse stakeholders. Strong and growing Australian companies support the economy beyond just their direct stakeholders, and our focus on sustainability ensures that we will continue to make a significant contribution to the Australian economy and other economies we operate into the future. In FY 2017, we paid over $53 billion to our suppliers, landlord and other service providers, making a significant indirect contribution of employment and wealth creation. As Australia’s largest private-sector employer, we paid $8.7 billion directly to our 223,000 employees. Employee numbers increased by around 3,000. We paid our fair share of taxes and royalties with $2.1 billion going to government. Given our policy to put franking credits in the hands of our shareholders where they are most valuable, the majority of our profits are distributed to our 530,000 shareholders, most of whom are Australian. Also, notably over the past year, through direct and indirect contributions, we made over $130 million in community contributions across a number of philanthropic programs in support of the arts, education, medical research and a variety of community projects. And finally, we invested $1.6 billion in our businesses. This will continue to drive sustainable growth in employment and shareholder returns over the long term, as well as ongoing value creation for all our stakeholders in the broader Australian economy. Turning to Slide 9. The group continues its strong focus on sustainability, and over the year, a number of milestones have been achieved. The quality and well-being of our people is one of the most important assets for the group, and it was pleasing to see further improvements made to our safety record. The total recordable injury frequency rate fell 16% over the year. Over the year, there was an increased focus on a more inclusive work environment, specifically around diversity, including gender, age and ethnicity, and in particular, the inclusion of Aboriginal and Torres Strait Islanders within our workforce. The group made good progress to increasing indigenous Australian representation. It is on track to achieve our target for indigenous employee representation by 2020. At the end of the financial year, the group employed 4,231 indigenous employees, representing an increase of 27% on the prior year. We continue to focus on gender balance, and over the year made progress, with more work to do. Now I’ll hand over to Terry, who will talk through the group’s balance sheet and cash flow.

Thanks, Richard. Good morning or afternoon, everyone. I’ll start with an overview of our other business performance on Slide 11. In total, other businesses and corporate overheads reported a net expense of $54 million for the year. This compares to an expense, excluding non-trading items, of $68 million last year. Within this year’s result, earnings from associates at $86 million was 6.2% higher as lower BWP Trust earnings were offset by revaluations of a portfolio of Bunnings properties in which the group has an interest via a securitized investment vehicle. Despite a very busy year for the corporate office, group overheads were kept broadly in line with last year. Turning now to operating cash flows on Slide 12. It’s pleasing to report the group achieved a record level of operating cash flows for the year of $4.2 billion, an increase of 26% nearly on the prior year. This was delivered through strong earnings growth and an improvement in our cash realization ratio to 102%. Overall, group cash from working capital was $163 million better than last year. Within this result, the group reported relatively flat net working capital in our retail businesses, despite another year of solid growth. The favorable working capital movement in retail compared to last year was driven by a focus on improving inventory management, particularly in Coles and Target. This was partially offset by higher fertilizer inventories in WesCEF given a more difficult end to the year in terms of selling seasons as well as higher receivables in Resources given increased coal prices and sales volumes. Further information on the balance sheet and working capital is included in the supplementary pack on Slides 4 and 5. I’ll now turn to capital expenditure on Slide 13. The group retains very strong discipline in capital expenditure, as Richard says, with opportunities evaluated using appropriately risk-adjusted discount rates and a conservative bias in our cash flows. For the year, gross CapEx of $1.7 billion was 11.5% down on last year due to fewer Bunnings store openings in Australia, reduced refurbishment activity in Target and lower expenditure across the industrial businesses. The proceeds from property disposals of $653 million were $90 million above last year due to the sale of Coles’ interest in a number of joint venture properties in ISPT – or to ISPT, and also the sale of the Bayswater land by WesCEF. In total, this resulted in overall net capital expenditure of $1 billion for the year, some 23% below last year. For the 2018 year, we currently expect that net capital expenditure will be between – somewhere between $1.5 billion and $1.9 billion. As always, this will be dependent upon the level of freehold property activity, which is very difficult to predict at this time of year. It’s also worth pointing out that, historically, our CapEx forecast at this time of the year have often proved to be conservative. Turning to cash generation on Slide 14. Higher operating cash flows and lower net capital expenditure contributed to a strong free cash flow for the year of $4.2 billion, including $947 million in proceeds from the sale of the Coles credit card book. Overall free cash flows were $2.9 billion ahead of last year, which – and last year included the acquisition of Homebase. Turning to Slide 15 and the group’s financing. Given strong cash generation, the group’s balance sheet was significantly strengthened this year with net financial debt reducing by $2.2 billion to finish at $4.3 billion at the end of the period. This reduction included the repayment of $500 million of domestic medium term notes using surplus cash and bank facilities. And we also repaid a further $900 million of debt following the sales of the Coles’ credit card booking in February 2017. In summary, the group’s access to debt and repayment profile remain in a very healthy position. Given the group’s extensive retail operations, our other liabilities in the form of off-balance sheet leases. As I’ve spoken of previously, we continue to take a very disciplined approach to managing these liabilities and continue to progressively reduce the term of our leases while still retaining security of tenure on sites through option periods. Turning to Slide 16. The group’s finance costs of $264 million were 14% lower than last year. This was due to a lower average net debt balance and also a further reduction in the group’s all-in effective interest rate of 46 basis points to now only 4%. On this result, I do want to acknowledge the good work our small Treasury team continues to do. Given a strong balance sheet and increased earnings, the group recorded a solid improvement in its credit metrics. Cash interest cover has increased from 16.8 times to 25 times, and fixed charges cover has increased from 2.7 times to 3.1 times. Turning to Slide 17 and the dividend. As Richard mentioned, the board has declared a fully franked dividend of $1.20 on the final dividend, bringing the full year dividend to $2.23 per share. This is effectively an 88% payout ratio. The dividend for the year reflects the group’s dividend policy, which considers current year earnings, our cash flow generation and also our targeted credit metrics, while we also recognize that there is a present value benefit in transferring franking credits to shareholders as quickly as possible. The final dividend will be paid on the 28 of September to shareholders on the company’s register on the 23 of August, this being the record date. In addition to the Australian franking credits, pleased to say that the final dividend would also carry a New Zealand franking credit of some $0.10 per share in order to distribute to shareholders, the franking credits we’ve accumulated from our New Zealand tax payments that we make. The group will again provide shareholders with the option to participate in the Dividend Investment Plan. Given the strong cash flow performance and improvement in credit metrics, shares issued under the plan are likely to be purchased on-market to avoid any dilutionary impacts. Shares will be issued at no discount, and the plan will not be underwritten. And with that, I’m happy to hand over to John Durkan.

Thank you, Terry, and good afternoon, everyone. FY 2017 was another year where Coles proactively invested in our customer offer and executed our customer-first strategy across all of our brands. It was also, on a number of levels, an extraordinary year. We saw significant investment from our competitors, combined with a subdued consumer market. In response to these conditions, we took the deliberate decision to use FY 2017 to invest in the long-term sustainable growth of the Coles business. This meant continuing to lower prices, enhance our customer service levels, improve our fresh food credentials, ensure our product availability was at its best and continue building a better store network. Throughout the year, our 105,000 team members maintained their unwavering focus on delivering high-quality service to the 21 million customers we serve every week. And I would like to take this opportunity to thank all of them for their very hard work. The whole team should be very proud of the fact that despite the extraordinary year we have faced, their efforts resulted in positive transactions growth, positive comparable sales growth, an increased level of cash realization and most importantly, set up Coles for sustainable long-term growth in the years to come. I’ll now turn to the financial results on Slide 19. Total revenue was broadly in line with FY 2016 at $39.2 billion. Our EBIT decreased 13.5% to $1.6 billion, and our EBIT margin of 4.1% was lower than the prior-corresponding period. Food and liquor revenues increased 1.6% to $33.1 billion, and our headline sales grew by 2% and our comparable sales by 1%. Deflation for the year was at 0.8%, making this the eighth consecutive year of delivering lower prices for our customers, which is something we take great pride in. Convenience revenue declined 8.2% to $6.1 billion, primarily due to reduction in fuel volume. Convenience store sales continued to perform strongly, increasing 4.6% over the prior year. I’ll now turn to Slide 20. Despite the changing market condition, I’m pleased we have continued to grow transactions, basket size and comparable sales growth through the year. Furthermore, our cash realization again exceeded 100%. Our investments have not only improved our customer offer, but they’ve strengthened the business to be fit to compete in the future. Price remains a hygiene factor for us, and we continue to lower the average price of the weekly shop for our customers this year with a total of 8.2% cumulative deflation over the past 8 years. We have invested in our team members, and as an example, 6,000 training courses were completed in our fresh food team alone. We’ve also put in a significant amount of incremental hours into service as we continue to provide first-class service to our customers. Our on-shelf availability has improved again this year with a 16% reduction in gaps on shelf, driving the best availability metrics Coles has had in the last five years. And I believe there is still further opportunity to reduce gaps as we improve our range to deliver a better customer offer. We’ve completed the rollout of our OneShop program, and we are starting to realize the benefits. We’re also in the process of implementing our One Team program, where we’ll see the customer service and financial benefits over the next 12 months. I’ll now turn to Slide 21. Our product range continues to improve, thanks to the hard work of our merchandise team and our supply partners. We’ve made progress in rationalizing our range, whilst at the same time stepping up the quality of our produce, meat and our fresh spread. We’ve entered into a number of new long-term agreements with Australian suppliers, including with Norco across the dairy category and TOP Pork, a business representing 12 Victorian and South Australian farming families who will supply a substantial proportion of our weekly demand. The Coles Nurture Fund goes from strength to strength, with 20 small Australian producers bringing their ideas to life. And our Coles Brand product range and quality credentials continue to improve, with our products winning 51 industry awards last year. I’ll now turn to Slide 22. We’re always looking for new ways to give customers more value and more choices regardless of how they wish to shop. Coles Online achieved a double-digit sales growth in FY 2017 while continuing to improve our customer experience via increased fulfillment rates and delivery efficiency. In addition, a new standalone Coles Online supermarket, servicing the Sydney Metro market, will open in the early part of FY 2018. There are now almost 6 million Australian households that are active flybuy members, and we’ve seen an increase of 2.3% over the prior period. Flybuys continues to be another way we’re able to deliver personalized value to our customers. During the period, we’re able to sign a significant new partnership agreement with Virgin Australia on the Velocity program, providing our customers with an even greater point redemption choice. These new agreements and initiatives have translated into double-digit increase in a number of redemptions, demonstrating the value of the program to our customers. During the year, Coles completed a 10-year credit card distribution agreement with Citi, providing a solid platform for the ongoing growth of Coles credit card. I will now turn to Slide 23 to discuss our liquor business. Three years ago, we launched our transformation of our liquor business, and I’m pleased to say that in FY 2017, we recorded another positive year in this business. The team achieved positive comparable sales growth in the second half, taking the number of consecutive quarters of comparable sales growth to two. Our comp sales growth was primarily achieved through strong transaction growth. We are also pleased to be opening new avenues of convenience for our customers, with liquor online achieving more than 20% growth in sales during the year. We’ve continued to optimize the quality of our liquor network and achieved our target of 200 Liquorland renewals in FY 2017, together with 29 new stores that have opened. We now have renewed over 280 Liquorland stores since the transformation program commenced, and have also launched four Liquor Market trial stores across two states. With that being said, there still remains ample opportunity to improve our customer offer, and I see significant upside to this business. I will now turn to convenience on Slide 24. In Coles Express, convenience shop sales achieved strong growth of 4.6% driven primarily by transaction growth. This has been due to our improved and expanded food-to-go range, together with our compelling value offering by extending Every Day prices and growing Coles Brand in our Coles Express stores. Furthermore, we continue to invest in the network with 17 new sites in FY 2017 and 132 sites now upgraded with bold branding to inspire and delight our customers. Coles Express continues to experience pressure on fuel growth – on fuel volumes, with comparable fuel volumes down 16%. Commercial negotiations with our alliance partner are ongoing, and we remain committed to working towards a competitive fuel offer. Now turning to our outlook on Slide 25. Coles continues to operate in a highly competitive environment. I expect that our increased investment in this unique year should return to the normal levels seen in previous years during the second half. This is on the assumption that there are no major market shifts. Coles’ earnings in the first half of FY 2018 are expected to be impacted by the annualization of investments made in our customer offer during the second half of FY 2017 and some additional simplicity savings coming through. We will also see lower earnings from the sale of our credit card receivables, Citi, plus the gains associated with the sale of Coles’ interest in a number of joint venture properties. While we’ve made some significant inroads in Fresh, it remains a key strategic opportunity for the business going forward, and we are focused on delivering a world-class offering for our customers. As we have discussed, there remains a significant opportunity to realize simplicity benefits within the business, and over time, these – over the long-term, these benefits will fund the investment in the customer offer. We remain guided by doing what is right for our customers and what is right for the long-term success of the business. We will continue the transformation plan in liquor. And while we have made considerable progress to-date, there remains much to do to deliver our five-year plan. In Express, we’ll remain steadfastly focused on delivering a market-leading customer offer and working with our alliance partner to provide a competitive fuel offering. I’m proud of what the team has achieved this year, but as you’ve heard today, there are still many opportunities to improve performance across the portfolio of businesses, and we look forward to working hard over the coming year to do just that. Thank you and I’ll now hand over to Mike Schneider.

Thanks, John, and good morning or good afternoon, depending on where you are. It’s been another busy year across the Bunnings businesses, and I would like to start by thanking all of our team in all areas of the business for their hard work and support. I’ll start on Slide 27. From our headline results, it’s evident that there has been a lot of progress on all elements of our strategic agenda. Reported revenue for the Home Improvement division increased 17.4% to just under $13.6 billion, with earnings increasing 2.6% to $1.2 billion. These results includes the first full year of trading from the Homebase and Bunnings UK and Ireland businesses compared with the first four months of ownership last year. I’ll now speak to the BANZ and BUKI results separately. Turning to Slide 30, the results from the Bunnings ANZ business remained strong. Revenue was up 8.9% to $11.5 billion, with store-on-store sales growth of 7.3%. The result reflects solid growth in all trading regions and are particularly pleasing given a significant liquidation activity in the market as a result of changes in the competitive landscape as well as some quite challenging weather patterns across many markets at different times of the year. Sales growth was strong in both our consumer and commercial segments, with very strong performance among our light commercial segments, reflecting the good work that’s gone into product innovation and offerings relevant to the various trade segments we serve as well as improved pricing in digital engagement. EBIT was up 10% on the previous year at $1.3 billion, reflecting strong sales growth, ongoing disciplined cost controls and productivity improvements as well as contributions from our capital recycling programs. This was delivered against the backdrop of significant price deflation following our reinvestment in value, ensuring our policy of lowest prices continues to strongly resonate with our customers and create strong competition in what continues to be a highly competitive market. This is illustrated well on the graph on the top right-hand side of the slide. In addition to this, our results include a higher-than-normal level of write-downs, including the store closure provisions associated with the agreement with Home Consortium for new sites which were discussed at the first half, and additional write-downs for some of our more significant property developments, including the redevelopment of strategically important sites such as Caringbah in Southern Sydney and Compton Road in Western Brisbane. The images on the bottom of this slide show the demolition work underway at Caringbah and an illustration of our new warehouse, which gives a sense of the scale of these sort of projects. As we continue to develop our network, it’s likely that similar scale developments will become a feature of our network planning. In addition, system improvements have enabled us to better identify displaced stock across the network, which resulted in this stock being written off during the second half. Turning to Slide 31, I’m pleased to report that there is continued improvement across all areas of the Bunnings ANZ strategic agenda, investing more in customer experiences both in-store and online, more training for our team members to provide better advice to customers, initiatives to keep our team even safer and processes to ensure our in-stock position all combined to make the core of our business even stronger. From a growth perspective, we’re continuing to drive our focus on breathtaking value for our customers,, along with introducing new and innovative products and services. Whilst in their infancy, work around offshore sales, commercial joinery and the effort being put into bringing our special orders range online are all good signs to me that there is no shortage of energy, enthusiasm and opportunity to continue to improve our reach and expand our market as well as the role we play in it. On Slide 32, this sentiment is reflected in our positive outlook and business agenda, which I spoke to a couple of months ago at our Strategy Day. Our focus remains consistent; our passion for our customers reflected in even better experiences whenever and wherever they choose to engage with us; discipline and focus on improving efficiencies across the whole engine room of our business to both lower costs and lift productivity as well as drive long-term, sustainable growth. This focus on a winning offer for our customers is well-complemented by the passion and engagement of our team. Investing even more into our teams through training, service and safety initiatives will support the trust our customers and suppliers give us to continue to grow and innovate, both our format but also our products, to ensure we remain very competitive in a changing and dynamic market. We will continue to look for opportunities to expand our offer both physically and digitally both in Australia and New Zealand as well as new neighboring markets. Of note is our expectation that we’ll be able to finalize our lease arrangements with the Home Consortium later this year, which will enable us to develop the remaining Masters sites that we’ve indicated we’ll move into during the second half. This will also see an increase in capital expenditure this year. I believe that the work we’ve done to create a strong offer for our customers enables us to be well-positioned to meet market needs, whether the consumers are buying and selling homes, starting from scratch with new build or improving the homes they live in. It’s this balance, along with great product innovations and investment in value, that create a real sense of confidence and continued strong trading performance. This focus carries into our commercial operations as well, with deeper engagement in stores, trade centers and on-site. Even more products developed with tradespeople in mind continue to be developed bringing innovation and new technologies to these customers. Our service prepositions in terms of speed and convenience continue to evolve. Our engagement of light trades as well as deeper relationships with larger builders ensures we’re well-positioned to meet the needs of this sector of the market. I’ll now turn to Slide 34 to talk about the UK and Ireland business. Revenue was GBP 1.2 billion or just over AUD 2 billion. The business reported a loss of GBP 54 million or AUD 89 million. This includes GBP 19 million in one-off transition costs associated with restructuring, concession exits and the establishment of the Bunnings brand in the UK and Ireland. Trading during the year was impacted by price deflation following the introduction of Every Day low pricing across the Homebase business as well as lower volumes of high-value kitchen and bathroom sales as those categories were significantly repositioned away from an installation and in-home services model. The volume and pace of the repositioning activity also had an impact on in-store execution, and this is a big area of focus for the team moving forward. The repositioning of the Homebase business to a core home improvement and garden offer with Always Low Prices has taken a huge amount of work. This has involved introducing higher stock weights as well as wider product assortments. Pleasingly, this has resulted in increased participation in core Home Improvement categories. But as I’ve already mentionedmentioned, the volume and pace of change has had an impact on the consistency of execution in stores. Since taking on my new role across the group, I’ve had the opportunity to spend some time with the team in the UK over the last couple of months. There’s great focus on building and developing a strong team to support the transformation agenda. For the Homebase stores, we have very clear work streams underway to improve range assortment, store presentation and clear and engaging customer communication. The space price that’s been achieved in exiting concessions now needs to be leveraged to drive more sales and better customer participation. Our new range of kitchens is now in all pilot stores and a refresh and relaunch of this offer across the Homebase network is now underway. Whilst we are pleased with the new we offer brings, we are conscious it will take some time to get traction with customers as they become very used to a promotion-driven installation model across the market. If you turn to Slide 35, you will see that large volume of transition and separation work has now been completed. We’ve exited non-core ranges, including soft furnishings and installation and in-home services business, and reinforced our core home improvement and garden categories. Significant investment in the team both in the UK and Ireland and through emergence in the Bunnings ANZ business, has demonstrated the strength of leveraging the wider Bunnings team and the ability to identify and attract talented leaders across all levels, both in-store operations and support functions like merchandise marketing and HR has been really pleasing. During the year, the team successfully opened the first four of our pilot stores, with a fifth opening in July. Having seen all of them, I’m really impressed with the strength and relevance of the offer, competitive value position and positive and enthusiastic service that our team are providing. Customer reaction to the pilot has been very positive, and sales and transactions have been at levels well in line with our business case expectations. The variation across the five stores has meant we’re able to test layouts and concepts across a range of store sizes as well as trialing a variety of space and product adjacencies. Finally, turning to Slide 36, it’s fair to say that after just under two months in the group and the role, I continue to work hard to get a deeper understanding of the challenges and opportunities within the BUKI business. I’m very encouraged of the quality of talented executives we have and continue to attract to the business and with a hard work energy the team every to the transformation agenda. It will be critical to ensure we like all we can from the pilot stores about range and offer, team engagement as well as the cost structures that will enable us to scale the Bunnings Warehouse offer across the UK and Ireland. Our aim is to end this calendar year with between 15 and 20 Bunnings stores open or near completion. These will give us some important benchmarks to trading patterns and customer participation across the northern winter. As we’ve always said, further investment is predicated on successful pilots. Proof of concept is a very big area of focus for the business in the year ahead. Despite the significant work that’s been completed since acquisition, we really are in the very early stages of building the Bunnings business in the UK and Ireland. It is very important to recognize that this is a significant transformation program, and it will take time. So as to ensure that the offer resonates with customers in all seasons, we developed the team and leadership capability to transition each store successfully and make our investment decisions in the most commercial manner. I expect trading to remain challenging for Homebase at least in the short-term as customers continue to adjust to the new offer. In addition, until we reach sufficient scale with the roll out of the Bunnings format, business performance will continue to be negatively affected by disproportionate non-operating costs and disruptions associated with the new store openings. As I said before, this is a significant long-term transformation project and P.J., the team and I are committed to driving the agenda hard in the year ahead. Thanks very much, and I’ll now hand over to Guy.

Thanks, Michael. And turning to the Department Stores divisional financial performance summary on Slide 38. The Department Store division recorded a total revenue of $8.5 billion and earnings of $543 million for the year. On an adjusted basis, earnings were up $136 million, which represented a growth of 32%. We are very pleased with the continued sales and earnings growth from Kmart and the strong execution by the Kmart team under Ian Bailey’s leadership. I’d now like to turn to Target’s results on Slide 40. Target’s revenue for the year was $2.95 billion, a decrease of 14.6% on the prior year. Target recorded a loss before interest and tax of $10 million. When adjusted for restructuring costs in the current and prior year, earnings increased $53 million to $3 million. I’d like to thank the Target team, and whilst we have made some good progress, we had much to do. Turning to Slide 41. During the year, we had better quality of sales, drove improved margins and good progress was made to reduce costs, which included the benefits of supply chain streaming, restructuring of the store support office and improved store productivity. Sales during the year were affected by the decisive actions taken to transform the business. We removed loss-making products and exited unprofitable events, including the Annual Toy Sale. Levels of promotional activity were reduced and prices were lowered. During the year, we significantly reset buying programs, which, due to lead times, affected the availability of seasonal stock and the levels of fashionability. Importantly, improved merchandise disciplines and planning processes, supported by investments in systems, delivered SKU reduction, lower levels of inventory and increased levels of direct sourcing. Also, improved working capital management and moderated levels of capital expenditure supported high free cash flows for the year. During the year, we reviewed Target store network, reset the existing renewal stores and commenced range and space trials. Target opened one new store during the year and closed four stores, including two conversions to Kmart. There were 303 Target stores at the end of the June 30, 2017. Turning to Target’s outlook on Page 42. Whilst the 2017 financial year reflected our cost-reduction initiatives and the exiting of unprofitable events and the removal of loss-making products, the 2018 financial year will require us to drive better ranges through further improvements in our merchandise disciplines. As I mentioned at the Strategy Briefing Day, the 2018 financial year will therefore continue to reflect the significant transition underway in the business as we endeavor to provide amazing fashion at low prices. Our focus will be on improving the quality of sales, reducing end-to-end costs, progressing renewal and range and space trials and relocating the store support office. The focus on working capital improvement and cash generation will continue. We will launch five new stores during the year. I will now hand over to Ian, who will take you through the Kmart’s performance.

Thanks, Guy. I’m pleased to be here today to take you through Kmart’s results for financial year 2017 to highlight our key achievements and to provide some insight into the areas of focus for our business going forward. On Slide 44 is Kmart’s performance summary for financial year 2017. Kmart’s performance was strong for the year, with earnings increasing faster than sales. Revenue of $5.6 billion was up 7.5% on last year, with comparable sales growth of 4.2%. Earnings grew 17.7% to $553 million through improved inventory management, enhanced product ranges, productivity improvements across stores and supply chain as well as sourcing benefits. Return on capital improved 596 basis points on last year to 43.7%, driven by continued focus on working capital management. Safety has improved with lost time injury frequency rate decreasing 11.8% on last year, albeit significant work remains to continue to reduce the number of safety incidents. I’ll now turn to Slide 45. Kmart continued to build on solid performance in prior years to deliver strong growth in financial year 2017. All categories achieved sales growth driven mainly by core Every Day ranges and continued investment in price. Strong unit growth was driven by increased transactions as well as more items per basket. Earnings grew faster than sales during the year due to improved margin management, with a higher proportion of full-priced standard sales than in prior periods as well as productivity improvements in supply chain and stores. We have continued to invest in the network by opening 11 new Kmart stores, taking the network to 220 stores in total. 33 major refurbishments were completed during the year, and we now have 139 stores in the Plan C format. I’ll now turn to Slide 46. Looking to financial year 2018 and beyond, our focus is on ensuring sustainable earnings growth by making Kmart a great place to shop that is simple to run, and by delivering better products at even lower prices. These two strategic pillars are key to our model and are focused on, first, continuing to drive demand, and then finding ways to efficiently process this demand through our operations. The drivers of demand will come from an ongoing focus on improving the customer experience by getting to know our customers better and by our continued commitment to lowering prices. Demand will also be supported by network improvements by opening approximately 10 new stores per year for the next few years and executing 35 store refurbishments in financial year 2018. Driving operational efficiencies across the entire business, but particularly in stores and supply chain, is an operational imperative for us to support the continued volume growth. We expect the level of price competition to remain strong, and we will continue to invest in price to drive volume and to maintain Kmart’s price leadership position in the market. I expect that sales will grow faster than earnings in the financial year ahead as a result of this. In August 2017, we acquired the Kmart brand name in Australia and New Zealand for AUD 100 million. The name was previously held under a long-term license agreement, and this will not have a material impact on our future earnings. Lastly, I would like to take this operative thank our team members for their tireless efforts and congratulate everyone across the business on the great results we have achieved. Thanks for your time today, and I’ll now hand over to Mark.

Thanks, Ian. I’m pleased to report another strong full year performance for Officeworks, which is a real credit to the hard work of the entire Officeworks team. Turning to Slide 49. Headline revenue growth of 6.1% reflects the strong sales growth in all channels. This is a real illustration that our focus on making shopping easy with us and seamless for customers is working. It also demonstrates that our stores and our online offer complement each other from a customer perspective rather than compete with one another. Record results were delivered in the key trading periods of back-to-school and tax time. The full year result was partly driven by enhanced ranging in merchandising, delivering great service to our customers and also by continuing investments in price to deliver even stronger value. The lift in revenue, combined with our ongoing focus on capital and cost productivity, helped drive a 7.5% increase in EBIT. Over the last seven years, we have maintained a CAGR EBIT growth of close to 11%. Earnings growth, productivity improvements and being very disciplined with capital and inventory underpinned another strong improvement in our return on capital, up another 121 basis points to 14.7%. Our offer is centered around being a one-stop shop for those looking to start, run or grow a business as well as the students and households. Our relentless focus on making sure that our offer is fresh, relevant, evolving and delivering exceptional value is what’s driving our continued strong outcomes. The team has made a lot of progress expanding existing ranges by adding new categories such as art, office automation and early learning. We also recognize the important and differentiated role that our stores have, so we’re always looking at better ways to bring products to life in our stores. Our every channel investments continue with a focus on making it easy and convenient for customers to shop in-store, online or through our business team whenever, wherever and however they choose. Process improvement and automation is helping to enable our team members to focus on delivering great service to customers ahead of performing tasks. This is delivering both better service outcomes and efficiency benefits. Six new stores were opened during the year, with all stores undergoing some level of merchandising refresh also across the entire year. Our B2B team continues to expand in size and reach and delivered a record year of growth well beyond the growth in the general market. Turning to Slide 50. Looking forward, we anticipate variable trading conditions to continue, with confidence expected to be somewhat subdued and competitive intensity to remain high. We’ll continue to be very disciplined in executing our strategic agenda to drive growth, and we see plenty of opportunity to inspire customers with innovative products and services while making their shopping journey easy and seamless across every channel. These things can only be delivered if you have an engaged team, supportive suppliers, be involved in local communities and have strong customer relationships, all of which we do, and all of which we will continue to invest in to continue to help make bigger things happen for all our stakeholders. I’ll now hand over to Rob.

Thanks very much, Mark. I’ll start on the performance summary on Slide 52. The Industrials division delivered a significant improvement on the prior year with EBIT of $915 million compared to $47 million last year. Pleasingly, each of the three operating businesses delivered improved earnings and return on capital. Chemicals, Energy & Fertilizers continues to deliver strong returns on capital in competitive markets. Industrial and Safety is starting to see the benefits of the restructuring program we launched in 2016. The earnings growth this year has been encouraging, but there’s still much work to do. The Resources business benefited from significantly higher export coal prices. Our team at Curragh was able to increase production to take advantage of these prices and report a strong result. I’ll now run through each of the businesses, starting with Chemicals, Energy & Fertilizers on Slide 53. I’d like to start by congratulating Ian Hansen and the team at WesCEF for their significant improvement in safety performance, with both the lost-time and total recordable injury frequency rates at all-time lows. Reported earnings of $395 million included two one-off items, a $22 million profit on the sale of some surplus land at Bayswater and a $33 million increase in the carrying value of our interest in Quadrant Energy. The business continues to deliver a strong return on capital, which increased to 27.4% for the year or 23.5%, excluding the one-off items. I’ll cover the key elements of the results on Slide 54. Total revenue was down due to lower PVC and fertilizer volumes as well as lower fertilizer and ammonia commodity prices. In chemicals, higher earnings were primarily driven by the ammonium nitrate business, which benefited from lower ammonia input prices in the first half. We also benefited from the change announced last year moving Australian Vinyls from a manufacturer to an importer of PVC. With the exception of the ammonia plant, which experienced a series of unplanned shutdowns, plants operated at close to full capacity through the year. The issues affecting the ammonia plant have now been – have since been identified and rectified. In Kleenheat, earnings were higher across all segments. Of particular note, the LPG business benefited from an increase in the Saudi CP and an improved sales mix, and the natural gas retail business continued to grow, with customer numbers now over 150,000, representing more than 20% of the WA market. Fertilizer volumes were impacted by a very dry autumn in many parts of WA on lower margins. Relative to the above-average season in 2016, earnings for fertilizers in FY2017 were down. During the year, construction of the new ammonium nitrate emulsion plant commenced. Our plant is underpinned by long-term offtake agreements, and together with the new contract, will partly – partially offset the loss in volumes from a recent contract expiry. Now turning to Industrial and Safety on Slide 55. Despite a 3.7% decline in revenue, excluding last year’s restructuring costs, we increased EBIT by 17.4% to $115 million. Prior to the Fit for Growth restructuring program, many of our business units were generating losses. I’m pleased to report that now all of the businesses within Industrial and Safety are profitable. I will now turn to the overview on Slide 56. With last year’s restructuring behind us, FY2017 saw the commencement of a multiyear program to improve capabilities in the Blackwoods and Workwear Group businesses. For example, during the year, our sales force and technical specialists were realigned to better support our medium to large customers with specific needs. Our supply chain was enhanced through the implementation of new inventory management and freight management systems. We commenced an accelerated program of digital development, including the launch of a new Blackwoods Xpress website. We also rationalized key product categories, improved our pricing controls and developed closer partnerships with key suppliers in Blackwoods. We are starting to see the benefits of this flow through to both customer service and margin. At Blackwoods, revenue is showing signs of stabilizing, with sales in the last few months being broadly in line with the prior-corresponding period. This is encouraging, as it has followed a period of revenue decline in recent years. Coregas continues to win market share as the challenging – challenger brand in industrial gas. It delivered both revenue and earnings growth with a part-year contribution from the Supagas New Zealand acquisition, further rollout of Trade N Go gas and the development of new market opportunities such as Coregas Healthcare. Now turning to Resources on Slide 57. After some challenging years, Resources reported a much improved result, with revenue up 73% and EBIT up $715 million. Whilst we have clearly benefited from significant increases in export prices, a number of the mine planning and productivity measures introduced when prices were low are starting to yield results and provide further scope for optimization of our resource. I’ll talk to some of the factors that drove performance on Slide 58. A number of external factors, including changes to Chinese policy, Cyclone Debbie and infrastructure outages in Queensland restricted the supply of met coal in FY2017 and led to significant increases in pricing. There was also an improvement in Curragh’s sales mix with a greater proportion of higher-margin hard coking coal relative to the prior year. Revenue for the year was impacted by locked-in hedge book losses of $72 million, a lower amount than the prior year. We also were impacted by a marginally higher Australian dollar. Despite the weather disruptions, metallurgical production was up 12.5% to 8.2 million tonnes, which was in line with our guidance of 8 million to 8.5 million tonnes. This was supported by a continued focus on productivity, our revised mine plan and also the use of contract de-fleet to take advantage of the higher prices. Whilst we are delivering improvements in underlying mine cash costs, we did take the opportunity through the year given the disruption through weather events to utilize additional truck and shovel fleet to opportunistically increase production. Together with wet weather disruptions, this increased our unit cash costs. However, the net margin generated from the incremental sales was value accretive. Our total mining and other costs were slightly lower, partly due to a one-off provision release of $35 million that we signaled at the half year in relation to the settlement of our litigation with Stanwell. Curragh’s obligations to Stanwell, including the export rebate and thermal coal supply, reduced our EBIT in the year by $186 million. Now turning to the outlook for Industrials on Slide 59. Our team in WesCEF continue to focus on strong operational performance and the development of new business opportunities to diversify revenues and build new platforms for growth. We are particularly focused on finalizing the construction of our new emulsion facility and continuing the growth of Kleenheat’s natural gas retail business. We’re also working on a roll-out of our digital services and capabilities to farmers to help enhance their yields and optimize fertilizer applications. As always, our business remains subject to movements in commodity prices and seasonal conditions. We also expect further competitive pressures in the WA explosives-grade end market, as the market is expected to move into an oversupplied position in the coming years. In Industrial and Safety, our team are focused on continuing the sales momentum that is building, with both new and existing customers, particularly in Blackwoods. A multiyear program is underway to improve the core capabilities that will support this future growth. We see digital as an important channel to market in both large and small customers, and this is an area where we are increasing our investment in the coming year. We see new business opportunities associated with some of the major infrastructure spend announced in the recent Federal budget that will help offset lower investment that we’re seeing in the resources and manufacturing sectors. Turning to the outlook for Resources on Slide 60. Spot prices of hard coking coal have remained volatile following Cyclone Debbie. Following the recent collapse of the bilaterally negotiated benchmark quarterly pricing system, implementation of an index-linked quarterly price mechanism for hard coking coal is underway. At the 30th of June, Curragh had around 1.3 million tonnes of carryover, which is in line with the position that we had at the end of the first half. Looking forward, we’ll continue to improve our cash cost position through implementation of our revised mine plan. Subject to weather and infrastructure availability, our metallurgical coal sale volume target is expected to be between 8.5 million and 9 million tonnes, up from the 8.2 million tonnes sold in FY2017. Earnings for resources in FY2018 will also be impacted by the continuing rebate obligations to Stanwell, which, in this year, will be in the order of $175 million to $195 million, given the lag effect of that rebate. We also have locked-in hedge book losses of $34 million, which is down on the recent year. I’d like to conclude by thanking everyone in the Industrials division for their support and efforts over the past two years to deliver this pleasing result and position our business for future opportunities. I’d also like to welcome David Baxby who’s started with us as the new Managing Director of Industrials this week. I’ll now pass back to Richard.

Thanks, Rob. Now turning to Slide 62 on outlook for the group. Our outlook page won’t surprise those of you who have followed the group for a while, and that is, given the group’s diverse business operations and strong balance sheet, we remain generally optimistic in our future. We’ll continue to retain a strong balance sheet, allowing us to be opportunistic as growth opportunities arise. Building and investing in our people to ensure that we have sufficient capability and capacity is required will also remain you priorities. And the final outlook slide. The divisional managing directors have each spoken to outlook so I’m not going to repeat that. What I would say is that our focus is on our customers and delivering value to all our stakeholders, particularly owners and shareholders. I’m extremely confident that under Rob Scott’s leadership, Wesfarmers has a great feature. Finally, I’d like to acknowledge the immense contribution Terry Bowen has made at Wesfarmers From the early days, working with me in the rural division to running Wesfarmers Industrial and Safety Finance Director of Coles and Finance Director of the group, Terry’s fingerprints are all over Wesfarmers in a positive way. Thanks, Terry. Anthony Gianotti is a terrific replacement and will work really well with Rob in the divisions. Now we’ll be happy to take any questions you have.

Ladies and gentlemen, we’ll now being the question-and-answer session. [Operator Instructions] Our first question today comes from the line of Andrew McLennan from Macquarie Bank. Please ask your question.

Good afternoon. First of all, Richard, just to you. In terms of your introductory comments, you didn’t sound as optimistic around the strategies at Coles as you have previously. I’m not sure whether that was just my interpretation, but if you could just sort of explain how you’re feeling about the strategy at the moment?

I was actually meant to sound even more optimistic, Andrew, so I’m sorry if that was the case. No, I think it’s really important. I completely endorse John’s comments where he congratulated his team on the year. I think you’ve got to look at the Coles’ performance in the context of the market. It’s the weakest or second weakest market we’ve had in 30-something years. As I said, major competitor, it’s rebased its earnings materially and spent $1 billion on price and service, and other competitors expanded into South Australia and Western Australia. I think in that environment, the Coles’ performance is very strong. And we’re really positive about the future for Coles. And we think it’s well led, got terrific people, some great initiatives in the business. And you never – none of us ever like reporting an earnings decline in any business, but sometimes you need to deal with it. And Andrew, the other thing I’d say is, it would be so easy for us to revert to a short-term strategy, pulling labor out of stores, putting up background pricing, doing the sort of things that ultimately would damage the business, and it’s to John’s great credit and the team’s great credit that we haven’t done that at Coles. And as I said, we remain very positive about the outlook for Coles. It will be challenging, that’s the competitive market we’re in, in the near-term, but long-term, we’re very positive.

Yes, there’s no doubt that it’s been a pretty brutal year in terms of the big competitive changes that have been taking place, and I guess the market has been pretty accepting of what you’ve been doing. In terms of the relative sales momentum though, given that there was at least from the ABS stats the perspective of a bit of a recovery in sales in the fourth quarter, I mean, how are you feeling about the performance in the fourth quarter sales without focusing too much on one quarter alone? But would you have expected a better improvement in momentum there?

I think it’s problematic to – I’ll get John to add to this, Andrew, but I think it’s problematic to focus on quarter by quarter. There’s always different factors at play. And as John said, we’ve got good customer numbers, good transaction numbers, and there’s some underlying numbers that we’re pretty happy with in the business. John, do you want to add to that?

Yes, thanks, Richard. Andrew, I won’t repeat what Richard said, but it’s been an unprecedented year in my view of investment by others. And actually, I would have expected probably a worse set of sales numbers than I’ve seen with the level – significant level of investment that’s gone in elsewhere. So underlying, I think the result’s a solid one in terms of customer numbers, in terms of baskets and comp sales. I don’t expect a recovery in our sales until the second half, so I think you’re going to see, and I said this at the Strategy Day, I don’t think you’re going to see a change in our comps in the first half, never mind the last quarter. And these things just take time in terms of getting the growth back in our business that we won. But for sure, we’re putting the right things in place at the moment to be able to capitalize on that growth when it arrives. So as with Richard, I’m feeling fairly confident about where we are with the business.

Okay, thanks. I’ll dial-in with more questions later.

Thanks, Andrew.

Our next question today comes from the line of David Errington from Merrill Lynch. Please ask your question.

Hey, Richard, a bit of an end an era today, isn’t it? That guys like you and Terry won’t be on the call that we can have a battle with. But anyway, best of luck for the future and hopefully, well done for where you’ve left the company. My two questions. First one on Coles and the second one on BUKI. On Coles, can you elaborate on numbers? Now whether this is John or whether it’s Terry, on what you’re actually expecting in 2018? Because there’s a lot of issues there, like for example, the cycling of the price investment. How much that price investment stepped up in second half relative to the third quarter that has to cycle through. The property loss, the profits, I think they’re $57 million that were there in 2017 that won’t be there in 2018. The profit from the business that you sold, correct me if I’m wrong, I think it’s $22 million that won’t be there in 2018. So if you add all that up, it’s a fair whack in EBIT that’s going to drop. Now is that all in the first half? Or is that going to cycle right through? Can you give us an idea as to what the magnitude of just those one-off events? And then we’ve got the cycling of the lower comps, which I suppose is deleveraged, but then you’ve got your cost savings. So can you put a bit of granularity to those numbers so we’ve got an idea as to what the base in 2018 is compared to what you’re saying in 2017? And then on BUKI, one of the most concerning things I’ve heard on this call was Mike saying that you’re trying to convert UK customers to a nonpromotional offer. Now you’ve lost a lot of money in this business this year. You lost – the biggest trading period, you’ve lost nearly $30 million, and that’s your best trading period. And you’re going to try to convert a market. Now most of us who have covered whether it be wine companies or the UK retail is the whole UK market is a promotional market, that’s what the UK customers are based – that’s what they deal on, whether it’s BOGOFs or whatever it might be. You’re going to try to convert the market to being non-promotional. That, to me, is a real worry, and I’d like to hear why you think that strategy is going to be successful going forward.

Thanks, David. I’ll get John to go first on Coles and then Mike can talk to BUKI.

Okay. Hi, David.

Hi, John.

So I’ll take you – so it’s difficult to look at the whole year, but let me take you through and try and help with the first half. So the way we look at the first half for FY 2018 is really to take the underlying EBIT change in the first half that we gave you at our first half results. Then, if we then look at the second half, and obviously, you’ve got the numbers for the second half in terms of how the numbers fell out, and you take one for the other to give us a net position really for the second half, we expect that to flow through into the first half 2018, but there will be upside in terms of simplicity savings that offset some of that investment. You then get the effect in the first half of the JV in terms of property, plus the sale of the credit card book, which in total, is about $60 million for those two events.

Combined?

Yes.

$50 million combined. Okay.

Combined. Because the $57 million you see in the numbers includes the regular property sale that we get year in, year out of our business. But the JV bit of it was actually around $40 million, and then you’ve got the first half effect of the Citi transaction. And as I said, if you take the combined first half, second half of last year, net off, back to some simplistic savings, you get our direction in the first half which will all come into the first half. In the second half, we expect an improving position, just because we’re facing into obviously weaker comps year-on-year and we’ve got momentum as to the cost savings that we’re driving and have been driving that we showed you in the two stores when we went through the Strategy Day.

Yes. So stabilization in second half, possibly even a little bit better, but pretty much a pretty horrible first half. Is that a good way? And then 2019, hopefully, recovery. Is that a good way of thinking about it?

Well, it’s not the way I’d describe it, but it’s a good way of thinking about it, but it’s not the way I’d describe it. I don’t think it’s horrible. I think it is a good investment for our future actually.

Yes, investment, but it’s a couple of hundred of million bucks.

I’m not going to give you a complete number in the first half of that, for sure, but I’m not sure it’s going to be of that level of magnitude.

Okay, okay. Thanks for that. Maybe some others might want to go further into that. But BUKI, Richard. Or just John, I’ll let someone else ask you, but BUKI, Richard. Now geez, that’s a big loss, isn’t it? I mean, really, you guys were pretty aggressive on saying that BUKI wasn’t going to lose money, and now you’ve gone in there and you’re effectively going to try to convert the whole market into a market that it’s not used to. Where is this business going to go? I mean, I presume the first half is going to be heavy losses again, and potentially you’re really looking down the barrel here. What’s the strategy here?

Yes, so I’ll let Mike answer it, David.

Thanks, David.

Mike didn’t buy it though, Richard. You did.

Yes, but he’s across it. And I mean, David, fair to say, one of the regrets I have in leaving is I won’t be around to see BUKI achieve what I think it can achieve. But time will tell on that front. I’ll leave it Mike now to answer.

Hi David, I was reminded earlier, talking to someone back in 1994, the Australian retail landscape was very much predicated on high-low transactions and a thing called Bunnings Warehouse came along and introduced Every Day Low Pricing. And we’re certainly seeing here, a market that’s got its head around that. And we’re seeing from the first five pilot stores that have been opened that when you’re really clear on what EDLP is and you really strive to create breathtaking value for customers, they trust it and they shop with the store. So we’re seeing that in the transaction sales up we’re seeing in the pilot stores. What I think the opportunity for the Homebase stores is going to be over the next period of time is really all about more clarity and consistency and store layout and execution, a stronger marketing offer that explains more clearly to customers more accustomed to shopping for soft furnishings and in-store kitchens, what our core Home Improvement and garden range will look like and how they can trust that pricing architecture as we go forward. Now there’s no silver bullet in that, as you well know, but the other thing that we’ve got is a whole lot of work happening now around different types of marketing collateral, both traditional and digital, to engage customers in the Homebase business. It’s going to be a long slog, but certainly from what we’re seeing in the way we’ve established the Bunnings pilots that they’re performing well on an EDLP basis.

But what’s the worry, Mike, that the Homebase stores, which is the bulk of the priority – the 260 Homebase stores that you’re converting to being non-promotional. What’s the risk that they turn into a real disaster? And like, because I get the Bunnings Warehouse roll-out, I get the digital, I get all of that, but what’s the risk that the real hump of the business just drops so quickly that it offsets any potential upside from these new things that you’re bringing in?

Well, I guess there is a risk. I think the challenge that the team have got in front of them and the work that we’re doing is all about positioning the stores as a core Home Improvement and garden offer, and that’s one of the big things that’s sort of underestimated, I guess, in seeing the transition. I’ve spent quite a bit of time the last few weeks in the UK. Those stores to what I saw three or four years ago when I was visiting the UK substantially, and it will take time for customers, irrespective of the pricing framework, to actually understand what those stores are there for, because that market’s grown up with that business being something different.

The track record though, the last 5 years before you bought it, Homebase was a very profitable business. The first year now that Wesfarmers owned it, the business has lost $90 million. That says that something that you have done gone into this business is not right. So I suppose that’s more a statement than a question, but…

David, let us address that a bit. It’s also worth saying, I mean, I’ve talked to and Mike’s talked to strengthening the team. Mike and Rob Scott have done a lot of work to bring Damian McGloughlin in who will start with the business later this year. We think he’s a terrific hire. And David Haydon going back from Officeworks back to the UK has a focus on the Homebase stores now. So there’s no doubt we’ve strengthened the team. Terry, do you want to talk a bit about some of the things the way Homebase was making money in the past that we’re not doing now?

I think – I mean, the quality of earnings, David, that you refer to when we took it over was – I mean, the best way to describe it would have been non-sustainable. I mean, what the business was doing was effectively, through concession arrangements, selling more and more of their store and indeed then moving out into the carpark and selling the carpark spaces for car washes. So when we strip that out by definition, there was a fall in what the business’s earnings would’ve otherwise been. But again, if you’re going to convert something can turn it into a long-term business, you’ve got to face into that, so they will get

But you paid a big price for it, though, Terry. If you do that – if you strip that out, it’s a big price.

I mean, it’d be fair to say that was considered within the acquisition case, so that’s – as in the effect of doing that. I mean, it was…

I have taken enough time. But thanks Richard and thanks Terry. And again congratulations, I’m going to miss you guys on the call going forward.

We’re going to miss you too David.

Yes. Sure.

Our next question today comes from the line of Tom Kierath from Morgan Stanley. Please ask your question.

A question on Kmart. If I heard it right, the margins are coming down. Could you just talk about the drivers there, whether it’s a proactive investment in price and gross margin led? Or it’s more a view that the sales trajectory in the cost-out – the cost outlook?

Yes, Tom. I mean, we had a particularly strong profit year this year. And really, I guess, I wanted to create that view out there that I don’t see profit growing faster than sales as a trend that’s going to continue. And if you look at our profit over the last few years, you’ve seen our final EBIT margins have oscillated around in the 9s, and I think that’s going be a feature as we go forward. What I do see is it’s a great opportunity for us to grow market share, particularly in the market as it is. And even though the market’s competitive, I think it’s a great one for us to go after, and I think for the – certainly for the near term and the long term, I think it will pay dividends for us. So whilst I still see sales growth being strong in the year ahead or that’s what we’re looking to achieve, I see profit growth coming along for the ride, just not at quite the same speed.

That makes sense. And then probably a question for Richard. I think most of the retailers that have reported so far have said that July has been a lot softer than the quarter before. Are there any divisions that you’d like to call out where the performance has differed in the year-to-date versus what you’ve seen through 2017?

No, we wouldn’t call that out, Tom, I don’t think. I’d hate to call anything out on a month-by-month basis, but we certainly wouldn’t call that out.

Okay. Thank you.

Thanks.

Our next question today comes from the line of Phil Kimber from Evans & Partners. Please ask your question.

Just a first question on Bunnings and particular comments around the Australian business where probably more positive than you have been previously. Is that maybe a shorter-term benefit from the demise of masses? Or is there some other things going on, you’re seeing more strength from the housing cycle? What’s driving such positive outlook comments on Bunnings ANZ?

Thanks for the question. I think that when we look at the strategic agenda we have, which is consistent with what we’ve had in previous years, we just feel that we’ve got operating disciplines in the right place, we’ve got good cost structure to drive efficiencies in performance, we’ve got good growth plans in place with the things we’re doing from a product and a service and a digital engagement point of view. And we just have that sort of business positioned for good growth, both physically, digitally and in the markets around Australia and New Zealand.

And just as a clarifying question, can you – you talked about some one-off costs that you’ve just worn in the fiscal 2017 year. I had a feeling it was $30 million in the first half, but it sounds like there’s some more in the second half. Can you give any clarification on that?

Yes, that’s right. We took up close to $30 million in the first for the lease tails on the sites that we’ll exit when we move into the Masters sites. The numbers in the second half are broadly in line with the first.

Okay. So there’s roughly $60 million costs in fiscal 2017 that shouldn’t repeat in fiscal 2018 for Bunnings Australia. Is that a fair way to think about it?

Yes.

And then my second question was just on the Chemical, Energy and Fertilizer business. I understand about the contract and the new emulsion plant helping to offset it, but it sounds like it won’t offset all of it. So should we read into that, that on an underlying basis, the earnings of that business are likely to go backwards in fiscal 2018?

Rob here. So I guess how you should read our comments there is that as we go into a market where there is likely to be oversupply, you would expect there to be some margin pressure. And related to that, export opportunities are always there, but pricing on the export side is also quite competitive given other international options there. So I guess, we’re just expressing some caution around the earnings outcome as we respond to that oversupply in the market.

I mean when you say you can offset, are you talking you can offset the bulk of it? Or are you only offset a little bit of it? Because I can’t recall if you’ve given sort of the details of how much volume you will lose from that contract loss.

Yes. We haven’t given specific guidance on a contract-by-contract basis, and we don’t want to, but I guess the simple message is that as the market moves into an oversupply position and as a proportion of our volumes are uncontracted as we’re competing for that business, you would expect there to be some margin pressure. Now there are a number of options available for us. The emulsion option is a good strong margin option, and we’ll continue to explore more opportunities in that space as we’ll continue to compete rationally for other contracts and look at export opportunities from time to time as well.

Okay, that’s great. Thank you.

Thanks Phil.

Our next question today comes from the line of Ben Gilbert from UBS. You can ask your question.

Good afternoon. Firstly, just one maybe to Mike and Rob just around BUKI. I’m just interested firstly – there’s two parts to this question, if you’re still sort of committed to that 18% ROIC target by fiscal 2021? And secondly, Mike, if you believe it’s an opportunity like for Screwfix or someone like that was to come up and bulk up the trade offer, whether that’s something that you think you’d look at in that market? Or is it more about starting to consolidate the business as it stands at the moment?

So Ben, you’re breaking up a bit, but I think the question was, still committed to ROIC of 18% by 2021? And would we commit more to trade in the UK market?

Yes, that’s correct.

Hi Ben, Rob here. So from my point of view, I wouldn’t want to be making specific granular ROIC commitments five years out from where we are now. What I would say is everything I’ve seen of BUKI and the UK market, and Mike and I spent a fair bit of time over there in the last six months, suggests to me that there is an opportunity to build a successful and profitability – profitable business over a five-year-plus time frame. So that’s certainly what we’re working towards. There are clearly some challenges that we’re working through as we’ve outlined. What does give us some hope is that the new offer is certainly resonating with customers, and that’s a real positive. But we need to be really disciplined around how we invest our capital, making sure we invest it in the right way, across a range of different store formats and so forth. So I certainly wouldn’t give an ROIC forecast, but I would say that Mike and I are focused on building a successful and profitable business over a five-year-plus time frame.

And Ben, on the commercial side, when we opened our Milton Keynes and Folkestone warehouses, so fourth and fifth pilots, we actually opened those with dedicated trade desks to sort of understand and test the appetite for trade customers in that market. That’s been very pleasing. And interestingly, the convenience of the Homebase network is starting to attract on some product categories the sort of white van trades in those areas because they’re very convenient to get to. So that will give us an opportunity to really consider the ranged assortment and offer that we can bring to trade customers in the UK market.

Got it. Just a final one from me. Just interested in – just following from Tom’s question, I’m obviously not trying to focus around July specifically, but just general view on the consumer, maybe Richard, just how you’re feeling as you look out over the next sort of three, six, 12 months. Because obviously, with a lot of the results we haven’t seen the impact of high utility costs. There’s still a lot of the changes in bank funding in terms of the switch from interest only to a principal plus interest and just how you see some of those headwinds impacting the consumer?

Yes, Ben, I mean, it varies a bit across the businesses. I asked this specific question a couple of days ago, when we had a leadership team on the back of the Westpac consumer confidence survey that was released last week I think. And certainly in Coles, we’re seeing in different demographics shoppers trading down, if you like, looking for value. It’s less noticeable in Department Stores. I think in Bunnings, it’s more linked to housing conditions, frankly. And Officeworks, I think, more there we’re seeing pretty strong sales from our small- to medium-sized businesses and maybe a little bit of weakness in – on the consumer side of things. So it’s something obviously to watch more broadly. I think our businesses are pretty well placed to deal with that, but something to keep an eye on, I think.

Okay. That’s great. Thanks very much.

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

Thank you. Congratulations, Richard and Terry, as well from me. A question on Coles, if I could. Aldi is planning to – or is embarking on refurbishing all its East Coast stores in a new fresh format and Woolworths is obviously ramping up its renewal program, so I’m just interested from John if there’s any experience shared with any of the Coles stores and how impactful that has been and could be as those programs go forward. And how successful you’ve been at mitigating that type of impact, because that’s obviously going to happen over multiple years?

Yes, hi Grant, thanks very much. So I’ll comment on the individual stores, but we’ve seen over the period, many of the retailers renew their stores, and we’ve done the same. So we’ll have a renewal program. And even in a rerenewal program of many of the stores that we touched seven years ago. So this is a constant investment for us. And I think what everyone would see on the West – on the East Coast is certainly a slowing down in terms of the discounters. I can’t – I mean, we can’t get access to all of their numbers so it’s our judgment on that. But I expect us to be able to – in all of the locations, to be able to stand up to any of the renewals, and of course, we will do the opposite in terms of renewing our stores as well in different locations where we haven’t renewed our portfolio. So I don’t see a big impact in terms of that, over time.

Okay. Thanks. And second question, I guess, if I could just ask around – I guess thinking about the UK experience from effectively sort of a license to do other things. I mean, in the way you think about the business corporate at the moment, how far forward do you have to get with success in the UK before you feel confident that you could take on another big challenge? Because in some respects, maybe getting that right is a prerequisite to doing anything else that you might plan to do from way of expansion across Wesfarmers?

Great. Rob here, I’ll comment on that. The first one I’d say, it doesn’t matter where we invest our capital. We expect that we will generate an exceptional return over time. So that applies whether the capital is in the UK, Australia or anywhere. So the message is, we are not satisfied with the returns in BUKI, and we’re working really hard to improve that. But I think it’s important to put in context that this represents about 8% of our capital employed. And we just need to remember that and realize that a business the size of Wesfarmers can accommodate this and actually has the opportunity to be patient and do the things that are required to create value over time. So we’re clearly focused on improving and creating a successful business there, but I don’t see it as necessarily related to other things and other opportunities we may pursue.

Okay. Well, thanks, Rob and John.

Thanks, Grant.

Our next question today comes from the line of Shaun Cousins from JPMorgan. Please ask your question.

Thanks. Just a question on Coles’ convenience business. Just on fuel volumes, they fell again. I’m just curious why expensive fuel prices reflect well rather than poorly for Coles and why it’s not hurting the Coles’ supermarket business? And when will you have fuel prices in the market that are like what your insurance and your supermarket prices are which have a value message, because the damage it’s doing to your other parts of the business seem to be significant.

Shaun, I’m – we have this strategy. I’m not sure this is having an effect on our supermarket, smart supermarket business. We’ve looked at this in various ways. I think where we are in our agreement, if you look now in the market, we’re more competitive than we’ve ever been across many markets. And I think we’re making progress with our Alliance partner in ensuring we’re getting back to a good, sustainable volume business that’s profitable for all of us. And we’re going to maintain that in terms of good volume and profitability out of the business. As I said, we’ve looked across the supermarket metrics in many ways, and I don’t think it’s having or had a substantive effect.

Okay. And just a question for Guy on Target. Can you talk a bit about how your inventory levels, are you comfortable with the quality of the inventory that you’ve got? Are you still having to sell other people’s inventory that might have been mistaken? And just question why you’re still looking to roll out stores given you’ve got negative comps and you’ve got a lease tail that’s actually quite modest because of the work Terry has done, why you wouldn’t look at the closing stores in time just given the competitive dynamics, given Kmart but also H&M and others make this a very tough market and low prices rather than lowest, is not a tremendously compelling proposition? Just curious there about your product and your property going forward, please?

Yes, I think – Shaun I understand both those questions. Inventory levels, we’re happy with the levels of them. At the end of the 30 of June, we’re about 10% lower than last year, and into our eighth week of this year, we’re still running lower than the previous year. So those numbers have dropped. Am I happy with the – there’s work to do with product, so not so much the levels of inventory, so we’ll continue to manage that coverage to drop in time and make sure we do it commercially right. As far as the quality of the inventory is concerned, we’re probably over- indexed on, if you think about good, better, best. I’ve got a bit too much of good in the business, 365-type line items that I would rather reduce over time over the next 12 months. And our focus is to increase the level of better and best, especially in fashionability, and that’s the piece when I talk about having a competitive advantage over the group that I’m targeting in better and best. So get that fashionability right and lower prices compared to that competitive set. So hopefully, that covers the inventory piece for you. On the real estate piece, as I updated on the Strategy Day, over the next five years, there will be less Target stores, less space, so we’ve got closures planned to do as each of the leases come up. Whilst I think you guys asked for a number on that and I said I’d held back on exactly what number that was. But we’ve gone through the whole 500 sites with the Department Store real estate team, so we know where we are over-indexed or not performing, and that the Kmart brand would be more beneficial to trade better earnings without the Target store, but we just need to do work with our landlords on those as they come up. And as again, the main reason for not disclosing the numbers, I want to talk to the team about what those stores are before I go to the market on it. On the new store pipeline that you’ve heard me call out, they’re really a reflection of the pipeline that happened in the last five years. New sites take a long time to be opened, and the ones that are opening this year were probably signed off somewhere in the last four or five years. I did get to cancel about two; two sites that were in the pipeline that were board approved with landlords. And any other sites that I’m opening between now and the next two or three years from the old pipeline, I’m pretty happy with. We just opened two sites in that group this last six months. One at Narellan and one at Mandurah. And the one at Narellan is the second-best site in the fleet. So the team did have good processes in place in regards to signing off sites, but this is about a long-term strategy now at the 500 stores to make sure that we do really have the best portfolio of Kmart’s and Targets for the long term.

And so that five new stores that you’ve highlighted in the presentation, we should take that as a gross number or that’s a net number for fiscal 2018, please?

Gross.

Gross. Thank you.

Our next question today comes from the line of Michael Simotas from Deutsche Bank. Please ask your question.

Good afternoon, everyone. A question for John on Coles. I think you made a comment something along the lines that there’s some investment that needs to be made so you can enjoy the growth when it eventually comes. I just want to understand exactly what that means. So you’ve called out that simplicity benefits will be reinvested. Do you think margins from this business can recover some of their lost ground if the sales line improves and you get some operating leverage coming back through the business?

Hi. So as we’ve always said, margin in itself will be an outcome. Just to clarify what I meant. The first half will be a continuation of the second half of last year in terms of investment. It doesn’t mean any more investment, it means a continuation with some upside in terms of simplicity savings. So the net number will be slightly better in terms of the that sense, but it’s definitely moving in the right direction. What I believe will be the case in the second half, I think our sales will improve. And with that, obviously, I expect our profitability to improve on the back of our sales improvement. But it’s not a fixed market. So it’s always subject to whatever else is going to happen in this marketplace, and we will always make sure that we’re going to be competitive, whatever the case is across a variety of levers, but it’s – our direction of travel is certainly that we see an improvement in terms of our direction of travel in terms of our sales and our profitability.

Okay, but it seems like if the sales line does improve and there’s no dramatic change in the competitive landscape, you will let the profitability of the business improve with it?

Of course, it would be the right thing to do in terms of doing that. As I said, the only caveat is that I don’t know what others are going to do. And as you’ve seen, we will always maintain our competitiveness over time.

Okay. No, that’s very helpful. And then another question on Bunnings in the UK, I’d just like to talk a little bit about the kitchen and bathroom category. I mean, we can see the challenges in the Homebase business and that will hopefully diminish over time, but I’m more interested in the Bunnings’ formats and what’s happening with kitchen and bathroom there. It seems like you’re trying to change the way customers shop the category by removing the installation and in-home service. From what you’ve seen so far, can you generate enough sales density out of those stores to generate reasonable profits without a big component coming from kitchen and bathroom?

I think the opportunity for the Bunnings stores in the UK is the full assortment of range. And I think when you contrast that format to some of the competitors in the UK, you really do see a product intensity and width that is quite unparalleled. So I think different categories will contribute in different ways. On the kitchen offer, it’s still relatively new. Like it’s been in those stores now for – the longer trading ones in St Albans for a couple of months and in the other stores since they opened. It’s a considered purchase so what we’re seeing is a lot of activity, a lot of interest from customers in that and certainly leads and inquiries on the products have been encouraging. And the sales and then the customer feedback on the simplicity of it and the quality at the price point has been very pleasing. And what we’re finding is that we can create a really strong value proposition in that category. And as we sort of trade through the next sort of while, it’ll be interesting to see how that continues to perform, but early signs are positive.

Okay. All right. Thank you.

Our next question today comes from the line of Bryan Raymond from Citigroup. Please ask your question.

Good afternoon. My first question’s on Coles. For John, I’m just interested, I mean, each of the last few times that we’ve heard from you guys, there’s been incremental price investment called out. That’s something you haven’t mentioned today, and then you’re talking about second half 2018, that the price investment could return to a normal level or investment overall could normalize. I’m just interested, since the Strategy Day in early June, if you have seen any further incremental price investment or if we’re just annualizing previous price investment at this stage?

So thanks, Brian. There’s been no change since our Strategy Day in terms of what we said on that. So what I’m effectively saying is that we’re going to annualize the investment of half one with some savings, as I said, upside in terms of that. There will be the regular round of some price investment as we’re trying to get savings or we get lower cost of goods come through. But equally, on the other side, where there’s justifiable cost increase, we’ll see price inflation in some categories as well. So I think there’s a whole mix of that. But I’m describing it as more a business as usual prior to others in the market effectively rebasing their profit lines to invest back in their pricing.

Sure. And then just a follow-up on earlier, earlier in the call you talked about the renewals and I know again from the Strategy Day you talked about 20 to 30 plan for FY 2018. And then some earlier comments referred to a new round of renewals on some of the ones you did seven years ago. I’m just interested in that profile and whether we are actually expecting a bigger number than 20 to 30 next year or is that something that’s FY 2019 and beyond? So if you could just give some further color around your store network on that basis, that would be great?

Yes, sure. So the 30, it’ll be at least 30 I think in this year, and it may be slightly higher. It shouldn’t be materially higher than that. And what we’re certainly doing is, is where we haven’t invested in the fleets, we’re going to make sure that we renew those stores that we want to. Some we’ll never renew because we’ll get out of those leases. But some stores now that are seven years and beyond will require a reinvestment, and that will be at a lower level than we first renewed them, of course, because if you remember seven or eight years ago, we had to substantively invest in these stores because they had been underinvested for such a long period of time. The requirement in terms of the next round of investment will be much lower, and therefore, we should be, in FY 2019 and beyond, be able to do more with the same amount of capital or even less capital because they don’t require the same investment as before. But it’s fair to say that our renewal program will be strong for the foreseeable future.

Great. And then just my final question for Guy on Target. I’m just interested in the drivers of the improvement in profitability. I think, given your sales decline this year, it’s impressive to be able to break even on an underlying basis. So I’m just interested in how you achieved this, through the lens of either better price realization, cost reduction, direct sourcing. Was there sort of any of those factors or some others that were particularly important in driving that profitability in the full year?

Yes – no, it’s mainly called out in the note to you at the beginning there. It was related to all of those things. Supply chain was a piece of it. Supply chain, store costs, looking at productivity inside the stores, the support office itself was a piece of it. So the increase in direct sourcing, I mean, all those things were incremental and contributed to it. And then on the product side, when you remove those unprofitable events, the Toy Sale was one of them that I called. There were some minor events that used to happen inside the business that when you add up the sum of all those parts, removing the events also obviously removed sales. But when you do remove those events, hopefully we were – what we were trying to do is remove the unprofitable sales. So I did call out that we had a miss in some seasonal sales and some products that when you are stripping out, especially on the product line, there are opportunities there that we need to now go back and look at so nothing more than that. I mean, it’s a hard thing – it’s a hard piece to do when you’re trying to rebase the business and set it up for the long term because now the opportunity really lies in that – the diamond that I shared with all of you at the Strategy Day on good, better, best. The good part, we over-dialed on in our first 12 months. So a bit too much product there than I’d like but it’s not bad product. It just means I’ve got more weeks coverage there than I would like and not enough coverage or happy with the better and best piece. The only other thing I’d make to this improvement in profitability, when you are bringing in less stock, and it’s significant if you go back 18 months of the $850 million or $900 million worth of stock down to what we are now, which has got a four in front of it, when you’re being in less, that’s less to touch, less to move, less to handle, less to buy, and that all goes to the bottom line as well. So our team’s now focused on, particularly in women’s and kids and home and improving fashionability at better and best.

Okay, fantastic. Thank you.

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

Thank you. A question – another question on Coles, John. I just want to understand a little bit more when you talk about the – your expectations around improvement in sales growth in the second half. Is your expectation that you can at least return back to a market rate of growth from the second half? Or is that being a little bit too optimistic? And in the context of, I guess, between now and then, how do you balance up, giving sufficient pressure on your staff for keeping them motivated knowing that your major competitor’s posting higher rates of growth and just how you actually manage, I guess, morale whilst this sort of transition plays through?

Yes, thanks, Richard. It’s difficult to answer the question on market growth because who knows what that’s going to be in the foreseeable future. What I expect us certainly to be able to do over time is get towards that position with the initiatives that we’ve got in play. And the reason I talk about the second half, obviously, is that we’re up against lower comps in Q3 and Q4 from this year. So we should be well placed to cycle through those with what we’ve done. But it does depend a bit on what happens in the market in the second half, and I don’t have a view on that yet. But certainly our direction of travel should be a positive one in terms of our comp sales from where we are today and actually in the next couple of quarters. On the team members, we do a weekly survey of our team members, and I particularly take a weekly interest in what they’ve got to say. So we get about 14,000 responses every single week from a survey that’s called Always Open in Coles, and we take this as seriously as we take our customer feedback. And we look at it across stores and across the support center and then with functions within the support center. And it’s fair to say that our teams are feeling in a pretty good place, actually, because of the work that they see in terms of comp sales and headline sales and the fact that certainly at a local level, the work that they’re doing in the community. So the surveys, and we’ve looked at them over the recent past and then going back a while, would suggest that the majority of our team members are pretty happy with their week’s work. Now what we do, obviously, as we have a bit of a mantra here so that if there’s consistent feedback in certain areas, we have a – if you tell us something, we do something about it, and that’s the whole of the leadership in Coles. So when we see something that’s untoward, we make sure we take action on it. But it’s a good question, because it’s in tough times that you’ve got to keep people’s heads up. And I’m confident that actually our team are in pretty good shape.

Okay. And this is my second question for Ian, if I can. Can you just clarify, Ian. You talked about an acquisition of the Kmart brand name. Did you say $100 million? I would have been stunned is that was as big as that. And if – whatever the amount is, what savings will that actually deliver? Presumably you have been paying Kmart some sort of royalty or a license fee for the use of that brand name so there must be an associated annual saving as well?

Yes, there was. So you’re right, the number is $100 million, so that’s the number that we quoted. When you look at the materiality in the P&L, the numbers that are in the P&L are immaterial, and they’re immaterial going forward, so we haven’t called those out separately. What it does give us though, it gives us certainty over access to the name. So we have been licensing that name for a number of years. And of course, that license comes to an end at some point in time. And the current agreement was due to expire next year. So on balance, when we looked at – we looked at risk, we looked at the commercials, we looked at the alternatives, we felt this was the right commercial call.

Okay. It sounds like you – they had you over a barrel to some extent.

Yes. I mean, Richard, we were paying a certain amount each year anyway. And as Ian said...

Wasn’t it only a couple of million, Richard? I remember from years ago, it was $2 million or $3 million a year?

I’ll tell you the number, it was $5.5 million per annum, and it was up for renewal. So yes, do the math. And it hadn’t been increased for some time, so we came to the view that we didn’t want the uncertainty.

Understood. Thank you.

Thanks.

Our next question today comes from the line Andrew McLennan from Macquarie Bank. Please ask your question.

Hi, thanks.

Hi Andrew.

Just one more from me. Just around the, I guess, the tactics of the Bunnings pilot stores in the UK, are you going to get up to that sort of 20 stores and then let it sit and trade through spring and summer? I’m just wondering how we should anticipate those conversions? And then, also how you’re going to adequately assess the performance of those pilot stores?

Thanks, Andrew. We’ve got a range of measures that we’ll use to assess the different pilot stores and formats. We’ll end the calendar year at between 15 or 20 open or being developed. There’s a real logic to actually being able to convert stores during the winter period to be ready for the next summer. So I’d anticipate that there’ll be a number of openings into the early part of the second half. And I think then we’ll be in a position to sort of look at the review process again.

Right, okay. Thank you.

Thanks.

Ladies and gentlemen, that concludes our conference for today as there are no further questions. We thank you for your participation. You may now disconnect.