Ladies and gentlemen, thank you for standing by. And welcome to the Wesfarmers 2019 Full Year Results Briefing. Your lines will be muted during the briefing. However, you will have an opportunity to ask questions immediately afterwards and instructions will be provided on how to do this at that time. The call is also being webcast live on the Wesfarmers website and can be accessed from the homepage of wesfarmers.com.au. I’d now like to hand the call over to the Managing Director and Wesfarmers Limited, Mr. Rob Scott. Please go ahead.

Thanks very much and welcome everyone to Wesfarmers 2019 full year results briefing. I am joined today by each of our divisional managing directors and our CFO, Anthony Gianotti. To begin, I will provide an overview of the Group’s performance over the last year, following which, Anthony will provide some commentary on the Group’s other businesses, balance sheet and cash flows. The divisional managing directors will then provide an overview of the performance and outlook of their respective businesses. I will then conclude with the outlook for the Group and there will be an opportunity to ask questions at the end of the briefing. So starting off with slide four, our results released today reflect a number of actions that we have taken over the last year to reposition the Wesfarmers portfolio for long-term sustainable growth. A highlight this year was the successful demerger of Coles as a standalone listed company, as well as the disposals of Bengalla, KTAS and our interest in Quadrant Energy. The Coles demerger delivered a good outcome for shareholders and in a year of change both companies made significant progress with their strategic agenda. These actions also had the benefit of further strengthening the Group’s balance sheet. Importantly, we were able to share the profits realized on completion of these transactions with our shareholders in the form of a fully franked special dividend in April 2019. In addition to our portfolio management activity, we have made good progress in establishing the foundations for future growth of the Group. We have transitioned to a number of leadership roles and I am pleased that the majority of these appointments have been filled internally. From my perspective, one of the most material changes in Wesfarmers in the past year has been the step change in data and digital capabilities, and integration of these capabilities into our businesses, supported by the Advanced Analytics Centre. We have teams across our divisions working on numerous use cases, supported by Advanced Analytics to better serve our customers and improve business productivity. This month, we completed the acquisition of Catch Group. We are excited about the new capability this brings into our Group and look forward to accelerating the growth of Catch Group’s platform. In May, we entered into a Scheme Implementation Deed with Kidman, which is subject to a shareholder vote scheduled on the 5th of September and final court approval. Catch Group and Kidman are both relatively small investments in the context of the broader Wesfarmers Group. However, they are good examples of our disciplined approach to capital allocation and are consistent with our objective of deploying capital in areas where we can leverage existing capabilities and where we expect to generate attractive returns over time. Now, moving to slide five. While each of our businesses have their own unique strategies, all remain focused on managing their business for long-term success. There are three themes that resonate across all our divisions and you will hear this from our divisional managing directors. Firstly, a relentless focus on customers means maintaining price leadership and investing in better quality service and convenience. Providing better value to customers requires investment, both in our products and in our business processes. All our businesses are continuing to invest in their data, digital and e-commerce capabilities. This will be important. It helps improve our decision making and in the last year our retail businesses grew online sales by 33%. We are fortunate to have strong and resilient businesses in our portfolio, but we are always focused on building on our unique capabilities and platforms to deliver even better value for customers and to provide new growth opportunities. With this, our addressable markets are expanding each year. By way of example, Bunnings increased penetration in the commercial market, Officeworks offer of IT services through Geeks2U and the acquisition of Catch, are just a few examples of ways in which our businesses are expanding their markets. Now, turning to slide six, the financial overview. In a year of portfolio renewal, the Group has continued to record strong results and delivered improved shareholder returns. The reported net profit after-tax was $5.5 billion, which included $3.2 billion related to discontinued operations and the gain on the Coles demerger and other divestments. The Group generated net profit after-tax from continuing operations of $1.9 billion, an increase of 13.5%. After adjusting for the contribution from the Group’s 15% stake in Coles, the increase in NPAT was 8.3%. Our Directors have declared a fully franked final dividend of $0.78 per share, which we’ll distribute around $900 million to shareholders. Including the special dividend and earlier interim dividend, we have paid approximately $3.6 billion to our shareholders in fully franked dividends over the last 12 months. Turning to slide seven, each of our divisional managing directors will cover their businesses in more detail, but I will make a few introductory comments. Bunnings delivered another strong result with ongoing growth in sales and earnings, achieving this result in a softer residential housing market is a reflection of the diversity of its customer base and the resilience and breadth of its product offering. The Kmart Group performance was below expectations and earnings declined relative to the previous year. Despite this moderation in performance, Kmart continues to deliver strong returns, and Ian Bailey and his team ended the year with improved sales momentum, better operational performance and stronger customer NPS. As we set out at our Strategy Day, the Target team is accelerating the repositioning of its customer offer and remains disciplined in managing the store network. Officeworks has again delivered solid growth with earnings up 7.1% on the prior year. Officeworks continues to benefit from its investment in new and expanding product ranges and enhancements to its omni-channel offer. Now, moving to our industrial businesses, a solid operating performance, strong customer demand and disciplined focus on capital investment over time has allowed our Chemicals, Energy and Fertilizers business to deliver another strong result. You will see that we have provided more detail in the pack on operating metrics for WesCEF that helps explain the strong financial performance and why we are confident to invest more capital in this division. The performance of Industrial and Safety was disappointing and reflects the impact of Blackwoods earnings from ongoing investment in customer service and the ERP system. Turning to slide eight. Our commitment to disciplined capital allocation has not changed. Each of our divisions has maintained a strong focus on generating an acceptable return on capital with most of our divisions again delivering strong returns. Turning to slide nine. At Wesfarmers, our primary objective is to provide a satisfactory return to our shareholders. We recognize, we can only achieve our objective over the long-term if we create shared value for all stakeholders. This includes our shareholders, customers, team members, suppliers and the communities in which we operate. We continue to build strong relationships with our suppliers with over $29 billion of payments made in the last year. We also paid over $6 billion to our team members and relentlessly focused on providing engaging and even safer working environments. If we consider continuing operations, our total recordable injury frequency rate was 6% better than the prior year. We remain one of Australia’s largest tax payers with payments to governments of around $1.5 billion. Finally, I am very proud of the contributions the Group continues to make to the community either directly or through our customers and our team members. In the last year contributions totaled over $72 million, an amount that I know is making a real difference to many people. Now turning to slide 10. The Group’s balance sheet remains strong with $1.4 billion reduction in net financial debt on the prior period. I will now hand over to Anthony, who will talk in more detail to the Group’s balance sheet and cash flows.

Thanks, Rob, and good afternoon, everyone. I will provide further information on the Group’s other businesses, balance sheet and cash flows. Starting on slide 12, where we have provided a summary of significant items for the year. As we highlighted at the half year results, the Group’s portfolio management activities resulted in gains on the disposal of Bengalla, Kmart Tyre and Auto, the Group’s interest in Quadrant Energy, and of course, the gain on demerger of Coles. I will now run through these items again except to note that following a review of available tax losses related to the disposal of Bunnings, U.K. and Ireland post-tax profits from the various assets sales have increased by $112 million, compared to the amount that we disclosed back in February. Turning to a summary of earnings contribution from discontinued items on slide 13. As Rob has mentioned, our reported earnings included the trading performance of the businesses we disposed of during the year. Total earnings from discontinued operations contributed $587 million to the first half result, reflecting the various periods of ownership of the divested businesses. This compares to a full year contribution in the prior year of over $1.6 billion. Turning to other businesses on slide 14. Other businesses and corporate overheads reported a profit of $122 million for the year, which compares to an expense of $133 million in the prior year. There are a few moving parts within this result including Wesfarmers share of earnings from our 15% interest in Coles, as well as some items that are non-recurring. Our share of profits from associates for the year contributed $215 million, an increase of $159 million. This increase primarily reflects earnings from the Group’s 15% interest in Coles for the seven-month period following demerger of $128 million. Going forward, earnings from associates will reflect the full year contribution of our 15% interest in Coles. The Group also recognized a $61 million non-cash gain on its investment in Barminco, following its acquisition by Ausdrill, $28 million of this gain relates to our indirect interest, which is held through Gresham private equity and is recognized in other associates. This amount increased $19 million during the second half following a reevaluation of the Ausdrill shares. Interest revenue also increased during the year due to higher average cash balances. Other corporate earnings were $1 million for the year, compared to an expense of $66 million in the prior period. The increase reflects the remaining $ 33 million of the Barminco gain, $34 million received as a result of the value share mechanism that we entered into as part of the sale of the Curragh coal mine, as well as a reduction in the Group’s insurance cost of $24 million. Corporate overheads also decreased during the year by $14 million. It’s important to note that the Curragh value share agreement will expire in March next year, with any further contribution from this arrangement dependent on future coal prices. Turning now to operating cash flow on slide 15. Pleasingly, divisional cash generation from our continuing businesses remains strong at 97%, reflecting the highly cash generative nature of our existing businesses. Reported operating cash flows of $2.7 billion for the year were below the prior year as a result of the demerger and sale of the various discontinued businesses. The contribution of Coles to operating cash flow was significantly lower than the prior year reflecting the removal of seven months of Coles cash flows including the busy Christmas trading period. The divestments of Bengalla, KTAS and Quadrant also resulted in the reduction of associated earnings and cash flows relative to the prior year. Reported Group cash realization of 86% was impacted by a number of one-off items. These include the non-cash gain of $61 million relating to the Group’s investment Barminco, as well as the higher than usual gains on property disposals in Bunnings, which are not recognized in operating cash flows. In addition, although, we have recognized our 15% share of Coles net profit after-tax in our reported earnings, we are yet to receive a cash dividend on this investment, which has further impacted Group cash realization. Reported free cash flows of $2.96 billion were 13% below the prior year, primarily reflecting the reduction in operating cash flows following the demerger of Coles and the sale of our businesses completed obviously during the first half. Turning to working capital management on slide 16. Year-on-year working capital performance was impacted by the removal of discontinued businesses during the year. To provide some further clarity on the reasons for these movements, we have separately called out working capital cash movements from continuing operations, as well as providing working capital including our discontinued operations. Working capital from continuing operations improved on the prior year, resulting in a smaller cash outflow. During the year, cash outflows associated with inventory movements within our retail businesses increased as a result of the non-repeat of the significant inventory reduction achieved in target in the prior year, as well as higher levels of inventory investment in Kmart to support year-end sales campaigns in key product lines. This investment in inventory also resulted in a corresponding increase in payables at the end of the year. Importantly, inventory health in both Kmart and Target remains in good shape. Working capital investments in the retail businesses were more than offset by an improvement in working capital performance across industrials, including discontinued operations, the increased working capital outflow on the prior year was also impacted by the timing of the Coles demerger, which occurred during the seasonal inventory build prior to Christmas and the usual working capital unwind that occurs during December. We have included further information on the balance sheet and working capital, including a breakdown of working capital for continuing operations in the appendix. Turning now to capital expenditure on slide 17. Gross capital expenditure, including our discontinued operations decreased $459 million to $1.36 billion. The decrease reflects lower capital expenditure following the demerger of Coles and the sale of discontinued operations, as well as lower gross capital expenditure across our continuing businesses, which decreased by $80 million. The majority of the reduction in capital expenditure associated with continuing businesses was due to the one-off acquisition of the Kmart brand name for $100 million in the prior year. Higher CapEx in Industrial and Safety during the year was primarily associated with an investment in Coregas Healthcare and ongoing implementation of the ERP. Total proceeds from disposals in continuing operations increased $133 million to $497 million, primarily from property disposals in Bunnings. The elevated level of property activity reflected the favorable conditions in the commercial property market during the year. In total and including our discontinued operations, net capital expenditure of $827 million was $382 million below the prior year. For the 2020 financial year, we expect net capital expenditure for The Group will be between $550 million and $750 million. This guidance excludes any capital expenditure associated with the Catch Group and our proposed acquisition of Kidman, and as always, will be dependent on the level of freehold property activity during the year. On slide 18, we have outlined the movement in the Group’s net financial debt during the year, which included the proceeds from the demerger of Coles, the sale of discontinued businesses, as well as the payment of the interim and special dividends during the year. Overall, net financial debt decreased by $1.5 billion to $2.1 billion at the end of June, providing the Group with significant debt capacity to fund the acquisition of Catch and the announced acquisition and further capital investment associated with Kidman. Turning now to slide 19 and the Group’s debt management. The Group’s balance sheet and access to funding remains strong, our already strong credit metrics improved during the year and remain well ahead of the minimum targets required to maintain our current ratings. Our total finance costs continued to decline due to lower average debt levels and were $46 million lower than the prior year. Despite this, our overall weighted average cost of debt increased to 5.1% reflecting a higher weighting of overall debt to our capital markets bonds, following the repayment of our lower cost bank debt during the year. We expect our weighted average cost of debt to come down in the current financial year, reflecting the use of lower cost bank debt to fund the acquisition of Catch and subject to completion, the acquisition and the associated capital investment in Kidman. During the year, we also renegotiated our existing bank facilities, which will provide additional flexibility and improved cost of funds. Our bank facilities provide us with a substantially lower cost of debt than our current capital markets issuance. Importantly, we continue to have a balanced debt maturity profile and appropriate diversification of funding sources. Turning to slide 20 and our lease portfolio, Wesfarmers undiscounted lease liabilities totaled $8.5 billion at the end of the year and reduced by more than $9 billion following the demerger of Coles. The Group’s average lease tenure, weighted by dollar commitments is now 5.1 years, compared to 5.8 years as at the 30th of June, 2018. This was achieved through the demerger of Coles which removed longer term supermarket leases as well as the continued disciplined management of leases across our remaining retail businesses. We continue to focus on lease adjusted return on capital as a key metric for making network investment decisions across our portfolio. Turning now to slide 21, where we have provided an update -- updated information on the impact of the new lease accounting standard. As you know, Wesfarmers has adopted the new lease accounting standard from the 1st of July this year, bringing leases onto our balance sheet for the first time. We provided preliminary estimates of the impact to our balance sheet and income statement at our Investor Briefing Day in June. We have taken the opportunity to update these estimates as at the 1st of July, 2019, and note that they have changed materially following a significant reduction in discount rates as a result of reduction in the prevailing risk-free rate since the 1st of July, 2018. It’s important to note that as this updated estimate has now been determined at the date of adoption, our estimate of the right-of-use asset and associated liability for existing leases will not change materially from what we expect to report at our half year results with the obvious exception of any new leases into the portfolio or any portfolio changes that occur during the half year. Our pro forma income statement for the 2019 financial year for continuing operations would have shown an increase in EBITDA of around $1.2 billion and increase in depreciation expense of around $1 billion and a decrease in operating lease expenses of approximately $1.2 billion. These changes would have resulted in reported EBIT being higher by approximately $200 million, with an increase in finance costs of around $200 million, resulting in a broadly neutral impact on our reported net profit after-tax. Again, there will be no changes to our total cash flows, debt covenants or credit ratings and these changes will not affect shareholder returns. To assist with the transition to the new standard, for the 2020 financial year, we will provide reported results including and excluding the impact of the lease accounting standard. Turning now to slide 22 and the Group’s dividend and capital management. As Rob mentioned, the Board declared a fully franked ordinary final dividend of $0.78 per share, along with the $1 per share interim dividend and the further $1 per share special dividend paid in April, Wesfarmers has declared total dividends of $2.78 per share for the 2019 financial year. As always, our dividend policy seeks to maximize the value of franking credits to shareholders while having regard to current year earnings, credit metrics, and forecast cash flow requirements. Importantly, it also preserves balance sheet capacity to take advantage of value accretive growth opportunities if and when they arise. The final dividend will be paid on the 9th of October to shareholders on the company’s register on the 2nd of September. The Group will again provide shareholders with the option to participate in the DRP. Given our strong cash flow performance and credit metrics, it is our expectation that shares for the plan will be purchased on market. And with that, I will now hand over to Mike Schneider.

Thanks, Anthony, and hi, everyone. It’s been another busy year across the Bunnings business and I’d like to start by thanking our amazing team for their hard work and support. I am going to begin on slide 25. A headline results reflect the good progress that we have made across our strategic agenda this year. Reported revenue for the home and lifestyle division increased 5% to $13.16 billion. Turning now to slide 26. Total store sales growth of 5.2% was achieved during the year, underpinned by an increase of 3.9% in store-on-store sales. Sales growth reflected the diversity of our customer base and resilience of product offerings, despite softening conditions in the Australian residential housing market. Pleasingly, we saw continued growth across all major trading regions in both consumer and commercial markets, and all product categories. Turning now to slide 27. The solid trading performance achieved during the year can be attributed to focused execution of our strategic agenda, which continues to build on the underlying strength of our business. Bunnings recorded EBIT of $1.62 billion was an increase of 8.1% on the prior year. EBIT, excluding the property contribution was up 4.8%, an ongoing focus on disciplined cost control, supported earnings growth despite a moderation in sales growth. Incremental operating costs of just over $10 million associated with the development of our digital offer were incurred in the second half. We expect to step up that investment to $20 million in the 2020 financial year as the offer is enhanced and we continue the rollout of our Click & Collect offer in Australia and then into New Zealand. Solid earnings growth and disciplined capital management continued a strong return on capital of 50.5%. Turning to slide 28. Throughout the year we have stayed focused on delivering against our strategic agenda of driving stronger growth, delivering better experiences for our team members and customers, and driving efficiency through the core of our business. Throughout the year, we opened 17 new trading locations, 10 of which were replacement stores. We continue to invest in our store network and look for opportunities to bring customers in even wider and more compelling home improvement offer, whether that is addressing a gap in the market with a new store, expanding the footprint of a current store or bringing a multilevel offer to inner urban locations as we did at Caringbah in New South Wales and Newstead in Queensland. For example, a replacement warehouse at Caringbah in Sydney has given us 10,000 meters more retail space and over 200 additional car parks. Whilst our Newstead warehouse on the edge of the Brisbane CBD spans over 16,000 square meters and allows us to provide a really strong offer in this great inner city location. We continue to be excited about the opportunities in our trade business. We believe our wide range, sites and long trading hours, as well as the delivery of digital applications such as the PowerPass app create a very convenient offer that customers are responding to. Right now, we have 700,000 members signed up to our PowerPass trade program, which is growing at about 10% to 15% a year, with downloads of the PowerPass at, which we launched in November last year, averaging 1,500 downloads a week. We will continue to focus our effort on building more substantial commercial categories across all channels, so that we offer relevant brands at an attractive price and with high convenience. In respect to driving growth, range innovation and extension opportunities, we see them exist in most categories with a strong appetite from our suppliers to collaborate with us on bringing new and innovative products to market for our consumer and trade customers alike. This innovation continues to deliver a more competitive offer for our customers. As I discussed at Investor Day and at Strategy Day, we will continue to challenge the way we view the market in terms of new ranges, expanded categories, including in the low market share categories, along with our clever home range, where we know we have a strong runway for growth. Delivering better experiences remains a priority and continues to underpin our growth, this included building out our anytime anywhere offer with the introduction of Click & Collect in Tasmania and Victoria, following a successful trial earlier this year and I will talk more about our digital aspirations for the new financial year shortly. While making DIY even stronger remains core we continue to build solutions that connect our customers with local experts, making it easier and more affordable for them to have products in-store, particularly when it comes to a licensed tradesperson. We have expanded our assembly and installation offer to help our customers who don’t always have the time or skills to undertake some jobs and projects. 18 new services were introduced throughout the year with a total of 30 services now available. Uptake from customers continues to grow, with Dux hot water installation, toilet installation and barbecue assemblies being some of the most popular services we offer. We have also expanded our in-store events and activities, making it even easier for our customers to learn new skills and bring their home and lifestyle aspirations to life. Every store now has a mobile DIY unit, which is used to engage our customers in aisle with product demonstrations, displays and craft. Turning now to slide 29 and looking to the year ahead. While moderated trading conditions are expected to continue, Bunnings remains well positioned for growth in the 2020 financial year. We will continue to build on our recognized market strengths to create an even stronger offer for our customers and accelerate our trade growth through further investments in value, category expansion and growing our service and installation offerings. This will be fueled by our investment in our data and digital capabilities, as well as talented retailers and merchants across our business. As I mentioned earlier, we will continue to invest in the stage rollout of our Click & Collect offer across Australia, which we expect to complete in-time for Christmas trade. Next month, we will extend the offer into the ACT followed by South Australia, the Northern Territory and Queensland in October, followed soon after by Western Australia and New South Wales. Once we have completed the rollout in Australia, we will look to introduce the Click & Collect offer into the New Zealand market during 2020. In addition to Click & Collect, we will continue to invest in our online transactional platform so that we deliver a true omni-channel experience that meets the needs and expectations of our customers. This includes looking at how we can expand the range of home and lifestyle products we make available to our customers, whether it’s in-store, online or through a marketplace offer. Whilst it is still early days in respect to our online offer, rest assured our investment in data, digital and the in-store experience which will always be central to our DNA will be focused on how we continue to deliver a competitive and relevant offer, wherever and whenever our customers choose to shop. The quality of this offer will ensure we continue to be chosen and trusted by our customers. I am pleased with Bunnings continued growth in the 2019 financial year and look forward to building on our offer in 2020. I’d like to sincerely thank our team, suppliers and partners for their contributions to this year’s results. That’s it for me. I will now hand over to Ian Bailey. Thank you.

Thanks, Mike. Please turn to slide 30 for an overview of Kmart Group’s performance summary. Excluding Kmart Tyre and Auto, Kmart Group delivered revenue of $8.6 billion for FY 2019, up 1.1% on last year. Total earnings before interest and tax decrease 13.7% on last year to $540 million. Including Kmart Tyre and Auto, which was disposed of on the 1st of November 2018, earnings declined on last year by 16.7% or $550 million. Return on capital decreased 3.1 percentage points to 29.1%, driven by the lower EBIT performance this year. The division’s safety performance has improved with total recordable injury frequency rate decreasing 2.5% on last year, reflecting our ongoing focus to reduce the number of safety incidents in our business. For the 2019 financial year, Kmart sales were up 1.5% on last year, with flat comparable sales growth. Target sales decrease 1.5% on last year, with comparable sales down 0.8%. Turning to slide 31. Kmart’s moderate sales growth for the year was impacted by a number of factors, including the modest price investment this year compared to prior year. In FY 2019, the business implemented a number of initiatives to optimize product flow and store processes to support future growth. These changes led to a reduction in on-shelf availability, which in turn impacted our sales growth for the year. Lower sales growth was also achieved in apparel, particularly in women’s wear, as well as in our non seasonal products. In addition, the planned exit from DVDs negatively impacted sales by approximately 1%. The execution issue was largely resolved at the end of 2019 and on-shelf availability and execution has now improved. Kmart online continue to deliver strong growth during the year, supported by the improvements in the online offer, as well as the extension of the Click & Collect service. Turning to page 32. Target sales were below expectations, with comparable sales declining on last year. Trading momentum moderated during the second half of the financial year, reflecting a customer proposition, which is yet to resonate with customers in a sustainable way and highlights the need for ongoing repositioning. Whilst, overall sales underperformed, pleasingly Target saw growth in its best ranges in apparel and soft home, which demonstrates customer demand for quality, stylish products at affordable prices. The online channel continues to grow strongly, with improved site traffic and conversion, reflecting improved availability, expanded ranges and the improved customer experience. Turning to slide 33. Total earnings for FY 2019 were lower than the prior year, impacted by a number of factors. At Kmart, earnings were impacted by the moderation in sales momentum, higher operational costs, included the implementation of a number of initiatives to address the stock management challenges, resulting from the significant volume growth in recent years, along with an increase in stock loss. At Target, earnings for the year remain positive but decreased due to lower operating leverage from a decline in sales. Costs remain well-controlled and inventory held continued to be tightly managed. Return on capital, although lower than in the prior year due to the lower EBIT performance, reflects our ongoing focus on effective capital management. This is also supported by The Group’s continued discipline and integrated approach to the store network. Kmart opened four new stores, closed one store and completed 23 refurbishments during the year. Target opened one new store and closed 15 stores during the year. It is worth noting that the timing of the Target store closures has been aligned to lease expiry to minimize our exit cost. Turning to slide 34. Looking forward, the Kmart Group will continue to take a long-term focus to delivering strong returns over time and continue to leverage the Group’s structure to optimize our cost base. Kmart remains committed to delivering sustainable growth through two strategic pillars of being a great place to shop that is simple to run and delivering better products at even lower prices. Kmart ended FY 2019 with improved sales momentum and will continue to defend its price leadership position in the market by continuing to enhance our product offer relentlessly pursuing the lowest cost, improving operational productivity and accelerating our digital and data capabilities. Kmart will also continue to invest in its store network through new stores and the plan C Refurbishment Program. Target will accelerate the transformation of its customer offer to deliver a vision to inspire families to live better through a curated range of high quality and stylish product reweighted towards apparel soft home and toys. This repositioning has resulted in a reconfiguration of the Target support office structures as announced in recent weeks. Target will continue to enhance and expand on its online offer and further optimize its store network. On the 12th of August, the acquisition of Catch Group was successfully completed. The acquisition of Catch provides high caliber skills and capability in e-commerce and fulfillment and a leading technology platform. This is an exciting development for the Kmart Group and we look forward to leveraging Catch’s expertise to drive continued improvement and innovation in the online execution of our existing brands. Lastly, I’d like to take this opportunity to acknowledge and thank our 47,000 team members across Kmart Group for their hard work and support during the year. I look forward to working with you all and your continued support in the year ahead. Thank you and I will now hand over to David.

Thanks, Ian. Turning now to page 35. The results for the Industrials businesses comprise of strong operational and commercial results from the WesCEF businesses offset in part by a Wiz portfolio, which is undergoing a material transformation program. Whilst we have seen some improvement in customer service metrics for the Blackwood business, it is taking longer than anticipated to see earnings materialize. I want to commend the hard work by all the teams in the last year of activity. But in particular, I want to call out Ian Hansen and Ross Martelli and their teams, who deserve special mention not only for their core operational performance, but also their very significant efforts with respect to our business development priorities. Turning now to page 36. The Industrials division comprises the WesCEF and Wiz portfolios. Following the divestment of Quadrant Energy and the 40% interest in Bengalla, the Industrials result excludes any attributable trading results for resources in Quadrant. For 2019, the Industrials division grew revenue by 7% to $3.8 billion and generated earnings of $518 million, which is a 4.2% higher than the prior corresponding period. WesCEF earnings grew by $54 million to $433 million, while Industrial and Safety recorded a disappointing $33 million decline to $85 million, the drivers of which are detailed in the following slides. Turning now to page 37 and to WesCEF. Pleasingly, in their ongoing focus on safety at WesCEF, particularly with respect to high potential incidents, saw a decrease in TRIFR from 5.4% to 4.2%. Safety remains a key priority and increased focus will continue on high potential events and a strong reporting culture. WesCEF earnings excluding Quadrant Energy increased by 14.2% and return on capital increased to 32.6%. Excluding the insurance proceeds and the one-off provisions, earnings increased 11.3% to $422 million with a 3.4% increase in return on capital. The insurance proceeds relate to the five-month ammonia plant production disruption this year and the provision for the removal of redundant equipment across a number of our sites. Turning now to page 38. WesCEF strong results have been driven by a focus on operational excellence and I’d like to call out a few of the metrics that I believe demonstrate this focus. As mentioned, safety is the number one focus at WesCEF and the graph on the left displays the TRIFR since FY 2011. The overall downward trend has been delivered through a continual improvement ethos, including a focus on behavioral safety where we have empowered our people to drive positive safety practices to have an ongoing vigilance against complacency and promote an open culture where we proactively report hazards and capture learnings from safety incidents. Specifically, in recent years, we have placed a greater emphasis on high potential incidents to ensure we are controlling hazards for incidents with a potentially greater consequence. The graph on the right displays the production performance across our chemical products and the average availability across all our chemical facilities. The step-up in production in 2015 is primarily driven by the commissioning of the AN3 plant, but is also due to the incremental debottlenecking of sodium cyanide capacity. In terms of availability, there is some variability driven by planned and unplanned production disruptions over the years. But the nine year average of 93% compares very favorably to international industry benchmarks. Since coming online, the third nitric acid train has had excellent availability of 96% and is scheduled for its first major maintenance shutdown in the first half of FY 2020. Turning now to page 39. The breakdown of the WesCEF result is the following. In the Chemicals business, the AN business continued to benefit from ongoing Burrup disruptions, which contributed to growth in EGAN sales. However, earnings declined due to lower margin contracts and higher operational costs. Ammonia earnings improved due to higher production levels and lower gas input costs. Higher production and export margins drove an improvement in sodium cyanide earnings. In the Energy business high sales volume for LPG, LNG and natural gas retail were also assisted by lower gas input costs helping to contribute to earnings growth. Earnings also benefited from a 10% higher Saudi CP during the year. In the Fertilizer business, we achieved earnings growth, despite a late seasonal break driven by higher sales volumes as a result of positive sentiment following a strong wheat harvest in Western Australia in 2018. Turning now to page 40 and the Industrial and Safety businesses. Disappointingly TRIFR increased to 6.9 from 6.6. However, all lead indicators are well above target and our positive reporting culture is intact. The earnings performance of Industrial and Safety was impacted primarily by a disappointing year in Blackwoods. The Industrial and Safety portfolio generated revenue of $1.7 billion, which is a marginal decline on last year and is underpinned by reduced sales in Blackwoods, offset in part by growth in core gas. Disappointingly earnings of $85 million were $33 million below the prior year, the drivers, of which are set out on the following slides. Turning now to page 41. The Industrial and Safety result breaks down into the following components. For Blackwoods as previously mentioned, we have made a conscious decision for the next 12 months to 18 months to focus on key strategic customers while new systems and processes are implemented. As a result, revenue was marginally down with increased demand in mining offset in part by lower sales in construction and small-to-medium enterprises and a corresponding impact on margin, earnings continue to be impacted by ongoing investment in customer service, supply chain and ERP, and is reflected in increased support costs. Positively customer service metrics have improved and remains strong with average DIFOT of above 95% for the largest customers and customer backlog has been reduced by 75% compared to two years ago. These are fundamental building blocks for the business in the future. For Workwear Group revenue was broadly in line with the prior year with higher Uniform Sales offset by the impact of the retail store divestment and the ongoing macroeconomic weakness in the U.K. Earnings benefited from one-off insurance proceeds and the profit on the sale of the divestment of the retail stores. In Coregas, revenue increased due to increased in demand for bulk sales and the successful launch of our healthcare offering in December 2018. Earnings increased marginally due to higher sales offset in part by margin pressure by higher input costs. For Greencap, lower utilization and expert services offset strong growth in our online services platform. Now turning to page 42 and the outlook for WesCEF. For WesCEF overall production and product demand is expected to remain robust. The AN business will continue to benefit from ongoing disruption at the competing Burrup plant. However, beyond this earnings are expected to be impacted by an oversupply of EGAN in WA and some contracts rolling over to new lower margin pricing. Kleenheat continues to benefit, continues to focus on long-term customer value propositions and retention with earnings expected to be impacted by a lower Saudi CP outlook. Fertilizer earnings remain dependent on seasonal weather conditions. We have an investor tour that’s scheduled for Thursday, the 3rd of October this year at the Kwinana plant and I would welcome you all to attend. Please contact Eric and the team for the details. And finally turning to the outlook for the Industrial and Safety businesses on page 43. Overall conditions in Australia and New Zealand are expected to remain stable. Digitization and automation activities across the Wiz portfolio are expected to continue for at least the next 12 months to 18 months. Earnings are expected to remain under pressure during this period. Successful implementation of the ERP, supply chain and digital investments are key for the success of the Blackwoods business and will continue the cost pressures in the business in the next 12 months to 18 months. The leadership changes that we have already announced for the Blackwoods business have been all about rebalancing the team to get closer to our customers, drive greater local ownership of results and by moving to a regional model and reestablishing our market leadership in safety and technical excellence. Coregas will benefit from an annualization of the healthcare offering, which launched in December 2018, but earnings are expected to be moderated by margin pressure. Workwear Group and Greencap have stable outlooks in their core markets. I will now hand over to Sarah in Officeworks.

Thanks, David, and hi, everyone. I am pleased to report that Officeworks has continued to deliver positive progress over the past 12 months. Turning to slide 45. We recorded our safest year under Wesfarmers ownership, with TRIFR decreasing 16% to 8.5%. The safety, health and wellbeing of our 8,000 team members is a priority for me and for Officeworks, and whilst, we are proud of our progress even one injury at work is one too many. So there remains more to do. Providing an easy and engaging customer experience remained a focus throughout the year. Our customers told us, our service continued to improve with strong satisfaction results. Coupled with strong transaction growth this drove revenue growth of 8% to $2.3 billion. Other key financial metrics performed well with EBIT growth of 7.1% to $167 million and return on capital increasing to 17% from 16.6% in the prior year. Moving to the next slide, sales momentum was underpinned by investment in new and expanded product ranges, online enhancements and improvements to the Click & Collect experience. The every channel strategy continues to resonate well with customers, delivering strong sales growth in both stores and online. Positive momentum in the B2B segment was maintained with more customers choosing Officeworks to help them start, run and grow their business. The uplift in earnings was delivered by the strong sales growth and very effective cost management. Return on capital grew to 17% as the business continued to invest in products and services to support growth. Moving to the next slide. Having an engaged team that feel they belong and have a safe place to work is key to the success of our business. The successful vote in favor of the new Enterprise Agreement for our store team members was an important milestone in the second half of the year. We look forward to the approval of the agreement by the Fair Work Commission and implementation during FY20. Delivering an easy and engaging customer experience, as I said, has remained a focus. In March, we opened a trial format in Mentone, Victoria and to-date the store has performed in line with our expectations, and is informing the shape of our future renewal program for this year and beyond. During the year, we also invested in making our Click & Collect service easier for customers, which delivered an increase of 45% in Click & Collect orders and a materially better customer experience. Officeworks is committed to operating a responsible and sustainable business that supports the communities in which we live and work. A couple of the highlights from this year were our 7% reduction in carbon emissions and our continued improvement in the recycling of our operational waste, which improved from 76% to 82%. Making focused investments to drive operational excellence will enable future growth and improved productivity. For example, during the last year we made good progress building our new distribution center in Hazelmere, Western Australia, which will open this financial year. This will enable faster and more cost effective operations, supporting our every channel model here in WA. During the year, we also grow our business by opening four new stores, acquiring Geeks2U and continuing to invest in evolving our ranges to better meet customer needs. For example, in educational products, commercial furniture and commercial technology. Turning to the next slide, we remain focused on making bigger things happen for our customers, our team, the communities in which we live and work and other stakeholders. We will continue to drive growth by executing our refreshed strategy as outlined at the Strategy Day and investing for the long-term. During FY20, earnings growth will be impacted by maintaining price leadership and the New Store Operations Enterprise Agreement, which we expect will be partly offset by productivity initiatives. I would like to take this opportunity to recognize and thank my team for delivering another year of positive progress for Officeworks. The future for Officeworks is exciting and the team and I are looking forward to building on our recent progress to continue to deliver satisfactory returns to shareholders over the long-term. I will now hand back to Rob.

Thanks, Sarah. So I will turn to slide 50 and the outlook for the Group. Our efforts in repositioning the portfolio have resulted in a very busy year for Wesfarmers and I’d also like to add to the thanks from our divisional managing directors to the 105,000 team members across the Wesfarmers Group for their hard work and dedication in what was a very busy year. Going forward, excuse me, our businesses are well-positioned within their respective markets and will continue to invest to deliver even greater value, quality and convenience to their customers. Given the diversity and resilience of our portfolio, the Group remains well-positioned for a range of economic conditions. While we maintain an eye to new opportunities, our primary focus will remain on our existing businesses together with the Catch acquisition and subject to shareholder and court approval, Kidman, as we continue to build on our unique capabilities and platforms and this includes further investing in and developing our data, digital and e-commerce capabilities. As always we will remain disciplined in our approach to capital allocation when considering these opportunities. That brings us to the end of the briefing we would now be happy to take any of your questions.

Thank you. [Operator Instructions] Thank you. We have several questions in the queue. Our first question is from Andrew McLennan from Goldman Sachs. Please ask your question.

Hi, everyone. Thanks for the presentation. I was just wondering with respect to Bunnings, if you could provide any guidance around store openings. You mentioned 13 were in planning, but I note that the net expansion you had this year was a little bit on the soft side. So I was just wondering if you could provide some commentary there. And also you did mention that there was improving momentum in Kmart. I am just wondering if you can reflect on Bunnings start to the financial year as well.

On this store front -- on the store rollouts, just had a little bit around timing from a construction point of view, some of that tends to be caught up a little bit in planning and weather. So no real change to the sort of longer term guidance in that sort of 10 -- net sort of 10 new stores a year frame. From a trading point of view, we are here to talk about results today. So that’s what our primary focus is on.

Okay. I’d just like to follow-up on salary and wages growth was around 5.5% compared to [indiscernible]. Just wondering given the enterprise agreements that you are looking ahead at, if you can provide just some commentary on where you expect that to step-up to please?

Yeah. we -- our -- we have had a fairly consistent sort of approach to EBAs even in periods where now EBAs [indiscernible] sort of passed on our increases to our teams, so we don’t see any sort of surprises in that space at all and our focus, obviously, given the sort of expert level of service we provide in store, usually means that some of that investment in salaries and wages at a store level can be a little bit higher than in others but we are very focused on it.

Okay. Thank you.

[Operator Instructions] Our next question is from Morana from Macquarie. Please ask your question.

Hi. So just follow-up on that earlier question, I am just trying to, I guess, interpret what the comment around Bunnings growth moderating in the first half was 2020 is. Does that mean those like-for-like sales around -- stay around the 4% mark or are they actually declining now?

No. We have, I think, just to sort of clarify the point I made during the presentation. We sort of see continued moderated conditions in the housing market as opposed to a moderation in our trading performance.

Okay. Thank you. And then just on that, I guess, the commentary on the weaker housing market, could you just provide some higher level comments on any trends that you are seeing across different states. And then any commentary on what you are seeing across trends in discretionary versus necessity and just the mix there?

Yeah. I think the only sort of commentary you sort of make around the housing market is there’s been a little bit of talk about some higher clearance rates in auctions over the last few weekends in the sort of Sydney and Melbourne housing markets talking to a few agents, I think, that’s as much a byproduct of less stock in the market as anything else. So it’s really hard to say and we have talked about some other broader macroeconomic issues in markets like Western Australia in the past. But it sort of -- it is a hard one to call out and -- sorry, I have forgotten the second part of your question.

And then just any trends that you are seeing at Bunnings across discretionary versus necessity categories?

Yes. It’s still sort of continues to be pretty much as it’s always been, which is that there’s this balance between the trade side of the business and the consumer side of the business where trade has a stronger bias to the necessity spend, and I guess, in some ways we are a supermarket for trades people. So that bears out. And then, I think, you see that mix right across the product category range for discretionary necessity for the consumer customer. So there’s nothing that’s particularly different to what we have seen in the long-term.

Okay. Thank you. That’s clear.

Our next question in queue is from David Errington from Merrill Lynch. Please ask your question.

Hi, Rob and team. Rob, my question is to Ian Bailey. I am trying to get an understanding as to what is actually happening within Kmart and Target. Kmart, there’s a couple of worries that I have got, I am trying to get my head around what this, first of all, reduction in inventory was, and then and then there seems to have been about $400 million increase in inventory that you have put in the back of - I think page 55 where inventories increased by just under $400 million and basically it says, it’s reflecting investment in Kmart. But then on the flip side, Ian was talking about stock loss and all rest of it. I just don’t understand how well Kmart is going at the minute. And he made the comment, Ian, you made the comment that Target you are still not resonating with your customers yet and you need a lot more work. That’s all it doesn’t give me a lot of confidence toward the long-term sustainable future. If -- for probably five years if truth be known you have been trying to find an offer that resonates with your customers and you still haven’t found one. So that doesn’t give me a lot of confidence. So there are my questions. They are a bit jumbled but if you have a go at trying to alleviate some of my concerns as to what’s happening in those businesses that that would be really appreciated?

David, it’s Anthony. I’d like to start with just the first part of your question on inventory, so a couple of things that we have called out. As you recall back in 2018, we called out there was significant inventory reduction in Target. As that, obviously, business deleverage and there was a long -- a much greater focus on inventory controls and so we saw inventory come back significantly. Clearly, in FY19 we are not cycling that same level of inventory release. Secondly -- so that means the inventory levels in the current year are more normal. Secondly, on Kmart there was an increase in inventory towards the end of the year, partly related to timing, partly related, as we said to increase sales campaign and that was probably around $190 million of additional inventory. But again that was also reflected in payables from a working capital perspective.

Just before you jump off Anthony, and I hand over to Ian. So you cleared out inventory from Target, but then you have built it back up. So that was -- that stock -- was it that you couldn’t sell or clearance stock or and now you are building up inventory again in Kmart before you have actually got resonance with customers or actually you have actually got traction in sales, is that a wrong way of reading it?

Yeah. And that’s not right. What we -- as you know in Target in 2018 there was a significant reduction in inventory as the business repositioned. There was the closure of stores and there was, historically, inventory issues in Target, which were addressed to the 2018 year. So that came-off significantly. In Kmart it’s more about campaigns and timing of campaigns. So an -- Ian, can talk to inventory in terms of what’s happening.

Anthony, I am sorry to cut you off, I don’t want to cut off you here, but just on Target, I have got to try to get my mind around that. You cut the inventory back because you closed some stores, but now you have built it back up again to more normal levels, but you are not resonating it with your customers and yet you tell me that you have got a healthy inventory position. It’s just that sort of like line of logic doesn’t sort of like flow to me?

No. So, David inventory hasn’t built back up. It’s at more normal levels. So the inventory increase hasn’t been in Target. It’s been in Kmart and there’s been some in Bunnings. But it’s at a more normal level of inventory now. So we haven’t seen increases in inventory in Target.

Right. Okay. So we haven’t seen -- so, okay. But when you have gone back to more normal levels?

Yes.

Right. Okay. But you are still not resonating with customers yet?

That’s it. I think that’s a separate issue, which Ian can talk to. I am just more focused around what’s happening with inventory.

Okay. Okay. Sorry.

Yeah. Thanks David. I will have a couple of gos at the inventory one as well just around that and then I will come back to the position of the two businesses. The first thing I’d say on the Kmart inventory is, it was a high increase at the end of the year, but that was really a timing issue. And when you look at inventory over the course of the months, the increase isn’t anything like that great. So that was really a moment in time. As Anthony says, it’s offset by the payables from the balance sheet view, which also says that again it’s a moment in time that we are confident with; our seasonal performance in Kmart’s actually been pretty strong through the back half of the financial year. So we come out with cleaner clearance this year than we did last year. So my feeling around inventory health in Kmart is good as we come out of that irrespective of that that inventory increase and my expectation that will normalize is high. On the Target side, there’s a very modest increase in inventory, which is more to do with FX in the cost of goods than it is to do with any with any other factor and we very closely watch the week’s cover we carry on that business. So if I…

Okay.

If I go to the question on, how we’re building inventory in Kmart in advance of the sales momentum. We called out that the sales momentum has picked up to a degree from where it was and indeed you can probably back calculate how that’s going in the last month of the year from the announcement we made when we -- when we gave the market an update on profit through to the end of half, which is really us making improvements in some of those areas, which we talked about at the strategy day. So our executions improved, our in-stock availability is improved, and our products are also improving as well. So those elements in their own are starting to now gather some traction, which gives us confidence in the long-term position of Kmart. I think on the question of Target, I think, we are all very acutely aware of the fact that the business has been through a great deal over the last period of time. I think one of the great successes in the last few years has been to reduce the costs in that business and get that business to a position of profitability, which is where it is today. Of course, what we want to do is maintain that profitability into the future and what we are seeing is that the product offer and the offer we have in front of our customers isn’t generating a positive sales position. So that says to us, we have got to continue to improve at a faster rate than we than we currently are. So that’s why we have caught out accelerating the transformation of that business and Marina’s doing a really great job with the Target team on getting really clear on how that proposition is going to evolve in the future to drive improved performance.

Okay. Okay. Thanks, Ian. Thanks for Anthony. Thanks for your answers really good. Excellent.

Our next question on the line is from Bryan Raymond from Citi. Please ask your question.

Good afternoon. Just maintaining focus on Kmart, Target for a moment. Just interested in how are you finding discounting activity across the market. I think it look like to be downgraded in June on this business you mentioned it’s been a bit unsustainable. How [we fare] [ph] on that into the final 4 weeks of the year and essentially even bit past that. Are we seeing any improvement in those conditions?

Yeah. Thanks Bryan. I think, I’d probably describe it as erratic, is probably the best description. So certainly out there, there’s times when some of the pricing is incredibly sharp and then at other times it seems to lift away. I think the thing that we have really focused on in the last, certainly, in that last quarter is really making sure we are number one on price. So we put through one of our biggest price drop campaigns at the back -- in the last quarter of the year and we are seeing evidence in customers minds that Kmart’s really leading in that lowest price position.

All right. So on that basis then, there still be some annualization of that price investment into the first three quarters of FY20, would that be a fair assumption?

Sorry, Bryan, I couldn’t quite catch the start of that.

Sorry. Just confirming then, if there would be some annualization of that price investment through into the first three quarters of FY20 on the basis of the timing of it, is there anything that would indicate that margins shouldn’t be down in -- at least the first half ‘20 or year-on-year?

I think what I’d say is, dropping prices is something Kmart has a rich history of doing and so we very much do it in the mind -- with the mind to how the business is going to perform into the future. So, I think, if you are looking at it from a from a margin viewpoint, I wouldn’t look at the price drops on their owners as a unique factor that’s going to drive a different outcome.

Sure. Okay. Then just on Bunnings, I am just interested in that online investment of $20 million in FY20, I am sorry, $20 million in FY20. Is this something that should be finished after that, is there planned investment that are concluding throughout FY20 and then from FY21 it turns just into a trading profit, essentially, for that online business, can you just give us feel if that or if that $20 million should be in the base and ongoing indefinitely.

I think, it would be fair to assume Bryan that it will be sort of be in the base ongoing with sort of, things that we think about in the year ahead, is really moving our offer from good-to-best, it’s ongoing technology development, it’s day-to-day management of the e-commerce business, and obviously, as you would imagine, it’s the commencement of depreciation, which starts to roll through in the years ahead as well.

Right. You have talked a lot about Click & Collect for a Bunnings online perspective, but in terms of delivery can you give us an update of where you are in Victoria. I think that was phase two of the rollout around the delivery side specifically. I say, that would be more of a margin risk on the Click & Collect side.

Yeah. It’s an interesting one. I think in FY2018 through to FY2019, we had something like 640,000 to 650,000 deliveries out of Bunnings stores. We’ve been doing deliveries for a really, really long time. So we’ve trialed a few stores in Victoria and in Tasmania with Click & Delivery, and we find that the delivery rates ask of our customers, they understand, given the nature of the product. So we don’t see that as having any impact at all because we’re processing those as we’ve always done.

Okay. And then just finally on Bunnings, just the sales per square meter performance in FY19, I appreciate you gave us same-store sales, but there’s been quite a large gap between sales productivity and the like-for-like sales. So I’d just be interested in whether that gap has been maintained or whether that sales per square meter is broadly in line with comp store sales?

Yeah. I think, as we -- I think if you think back to invest today in Strategy Day, Justin Williams our CFO sort of explained that out a little bit around the mix of our stores in that Caringbah examples quite a good one, where you build something is a little bit bigger than what you had before. It takes a period of time for those to sort of come back to normal. So it’s a little bit of a byproduct of the way the network’s going and sort of flattening out over time.

And that should continue given your -- strategy don’t change in terms of top store formats?

Yeah. The store formats are a mix, like, for it for a lot of the big ones we opened -- new stages in Caringbah, smaller ones like Fairfield in Victoria, which is 4000 square meters. So there is a bit of a blend but it’s more often than not a byproduct when we open some of those really big ones or we refurbish and create a lot more space.

Okay. Great. And then, just finally, just the EBIT contributions or sales contributions from gigs to you and catch on a pro-forma basis, just trying to model that through into FY20, is it possible to get some information around that place?

Look for both -- it’s Rob here. For both acquisitions not material to either Officeworks or the K Mart Group and in fact in both businesses, we are looking to make some additional investments to scale the platforms up. So in turn, obviously, over time, we will be looking for an improved cash realization from the investment. But in the short-term I wouldn’t expect a material change in earnings. But I would certainly be focused on the sales and the customer benefit that we are extracting and the cross-sell benefit as well we would expect to get from those value added services.

Great. Thanks a lot.

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

Yeah. Thank you. My question is for David Baxby. I wanted to talk about Blackwoods in particular, it would appear that not much is going right. I mean, do you have flagged at the Strategy Day, a weak second half, but I don’t think anyone was expecting such a weak second half. Just love to hear your thoughts a bit more from the strategy point of view here, because based on some of the things we see in terms of people movements would appear that you are moving back away from more of a national approach back to a regional approach and if that’s the case as sort of winding the clock back, back to where this business was some time ago. So if that’s true then I guess, it’s acknowledgement that what you have been doing or what’s happened in the last couple of years hasn’t been working. So just love to hear your thoughts on that?

Now look it is a great question Richard and thanks for asking it. I think if you look back over the last three years of the transition of Blackwoods. So I think what the business has successfully done is reestablish some real credibility with respect to our supply chain and our merchandising platforms at the center of the business. And I think you have got to go through a period of sort of central reflection in order to strengthen those two functions and I think that work has now been broadly done and we have talked a lot about the investments we have made in both the merch team that now numbers in excess of 25 odd people and we have also got a number of investments that have gone on in the supply chain we have talked about. And there was a video of the Strategy Day around the cohesive system that we have installed, the additional stock more SKUs work we’ve done at Greystanes and we’ve added little pieces of automation to those supply chains. And I think what those two initiatives have done have enabled us to achieve DIFOT levels now consistently across the network in excess of 90% -- 95% and we have taken backlogs and times to turn quotes, right back to what we regard as being world leading result. So, from a fundamental building block perspective, we think that’s sort of really, really important. And in addition to that, we have also strengthened and I think we have talked in the past before about the number of salespeople that we have got focused on some of the larger accounts and I think I called out at the Strategy Day that the growth that we have had in some of those large national accounts that interact with multiple branches, multiple DC’s around our network. We have seen reasonable growth in those accounts but that growth has also come at lower margin. And I don’t think we have shied away from that. And that’s been a deliberate attempt to ensure that we can continue to extract the investment in those centralized functions. I think having completed that work and obviously we have also talked a lot about being partway through ERP. We have continued to carry 60 odd branches during that process and there are branches that have got deep local community ties in their local communities. And if you look at the business, the part of the business that has been disappointing, have been those businesses there are more naturally attached to those branches. So rather than a sort of back to the future, I’d characterize it as being retaining that centralized discipline around supply chain and merchandising, retaining our very strong focus on national accounts where we have shown that we can deliver for our customers and that’s been shown in both DIFOT performance and NPS scores and now through the addition of some organizational change. So actually having state based P&L’s and also the addition of a couple of incremental senior managers, the ability to go back and re-leverage the investments that we have already got in the ground with respect to the branch network, while we also complete a reasonably significant re-platforming with the ERP and I talked at the Strategy Day of having re-launched our web front end which is dramatically reduced the amount of friction our customers feel when they work with us. These are all parts of the building blocks to getting back to realizing the potential of Blackwoods. Now I am not going to shy away from the fact that no one’s more disappointed with the results in the last 12 months than me. But what I feel we have done is we have bitten off a lot of the data remediation, a lot of the systems remediation, challenges that you always encounter and that maybe you don’t fully expect when you undertake an ERP program. That’s going to go on for the next six months to 12 months, we can’t shy away from that. But I feel like, we have got the team focused on exactly the right things that are important to the business. We will continue to leverage that regional presence. We will reestablish our leadership in safety and they -- and both those initiatives don’t require incremental investment because we have all the building blocks in place and that’s where the team is focused.

Thank you for that. A lot of what you said I mean there’s progress, sounds like it is being made and I hear you winning with some of the big customers and you say that comes with a margin impact. But, I mean, we don’t know the exact numbers because you don’t disclose them, but you have been pretty clear saying Blackwoods revenue overall has still declined as most.

Oh! Yes.

So, yeah, if you could explain that because most of what you are explaining here to me talks about where we would see an EBIT impact, but not necessarily a negative revenue impact?

I think look the revenue trend within Blackwoods is very modest. So when we talk about a decline, it’s very, very modest. So I wouldn’t focus too much on the sales line. The way I characterize it is that we have seen a shift in mix of customer underlying. There’s no doubt that we have lost both share of wallet and also overall gross sales with some of our smaller customers which is part of that centralization effort. They are the customers that we are going to go back and refocus on and to ensure that we can start to grow sales again but also inject some additional margin into the business over the next 18 months to 24 months.

Okay. So if we think about that timeframe, David, and you are talking about the ERP program, another six months to integrate.

Yeah.

Are we six months away or correct me if I am wrong, are we six months away from finding a floor in earnings here or not?

Look, again, I don’t think we have called that six months ERP will not be installed until June 2020. So that’s something that we are very, very focused on, which is why we have been quite cautious in terms of our outlook for the Blackwoods business, because there is a lot of change management to go on in that business. And while the teams are doing a great job, I think, it’s going to take continued focus while so much change is going on in order to stabilize the business.

Okay. All right. That’s helpful. Thank you very much.

[Operator Instructions] Our next question in queue is from Grant Saligari from Credit Suisse. Please ask your question, Grant.

Thank you. Just the Officeworks margin in the second half was down around 30 basis points. You did call out some additional expenditure to reposition on price. Just wondering whether you could elaborate on what’s actually happening there, what are the market factors that are causing that whether it’s permanent and if there’s any contribution in that margin decrement from the EBA that you are moving to?

Yeah. So you are right. We continue to invest in the second half to maintain our price leadership position as it has been our strategy for a number of years. We continue to say, as I said at the strategy day, a competitive environment that’s strong and that hasn’t alleviated, there’s a continuation of that as we go through into this year, which I referenced in outlook as well. In terms of the EBA, that we are waiting for ratification from the Fair Work Commission on that, and we hope that that will come in the coming months and at that point we will make the changes and implement that. So that hasn’t hit our performance yet and certainly didn’t last year.

Just a little bit more on the price investment. Are you seeing that come through as additional promotion in the market that might be a function of fairly soft consumer conditions or is it something structurally changing there that is necessitating those moves?

No. I mean we haven’t really seen a change in our -- what I’d say consumer position over the last six plus months. What I would say is that, we have been working in a competitive marketplace for many years. It is certainly intense and it remains intense. Those competitors are far and wide depending on the sector whether it be furniture, whether it be technology hardware, whether it be online or bricks-and-mortar retailers. So we have a very strong trusted price position with our customers and our -- and it’s very, very important we continue to maintain that and that is what is driving sales in our business and customers continuing to choose Officeworks.

Okay. Just a quick one just on Chemicals, Energy, and Fertilizer. You had a terrifically strong second half. The commentary seems to suggest it was probably built off higher fertilizer volumes, which were presumably seasonal. LPG sounded like it was quite strong when you called out some softness in margin [ph] in the end market. I guess my question is just to get an understanding of the permanence of that lift in the second half or should we sort of think more about seasonal effects through fertilizer and the like?

No. I think you are right. I think it’s far more likely to be a seasonal effect.

Okay. Thank you.

Our next question is from Ben Gilbert from UBS. Please ask your question, Ben.

Hi, guys. Just first question to David just around the Chemicals business into next year. I appreciate there is some commercial sensitivity around spot and contracts, et cetera. But is there any color you can give us in terms of just how we should think about the headwinds as we move into next year from not being able to sell as much in that’s high price spot, and what sort of EBIT drag that’s going to have, because presumably it’s going to have a reasonable type EBIT drag on that division?

Sorry, when you say high priced spot, which commodity you are referring to?

In terms of the export [ph] side.

Yeah. Look, as we have talked about before, it’s a reasonably sort of fluid and frankly competitive market. So, it would be wrong to sort of pull those apart to try and give any more guidance. Again, I think the teams have done a great job in providing enough contracted forward contracts to give some certainty with respect to our production schedule and then try and manage the margin, and we will continue to do that. But I don’t think it would be appropriate to give any more guidance beyond that.

Okay. And maybe just then to Rob, just interested around Catch and how you are thinking about that strategic opportunity. I appreciate it is relatively immaterial in terms of scheme of things, but in terms of the back end and what it provides in terms of your ability to reach across all of your businesses and as you mentioned sort of talk to the marketplace and these sort of things, how are you sort of thinking about that in terms of the opportunity and one thing I am interested in terms of your ability to move into categories you might have, say just dipped your toe in [indiscernible] on electronics, Bunnings, appliances, et cetera, as always been talked about, is that something you are thinking about. And then also interested in food and grocery, and if you would look to sort of enter back into that through an online type platform?

Ben, you raise a number of interesting opportunities that do arise by virtue of having a marketplace platform, and initially the focus is very much going to be on looking at ways we can leverage the marketplace across the Kmart Group. There’s some obvious synergy there around fulfillment, on the online fulfillment in parts of the Target business; and in the team, we will look at ways in which we can better leverage the significant web traffic we have and using Catch as a way of expanding range in a more capital-efficient way. So that’s first and foremost the focus. I should note that we already have a very significant investment in a high-quality food retailer and not proposing to do anything other than see that investment be successful. But we won’t be -- as it relates to Catch, we will keep you up to date on what we do, but we won’t be like our other competitors in the digital space, we won’t be broadcasting in advance everything we are going to be doing strategically, but we will be looking to leverage the capability of the team and the platform that we have acquired.

Perfect. And then a just follow on for me to you as well Rob, I appreciate you are not giving trading updates from the divisions. But as you sort of mentioned, you have got around 100,000 team members across Australia, and you have probably got a pretty good finger on the pulse in terms of what’s happening in a few of your retail peers out there, you talked to some improving conditions sort of through the back end of July and into August. Just interested if there’s any interesting broad-based comments you can give us in terms of how you are seeing the consumer, any signs of green shoots et cetera, et cetera?

Yeah. So, as I have said earlier today on the media call, we see the environment has been not too bad, and if you look at the results that are being delivered across the board, I guess, that demonstrates that things aren’t too bad from a consumer point of view. They are patchy across Australia, so if you look at different regions, there are certainly different trading conditions by region which is always the case. But when we get our offer right, at least, in the businesses we have in the portfolio, we are able to deliver reasonable growth. And we haven’t seen -- haven’t really seen a material change in what we saw towards the end of the fourth quarter when we updated the market this time of year, also with weather conditions, weather week-in, week-out can also drive some different trading conditions, particularly in areas like apparel and on the home improvement side. So, that’s partly why we are not specifically calling out any changes. The comment I made in the outlook statement around economic outlook and uncertainty. I’d really characterize it as follows. We think the trading environment is not too bad in Australia. I think we have a lot of things going for us in Australia that other countries don’t have. Population growth across the board is an important driver. There are a few things on the horizon which could well deliver some improvements over time such as the tax refunds; such as stabilization in house prices, but that will take time; lower interest rates, but then I guess those potential positives need to be seen in light of quite a volatile global economic environment. And I don’t think anyone would be confident enough to make calls on the broader global environment. And in Australia, we are not immune to what happens globally, particularly as it relates to the China-U.S. trade relationship. So that’s why we are focused on ensuring that each of our businesses are as well positioned as possible. Most of our businesses on the retail side have a history of outperforming in the tough times. So our focus is to make sure we get our costs under control, keep investing in digital and data to ensure we are expanding our addressable markets and continue day-in, day-out to be focused on customers and outperforming our competitors, and I think with a strong balance sheet we are well positioned to do that.

That’s helpful. Thanks very much.

Our next telephone question is from Shaun Cousins from JPMorgan. Please ask your question, Shaun.

Thanks. Good afternoon. Just a question in regards to – to Mike for Bunnings, just maybe talk a little bit about if there was any difference in the growth rates between commercial and consumer? And maybe just more generally as you look at going after that commercial market with a little bit more gusto, just talk a bit about the KPIs you are giving to your sales reps and if any of them have sort of margin in it. We understand you are deleveraging [ph] sort of price and convenience as big attributes that you can use to gain market share. But particularly, how interested are you in using price and sort of signing up customers and just growing revenue being the primary, arguably the only sort of criteria for those sales reps please?

Yeah. I think as we have sort of been on record for a long time not talking about the sort of growth rates of commercial and consumer, we will probably continue that trend today Shaun. But on how we sort of want to engage with our sales force in the field, the thing that really I love about our business is the long-term focus we have on really good relationships. So, we’ve got store-based trade specialists. Their job is to really create and connect fantastic relationships based around convenience, in-stock availability, and high quality sort of product advice and service for the really small trades and giving those customers some way to come in and have a bit of a base in a community, a bit isolated out there working as a small business on your own in someone’s home. And then for the sort of medium-to-larger builders, again it’s very much built around relationship and I think the theme that we see right across the segment in which we operate whether it’s us or any of the sort of broader competitive set is that relationship is very important. Price is always going to be important, particularly when it’s competitive, but we are very focused on long term profitable growth, and you can’t do that by giving away margin and price. So, the investment in relationship, quality of product, and convenience of product are the sort of primary drivers for us.

Okay. Maybe a question for Ian, just a few questions on Target. There were 15 closures in 2019. If there’s a plan to have, say maybe 50 closures over the next sort of five years, I am not sure if that’s still the case, but how should we think about the number of closures for fiscal 2020, please?

Yeah. We called out previously that we would look to close about or reduce about 20% of the overall space over time as leases come up for renewal. So, if you look at last year, we closed 15. It’s going to be -- it’s probably going to be in that order of magnitude, maybe a little less some years, maybe a little more basically depending upon when the leases come up for renewal.

And any color that you have got in terms of line of sight you have on leases that are coming up for renewal for ’20, please?

Yeah. I have not got all the numbers in front of me, but if you use a number, that’s in that ballpark, it’s going to be pretty close.

Got you. And maybe just more broadly, what gives you confidence that Target can sort of win in Apparel, Soft Goods, and Home, just in that your competitor said it’s a lot stronger than it was when Lorna was running the business, and the company with the business was doing fantastically well. I am just curious what do you think you have got that’s different to your, now I guess more international competitors than if you are on a bricks-and-mortar and also online basis of well, what do you think you have got that different that can help you be a success, because I think as Dave sort of mentioned earlier, it’s been something that’s been somewhat elusive for the last sort of five plus years?

Yeah. It’s a good question again. I guess, what I have got Shaun is I have got the advantage of being able to see the product sales that we deliver down at an item level. And when I look at that, I see when we get the combination of quality, style, and affordability right. Then, we get incredibly strong sell-throughs. I think our issue currently is the mix of product we have doesn’t live up to that, live up to that standard consistently, which is why we are not delivering the sales that we would really like to. So, where Marina’s really spent her time is getting really clear around what does a great product look like within those categories at Target and then we are going to start really building the product offer around that. So, we can see the evidence that’s there. We can see the customer reaction when we get it right, and we can see the reaction to the brand which remained strong, which gives us confidence there’s an opportunity for us in that business.

Great. Thank you.

And the next question from telephone is from Phil Kimber from Evans & Partners. Please ask a question.

Hi. I have another question for Ian. Just, if you could talk a little bit about what you are seeing from an FX currency perspective on your buying cost and maybe if you can give sort of your hedge rates for fiscal ‘20 versus fiscal ’19, is that becoming more of an issue with spot Australian dollar where it is?

Yeah. Phil we won’t go into the exact hedge rates we have got, because of course they vary considerably. We do hedge, as you know, and the reason that we hedge is so that we have certainty over cost of goods for the buyers, because we pre price a lot of our products, particularly in apparel. I think irrespective of our hedging policy, if an FX is falling obviously sooner or later, that’s going to translate into cost of goods, and that’s true for everybody within the market. So, I think, it’s a pressure that’s on us, but equally, I think, it’s a pressure that’s on everybody else.

Are you saying costs -- are you saying, you mentioned before about your aggressive price reductions in the fourth quarter, but I -- and you talked a bit about discounting, but are you seeing any signs that those higher Aussie dollar product costs are starting to flow through the market?

I don’t think you could see it yet. Certainly, I don’t think I can call it out in any of our competitive set. But what I would say is that there’s a real skill in having lowest price and making money, and I think that’s something that Kmart is being pretty good at over the years.

Okay. And then my second question is just on Officeworks. I think in the commentary, outlook commentary, specifically, you said productivity initiatives will partially offset the investments in price leadership and new EBA, I mean, does that -- I mean, should we expect earnings therefore not to grow as a result of those investments or it will affect earnings growth but you are still expecting some sort of growth in earnings in FY20?

Yeah. So what I said was earnings growth will be impacted. So our expectation is that we will continue to grow. But we are flagging that there will be an investment as a result -- in our team as a result of the step change required for the new enterprise agreement. And we are working hard to mitigate that impact with productivity initiatives across the business, not just in stores. We want to ensure that we continue to maintain the fantastic momentum we have around customer experience in stores and that’s really, really important to continue to invest in.

Perfect. That’s great. Thank you.

And next question in queue is from Johannes Faul from Morningstar. Please ask your question.

Hi, everyone. I have another one for Ian if I may. I am just trying to get my head around the difference in customer shopping habits across the two discount department stores, and really what I’d like to know is, whether it was online currently standing at Target andKmart in terms of penetration and growth? And how do customers shop, do they pick up more Click & Collect at Kmart and Target, are they – because they are perhaps more price sensitive and then would it be fair to say that you know the approach to the store networks cutting back at Target, but probably, expanding at Kmart, does that suggest that there is actually that difference?

Thanks Johannes. A few questions in there. Let me have a go at the online piece. We don’t call out the online penetration within the businesses, but what we have said within our release is that both Target and Kmart are growing online very quickly. And what we see in terms of customer shopping behavior is so much of the customer journey now begins online, and then the customer ultimately makes the choice to either purchase in-store or do they convert online at that moment, and if they convert online does that translate to Click & Collect. Click & Collect has been very successful across both Kmart and Target. And I think there is an economic reason for that for customers, and it’s low cost, but equally there’s a convenience reason, and we are seeing that as a global trend not just as a local trend as well. So we see it as a really great opportunity to leverage our store footprint across Australia as a Click & Collect destination. I think we have called out before, we are looking at how do we have as many Kmart and Target products picked up at our stores as we can to make it really nice and convenient for customers. As we continue to rationalize the Target’s number of stores, it’s one of the areas which we see we can fuel the online growth in Target. We want to keep a very tight relationship with those customers so that when the store closes, we don’t lose the customer relationship, and we stay as close to them as possible. We have already started doing Click & Collect in some of the locations where we have a Kmart store near a Target closure, and we are seeing already good success of Target customers converting to pick up their Target products from their Kmart store. So, it’s very much an omni-channel strategy that we are embarking upon. We see a lot of growth opportunity from it. And of course staying really close to our customers is key as we develop that strategy.

Okay. Thanks. And just to clarify, so a Target customer can pick up a Click & Collect at a Kmart store, is that right?

Yeah. It’s correct. It’s -- only a small number of stores are present, and we are looking to expand that across the fleet over time.

And how’s that logistically in terms of delivering the product into that Kmart store?

Yeah. It’s pretty much -- it’s pretty like any other delivery coming to the Kmart stores, it is delivered to the store, it’s put away, and when the customer comes in, we pick it out and hand it to the customer.

All right. Thank you.

And our next question from the telephone line is from Scott Ryall from Rimor Equity Research. Please ask your question, Scott.

Hi. Thank you. The question is for David Baxby, I think on the chemicals business. I was wondering if you could comment across your different product lines on the potential for opportunities outside of Western Australia and how cost competitive you are, because obviously you have got some headwinds you called out in ammonium nitrate at some point. Fertilizer, you obviously had a very strong seasonal performance, but I am just wondering what opportunities you see in the medium term to, I’ll call it export out of Western Australia, but you know what I mean, get access markets outside of Western Australia?

Yeah. Scott, look, it’s a great question. We do have modest exports of sodium cyanide and have done for some time, although we are seeing there have been some significant international capacity expansions with respect to that commodity. So, we are watching that market very carefully. The rest of it is very, very modest. But what I’d encourage you to do is come along with the site tour that we have got where you can actually come and speak to the team. Yeah, we believe our cost and operational performance benchmarks are internationally competitive. But at the end of the day, the further you go away, the larger the freight component becomes, and therefore it is going to create some headwind, but I’d be happy to elaborate that further if you were to come along for the site tour.

Okay. Great. Thank you.

There are no further questions at this time. I’d like to hand the call back to speakers for closing remarks. Please go ahead.

Okay. Thanks very much everyone for joining us for a long call. If any questions, please call Erik and the team. Have a good day.

Ladies and gentlemen, that does conclude the call. You may all disconnect. Goodbye.