Wesfarmers share price: interim results in focus

The revelation that Target staff have been underpaid some $9 million is likely to overshadow Wesfarmers otherwise solid half-year results.

Wesfarmers share price: interim results at a glance

The Wesfarmers (ASX: WES) share price rose ~3% after the conglomerate released its first-half results to the market this morning.

Wesfarmers, known for owning some of Australia’s most iconic businesses, including: Kmart, Bunnings and Officeworks, today reported a stable set of first-half figures.

On the top-line, WES recorded H1 revenues of $15,249 million against earnings from discontinued operations (NPAT) of $1,210 million.

Wesfarmers also revealed a 75 cent Interim Dividend as part of today’s results – representing a 25% decline from the company's FY19 Interim Dividend.

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Commenting on these results, the Group's CEO, Rob Scott, said:

'Bunnings, Kmart and Officeworks delivered a pleasing trading performance, with sales growth increasing relative to the prior corresponding period. Strict working capital management and disciplined capital expenditure also resulted in strong cash flow generation across the Group's operating divisions.'

In saying that, Rob Scott did note that:

‘In contrast to the rest of the Group, the Industrial and Safety result was disappointing, and the performance of Target was below expectations. A number of initiatives are underway to address the underperformance of both businesses.'

In response to today's release, Ord Minnett reiterated their Lighten recommendation and cited a price target of $39.00 per share on WES.

At Wesfarmers’ current share price: such a price target would imply downside of ~13%.

Broker views aside, the Wesfarmers (ASX: WES) share price has performed incredibly well in the last year, rising ~40% in that period. The ASX 200 by comparison is up just 16.5% in the last 12-months.

Payment issues in focus

Besides financial performance metrics, Wesfarmers today announced that following an extensive review, the company had identified a number of payroll issues – specifically related to its Target stores. This comes just one day after Coles Group (ASX: COL) announced that they had underpaid staff by approximately $20 million, over a six year period.

Looking at the specifics of this issue, Wesfarmers revealed that it has consequently set aside $9 million for underpayments of Target staff, on top of $15 million that had already been put aside for the underpayment of other staff within the Group.

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