Wesfarmers boss Richard Goyder has painted himself as the ‘'shareholders’ friend'’ after thrusting a further $1.1 billion in special dividends into investors’ pockets, while also vowing he won't pay silly prices for a bolt-on acquisition with the piles of cash still sitting on the conglomerate’s balance sheet.
The payout follows a $600 million capital return unveiled last year, and helped lift Wesfarmers shares to seven-year highs as investors were promised there was plenty of growth inside the company to come.
The Perth group, whose present portfolio is heavily weighted towards retail and anchored by its Coles, Bunnings, Target and Kmart banners, is scouring the globe for a deal to match the growth coming out of its domestic businesses, but to date the ideas being brought to it have not stacked up.
‘‘One of our values in Wesfarmers is boldness, and we are bold from time to time, but we are going to try to avoid being silly,’’ said Mr Goyder as he unveiled on Wednesday a 19 per cent lift in full-year net profit to $2.68 billion, boosted by the $3 billion disposal of its insurance arm.
And historically low interest rates, making the cost of debt as low as it has been for decades, did not suddenly make the numbers for an acquisition meet Wesfarmers’ high investment hurdles, he said.
‘‘We think it’s a big trap to do things for growth's sake, because ultimately it will destroy value if you don’t cover the cost of capital.
''You can get earnings per share targets these days by gearing up your balance sheet and using the low cost of debt, but then you are making an implicit assumption low-cost debt is here for ever, and we don’t make that assumption.’’
As Mr Goyder and his board bided their time, excess cash would be sent back to shareholders, with the company declaring a $1 capital return, subject to a ruling by the Tax Office and approval by investors, amounting to a total distribution of $1.1 billion.
''When we have got excess capital and recognising it's the shareholders' money, we will look at the best way we can return that capital to shareholders, and we think we have done that effectively over many years. And this year's initiative is no different to that.’’
Wesfarmers also declared a fully-franked final dividend of $1.05 a share, taking the full-year dividend to $1.90 a share, with an extra 10¢ a share thrown on top to mark the company’s centenary year.
Revenue for fiscal 2014 was 4 per cent higher to $62.348 billion, with its Coles and Bunnings arms once again doing the heavy lifting as weaker earnings were booked by coal, chemicals and merchandise chain Target.
But Mr Goyder said Target was showing improving sales, with its retail operations in general booking better traffic and sales in the past two months, and in contrast to generally tough trading conditions earlier in the year in the lead-up to the release of the federal budget.
He said as Wesfarmers looked for an acquisition it would not deprive its existing businesses of capital to fund their own promising growth plans.
‘‘We are also happy about the growth profile we have in our existing businesses and are investing heavily in them, and have done so for a number of years.
''Coles, Bunnings, Officeworks and Kmart all have good momentum as they lead into the 2015 financial year, while Target is expected to undergo significant change and improve as it progresses its transformation plan.’’
Shares in Wesfarmers rose $1.66, or 3.77 per cent, to $45.66.
