Australian conglomerate Wesfarmers Ltd posted record earnings in core divisions on Wednesday, sending its shares to a record high as investors glimpsed the rapid growth promised by a restructuring initiated by new managing director Rob Scott.
Although an inglorious exit from an ill-fated hardware expansion in Britain hammered full-year profit almost 60 percent lower, profit from continuing operations rose 5.2 percent to A$2.9 billion ($2.1 billion), beating market expectations.
Much of that rise was due to double-digit earnings growth in Wesfarmers' domestic hardware and department stores, which are set to become the company's core after its Coles supermarket chain is spun off as part of a major portfolio overhaul.
Coles' earnings fell 6.8 percent to their lowest in six years, buttressing management's decision to get out of the business.
"Finally the sum of the parts is starting to equal the whole," said James McGlew, executive director of Perth stockbroker Argonaut Ltd, which owns Wesfarmers shares.
Wesfarmers shares had jumped 3.2 percent to a record high of A$52.21 by 0505 GMT, while the broader market edged higher.
New drivers
Net profit for the retail-to-chemicals conglomerate more than halved to A$1.2 billion for the year to June 30.
The fall was almost entirely due to A$1.2 billion in costs associated with abandoning a loss-making hardware business in Britain.
Appointed last November as that disaster deepened, Scott decided to cut losses and quit Britain.
He has since moved to remake a firm so big and diversified it is often treated as a proxy for the Australian economy.
He is unwinding its single biggest purchase, Coles, due to demerge in November, and this month sold a car repair business and profitably ended a 27-year investment in coalmining.
The business he has retained showed strong growth. Australian hardware business Bunnings posted a 12.7 rise in earnings to A$1.5 billion, while discount department store Kmart showed signs of a long-awaited turnaround with a 21.5 percent earnings jump to A$660 million.
"Following the demerger Wesfarmers will have a portfolio of cash-generative businesses with good growth momentum and leading positions in growing markets," Scott told investors on a conference call.
The company will hand each Wesfarmers shareholder one Coles share when it lists separately, keeping a 15 percent stake.
Scott said improvement in Coles' comparable sales growth, which doubled in the fourth quarter to 1.8 percent, showed its outlook had brightened since six months ago.
Wesfarmers announced a final dividend of A$1.20, unchanged from last year, and gave no profit guidance for 2019, besides saying the company is "well placed" to grow.