Wesfarmers Ltd has lifted its interim profit by more than 10%, driven by strong earnings growth across its retail portfolio, particularly Coles and Bunnings.
In the six months to December 31, Wesfarmers posted a net profit of $1.43 billion, an 11.2% increase on the $1.26 billion recorded in the first half of fiscal 2013.
In the same period revenue was $31.85 billion, a four% lift on the previous corresponding period's $30.61 billion.
The group will pay a fully-franked interim dividend of 85 cents on April 2 to shareholders on the register at February 28.
The previous corresponding dividend was 77 cents, fully-franked.
Wesfarmers said it would continue to strengthen its existing businesses, secure growth opportunities and renew and develop the portfolio in order to deliver satisfactory long-term shareholder returns.
Retail businesses eye further growth
Wesfarmers said its retail businesses are expected to continue to grow as they improve customer propositions, invest in value, innovate merchandise offers, focus on operational productivity and optimise store networks.
In the first half, Coles delivered earnings growth of 10.7% to $836 million, with return on capital increasing 80 basis points to 10%.
Bunnings' earnings increased 8.5% to $562 million, while Officeworks achieved earnings growth of 10.5% to $42 million.
Kmart recorded earnings growth of 5.7% to $260 million for the period, driven by further improvements in merchandising and a strong focus on cost efficiency.
However, the embattled Target chain reported earnings of $70 million, 52.7% below the prior corresponding period.
Wesfarmers said trading conditions were challenging due, in particular, to the continued clearance of aged and excessive winter stock, which also affected the timing of the summer range launch.
"In addition, the decision to not repeat increasingly high levels of promotional activity of the prior year had a short-term adverse effect on trading," the group said.
Resources, insurance divisions weigh
The picture wasn't as bright in Wesfarmers' resources and insurance divisions, both of which saw a decline in earnings growth in the half.
The resources division reported earnings of $59 million, 36.6% below the prior corresponding period due mostly to lower export coal prices.
The insurance division recorded earnings of $99 million, 4.8% below the prior corresponding period, with results affected by a $45 million increase in reserve estimates for the February 22, 2011 Christchurch earthquake.
However, Wesfarmers said excluding EQ2, underlying earnings increased strongly by 38.5% to $144 million.
"Improved underwriting performance was supported by disciplined risk selection and premium rate growth across personal and commercial lines," the group said.