Coles Group Ltd. · ASX:COL
Coles — FY2007 Earnings Presentation
20 slides from Coles's earnings presentation, Sep 19, 2007
Slide 1: Full Year Financial Results and Market Update
Full Year Financial Results and Market Update 19 September 2007 Ownership update • Ownership review commenced 23 February 2007 • Board recommended Wesfarmers cash and scrip proposal – 2 July 2007 • Volatility in financial markets impacted value of proposal in the short term • Enhanced proposal annou
Slide 2: Details of enhanced proposal; Independent Expert conclusions
Details of enhanced proposal • For each Coles share: • $4 cash • 0.14215 ordinary shares • 0.14215 price protected ordinary shares (WPPS) • Shareholders receive CGJ $0.25 final dividend • WPPS: • intended fully franked dividend of at least $2 per share • reclassified into ordinary shares in 4 years
Slide 3: Directors' recommendation; FY07 Financial Result
Directors’ recommendation • Extensive review of ownership options completed • Independent Expert has concluded best interests • Shareholders retain exposure to operational upside • Wesfarmers has a track record of strong financial and operational performance • Shareholders will potentially receive a
Slide 4: FY07 EBIT; Underlying net profit after tax
FY07 EBIT ($m) FY07 FY06 Chg % Food & Liquor 693.3 766.3 (9.5) Coles Express 79.91 30.0 166.3 Kmart 96.8 76.0 27.4 Officeworks 85.4 74.9 14.0 Target 290.0 248.3 16.8 Retail EBIT 1,245.4 1,195.5 4.2 Property 89.0 35.5 150.7 Corporate Costs (184.8)2 (83.6) EBIT (continuing businesses) 1149.6 1147.4 0.
Slide 5: Cost of doing business; Food and Liquor
Cost of doing business CODB % 25 24.8 24.7 24 23 22.8 22 22.0 21 21.5 21.1 20 20.3 19 18 FY02* FY03* FY04* FY05 FY06 FY06^ FY07^ *AGAAP ^continuing businesses 9 Food and Liquor FY07 FY06 Change Sales ($m) 20,437 19,626 4.1% Retail EBIT ($m) 693.3 766.3 (9.5%) Retail margin (%) 3.39 3.90 (51 bps) ROI
Slide 6: Food and Liquor; Supermarkets - priorities
Food and Liquor EBIT $m EBIT margin % 800 4.2 766 750 725 4.0 693 700 650 3.9 3.8 650 3.8 596 600 3.6 547 3.6 3.6 550 3.5 3.4 500 3.4 3.2 450 400 3.0 *AGAAP FY02* FY03* FY04* FY05 FY06 FY07 FY05: adjusted to 52 weeks FY04: excludes F&L restructure costs and Mt Druitt store restructuring costs FY03:
Slide 7: Supermarkets - priorities
Supermarkets - priorities • Fresh • ‘Love Fresh’ has increased participation rates, sales and volumes in deli, bakery and produce • meat now a focus, participation rates improving • Value • 171 additional ‘Smart buy’ lines in Q4 • over 1,100 lines on Price Rewind • ‘You’ll love Coles’ expansion cont
Slide 8: Coles Liquor - overview
Coles Liquor - overview • Strong performance • Large format • 20 1st Choice Superstores opened in FY07 taking network to 39 • Convenience • 55 Liquorland stores refurbished • Hotels • Hedley, Talbot and Mr Corks integration completed adding 46 hotels • further acquisitions in QLD and SA taking netwo
Slide 9: Coles Express - overview
Coles Express - overview • Very strong result in competitive sector • Excellent contribution from C-stores • C-store comp sales up 6.2% • customer focused strategy • You’ll love Coles combo deals, food to go • 4 + 2 cpl loyalty offer • fuel dockets expanded to Kmart • Launched with alliance partner
Slide 10: Kmart – overview
Kmart – overview • Result exceeded expectations • strategy resulted in lower sales but improved margins • improved cost control focus • inventory down $91 million • KTAS EBIT improvement • FY08 focus • better value every day • further improving profitability • continued investment in store network 1
Slide 11: Target – overview
Target – overview • Another very strong performance • Reputation for on-trend, differentiated and affordable fashion strengthened • Designers for Target • Apparel, footwear and toys were key performers • consistent sales and margin growth • Significant investment in store network • nine additional s
Slide 12: Officeworks – overview; Business simplification
Officeworks – overview • Successful performance from Officeworks retail • strong results from stationery and business consumables • margin and cost improvements across the business • OW BusinessDirect sales disappointing • integration of systems impacted short term sales • Store network expansion •
Slide 13: Transformation - progress; Group Financials
Transformation - progress • New DC network operating • six purpose built DCs opened in FY07 with final three to open by mid-FY09 – live with Warehouse Management and Transport Management Systems • five DCs closed to date, 13 more to close in FY08 taking network from over 40 to around 26 • I-trade su
Slide 14: Stock-turns; Negative working capital
Stock-turns FY07 FY06 FY05 FY04* FY03* FY02* Food & Liquor 10.5 11.2 11.4 11.2 11.1 11.2 Coles Express 55.5 58.6 65.7 65.2 - - Kmart 3.7 3.6 3.6 3.7 3.6 3.4 Target 3.6 3.7 3.9 4.3 4.3 3.8 Officeworks 4.6 4.7 5.1 4.7 4.9 4.4 Total retail 7.2 7.3 7.4 7.5 7.3 7.1 (ex Fuel, Myer & Megamart) *AGAAP 27 Ne
Slide 15: Capex – investing for the future
Capex – investing for the future • Investment in new stores • Refurbishment program • Strategic bolt-on acquisitions • Investment in transformation •supply chain and IT systems 29 Net Capex – investment in growth ($m) FY07 FY06 New stores / replacements 367 275 Refits 239 208 Technology 254 289 Prop
Slide 16: Cash flow – key impacts; Cash flow
Cash flow – key impacts • Operating cash flow • lower than anticipated sales and earnings in supermarkets • redundancy and other strategy costs • Free cash flow • FY06 included Myer disposal • FY07 property disposals 31 Cash flow ($m) FY07 FY06 Operating cash flow 943 1,301 Capex (1,041) (1,043) Acq
Slide 17: Net debt / net debt & equity; Fixed charges cover
Net debt / net debt & equity % 25.0 19.4 20.0 17.5 18.4 15.0 12.6 10.0 6.2 5.0 0.0 -5.0 -2.7 -10.0 FY02* FY03* FY04* FY05 FY06 FY07 *AGAAP 33 Fixed charges cover multiple 2.4 2.3 2.3 2.3 2.3 2.2 2.2 2.0 2.0 1.8 FY02* FY03* FY04* FY05 FY06 FY07 *AGAAP 34 17
Slide 18: Inventory; Group ROI
Inventory ($m) FY07 FY06 Food & Liquor 1,511 1,294 Coles Express 100 109 Kmart 648 739 Target 528 558 Officeworks 159 152 Total inventory 2,946 2,852 Inventory up 3.3% Total sales up 1.4% 35 Group ROI^ % 35.0 29.1 30.0 27.3 26.7 25.0 21.6 20.0 17.9 15.0 12.7 10.0 5.0 0.0 FY02* FY03* FY04* FY05 FY06
Slide 19: Brand ROI; Non-food ROI
Brand ROI FY07 FY06 FY05 FY04* FY03* FY02* Food & Liquor 24.0 34.1 36.7 30.9 30.1 29.9 Coles Express 27.4^ 21.6 18.0 21.1 - - Kmart 18.3 12.9 12.8 12.3 8.4 4.1 Target 65.0 61.5 51.7 31.9 18.4 9.4 Officeworks 52.5 46.1 39.9 27.4 32.0 26.5 Total retail 27.3 30.3 30.7 24.4 21.3 16.8 (continuing busines
Slide 20: Full Year Financial Results and Market Update
Full Year Financial Results and Market Update 19 September 2007 20