Slide 1: ASX cover letter: 2011 Full Year Results Presentation
Metcash Limited ABN 32 112 073 480 50 Waterloo Road Macquarie Park NSW 2113 Australia For personal use only PO Box 6226 Silverwater Business Centre NSW 1811 Australia Ph: 61 2 9751 8200 Fax: 61 2 9741 3027 7 June 2011 The Manager, Companies Australian Securities Exchange Company Announcements Office
Slide 2: Company Results Full Year Ending 30 April 2011
For personal use only Company Results Full Year Ending 30 April 2011 Andrew Reitzer Chief Executive Officer Adrian Gratwicke Chief Financial Officer 7 June 2011
Slide 3: Agenda
Agenda For personal use only Andrew Reitzer, Reitzer CEO Metcash Limited - Group Update Silvestro Morabito, CEO IGA>D - IGA>D Highlights Mark Laidlaw, CEO Mitre 10 - Mitre 10 Highlights Andrew Reitzer - ALM and CW Highlights & Supply Chain Adrian Gratwicke, CFO - Financial Insights Andre
Slide 4: Overview
Overview For personal use only Creditable group results in context of: Tough trading environment due to: - ongoing deflationary impacts - more cautious and value-driven consumer - poor summer weather and natural disasters Demonstrates resilience of our business model Continuing investment in
Slide 5: Financial Headlines
Financial Headlines For personal use only 1 Variance FY11 FY10 (%) Revenue - Reported ($m) 2 12,461.6 11,608.1 7.4% Wholesale Sales ($m) 3 12,364.0 11,517.4 7.4% Like for like = 5.2% EBITA ($m) 3 438.0 401.2 4 9.2% Like for like = 7.4% EBITA Margin (%) 3.54% 3.48% +6bps CODB / GP (%) 62.72% 62.88% 4
Slide 6: 'Like for Like Sales' and EBITA
‘Like for Like Sales’ and EBITA For personal use only Variance Wholesale Sales FY11 FY10 (%) $m $m Group Wholesale Sales 12,364.0 11,517.4 7.4% G d core grocery & Good liquor growth in face of Less: constraining market conditions ALH Volume (41.3) (444.7) Campbells Wholesale branch closures - (51 7)
Slide 7: Financial Highlights – Group
For personal use only FINANCIAL HIGHLIGHTS – GROUP 5
Slide 8: Wholesale Sales
Wholesale Sales Group wholesale sales up 7.4% driven by: For personal use only Strong IGA>D sales growth (+6%) Full year impact of Mitre 10 sales Core C ‘lik ‘like-for-like’ f lik ’ sales l remains i strong t - up 5.2% 5 2% b butt constrained t i db by: Restrictive market conditions includin
Slide 9: CODB as % of Gross Profit
CODB as % of Gross Profit For personal use only Continue to achieve CODB reductions: Incremental improvements to supply chain logistics resulting in productivity gains Savings S i achieved hi d despite: d it Costs associated with full year of ‘standalone’ Hardware business Increasing utility
Slide 10: EBITA
EBITA EBITA growth of 9.2% driven by: For personal use only Mitre 10’s strong 2H contribution Creditable IGA>D IGA D contribution despite diminished operating leverage in 2H On a ‘like-for-like’ basis EBITA was up 7.4% on 5.2% sales growth – operating leverage of 1.4x Strong ALM result on ‘l
Slide 11: PAT
PAT For personal use only FY11 FY10 Variance (%) PAT ($m) - Underlying 1 256.2 244.9 4.6% PAT ($m) - Reported 241.4 227.6 6.1% PAT growth moderated by higher interest costs NOTES: 1. PAT for underlying EPS purposes is stated pre non recurring items & intangible amortisation ((consistent with how EPS
Slide 12: Operating Cash Flow
Operating Cash Flow For personal use only Cash flow from operations of $142.5m impacted by: Timing of Easter trading period Recurrent poor inbound service levels High promotional sales activity All of the above requiring investment in heightened stock levels NOTES: 1. PATBDA = Profit after t
Slide 13: EPS
EPS For personal use only FY11 FY10 Variance (%) EPS - Underlying 1 33.4 32.0 4.4% EPS - Reported 31.5 29.7 6.1% Within revised guidance range of 3-5% NOTES: 1 Underlying EPS is stated pre 1. NRI and IA (consistent with EPS guidance) 2. FY11 EPS based on weighted average shares of 767.7m (765.2m FY1
Slide 14: DPS
DPS For personal use only The Board has declared a final dividend of 16.0 cents a share (100% franked) The total dividend of 27 cps p represents p ap payout y ratio of: 86% of Reported EPS (FY10: 87%) Continuing strong 81% of Underlying EPS (FY10: 81%) payout ratio 81% 81% Payout ratio 81% 81% 7
Slide 15: Divisional Highlights - IGA>D
For personal use only DIVISIONAL HIGHLIGHTS - IGA>D 13
Slide 16: IGA>D - Financials
IGA>D - Financials For personal use only FY11 FY10 Variance (%) WHOLESALE SALES ($m) 7,559.9 7,129.9 6.0% EBITA ($m) 361.8 346.6 4.4% EBITA MARGIN (%) 4.78% 4.86% -8bps Wholesale sales up p 6.0% and comparative p store sales up p 4.5% Solid growth despite tough market environment (customer flight
Slide 17: IGA>D – Sales Performance
IGA>D – Sales Performance For personal use only Solid growth and strong comparative sales from independent retailers Market share stable excluding g impact p of WA trading g hours deregulation g FY10 FY11 Good growth in context of customers’ search for value Base Business 6.8% 6.0% Cycling o
Slide 18: IGA - How the locals like it...
IGA - How the locals like it... For personal use only Move away from talking about ourselves… Start talking about the consumers and what they like! 16
Slide 19: IGA - Locked Down Low Prices
IGA - Locked Down Low Prices For personal use only Our low price / value positioning p g statement Thousands of lines locked in every 12 weeks To combat the marketing activity of the chains low price strategies 17
Slide 20: IGA>D – Top 5,000 Range Gap Analysis
IGA>D – Top 5,000 Range Gap Analysis For personal use only Up-ranging the retail offer Measurement The Top 5,000 5 000 selling products by sales Tracks all stores Top 5,000 Range Gap represent 75% of all sales through the analysis IGA>D warehouses Designed so we can definitively Stocking the
Slide 21: IGA>D - Retail Development
IGA>D - Retail Development For personal use only Marked increase in retail store developments as independent retailers invest in network growth Indication of IGA brand’s ongoing market relevance and strength Business strategic focus augmented by buy-back and re-sale strategy, and supported by:
Slide 22: IGA>D - Operational Highlights
IGA>D - Operational Highlights For personal use only Store Buy Back Program IGA>D IGA D ffacilitated ilit t d store t ownership hi ttransfer f Sub-optimal performers switched to Where we are experienced and capable retailers 80+ back buy-back and re-sale The Process opportunities identified
Slide 23: IGA>D - Retail Initiatives
IGA>D - Retail Initiatives For personal use only Retail analytics Sales performance benchmarking Range improvement opportunities Tools to enhance retailers p operations IGA iPad and iPhone Application Enhanced consumer tools Store locator Shopping lists iPhone launched mid Dec 10 iPa
Slide 24: IGA Fresh Strategy - Operational Highlights
IGA Fresh Strategy - Operational Highlights For personal use only Produce Good performance, although persistent deflation Solid growth in fresh volumes impacted NSW particularly Augmenting grocery offer with customer-oriented Rocklea operations submerged during ‘fresh’ offer - aligned with ‘
Slide 25: Divisional Highlights - Australian Liquor Marketers (ALM)
For personal use only DIVISIONAL HIGHLIGHTS - AUSTRALIAN LIQUOR MARKETERS (ALM) 23
Slide 26: ALM - Financials
ALM - Financials For personal use only Strong FY11 FY10 Variance (%) performance in a contracting SALES ($m) 2,296.6 2,640.6 market Less: ALH Volume Loss (41.3) (444.7) Like for Like Sales 2,255.3 2,195.9 2.7% EBITA ($m) 30.1 36.1 Less: ALH Volume Loss - (11.1) Like for Like EBITA 30.1 25.0 20.4% Go
Slide 27: Packaged Liquor Market Decline
For personal use only Rolling Quarrter % Chang e on Year A go ‐8.0% ‐6.0% ‐6 0% ‐4.0% ‐2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% May‐06 Jun‐06 Jul‐06 Source: Nielsen Aug‐06 Sep‐06 Oct‐06 Nov‐06 Dec‐06 Jan‐07 Feb‐07 Mar‐07 Apr‐07 May‐07 Jun‐07 Jul‐07 Aug‐07 Sep‐07 Oct‐07 Nov‐07 Dec‐07 = Interest Rate Decre
Slide 28: Divisional Highlights - Campbells Wholesale
For personal use only DIVISIONAL HIGHLIGHTS - CAMPBELLS WHOLESALE 26
Slide 29: Campbells Wholesale - Financials
CAMPBELLS WHOLESALE - Financials For personal use only FY11 FY10 Variance (%) SALES ($m) 1,709.9 1,685.3 Less: 8 Store Closures - (51.7) Like for Like Sales 1,709.9 1,633.6 +4.7% EBITA ($m) 31.8 28.8 +10.3% EBITA MARGIN (%) 1.86% 1.71% +15bps Sales Tough market conditions including customer flight
Slide 30: Campbells Wholesale - Operating Highlights
CAMPBELLS WHOLESALE - Operating g Highlights g g For personal use only Successfully completed 'mini-loader' site & 'route planner ' integration in May 11 Seamless and on schedule Enables efficient combination of full case and unit picks Productivity benefits from improved unit picks capabili
Slide 31: Divisional Highlights - Mitre 10
For personal use only DIVISIONAL HIGHLIGHTS - MITRE 10 29
Slide 32: Mitre 10 – Financials
MITRE10 – Financials For personal use only FY11 FY10 (1) SALES ($m) 797.6 61.6 EBITA ($m) 20.7 1.5 EBITA MARGIN (%) 2 6% 2.6% 2 4% 2.4% Sales Good G d trade t d sales l performance f despite d it weather th affecting ff ti Q2 and d Q3 Warehouse and chargeback sales encouraging Network stabilit
Slide 33: Mitre 10 – Operating Highlights
MITRE10 – Operating g Highlights g g For personal use only Stabilise Change the Game Grow ‘Change The Game’: 1- 2 year phase on track Strengthen g store network Brand harmonisation Modernise supply chain Improve merchandise and marketing programs 31
Slide 34: Mitre 10 – Operating Highlights
MITRE10 – Operating g Highlights g g For personal use only Insert POS Image LDLP (with padlock) Store Network Network N t k off 420 stores. t N Now need d tto grow Retail brand consistency - 50% now Blue & White compliant (from 20%) Supply Chain Warehouse productivity improvements into all DCs
Slide 35: Mitre 10 – Operating Highlights
MITRE10 – Operating g Highlights g g For personal use only Merchandise Range expansion to meet retailer and end-consumer needs 3,000 SKUs added since June 2010 (including 55 Black & Gold) 750 SKUs extra to be added by June 11 Locked Down Low Prices program from Feb 11 - 1,300 SKUs New Cata
Slide 36: Supply Chain
For personal use only SUPPLY CHAIN 34
Slide 37: Supply Chain - Major Initiatives
Supply Chain - Major Initiatives Committed to deliver a modernised supply chain to support our customers For personal use only and our own business growth objectives Business Project j Status NSW Mega DC - 92,000 sqm development by Goodman Group - Consolidates multi-site operations - Phase 1: Dry gr
Slide 38: Supply Chain - Major Initiatives (NSW Mega DC)
Supply Chain - Major Initiatives For personal use only NSW Mega DC - Huntingwood Part of our vision for the future Consolidates pillar multi-site operations in NSW 92,000 sqm development 3 phase project To be first temperature controlled warehouse achieving a 4 StarS rating in Australia NS
Slide 39: Financial Insights
'Champion of the Independent Retailer' For personal use only Financial Insights Adrian Gratwicke Chief Financial Officer 37
Slide 40: Financials
For personal use only Financials - Balance Sheet Extract - Cash Flow Extract - Workingg Capital p Analysis y - Interest Expense 38
Slide 41: Balance Sheet - Extract
Balance Sheet - Extract 30-Apr-10 30 Apr 10 30-Apr-11 30 Apr 11 Movement Commentary #039;m #039;m $m % For personal use only Seasonal increase due to April stock purchases. No significant change to payment terms over Trade and other payables -1,294.4 -1,376.5 -82.1 6% the prior period (creditor days down
Slide 42: Cash Flow - Extract
Cash Flow - Extract Apr 10 Apr-10 Apr 11 Apr-11 Inc/(Dec) $m $m $m $m $m For personal use only EBITDA 426.0 477.1 51.1 Increase due to higher average debt levels (post M10 acquisition), additional Net Interest Paid (46.0) (62.6) (16.6) working capital and rising interest rates. Taxation Paid (101 6)
Slide 43: Working Capital Analysis
Working Capital Analysis For personal use only Apr-10 Apr-11 Movement Commentary $m $m (Decrease)/increase in Creditors (18.4) 81.3 99.7 Reflects increase in inventory holdings at year end. Inventory increase mainly due to strong sales and high promotional off-take, off-take recurrence (Increase)/de
Slide 44: Interest Expense
Interest Expense For personal use only Apr 11 Apr 10 Change $m $m (%) - 1H 36.5 27.3 1 33.7% - 2H 41.0 30.2 1 35.8% I t Interest t Expense E (Total) (T t l) 77 5 77.5 57 5 57.5 34 8% 34.8% Interest Income (11.2) (8.2) 36.6% Interest Expense (Net) 66.3 49.3 34.5% 34.5% increase in interest expense
Slide 45: Conclusions
For personal use only CONCLUSIONS 43
Slide 46: Growth Strategies
Growth Strategies For personal use only PERFORMANCE Sales 6.0% Sales 2.7% L4L (ALH loss) Sales 4.7% L4L Sales $797.6m EBITA 4.4% EBITA 20.4% L4L EBITA 10.3% EBITA $20.7m EBITA margin i 2.6% 2 6% FUTURE DIRECTION Focus on Value IBA and Liquor Alliance store Confectionery expansion
Slide 47: Outlook
Outlook For personal use only Market conditions challenging Deflation despite indications of some product cost inflation emerging Underlying cost inflation Cautious value conscious consumer Cautious, Uncertainty regarding pending Federal Court decision on Franklins acquisition For these
Slide 48: 'Champion of the Independent'
For personal use only 'Champion of the Independent' 46
Slide 49: Appendices
For personal use only APPENDICES 1. Reconciliation - Group Results (Reported and Underlying) 2. Group Results by Division 3. EBITA by Division 4. Dividend and Capital Management Policy 5 5. T Trend d Metrics M t i (Financial (Fi i l & Operational) O ti l) 6. Sustainability Metrics 7. Directory of Te
Slide 50: Reconciliation - Group Results (Reported and Underlying)
Reconciliation - Group Results ((Reported and Underlying) y g) For personal use only FY11 FY10 $m $m EBITA 438.0 401.2 Net Interest (66.3) (49.3) Profit Before Tax and Amortisation 371.7 351.9 Tax (106.1) (104.3) Non Controlling Interest (9.4) (2.7) Underlying PAT 256.2 244.9 Intangible Amortisation
Slide 51: Group Results By Division
Group Results By Division For personal use only Wholesale Sales FY11 FY10 Variance (%) $m $m IGA Distribution 7,559.9 7,129.9 6.0% Australian Liquor Marketers 2,296.6 2,640.6 -13.0% Campbells Wholesale 1 709 9 1,709.9 1 685 3 1,685.3 1 5% 1.5% Mitre 10 797.6 61.6 1 Metcash Total 12,364.0 11,517.4 7.
Slide 52: EBITA By Division
EBITA By Division For personal use only NOTE: 1. The difference to the Reported EBITA will be in ‘Corporate’ 50
Slide 53: Dividend and Capital Management Policy
Dividend and Capital Management Policy For personal use only The Board’s intention is to return earnings to shareholders whilst retaining adequate funds within the business to invest in future growth opportunities The pproposed p FY11 final dividend of 16.0 cents pper share takes the total FY11
Slide 54: Trend Metrics – Financial
Trend Metrics – Financial FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 For personal use only FULL YEAR CAGR* Apr 07 Apr 08 Apr 09 Apr 10 Apr 11 Total Revenue $ millions 9,761 10,199 11,067 11,608 12,462 6.3% Sales ((wholesale & retail)) $ millions 9,695 10,116 10,981 11,517 12,364 6.3% Sales (wholesale)
Slide 55: Trend Metrics – Operational
Trend Metrics – Operational For personal use only Branded Stores - Grocery Oct 08 Apr 09 Oct 09 Apr 10 Oct 10 Apr 11 (IGA – 3 channels + Friendly Grocer + Eziway) S Supa IGA 425 430 440 446 449 463 IGA 720 717 720 718 735 734 Xpress 129 131 140 156 170 183 IGA branded stores 1,274 1,278 1,300 1,320
Slide 56: Sustainability Metrics
Sustainability Metrics For personal use only 2011 2010 2009 2008 2007 2006 2005 People Long Term Injury (LTI) 209 244 273 275 317 238 365 Long Term Injury Frequency Rate (LTIFR) (1) 21.3 25.9 30.8 27.3 25.7 33.6 52 Severity Rate (2) 531.6 456.4 883.3 2011 2010 2009 Notes: Environment (3) 1. LTIFR is
Slide 57: Directory of Terms
Directory of Terms Metcash’s Business Areas & Terms For personal use only ALM Australian Liquor Marketers is Australia and New Zealand's leading broad range liquor wholesaler. ALM operates from 18 distribution locations across the country. Larger ‘off-premise’ customers are supplied through the main
Slide 58: Directory of Terms - Financial Terms
Directory of Terms For personal use only Financial Terms CAGR Compound Annual Growth Rate over 4 years (FY07 to FY11) Net operating cash flow (not adjusted for non-recurring items) / [Profit after tax pre non recurring items + Cash realisation ratio Depreciation + Amortisation (tax effected) ] CODB
Slide 59: For additional information contact
For personal use only For additional information contact: Adrian Gratwicke, Chief Financial Officer Phone: 61 2 9741 3248 Fax: 61 2 9741 3027 E-mail: adrian.gratwicke@metcash.com Or visit our website: www.metcash.com 57
Slide 60: Disclaimer
Disclaimer For personal use only This presentation contains summary information about Metcash Limited (ABN 32 112 073 480) (Metcash) and its activities current as at the date of this presentation. The information in this presentation is of general background and does not purport to be complete. It s