Metcash Limited · ASX:MTS
Metcash — H1 FY2013 Earnings Presentation
55 slides from Metcash's earnings presentation, Nov 30, 2012
Slide 1: Half Year Results Presentation cover letter
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 30 November 2012 Ph: 61 2 9751 8200 Fax: 61 2 9741 3027 ASX Limited Company Announcements Office Level 4, Exchange Centre 20 Bridge S
Slide 2: Company Results Half Year Ending 31 October 2012
For personal use only Company Results Half Year Ending 31 October 2012
Slide 3: Agenda
Agenda Andrew Reitzer, CEO Metcash Limited - Group Overview For personal use only Silvestro Morabito, COO Metcash Food & Grocery - Divisional Highlights Fergus Collins, CEO ALM - Divisional Highlights Mark Laidlaw, CEO Mitre 10 - Divisional Highlights (Mitre 10 & ABG) Adrian Gratwicke, CFO
Slide 4: Overview
Overview Growth in tough conditions Wholesale sales +3.5% For personal use only Underlying PAT +4.0% Underlying EPS -4.6% (impacted by equity dilution) Dividend unchanged at 11.5 cps Group results affected by: Persistent deflation affecting operating leverage, particularly in F&G Ong
Slide 5: Overview
Overview Hard decisions (ie: Group restructure) paying off in light of continued deflation and increasing For personal use only utility/transport costs Solid cashflow New initiatives progressing well ABG performing well – in line with expectations Mitre 10 network growth progressing Supa
Slide 6: Financial Headlines
Financial Headlines H113 H112 Variance For personal use only Fav / %Var (Unfav) Revenue - Reported $M 1 6,335.6 6,123.0 212.6 3.5% Wholesale Sales $M 2 6,278.9 6,068.9 210.0 3.5% EBITA $M 206.2 203.7 2.5 1.2% EBITA Margin % 3.28% 3.36% (0.08) (2.4%) CODB / GP% % 64.9% 64.1% (0.80) (1.2%) PAT - Repor
Slide 7: Financial Highlights – Group
For personal use only FINANCIAL HIGHLIGHTS – Group 55
Slide 8: Wholesale Sales
Wholesale Sales Group wholesale sales $6.28bn up 3.5%: Includes wholesale sales to Franklins corporate stores For personal use only Strong ALM sales including 1 month of LMG contract Strong contribution by Hardware & Automotive pillar 6,500 6,279 6,069 6,000 5,940 5,612 $M 5,500 5,263 5,000 NO
Slide 9: CODB as % of Gross Profit
CODB as % of Gross Profit Marginal CODB increase due to: Significant incremental marketing/advertising costs For personal use only Rising utility and transport costs Impact of sales deflation against fixed costs Increase in long service leave and doubtful debts provisions Partly offset b
Slide 10: EBITA
EBITA EBITA growth of 1.2% driven by: Strong ALM result For personal use only Positive contribution from Hardware & Automotive Achieved despite deflationary impact on operating leverage and higher underlying cost inflation Partly offset by reduced Food & Grocery pillar contribution 210.0 2
Slide 11: PAT
PAT 1H13 1H12 Variance ($) For personal use only PAT ($m) - Underlying 1 121.3 116.6 4.7 PAT ($m) - Reported 2 82.0 94.4 (12.4) 140.0 Reported Underlying Franklins 121.3 Discontinued 120.0 115.0 116.6 112.4 110.2 Operations $34m 109.2 100.3 100.0 94.4 80.0 82.0 80.0 $M 60.0 NOTES: 40.0 1. PAT for un
Slide 12: Operating Cash Flow
Operating Cash Flow Cash flow from operations of $144.7m consistent with underlying PAT result Solid working capital performance partially offset by cash out flows from Franklins For personal use only discontinued operations Prior year reflects cash inflows from the reduction in inventory foll
Slide 13: EPS
EPS 1H13 1H12 Variance (c) For personal use only EPS - Underlying 1 14.5 15.2 (0.7) EPS - Reported 3 9.8 12.3 (2.5) 16.0 15.2 Equity Raising Reported 15.0 14.7 14.4 14.5 dilution Underlying 14.3 14.0 13.1 12.3 12.0 10.5 9.8 10.0 cents 8.0 NOTES: 1. Underlying EPS is stated pre significant items, int
Slide 14: DPS
DPS The Board has declared an interim dividend of 11.5 cents a share (100% franked) Dividend payout ratio: For personal use only 117% of Reported EPS (FY12: 93%) 79% of Underlying EPS (FY12: 76%) Continuing strong payout ratio reflecting Board‟s confidence in underlying position of the Group
Slide 15: Divisional Highlights: Metcash Food & Grocery
DIVISIONAL HIGHLIGHTS For personal use only Metcash Food & Grocery - Supermarkets - Fresh - Convenience 1313
Slide 16: Food & Grocery - Financials
Food & Grocery - Financials (includes Convenience and Fresh) For personal use only Variance Variance Food and Grocery 1H13 1H12 $m % SALES ($m) 4,552.1 4,533.7 18.4 0.4% EBITA ($m) 175.0 185.0 (10.0) (5.4%) EBITA MARGIN (%) 3.84% 4.08% Supermarket sales up (including Franklins NSW business) but lo
Slide 17: Food & Grocery - Actively developing the retail network
Food & Grocery - Actively developing the retail network Independent retailers continue to invest in strengthening the network For personal use only Highly selective approach to new store developments, extensions and refurbishments Branded Stores (IGA – 3 channels + Friendly Grocer + Eziway) FORECA
Slide 18: Food & Grocery - Operational Highlights
Food & Grocery - Operational Highlights Store Buy-Back Program For personal use only 31 completed Buy-backs for the half Retail uplift of +10.9% - Note: 10 of the 31 sites handed over in September and October 2012 Expect retail sales to be up 17.5% once full impact of handover to new owners ar
Slide 19: Food & Grocery - Franklins Strategy
Food & Grocery - Franklins Strategy For personal use only Franklins Store Handover Update 58 stores sold and handed over or expected to be sold (including Franchise stores) 5 stores under review 27 stores closed or likely to be closed Supa IGA relaunch in NSW Relaunch of Supa IGA in NSW- TV,
Slide 20: Food & Grocery - Franklins Strategy: Supa IGA stores NSW
Food & Grocery - Franklins Strategy Supa IGA stores - NSW For personal use only 18 18
Slide 21: Food & Grocery - Marketing Initiatives
Food & Grocery - Marketing Initiatives Increased focus on marketing and advertising For personal use only Several major campaigns launched: Locked Down Low Prices (LDLP) – value proposition. Fully integrated campaign – TV, online, POS, catalogues “Future Champions” – highlights IGA Community
Slide 22: Divisional Highlights - Australian Liquor Marketers (ALM)
For personal use only DIVISIONAL HIGHLIGHTS - Australian Liquor Marketers (ALM) 20 20
Slide 23: ALM - Financials
ALM - Financials Variance Liquor 1H13 1H12 Variance For personal use only % SALES ($m) 1,272.6 1,108.0 164.6 14.9% EBITA ($m) 16.6 13.1 3.5 26.7% EBITA MARGIN (%) 1.30% 1.18% Strong sales and EBITA performance LMG contribution commenced from Oct 2012 One pub transacted in the half with others
Slide 24: ALM - Operational Highlights
ALM - Operational Highlights IBA For personal use only Sales growth up 16% Everyday Discounts (EDD) in store pricing program supporting strong sales growth IBA outperforming supplier market performance with all key suppliers Cellarbrations on Premises (COP) and Harbottle on Premise (HOP) on
Slide 25: ALM - Operational Highlights: Private Label
ALM - Operational Highlights For personal use only Private Label Supporting retailers with private label protects margins Good margins, plan to keep volume at 5-7% Beer – 100,000 cases equivalent in our network - Summer Bright or Hahn Super Dry Wine – wide variety trading exceptionally well
Slide 26: Packaged Liquor Market rolling quarter growth
For personal use only Rolling Quarter % Change on Year Ago -8.0% -4.0% -2.0% -6.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% May/06 Jun/06 Source: Nielsen Jul/06 Aug/06 Sep/06 Oct/06 Nov/06 Dec/06 Jan/07 Feb/07 Mar/07 Apr/07 May/07 Jun/07 Jul/07 Aug/07 Sep/07 Oct/07 Nov/07 Dec/07 Jan/08 Feb/08 Mar/08 Apr/08 Ma
Slide 27: Divisional Highlights - Hardware and Automotive
For personal use only DIVISIONAL HIGHLIGHTS - Hardware and Automotive 25 25
Slide 28: Hardware & Automotive - Financials
Hardware & Automotive – Financials Variance Hardware and Automotive 1H13 1H12 Variance % For personal use only SALES ($m) 454.2 427.2 27.0 6.3% EBITA ($m) 15.0 8.7 6.3 72.4% EBITA MARGIN (%) 3.30% 2.04% Hardware EBIT improvement primarily driven by: Improved gross margins driven by lower cost of
Slide 29: Hardware & Automotive - Operating Highlights
Hardware & Automotive – Operating Highlights Automotive For personal use only Business performing in line with expectations Initial synergies being delivered Despite increased competitor activity through the last quarter, retail sales in low to medium single digit L4L growth across both retail
Slide 30: Supply Chain Update
Supply Chain Update Project Mustang Engineering study completed for proof of concept For personal use only Will enable significant cost efficiencies Latest technology from Europe – significantly automate order selection process by reduction in manual handling activity Capability to pick stor
Slide 31: Financial Insights
'Champion of the Independent Retailer' For personal use only Financial Insights Adrian Gratwicke Chief Financial Officer 29 29
Slide 32: Financials
For personal use only FINANCIALS 1. Balance Sheet Extract 2. Cash Flow Extract 3. Interest Expense 4. Significant Items 5. Franklins Acquisition 6. Equity Raising Update 30 30
Slide 33: Balance Sheet - Extract
Balance Sheet - Extract 31 Oct 30 Apr Movement 2012 2012 $m $m $m % Commentary For personal use only Creditor days stable versus October 11. Cyclical / acquisition Trade and Other Payables (1,615.8) (1,372.7) (243.1) 17.7% impact Inventory well controlled. Inventory days up 0.9 days partly due to In
Slide 34: Cash Flow Extract
Cash Flow Extract 31 Oct 2012 31 Oct 2011 Movement $m $m $m % Commentary For personal use only EBITDA - Underlying 228.9 226.5 2.5 1.1% Net interest paid (27.3) (30.2) 2.9 (9.6%) Reduced debt levels in current period Taxation Paid (58.1) (58.6) 0.5 (0.9%) Tax installment rates and levels have been s
Slide 35: Interest Expense
Interest Expense 1H13 1H12 Change For personal use only $m $m $m Change (%) Fav / (Unfav) Interest Costs 30.8 35.8 5.0 14.0% Deferred Borrowing Costs 0.8 2.2 1.4 63.6% Discount Rate Adjustments 1.7 0.5 (1.2) (240.0%) Interest Expense (Total) 33.3 38.5 5.2 13.5% Interest Income 3.5 6.1 (2.6) (42.6%)
Slide 36: Significant Items
Significant Items For personal use only 1H13 1H12 $m $m Legal Costs / (Recovery) - Franklins ACCC 1 (3.5) 3.1 Acquisition Costs - ABG 2 2.4 - Blacktown and Silverwater Lease Tail / Closure - 16.4 Significant Items (Before Tax) (1.1) 19.5 Income Tax (Benefit)/Expense 1.1 (4.9) Significant Items (Afte
Slide 37: Franklins Acquisition – Final Valuation
Franklins Acquisition – Final Valuation 1H13 Change As at 30 September 2011 $m $m For personal use only Net purchase consideration 189.6 (0.1) Fair value of net identifiable liabilities 66.5 16.3 Goodwill 256.1 16.2 Assets / (liabilities) assumed: Net working capital (60.4) - Disposal group assets 1
Slide 38: Franklins Discontinued Operations
Franklins Discontinued Operations For personal use only 1H13 1H12 $m $m Revenue from sale of goods – retail 76.3 21.9 Cost of sales and other costs (118.4) (26.9) Finance costs attributable to discounting of provision for (6.5) − rental subsidy Loss before income tax (48.6) (5.0) Income tax benefit
Slide 39: Equity Raising Update
Equity Raising Update Sources $m For personal use only Institutional Placement 325.0 Share Purchase Plan 50.0 Transaction Costs (7.0) Net Funds 368.0 Spent Committed Total $m $m $m Acquisition of 49.9% of Mitre 10 47.9 47.9 Other Mitre 10 Acquisitions / JV's 39.7 39.7 Acquisition of Automotive Brand
Slide 40: Conclusions
For personal use only CONCLUSIONS 3838
Slide 41: Growth Strategies
Growth Strategies For personal use only MF&G ALM M10 ABG More m2 IBA network Network growth Network growth growth Store refurbs LMG/HLW New concept New customers integration stores Buy back Retail execution JVs Bolt on acquisitions Channel clarity Beer Natbuild alliance
Slide 42: Outlook
Outlook Challenging market Deflationary trading conditions expected to continue For personal use only Continued pressure on operating leverage Positives Negatives Supa relaunch in NSW Higher number of Franklins stores closed than expected Ex-Franklins performing better once in Franklin
Slide 43: Champion of the Independent
For personal use only 'Champion of the Independent' 41 41
Slide 44: 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. Trend Metrics (Financial & Operational) 6. Sustainability Metrics 7. Directory of Terms 42 42
Slide 45: Reconciliation - Group Results (Reported and Underlying)
Reconciliation - Group Results (Reported and Underlying) For personal use only 1H13 1H12 1H13 1H12 $m $m EPS (cps) EPS (cps) EBITA 206.2 203.7 Net Interest (29.8) (32.4) Profit Before Tax and Amortisation 176.4 171.3 Tax (53.1) (51.3) Non Controlling Interest (2.0) (3.4) Underlying PAT 121.3 116.6 1
Slide 46: Group Results by Division
Group Results by Division Wholesale Sales 1H13 1H12 Variance $m $m $m Food and Grocery 4,552.1 4,533.7 18.4 For personal use only Liquor 1,272.6 1,108.0 164.6 Hardware & Automotive 454.2 427.2 27.0 Metcash Total 6,278.9 6,068.9 210.0 EBITA 1H13 1H12 Variance $m $m $m Food and Grocery 175.0 185.0 (10
Slide 47: EBITA By Division
EBITA By Division 250 For personal use only Hardware & Automotive Liquor Food and Grocery 6.8 8.7 15.0 200 9.9 13.1 14.6 16.6 14.4 150 $m 100 189.2 185.0 176.8 175.0 162.4 315.5 50 0 1H09 1H10 1H11 1H12 1H13 NOTE: The difference to the reported EBITA will be in „Corporate‟ 4545
Slide 48: 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 A minimum payout ratio of 60% of underlying earnings per share has been set by the
Slide 49: Trend Metrics - Financial
Trend Metrics - Financial FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 Half Year Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Revenues: For personal use only Total Revenue $m 4,952 5,311 5,657 5,984 6,123 6,336 Sales (wholesale) $m 4,867 5,263 5,612 5,940 6,069 6,279 Underlying results: EBITDA $m 175.0 19
Slide 50: Trend Metrics - Operational
Trend Metrics - Operational Branded Stores - Grocery (IGA – 3 channels + Friendly Grocer + Oct 09 Apr 10 Oct 10 Apr 11 Oct 11 Apr 12 Oct 12 For personal use only Eziway) Supa IGA 440 446 449 463 468 475 475 IGA 720 718 735 734 723 744 735 Xpress 140 156 170 183 178 184 183 IGA branded stores 1,300 1
Slide 51: Sustainability Metrics
Sustainability Metrics 2012 2011 2010 2009 2008 2007 2006 For personal use only People Long Term Injury (LTI) 85 209 244 273 275 317 238 Long Term Injury Frequency Rate (LTIFR) 25.9 30.8 (1) 18.2 21.3 27.3 25.7 33.6 2012 2011 2010 2009 Environment Notes: 1. LTIFR is the number of lost time CO2 Emiss
Slide 52: Directory of Terms
Directory of Terms Metcash’s Business Areas & Terms ALM Australian Liquor Marketers is Australia and New Zealand's leading broad range liquor wholesaler. ALM operates from 18 For personal use only distribution locations across the country. Larger „off-premise‟ customers are supplied through the main
Slide 53: Directory of Terms - Financial Terms
Directory of Terms Financial Terms Net operating cash flow (not adjusted for significant items) / [Profit after tax pre significant items + For personal use only Cash realisation ratio Depreciation + Amortisation (tax effected) ] CODB Cost of doing business Gearing Debt / [Debt + Shareholders equity
Slide 54: For additional information contact
For additional information contact: For personal use only Adrian Gratwicke, Chief Financial Officer Phone: 61 2 9741 3248 Fax: 61 2 9741 3027 E-mail: adrian.gratwicke@metcash.com Stephen Woodhill, General Manager Corporate Affairs Phone: 61 2 9741 3415 Fax: 61 2 9741 3027 E-mail: stephen.woodhill@me
Slide 55: Disclaimer
Disclaimer 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 should be read in conju