Metcash Limited · ASX:MTS
Metcash — H1 FY2010 Earnings Presentation
48 slides from Metcash's earnings presentation, Dec 1, 2009
Slide 1: CEO presentation cover letter to ASX
Metcash Limited ABN 32 112 073 480 50 Waterloo Road Macquarie Park For personal use only NSW 2113 Australia PO Box 6226 Silverwater Business Centre NSW 1811 Australia Ph: 61 2 9751 8200 1 December 2009 Fax: 61 2 9889 1557 The Manager, Companies Australian Stock Exchange Company Announcements Office
Slide 2: Company Results Half Year Ending 31 October 2009
'Champion of the Independent Retailer' 2010 For personal use only Company Results Half Year Ending 31 October 2009 Andrew Reitzer Chief Executive Officer 1 December 2009
Slide 3: Group Headlines
GROUP HEADLINES 2010 For personal use only Continued growth of core IGA>D business underpins solid Group result FY10 1H FY09 1H Variance % WHOLESALE SALES ($m) 5,612 5,263 1 6.6% EBITA ($m) - Reported 189.9 177.7 6.9% EBITA MARGIN (%) - Reported 3.38% 2 3.37% 2 +1bps CODB / GP (%) 63.98% 64.36% -38b
Slide 4: Financial Highlights – Group
2010 For personal use only FINANCIAL HIGHLIGHTS – GROUP 2
Slide 5: Wholesale Sales
WHOLESALE SALES 2010 For personal use only Group wholesale sales up 6.6% Core IGA>D business achieves strong underlying growth Despite significantly lower inflation in core grocery categories and +6.6% on deflation in many produce categories pcp Moderate sales growth in ALM and CW businesses 6
Slide 6: Market Share
MARKET SHARE 2010 For personal use only Market share (MAT) for the half year ended 25 Oct 09 was 18.9% Market share maintained 22% 18.5% 18.8% 18.9% 18.4% 18% MAT 14% 13.5% NOTES: 1. Market share data collated by Nielsen is for defined dry grocery product categories 10% 2. MAT as at respective half
Slide 7: EBITA
EBITA 2010 For personal use only 6.9% EBITA growth on 6.6% wholesale sales growth Operating leverage somewhat held back in 1H by: − Significantly lower price inflation − IGA Fresh dilution impact +6.9% on pcp − CW performance hampered by large bad debt and soft foodservice and convenience market c
Slide 8: EBITA Margin
EBITA MARGIN 2010 For personal use only EBITA margin up 1 bps on 1H09, subdued slightly by: Operating leverage dilution arising from continued ‘cost investment’ in IGA Fresh operations Some increased underlying CODB pressures (electricity and rentals) 1H10 includes full half of Fresh acquisiti
Slide 9: CODB as % of GP
CODB AS % OF GP 2010 For personal use only CODB down 38 bps, despite Increased CODB establishing IGA Fresh – fully operational in 1H10 compared to 1H09; and ~8-10% deflation in produce prices impinging on Fresh margin Large bad debt in Campbells Wholesale ($1.5m) Higher cost inflation in discr
Slide 10: PAT
PAT 2010 For personal use only FY10 1H FY09 1H Variance PAT ($m) - Pre NRI 109.2 1 97.2 12.3% PAT ($m) - Pre IA, NRI 112.4 2 100.3 12.1% PAT ($m) - Reported 109.2 80.0 36.5% Normalised PAT Strong bottom +12.3% on sales P A T - Repo rted P A T - pre NRI line result growth of 6.6% 120.0 109.2 .2% R 18
Slide 11: Operating Cash Flow
OPERATING CASH FLOW 2010 For personal use only Strong operating cash flow generation at $207m (pcp $101m) Assisted by some impact from cut-off Prior period held back by higher interest cost and Blacktown DC restocking Operating Cashflow PATBDA 220.0 207.3 180.0 140.0 127.8 117.7 107.8 $M NOTES:
Slide 12: EPS
EPS 2010 For personal use only FY10 1H FY09 1H Variance EPS - Pre IA, NRI 14.7 1 13.1 12.1% EPS - Pre NRI 14.3 2 12.7 12.3% EPS - Reported 14.3 10.5 36.4% Above guidance range of ~7-10% EP S - Repo rted EP S - pre NRI growth 16.0 14.3 14.0 12.7 14.3 NOTES: 12.0 11.3 Cents 1. Headline EPS is stated p
Slide 13: DPS
DPS 2010 For personal use only The Board has declared an interim dividend of 11.0 cents a share (100% franked) This represents a payout ratio of: 77% of Reported EPS (79% of EPS - pre NRI in pcp) 12.0 11.0 10.0 10.0 9.0 8.0 7.0 Cents 6.0 5.5 4.0 NOTES: 2.0 1. Metcash dividend and capital managemen
Slide 14: Divisional Highlights – IGA>D
2010 For personal use only DIVISIONAL HIGHLIGHTS – IGA>D
Slide 15: IGA>D – Financials
IGA>D - FINANCIALS 2010 For personal use only FY10 1H FY09 1H Variance (%) 1.23x operating leverage WHOLESALE SALES ($m) 3,486.6 3,190.0 1 9.3% EBITA ($m) 163.3 146.5 11.5% NOTES: EBITA MARGIN (%) 4.68% 4.59% +9bps 1. FY09 - Wholesale sales excludes retail sales in MTS hands Wholesale sales up 9.3%
Slide 16: IGA>D – Sales Performance
IGA>D – SALES PERFORMANCE 2010 For personal use only Comparative Strong underlying growth maintained, both in terms of store sales ‘comp store’ and ‘real’ sales growth growth 6.4% FY08 FY08 FY09 FY09 FY10 1H FY 1H FY 1H Base Business 7.1% 7.4% 9.8% 11.3% 9.3% Fresh sales ‘kicker’ vs pcp plus good
Slide 17: IGA>D – Retail Development
IGA>D - RETAIL DEVELOPMENT 2010 For personal use only Retail development activity has recovered quickly to pre-GFC levels New stores Branded Stores activity rising (IGA + Friendly Grocer + Eziway) COMPLETED PLANNED FORECAST 1H 2H FULL YEAR NO. SQM NO. SQM NO. SQM New stores activity rising after FY0
Slide 18: IGA>D – Operational Review
IGA>D - OPERATIONAL REVIEW 2010 For personal use only FoodWorks Of the 45 ex Coles stores transitioning to FoodWorks, 6 had started purchasing from IGA>D by the end of Oct 09 with between 3-5 weeks of activity Materiality of impact to 2H10 dependent on timing of remaining store transition Overal
Slide 19: IGA Fresh Strategy – Operational Review
IGA FRESH STRATEGY - OPERATIONAL REVIEW 2010 For personal use only Strategic Rationale: Provide independent retailers with comprehensive, consistent and quality fresh food offer to meet customer needs Performance Annualised run rate: Produce ~ $400m, total Fresh sales ~ $1b YTD category growth:
Slide 20: IGA>D – Supply Chain Initiatives
IGA>D – SUPPLY CHAIN INITIATIVES 2010 For personal use only IGA>D continually searches for opportunities to improve the efficiency and effectiveness of its supply chain Initiatives to drive CODB reduction going forward include: Start Due Business Project Date Date IGA>D VIC ‘Mini-loader’ automated
Slide 21: Divisional Highlights – ALM
2010 For personal use only DIVISIONAL HIGHLIGHTS - ALM
Slide 22: ALM – Financials
ALM - FINANCIALS 2010 For personal use only FY10 1H FY09 1H Variance (%) SALES ($m) 1,282.4 1,267.3 1.2% Above target EBITA ($m) 14.6 14.4 1.4% leverage at 1.16X EBITA MARGIN (%) 1.14% 1.14% - Sales growth up 1.2% Growth driven primarily by IBA sales (+7.4%) Cellarbrations +9.9%, IGA Plus Liquor
Slide 23: ALM – IBA Store Growth
ALM - IBA STORE GROWTH 2010 For personal use only Independent Brands Australia (IBA) continues to promote its 3 major store brands Strong focus on improving store standards and brand equity − 41 store refurbishments completed to improve store standards IBA Stores Apr 08 Oct 08 Apr 09 Oct 09 Cellar
Slide 24: Divisional Highlights – Campbells Wholesale
2010 For personal use only DIVISIONAL HIGHLIGHTS - CAMPBELLS WHOLESALE
Slide 25: Campbells Wholesale – Financials
CAMPBELLS WHOLESALE - FINANCIALS 2010 For personal use only FY10 1H FY09 1H Variance (%) SALES ($m) 843.2 805.9 4.6% EBITA ($m) 13.5 15.8 -14.8% EBITA MARGIN (%) 1.60% 1.97% -37bps Sales up 4.6% Change in mix of business Higher growth CSD and foodservice down Cash and Carry maintained reasonab
Slide 26: Campbells Wholesale – Operating Performance
CAMPBELLS WHOLESALE - OPERATING PERFORMANCE 2010 For personal use only Business Model Cash and Carry format in Regional distribution outlets Specialist food service business Single unit pick supplying metropolitan areas supplying delivering grocery, confectionery (WA & QLD) confectionery and
Slide 27: Financials – Balance Sheet, Cashflow, Interest Expense
2010 For personal use only FINANCIALS - BALANCE SHEET - CASHFLOW - INTEREST EXPENSE 25
Slide 28: Balance Sheet – Extract
BALANCE SHEET - EXTRACT 2010 For personal use only 30-Apr-09 31-Oct-09 $m $m Movement Commentary $m % Seasonal increase in payment terms. Represents approximately 3 days additional over April 09. Trade and other payables (1,188.0) (1,308.0) (120.0) 10% Inventories 680.5 680.2 (0.3) (0)% After taking
Slide 29: Cashflow – Extract
CASHFLOW - EXTRACT 2010 For personal use only FY09 FY10 Inc/ Oct 08 Oct 09 (Dec) $m $m $m $m $m Commentary EBITDA 197.8 209.7 11.9 Reduced net interest cost in line with expectations. Net Interest Paid (29.3) (27.5) 1.8 Prior year contained credit adjustment for prior period returns Taxation Paid (1
Slide 30: Interest Expense
INTEREST EXPENSE 2010 For personal use only Interest Expense FY10 1H FY09 1H Interest Expense (Total) 32.3 37.8 Interest Income (3.2) (3.2) Interest Expense (Net) 29.1 34.6 1H 10 in line with expectations Interest expense $32.3m ($37.8m pcp) $5.5m reduction due primarily to lower cash rates and pc
Slide 31: Conclusions – Key Messages, Guidance, Mitre 10
2010 For personal use only CONCLUSIONS - KEY MESSAGES - EARNINGS GUIDANCE - PROPOSAL TO ACQUIRE MITRE 10 29
Slide 32: Key Messages
KEY MESSAGES 2010 For personal use only PERFORMANCE Sales +9.3% Sales +4.6% Sales +1.2% EBIT +11.5% EBIT -14.8 % EBIT + 1.4% Operating leverage at 1.23x – in line with Operating leverage <1.1 Operating leverage ~1.1x expectations during Fresh ‘start up GROWTH Fresh (Teamwork) Confectionery expan
Slide 33: Earnings Guidance – FY10
EARNINGS GUIDANCE – FY10 2010 For personal use only Trading environment has been strong for much of half as evidenced by good comparable store growth in IGA>D. However, low price inflation (and pack changes) have hampered trading opportunities across all pillars Significant produce price deflati
Slide 34: Proposal to Acquire Mitre 10
PROPOSAL TO ACQUIRE MITRE 10 2010 For personal use only Metcash has a proven track record of successfully supporting independent retailers compete with the chains The state of the hardware wholesaling sector is very similar to how grocery wholesaling looked when Davids was acquired in 1998 and r
Slide 35: 'Champion of the Independent' 'The Third Force'
'Champion of the Independent' 2010 For personal use only 'The Third Force' 33
Slide 36: Appendices
2010 For personal use only APPENDICES 1. Segment Note – Unallocated & Corporate 2. Reconciliation – Group Results 3. Split of Business – EBITA by Division 4. Dividend and Capital Management Policy 5. Trend Metrics (Financial & Operational) 6. Metcash TSR 7. Directory of Terms
Slide 37: Segment Note – Unallocated & Corporate
SEGMENT NOTE - UNALLOCATED & CORPORATE 2010 For personal use only Oct 09 Oct 08 $m $m Corporate - Share Based Payments (1.3) (2.4) - Other (0.2) 3.3 Included in Group EBITA (‘Above the line’) (1.5) 0.9 Unallocated - Intangible Amortisation (3.2) (3.0) - Interest - net (29.1) (34.6) - Interest Collar
Slide 38: Reconciliation – Group Results
RECONCILIATION - GROUP RESULTS 2010 For personal use only Oct 09 Oct 08 $m $m EBITA 189.9 177.7 Net Interest (29.1) (34.6) Profit Before Tax and Amortisation 160.8 143.1 Tax (47.7) (42.8) Minority Interest (0.7) (0.1) PAT pre IA & NRI 112.4 100.2 Intangible Amortisation (3.2) (3.0) PAT pre NRI 109.2
Slide 39: Split of Business – EBITA by Division
SPLIT OF BUSINESS - EBITA By Division 2010 For personal use only Food Distribution Liquor Distribution Cash & Carry Distribution Total $M 200.0 $191.4 Total $176.7 13.5 (7.1%) Total 14.6 (7.6%) 15.8 (8.9%) $157.2 160.0 Total $143.9 14.4 (8.2%) 14.6 (9.3%) 14.5 (10.1%) 13.2 (8.4%) 12.5 (8.7%) 120.0 T
Slide 40: Dividend & Capital Management
DIVIDEND & CAPITAL MANAGEMENT 2010 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 proposed 1H10 dividend of 11.0 cents per share represents approximately: 77% of
Slide 41: Trend Metrics – Financial (Half Year)
TREND METRICS – FINANCIAL (HALF YEAR) 2010 For personal use only FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 HALF YEAR Oct 09 CAGR Oct 05 Oct 06 Oct 07 Oct 08 Sales (all sources) $ millions 3,482 4,764 4,952 5,311 5,612 13.0% Sales (wholesale) $ millions 3,447 4,573 4,867 5,263 5,612 13.0% EBITDA - repo
Slide 42: Trend Metrics – Financial (Full Year)
TREND METRICS - FINANCIAL (FULL YEAR) 2010 For personal use only FY 2006 FY 2007 FY 2008 FY 2009 FULL YEAR CAGR Apr 06 Apr 07 Apr 08 Apr 09 Return on Capital Employed % 12.5% 17.2% 17.7% 19.6% Return on Equity % 11.9% 15.0% 15.6% 17.2% Gearing % 42.3% 34.4% 33.2% 33.5% Debt / EBITDA (pre NRI) times
Slide 43: Trend Metrics – Operational
TREND METRICS - OPERATIONAL 2010 For personal use only Branded Stores Stores Stores Stores Stores Stores (IGA + Friendly Grocer + Eziway) Oct 07 Apr 08 Oct 08 Apr 09 Oct 09 Supa IGA 416 418 425 430 440 IGA 719 717 720 717 720 Xpress 249 153 129 131 140 IGA branded stores 1,384 1,288 1,274 1,278 1,30
Slide 44: Metcash TSR
METCASH TSR 2010 For personal use only TSR under current management vs market 6.00 5.00 MTS TSR: 37% 4.00 Share price (rebased) 3.00 2.00 1.00 ASX 200 TSR: 6% 0.00 Jan 01 Jun 02 Dec 03 May 05 Nov 06 May 08 Oct 09 MTS ASX 200 Note: Total Shareholder Returns (TSR) represents share price appreciation a
Slide 45: Directory of Terms
DIRECTORY OF TERMS 2010 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 distribution system; a sp
Slide 46: Directory of Terms – Financial Metrics Definitions
DIRECTORY OF TERMS 2010 For personal use only Financial Metrics Definitions CAGR - Compound Annual Growth Rate over 4 years (FY06 to FY10) Cash realisation ratio - Net operating cash flow (not adjusted for non-recurring items) / [Profit after tax pre non recurring items + Depreciation + Amortisa
Slide 47: Directory of Terms
DIRECTORY OF TERMS 2010 For personal use only Moving Average Total (MAT) - A 12 month running average measure of market share Non-recurring items (NRI) - Items not expected to recur in the ordinary course of business in subsequent trading periods Normalised - Adjusts for non-recurring items PATBDA -
Slide 48: For additional information contact
2010 For personal use only For additional information contact: Adrian Gratwicke, GM Finance Phone: 61 2 9741 3248 Fax 61 2 9741 3027 E-mail adrian.gratwicke@metcash.com Or visit our website: www.metcash.com Disclaimer This presentation is for the general information of investors. Metcash Limited giv