Metcash Limited · ASX:MTS
Metcash — FY2010 Earnings Presentation
49 slides from Metcash's earnings presentation, Jun 1, 2010
Slide 1: CEO Presentation cover letter to ASX
Metcash Limited ABN 32 112 073 480 50 Waterloo Road Macquarie Park NSW 2113 Australia PO Box 6226 Silverwater Business Centre NSW 1811 Australia Ph: 61 2 9751 8200 Fax: 61 2 9889 1557 1 June 2010 The Manager, Companies Australian Securities Exchange Company Announcements Office Level 4 20 Bridge Str
Slide 2: Champion of the Independent Retailer – 2010 Company Results
“Champion of the Independent Retailer” 2010 Company Results Financial Year Ending 30 April 2010 Andrew Reitzer Chief Executive Officer
Slide 3: Group Headlines
GROUP HEADLINES 2010 Strong sales growth and significant productivity improvements in a low inflationary environment deliver underlying EPS within guidance Variance FY10 FY09 (%) WHOLESALE SALES ($m) 11,517 10,974 4.9% EBITA ($m) - Reported 415.4 382.5 8.6% EBITA MARGIN (%) - Reported 1 3.61% 3.49%
Slide 4: Financial Highlights – Group
2010 FINANCIAL HIGHLIGHTS – GROUP 2
Slide 5: Wholesale Sales
WHOLESALE SALES 2010 Group wholesale sales up 4.9% (4.4% ex Mitre 10 sales) Solid underlying IGA>D growth (+6.8%) Comparatively lower 2H10 growth due to cycling out of FY09 gov’t stimulus which saw significant 2H09 food sector sales growth +4.9% on pcp Constrained by persistent low inflation i
Slide 6: Market Share
MARKET SHARE 2010 April May MAT 19.7% 19.8% Market share solid in Quarter 19.9% 20.1% competitive environment 22% 19.9% 19.3% 19.0% 18.6% 18% MAT 14% NOTES: 1. Market share data is for defined dry grocery product categories 2. Graph shows MAT for quarter ending April 10% 3. Previously collated b
Slide 7: CODB as % of Gross Profit
CODB AS % OF GROSS PROFIT 2010 Significant CODB reduction achieved this year – down 83bps Further 2H CODB reduction achieved on top of 1H 38 bps reduction Ongoing focus on improving warehouse operations and reducing inefficiencies Margins maintained with ongoing supplier support and investment
Slide 8: EBITA
EBITA 2010 8.6% EBITA growth on 4.9% wholesale sales growth Reflects operating leverage improvement in 2H10 via cost containment strategies Maintenance of operating margins despite softening sales % 415.4 420.0 R 16.3 CAG 382.5 380.0 335.1 340.0 310.7 $M 300.0 260.0 226.9 NOTES: 220.0 1. FY10 Ca
Slide 9: EBITA Margin
EBITA MARGIN 2010 EBITA margin up 12bps on FY09 Reflects strategies discussed in commentary in CODB and EBITA graphs above +12 bps on pcp 4.00% 3.61% 3.49% 3.50% 3.29% 3.34% 2.95% 3.00% 2.50% NOTES: 1. EBITA margin calculated 2.00% using EBITA pre NRI and wholesale sales 2006 2007 2008 2009 2010 7
Slide 10: PAT
PAT 2010 FY10 FY09 Variance (%) PAT ($m) - Underlying 244.9 1 225.9 1 8.4% PAT ($m) - Reported 227.6 202.5 12.4% Underlying PAT PA T Reported PA T Underlying +8.4% on sales 244.9 growth of 4.9% 250.0 225.9 220.0 227.6 199.0 190.0 180.3 202.5 197.4 $M 160.0 166.8 125.7 130.0 NOTES: 100.0 1. A definit
Slide 11: Operating Cashflow
OPERATING CASHFLOW 2010 Strong cashflow from operations at $294.7m Assisted by some timing impacts PATBDA Operating Cashflow 294.7 300.0 260.0 242.7 248.1 276.0 252.3 $M 220.0 228.3 197.6 205.6 177.5 180.0 NOTES: 1. PATBDA = Profit after tax before depreciation and 140.0 amortisation (before NRI)
Slide 12: EPS
EPS 2010 FY10 FY09 Variance (%) EPS - Underlying 32.00 1 29.53 1 8.4% EPS - Reported 29.74 26.47 12.4% Within guidance EPS Reported EPS Underlying 36.00 32.00 32.00 29.53 NOTES: 28.00 26.07 29.74 1. Underlying EPS is stated pre 23.94 non-recurring items and pre Cents 25.86 26.47 intangible amortisat
Slide 13: DPS
DPS 2010 The Board has declared a final dividend of 15.0 cents a share (100% franked) The total dividend of 26 cps represents a payout ratio of: 87% of Reported EPS (81% for FY09) 81% of Underlying EPS 28.0 26.0 24.0 24.0 21.0 20.0 Cents 17.0 16.0 11.5 12.0 NOTES: 8.0 1. Metcash dividend and cap
Slide 14: Divisional Highlights - IGA>D
2010 DIVISIONAL HIGHLIGHTS - IGA>D 12
Slide 15: IGA>D - Financials
IGA>D - FINANCIALS 2010 FY10 FY09 Variance (%) Operating leverage 1.44x WHOLESALE SALES ($m) 7,129.9 6,674.4 1 6.8% EBITA ($m) 346.5 315.5 9.8% NOTES: EBITA MARGIN (%) 4.86% 4.73% +13bps 1. Wholesale sales – excludes retail sales in MTS hands Wholesale Sales up 6.8% (1H10 9.3%) with comp store sales
Slide 16: IGA>D – Sales Performance
IGA>D – SALES PERFORMANCE 2010 Strong underlying growth in “comp” sales on a high prior year base FY08 FY09 FY10 Base Business 7.4% 11.3% 6.8% Solid growth on high prior year comparatives New Store & Includes new stores and sales “acquired” under IGA (1.2)% (2.3%) (2.7%) Acquisitions Fresh growt
Slide 17: IGA>D - Retail Development
IGA>D - RETAIL DEVELOPMENT 2010 Retail development activity continues to be strong Branded Stores (IGA – 3 channels + Friendly Grocer + Eziway) COMPLETED COMPLETED COMPLETED 1H 2H FULL YEAR NO. SQM NO. SQM NO. SQM New stores up on FY09. Mainly mid range & New Stores 31 21,888 22 16,045 53 37,933 sma
Slide 18: IGA>D - Operational Review
IGA>D - OPERATIONAL REVIEW 2010 Private Label Brands Black & Gold Range strategy being continually refined with focus on developing categories that meet consumer demands for value Sales growth at 4% p.a. IGA Signature (premium label range) Retailers and consumers supporting uniform IGA Sig
Slide 19: IGA Fresh Strategy - Operational Review
IGA FRESH STRATEGY 2010 - OPERATIONAL REVIEW Strategic Rationale: Provide independent retailers with comprehensive, consistent and quality fresh food offer to meet customer needs Performance Annualised run rate unchanged: Produce ~ $400m, total Fresh sales ~ $1b YTD category growth: Meat +24%, D
Slide 20: Divisional Highlights - ALM
2010 DIVISIONAL HIGHLIGHTS - ALM 18
Slide 21: ALM - Financials
ALM - FINANCIALS 2010 FY10 FY09 Variance (%) Good EBITA SALES ($m) 2,640.6 2,639.5 - growth despite flat sales EBITA ($m) 36.1 33.8 6.9% EBITA MARGIN (%) 1.37% 1.28% +9bps Sales flat on last year as 2H10 market conditions deteriorated Absence of inflation year on year has depressed sales growth
Slide 22: ALM - Operational Overview
ALM - OPERATIONAL OVERVIEW 2010 Independent Brands Australia markets 3 major liquor store brands IBA store appraisals and standard benchmarking has resulted in further movement in store numbers Brand renewal – IGA Liquor replaces IGA Plus Liquor and Bottle-O Neighbourhood revamped Strong empha
Slide 23: Divisional Highlights - Campbells Wholesale
2010 DIVISIONAL HIGHLIGHTS - CAMPBELLS WHOLESALE 21
Slide 24: Campbells Wholesale - Financials
CAMPBELLS WHOLESALE - FINANCIALS 2010 FY10 FY09 Variance (%) SALES ($m) 1,685.3 1,660.4 1.5% EBITA ($m) 28.8 33.0 -12.5% EBITA MARGIN (%) 1.71% 1.99% -28bps Sales up 1.5% Low inflation and unwinding of government stimulus in FY10 has dampened comp sales performance Traditional “mum & pop” conven
Slide 25: Campbells Wholesale - Operating Performance
CAMPBELLS WHOLESALE 2010 - OPERATING PERFORMANCE Business Model Cash and Carry format in Regional distribution outlets Specialist food service business Single unit pick supplying metropolitan areas supplying grocery, delivering grocery, confectionery (WA & QLD) confectionery and convenience
Slide 26: Divisional Highlights - Mitre 10
2010 DIVISIONAL HIGHLIGHTS - MITRE 10 24
Slide 27: Mitre10 – Hardware Distribution
MITRE10 – Hardware Distribution 2010 Business Model Hardware wholesaler and marketer of Mitre 10 hardware store brand Supplies ~440 Mitre 10 and True Value branded stores (all independently owned) and 400+ non-branded independents Deal Mechanics Acquisition date – 25 Mar 2010 Metcash with 50
Slide 28: Metcash Supply Chain Initiatives
METCASH SUPPLY CHAIN INITIATIVES 2010 Metcash continually searches for opportunities to improve the efficiency and effectiveness of its supply chain, which are shared across the Group Start Due Business Project Date Date IGA>D ‘Mini-loader’ automated storage and retrieval system Oct Sep VIC / CSD -
Slide 29: Financials - Balance Sheet, Cashflow, Interest Expense
2010 FINANCIALS - BALANCE SHEET EXTRACT - CASHFLOW EXTRACT - INTEREST EXPENSE 27
Slide 30: Balance Sheet - Extract
BALANCE SHEET - EXTRACT 2010 30-Apr-09 30-Apr-10 Movement $'m $'m $m % Commentary Increase due to Mitre 10 acquisition ($116m). Payment terms largely maintained with increased Fresh mix reducing overall payment terms being offset by longer Trade and other payables -1,188.0 -1,294.4 -106.4 9% terms i
Slide 31: Cashflow - Extract
CASHFLOW - EXTRACT 2010 FY Apr 09 FY Apr 10 Inc/(Dec) $m $m $m $m $m Commentary EBITDA 422.9 440.2 17.3 Increase due to increased "line fees", higher average debt levels and rising interest Net Interest Paid (54.7) (60.2) (5.5) rates Taxation Paid (31.0) (101.6) (70.6) 337.2 278.4 (58.8) Prior year
Slide 32: Interest Expense
INTEREST EXPENSE 2010 Interest Expense Apr 10 Apr 09 $m $m - 1H 32.3 37.8 - 2H 39.4 32.4 Interest Expense (Total) 71.7 70.2 Interest Income (8.2) (9.2) Interest Expense (Net) 63.5 61.0 Interest expense $71.7m ($70.2m pcp) FY10 average debt slightly higher than in FY09 lower cash rates in 1H10 of
Slide 33: Conclusions - Key Messages - Earnings Guidance
2010 CONCLUSIONS - KEY MESSAGES - EARNINGS GUIDANCE 31
Slide 34: Key Messages
KEY MESSAGES 2010 PERFORMANCE Sales +6.8% Sales 0% Sales +1.5% Sales N/A EBIT +9.8% EBIT + 6.9% EBIT -12.5% EBIT N/A Operating leverage at 1.4x Operating leverage Operating leverage Operating leverage N/A FUTURE DIRECTION Introduction of Value Statement: IBA and Liquor Alliance store Confectio
Slide 35: Earnings Guidance – FY11
EARNINGS GUIDANCE – FY11 2010 Low sales growth in food and liquor sector will continue to December 2010 Cycling of the government stimulus felt in FY09 Continued low inflation Interest rates rose 150 basis points in FY10 and projected to rise further Macro economic climate unsettled With
Slide 36: Champion of the Independent – The Third Force
“Champion of the Independent” 2010 “The Third Force” 34
Slide 37: Appendices
2010 APPENDICES 1. Reconciliation - Group Results 2. Reconciliation – Profit Before Tax 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 38: Reconciliation - Group Results
RECONCILIATION 2010 - GROUP RESULTS Apr 10 Apr 09 $m $m EBITA 418.0 387.0 Share Based Payments (2.6) (4.5) Operating EBITA after share based payments 415.4 382.5 Net Interest (63.5) (61.0) Profit Before Tax 1 351.9 321.5 Tax (104.3) (94.9) Minority Interest (2.7) (0.7) Underlying Profit After Tax 24
Slide 39: Reconciliation - Profit Before Tax
RECONCILIATION 2010 - PROFIT BEFORE TAX Apr 10 Apr 09 $m $m Profit Before Tax 1 351.9 321.5 Amortisation (6.5) (6.2) Significant and Non-recurring items before tax 2 (15.4) 3 (24.6) Profit before tax per Appendix 4 E 330.0 290.7 (Consolidated Statement of Comprehensive Income) Note : 1. Reconciliati
Slide 40: Split of Business – EBITA by Division
SPLIT OF BUSINESS – EBITA BY Division 2010 Food Distribution Liquor Distribution Cash & Carry Distribution Hardware Distribution $M Total $412.9 420.0 Total $382.3 $1.5m (0.4%) - Hardware 28.8 (7.0%) Distribution (Mitre 10) 380.0 Total $336.9 33.0 (8.6%) 36.1 (8.7%) Total 340.0 33.8 (8.9%) $304.6 30
Slide 41: Dividend & Capital Management
DIVIDEND & CAPITAL MANAGEMENT 2010 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 FY10 final dividend of 15.0 cents per share takes the total FY10 dividend to 26.0 cents per sha
Slide 42: Trend Metrics – Financial
TREND METRICS – FINANCIAL 2010 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FULL YEAR CAGR* Apr 06 Apr 07 Apr 08 Apr 09 Apr 10 Sales (all sources) $ millions 8,214 9,695 10,116 10,981 11,517 8.8% Sales (wholesale) $ millions 7,705 9,451 10,045 10,974 11,517 10.6% EBITDA - reported $ millions 277.5 354.6
Slide 43: Trend Metrics - Operational
TREND METRICS - OPERATIONAL 2010 Branded Stores - Grocery Oct 07 Apr 08 Oct 08 Apr 09 Oct 09 Apr 10 (IGA – 3 channels + Friendly Grocer + Eziway) Supa IGA 416 418 425 430 440 446 IGA 719 717 720 717 720 718 Xpress 249 153 129 131 140 156 IGA branded stores 1,384 1,288 1,274 1,278 1,300 1,320 Friendl
Slide 44: Metcash TSR
METCASH TSR 2010 TSR under current management vs market 6.00 5.00 4.00 MTS TSR: 33% Share price (rebased) to MTS 3.00 2.00 1.00 ASX 200 TSR: 9% 0.00 Jan 01 Jul 02 Feb 04 A ug 05 Mar 07 Oct 08 A pr 10 M TS ASX 200 Note: Total Shareholder Returns (TSR) represents share price appreciation and dividend
Slide 45: Directory of Terms
DIRECTORY OF TERMS 2010 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 specialist ‘on-premise’
Slide 46: Directory of Terms
DIRECTORY OF TERMS 2010 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 + Amortisation (tax effected) ]
Slide 47: Directory of Terms
DIRECTORY OF TERMS 2010 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. Non recurring items reflected are: FY10 – Campbells Wholesale store closur
Slide 48: For additional information contact
2010 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 46
Slide 49: Disclaimer
Disclaimer 2010 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