Slide 1: Metcash 2012 Full Year Results Presentation cover letter
Metcash Limited ABN 32 112 073 480 50 Waterloo Road Macquarie Park For personal use only NSW 2113 Australia PO Box 6226 28 June 2012 Silverwater Business Centre NSW 1811 Australia Ph: 61 2 9751 8200 Fax: 61 2 9741 3027 ASX Limited Company Announcements Office Level 4, Exchange Centre 20 Bridge Stree
Slide 2: Company Results Full Year Ending 30 April 2012
For personal use only Company Results Full Year Ending 30 April 2012 28 June 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 Adrian Gratwicke, CFO - Financials A
Slide 4: Overview
Overview Sound group results (and within guidance range), in context of: For personal use only Tough trading environment due to: - Ongoing marketing war by chains - Value driven consumer - Ongoing deflationary impacts Strong cashflow and maintenance of strong dividend payout Positioned for n
Slide 5: Financial Headlines
Financial Headlines FY12 FY11 Variance For personal use only Revenue - Reported ($m) 1 12,366.3 12,461.6 (0.8)% Wholesale Sales ($m) 2 12,599.1 12,364.0 1.9% EBITA ($m) 451.2 438.0 3.0% EBITA Margin (%) 3.58% 3.54% 4 bps CODB / GP (%) 61.45% 62.72% (127) bps PAT - Reported ($m) 4 90.0 241.4 (62.7)%
Slide 6: Financial Highlights - Group
For personal use only FINANCIAL HIGHLIGHTS – Group 4
Slide 7: Wholesale Sales
Wholesale Sales Group wholesale sales up 1.9% driven by: Strong sales growth from liquor and hardware For personal use only Includes wholesale sales to Franklins corporate stores Core sales flat reflecting 53 weeks last year, impact of inflation and significantly elevated promotional offtake +
Slide 8: CODB as % of Gross Profit
CODB as % of Gross Profit Continue to achieve CODB reductions: For personal use only Significant reduction in CODB driven by: Consolidation of warehouses improving operational efficiency Ongoing productivity improvements from continued technology deployment Reduction in administrative/overhe
Slide 9: EBITA
EBITA EBITA growth of 3.0% driven by: Strong ALM result For personal use only Strong leverage in Supermarkets Achieved despite deflationary impact on operating leverage and higher + 3.0% underlying cost inflation on pcp Reflects excellent CODB containment and maintenance of gross margins 500
Slide 10: PAT
PAT Underlying profit FY12 FY11 Variance growth For personal use only maintained PAT ($m) - Underlying 1 262.5 256.2 2.5% PAT ($m) - Reported 90.0 241.4 (62.7%) 300 PAT Reported 262.5 256.2 244.9 PAT Underlying 250 225.9 241.4 227.6 199.0 NOTES: 200 202.5 197.4 1. PAT for underlying EPS $m purposes
Slide 11: Operating Cash Flow
Operating Cash Flow Cash flow from operations of $284.3m primarily driven by working capital improvement For personal use only Strong cashflow generation 300 294.7 284.3 285.7 290.9 276.0 250 248.1 252.3 228.3 200 197.6 Operating Cashflow $m 150 142.5 PATBDA 100 50 NOTES: 1. PATBDA = Profit after
Slide 12: EPS
EPS Within FY12 FY11 Variance guidance For personal use only range EPS - Underlying 1 34.1 33.4 2.1% EPS - Reported 11.7 31.5 (62.9)% 36 34.1 33.4 EPS Reported 32.0 32 EPS Underlying 29.5 31.5 29.7 NOTES: 28 26.1 1. Underlying EPS is stated pre 26.5 significant items, discontinued 24 25.9 operations
Slide 13: DPS
DPS The Board has declared a final dividend of 16.5 cents a share (100% franked) For personal use only The total dividend of 28 cps represents a payout ratio of: Continuing strong payout 239% of Reported EPS (FY11: 86%) ratio reflecting Board’s confidence in underlying 82% of Underlying EPS (FY1
Slide 14: Divisional Highlights: Metcash Food & Grocery
DIVISIONAL HIGHLIGHTS For personal use only Metcash Food & Grocery - Supermarkets - Fresh - Convenience 12
Slide 15: Supermarkets - Financials (includes Fresh)
Supermarkets - Financials (includes Fresh) Sales variance FY12 FY11 Variance includes Franklins For personal use only impact WHOLESALE SALES ($m) 7,711.5 7,559.9 2.0% EBITA ($m) 380.8 361.8 5.3% EBITA MARGIN (%) 4.94% 4.78% Leverage 2.7x Solid growth despite highly competitive and tough market env
Slide 16: Actively developing retail stores and rationalising the network
Actively developing retail stores - and rationalising the network For personal use only Independent retailers continue to invest in strengthening the network Highly selective approach to new stores developments, extensions and refurbishments Branded Stores (IGA – 3 channels + Friendly Grocer + Ezi
Slide 17: Supermarkets - Operational Highlights
Supermarkets - Operational Highlights Store Buy-Back Program For personal use only Supermarkets facilitated store ownership transfer Where we are Sub-optimal performers switched to experienced and capable retailers The Process 33 completed - now in hands of new retailer Identify retail store
Slide 18: Fresh Strategy - Operational Highlights
Fresh Strategy - Operational Highlights Produce For personal use only Harvest Market New franchise concept Aiming to take advantage of increased consumer demand for fresh 2 stores converted with sales up on last year and in line with budget Plans to develop a further 14 stores in the next
Slide 19: Marketing Initiatives
Marketing Initiatives For personal use only 17
Slide 20: Convenience - Financials
Convenience - Financials FY12 FY11 Variance For personal use only SALES ($m) 1,718.2 1,709.9 0.5% EBITA ($m) 16.9 31.8 (46.9)% EBITA MARGIN (%) 0.98% 1.86% Sales Strong petrol and convenience sector at ~ 0.5% growth - attributable to 7-Eleven and other Total Supply Solutions Lucky 7 (retail conv
Slide 21: Divisional Highlights - Australian Liquor Marketers (ALM)
For personal use only DIVISIONAL HIGHLIGHTS - Australian Liquor Marketers (ALM) 19
Slide 22: ALM - Financials
ALM - Financials Outstanding FY12 FY11 Variance performance in For personal use only falling liquor SALES ($m) 2,336.2 2,296.6 market Less: ALH Volume Loss - (41.3) Like for Like Sales 2,336.2 2,255.3 3.6% EBITA ($m) 34.9 30.1 15.9% EBITA MARGIN (%) 1.49% 1.31% Excellent ‘Like for Like’ EBITA growth
Slide 23: Packaged liquor rolling quarter volume and value growth
For personal use only Rolling Quarter % Change on Year Ago -8.0% -6.0% -2.0% -4.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 = In
Slide 24: Divisional Highlights - Mitre
For personal use only DIVISIONAL HIGHLIGHTS - Mitre 10 22
Slide 25: Mitre - Financials
Mitre 10 – Financials For personal use only FY12 FY11 Variance SALES ($m) 833.2 797.6 4.5% EBITA ($m) 21.2 20.7 2.4% EBITA MARGIN (%) 2.5% 2.6% Sales Sales up 4.5% up on LY Strong warehouse sales growth , driven by range and marketing initiatives Network – 33 new stores added to the network ov
Slide 26: Mitre - Operating Highlights
Mitre 10 – Operating Highlights For personal use only Store Network Network of 423 stores Securing strategic control of footprint with 3 joint ventures Retail brand consistency - 70% now Blue & White compliant (up from 26% over 24 months) Implementation of new concept stores – Grocery & Hard
Slide 27: Mitre - Operating Highlights
Mitre 10 – Operating Highlights For personal use only Merchandise Total 6,800 new SKU‟s (3,800 old/removed) New and very positive supplier relationships Continuous improvement to catalogue program driving sales growth Marketing Brand Essence „Mighty Helpful‟ Mitre 10 established in market
Slide 28: Supply Chain
For personal use only SUPPLY CHAIN 26
Slide 29: Supply Chain - Major Initiatives
Supply Chain - Major Initiatives Committed to deliver a modernised supply chain to support our customers and our own business growth objectives For personal use only Business Project Status NSW Mega DC Construction - Phase 1: Dry grocery warehouse & offices Complete - Phase 2: Perishable warehouse
Slide 30: Supply Chain - Major Initiatives
Supply Chain - Major Initiatives Warehouse Logistics Improvements For personal use only Phase 4 NSW Mega DC Construction – CSD NSW Currently being installed at Huntingwood, NSW for go-live end Oct 12 System will service convenience sector Latest available Goods-to-Person picking/putting tech
Slide 31: Financial Insights
'Champion of the Independent Retailer' For personal use only Financial Insights Adrian Gratwicke Chief Financial Officer 29
Slide 32: Financials
For personal use only FINANCIALS - Balance Sheet Extract - Cash Flow Extract - Interest Expense - Significant Items 30
Slide 33: Balance Sheet - Extract
Balance Sheet - Extract Apr 12 Apr 11 Movement Commentary #039;m #039;m $m % Creditor days down due to seasonal impact in FY11. No significant change to payment terms Trade and other payables (1,372.7) (1,376.5) 3.8 0% For personal use only over the prior period. Inventories 833.6 954.9 (121.3) (13)% Inve
Slide 34: Cash Flow - Extract
Cash Flow - Extract Apr 12 Apr 11 Inc/(Dec) $m $m $m $m $m 280.3 477.1 (196.8) Reflects impact of significant items and discontinued operations loss. For personal use only EBITDA Net Interest Paid (64.2) (62.6) (1.6) Interest slightly up – Franklins. Taxation Paid (110.3) (116.8) 6.5 Tax paid prior
Slide 35: Interest Expense
Interest Expense FY12 FY11 Change For personal use only $m $m (%) - 1H 38.5 36.5 5.5% - 2H 41.8 41.0 2.0% Interest Expense (Total) 80.3 77.5 3.6% Interest Income (12.7) (11.2) 13.4% Interest Expense (Net) 67.6 66.3 2.0% 3.6% increase in interest expense Average debt higher than in FY11 due to Fran
Slide 36: Significant Items
For personal use only SIGNIFICANT ITEMS 34
Slide 37: Summarised Income Statement
Summarised Income Statement FY12 FY11 FY12 FY11 For personal use only EPS EPS $m $m (cps) (cps) Underlying PAT/EPS 262.5 256.2 34.1 33.4 Intangible amortisation (9.7) (7.9) Significant items: Franklins acquisition & restructure (28.5) (6.9) Group restructure (42.5) - Associate impairment (105.7) - L
Slide 38: Joint Venture impairment
Joint Venture impairment FY12 Queensland Joint Ventures $m For personal use only Loans & receivables 50.8 Equity accounted investment 24.6 Customer contract intangibles 9.1 Restructure costs (provided) 12.5 Restructure costs (paid) 8.7 Significant item expense 105.7 Estimated tax benefit (22.5) Post
Slide 39: Strategic Review (Group restructure)
Strategic Review (Group restructure) FY12 For personal use only $m Delivers savings: Lease tail and exit costs 17.0 FY13: $25 – 30m FY14: $10 – 15m (incremental) Redundancy costs 11.5 Some of these savings will be reinvested in marketing spend Impairment – non-current assets 12.4 Other closure costs
Slide 40: Franklins acquisition and restructure
Franklins acquisition and restructure FY12 1H12 For personal use only $m $m Acquisition costs 6.3 3.1 Lease tail costs 15.9 14.1 Impairment of plant & equipment 2.3 2.3 Other closure costs 4.0 - Significant item expense 28.5 19.5 Estimated tax benefit (6.6) (4.9) Post tax expense 21.9 14.6 Metcash
Slide 41: The Future - Positioning for growth
For personal use only THE FUTURE - Positioning for growth 39
Slide 42: Mitre
Mitre 10 In March 2010 Metcash acquired 50.1% of Mitre 10 with an option to acquire the For personal use only remaining 49.9% after 30 June 2012 or 30 June 2013 by redeeming the Redeemable Converting Preference Shares (RCPS) issued to the existing Mitre 10 shareholders On 20 June 2012, Metcash a
Slide 43: Automotive Brands Group (ABG) Acquisition
Automotive Brands Group (ABG) Acquisition For personal use only Metcash has entered into an agreement to acquire a 75.1% stake in ABG for $53.8m ABG is Australia‟s largest privately owned distributor and franchise operator in the $5.6bn automotive parts and aftermarket sector. It is the third la
Slide 44: Automotive Brands Group (ABG) Acquisition
Automotive Brands Group (ABG) Acquisition For personal use only Metcash is enthusiastic about this new wholesale business opportunity Retail automotive aftermarket sector has proven to be resilient to economic downturns when consumers are more likely to retain existing vehicles thereby increasin
Slide 45: Project Mustang
Project Mustang For personal use only Latest technology from Europe primarily to significantly automate our order selection process by reduction in manual handling activity Need to continually reduce CODB in current market conditions Pride ourselves in being leaders in supply chain logistics
Slide 46: Project Mustang
Project Mustang For personal use only Denser pallet assembly to reduce transport costs Minimal errors in pallet assembly Efficiency improvements of approximately 500% in order selection Timeframe for first DC – targeting Q4 FY14 (Huntingwood) Working estimate for development of first site
Slide 47: Conclusions
For personal use only CONCLUSIONS 45
Slide 48: Outlook
Outlook Challenging market For personal use only Continued deflation driven by high AUD Low consumer confidence and highly value-driven Ongoing marketing war between chains FY 13 Guidance Low to mid single digit growth in underlying EPS from existing core business Growth strategies and
Slide 49: 'Champion of the Independent'
For personal use only 'Champion of the Independent' 47
Slide 50: 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 48
Slide 51: Reconciliation - Group Results (Reported and Underlying)
Reconciliation - Group Results (Reported and Underlying) FY12 FY11 For personal use only $m $m EBITA 451.2 438.0 Net Interest (67.6) (66.3) Profit Before Tax and Amortisation 383.6 371.7 Tax (112.9) (106.1) Non Controlling Interest (8.2) (9.4) Underlying PAT 262.5 256.2 Intangible Amortisation (9.7)
Slide 52: Group Results By Division
Group Results By Division Sales $m For personal use only Mitre 10: 833.20 Wholesale Sales FY12 FY11 Variance 6.6% Convenience 1,718.20 $m $m 13.7% Supermarkets 7,711.5 7,559.9 2.0% Australian Liquor Marketers 2,336.2 2,296.6 1.7% Convenience ALM: 1,718.2 1,709.9 0.5% 2,336.20 Mitre 10 18.5% 833.2 79
Slide 53: EBITA By Division
EBITA By Division 500 For personal use only Hardware Distribution Cash & Carry Distribution Liquor Distribution Food Distribution 450 21.2 20.7 1.5 16.9 31.8 34.9 400 28.8 34.9 30.1 33.0 36.1 350 380.8 30.6 33.8 300 31.2 361.8 $m 250 346.6 200 315.5 150 275.1 100 50 0 2008 2009 2010 2011 2012 NOTE:
Slide 54: 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 55: Trend Metrics - Financial
Trend Metrics – Financial FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FULL YEAR CAGR* For personal use only Apr 08 Apr 09 Apr 10 Apr 11 Apr 12 Total Revenue $ millions 10,199 11,067 11,608 12,462 12,366 4.9% Sales (wholesale & retail) $ millions 10,116 10,981 11,517 12,364 12,599 5.6% Sales (wholesale)
Slide 56: Trend Metrics - Operational
Trend Metrics – Operational For personal use only Branded Stores - Grocery (IGA – 3 channels + Friendly Grocer + Apr 09 Oct 09 Apr 10 Oct 10 Apr 11 Oct 11 Apr 12 Eziway) Supa IGA 430 440 446 449 463 468 475 IGA 717 720 718 735 734 723 744 Xpress 131 140 156 170 183 178 184 IGA branded stores 1,278 1
Slide 57: 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 58: 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 59: Directory of Terms - Financial Terms
Directory of Terms Financial Terms For personal use only CAGR Compound Annual Growth Rate over 4 years (FY08 to FY12) Net operating cash flow (not adjusted for significant items) / [Profit after tax pre significant items + Cash realisation ratio Depreciation + Amortisation (tax effected) ] CODB Cost
Slide 60: 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 Stephen Woodhill, General Manager Corporate Affairs Phone: 61 2 9741 3415 Fax: 61 2 9741 3027 E-mail: stephen.woodhill@me
Slide 61: Disclaimer
Disclaimer This presentation contains summary information about Metcash Limited (ABN 32 112 073 480) (Metcash) and its activities For personal use only 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