Metcash Limited · ASX:MTS
Metcash — FY2007 Earnings Presentation
44 slides from Metcash's earnings presentation, Jun 5, 2007
Slide 1: ASX letter re CEO Presentation
Metcash Limited ABN 32 112 073 480 4 Newington Road Silverwater NSW 2128 Australia PO Box 6226 Silverwater Business Centre NSW 1811 Australia Ph: 61 2 9741 3000 Fax: 61 2 9741 3399 5 June 2007 The Manager, Companies Australian Stock Exchange Company Announcements Office Level 4 20 Bridge Street SYDN
Slide 2: Company Results Year Ending 30 April 2007
1 “Champion of the Independent Retailer” Company Results Year Ending 30 April 2007 Andrew Reitzer Chief Executive Officer “Focussed on the Growth and Success of Independent Retailers”
Slide 3: Headlines
2 HEADLINES 2007 9 Successful integration of FAL business delivers record result: 9 Sales up 18% to $9.7b 9 Costs controlled (CODB down 0.34 bps) 9 Normalised EBITA up 39% to $315m 9 Normalised PAT up 42% to $174m 9 Normalised EPS within guidance at 23.23cps 9 Strong earnings and strong cashflows yi
Slide 4: Metcash TSR
3 METCASH TSR • Under current management vs competitors and market. 2007 Note: Total Shareholder Returns (TSR) represents share price appreciation and dividend returns to shareholders. 5.00 MTS TSR: 55% 4.50 4.00 3.50 Share price (rebased) 3.00 2.50 2.00 1.50 WOW TSR: 23% 1.00 CGJ TSR: 17% 0.50 ASX
Slide 5: Financial Highlights – Year Ended April 2007
4 FINANCIAL HIGHLIGHTS – YEAR ENDED 30 APRIL 2007 Total Revenue up 18% to $9.7 billion 2007 Wholesale Sales rose 22.7% to $9.45 billion Normalised EBITA grew 38.8% to $315 million and EBITA margin rose to 3.33% from 2.95% last year (before non-recurring items) Cost of Doing Business as a per
Slide 6: Wholesale Sales
5 WHOLESALE SALES ANNUAL WHOLESALE SALES UP 22.7% 2007 9,500 8,500 7,500 SALES - $'M 6,500 5,500 4,500 3,500 2,500 1,500 NOTES: 2005 2006 2007 1. DATA IS FOR 2002 2003 2004 WHOLESALE SALES AIFRS AIFRS AIFRS – HENCE 2007 EXCLUDES ACTION $'Millions 5,421 6,117 6,577 6,565 7,705 9,451 RETAIL SALES 2. A
Slide 7: Market Share
6 MARKET SHARE NATIONAL METCASH MARKET SHARE - ALL CUSTOMERS UP TO 19.0% FROM 12.5% IN 2002 20.0% 19.0% METCASH 18.0% MARKET 17.0% 16.0% SHARE UP MAT - % 15.0% TO 19% IN 14.0% THE 13.0% QUARTER 12.0% ENDING 13 11.0% MAY 07 10.0% 2007 2002 2003 2004 2005 2006 2007 LQTR MAT % 12.5% 13.0% 13.2% 13.5% 1
Slide 8: EBITA
7 EBITA 2007 FULL YEAR 2007 EBITA UP 38.8% 350.0 EBITA AT 300.0 $315M CLEARLY 250.0 SHOWS EBITA - $'M 200.0 IMPACT OF TARGETTED 150.0 SYNERGY AND 100.0 PROFIT GAINS ARISING 50.0 FROM FAL - 2005 2006 2007 ACQUISITION 2002 2003 2004 AIFRS AIFRS AIFRS $'M illions 117.5 152.7 183.8 194.5 226.9 315.0 CAG
Slide 9: EBITA Margin
8 EBITA MARGIN 2007 FULL YEAR 2007 EBITA MARGIN UP 39 BPS 3.60% SINCE 2002 3.40% EBITA 3.20% MARGIN HAS 3.00% INCREASED EBITA - % 2.80% 116 BPS 2.60% REFLECTING 2.40% VOLUME 2.20% ECONOMIES, IMPROVED 2.00% 2002 2003 2004 2005 2006 2007 TERMS AIFRS AIFRS AIFRS NEGOTIATION MARGIN % 2.17% 2.50% 2.80% 2
Slide 10: Operating Cashflow After Tax
9 OPERATING CASHFLOW AFTER TAX 2007 FULL YEAR 2007 PATBDA UP STRONGLY METCASH PERIOD-END CASHFLOW AGAIN SUBJECT TO TIMING OPERATIONS CONTINUE TO 240.00 THROW OFF CASHFLOW - $'M 210.00 SIGNIFICANT 180.00 CASHFLOWS 150.00 120.00 ENABLING TRADING 90.00 OPPORTUNITIES TO 60.00 BE OPTIMISED, 30.00 - DEBT
Slide 11: CODB as % of GP
10 CODB AS % OF GP 2007 FULL YEAR 2007 CODB DOWN 34 BPS METCASH 76.00% HAS REDUCED 74.00% CODB A 72.00% FURTHER CODB/ GP - % 0.34% THIS 70.00% YEAR 68.00% REFLECTING 66.00% ITS 64.00% CONTINUING 62.00% ABILITY TO 2005 2006 2007 2002 2003 2004 AIFRS AIFRS AIFRS SECURE CODB / GP% 75.22% 70.98% 68.66%
Slide 12: PBT as % of Sales
11 PBT AS % OF SALES FULL YEAR 2007 PBT AS % OF SALES UP 30 BPS 2007 3.25% 3.00% 2.75% PBT/ SALES - % 2.50% 2.25% NOTES: 2.00% 1. STATED EXCLUSIVE OF CULS/ CUPS FINANCING 1.75% COSTS IN FY06 AND RESTRUCTURE COSTS IN FY07 1.50% 2. FY06 IMPACTED BY INCREASED INTEREST 1.25% COSTS (FROM FAL & METOZ DEBT
Slide 13: PAT
12 PAT FULL YEAR 2007 NORMALISED PAT UP 41.6% 2007 180.0 160.0 140.0 NOTES: 120.0 PAT - $'m 1. FY07 NORMALISED PAT IS STATED 100.0 BEFORE RESTRUCTURE COSTS, NET NON- 80.0 RECURRING INCOME & ACTION LOSS 60.0 2. FY06 NORMALISED PAT IS STATED 40.0 BEFORE CULS/ CUPS FINANCING COSTS 20.0 3. FY06 NORMALIS
Slide 14: EPS
13 EPS FULL YEAR 2007 REPORTED EPS UP 62% 2007 ADJUSTED EPS UP 8% 30.00 NOTES: 1. FY07 REPORTED EPS BASED ON WEIGHTED AVERAGE 25.00 SHARES OF 753.1M (593.7 FY06). 2. FY07 NORMALISED EPS EPS (Cents) 20.00 ADJUSTED FOR RESTRUCTURE COSTS (IN LINE WITH EARNINGS GUIDANCE), ACTION LOSS, & 15.00 NET NON-RE
Slide 15: DPS
14 DPS FULL YEAR 2007 DPS UP 5.5 CENTS 2007 18.0 FINAL 16.0 DIVIDEND OF 14.0 10 CENTS (100% DPS (Cents) 12.0 FRANKED) 10.0 8.0 BRINGS THE FULL YEAR’S 6.0 DIVIDEND TO 4.0 17 CENTS 2.0 PER SHARE 2005 2006 2007 2002 2003 2004 AIFRS AIFRS AIFRS - UP 48% CENTS (full year) 5.0 8.6 11.0 9.5 11.5 17.0 FINAN
Slide 16: Dividend & Capital Management
15 DIVIDEND & CAPITAL MANAGEMENT The Board’s intention is to return earnings to shareholders whilst 2007 retaining adequate funds within the business to invest in future growth opportunities In the current period the proposed dividend of 17 cents per share represents approximately 77% of Reporte
Slide 17: Group Summary
16 GROUP SUMMARY AN EXCELLENT RESULT IN A PERIOD OF SIGNIFICANT CHANGE SHOWING 2007 GROWTH IN BOTH THE LEGACY BUSINESS AND POST FAL ENLARGED GROUP GROUP SUMMARY VARIANCE FY06 FY07 % TOTAL SALES - $'M 8,214 9,695 18.0% TOTAL EBITA - $'M 227 315 38.8% EBITA TO SALES - % 2.76% 3.25% 0.49%pts CODB/ GP -
Slide 18: IGA>D – Financials
17 IGA>D - FINANCIALS IGA>D CONTINUES ITS IMPRESIVE PERFORMANCE AS THE 2007 POWERHOUSE OF THE GROUP WITH BOTH STRONG UNDERLYING GROWTH AND SIGNIFICANT GAINS FROM THE FAL ACQUISITION IGAD FULL YEAR VARIANCE (Published Data) FY06 FY07 % TOTAL IGAD WHOLESALE SALES - $'M 4,373 5,581 27.6% EBITA TO SALES
Slide 19: IGA>D – Operating Performance
18 IGA>D – OPERATING PERFORMANCE Strong underlying performance in ‘legacy’ business: 2007 Legacy IGA • IGA BRANDED Base Business 7.8% 8.7% STORES ONLY. WA Business n/a 17.2% • EXCLUDES = Total 7.8% 10.3% ANY NEW STORES. Less: New Stores (2.0)% = L4L GROWTH = L4L Growth 5.8% Total IGA>D
Slide 20: IGA>D – Operating Performance
19 IGA>D – OPERATING PERFORMANCE 2007 IGA Store development: COMPLETED PLANNED - FY08 ON THE BOOKS NO. SQM NO. SQM NO. SQM NEW STORES 42 48,000 60 82,000 252 367,000 EXTENSIONS 23 13,000 53 23,000 73 50,000 REFURBISHMENTS 61 69 40 Of the planned store IN PROGRESS development for NO. SQM FY08, a la
Slide 21: IGA>D Fresh
20 IGA>D FRESH 2007 FY07 • Average weekly turnover up 26% to $2.1m • Sales building steadily: 9 Total turnover (IGA>F only) of $100m for FY07 9 Fresh Sales ex-Perishable DC’s $159.8m 9 Sales direct to store $253.5m 9 Charge through Fresh Sales $127.3m • Serving over 240 stores nationally by the end
Slide 22: FAL Integration – Complete
21 FAL INTEGRATION - COMPLETE AREA OF INTEGRATION STATUS/ STATUS/ 2007 SYNERGY GAINS SYNERGY GAINS 07 08 Western Australia • Profits from WA • Ongoing • IGA>D WA operations fully established operations realised • Market share at 31.2% for Qtr ending 13/5/07 • Voice pick implemented - annualised prod
Slide 23: FAL Integration – Profit & Synergies
22 FAL INTEGRATION - PROFIT & SYNERGIES FAL ACQUISITION PROFIT & SYNERGY GAINS $'M $'M 2007 FULL YEAR GAINS EXPECTED "80-90" METCASH’S SUCCESSFUL VOLUME GAINS (IGA>D + CCC) 93 INTEGRATION OF - INCLUDES FRESH - INCLUDES PURE VOLUME GAINS THE FAL - INCLUDES BUYING SYNERGIES OPERATIONS HAS - INCLUDES S
Slide 24: ALM – Financials
23 ALM - FINANCIALS 2007 ALM FULL YEAR VARIANCE (Published Data) FY06 FY07 % SALES - $'M 2,407.7 2,453.2 1.9% EBITA TO SALES - % 1.28% 1.16% -0.12%pts EBITA - $'M 30.7 28.4 -7.6% Notes Additional IBA marketing opex noted in 1H 07 likley to be ongoing for 1-2 years w hilst leverage brand expansion ST
Slide 25: ALM – Operating Performance
24 ALM - OPERATING PERFORMANCE 2007 Sales Growth positive in light of tough market conditions and loss of Hedleys/ Coles business EBITA of $28.4 million down $2.3 million on last year reflects this highly competitive environment Range of strategies undertaken to stabilise trading performance a
Slide 26: ALM – Operating Performance
25 ALM - OPERATING PERFORMANCE 2007 Two prong growth strategy continues: 1. Liquor Alliance – A strategic long term supply partnership comprising 6 external banners and representing 653 pubs joined together to form a national marketing group. Pubs to be rebranded under new “Thirsty Camel” banner.
Slide 27: ALM – IBA Store Growth
26 ALM - IBA STORE GROWTH 2007 30/04/06 30/04/07 Increase % Target 10/07 CELLARBRATIONS 223 393 76.2% 500 IGA 448 463 3.3% 480 LIQUORWISE 172 14 Transfer to Bottle O N/A BOTTLE O / 0 219 Replace Liquorwise 400 NEIGHBOURHOOD LOCAL LIQUORWISE 196 159 Transfer to Bottle O N/A PROMOTIONAL 969 1,042 7.5%
Slide 28: Campbells Wholesale – Financials
27 CAMPBELLS WHOLESALE - FINANCIALS 2007 CAMPBELLS WHOLESALE FULL YEAR VARIANCE (Published Data) FY06 FY07 % SALES - $'M 1,147.4 1,417.4 23.5% EBITA TO SALES - % 1.85% 2.04% 0.19%pts EBITA - $'M 21.2 28.9 36.1% CW HAS PRODUCED A RECORD YEAR, CAPITALISING ON SYNERGIES FROM THE FAL ACQUISITION AND ITS
Slide 29: Campbells Wholesale – Operating Performance
28 CAMPBELLS WHOLESALE - OPERATING PERFORMANCE 2007 CCC CSD 24 Metro C&C (with 3 in WA) 4 Stockless DCs Campbells 4 Specialist Confectionery DCs Wholesale Sales +18% on last year Voice Pick business model Put to Light CSD 22% now reflects Grocery 62% CCC Tobacco 28% 37% Sales +50.8% on last year dis
Slide 30: Campbells Wholesale – Operating Performance
29 CAMPBELLS WHOLESALE - OPERATING PERFORMANCE • Sales up 23.5% on last year to $1.4b: – Grocery categories up 40% and represent over 55% of total sales – Confectionery up 14% or +$27m – EBITA up 36.1% to $28.9 million or 2.04% of sales – Product mix change: grocery and confectionery sales now over
Slide 31: Supply Chain Initiatives
30 SUPPLY CHAIN INITIATIVES • Metcash has 2007 implemented Supply Chain Transformation Phase 1 significant Building Platforms for Growth improvements to its supply chain IGA>D Combined Productivity Trend Grocery Perishables • Initiatives have 85 been designed to: 80.44 IGA>D Combined 80 Cartons / Ho
Slide 32: Supply Chain Initiatives
31 SUPPLY CHAIN INITIATIVES Supply Chain Transformation Phase 2 Supplier / 2007 Customer Optimisation Pri mary Frei ght METCASH DC & Secondary Freight Customers Phase 2 in X Dock Centre Metcash’s SUPA supply Supplier chain IGA D.C. transform- D.C. ation Supplier includes Consolidation Centre X-DOCK
Slide 33: Supply Chain Initiatives – Crestmead Mega DC
32 SUPPLY CHAIN INITIATIVES Infrastructure Facilit y Develo pment – CRE ST ME AD MEGA DC Total area: 102,753 m² | Pallet Capacity: 90,000 | Cases per week: 1.5 mill / week
Slide 34: Balance Sheet – Extract
33 BALANCE SHEET - EXTRACT 2007 FY Apr 06 FY Apr 07 $million $million Inventory up $70.2 million and days inventory up 0.9 days to 21.1 days Inventory 524.9 595.1 Increase in creditors over last year due to acquisition of FAL. Trade Payables (903.7) (955.8) Days creditors to sales dow n 1.1 days to
Slide 35: Cashflow – Extract
34 CASHFLOW - EXTRACT FOR THE YEAR ENDED 30 APRIL 2007 2007 FY Apr 07 FY Apr 06 $'000 $'000 $'000 $'000 EBITDA 354,561 277,471 Net Interes t Paid (57,217) (37,240) Taxation Paid (51,927) (77,523) 245,417 162,708 Working Capital Movem ent (67,941) 79,965 TOTAL CASH PROVIDED BY OPERATING ACTIVITIES 17
Slide 36: Growth Plans
35 GROWTH PLANS ¾ MORE NEW STORES ¾ PENETRATION OF MODERN ¾ GROWING RETAIL P&C MARKET POWER ¾ HIGH REFURBISHMENT PLAN ¾ GROWTH IN CORE CCC & CW ¾ CHEAPEST ROUTE TO BUSINESS MARKET FOR INDEPENDENT SECTOR ¾ LEVERAGE UNIQUE ¾ EXPANDING FOODSERVICE MARKETING POSITION FOOTPRINT ¾ IMPROVED TEAMWORK SCORE
Slide 37: Earnings Guidance
36 EARNINGS GUIDANCE 2007 • Sales continue to perform strongly in May • Structural trading environment uncertain in context of Coles sale • In absence of any major changes emanating from Coles ‘shake-up’ Management anticipate: • Sales growth of 6-7% in FY08 • EBITA growth to be leveraged in the high
Slide 38: Appendix
37 APPENDIX 1. Directory of Terms 2. Trading Overview 3. Dividend Policy & Capital Management
Slide 39: Dictionary of Terms
38 DICTIONARY OF TERMS • Non-recurring items – comprise 1H Action loss plus net non-recurring income • Restructure costs – relate to costs booked in the first half re FAL integration and are non-recurring ($9.8m pre tax; $7m post tax) • Normalised – adjusts for non-recurring items • Legacy – Core bu
Slide 40: Overview – Year Ended April 2007
39 OVERVIEW – YEAR ENDED 30 APRIL 2007 Another excellent result capitalising on the strong first half result posted. 2007 Group turnover up 18% to $9.7b and profit after tax up 105.5% to $166.8m. Normalised profit after tax (before restructure costs) was up 43.5% to $174.4m. This has produce
Slide 41: Overview – Year Ended April 2007
40 OVERVIEW – YEAR ENDED 30 APRIL 2007 Metcash’s specialized convenience distribution division, Campbells 2007 Wholesale had an excellent year benefiting from the addition of the WA FAL operations, improved negotiating ability arising from its new national footprint, increased modern petrol and co
Slide 42: Dividend Policy & Capital Management
41 DIVIDEND POLICY & CAPITAL MANAGEMENT 2007 The Board’s intention is to return earnings to shareholders whilst retaining adequate funds within the business to invest in future growth opportunities In the past the company’s dividend payout ratio has ranged between approximately 51- 66% of EPS on
Slide 43: Dividend Policy & Capital Management
42 DIVIDEND POLICY & CAPITAL MANAGEMENT • Consistent with the Board’s determination of the company’s Dividend 2007 Policy is its approach to Capital Management • In the past, Metcash has used its funds to pay dividends, finance growth, provide trading opportunities and strengthen its balance sheet –
Slide 44: Champion of the Independent
_—_————— "CHAMPION OF THE INDEPENDENT" PV UCAS “THE THIRD FORCE” _