Metcash Limited · ASX:MTS
Metcash — Investor Day (March 2019)
46 slides from Metcash's investor day presentation, Mar 4, 2019
Slide 1: ASX Announcement: Strategy Update Presentations
Metcash Limited ABN 32 112 073 480 1 Thomas Holt Drive Macquarie Park NSW 2113 Australia 4 March 2019 Market Announcements Office Australian Securities Exchange Limited 20 Bridge Street Sydney NSW 2000 Dear Sir/Madam METCASH LIMITED – STRATEGY UPDATE PRESENTATIONS (INCLUDING TRADING UPDATE) Metcash
Slide 2: Strategy Update 4 March 2019
STRATEGY UPDATE 04 MARCH 2019
Slide 3: Group Overview
GROUP OVERVIEW J E F F A DA M S Group Chief Executive Officer
Slide 4: Agenda
AGENDA PRESENTATIONS PRESENTER 9.30am Group overview Jeff Adams, Group CEO Liquor Rod Pritchard, Interim CEO Liquor Hardware Mark Laidlaw, CEO Hardware 11.30am Break Food Scott Marshall, CEO Supermarkets & Convenience Retailer comments Joseph Romeo, Director Romeo Retail Group Summary and trading up
Slide 5: Purpose, Vision and Values
PURPOSE, VISION AND VALUES OUR PURPOSE & VISION OUR VALUES CHAMPIONING We believe: Independence is worth fighting for; in treating our people, retailers and SUCCESSFUL suppliers the way we like to be treated; and in giving back to the communities where we INDEPENDENTS live and work. INDEPENDENCE IS
Slide 6: Our Current Position
OUR CURRENT POSITION LIQUOR HARDWARE FOOD FINANCIAL Clear #2 in market Clear #2 in market with Positioned as alternative Strong balance sheet strong Trade focus to majors – independent, Mature market active in their Strong underlying More favourable communities, convenient cashflows
Slide 7: Why mFuture
WHY MFUTURE The prior three years Working Smarter We are now in the final year included a strong focus helped to partly offset of our successful three-year on cost reduction the impact of challenging Working Smarter program and limited growth market conditions initiatives Strategy for the next 5 yea
Slide 8: mFuture – Our 5 Year Vision
MFUTURE – OUR 5 YEAR VISION To deliver a pathway to long term sustainable growth Improved A sustainable cost The trial of new competitiveness for base through a store formats and our retailer networks continued focus on ownership models Range Service simplification and Matching formats efficie
Slide 9: Key mFuture Initiatives
KEY MFUTURE INITIATIVES LIQUOR HARDWARE FOOD Grow share of ‘on-premise’ Acceleration of Sapphire Clear brand strategy by store market program format National roll out of Porters ‘Whole of House’ strategy – Appropriate range and pricing Liquor Rollout of Hardings Plumbing – Small format s
Slide 10: Liquor
LIQUOR RO D P R I TC H A R D Interim CEO Liquor
Slide 11: Overview
OVERVIEW A mature market with value growth driven through ‘premiumisation’ trend ALM is the 2nd largest player in Australian liquor market IBA retail network has grown to ~55% share of total ALM business - Strong national retail brands, in both Australia & NZ - Continued focus on growing and strengt
Slide 12: Our Business
OUR BUSINESS ALM supplies ~12,000 hotels, liquor stores, restaurants IBA NATIONAL NETWORK OF STORES & other licensed premises throughout Australia and NZ Our IBA retail network consists of ~1,600 Tier 1 bannered stores across Australia & NZ NT IBA supports independent retailers through: 26 nationa
Slide 13: Our Journey
OUR JOURNEY A HISTORY OF SALES AND EARNINGS GROWTH SALES1 ($m) EBIT ($m) 3600 80 3500 70 3400 60 50 3300 40 3200 30 3100 20 3000 10 2900 0 FY14 FY15 FY16 FY17 2 FY18 FY14 FY15 FY16 FY17 FY18 3 Conversion of unbannered customers to IBA network a key driver of growth 1. FY15 to FY18 Sales revenue has
Slide 14: Market Position
MARKET POSITION 2ND LARGEST PLAYER IN RETAIL PACKAGED LIQUOR MARKET SHARE IBA banner groups 55% Contract customer Metcash sales mix wholesale business 35% Metcash Chains Others On-premise channel 10% Source: Iri – MAT Jan 2019 IBA network well positioned with competitive tailored offers in convenien
Slide 15: IBA Network
IBA NETWORK A FULL SPECTRUM OF STRONG BRANDS SHOPPER PROPOSITION IBA RETAIL STORE NETWORK Premium / High Value 1,614 557 Generic / Convenience Specialty / Destination 356 RANGE > OFFER 466 156 54 Mainstream / Low Value 25 SHOPPER > BASKET $ 6
Slide 16: Consumption Trend Driving Value Growth
CONSUMPTION TREND DRIVING VALUE GROWTH Category Category ‘Premiumisation’ trend – Value Volume share of share of consumers are drinking less, growth growth market - IBA market but higher quality 43.4% 35.2% -0.2% -2.1% Reflected in growth in premium spirits & wine, 16.3% 21.3% 5.3% 2.7% craft be
Slide 17: Strategic Focus
STRATEGIC FOCUS WHOLESALE RETAIL Product ranges to Further conversion align with of retailers into the consumption trends IBA network Low cost route-to-market Trial of company- for independent retailers owned stores and on-premise customers Leverage IBA retail Product range tailored netw
Slide 18: IBA Growth Initiatives
IBA GROWTH INITIATIVES CURRENT NEW Drive retail investment initiatives to Porters Liquor national footprint deliver ‘Best Store in Town’ Corporate store trial Increased focus on ‘on-premise’ market Regional core range supported by localised product offerings Accelerate digital capability
Slide 19: IBA Growth Initiatives: Best Store in Town
IBA GROWTH INITIATIVES BEST STORE IN TOWN Ongoing investment to improve quality of IBA store network and shopper experience ~290 store refreshes completed ~550 cool room upgrades completed Regionalised core ranging, tailored for local communities and changing consumption trends ‘Cellar Selection
Slide 20: IBA Growth Initiatives: Private and Exclusive Labels
IBA GROWTH INITIATIVES PRIVATE AND EXCLUSIVE LABELS Grow ‘award winning’ private label portfolio Currently ~70 SKUs across wine, beer & spirits Strong focus on growing wine category Continue to evolve and premiumise private label range Increase retailer profit margin and basket size In-store executi
Slide 21: IBA Growth Initiatives: Porters Liquor
IBA GROWTH INITIATIVES PORTERS LIQUOR Grow IBA Acquired Completed Targeting Planned Network share of Porters brand brand review national three year support and premium / in 2017 leading to network of roll out investment higher value (21 stores store refresh stores from market in NSW only) project Me
Slide 22: Corporate Store Trial
IBA GROWTH INITIATIVES CORPORATE STORE TRIAL Establish a portfolio of ‘best in class’ company-owned stores Targeting existing retail stores outside IBA network, along with greenfield sites Trial of 10 stores - Three stores currently in operation - Targeting 10 stores by December 2019 - Trial t
Slide 23: ALM Growth Initiatives: On-Premise Market
ALM GROWTH INITIATIVES ‘ON-PREMISE’ MARKET Renewed focus within ‘on-premise’ channel Metcash historically under-indexed in ‘on-premise’ ~10% of ALM sales v ~20% of total market Growth strategy: Strengthen alignment between keen partners including suppliers and customers Investment in dedicated
Slide 24: Summary
SUMMARY Position of strength – 2nd largest player in Australian market Strong retail network with local and convenient stores ‘Best Store in Town’ Grow Private Label Expand Porters Liquor network Corporate store trial Grow share of ‘on-premise’ market Accelerate digital capability Capex for growth i
Slide 25: Hardware
HARDWARE M A R K L A I D L AW CEO Hardware
Slide 26: Overview
OVERVIEW IHG is 2nd largest player in Australian hardware market Integration of HTH has delivered significant synergies Strong Trade focus, but Retail/DIY remains important Company-owned / JV stores core to strategy Challenging market due to softening of construction activity Diverse portfolio of st
Slide 27: Mitre 10 – 60 Year Anniversary
MITRE 10 – 60 YEAR ANNIVERSARY IN 1959 TODAY eight Timber & Plumbing we have a network of independents joined ~700 stores with together to form a buying sales over $2bn. group. They met at the Mitre Tavern Melbourne. 1959 1965 1986 2007 2016 2017 3
Slide 28: Our Journey
OUR JOURNEY STRONG SALES AND EARNINGS GROWTH SALES1 ($m) EBIT ($m) 2,500 80 70 2,000 60 1,500 50 40 1,000 30 20 500 10 0 0 2 4 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 2,3 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 1. FY15 to FY18 Sales revenue has been adjusted to reflect the adoption of AASB15: Revenu
Slide 29: Our Business Today
OUR BUSINESS TODAY 313 A national 198 network of 172 690 stores 7 110 54 1 65% Sales mix trade 32 43 2 weighted 57 32 to Trade 35% 81 85 1 DIY 74 96 1 Wide 5 M10 and True Value distribution Distribution centres HTH and related brands network (7 on acquisition of 22 4 HTH) Distribution centres 5
Slide 30: Market Structure
MARKET STRUCTURE SIGNIFICANT CONSOLIDATION POSITION 2015 POSITION TODAY IHG is the 2nd largest player in hardware with sales of over $2bn 6
Slide 31: Change in Sales Mix
CHANGE IN SALES MIX STRONGER IN TRADE, MORE COMPANY OWNED / JV STORES AND BRANDS 2016 TODAY DIY vs DIY TRADE Trade 50% 50% 35% 65% Corporate/JV CORPORATE vs 20% 80% 40% 60% Independent INDEPENDENT HTH and related ~10% ~10% Mitre 10 BRAND Other ~40% ~50% ~30% ~60% HTH acquisition has driven change in
Slide 32: Market Outlook
MARKET OUTLOOK Slow down in construction, but activity expected to be at solid levels Diversified portfolio of retailers and end customers limits exposure to any particular segment The boom is over, but still at record levels Australian Housing Starts Forecast Total Dwelling Starts - Australia 65,00
Slide 33: Customer Segmentation Profile
CUSTOMER SEGMENTATION PROFILE DIVERSIFIED EXPOSURE TO CONSTRUCTION SEGMENTS 65% TRADE 5% 30% 30% 35% Multi Detached Renovations DIY Dwellings Dwellings & Additions 35% RETAIL / DIY 9
Slide 34: Integration of HTH
INTEGRATION OF HTH SIGNIFICANT SYNERGIES DELIVERED #1 #2 Integration largely Annualised gross complete synergies of $34m delivered (end FY18) #3 #4 #5 Dual branding strategy accepted by store Continued focus Strong network owners on cost efficiency support Mitre 10 primary brand, HTH strong second
Slide 35: Corporate Stores
CORPORATE STORES Currently 90 corporate stores (company-owned / JV stores) BANNERED STORES - 36 stores in HTH / 54 stores in Mitre 10 5% 8% Corporate stores make up ~40% of IHG wholesale sales 87% Independent retailers are supportive of corporate stores - Enables trial of new concepts - Underp
Slide 36: Pursuing Attractive Growth Initiatives
PURSUING ATTRACTIVE GROWTH INITIATIVES ACCELERATE CURRENT GROW SHARE OF ‘WHOLE SUCCESSFUL STRATEGIES OF HOUSE’ Sapphire Store Foundations Upgrade Program Core Ranging Frame & Truss Digital, Data Lock up and Insights Grow Trade Fix Fit out 12
Slide 37: Sapphire Program
SAPPHIRE PROGRAM OBJECTIVE ROLL OUT PLAN RESULTS To keep stores modern 56 to be completed by Sapphire store sales up > 15% and leading edge April 19 Up to 50% investment Accelerate roll out – ~200 contribution by IHG stores by 2022 (+144 stores) Sapphire stores delivering strong growth 13
Slide 38: Sapphire Formats and Deliverables
SAPPHIRE FORMATS AND DELIVERABLES TRADE ONLY MIXED TRADE & DIY SMALL DIY < 700M2 11 completed 37 completed 8 completed Potential for a further ~30 Potential for a further ~90 Potential for a further ~25 Greenfields & upgrades Average Metcash investment of Average Metcash Average
Slide 39: Recent Sapphire Conversions
RECENT SAPPHIRE CONVERSIONS MIXED TRADE / DIY Katoomba, NSW Bendigo, Vic 15
Slide 40: Core Range Implemented on Key Lines
CORE RANGE IMPLEMENTED ON KEY LINES Before After FASTENERS 164 Stores 2,182 SKUs ITW Range HAND TOOLS Sales growth of 64 Stores 1,327 SKUs Black Fixtures 7% TO 23% across POWER TOOLS 48 Stores 483 SKUs Black Fixtures categories Now being PAINT rolled out 64 Stores 1,818 SKUs Front of Store through H
Slide 41: Whole of House
‘WHOLE OF HOUSE’ STRATEGY TO GROW CATEGORIES NOT HISTORICALLY SOURCED THROUGH IHG FOUNDATIONS Slab Hardware & Floor Systems FRAME & TRUSS Wall Frames, Roof Trusses & Engineered Timber LOCK UP Roofing, Facia, Gutters, Insulation, Windows, Flooring & Cladding FIX Plaster, Linings, Doors, Architraves,
Slide 42: Whole of House: Alliances Established
‘WHOLE OF HOUSE’ ALLIANCES ESTABLISHED WITH KEY PLAYERS FRAME & TRUSS PRE-FABRICATION SUPPLY & INSTALL FOW, APPLIANCES & KITCHENS Collective volume Expand market Plasterboard & Tailored range to via one source Offsite construction insulation segmentation Earlier access to site Reduced
Slide 43: Digital, Data and Insights
DIGITAL, DATA AND INSIGHTS A MARKET LEADING OFFER 19
Slide 44: Digital
DIGITAL CUSTOMER UPTAKE GROWING STRONGLY 1.5M – 2.5M 100k+ $220+ 800k+ 400+ searches on visitors average basket loyalty stores per month M10 website per week members with orders per month NEW MARKETS & NEW AUDIENCES Provides a much broader product range to customers versus in-store 20
Slide 45: Hardware Initiatives: Financial Summary
HARDWARE INITIATIVES FINANCIAL SUMMARY Sapphire Build Grow retail Digital & IT program Trade network support Potential for a further Investment in ‘Whole Acquire existing Continued investment in ~145 stores to be of House’ strategy minority interest in – Tradies Online upgraded by 2022 – Fra
Slide 46: Summary
SUMMARY IHG clear number 2 in Hardware market with an extensive national footprint Integration of HTH nearly complete with significant synergies delivered Strong focus on supporting Independent store owners Dual Brand Strategy accepted by our store owners Sapphire and Core Range program delivering s