Slide 1: Coles Group Limited – 2020 Half Year Results Presentation
18 February 2020 The Manager Company Announcements Office Australian Securities Exchange Dear Sir or Madam Coles Group Limited – 2020 Half Year Results Presentation Please find attached for immediate release to the market the 2020 Half Year Results Presentation for Coles Group Limited. Yours faithfu
Slide 2: 2020 Half Year Results Presentation
2019 Full Year Results Presentation 22 August 2019 Coles team members delivering supplies to bushfire Emergency Services Control Centre in Yeppoon, Queensland. 2020 Half Year Results Presentation 18 February 2020
Slide 3: Disclaimer
Disclaimer This presentation contains summary information about Coles Group Limited (ACN 004 089 936) and its related bodies corporate (together, Coles) and Coles’ activities as at the date of this presentation. It is information given in summary form only and does not purport to be complete. It sho
Slide 4: 1H20 summary
Tenterfield, NSW Store Manager Kyle supporting drought affected local residents with drinking water donated by Coles (left); Kalgoorlie, WA team members flying food and essentials for over 200 truck drivers and holidaymakers stranded due to bushfires closing the Eyre Highway (right). 1H20 summary
Slide 5: 1H20 financial highlights
1H20 financial highlights Successful strategy execution inspires customers and drives Supermarkets growth, interim dividend of 30 cents per share declared Total sales revenue1 EBIT1 Supers comp sales growth of 2.0%2 $18.8bn $725m 49 quarters of 3.3% vs. pcp 0.4% vs. pcp consecutive growth Smarter se
Slide 6: Coles “Winning in our Second Century” Strategy
Coles “Winning in our Second Century” Strategy Our vision. Become the most trusted retailer in Australia and grow long-term shareholder value. 4
Slide 7: Progress against strategy: Inspire customers
Progress against strategy: Inspire customers Through best value food and drink solutions to make lives easier. Delivered trusted value through “Good things. Great value.” campaign which included ‘lowering the cost of breakfast, lunch, dinner and Christmas entertaining’ Own Brand achieved >$1 bil
Slide 8: Good things. Great value.
Good things. Great value. 6
Slide 9: Progress against strategy: Smarter selling
Progress against strategy: Smarter selling Through efficiency and pace of change. Delivered $95 million in cost-out as a result of efficiencies in the Store Support Centre and supply chain Decision making and work environment in Store Support Centre adapted to support increased pace and agility
Slide 10: Progress against strategy: Win together
Progress against strategy: Win together With our team members, suppliers and communities. 10% reduction in safety TRIFR compared to 2H19 Initiatives to support health and wellbeing of team members including 3,000 leaders trained in mental health resilience; >$200k raised for Movember, including
Slide 11: Progress against strategy: Win together – drought and bushfires
Progress against strategy: Win together Supporting our communities through drought and bushfires. Varied product specifications to maintain supply for customers and income for farmers dealing with impact of drought and bushfires >$6 million contributed to bushfire relief including $3 million in
Slide 12: Coles’ strategy tracker – making progress
Coles’ strategy tracker – making progress KPIs Progress Reduced safety TRIFR 10% reduction in TRIFR compared to 2H19 Increased team member Update to be provided at FY20 results announcement following annual engagement MySay team engagement survey Improved customer Customer satisfaction1 improv
Slide 13: Group financial overview
The sale of ‘Mum’s Sause’ has raised over $300,000 for children in hospitals around Australia. Group financial overview
Slide 14: 1H20 results – Group
1H20 results – Group EBIT (pre-AASB 16 and significant items) increased by 0.4% driven by strong investor demand for Coles’ property divestments Retail result $m 1H20 1H19 Change Sales revenue1 18,846 18,237 3.3% EBIT (post-AASB 16, pre-significant items)2 910 722 N/M EBIT (pre-AASB 16, pre-signific
Slide 15: 1H20 results – segment financials
1H20 results – segment financials Satisfactory sales revenue growth across all segments and continued profit growth in Supermarkets Retail basis, pre-significant items $m 1H20 1H19 Change Sales revenue Supermarkets 16,583 16,053 3.3% Liquor 1,691 1,637 3.3% Express 572 547 4.6% Group sales revenue (
Slide 16: Normalised cash flow
Normalised cash flow Cash realisation of 87%, expect >100% cash realisation for FY20 Normalised cash flow¹ Comments (non-IFRS) Movement in working capital 1H20 1H20 Timing of half year end relative to the prior $m Reported pre-AASB 16 1H19 year has impacted working capital EBIT pre-significant ite
Slide 17: Capital expenditure
Capital expenditure Strong property market divestments contributed to reduced net capex in 1H20 Capital expenditure breakdown Key capital expenditure initiatives Statutory basis Store renewals 32 supermarket and 23 liquor $m 1H20 1H19 renewals Second Coles Local in St Kilda, Store renewals 76 71
Slide 18: Balance sheet
Balance sheet Strong balance sheet with investment grade credit metrics Balance sheet summary Comments (non-IFRS) Inventory and creditor days 5 Jan 2020 Coles no longer holding fuel inventory under $m post-AASB 16 30 Jun 2019 the New Alliance Agreement and change in tobacco excise treatment impact
Slide 19: Impact of AASB 16
Impact of AASB 16 Impact of new lease accounting standard AASB 16 Balance Sheet 1-Jul-19 5-Jan-20 Income Statement (1H20 impact) Right-of-use assets ↑ $7.5bn $7.3bn EBITDA ↑ $611m Lease liabilities ↑ $8.9bn $8.8bn Depreciation ↑ $426m Provisions1 ↓ $188m - EBIT ↑ $185m Deferred tax assets ↑ $356m $3
Slide 20: Capital management
Capital management Disciplined approach with attractive fully-franked dividend Debt facility maturity profile ($m) Dividend and Dividend Reinvestment Plan Fully-franked FY20 interim dividend of 30 cents 2,182 per share Dividend Reinvestment Plan activated, no discount offered, will be neutralise
Slide 21: Reaching the Smarter Selling target (illustrative only)
Reaching the Smarter Selling target (illustrative only) Indicative annualised cost-out opportunity to FY23 Comments ~$1bn ~$1bn $95 million in cost-out achieved in 1H20 driven by efficiencies in supply chain and the Store Support Centre: FY23 Good progress made on streamlining Store Support Cent
Slide 22: Supermarkets
The expanded Convenience range at The Glen, Victoria. Supermarkets
Slide 23: Supermarkets key metrics
Supermarkets key metrics 49 consecutive quarters of comparable sales growth Total sales revenue Comp sales growth1 Sales per sqm $16.6bn 2.0% $16,800 +3.3% vs. pcp vs. pcp +1.6% vs. pcp Own Brand sales Coles Online sales Customer satisfaction +6.0% +23.8% 88.5% (2Q19) vs. pcp vs. pcp +0.7pp on 4Q19
Slide 24: Supermarkets 1H20 results
Supermarkets 1H20 results Second half of improving profitability 1H20 results Key commentary Retail basis (27 weeks) Comparable sales growth of 2.0% driven by new value campaign and tailored range $m 1H20 1H19 Change change Key P&L items Improvement in basket size and transaction Sales revenue 1
Slide 25: Liquor
First Choice Liquor Market Tooronga, Victoria team members following the opening of the renewal in October 2019. Liquor
Slide 26: Liquor key metrics
Liquor key metrics Sales growth driven by First Choice Liquor Market and online sales Total sales revenue Comp sales growth¹ Online sales $1.7bn 1.5% +28.2% +3.3% vs. pcp vs. pcp vs. pcp Award winning FCLM renewals Number of stores¹ quality 248 47% 917 of the fleet ELB medals and +7 vs. FY19 renewed
Slide 27: Liquor 1H20 results
Liquor 1H20 results EBIT impacted by clearance and promotional activity following the commencement of tailored range change 1H20 results Key commentary Retail basis (27 weeks) Exclusive Liquor Brand (ELB) sales continued to $m 1H20 1H19 Change grow, particularly in the wine category Key P&L items
Slide 28: Express
Coles Express supporting the Rural Fire Service fuel replenishment during recent bushfires in Moss Vale, New South Wales. Express
Slide 29: Express key metrics
Express key metrics C-store sales growth driven by introduction of Little Shop 2 campaign and improving fuel volumes Total sales revenue1 C-store comp sales EBIT growth $572m 2.9% $4m under New Alliance +4.6% vs. pcp vs. pcp Agreement 1H20 weekly fuel Comp fuel volume Number of sites volumes growth
Slide 30: Express 1H20 results
Express 1H20 results First consecutive quarters of positive fuel volume growth in six years driven by Alliance partner investment in fuel pricing 1H20 results Key commentary Retail basis (27 weeks) Comparable c-store sales growth of 2.9% $m 1H20 1H19 Change driven by the successful Little Shop 2 K
Slide 31: Outlook
Coles ambassador Sally Pearson with kids from Reynella East and District Little Athletics Centre, SA who received a grant of $3,600 for new sports equipment from Coles. Outlook
Slide 32: Outlook for the remainder of FY20
Outlook for the remainder of FY20 In the early part of the third quarter, comparable Supermarkets sales have remained broadly consistent with the levels achieved in the second quarter Incremental costs associated with the removal of plastic bags and increased flybuys promotions which were a bene
Slide 33: Q&A
Coles ambassador Curtis Stone serving lunch at the launch of Coles’ Christmas range. Q&A