Slide 1: Metcash Limited – FY15 Half Year Results (ASX cover letter)
Metcash Limited ABN 32 112 073 480 50 Waterloo Road Macquarie Park NSW 2113 Australia 1 December 2014 ASX Limited Company Announcements Office Level 4, Exchange Centre 20 Bridge Street SYDNEY NSW 2000 Dear Sir/ Madam METCASH LIMITED – FY15 HALF YEAR RESULTS We refer to the Metcash Limited FY15 Half
Slide 2: FY15 Half Year Results, 1 December 2014
FY15 HALF YEAR RESULTS, 1 DECEMBER 2014
Slide 3: Agenda
Agenda Presenter Group overview Ian Morrice, Group CEO Metcash Limited Financials Adrian Gratwicke, CFO Metcash Limited Strategic priorities Fergus Collins, CEO Supermarkets Transformation of Metcash Food & Grocery Peter Struck, CEO Convenience Mark Laidlaw, CEO Mitre 10 Consolidation & sustaina
Slide 4: Group Overview
GROUP OVERVIEW SUCCESSFUL INDEPENDENTS
Slide 5: Overview
Overview The 1H15 results confirm the need for investment to turn around the Food & Grocery (MFG) business Six months into the Transformation Plan (the ‘Plan’) we remain very encouraged by initial indicators – implementation was later than planned, program is now gaining momentum Increased sal
Slide 6: Financial highlights
Financial highlights 1H15 1H14 Variance % var Commentary Growth in Convenience and Hardware/Auto sales, together with Sales revenue $m 6,645.4 6,579.4 66.0 1.0 incremental sales from acquisitions, partly offset lower MFG sales. Improved Liquor and Hardware/Auto results more than offset by EBIT $m 16
Slide 7: Our strategic priorities
Our strategic priorities 1. TRANSFORMATION OF METCASH FOOD & GROCERY 2. CONSOLIDATION & SUSTAINABLE NETWORK GROWTH 3. WORLD CLASS SUPPLY-CHAIN 4. SUPPORTING INDEPENDENTS 6
Slide 8: Financials
FINANCIALS SUCCESSFUL INDEPENDENTS
Slide 9: Balance Sheet extract
Balance Sheet extract 31 Oct 14 30 Apr 14 Movement Commentary $m $m $m % Seasonal increase at 1H15 (2.2 days increase vs FY14), with debtor days lower Trade receivables 1,065.8 995.2 70.6 7.1 than 1H14. Prepayments & other assets 13.1 13.9 (0.8) (5.8) Inventory days consistent with 1H14 (0.3 day imp
Slide 10: Cashflow extract
Cashflow extract 31 Oct 14 31 Oct 13 Movement Commentary Cash Flow $m $m $m % Prior period reflected significant working capital Trading cash receipts and payments 189.8 280.7 (90.9) (32.4) improvements and some timing benefit. Interest (19.6) (21.6) 2.0 9.3 Lower average debt utilisation and intere
Slide 11: Interest expense
Interest expense 1H15 1H14 Movement Commentary $m $m $m % Interest costs 22.4 25.9 (3.5) (13.5) Lower average debt utilisation and interest rates. Deferred borrowing cost 0.4 0.9 (0.5) (55.6) Mainly interest unwind on provisions (PUT options, rental Interest unwind & discount rate adjustments 5.1 4.
Slide 12: Gearing, Cash Realisation Ratio & Interest Cover
Gearing, Cash Realisation Ratio & Interest Cover Improved gearing reflects solid operating cashflows, working capital control and lower capital investment (below 40% target ceiling) Cash realisation ratio in pcp results reflects a significant timing benefit. Current period CRR of 93.8% is slight
Slide 13: Dividend & Capital Management
Dividend & Capital Management Interim dividend of 6.5c has been declared (57.0% DPR) Intention to maintain DPR of at least 60% for full year (in line with policy) Capital management intent remains to conserve cash to fund Transformation Plan DRP remains in place and will be underwritten to 7
Slide 14: Transformation of Metcash Food & Grocery
TRANSFORMATION OF METCASH FOOD & GROCERY SUCCESSFUL INDEPENDENTS
Slide 15: MFG – financials
MFG – financials Supermarkets: MFG 1H15 1H14 % Change Wholesale sales down 0.9% (-1.5% LFL basis), Sales ($m) 4,508.4 4,483.8 0.5 retail scan sales up 0.9% LFL with improving trend in Q2 EBIT ($m) 119.2 146.0 (18.4) Ongoing deflation of 1.4% (1.3% pcp) due to EBIT (%) 2.64 3.26 continued promoti
Slide 16: MFG – operating highlights
MFG – operating highlights EBIT down due to: Deleverage effect compounded by unfavourable sales mix Diamond investment in competitive pricing and increased capability Investment in NSW DC automation, benefits from FY16 with MFG orders moving into Mustang progressively from January 2015 Fundame
Slide 17: Transformation of Metcash Food & Grocery: phase 1
Transformation of Metcash Food & Grocery: phase 1 Fix the Basics Invest in Growth Sustain Growth Develop shopper-led range Offer competitive prices and Expand innovation in price and Make every store famous as a local promotions promotions shopper destination Grow new, exciting offers and
Slide 18: Diamond Transformation Program
Diamond Transformation Program A comprehensive roadmap that focuses on growing our network capabilities, stimulating sales growth, instilling retail excellence and delivering sustainable growth COMPETITIVE SHOPPER LED COMPELLING RETAIL NETWORK CONVENIENCE PRICING RANGING FRESH OFFER EXCELLENCE INVES
Slide 19: Competitive pricing
Competitive pricing Program live across Supa IGA network with a 4 week roll out from 1 October 305 Supa IGAs live plus an additional 120 IGAs voluntarily joining the program Negative sales trajectory reversed in Price Match stores Stage 2 pilot Price Match live from 1 October to test concept
Slide 20: Private label
Private label New B&G pricing program launched at EXPO in July, matching prices of ~500 SKUs to competitors across all key grocery categories Now live in over 900 stores - with majority rolling out from the end of September B&G retail sales return to growth after historical declines with wareh
Slide 21: Compelling fresh offer
Compelling fresh offer Fresh sales growth of +4.1 % LFL basis Quality improvement and range optimisation program: Management team enhanced: new capabilities and expertise Extensive shopper-led range review – Would I buy it? program Accelerating new range of pre packed produce and ready meals w
Slide 22: Retail excellence – DSA Program & network investment
Retail excellence – DSA* Program & network investment Store prioritisation 1466 786 442 233 DSA stores High upside Full-line Can pull 3- potential: Management 5 growth validation 50 in FY15 All Stores & mid-sizes regression stores levers analysis ~100 in FY16 ~300-400 in 3-5 years 3 stores completed
Slide 23: DSA Program - delivering the right results
DSA Program - delivering the right results Trading results from the DSA pilot store (Daisy Hill): Av. basket size Basket #’s Fresh participation up 13% on prior up 22% on consistently period* prior period* exceeding 30%* Sales uplift: Warehouse withdrawals exceeding 30% target* up in line with sales
Slide 24: Convenience - one solution
Convenience - one solution • Relevant core range • Consolidated supply & delivery • Tailored solutions • Single source – cost efficiencies • Competitive • Paperless solutions pricing • Merchandise & • Support for perpetual ranging support Metcash will stock management provide a • Market insights Tot
Slide 25: Campbells future growth
Campbells future growth CWD’s future growth lies in food service: significant incremental sales at much higher margins than current mix Accommodation & Institutions Campbells – Restaurants & Food strategy developed to Service maximise potential Food Service Pubs & Clubs Business (Staff Ameneties) Re
Slide 26: Transforming Campbells
Transforming Campbells Challenges Reseller business continues to decline 10% of SKU’s delivering 80% of sales Heritage in state based ranging resulting in a national core range of only 20% Early Wins Addressed capability gaps in in Sales Merchandise and Operations Securing momentum on head
Slide 27: A 'Total Solution' in C-Store Distribution (CSD)
A ‘Total Solution’ in C-Store Distribution (CSD) CSD ‘Total Solution’ is gaining momentum - a strong pipeline of specific customer growth has been established via identified new business and targeted increases in share of wallet Grow organised share from 17% to ~30% Growing unorganised share fro
Slide 28: CSD opportunities
CSD opportunities Leveraging world class supply chain: Developing better solutions to support Daily Fresh in P&C which is seeing double digit growth Driving costs out for both the Retailer & Metcash by consolidating the supply chain Monthly promotions and national procurement is delivering bet
Slide 29: Progress roadmap
Progress roadmap NATIONAL RETAILER PILOT TWO DESIGN 120 IGA STORES COMPLETE PHASE ONE PILOT 34 COUNCIL ENDORSEMENT STORES FOR SUPA IGA ROLLOUT SUPA IGA 305 SUPA STORES COMPLETE TRANSITION SHELF PRODUCTIVITY TOOL RELAUNCH OF BLACK AND LAUNCHED GOLD BLACK AND GOLD PACKAGING REVIEW TOP 5% SKU ROLLOUT T
Slide 30: Consolidation & Sustainable Network Growth
CONSOLIDATION & SUSTAINABLE NETWORK GROWTH SUCCESSFUL INDEPENDENTS
Slide 31: ALM – financials
ALM – financials Liquor sales: Liquor 1H15 1H14 % Change Retail sales (IBA) up 3.5% (LFL basis), continuing Sales ($M) 1,482.7 1,538.1 (3.6) to perform strongly in an increasingly competitive market environment EBIT ($M) 24.9 23.3 6.9 Wholesale sales to other independents down between 4%-16%, ex
Slide 32: ALM – operating highlights
ALM – operating highlights Retail (IBA) Australian retail liquor market growth % Consumers buying less, but better quality Sales and volume growth well ahead of market % 4.4 4.5 Liquor shoppers continue to buy as needed, retail (IBA) initiatives driving 3.5 2.4 performance 2.5 1.5 0.6 Strong g
Slide 33: ALM – progress on strategic priorities
ALM – progress on strategic priorities CONTROLLED ALM CUSTOMERS RETAILER SUPPORT CULTURE MARKETING GROUPS Project Mustang live world Retail consolidation Online Retail Training Customer service focus class supply chain delivering Thirsty Camel – acquisition Academy to NSW independents of 140 stores
Slide 34: Hardware & Automotive – financials
Hardware & Automotive – financials Hardware & Hardware driven by strong trade result 1H15 1H14 % Change Automotive Sales up 16.5% on last year, (+3.9% LFL basis) Sales ($m) 654.3 557.5 17.4 Trade sales continue to be strong, driving positive Hardware 524.2 450.0 16.5 results Automotive 130.1 107
Slide 35: Hardware & Automotive – operating highlights
Hardware & Automotive – operating highlights Hardware Automotive Network growth Continued network growth Conversion of major Trade competitors, Maintaining focus on retail and service including G.Gay & Co (May 14) and market which remains highly fragmented Yenkens Group (July 14) On track for
Slide 36: Hardware - progress on strategic priorities
Hardware - progress on strategic priorities RETAIL AND TRADE DIGITAL DATA AND RANGE & PRICE SUPPLY CHAIN EXCELLENCE LOYALTY Big Brand Suppliers ‘Sapphire Store’ standard of Continued investment in Expanding on-line range excellence supply chain and through ‘Click & Collect’ Store within store concep
Slide 37: Automotive - progress on strategic priorities
Automotive - progress on strategic priorities CUSTOMER VALUE LOWEST COST TO SERVE UNIFIED CULTURE BUILDING BRANDS New merchandising and Multi-service Distribution Training Academy Targeted independent range program Centres - Victoria, Brisbane, promoting enhanced offer conversions: Autopro +4, Perth
Slide 38: World Class Supply-Chain
WORLD CLASS SUPPLY-CHAIN SUCCESSFUL INDEPENDENTS
Slide 39: World class supply-chain
World class supply-chain Automation update: One DC management structure successfully implemented in NSW Full-case KNAPP Split Case expansion successfully deployed (Mustang) in June Huntingwood Mustang Phase 1 full-case system successfully Distribution deployed during October in NSW for ALM Cen
Slide 40: Supporting Independents
SUPPORTING INDEPENDENTS SUCCESSFUL INDEPENDENTS
Slide 41: Supporting independents
Supporting independents Digital: Expand digital capabilities Training Academy: Building capability across the Metcash team and the retail network IGA online shopping – partnership with major MSO, launch in 2H15 Operational planning and retailer engagement completed IGA retailer digital service
Slide 42: Outlook
OUTLOOK SUCCESSFUL INDEPENDENTS
Slide 43: Outlook
Outlook Six months into the Transformation Plan Metcash is in a better position to provide guidance on FY15 earnings, given the now likely timing of initiatives and investment. FY15 Group EBIT is expected to be between $315m-330m Key initial Diamond programs took more time to put in place due to
Slide 44: Appendices
APPENDICES SUCCESSFUL INDEPENDENTS
Slide 45: Appendices
Appendices 1. Group Sales Revenue – 5 Year Trend 2. Cost of Doing Business – 5 Year Trend 3. EBIT – 5 Year Trend 4. PAT – 5 Year Trend 5. Earnings per Share – 5 Year Trend 6. Operating Cash Flow – 5 Year Trend 7. Reconciliation – Group Results (Reported and Underlying) 8. Group Results by Division 9
Slide 46: Group Sales Revenue
Group Sales Revenue Group Sales Revenue 6,800 up 1% Growth in Hardware trade sales and also 6,645 from new retail joint ventures 6,579 6,600 Increase in Automotive sales ($22.6m) primarily due to ATAP acquisition in 1H14 and Midas 6,400 In Liquor, lower wholesale sales partly offset 6,279 by i
Slide 47: CODB as % of Gross Profit
CODB as % of Gross Profit 80.0% Increase reflects the deleveraging 73.4% impact of the sales decline, 69.0% deflation and consequential 70.0% 65.2% 64.9% 65.6% impact on EBIT in MFG 60.0% Higher relative CODB in growing Hardware and Automotive business due to the nature of 50.0% these businesses
Slide 48: EBIT
EBIT EBIT decline of 10.9% reflects: 250 Decline in MFG due to deleverage 199.6 200.9 (reduction in volume, deflation, sales 200 195.6 186.0 mix), together with initial Diamond 165.8 Investment. 150 Solid EBIT growth in Liquor, despite weaker overall sales by leveraging $m strong retail (IBA) sa
Slide 49: PAT
PAT Variance Variance 1H15 1H14 $m % PAT ($m) - Underlying 1 101.7 111.7 (10.0) (9.0) PAT ($m) - Reported 101.7 98.9 2.8 2.8 140 120 116.0 111.2 112.5 111.7 110.2 101.7 98.9 101.7 100 94.4 82.0 80 $m 60 40 20 0 1H11 1H12 1H13 1H14 1H15 PAT underlying ($m) PAT reported ($m) NOTES: 1. Underlying PAT i
Slide 50: EPS
EPS Variance Variance 1H15 1H14 cps % EPS - Underlying (cps) 1 11.4 12.7 (1.3) (10.2) Discontinued Operations and EPS - Reported (cps) 11.4 11.2 0.2 1.8 Significant items in 1H14 16.0 14.5 14.4 14.6 13.8 14.0 12.7 12.3 12.0 11.2 11.4 11.4 9.8 10.0 cents 8.0 6.0 4.0 2.0 0.0 1H11 1H12 1H13 1H14 1H15 E
Slide 51: Operating Cash Flow
Operating Cash Flow 300 Solid cash flow from tight working capital control 252.4 250 Prior period result 229.3 included a timing benefit 200 144.7 $m 150 128.0 100 50 20.2 0 1H11 1H12 1H13 1H14 1H15 50
Slide 52: Reconciliation – Group Results (Reported and Underlying)
Reconciliation – Group Results (Reported and Underlying) 1H15 1H14 1H15 1H14 $m $m EPS (cps) EPS (cps) EBITDA – underlying 200.6 218.4 Depreciation and amortisation (34.8) (32.4) EBIT 165.8 186.0 Net interest (23.9) (27.0) Underlying profit before tax 141.9 159.0 Tax (39.7) (46.6) Non controlling in
Slide 53: Group Results by Division
Group Results by Division Sales Revenue - $m 1H15 1H14 Change (%) EBIT - $m 1H15 1H14 Change (%) Food & Grocery 4,508.4 4,483.8 0.5 Food & Grocery 119.2 146.0 (18.4) Liquor 1,482.7 1,538.1 (3.6) Liquor 24.9 23.3 6.9 Hardware & Automotive 654.3 557.5 17.4 Hardware & Automotive 22.1 20.9 5.7 Metcash G
Slide 54: Retail Put Options & Guarantees (On Balance Sheet)
Retail Put Options & Guarantees (On Balance Sheet) Estimated Liability Recognised Exposure 1H15 1H15 FY14 Movement Note $m $m $m $m Put Options over NCI MAH (16.8%) 2 36.0 36.0 34.9 1.1 Faggs (25%), Clennetts (20%), Capeview (20%) 11.7 11.7 11.7 - Put Options over NCI 1 47.7 47.7 46.6 1.1 Financial
Slide 55: Retail Put Options (Off Balance Sheet)
Retail Put Options (Off Balance Sheet) Estimated Liability Recognised Exposure 1H15 1H15 FY14 Movement Movement Note $m $m $m $m % Contingent Retail Put Options M10 JV's (2 entities) 2 10.8 - - - - Retail stores (1 store) 3 7.5 - - - - Notes 1. The exposures presented in the above table represent co
Slide 56: Trend Metrics - Financial
Trend Metrics - Financial 1H11 1H12 1H13 1H14 1H15 CAGR Half Year Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 % Sales Revenue $m 5,940 6,069 6,279 6,579 6,645 2.3 Underlying results: EBITDA $m 221.2 226.3 228.9 218.4 200.6 (1.9) EBIT $m 195.6 199.6 200.9 186.0 165.8 (3.3) PAT $m 111.2 112.5 116.0 111.7 101.7
Slide 57: Trend Metrics - Operational
Trend Metrics - Operational Branded Stores Apr 10 Oct 10 Apr 11 Oct 11 Apr 12 Oct 12 Apr 13 Oct 13 Apr 14 Oct 14 Grocery Supa IGA 446 449 463 468 475 475 506 513 505 506 IGA 718 735 734 723 744 735 773 780 801 801 Xpress 156 170 183 178 184 183 183 185 190 195 IGA branded stores 1,320 1,354 1,380 1,
Slide 58: Trend Metrics – Operational (MFG)
Trend Metrics – Operational (MFG) Independent retailers continue to invest in strengthening the network Branded Stores FY15 FY14 ACTUAL COMPLETED 1H15 PLANNED 2H15 (IGA – 3 channels) NO SQM NO SQM NO SQM New Stores 38 38,242 10 12,298 20 17,846 Conversions (1) 15 12,960 5 4,050 1 571 53 15 21 Extens
Slide 59: Definition of Underlying EPS – FY15
Definition of Underlying EPS – FY15 This section presents the Group’s financial information adjusted for the inclusion of customer contracts amortisation in the calculation of underlying earnings and underlying earnings per share (UEPS). Customer contracts amortisation has historically been presen
Slide 60: Underlying Pillar Results – EBITA vs EBIT
Underlying Pillar Results – EBITA vs EBIT MFG Liquor Hardware & Auto Corporate Consolidated Financial EBITA EBIT EBITA EBIT EBITA EBIT EBITA EBIT EBITA EBIT year (old) (new) (old) (new) (old) (new) (old) (new) (old) (new) 1H11 189.2 185.6 9.9 9.9 6.8 6.6 (6.5) (6.5) 199.4 195.6 1H12 185.0 181.2 13.1
Slide 61: Key Financial Metrics – FY15
Key Financial Metrics – FY15 This section presents the changes made to the Key Financial Metrics (KFMs) used by the Group to measure performance This change of emphasis reflects the Group’s focus on reporting the business performance indicators that will drive optimal performance and measure del
Slide 62: Directory of Terms
Directory of Terms Metcash’s Business Areas & Terms 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 sp
Slide 63: Directory of Terms
Directory of Terms Financial Terms Cash realisation ratio Cash Flow from operations/Reported NPATDA (depreciation and amortisation not tax effected) CODB Cost of doing business Net Debt */ Shareholder’s Equity + Net Debt* Gearing *Including cash on hand and based on hedged USPP debt Intangible Amort
Slide 64: Contact Details
Contact Details For additional information contact: Stephen Woodhill, Group General Manager Corporate Affairs Phone: 61 2 9741 3415 Fax: 61 2 9741 3027 E-mail: Stephen.Woodhill@metcash.com Merrin Hodge, Investor Relations Manager Phone: 61 2 9647 0866 Fax: 61 2 9741 3027 E-mail: Merrin.Hodge@metcash
Slide 65: Disclaimer
Disclaimer 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 conju
Slide 66: Thank You
SUCCESSFUL INDEPENDENTS THANK YOU