Slide 1: 2019 Half Year Financial Summary & Outlook
Coles directors, team members and Donald Coles, grandson of G J Coles, at the ASX listing ceremony in Sydney – 21 November 2018 2019 Half Year Financial Summary & Outlook 19 February 2019
Slide 2: Disclaimer
Disclaimer This presentation contains summary information about the Group Limited (ACN 004 089 936) (the Group) and its activities current as at the date of this presentation. It is information given in summary form only and does not purport to be complete. It should be read in conjunction with Cole
Slide 3: 1H19 summary
Brenda, who celebrated 50 years working at Coles Malvern in 2018, with her store manager Scott 1H19 summary
Slide 4: 1H19 summary
1H19 summary Strong cash generation, a robust balance sheet and EBIT down 5.8%, driven by decline in Express earnings Total sales revenue EBIT (Retail basis)¹ Supers comp growth 45 quarters $20.9bn $733m consecutive +2.6% vs. pcp (5.8)% vs. pcp growth Operating cash flow² Net capital Dividend expend
Slide 5: Other business highlights
Other business highlights Laying the foundations for long term sustainable growth #1 Over 30% online sales growth and improved customer satisfaction scores #2 Innovation trials launched with new store formats in Supermarkets and standalone Express #3 New Alliance Agreement signed with Viva Energy, p
Slide 6: Strengthening executive leadership team
Strengthening executive leadership team Steven Cain Managing Director & CEO Leah Weckert Greg Davis Paul Bradshaw David Chief Financial Chief Operating Chief Store Brewster Officer Officer – Operations Chief Legal Supermarkets Officer – Officer Supermarkets Alister Alister Jordan Jordan Thinus Keeve
Slide 7: Group financial overview
Coles Click & Collect has grown at >80% vs. pcp Group financial overview
Slide 8: 1H19 results – Group
1H19 results – Group EBIT (pre-significant items) down 5.8% vs. 1H18 on a comparable retail calendar year basis, driven by a decline in Express earnings $m 1H19 1H18 Change Statutory basis (183 days in 1H19; 184 days in 1H18) Sales revenue 20,235 19,844 2.0%² EBIT (pre-significant items)¹ 713 779 (8
Slide 9: 1H19 results – segment financials
1H19 results – segment financials Supermarkets resilient and a strong Liquor result Retail basis, pre-significant items $m 1H19 1H18 Change Revenue Supermarkets 16,195 15,629 3.6% Liquor 1,731 1,721 0.6% Coles Express 2,941 2,996 (1.8)% Total revenue 20,867 20,345 2.6% EBIT Supermarkets 602 600 0.4%
Slide 10: Normalised cash flow
Normalised cash flow Strong cash realisation, driven by favourable seasonal working capital position Normalised cash flow¹ Cash realisation² Statutory basis Note: favourable seasonal working capital position, expected to normalise in 2H19 $m 1H19 1H18 EBIT (pre-significant items) 713 779 141 % Depre
Slide 11: Capital expenditure
Capital expenditure FY19 net capital expenditure guidance narrowed to $700-800m Capital expenditure breakdown Key capital expenditure initiatives Statutory basis Store renewals Higher number of major $m 1H19 1H18 renewals across Supermarkets (25) and Liquorland (14) Store renewals 60 29 Liquor M
Slide 12: Balance sheet
Balance sheet Robust balance sheet supporting investment grade credit rating Balance sheet summary Statutory basis Net working capital $m 1H19 Inventory days of 25; trade payable days of 29 Cash and cash equivalents 484 Working capital balance favourable due to seasonal movements in inventory an
Slide 13: Capital management
Capital management Coles expects to pay its first dividend in September 2019, targeting an 80-90% dividend payout ratio Dividends Bank facility maturity profile ($m) Wesfarmers’ intention to pay an interim dividend in March 2019 which will reflect, in part, Coles’ 2,540 earnings up to and includin
Slide 14: Supermarkets
Coles Little Shop was loved by our customers! Supermarkets
Slide 15: Supermarkets key metrics
Supermarkets key metrics 45 consecutive quarters of comparable Supermarkets sales growth Total sales revenue Comp growth Sales per sqm $16.2bn 3.2% $16,533 +3.6% vs. pcp NYE adj. vs. pcp +0.4% vs. pcp Basket size Transactions Customer satisfaction +3.1% +0.5% 87.8% (2Q19) vs. pcp vs. pcp +13bps vs.
Slide 16: Supermarkets 1H19 results
Supermarkets 1H19 results Resilient 1H19 result despite significant cost headwinds Half-year results Key commentary Retail basis Comp sales growth of 3.0% for 1H19 driven mainly by Little Shop & improved availability $m 1H19 1H18 Change Comp sales growth of 3.2% for 1H19, adjusted Key P&L items
Slide 17: 'Fresh Tomorrow' strategy progress
‘Fresh Tomorrow’ strategy progress Transform food offer Move towards Every Day Low Prices Increased convenience food offer with ~200 ~180 additional EDLP products, up to ~4,700 new fresh product lines launched products − Fresh Kitchen and food-to-go range Maintained competitiveness despite cos
Slide 18: 'Fresh Tomorrow' strategy progress
‘Fresh Tomorrow’ strategy progress Offer anytime, anywhere shopping Land the right offer in every location Continued improvement in Coles Online Continued store investment across the fleet customer experience, making it easier for our − 14 new store openings and 7 closures customers − 25 superma
Slide 19: 'Fresh Tomorrow' strategy progress
‘Fresh Tomorrow’ strategy progress Reduce costs Win together Completed roll-out of proven initiatives, ~4,200 Indigenous team members – proudly including: one of Australia’s largest Indigenous − Stockless stock rooms employers − One Team Improvements in team member safety and Current initiat
Slide 20: Liquor
Winemaker, Alana Langworthy and her Story Bay Semillon Sauvignon Blanc 2017, which won the Winestate Wine of the Year ‘Best under $20’ wine award, and is exclusively available at Coles Liquor Liquor
Slide 21: Liquor key metrics
Liquor key metrics Strong EBIT growth of 7.0% vs. pcp Total sales revenue Comp growth¹ Exclusive brands $1.7bn 1.0% 18.5% of sales +0.6% vs. pcp NYE adj. vs. pcp +103bps vs. pcp Retail basket size¹ Retail transactions¹ Number of stores² +1.3% +0.7% 908 NYE adj. vs. pcp NYE adj. vs. pcp +9 vs. FY18 G
Slide 22: Liquor 1H19 results
Liquor 1H19 results EBIT growth driven by increasing exclusive brands penetration and productivity efficiencies Half-year results Key commentary Retail basis Comp sales growth of 1.0% for 1H19, adjusted $m 1H19 1H18 Change for NYE Key P&L items − Comp sales growth of 0.7% for 2Q19, adjusted for NY
Slide 23: Liquor business update
Liquor business update Store transformation First Choice format continues to evolve, with 15 First Choice Liquor Market brand conversions, driving improvement in trading 16 new retail store openings and 7 closures 80% of Liquorland stores now renewed ‒ 14 Liquorland renewals Exclusive brand Ab
Slide 24: Express
New Express standalone convenience store in Richmond, Victoria Express
Slide 25: Express key metrics
Express key metrics C-store growth despite declining fuel volumes Total sales revenue C-store comp growth EBIT $2.9bn 1.5% $51m (1.8)% vs. pcp vs. pcp (39.3)% vs. pcp Food-to-go growth Fuel volumes Number of sites 11.6% 62 mL/wk 713 vs. pcp (15.8)% vs. pcp +2 vs. FY18 Note: The results for the half
Slide 26: Express 1H19 results
Express 1H19 results Continued focus on range and format innovation supporting c-store sales Half-year results Key commentary Retail basis C-store comp sales growth of 1.5% driven by: $m 1H19 1H18 Change ‒ Expansion of food-to-go category Key P&L items ‒ Compelling every day value proposition Sale
Slide 27: New Alliance partnership
New Alliance partnership Express positioned to be Australia’s leading convenience retailer On 6 February 2019, Coles announced that it has entered into an agreement to restructure the terms of the Fuel and Convenience Alliance with Viva Energy ‒ Express will move to a commission agent model and Vi
Slide 28: Outlook
Tony Ceravolo of Ceravolo Orchards in South Australia, which is set to become the first grower from mainland Australia to harvest cherries under a fully automated retractable roof, backed by a $500,000 interest-free loan from the Coles Nurture Fund Outlook
Slide 29: Outlook 2H19
Outlook 2H19 Coles is committed to making life easier for customers with an increasing focus on convenience Overall sales momentum into the third quarter of the 2019 financial year remains broadly in line with the second quarter The newly announced Supermarket and Express collectables program
Slide 30: Coles' investment thesis
Coles’ investment thesis Demerged from Wesfarmers on 21 November 2018 #1 Operates in resilient and growing markets #2 Market leading position in an evolving competitive landscape #3 Established, non-replicable national store network #4 Making life easier for customers strategy #5 Strong cash generat
Slide 31: Initial CEO observations
Initial CEO observations Medium term Coles specific & market-wide headwinds Coles specific factors Market-wide factors Competitive pressures continue: Customer expectations and behaviour NSW Supermarkets, higher demographics, changing faster than ever convenience foods Vintage Cellars & First Ch
Slide 32: It's time for a new era at Coles
It’s time for a new era at Coles Coles historical EBIT and F&L growth over time FY09-FY16 FY16-FY18 Industry reset Investment in management, stores and brand reducing retail driving strong revenue and earnings growth profit pool ~125% EBIT ~19% EBIT growth decline 2,000 8.0 % 2,000 8.0 % Comparable
Slide 33: Objectives of Strategic Refresh
Objectives of Strategic Refresh Laying the foundations for long term sustainable growth Coles is currently undertaking a comprehensive Strategic Refresh to reposition the business in order to build on the foundations for long term sustainable growth In particular, the refresh will focus on: “Fresh
Slide 34: Thank you
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