Metcash Limited · ASX:MTS
Metcash — H1 2007 Earnings Presentation
37 slides from Metcash's earnings presentation, Nov 29, 2006
Slide 1: Half Year Company Results ending 31 October 2006
io zompany Results : ‘a4 ending 31 October 2006 Tk 7 a _ Andrew Reitzer Chief Executive Officer ee ] . WGP oy i |
Slide 2: Overview - Half Year 31 Oct 2006
OVERVIEW — HALF YEAR 31 OCT 2006 2007 * An excellent result with wholesale sales up 34% to $4.6b and net profit after tax (before non-recurring items, being restructure costs and Action retail losses) up 36% to $75.9m. This has produced a normalised EPS of 9.77cents. * The result reflects both a sol
Slide 3: Financial Highlights
FINANCIAL HIGHLIGHTS __ — HALF YEAR 31 OCT 2006 2007 Total Revenue up 37% to $4.8 billion « Wholesale Sales rose 34% to $4.6 billion EBITA grew 47% to $140 million and EBITA margin rose to 3.12% from 2.76% last year Cost of Doing Business as a percentage of gross profit fell by 0.51% to 68.37% PBT a
Slide 4: Wholesale Sales
WHOLESALE SALES __ FIRST HALF 2007 SALES UP 34% __ 2007 NOTES: 1. HALF YEARS = 26 WEEK PERIODS 2. DATAIS FOR WHOLESALE SALES - HENCE 2007 EXCLUDES ACTION RETAIL SALES 3. ALL YEARS EXCLUDE FRANKLINS IMPACT 4, 2007 TOTAL GROUP SALES = $4.8B : 2005 : 2008 : "2007 : es AIFRS AIFRS — AIFRS M$Millions 2,5
Slide 5: Market Share
MARKET SHARE NATIONAL METCASH MARKET SHARE - ALL CUSTOMERS 20.0% A UPTO 18.9% FROM 12.5% IN 2002 | SINCE — . COMPLETION _. OF FAL ao. ACQUISITION oc METCASH HAS So. & GAINED A | aeoe FURTHER 0.8% <0 0lhLlmlmUmrmrrrrS——i—<“Ci@CCSrsSsSC<i‘(Csi‘“‘i‘<‘“‘ MARKET 11.0% | oe a | . a _ | SHARE 10.0% QTR TO
Slide 6: First Half 2007 EBITA Up 51.3%
FIRST HALF 2007 EBITA UP 51.3% _ 2002 2003 | 2004 2005 _ AIFRS 2006 | AIFRS | 2007 AIFRS 717— 84.1 85.8 95.2 | 144.0 fS'Millions 55.6 _ __ FINANCIAL YEAR - FIRST HALF INCREASE % 10.8% 38.9% 17.2% 2.0% 11.0% 51.3% CAGR 21%pa SINCE 2002 4 IGA>D tae SHETUTION AUSTRALIAN LIQUOR MARKETERS PPT, ETT, 2007
Slide 7: EBITA Margin
EBITA MARGIN : ——— ——= 2007 3.30% _. FIRST HALF 2007 EBITA MARGIN UP 36 BPS _. — rrrr—“———“‘“CiCsCSC SINCE 2002 oo a7 _ ) a | | EBITA ~_ - | — ~~} ~=d| *MARGIN HAS 210% 7 | | | | INCREASED 2.50% | 7 ] 7 | 0.97% 230% 1 _ i : | + ~+'| REFLECTING 2.10% : rr | | VOLUME 1.90% | | _. i oe = _ L _ | ECONOM
Slide 8: Operating Cashflow After Tax
OPERATING CASHFLOW AFTER TAX = s z a _ _ FIRST HALF 2007 PATBDA UP STRONGLY 100.0 »,PERIOD-END CASHFLOW AGAIN SUBJECT TO TIMING 90.0 | ee 80.0 70.0 60.0 60.0 40.0 30.0 20.0 10.0 7 0.0 - i "2007 _AIFRS | AIFRS 2005 | AIFRS 2002 = 2003-—== 2004 7006 @ CASHFLOW 70.6 88.0 87.2 13.5 85.3. 47.0 | 426 | 57
Slide 9: CODB as % of GP
CODB AS % OF GP 2007 we _FIRST HALF 2007 CODE DOWN 51 BPS : ____| IN THE LAST 6 74.00% |__| MONTHS 73.00% || i... | METCASH 72.00% | -. |__| HAS REDUCED 71.00% 4) _ | ~~~_=+| CODBA 70.00% oe _ | FURTHER 69.00% S — 0.51% 68.00% _ TU ) REFLECTING 67.00% | a ao ee. ITS _6e.00% . _ - 7 | CONTINUING ee R
Slide 10: PBT as % of Sales
PBT AS % OF SALES 3.00% 2.60% 2.40% 2.20% PBT/ SALES - % 1.80% 1.60% 1.40% 1.00% 2.80% | 2.00% | 1.20% 2002 2003 2004 2005 | AIFRS 2006 AIFRS _ FIRST HALF 2007 PBT AS % OF SALES UP 14 BPS 2007 _AIFRS _ 1.52% 2.12% | 2.33% 2.80% 2.33% 247% 'l@ PBT/ Sales % FINANCIAL YEAR - FIRST HALF INCREASE “pts 1.
Slide 11: First Half 2007 Normalised PAT Up 36%
50. 30.0 20.0 10.0 40.0 4 2003 2004 2005 AIFRS _ FIRST HALF 2007 NORMALISED PAT UP 36% _ 2006 _AIFRS | 2007— AIFRS | || Reported PAT | 38.0 | 45.8 609 30.5 (66.1 Normalised 38.0 45.8 60.9 — 56.0 75.9 PAT FINANCIAL YEAR - FIRST HALF INCREASE %| 576.0% | 43.0% | 20.4% | 33.0% | 8.0% | 35.7% SINCE 2002
Slide 12: EPS (Cents)
11.00 40.00 8.00 7.00 EPS (Cents) _ 6.00. 5.00 9.00 | FIRST HALF 2007 REPORTED EPS UP 25% ___ ADJUSTED EPS UP 18% 2005 | 2006 AIFRS | AIFRS. | 2003 2004 | Reported EPS 777 «| 883 (9.55 7.10 | Q 8.29 mAdjusted EPS FINANCIAL YEAR - FIRST HALF INCREASE %| 170% 5% 14% | 8% | -26% REPORTED EPS INCREASES
Slide 13: DPS (Cents)
8.0 - 6.0. 40 DPS (Cents) 3.0 2.0 1.0 0.0 5.0 | 2002 FIRST HALF 2007 DPS UP 1.5CENTS 2003 2004 2005 AIFRS 2006 AIFRS | 2.0 4.0 5.0 55 6.5 | ‘a CENTS FINANCIAL YEAR - FIRST HALF INCREASE %| 100% 25% 10% 0% CONSISTENT DPS GROWTH : orereeuTiOn AUSTRALIAN LIQUOR MARERTERS) ETE, AD Campbells 2007 NOTES:
Slide 14: Dividend Policy
aa BHT RBUTION AUSTRALIAN LIQUOR MARKETERS PPT, ETT, DIVIDEND POLICY The Board’s intention is to return earnings to shareholders whilst retaining 2007 adequate funds within the business to invest in future growth opportunities In the past the company’s dividend payout ratio has ranged between approx
Slide 15: Group Summary
GROUP SUMMARY AN EXCELLENT RESULT IN A PERIOD OF SIGNIFICANT CHANGE 2007 ( FIRSTHALF ‘VARIANCE FYO6 ~—S~FYO7 ~—C yn Se rr——“O(“‘(‘ RCC 37.3% cope) GP -% _ . BR 8TH OSIM EBITA TO SALES - 2.96% - 0.20%pts EBITA- ou _ | i. . |. Notes Sales include $319. 6m Action Retail Sas : CODB stated before restruc
Slide 16: IGA Distribution - Financials
Te.) - FINANCIALS IGA>D CONTINUES TO BE THE POWERHOUSE OF THE GROUP 2007 FIRST HALF | VARIANCE Fvos Ror | SALES TO INDEPENDENT CUSTOMERS -§M |e el SALES TO ACTION STORES (IN OUR HANDS) Mw 23) TOTAL IGAD WHOLESALE SALES - $1 iar) hese] 3% EBITA TO SALES - , . op EBITA-$M _ —rr—“_O—sS—s<—( CU Notes At
Slide 17: IGA Distribution - Operating Performance
IGA>D — OPERATING PERFORMANCE = Strong underlying performance in ‘legacy’ business: 2007 « Legacy Business 10.3% « Less: Inflation CB.0)% « =Pre-Inflation Growth 7.3% = Less: New Stores (2.0)% =" = Real L4L Growth 5.3% = Total IGA>D market share per AC Nielsen up to 18.9% for quarter ended 31 Octobe
Slide 18: IGA Distribution - Operating Performance
IGA>D — OPERATING PERFORMANCE 2007 = IGA Store development: 36 53,000 | 257 367,000 11 ~—-7,000| + 19 11,000] 66 — 40,000 " Total of 56 new stores planned for FY07 (initially reoprted ~70) « 14 stores pushed back into FY08 due to DA issues = Voice Pick: « Implemented in dry grocery facilities in WA
Slide 19: Action
ACTION 2NDHALF | 1STHALF (VARIANCE 2007 _FYO6 ror Cl SALES - sm _ —rr—S Ss 6s] 37.3% | EBITA - sm «+ 8 469 s90. Notes : includes Action + Quickstop Data estimated from underlying books and feces EBITA Loss inevitable as reduced volumes don't cover the overhead as stores change hands (i.e. overhead r
Slide 20: Action - Store Divestment
ACTION - STORE DIVESTMENT ACTION STORES SOLD FOR $122.4 MILLION + STOCK — SLIGHTLY BELOW EXPECTATIONS IGA’D OPE UTION PERLAST | UPDATED 2007 BRIEFING POSITION OVER THE COURSE Total ores acquired. vu 87 OF THE LAST 7 Less: Stores managed until closure (short leases = oo 6 YEARS METCASH Less: ‘Stores
Slide 21: IGA Fresh
IGA>D FRESH « IGA>Fresh established and operating through 3 warehouses 2007 * Slower than expected start, but promising sales still being achieved: — IGA Fresh sales ex-3 new DC’s $46 million — Fresh Sales ex-Perishable DC’s $76 million — Sales Direct to Store $57 million — Charge Through Sales $108
Slide 22: FAL Integration
FAL INTEGRATION + FAL integration now complete 2007 + Western Australia + IGA>D WA operations fully established + Market share at 32.1% + Voice pick implemented with full productivity benefits to flow in second half * Frozen and chilled DC still on track to be converted by March 07 * Queensland + Ri
Slide 23: FAL Integration - Profit & Synergies
FAL INTEGRATION - PROFIT & SYNERGIES FIRST HALF YO? 2007 SM $M FULL YEAR GAINS EXPECTED rt—sC METCASH IS ON IGAINS EXPECTED FOR FIRST HALF . ees TRACK TO | (Being 40% in line with Earnings Guidance) a ee | FULLY REALISE VOLUME GAINS (IGA>D + oc |. _40| EXPECTED -INCLUDES FRESH © . | |-INCLUDES PUREV
Slide 24: ALM - Financials
LM - FINANCIALS 2007 FIRSTHALF (VARIANCE re Fr 4 rrrr—— ee s—isSzSCS EBITATOSALES -% ee re EBITA- §™M Co rr Add back: Additional IBA investment |... 2 =. . “oe 14% GOOD SALES PERFORMANCE - UP 4.2% ADJUSTING FOR ADDITIONAL ‘INVESTMENT’ IN IBA CONSOLIDATION COSTS + MARKETING SPEND SHOWS FLAT EBIT PERF
Slide 25: ALM - Operating Performance
ALM = OPERATING PERFORMANCE 2007 " Sales Growth of 4.2% positive in light of tough market conditions EBITA of $12.5 million down $1.5 million from last year reflects this highly competitive environment Additional $1.3 million invested in: « Banner consolidation = Additional marketing spend = Two pro
Slide 26: ALM - IBA Store Growth
ALM - IBA STORE GROWTH IGA’D OPE UTION Campbells 2007 AUSTRALIAN LIQUOR MARKETERS 7! 27%,
Slide 27: Campbells Wholesale - Financials
CAMPBELLS WHOLESALE - FINANCIALS 2007 -FIRSTHALF VARIANCE Me SSM ML EBITATOSALES -% = =-«—ss |= 1.78% «= 2.2%] 0.41% pts Se r———C—C—C “ENR BO CW IS ON TRACK TO PRODUCE A RECORD YEAR, CAPITALISING ON SYNERGIES FROM THE FAL ACQUISITION AND ITS SUCCESSFUL STRATEGY OF RESTRUCTURING ITS OPERATIONS TO MIR
Slide 28: Campbells Wholesale - Operating Performance
CAMPBELLS WHOLESALE. - OPERATING PERFORMANCE Campbells Wholesale business model now reflects distinct customer segments with 2007 separate distribution solutions to satisfy the varying needs of each customer type CCC 25 Metro cac (with 3i in n WA) Sales +47% on Bs year - oe 62% Tobacco 28% Liquor 10
Slide 29: Supply Chain Initiatives
SUPPLY CHAIN INITIATIVES * Metcash has implemented significant improvements to its supply chain ¢ Initiatives have been designed to: * Improve inventory management; * Shorten order-to-delivery cycle times; and * Reduce the cost of doing business. 2007 Flow through operations Use of technology to pro
Slide 30: Supply Chain Initiatives
SUPPLY CHAIN INITIATIVES * Initiatives in the process of further development include : Control Primary freight Optimise outbound freight Mechanisation of NDC Support store ready deliveries 2007 Move to factory gate pricing and consolidate inbound freight . Reduction in freight costs Improve receivin
Slide 31: Balance Sheet - Extract
BALANCE SHEET - EXTRACT 2007 Metcash Limited Restatement of BS for FAL Fair Value adjustment, see note 7 Balance Sheet Extract _ Restated FY Apr OGY Oct 06 {AIFRS) (AIFRS) Inventory up $75.8 million but days inventory down 0.5 days to 19.9 days $million $million Inventory §33.3 609.1 Increase in cre
Slide 32: Cashflow - Extract
CASHFLOW - EXTRACT 2007 Metcash Limited Cash Flow Extract HY Oct 05 HY Oct 06 (AIFRS) (AIFRS) $000s $000s $000s $000s EBITDA 87,836 155,617 Net Interest Paid (15,835) (27,943) Taxation Paid (24,539) (31,192) 47, 462 96,482 Working capital movement 36,878 (49,474) Reversal of prior year beneficial cr
Slide 33: Capital Management
CAPITAL MANAGEMENT Metcash sets its capital structure with the objective of minimising its 2007 weighted average cost of capital whilst retaining flexibility to pursue growth opportunities as they arise The Board believes that, from an operational trading perspective, it is important to achieve and
Slide 34: Metcash TSR
5.00 4.50 4 4.00 4 3.50 4 3.00 4 2.50 ‘Share price 2.00 1,50 1.00 4 0.50 4 0.00 Source: Iress METCASH TSR Under current management vs competitors and market. Note: Total Shareholder Returns (TSR) represents share price appreciation and dividend returns to shareholders. 2007 MTSTSR: 56% prergnoy hal
Slide 35: Growth Plans
GROWTH PLANS _~_. Management’s focus in the first half summarised as follows: 2007 OBJECTIVE ACHIEVEMENT Grow core business Strong Sales Growth - IGA>D legacy + 10.3% — Campbells Wholesale + 6.0% ~ ALM + 4.2% Complete FAL integration Done Metfoods Joint Venture IGA>Fresh Established — first tender a
Slide 36: Earnings Guidance
EARNINGS GUIDANCE Sales continue to perform strongly in November 2007 First half (Adjusted) EPS of 9.77 cents in line with expectations, reflecting: * Strong performance achieved in the ‘legacy’ business; * Achievement of FAL profit and synergy gains (41% of targeted 80- 90million) FAL restructure c
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