Slide 1: Metcash Limited 2014 Full Year Results Presentation cover letter
Metcash Limited ABN 32 112 073 480 50 Waterloo Road Macquarie Park For personal use only NSW 2113 Australia PO Box 6226 23 June 2014 Silverwater Business Centre NSW 1811 Australia Ph: 61 2 9751 8200 Fax: 61 2 9741 3027 ASX Limited Company Announcements Office Level 4, Exchange Centre 20 Bridge Stree
Slide 2: Successful Independents FY14 Annual Results
For personal use only SUCCESSFUL INDEPENDENTS FY14 ANNUAL RESULTS, 23 JUNE 2014
Slide 3: Agenda
Agenda For personal use only SESSION TOPIC PRESENTER Introduction & Group Overview Ian Morrice Financials Adrian Gratwicke Strategic Priorities Ian Morrice MFG Fergus Collins ALM Scott Marshall Hardware & Automotive Mark Laidlaw Wrap-up & FY15 Outlook Ian Morrice Q&A All 2
Slide 4: Introduction & Group Overview
For personal use only INTRODUCTION & GROUP OVERVIEW SUCCESSFUL INDEPENDENTS
Slide 5: Overview
Overview For personal use only Result in line with updated guidance given to market on 21 March 2014 Transformation program is progressing well across the group MFG Transformation is well underway and initial results from pilots are encouraging Non-food pillars active in network growth & con
Slide 6: Financial Highlights
Financial Highlights For personal use only June FY14 FY13 Variance (Review Commentary kicked off) Fav / (Unfav) %Var Full year benefit of LMG contract (Liquor), acquisition of ATAP and Sales Revenue $m 13,392.7 12,976.6 416.1 3.2% improved Hardware sales offset by small sales decline in MFG Improved
Slide 7: Financials
For personal use only FINANCIALS SUCCESSFUL INDEPENDENTS
Slide 8: Balance Sheet Extract
Balance Sheet Extract 30 Apr 30 Apr Movement For personal use only 2014 2013 Commentary $m % $m $m Increase in trade receivables reflects expansion in Group offset by debtors improving Trade Receivables 991.7 975.6 16.1 1.6% by 0.4 days Prepayments & other assets 17.4 10.1 7.3 72.3% Decrease reflect
Slide 9: Cashflow Extract
Cashflow Extract FY14 FY13 Movement For personal use only Cash Flow Commentary $m $m $m % Strong working capital management throughout the year Trading cash receipts and payments 500.5 401.9 98.6 24.5% including year end creditor timing difference of circa $80m that will unwind in 1Q15 Decrease aide
Slide 10: Interest Expense
Interest Expense For personal use only FY14 FY13 Change $m Change (%) $m $m Fav/(unfav) Interest Costs 49.8 58.5 8.7 14.9% Deferred Borrowing Costs 3.2 1.8 (1.4) (77.8%) Interest Unwind & Discount Rate Adjustments 12.1 9.0 (3.1) (34.4%) Interest Expense (Total) 65.1 69.3 4.2 6.1% Interest Income 7.9
Slide 11: Significant items
Significant items For personal use only FY14 FY13 Note $m $m Significant items Impairment of retail and other assets 1 34.7 - Strategic review and restructure costs 2 14.8 - Automotive - Acquisition and restructure costs 3 6.6 4.6 Franklins acquisition cost recovery - (3.5) Significant items (before
Slide 12: Gearing, Cash Realisation Ratio & Interest Cover
Gearing, Cash Realisation Ratio & Interest Cover Strong working capital management resulted in an abnormally high CRR for FY14. This is For personal use only expected to reverse in FY15 due to the FY14 timing benefit Increased gearing reflects capital investment but remains within target levels
Slide 13: Dividend & Capital Management
Dividend & Capital Management For personal use only The Board’s long-stated intention has been to return earnings to shareholders whilst ensuring adequate funds are available to invest in the business and in growth opportunities Decision to reduce payout ratio and underwrite DRP to 50% reflects
Slide 14: New Reporting Approach – FY15
New Reporting Approach – FY15 For personal use only Underlying Earnings & EPS Effective 1 May 2014, to simplify the calculation of underlying EPS and in recognition of the quantum of the customer contracts expense and a desire to match the “cause” of such expense with the business division incurri
Slide 15: Strategic Priorities
For personal use only STRATEGIC PRIORITIES SUCCESSFUL INDEPENDENTS
Slide 16: Our priorities are driving change
Our priorities are driving change For personal use only 15
Slide 17: Transformation of Metcash Food & Grocery
1. Transformation of Metcash Food & Grocery MFG transformation driven by shopper and customer needs For personal use only 1 2 3 4 5 6 Shopper-led Competitive Compelling Retail Network ranging pricing fresh offer excellence investments Convenience reset Leveraging Price Match Pilot New GM with
Slide 18: Convenience
Convenience will leverage customers requirements only Significant opportunity to expand within the ~$11.5b Petrol & Convenience (“P&C”) and Food Service markets MTS Convenience is well- MTS Convenience Revenue Potential positioned to grow use personalConvenience & Organised presence: Petrol Stro
Slide 19: Convenience – Strategic Priorities
Convenience – Strategic Priorities 1 2 3 For personal use only Improve C-Store Campbells Wholesale Consolidate Distribution performance Improve performance and C-store sector and profitability profitability Increase share of wallet in Improve elements of value Tailored solutions to both organi
Slide 20: Consolidation & Sustainable Network Growth
2. Consolidation & Sustainable Network Growth For personal use only Strategic role in industry consolidation – recent successes: Midas G Gay & Co Liquor Traders / Thirsty Camel Malz Pleasing progress by non-food pillars in driving sustainable network growth Converting more independent
Slide 21: World Class Supply-chain
3. World Class Supply-chain Split-case (Knapp) For personal use only Automation initiatives are on track Phase 2 (Split Case - Knapp) operational & Phase 3 (Full Case - Mustang) progressing as planned Split Case Pick deployed in NSW: Servicing ~700 P&C and ~700 supermarket customers Improved
Slide 22: Supporting Independents
4. Supporting Independents For personal use only Digital Campbells eCommerce well underway Launched retailer digital services offering Cross-pillar shopping tracking now active Training Academy Training curriculum finalised Content & delivery partnerships under development Identified ben
Slide 23: Metcash Food & Grocery
For personal use only METCASH FOOD & GROCERY SUCCESSFUL INDEPENDENTS
Slide 24: MFG – Financials
MFG – Financials For personal use only Change Supermarket sales impacted by: MFG FY14 FY13 (%) Increased competitive intensity & elevated Sales ($m) 9,072.4 9,120.6 (0.5%) fuel discounting up to end of December (resulting in some loss of market share) EBITA ($m) 304.3 377.9 (19.5%) Affected by
Slide 25: MFG – Operating Highlights
MFG – Operating Highlights For personal use only EBIT down due to the deleveraging effect of reduced sales and cumulative deflation LFL sales growth in charge thru business & lower margin categories negatively impacted mix Increased investment in the retailer network through pricing and developm
Slide 26: Transformation Lever Update
Transformation Lever Update For personal use only 1 2 3 4 5 6 Shopper-led Competitive Compelling Retail Network Convenience ranging pricing fresh offer excellence investments reset Leveraging Price Match pilot New GM with Diamond Refurbishment Focus on Diamond delivering 30+ years Standa
Slide 27: Competitive Pricing – Accelerating the program
Competitive Pricing – Accelerating the program Pilot delivering expected sales uplift (retail and warehouse) For personal use only Black & Gold volume uplift of 25-30% Over 55% of reference basket achieving higher than anticipated elasticity “Ritchies will be including all Retailer GP$ positiv
Slide 28: Competitive Pricing - Pilot Learnings
Competitive Pricing - Pilot Learnings For personal use only Four key learning's have enhanced program: Reference basket has been refined to further optimise profitability and meet shopper needs Detailed consumer research, including exit surveys from stores, have refined point-of sale and strengt
Slide 29: Diamond Standard tool-kit delivers actionable guidelines
Diamond Standard tool-kit delivers actionable guidelines across four Diamond levers CURRENT PILOT STORE DIAMOND STANDARD STORE For personal use only SHOPPER LED Shelf RANGING productivity toolkit COMPELLING FRESH OFFER Diamond guidelines for in-store execution (Business check lists, best practice ma
Slide 30: Shelf productivity tool allows stores to better align range
Shelf productivity tool allows stores to better align range with shopper needs and.... For personal use only CURRENT PILOT STORE EXAMPLE $GP / m* Tobacco Expanding Fresh space by 30-40% delivers higher sales/m² Fresh(Before) Increase attractive growth categories, e.g. Chilled(Before) Health, Bab
Slide 31: Realise opportunities by reducing low-productivity categories
...realise significant opportunities by reducing low-productivity categories For personal use only CURRENT PILOT STORE EXAMPLE Category complexity by value tier Laundry Powder Reduce range complexity and 60 free up space across a range of mature categories 40 Less space allocated to slow Benchma
Slide 32: Australian Liquor Marketers
For personal use only AUSTRALIAN LIQUOR MARKETERS SUCCESSFUL INDEPENDENTS
Slide 33: ALM – Financials
ALM – Financials For personal use only Liquor sales grew by 8.3% driven by: Liquor FY14 FY13 Change (%) LMG supply contract Sales ($M) 3,160.8 2,917.6 8.3% IBA achieving >3% like-for-like growth EBITA ($M) 53.8 47.1 14.2% IBA grew wine sales in $15 - $25 price bracket – improved ranging EBIT
Slide 34: ALM – Operating Highlights
ALM – Operating Highlights For personal use only IBA Store numbers increased by 101 Delivery of store traffic drivers and market competitive consumer offers Category projects converted sales to higher value transactions Everyday Value program delivered growth in each category Execution of
Slide 35: ALM – Progress on Strategic Priorities
ALM – Progress on Strategic Priorities For personal use only ALM network ALM CUSTOMERS Reduction in CODB in the supply chain against FY13 – further automation in FY15 CONTROLLED MARKETING On premise sales grew via strategic supplier support GROUPS Improvements to online ordering and discount s
Slide 36: Hardware & Automotive
For personal use only HARDWARE & AUTOMOTIVE SUCCESSFUL INDEPENDENTS
Slide 37: Hardware & Automotive – Financials
Hardware & Automotive – Financials For personal use only Hardware & Change Mitre 10 recorded another solid result FY14 FY13 Automotive (%) Sales up 10.2% on last year & 3.4% LFL basis Sales ($M) 1,159.5 938.4 23.6% Driven by solid growth in Trade (especially timber EBITA ($M) 53.5 36.2 47.8% cha
Slide 38: Hardware & Automotive – Operational Highlights
Hardware & Automotive – Operational Highlights For personal use only Hardware Automotive Continued to convert ‘independent Strong sales: business’ from competitors Both Retail and Trade experienced solid underlying LFL sales growth Additional 23 independent stores were converted to Mitre 10
Slide 39: Hardware - Progress on Strategic Priorities
Hardware - Progress on Strategic Priorities For personal use only VALUE TO THE Network growth & compliance: Continue to convert ‘independent business’ from competitors CONSUMER 80 stores added over 3 years (including the recent acquisition of Gays in Ballarat) SHOPPER-LED Growth also came thro
Slide 40: Automotive - Progress on Strategic Priorities
Automotive - Progress on Strategic Priorities For personal use only Successful retail / trade Catalogue Programs CUSTOMER VALUE Enhanced in-store experience with refreshed store standards – 25% network complete Extended Training academy LOWEST COST TO SERVE Multi-service Distribution Centres
Slide 41: Outlook & Wrap Up
For personal use only OUTLOOK & WRAP UP SUCCESSFUL INDEPENDENTS
Slide 42: Looking forward
Looking forward For personal use only Challenging market Ongoing market conditions expected to continue Good progress is being made against the strategic priorities laid out at the Strategy Day in March 2014 Momentum is building across the Group Transformation program underway and initial re
Slide 43: Questions & Answers
For personal use only QUESTIONS & ANSWERS 42
Slide 44: Appendices
For personal use only APPENDICES SUCCESSFUL INDEPENDENTS
Slide 45: Appendices
Appendices For personal use only 1. Group Sales Revenue – 5 Year Trend 2. Cost of Doing Business – 5 Year Trend 3. EBITA – 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. Grou
Slide 46: Group Sales Revenue
Group Sales Revenue For personal use only Commentary Group Sales Revenue up 3.2% Includes full year benefit of LMG contract in Liquor, which came into 14,000 effect in October 2012. 13,500 13,393 12,977 Increase in Automotive sales ($134.2m) 13,000 primarily due to ATAP acquisition. 12,501 12,
Slide 47: CODB as % of Gross Profit
CODB as % of Gross Profit For personal use only • Increase reflects the deleveraging impact of sales decline, deflation and consequential impact on GP in MFG 70.0% • Higher relative CODB and GP in 67.53% growing hardware and automotive business due to the nature of these businesses 65.0% • Includes
Slide 48: EBITA
EBITA For personal use only EBITA decline of 11.7% reflects: 500 460.4 451.2 Decline in MFG due to reduction in 450 438.0 sales volume, increase in pricing, 401.2 406.7 development support & marketing 400 investment along with deflationary 350 effects and unfavourable sales mix (deleverage impac
Slide 49: PAT
PAT For personal use only Variance Variance FY14 FY13 $m % PAT ($m) - Underlying 1 250.1 280.7 (30.6) (10.9%) PAT ($m) - Reported 169.2 206.0 (36.8) (17.9%) 300 Reported 280.7 Underlying 262.5 256.2 250.1 244.9 241.4 250 227.6 Primarily represents 206.0 significant items of $54.0m 200 169.2 $m 150 1
Slide 50: EPS
EPS For personal use only Variance Variance 13.2% dilution in line FY14 FY13 cps % with guidance issued in EPS - Underlying (cps) 1 28.3 32.6 (4.3) (13.2%) March 2014 (13%-15%) EPS - Reported (cps) 19.2 24.0 (4.8) (20.0%) 40 Reported Underlying 35 33.4 34.1 32.0 32.6 31.5 29.7 30 28.3 Primarily refl
Slide 51: Operating Cash Flow
Operating Cash Flow For personal use only Strong working capital management 450 and circa $80m 388.7 timing benefit 400 350 294.7 299.8 300 284.3 250 $M 200 142.5 150 100 50 0 2010 2011 2012 2013 2014 50
Slide 52: Reconciliation – Group Results (Reported and Underlying)
Reconciliation – Group Results (Reported and Underlying) For personal use only FY14 FY13 FY14 FY13 $m $m EPS (cps) EPS (cps) EBITDA 460.1 507.3 Depreciation and Amortisation (53.4) (46.9) EBITA 406.7 460.4 Net Interest (57.2) (61.6) Profit Before Tax and Amortisation 349.5 398.8 Tax (97.9) (115.0) N
Slide 53: Group Results by Division
Group Results by Division For personal use only Sales Revenue - $m FY14 FY13 Change (%) EBITA - $m FY14 FY13 Change (%) Food & Grocery 9,072.4 9,120.6 (0.5%) Food & Grocery 304.3 377.9 (19.5%) Liquor 3,160.8 2,917.6 8.3% Liquor 53.8 47.1 14.2% Hardware & Automotive 1,159.5 938.4 23.6% Hardware & Aut
Slide 54: Retail Put Options & Guarantees (On Balance Sheet)
Retail Put Options & Guarantees (On Balance Sheet) For personal use only Estimated Liability Recognised Exposure FY14 FY14 FY13 Movement Movement Note $m $m $m $m % Put Options over NCI MAH (16.8%, FY13 = 24.9%) 2 34.9 34.9 22.4 12.5 55.8% Faggs (25%), Clennetts (20%), Capeview (20%) 11.7 11.7 8.6 3
Slide 55: Retail Put Options (Off Balance Sheet)
Retail Put Options (Off Balance Sheet) For personal use only Estimated Liability Recognised Exposure FY14 FY14 FY13 Movement Movement Note $m $m $m $m % Contingent Retail Put Options M10 JV's (2 entities) 2 2.3 - - - - Retail stores (1 store) 3 7.5 - - - - Notes 1. The exposures presented in the abo
Slide 56: Trend Metrics - Financial
Trend Metrics - Financial FY2010 FY2011 FY2012 FY2013 FY2014 CAGR For personal use only Full Year Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Sales Revenue $m 11,517 12,364 12,501 12,977 13,393 3.8% Underlying results: EBITDA $m 441.4 483.4 495.9 507.3 460.1 1.0% EBITA $m 401.2 438.0 451.2 460.4 406.7 0.3% P
Slide 57: Trend Metrics – Operational
Trend Metrics - Operational Branded Stores For personal use only Apr 10 Oct 10 Apr 11 Oct 11 Apr 12 Oct 12 Apr 13 Oct 13 April 14 Grocery Supa IGA 446 449 463 468 475 475 506 513 505 IGA 718 735 734 723 744 735 773 780 801 Xpress 156 170 183 178 184 183 183 185 190 IGA branded stores 1,320 1,354 1,3
Slide 58: Trend Metrics – Operational (MFG)
Trend Metrics – Operational (MFG) Independent retailers continue to invest in strengthening the network For personal use only Highly selective approach to new stores developments, extensions and refurbishments Branded Stores FY14 FULL YEAR COMPLETED 1H COMPLETED 2H (IGA – 3 channels) ACTUAL NO S
Slide 59: Sustainability Metrics
Sustainability Metrics FY13-14 FY12-13 FY11-12 FY10-11 FY09-10 For personal use only People Lost Time Injury (LTI) 126 148 221 222 244 Lost Time Injury Frequency Rate (LTIFR) (1) 14.1 16.3 25.2 21.3 25.9 Group Turnover % 14.8 18.9 27.3 23.2 20.6 2013 2012 2011 2010 Environment Resource Efficiency Pr
Slide 60: Definition of Underlying EPS – FY15
Definition of Underlying EPS – FY15 For personal use only 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 hi
Slide 61: Underlying Pillar Results – EBITA vs. EBIT
Underlying Pillar Results – EBITA vs. EBIT For personal use only 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) FY10 375.4 368.9 36.1 36.1 1.5 1.5 (11.8) (11.8) 401.2
Slide 62: Key Financial Metrics – FY15
Key Financial Metrics – FY15 For personal use only 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 perfo
Slide 63: Directory of Terms
Directory of Terms Metcash’s Business Areas & Terms For personal use only 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 dis
Slide 64: Directory of Terms
Directory of Terms Financial Terms For personal use only Cash realisation ratio Cash Flow from operations/Reported NPATDA (depreciation and amortisation tax effected) CODB Cost of doing business Net Debt */ Shareholder’s Equity + Net Debt* Gearing *Including hedged USPP debt Intangible Amortisation
Slide 65: Contact Details
Contact Details For personal use only For additional information contact: Adrian Gratwicke, Chief Financial Officer Phone: 61 2 9741 3248 Fax: 61 2 9741 3027 E-mail: adrian.gratwicke@metcash.com Stephen Woodhill, Group General Manager Corporate Affairs Phone: 61 2 9741 3415 Fax: 61 2 9741 3027 E-mai
Slide 66: Disclaimer
Disclaimer For personal use only 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 s
Slide 67: Successful Independents Thank You
For personal use only SUCCESSFUL INDEPENDENTS THANK YOU