Slide 1: ASX cover letter: CEO presentation
Metcash Limited ABN 32 112 073 480 50 Waterloo Road Macquarie Park NSW 2113 Australia PO Box 6226 Silverwater Business Centre NSW 1811 Australia Ph: 61 2 9751 8200 30 November 2010 Fax: 61 2 9889 1557 The Manager, Companies Australian Stock Exchange Company Announcements Office Level 4 20 Bridge Str
Slide 2: Company Results Half Year Ending 31 October 2010
Company Results Half Year Ending 31 October 2010 Andrew Reitzer Chief Executive Officer 30 November 2010
Slide 3: Group Headlines
GROUP HEADLINES Strong performance in context of difficult trading conditions and prior year comps Variance FY11 1H FY10 1H (%) WHOLESALE SALES ($m) 1 5,939.8 5,612.1 5.8% Like for like = 2.3% EBITA - Underlying ($m) 1 199.4 184.9 2 7.7% Like for like = 7% EBITA MARGIN - Underlying (%) 3.36% 3.29% +
Slide 4: Like for Like Sales and EBITA
'LIKE FOR LIKE' SALES AND EBITA Variance Wholesale Sales FY11 1H FY10 1H (%) $m $m Group Wholesale Sales 5,939.8 5,612.1 1 5.8% Deflation, weak consumer demand and Less: adverse weather ALH Volume (41.3) (215.1) conditions experienced by all divisions Campbells Wholesale branch closures - (24.3) Har
Slide 5: Financial Highlights – Group
FINANCIAL HIGHLIGHTS – GROUP 3
Slide 6: Wholesale Sales
WHOLESALE SALES Group wholesale sales up 5.8% Strong IGA>D sales (up 4%) despite persistent tight trading conditions and an increasingly value-conscious consumer Mitre 10 (hardware) business in Metcash hands for full half contributing $401m to sales +5.8% on Achieved despite loss of ALH busine
Slide 7: Market Share
MARKET SHARE Market share (MAT) steady in the face of increased competitive promotional programs MAT to 24 Oct 10 at 19.7% Last quarter 0.8% up on same quarter LY to 19.8% Market share steady 22% 19.8% 19.7% 18.5% 18.8% 18.4% 18% MAT 14% NOTES: 1. Market share data is for defined dry grocery pro
Slide 8: CODB as % of Gross Profit
CODB AS % OF GROSS PROFIT Further CODB improvement down 21 bps - reduction due to: Incremental and sustained improvements in DC operations and across entire supply chain Progressively streamlining operational practices across IGA Fresh operations Cost saving synergies flowing from CW Project ‘
Slide 9: EBITA
EBITA EBITA up 7.7 % on wholesale sales growth of 5.8% On a like for like basis, EBITA growth impressive at 7.0% on 2.3% wholesale sales uplift Operating leverage improvement from strong EBITA performance in IGA>D and CW driven in particular by CODB reductions +7.7% on pcp 220.0 199.4 184.9 192.
Slide 10: PAT
PAT FY11 1H FY10 1H Variance (%) PAT ($m) - Underlying 115.0 1 112.4 1 2.3% PAT growth impacted by higher PAT ($m) - Reported 110.2 109.2 0.9% interest costs PA T Reported PA T Underlying 140.0 112.4 115.0 110.0 100.3 109.2 110.2 89.2 76.1 $M 80.0 86.2 80.0 66.1 50.0 NOTES: 1. A definition of 'Under
Slide 11: Operating Cash Flow
OPERATING CASH FLOW Cashflow of $20.2m (pcp $207.3m) Significant timing impacts in both current and prior year Covered in more detail in Financial Insights section below Cashf low PA TBDA Cut-off timing, particularly in accounts payable, has 207.3 ‘overstated’ 1H10 and ‘understated’ 1H11 200.0 1
Slide 12: EPS
EPS FY11 1H FY10 1H Variance (%) EPS - Underlying 15.00 1 14.69 1 2.1% EPS - Reported 14.38 14.27 0.8% Within guidance range on a 44:56 earnings split EP S Repo rted EP S - Underlying 16.0 15.0 14.7 14.0 13.1 14.3 14.4 NOTES: 1. Underlying EPS is stated pre NRI and pre IA (consistent with 11.7 EPS g
Slide 13: DPS
DPS The Board has declared an interim dividend of 11.0 cents a share (100% franked) This represents a payout ratio of: 76% of Reported EPS (73% of Underlying EPS) 12.0 11.0 11.0 10.0 10.0 9.0 8.0 Cents 7.0 6.0 4.0 NOTES: 1. Metcash dividend and capital 2.0 management policy reiterated in Appendix
Slide 14: Divisional Highlights - IGA>D
DIVISIONAL HIGHLIGHTS - IGA>D 12
Slide 15: IGA>D - Financials
IGA>D - FINANCIALS FY11 1H FY10 1H Variance (%) 1.5x operating leverage WHOLESALE SALES ($m) 3,624.6 3,486.6 4.0% EBITA ($m) 173.2 163.3 6.0% EBITA MARGIN (%) 4.78% 4.68% +10bps Wholesale sales up 4.0% and comp store sales up 3.3% Good sales growth in light of competition and deflation; and strong
Slide 16: IGA>D – Sales Performance
IGA>D – SALES PERFORMANCE Grocery ‘Comp’ sales encouraging given deflation, heightened competitive activity and customers becoming more value driven FY09 FY10 FY11 1H 1H 1H Base Business 9.8% 9.3% 4.0% Strong growth in a highly ‘value-driven’ market New Stores & 1H10 includes impact of sales 'ac
Slide 17: IGA>D - Retail Development
IGA>D - RETAIL DEVELOPMENT Strong retail development activity indicates retailers’ preparedness to invest in new and refurbished stores despite macroeconomic conditions Branded Stores (IGA – 3 channels + Friendly Grocer + Eziway) COMPLETED PLANNED FORECAST 1H 2H FULL YEAR NO. SQM NO. SQM NO. SQM Mai
Slide 18: IGA>D - Operational Review: Store Buy Back
IGA>D - OPERATIONAL REVIEW Store Buy Back Strategy Ownership transfer to experienced and capable retailers 60 buy back opportunities identified with 11 completed Store Buy Back – Case Study Date changed hands 4 May 09 Weekly warehouse withdrawals © 58% under new owner Investment in business Re
Slide 19: IGA>D - Operational Review: Brand Rejuvenation
IGA>D - OPERATIONAL REVIEW Our Brand Rejuvenation IGA 'How the Locals Like It' - launched in July 2010 Local community focus - intrinsic to tagline Aligned with and designed to highlight independent retail store diversity - responsive to local consumer demands Supported by a series of televi
Slide 20: IGA Fresh Strategy - Operational Review
IGA FRESH STRATEGY - OPERATIONAL REVIEW Performance Good overall growth, though hampered by deflation and increasing focus from consumers on 'value' products Produce Tough market environment characterised by high promotional activity / aggressive pricing and persistent deflation - notably in NSW
Slide 21: Divisional Highlights - Australian Liquor Marketers (ALM)
DIVISIONAL HIGHLIGHTS - AUSTRALIAN LIQUOR MARKETERS (ALM) 19
Slide 22: ALM - Financials
ALM - FINANCIALS Good FY11 1H FY10 1H Variance (%) performance in context of market SALES ($m) 1,095.0 1,282.3 declining by 4% Less: ALH Volume Loss (41.3) (215.1) Like for Like Sales 1,053.7 1,067.2 -1.3% EBITA ($m) 9.9 14.6 Less: ALH Volume Loss - (4.9) Margin reduction Like for Like EBITA 9.9 9.7
Slide 23: Divisional Highlights - Campbells Wholesale
DIVISIONAL HIGHLIGHTS - CAMPBELLS WHOLESALE 21
Slide 24: Campbells Wholesale - Financials
CAMPBELLS WHOLESALE - FINANCIALS FY11 1H FY10 1H Variance (%) SALES ($m) 819.0 843.1 In line with previously, Less: 8 Store Closures (24.3) disclosed ‘Project Streamline’ Like for Like Sales 819.0 818.8 - $2.5m increase on PY EBITA ($m) 16.0 13.5 +18.6% reflects benefits of EBITA MARGIN (%) 1.95% 1.
Slide 25: Campbells Wholesale - Operating Performance
CAMPBELLS WHOLESALE - OPERATING PERFORMANCE Post Project ‘Streamline’, operating divisions now comprise: Business Model Wholesale format in metropolitan / regional Single unit pick supplying confectionery and Specialist food service business (WA & areas supplying grocery, confectionery and con
Slide 26: Divisional Highlights - Mitre 10
DIVISIONAL HIGHLIGHTS - MITRE 10 24
Slide 27: Mitre10 – Hardware Distribution
MITRE10 – Hardware Distribution Performance Stabilise Change the Game Grow Sales $401.2 m and EBIT $6.8m Trade sales performing well until impact of wet weather Mitre 10 retail brand / format consistency initiative commenced Warehouse and chargeback sales yet to benefit Store development t
Slide 28: Metcash Supply Chain Initiatives
METCASH SUPPLY CHAIN INITIATIVES Each year we seek incremental and innovative ways of improving how we operate. This year our persistent efforts to make our supply chain responsive to our customer needs was rewarded by SCLAA Winner - 2010 ASCL Supply Chain Management Award High Recommendation -
Slide 29: Financial Insights
'Champion of the Independent Retailer' Financial Insights Adrian Gratwicke General Manager, Finance 27
Slide 30: Financials: Balance Sheet, Cashflow, Working Capital, Interest
FINANCIALS - BALANCE SHEET EXTRACT - CASHFLOW EXTRACT - WORKING CAPITAL ANALYSIS - INTEREST EXPENSE 28
Slide 31: Balance Sheet - Extract
BALANCE SHEET - EXTRACT 30-Apr-10 31-Oct-10 Movement #039;m #039;m $m % Commentary Seasonal increase with October stock purchases. Reduction in payment terms of approx 0.5 days due in part to tobacco and Fresh volume mix. Trade and other payables -1,294.4 -1,305.7 -11.3 1% Inventories 747.2 776.9 29.7 4%
Slide 32: Cashflow - Extract
CASHFLOW - EXTRACT Oct-09 Oct-10 Inc/(Dec) $m $m $m $m $m Commentary EBITDA 204.7 220.2 15.5 Increase due to higher average debt levels (post M10 acquisition) and rising interest Net Interest Paid (22.5) (31.2) (8.7) rates. Taxation Paid (64.9) (72.3) (7.4) Current year includes final two FY10 insta
Slide 33: Working Capital Analysis
WORKING CAPITAL ANALYSIS Oct-09 Oct-10 Movement $m $m $m Commentary Timing related - this 'Movement' in Oct 09 was +$145m, due in particular to an accounts payable cut-off impact. In addition, increased provisions in the prior period have since been realised (approx $34m payment of deferred wage inc
Slide 34: Interest Expense
INTEREST EXPENSE Variance Oct 10 Oct 09 (%) Interest Expense (Total) 36.5 27.3 33.7% Interest Income (3.6) (3.2) 12.5% Interest Expense (Net) 32.9 24.1 36.5% 34% increase in interest expense Higher average debt and higher cash rates compared to 1H10 Average debt up by ~ $100m – Mitre 10 Cash b
Slide 35: Conclusions - Key Messages - Earnings Guidance
CONCLUSIONS - KEY MESSAGES - EARNINGS GUIDANCE 33
Slide 36: Key Messages
KEY MESSAGES PERFORMANCE Sales © 4.0% Sales ª -1.3% L4L (ALH loss) Sales - L4L flat (8 stores closed) Sales $401.2m EBIT © 6.0% EBIT © 2.1% L4L EBIT © 18.6% EBIT $6.8m Operating leverage at 1.5x Operating leverage Operating leverage FUTURE DIRECTION Focus on Value IBA and Liquor Alliance store
Slide 37: Earnings Guidance – FY11
EARNINGS GUIDANCE – FY11 Directors are pleased with the Group’s performance in 1H11 - in line with guidance on a 44/56% earnings split basis, however; The Board expresses its concern that the continuation of the extremely tight trading conditions experienced throughout the first half onwards int
Slide 38: Champion of the Independent
'Champion of the Independent' 36
Slide 39: Appendices
APPENDICES 1. Reconciliation – Group Results (Reported and Underlying) 2. Reconciliation – Profit After Tax (Underlying to Appendix 4D) 3. Split of Business – EBITA by Division 4. Dividend and Capital Management Policy 5. Trend Metrics (Financial & Operational) 6. Metcash Total Shareholder Return 7.
Slide 40: Reconciliation - Group Results (Reported and Underlying)
RECONCILIATION - GROUP RESULTS (REPORTED AND UNDERLYING) Oct 10 Oct 09 $m $m EBITA 199.4 184.9 Net Interest (32.9) (24.1) Profit Before Tax and Amortisation 1 166.5 160.8 Tax (48.5) (47.7) Minority Interest (3.0) (0.7) Underlying PAT 115.0 112.4 Intangible Amortisation (3.8) (3.2) Profit After Tax p
Slide 41: Reconciliation - Profit Before Tax
RECONCILIATION - PROFIT BEFORE TAX (UNDERLYING TO APPENDIX 4D) Oct 10 Oct 09 $m $m Profit Before Tax - Underlying 1 166.5 160.8 Amortisation (3.8) (3.2) Significant and Non-recurring items before tax 2 (1.0) - Profit before tax per Appendix 4D 161.7 157.6 (Consolidated Statement of Comprehensive Inc
Slide 42: Split of Business – EBITA by Division
SPLIT OF BUSINESS – EBITA BY Division Food Distribution Liquor Distribution Cash & Carry Distribution Hardware Distribution $M 260.0 Total Total $205.9 220.0 $191.4 Total $6.8m (3.3%) - Hardware $176.7 Distribution (Mitre 10) Total 16.0 (7.8%) 13.5 (7.1%) 180.0 Total $157.2 9.9 (4.8%) 15.8 (8.9%) 14
Slide 43: Dividend & Capital Management Policy
DIVIDEND & CAPITAL MANAGEMENT POLICY The Board’s intention is to return earnings to shareholders whilst retaining adequate funds within the business to invest in future growth opportunities The proposed 1H11 dividend of 11.0 cents per share represents approximately: 76% of Reported EPS (pcp 77
Slide 44: Trend Metrics – Financial
TREND METRICS – FINANCIAL FY2007 FY2008 FY2009 FY2010 FY2011 Half Year CAGR Oct 06 Oct 07 Oct 08 Oct 09 Oct 10 Sales (wholesale & retail) $ millions 4,733 4,919 5,270 5,612 5,940 5.8% Sales (wholesale) $ millions 4,573 4,867 5,263 5,612 5,940 6.8% EBITDA - reported $ millions 159.5 175.0 193.5 204.7
Slide 45: Trend Metrics - Operational
TREND METRICS - OPERATIONAL Branded Stores - Grocery Oct 08 Apr 09 Oct 09 Apr 10 Oct 10 (IGA – 3 channels + Friendly Grocer + Eziway) Supa IGA 425 430 440 446 449 IGA 720 717 720 718 735 Xpress 129 131 140 156 170 IGA branded stores 1,274 1,278 1,300 1,320 1,354 Friendly Grocer / Eziway 323 351 339
Slide 46: Total Shareholder Return
TOTAL SHAREHOLDER RETURN TSR under current management vs market 6.00 5.00 Share price (rebased) to MTS MTS: 32% 4.00 3.00 2.00 1.00 ASX 200: 8% 0.00 Jan 01 May 02 Oct 03 Mar 05 A ug 06 Jan 08 Jun 09 Oct 10 MTS ASX 200 Note: Total Shareholder Returns (TSR) represents share price appreciation and divi
Slide 47: Directory of Terms
DIRECTORY OF TERMS ALM - 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 specialist ‘on-premise’ distr
Slide 48: Directory of Terms
DIRECTORY OF TERMS Financial Metrics Definitions CAGR - Compound Annual Growth Rate over 4 years (FY07 to FY11) Cash realisation ratio - Net operating cash flow (not adjusted for non-recurring items) / [Profit after tax pre non recurring items + Depreciation + Amortisation (tax effected) ] Gea
Slide 49: Directory of Terms
DIRECTORY OF TERMS Mitre 10 - Hardware wholesaler and marketer of Mitre 10 hardware store brand. Supplies over 400 Mitre 10 and True Value branded stores (all independently owned) and 400+ non-branded independents. 50.1% voting power acquired by Metcash on 25 Mar 2010, with right to acquire the rema
Slide 50: For additional information contact
For additional information contact: Adrian Gratwicke, GM Finance Phone: 61 2 9741 3248 Fax: 61 2 9741 3027 E-mail: adrian.gratwicke@metcash.com Or visit our website: www.metcash.com 48
Slide 51: 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