Metcash Limited · ASX:MTS
Metcash — H1 FY2008 Earnings Presentation
54 slides from Metcash's earnings presentation, Dec 4, 2007
Slide 1: Cover letter: CEO Presentation
Metcash Limited ABN 32 112 073 480 4 Newington Road Silverwater NSW 2128 Australia For personal use only PO Box 6226 Silverwater Business Centre NSW 1811 Australia Ph: 61 2 9741 3000 Fax: 61 2 9741 3399 4 December 2007 The Manager, Companies Australian Stock Exchange Company Announcements Office Lev
Slide 2: Company Results Half Year Ending 31 October 2007
1 “Champion of the Independent Retailer” 2008 For personal use only Company Results Half Year Ending 31 October 2007 Andrew Reitzer Chief Executive Officer
Slide 3: Group Headlines
2 GROUP HEADLINES 2008 For personal use only AN EXCELLENT RESULT IN A PERIOD OF SIGNIFICANT MARKET UPHEAVAL, INCLUDING TWO MONTHS OF HEAVY PRICE DISCOUNTING FY08 1H FY07 1H Variance WHOLESALE SALES ($m) 4,867 *1 4,573 *1 6.4% CODB / GP (%) 68.04% 68.37% -33bps EBITA ($m) - Reported 153.7 *2 137.9 *2
Slide 4: Financial Highlights - Group
3 2008 For personal use only FINANCIAL HIGHLIGHTS - GROUP
Slide 5: Wholesale Sales
4 WHOLESALE SALES 2008 For personal use only Group wholesale sales up 6.4% driven by strong performance across all three divisions – discussed further in individual divisions results +6.4% on 5,000 4,867 pcp 4,573 +6.4% +32.7% 4,000 3,447 CAGR 10.8 % $M 3,140 3,216 since 2003 +7.2% 3,000 +2.4% +7.6%
Slide 6: Market Share
5 MARKET SHARE Market Share for 4w/e Oct 07 was 19% and has been maintained: 2008 For personal use only Despite heightened price competition for 2 months of the half Reflecting the strength of the “Independent” sector, their differentiated market position and ongoing supplier support +0.5% on 07
Slide 7: EBITA
6 EBITA 2008 only FY08 1H FY07 1H Variance EBITA ($m) - Reported 153.7 137.9 11.5% EBITA ($m) - Normalised 153.7 *2 141.9 *2,3 8.3% use Reflects approx. 45-46% of full year earnings For personal 160.0 153.7 141.9 +8.3% +49.1% CAGR 120.0 16.5%pa 95.2 $M 91.8 since 2004 84.1 80.0 +9.1% +3.7% +17.2% NO
Slide 8: EBITA Margin
7 EBITA MARGIN EBITA Margin up 14bps on 1H 07 (down 13bps from year end) reflecting: 2008 For personal use only 2H traditionally stronger margin half – over 10bps increment Flat CW EBITA result on strong sales performance Abnormal stocktake loss Sales impact from discounting by chains Impact
Slide 9: Operating Cashflow After Tax
8 OPERATING CASHFLOW AFTER TAX 2008 For personal use only Metcash operations continue to throw off significant cashflows enabling trading opportunities to be optimised, debt reduction, supply chain reinvestment, and return of cash to shareholders Strong Operating Cashflow PATBDA cashflow 120.0 gener
Slide 10: CODB as % of GP
9 CODB AS % OF GP 2008 For personal use only Metcash has reduced CODB a further 0.33% this year reflecting its continuing ability to secure supply chain efficiencies in spite of inflationary cost pressures Ongoing strong cost control & 80.0% productivity improvement 70.00% 69.44% 68.88% 68.37% 68.04
Slide 11: PBT as % of Wholesale Sales
10 PBT AS % OF WHOLESALE SALES 2008 For personal use only PBT up 10bps on pcp and reflects EBITA margin as described above +10bps on 4.0% pcp 3.5% 3.0% 2.8% 2.5% 2.6% 2.5% 2.3% 2.3% NOTES: 2.0% 1. FY07stated before restructure costs and Action Loss 1.5% 2. FY06 impacted by increased interest costs (
Slide 12: PAT
11 PAT 2008 only FY08 1H FY07 1H Variance PAT ($m) - Reported 86.2 66.1 *1 30.4% PAT ($m) - Normalised 86.2 75.9 *1 13.6% use Normalised PAT +13.6% PAT Reported PAT Norm alised on sales growth of For personal 90.0 86.2 6.4% 75.9 70.0 60.9 CAGR 56.0 66.1 17.8%pa $M 45.8 since 2004 50.0 NOTES: 1. FY07
Slide 13: EPS
12 EPS 2008 use only FY08 1H FY07 1H Variance EPS - Reported 11.3 *1 8.8 *1 28.4% EPS – Normalised, pre GA 11.7 *1,3 10.2 *1,2,3 14.7% Normalised EPS +14.7% EPS Reported EPS Normalised In line with 12.0 11.3 For personal guidance on 9.6 9.8 annualised 10.0 8.8 basis 8.3 8.0 8.8 NOTES: Cents 1. FY08
Slide 14: DPS
13 DPS 2008 use only The Board has declared an Interim Dividend of 9.0 cents a share (100% franked) This represents a payout ratio of 80% of Reported EPS (73% for FY07). +2.0cps on pcp 10.0 9.0 For personal 8.0 7.0 +28.6% Cents 6.0 5.5 5.5 +27.3% 5.0 +10.0% +0.0% +25.0% 4.0 NOTES: 1. FY06 impacted b
Slide 15: Dividend & Capital Management
14 DIVIDEND & CAPITAL MANAGEMENT 2008 For personal use only The Board’s intention is to return earnings to shareholders whilst retaining adequate funds within the business to invest in future growth opportunities The half year dividend of 9.0 cents per share represents approximately 80% of Repor
Slide 16: Divisional Highlights – IGA>D
15 2008 For personal use only DIVISIONAL HIGHLIGHTS – IGA>D
Slide 17: IGA>D - Financials
16 IGA>D - FINANCIALS 2008 For personal use only IGA>D continues its impressive performance as the powerhouse of the group displaying strong underlying growth and maintaining expected leverage at 1.5X despite increased price competition for 2 months in the half FY08 1H FY07 1H Variance 1.5x operatin
Slide 18: IGA>D – Growth Analysis
17 IGA>D – GROWTH ANALYSIS 2008 For personal use only FY07 FY071H FY FY07 FY08FY1H Legacy Base Business Business 10.3% 7.8% 7.8% 7.1% See Store Development slide below Inflation New Store Growth (3.0)% (2.0)% (??)% (0.6)% Pre-Inflation Comp Store Growth 7.3% 5.8% 5.7% 6.5% New Store Growth Inflation
Slide 19: IGA>D – Operating Performance
18 IGA>D – OPERATING PERFORMANCE 2008 For personal use only Wholesale Sales up 7.1% and comp store sales up 6.4% Total IGA>D market share per AC Nielsen up to 18.9% MAT to 28 October (compared to 18.4% MAT last year) IGA growth in the market (MAT to 28 October) was 7.6% compared to overall mar
Slide 20: IGA>D – Retail Development
19 IGA>D – RETAIL DEVELOPMENT 2008 For personal use only IGA COMPLETED 1H PLANNED 2H FULL YEAR NO. SQM NO. SQM NO. SQM New Stores 25 20,864 30 25,474 55 61,069 Conversions 13 5,825 7 5,976 20 11,801 Extensions 14 4,358 38 20,809 52 25,167 Refurbishment 48 N/A 44 N/A 92 N/A Sales impact dependent u
Slide 21: IGA>F - New Division
20 IGA>F - NEW DIVISION Sales (F&V) $55m for half, up $9.5m (20.9%) on pcp 2008 For personal use only Fresh Sales ex-Perishable DC’s $77.5m ($76m pcp) Charge through Fresh Sales $132m ($108m pcp) But progress slower than desired – particularly on F&V expansion So, restructured operations a
Slide 22: IGA>D – Sale of WA Stores
21 IGA>D – SALE OF WA STORES 2008 For personal use only In-principle agreement reached with Progressive Trading Ltd (PTL) for purchase of 11 Progressive Supa IGA stores in WA PTL comprises a joint venture between ex-Action senior managers Bendigo retail group Metcash (to retain cornerstone
Slide 23: IGA>D – Growth Drivers
22 IGA>D – GROWTH DRIVERS 2008 For personal use only Increase Teamwork Score Restructured Fresh division + faster national roll-out Retail Development $100m Refurbishment fund Not on MTS balance sheet (100% bank funded) Rebate to offset interest cost over first 3 years Retailer must pr
Slide 24: Divisional Highlights - ALM
23 2008 For personal use only DIVISIONAL HIGHLIGHTS - ALM
Slide 25: ALM - Financials
24 ALM - FINANCIALS 2008 For personal use only Variance FY08 1H FY07 1H (%) SALES ($m) 1,206 1,198 0.6% Good underlying Hedley Impact (63) sales growth 1,135 6.2% EBITA ($m) 13.3 12.5 6.2% EBITA MARGIN (%) 1.10% 1.04% 6bps Good sales performance given loss of Hedley / Coles volume in pcp Excludi
Slide 26: ALM - Operating Performance
25 ALM - OPERATING PERFORMANCE 2008 For personal use only Reported sales up slightly (0.6%) on last year But adjusting for loss of the Hedleys business up 6.2% Underlying growth driven by IBA Sales to Celebrations +11% and IGA Plus Liquor +10% MAT Strong EBITA growth of 6.2% to $13.3m EB
Slide 27: ALM - IBA Store Growth
26 ALM - IBA STORE GROWTH 2008 For personal use only The two prong growth strategy continues Liquor Alliance – as at Oct 07, 240 hotels have been branded under the “Thirsty Camel” banner, with target of 415 by end of 2008 IBA – continues to expand with current stores totalling 2,434 up from 2,
Slide 28: ALM – Growth Drivers
27 ALM – GROWTH DRIVERS 2008 For personal use only Increased retail and marketing power IBA and Liquor Alliance growth (brand consolidation) Improved retail execution and compliance (IBA Rewards program) Teamwork score Optimise share of suppliers’ volumes eg IDA back through DC from 1 Oct
Slide 29: Divisional Highlights - Campbells Wholesale
28 2008 For personal use only DIVISIONAL HIGHLIGHTS - CAMPBELLS WHOLESALE
Slide 30: Campbells Wholesale - Financials
29 CAMPBELLS WHOLESALE - FINANCIALS 2008 For personal use only FY08 1H FY07 1H Variance (%) SALES ($m) 756 662 14.2% At 1.3-1.5x operating EBITA ($m) 14.6 14.5 0.7% leverage, EBITA Margin should EBITA MARGIN 1.9% 2.2% -34bps be up 18-21% or ~$3m Sales up 14.2% on last year to $756m Primary categ
Slide 31: Campbells Wholesale - Operating Performance
30 CAMPBELLS WHOLESALE - OPERATING PERFORMANCE 2008 For personal use only 23 metropolitan cash and carry stores Warehouse rationalisation (2 outlets closed but 75% business retention) Sales decline = 0.6% 5 x Sweetspots : Confect 16% up 19 country distribution centres 85% business = pick
Slide 32: Campbells Wholesale - Operating Performance
31 CAMPBELLS WHOLESALE - OPERATING PERFORMANCE 2008 For personal use only Specialist food service business - Perth, WA based Sales increase + 11 % Dallas & IDS implementation Good free-trade growth 4 Stockless DCs, 4 Specialist Confectionery DCs CSD QLD successfully merged with IGA>D in
Slide 33: CW – Growth Drivers
32 CW – GROWTH DRIVERS 2008 For personal use only Confectionery Drive growth in traditional distribution business (C&C, CW) “Sweetspot” and “Coast & Country” Continue growth of dedicated confectionery business within CSD Organised petrol & convenience sector (CSD) 7-Eleven BP expanded
Slide 34: Supply Chain Initiatives
33 2008 For personal use only SUPPLY CHAIN INITIATIVES
Slide 35: Supply Chain - Progress
34 Supply Chain - Progress 2008 For personal use only Continuing work to improve supply chain solutions across the Group using a phased transformation process: Phase 1: Building platforms for growth through: DC consolidation, technology improvements, centralising some inventory areas and unifyin
Slide 36: Supply Chain - Achievements
35 Supply Chain - Achievements 2008 For personal use only Platform for growth being realised Single warehouse operating system and DC configuration IGA>D Combined Productivity Trend ALM Combined Productivity Trend resulting in DC productivity IGA>D ALM 54 trends: 78 77 53 53 77 Average Cartons / H
Slide 37: Supply Chain - Achievements
36 Supply Chain - Achievements 2008 For personal use only Crestmead (QLD) yields supply chain improvements G ro ce ry 6.3 % 86 85 85 84 Cartons / Hou 83 82 81 80 80 79 78 77 Ju n -07 O c t- 0 7 P e rish a b le s 5.2 % 82 81 81 Carton s / Ho u 80 79 78 77 77 76 75 Ju n -07 Oct-07 ALM 10.4 % 76 74 74
Slide 38: Financials - Balance Sheet - Cashflow
37 2008 For personal use only FINANCIALS - BALANCE SHEET - CASHFLOW
Slide 39: Balance Sheet - Extract
38 BALANCE SHEET - EXTRACT 2008 For personal use only 30-Apr-07 31-Oct-07 $'m $'m Movement Trade payable up $27m reflecting creditors days $m % up 3 days to 38 days. Trade and other payables -1,169.5 -1,196.4 -26.9 2% Inventories 595.1 607.0 11.9 2% Inventory holding up 2% as stock is built up for N
Slide 40: Cashflow - Extract
39 CASHFLOW - EXTRACT 2008 For personal use only Oct-06 Oct-07 $'000 $'000 $'000 $'000 EBITDA 149,543 175,811 Net Interest Paid (27,943) (24,418) Metcash has extended its existing banking Taxation Paid (31,192) (26,831) facilities until September 2010. Minimal 90,408 124,562 changes to existing term
Slide 41: Conclusions - Key Messages - Consensus
40 2008 For personal use only CONCLUSIONS - KEY MESSAGES - CONSENSUS
Slide 42: Key Messages
41 KEY MESSAGES For personal use only PERFORMANCE Sales +7.1% Sales +14.2% Sales +0.6% EBIT + 10.7% EBIT + 1.0% EBIT + 6.2% Operating leverage at 1.5x achieved Operating leverage missed Operating leverage ~1.0x currently OPPORTUNITIES ¾ Fresh (Teamwork) ¾ Confectionery expansion ¾ IBA and LA growth
Slide 43: Earnings Guidance
42 EARNINGS GUIDANCE 2008 For personal use only Guidance provided at 30 August 2007 AGM Sales growth for 1st Qtr FY08 is in the 7% range If sustained, EBITA growth would be in the range of 10% If sustained, EPS would then be in the range of 24.5-27.0 cps (FY07 = 22.15 cps) Structural trading
Slide 44: Champion of the Independent
43 “Champion of the Independent” For personal use only “The Third Force”
Slide 45: Appendices
44 For personal use only APPENDICES 1. Segment Note – Unallocated & Corporate 2. Split of Business 3. Trend Metrics 4. Metcash TSR 5. Directory of Terms
Slide 46: Segment Note - Unallocated & Corporate
45 SEGMENT NOTE - UNALLOCATED & CORPORATE For personal use only Oct-06 Apr-07 Oct-07 $'000 $'000 $'000 CORPORATE - Action Loss (4,000) (4,000) 0 - Share Based Payments (2,143) (4,284) (2,400) - Non-recurring Income 0 3,200 - Other 0 10,428 (1,249) Included in Group EBITA ('Above the line') (6,143) 5
Slide 47: Split of Business Analysis
46 SPLIT OF BUSINESS ANALYSIS 2008 For personal use only EBITA by division $M Food Distribution Liquor Distribution Cash & Carry Distribution 160.0 14.6 (9.3%) 140.0 14.5 (10.1%) 13.2 (8.4%) 12.5 (8.7)% 129.4 (82.3%) 120.0 116.9 (81.2)% 100.0 9.0 (9.4%) 8.1 (8.9%) 80.0 14.0 (14.7%) 13.4 (14.8%) 72.3
Slide 48: Trend Metrics
47 TREND METRICS HALF YEAR 2004 2005 2006 2007 2008 CAGR* 2008 For personal use only Sales (wholesale) $ millions 3,140 3,216 3,447 4,573 4,687 10.8% EBITA - Reported $ millions 84.1 91.8 95.2 137.9 153.7 16.5% EBITA - Normalised $ millions 84.1 91.8 95.2 141.9 153.7 16.5% PAT - Reported $ millions
Slide 49: Metcash TSR
48 METCASH TSR 2008 For personal use only TSR under current management v competitors and market 6.00 Share price (rebased) 5.00 MTS TSR: 48% 4.00 3.00 2.00 WOW TSR: 24% 1.00 CML TSR: 15% ASX 200 TSR: 12% 0.00 Oct-01 Oct-03 Oct-05 Oct-07 MTS WOW CML ASX 200 Note: Total Shareholder Returns (TSR) repre
Slide 50: Directory of Terms
49 DIRECTORY OF TERMS For personal use only ALM - Australian Liquor Marketers is Australia and New Zealand's leading broad range liquor wholesaler. ALM operates from 21 distribution locations across the country. Larger ‘off-premise’ customers are supplied through the main distribution system; a sp
Slide 51: Directory of Terms
50 DIRECTORY OF TERMS For personal use only CWD - Campbells Wholesale Distribution (a division of CW) provides specialist distribution services to regional Australia, delivering a wide range of products to large geographical areas. CWD services route, petrol & convenience, hospitality, and foodser
Slide 52: Directory of Terms
51 DIRECTORY OF TERMS For personal use only Non-recurring items – Items not expected to recur in the ordinary course of business in subsequent trading periods Normalised – Adjusts for non-recurring items PATBDA – Profit after tax before depreciation and amortisation = proxy for real cash gener
Slide 53: For additional information contact
52 For personal use only For additional information contact: Adrian Gratwicke, GM Investor Relations Phone: 61 2 9741 3248 Fax 61 2 9741 3031 E-mail adrian.gratwicke@metcash.com Or visit our website: www.metcash.com Disclaimer This presentation is for the general information of investors. Metcash Li
Slide 54: Champion of the Independent
53 “Champion of the Independent” For personal use only “The Third Force”