Metcash Limited · ASX:MTS
Metcash — Investor Day (March 2019)
30 slides from Metcash's investor day presentation, Mar 4, 2019
Slide 1: Food
FOOD S C OT T M A RS H A L L CEO Supermarkets & Convenience Supermarkets & Convenience
Slide 2: Our Difference
OUR DIFFERENCE WE HAVE A DIVERSE NETWORK OF LOCAL INDEPENDENT GROCERY STORES Convenient Everyday locations value Our Vision is to be the partner of choice for retailers and suppliers delivering a shopper- led range with the right Local Active in prices through a ranges their local responsive communi
Slide 3: Market Conditions and Challenges
MARKET CONDITIONS AND CHALLENGES THE LAST 5 YEARS The business Intense competition has faced Deflation significant Roll out of value formats Difficult economic conditions – WA headwinds Retailer compliance and working relationships Brand articulation Net decline in store footprint Our
Slide 4: Our Journey
OUR JOURNEY EARNINGS STABILISED THROUGH COST OUT PROGRAMS SALES 1 ($m) EBIT ($m) 9,200 350 9,000 300 250 8,800 200 8,600 150 8,400 100 8,200 50 8,000 0 FY14 FY15 FY16 FY17 2 FY18 FY14 FY15 FY16 FY17 FY18 3 Future strategy focused on both sales growth & cost efficiencies 1. FY15 to FY18 Sales revenue
Slide 5: Current Network
CURRENT NETWORK A national network of >1,650 stores National network of stores Supa IGA 244 IGA 792 IGA-Xpress 215 Foodland 130 QLD WA 254 Total IGA stores 1,381 239 SA Friendly Grocer / Eziway 285 213 NSW Total network stores 1,666 324 VIC 351 Supported “Australia’s widest distribution network thro
Slide 6: Global Grocery Trends
GLOBAL GROCERY TRENDS DRIVEN BY SOCIETAL, COMPETITIVE AND TECHNOLOGICAL FORCES Smaller, more More small Less time More demand More eating More individual frequent shops stores, more spent in store for eat now/ out & eating on & more convenient make now site personal In Australia locations Today it’s
Slide 7: Overview – Key Initiatives
OVERVIEW – KEY INITIATIVES OUR STORE FOOTPRINT POSITIONS US TO CAPITALISE ON THE MARKET TREND TO LOCAL AND CONVENIENCE We will do this by being the partner of choice for: RETAILERS SUPPLIERS Right brand and offer by format and location Wholesale – right range by location – Range – including Fres
Slide 8: Our Way Forward
OUR WAY FORWARD INCREASED SHOPPER FOCUS Retail network & brand clarity – WHAT? Retail network & brand clarity – HOW? We will deliver channel clarity to meet shopper Delivered through acceleration of DSA program trends Retailer compliance – opt in to new offer Right brand by format (previousl
Slide 9: A New IGA Brand Proposition
A NEW IGA BRAND PROPOSITION ALIGNED WITH STORE EXPERIENCE AND SHOPPER MISSIONS We will fundamentally change our retail network by having: A clear proposition for shoppers A differentiated range and price aligned to format Enforced standards that protect the integrity of the brand Better pric
Slide 10: Resetting Our Retail Brands
RESETTING OUR RETAIL BRANDS GREATER FLEXIBILITY Standards & Execution HIGH HIGH LOW IGA IGA ENDORSED (OPT-IN) INDEPENDENT CONTROL BRANDS Highest IGA brand standards Level of IGA brand standards Independent brand standards Core, mission-based & localised Mission-based & localised range Ra
Slide 11: DSA
CURRENT INITIATIVES DSA DIAMOND STORE ACCELERATOR PROGRAM OLD PROGRAM NEW PROGRAM TO ACCELERATE GROWTH 320 stores & over 250 retailers have participated Linked to brand strategy and global supermarket trend Average sales improvement >10% achieved Simplified process for retailers Retailers
Slide 12: DSA Examples
CURRENT INITIATIVES DSA EXAMPLES NOOSA OUTLOOK IGA | QLD Sales Complete store transformation increase New flooring, lighting and signage throughout Expanded fresh departments & new service deli New product ranges ~17% ROSEBERY IGA | NSW Sales New flooring, lighting & signage increase Fre
Slide 13: Core Ranging and Pricing
CURRENT INITIATIVES CORE RANGING AND PRICING FEATURES BENEFITS Core range now Retailers more price focused improved price Price focused key competitiveness value lines to drive of key lines sales Range can vary by state and store to provide a Suppliers differentiated localised greater retailer
Slide 14: Grow Network Footprint
NEW INITIATIVES GROW NETWORK FOOTPRINT Store closures have been a significant headwind (closures mostly larger stores while openings mainly smaller stores) Rate of decline has stabilised New store openings and strong pipeline of new stores underpinned by increased retailer confidence Brand and chann
Slide 15: Private Label
CURRENT INITIATIVES PRIVATE LABEL GROWING STRONGLY 1 2 3 Private label Grow private Community Co under-indexed label through growing strongly in at ~5% of award winning brand awareness Metcash sales Community Co and network brand coverage 4 5 6 Total Community Opportunity to 10 product of the Co pro
Slide 16: Customer Loyalty / Insights
CURRENT INITIATIVES CUSTOMER LOYALTY / INSIGHTS Targeted, IGA REWARDS relevant, personal 30 Store Pilots running in WA since April 18 Based on Smarter actual shopper Marketing behaviour 50k shopper members Margin management 50% Retailer engagement (half the stores in WA Increased and now QLD have si
Slide 17: Small Format Convenience Offer
SMALL FORMAT CONVENIENCE OFFER Shopper trends reflect preference for small format stores Fastest growing format globally Australia well behind global trend Metcash has competitive advantage through existing footprint Typical store size 220 – 280 square metres Stores located in easy to access
Slide 18: Convenience
CONVENIENCE Convenience reporting being merged into Supermarkets commencing FY20 – Convenience sales will no longer be reported separately Convenience network to be integrated into overall logistics supply chain Campbells focused on delivering “everyday” price competitive offer to small independent
Slide 19: How We Are Making the Change
HOW WE ARE MAKING THE CHANGE RETAILER ENGAGEMENT NETWORK OPERATING & SUPPORT INVESTMENT MODEL Strategic direction Small format trial – world Wholesale focus for endorsed by the NRC class convenience suppliers while delivering retail execution Working with retailer Consumer brands to match
Slide 20: Food Initiatives
FOOD INITIATIVES FINANCIAL SUMMARY Network Small Logistics Systems investment store pilot investment Rebranding of network Trial of 10 small Investment in new A number of key Right offer, right format convenience SA DC (limited to fit investments to location, right brand stores out) suppor
Slide 21: Summary
SUMMARY Earnings stabilised through cost out programs Going forward our focus is on revenue growth and cost efficiencies Our strategy centres on ‘following the shopper’ and improving retailer competitiveness We are well positioned to capitalise on the shopper trend to convenience A realign
Slide 22: Summary & Trading Update
SUMMARY & TRADING UPDATE J E F F A DA M S Group Chief Executive Officer
Slide 23: Summary
SUMMARY MFUTURE – A PATHWAY TO LONG TERM SUSTAINABLE GROWTH Focus on both revenue growth and a sustainable cost base NEXT Revenue growth through acceleration of current successful initiatives and implementation of new growth initiatives Cost management focused on offsetting the impact of inflation Y
Slide 24: Summary – Key Growth Initiatives: Hardware
SUMMARY KEY GROWTH INITIATIVES HARDWARE Retail growth through acceleration of Sapphire program including Core Range Roll out to ~200 stores Average sales growth per store >15% Accelerate digital strategy Trade growth through ‘Trade Only’ stores and ‘Whole of House’ Conversion to Trade Only s
Slide 25: Summary – Key Growth Initiatives: Liquor
SUMMARY KEY GROWTH INITIATIVES LIQUOR Focus on delivering current and new initiatives including: National rollout of Porters Liquor Grow share of ‘on-premise’ market from ~10% to ~20% of total sales Corporate store trial Accelerating digital capability New CEO to commence early FY20 – update
Slide 26: Summary – Key Growth Initiatives: Food
SUMMARY KEY GROWTH INITIATIVES FOOD Retail brand offer – right brand per store Clear understanding of brand standards and expectations Match location to shopper mission Acceleration of DSA program Stores completed 320 – average sales improved >10% Additional ~500 stores targeted Program si
Slide 27: Summary – Cost Management
SUMMARY COST MANAGEMENT Our aim is to offset the impact of inflation over next 5 years (~$25m p.a.) Initial savings identified and confident of achieving ~$50m over FY20 and FY21 (primarily in Food) • DC rationalisation • Efficient marketing & promotions • Organisational redesign • Logistics costs •
Slide 28: MFuture Initiatives: A Disciplined Investment Process
MFUTURE INITIATIVES A DISCIPLINED INVESTMENT PROCESS All Disciplined investments Metcash gate based are regularly Investment Group has approach reviewed Each business approvals capacity to and case must • Initial capital All are at fund provided to assessed for satisfy incremental test business cont
Slide 29: Sources and Application of Funds (FY20-FY24)
MFUTURE INITIATIVES SOURCES AND APPLICATION OF FUNDS (FY20-FY24) POTENTIAL GROWTH FUNDING ($m) ILLUSTRATIVE FUNDING SOURCES ($m) Underlying cashflows3,4 250 Food1 165 Less: dividend payments5 (130) Hardware 90 Retained cashflows p.a. 120 Liquor2 15 FUNDED BY Retained cashflows over five years 600 Ma
Slide 30: Trading Update
TRADING UPDATE YTD Total Food sales are marginally higher than the corresponding prior year period. In FOOD Supermarkets, the rate of decline in wholesale sales ex tobacco is broadly in line with that reported for 1H19. Liquor sales in 2H19 have remained strong LIQUOR supported by increased whol