Metcash Limited · ASX:MTS
Metcash — H1 FY2012 Earnings Presentation
60 slides from Metcash's earnings presentation, Nov 30, 2011
Slide 1: ASX cover letter - Half Year Results Presentation
Metcash Limited ABN 32 112 073 480 50 Waterloo Road Macquarie Park NSW 2113 Australia For personal use only PO Box 6226 Silverwater Business Centre NSW 1811 Australia 30 November 2011 Ph: 61 2 9751 8200 Fax: 61 2 9741 3027 The Manager, Companies Australian Securities Exchange Company Announcements O
Slide 2: Company Results Half Year Ending 31 October 2011
For personal use only Company Results Half Year Ending 31 October 2011 Andrew Reitzer Chief Executive Officer Adrian Gratwicke Chief Financial Officer 30 November 2011
Slide 3: Agenda
Agenda • Andrew Reitzer, CEO Metcash Limited - Group Update For personal use only • Silvestro Morabito, CEO IGA›D - IGA›D Highlights • Fergus Collins, CEO ALM - ALM Highlights • Andrew Reitzer - CW Highlights, Mitre 10 Highlights & Supply Chain • Adrian Gratwicke, CFO - Financial Insights • Andrew R
Slide 4: Overview
Overview • Sales growth For personal use only · Challenging operating conditions persist - Reduced consumer confidence - Highly value-conscious consumer - Continuing deflation - Consumers’ savings up / consumers paying down debt • We continue to: · Leverage our key strengths - strong independent net
Slide 5: Financial Headlines - Group
Financial Headlines . Group FY12 1H FY11 1H Variance (%) For personal use only 1 Revenue - Reported ($m) 2 6,087.4 5,984.3 1.7% Wholesale Sales ($m) 3 6,072.7 5,939.8 2.2% EBITA ($m) 4 203.7 199.4 2.2% EBITA Margin (%) 3.35% 3.36% -1bp After significant items and discontinued operations CODB / GP (%
Slide 6: Financial Highlights - Group
For personal use only Financial Highlights Group
Slide 7: Wholesale Sales
Wholesale Sales Group wholesale sales up 2.2% in tough trading conditions • Characterised by high promotional activity, persistent deflation and consumer focus on value and For personal use only · IGA› D sales up 1.7% - includes one month Franklins’ wholesale sales · Strong Mitre 10 sales - up 6.5%
Slide 8: CODB as % of Gross Profit
CODB as % of Gross Profit CODB / GP ratio fell as a result of: • Continuous productivity improvements For personal use only 70% 68.25% -66bps on pcp 65.22% 64.93% 64.72% 65% 64.06% 60% 2008 2009 2010 2011 2012 6
Slide 9: EBITA
EBITA EBITA growth of 2.2% • In line with wholesale sales growth of 2.2% For personal use only +2.2% on pcp 220 203.7 199.4 184.9 180 173.4 $M 152.9 140 100 2008 2009 2010 2011 2012 7
Slide 10: PAT
PAT FY12 1H FY11 1H Variance (%) For personal use only PAT - Underlying 1 116.6 115.0 1.4% PAT - Reported (after significant items and 2 94.4 110.2 -14.3% discontinued operations) ■ PAT Reported PAT Underlying 140 +1.4% on pcp 115.0 116.6 120 112.4 100.3 109.2 110.2 100 89.2 94.4 NOTES: $M 80 86.2 1
Slide 11: Operating Cash Flow
Operating Cash Flow Strong operating cash flow for the half of $252.4m • Working capital improvement For personal use only Reflects post Easter inventory sell down - 300 as forecast 252.4 207.3 200 $M 103.1 101.0 100 20.2 NOTES: 1. Operating cash flows include 0 discontinued operations. 2008 2009 20
Slide 12: EPS
EPS FY12 1H FY11 1H Variance (%) For personal use only EPS - Underlying 1 15.2 15.0 1.3% EPS - Reported (after significant items and 2 12.3 14.4 -14.6% discontinued operations) +1.3% within full year guidance ■ EPS Reported EPS Underlying 16 15.2 15.0 14.7 14 14.3 14.4 13.1 NOTES: 1. EPS Underlying
Slide 13: DPS
DPS The Board has declared an interim dividend of 11.5 cents a share (100% franked) For personal use only This represents a payout ratio of: · 91% of Reported EPS from continuing operations (pcp: 76%) 12 11.5 11.0 11.0 10.0 10 9.0 8 91% Cents 76% Payout ratio 77% (continuing operations) 6 95% 80% 4
Slide 14: Divisional Highlights
For personal use only Divisional Highlights
Slide 15: IGA›D - Financials
IGA›D . Financials FY12 1H FY11 1H Variance (%) For personal use only WHOLESALE SALES ($m) 3,687.6 3,624.6 1.7% EBITA ($m) 174.6 173.2 0.8% EBITA MARGIN (%) 4.73% 4.78% -5bps Wholesale sales up 1.7% • Challenging trading environment impacting sales - value-driven customer, intense promotional activi
Slide 16: IGA›D - Sales Performance
IGA›D . Sales Performance • Growth amid challenging market conditions for independent retailers and our wholesale business · Supported by competitive ‘Locked Down Low Prices’ For personal use only • Market share remains stable FY11 1H FY12 1H Base Business 4.0% 1.7% • Solid sales by new retail store
Slide 17: IGA›D - Committed to our core strategies
IGA›D . Committed to our cores strategies • ‘How the locals like it’ · Consumer oriented For personal use only · Local · Unique Positioning - New ad campaign underway • Strong independent network - channel clarity • Locked Down Low Prices’ · Competitive pricing - Strong consumer uptake - Positive re
Slide 18: IGA›D - Actively developing retail stores and rationalising the network
IGA›D . Actively developing retail stores . and rationalising the network Independent retailers continue to invest in strengthening the network despite challenging conditions • Highly selective approach to new store developments and rationalising smaller stores For personal use only · Increase in fu
Slide 19: IGA›D - Operational Highlights
IGA›D . Operational Highlights Produce • Volumes maintained in restrictive conditions and post For personal use only Queensland floods and cyclone • Deflationary and supply impact from disasters • Single platform technology and warehouse modernisation fully implemented • Committed to innovation - fu
Slide 20: IGA›D - Operational Highlights
IGA›D . Operational Highlights Project Re-Rack - Up-ranging the retail offer • Tracking in-store sales performance of Top 5,000 selling products For personal use only · Targeting Channel 1 stores · Roll-out at Progressive Supa IGA (WA) - 100% complete Store Buy-Back Program • IGA›D facilitated store
Slide 21: IGA›D - Strategies for the future
IGA›D . Strategies for the future • ‘How the locals like it’ - entrench as our culture For personal use only • Lifting our ‘Share of Voice’ · Targeted use of national spend • Strong pipeline of new stores for FY12 and FY13 · Positive growth prospects • 3 tiered private label programme • Connected co
Slide 22: IGA›D - Tiered Private Label
IGA›D . 3 Tiered Private Label Tier 3 Tier 2 Tier 1 For personal use only Price Quality Value determined Price and Quality Value determined through low price Balancing act of creating through quality the fair price for level of good quality Simply Saving Value you can Trust Quality, Value & Communit
Slide 23: IGA›D - Franklins
IGA›D . Franklins • Acquisition completed 30 September 2011 For personal use only • Court decision on ACCC Appeal Senior Metcash management in place Fire Up Sales and working with Franklins team • Produce already done Logistics • Frozen / chilled – January 2012 Integration • Dry – February 2012 • Te
Slide 24: Divisional Highlights
For personal use only Divisional Highlights
Slide 25: ALM - Packaged Liquor Market
ALM . Packaged Liquor Market Rolling Quarter Volume & Value Growth vs Prior Year For personal use only Source: Nielsen 23
Slide 26: ALM - Packaged Liquor Category Growth
ALM . Packaged Liquor Category Growth Rolling Quarter Value Growth versus Year Ago For personal use only Source: Nielsen 24
Slide 27: ALM - Financials
ALM . Financials FY12 1H FY11 1H Variance (%) For personal use only Strong SALES ($m) 1,108.0 1,095.0 +1.2% performance as Less: ALH Volume Loss - (41.3) market continues to contract Like for Like Sales 1,108.0 1,053.7 +5.2% EBITA ($m) 13.1 9.9 +32.3% EBITA MARGIN (%) 1.18% 0.94% +24bps Sales • Impr
Slide 28: ALM - Future Strategies
ALM . Future Strategies • Continue to facilitate consolidation of independent market under IBA and Liquor Alliance For personal use only • Continue to grow beer volumes through distribution network: one stop shop • Continue to grow supplier promotional support for IBA retailers – but maintain promot
Slide 29: Divisional Highlights
For personal use only Divisional Highlights
Slide 30: Campbells Wholesale - Financials
Campbells Wholesale . Financials FY12 1H FY11 1H Variance (%) For personal use only SALES ($m) 849.9 819.0 +3.8% EBITA ($m) 10.4 16.0 -35% EBITA MARGIN (%) 1.22% 1.95% -73bps Sales • Restrictive market conditions and ongoing decline in traditional cash and carry market significantly hampered sales •
Slide 31: Campbells Wholesale - Operating Highlights
Campbells Wholesale . Operating Highlights • Volume growth through Laverton, VIC DC post 'mini-loader' site and 'route planner' integration in 2H11 For personal use only · On track for productivity benefits from improved unit picks capability • Crestmead, QLD warehouse storage optimisation completed
Slide 32: Divisional Highlights
For personal use only Divisional Highlights
Slide 33: Mitre 10 - Financials
Mitre 10 . Financials FY12 1H FY11 1H Variance (%) For personal use only SALES ($m) 427. 2 401.2 6.5% EBITA ($m) 8.7 6.8 27.9% EBITA MARGIN (%) 2.04% 1.69% +35bps Sales up 6.5% • Strong sales performance · Momentum from 2H11 maintained and ‘Locked Down Low Prices' program driving further sales · Sto
Slide 34: Mitre 10 - Operating Highlights
Mitre 10 . Operating Highlights Growing store network and keeping our brand consistent For personal use only • 20 stores joined network, 10 in 1H12 • Retail brand harmonisation – 51% of stores branded in ‘Blue and White’ • ~81% store lock in Incremental warehouse and supply productivity improvements
Slide 35: Supply Chain
For personal use only Supply Chain
Slide 36: 92,000sqm NSW Mega DC consolidates operations
92,000sqm NSW Mega DC consolidates operations Grocery facility completed and warehouse relocations on track For personal use only Investment in future Improving our supply chain so benefits accrue to our customers • Consolidates Blacktown and Silverwater warehouse operations • Dry grocery facility c
Slide 37: Financial Insights
For personal use only Financial Insights Adrian Gratwicke Chief Financial Officer
Slide 38: Financials
Financials • Franklins Acquisition For personal use only • Franklins Discontinued Operations • Franklins Significant Items • Balance Sheet Extract • Cash Flow Extract • Debt Funding • Interest Expense 36
Slide 39: Franklins Acquisition
Franklins Acquisition Purchase Consolidation $m Notes For personal use only Cash paid at completion 175.6 Paid 30 September 2011 Cash paid post completion 9.2 Paid in November 2011 Contingent consideration 4.5 Subject to landlord and other consents Total purchase consideration 189.3 Add: Franklins a
Slide 40: Franklins Discontinued Operations
Franklins Discontinued Operations Discontinued Profit & Loss $m Notes For personal use only Retail corporate store Retail sales 57.5 sales to end consumers Retail trading loss for the month of EBIT(Loss) (5.0) October 2011 Franklins is now debt free – funded Finance costs – by Metcash Income tax ben
Slide 41: Significant Items
Significant Items Franklins Acquisition and Restructure Costs For personal use only FY12 1H FY11 1H Significant Items $m $m Legal and acquisition costs 3.1 1.0 Blacktown & Silverwater Distribution centres: • Lease tail provisions 16.4 – and closure costs Significant Items (before tax) 19.5 1.0 Incom
Slide 42: Balance Sheet - Extract
Balance Sheet . Extract 31-Oct-11 30-Apr-11 Movement Commentary For personal use only $m $m $m % Increase due to inclusion of Franklins related trade and other payables, Trade and other payables (1,543.5) (1,376.5) (167.0) 12% improvement in creditor days and some cut-off impact. $157m inventory red
Slide 43: Cash Flow - Extract
Cash Flow . Extract 31-Oct-11 31-Oct-10 Inc/(Dec) Commentary $m $m $m $m $m EBITDA - Underlying 226.5 221.2 5.3 For personal use only Net interest paid (30.2) (31.2) 1.0 Refer slide 43 for net interest expense. Taxation paid (58.6) (72.3) 13.7 Earnings before 137.7 117.7 20.0 Depreciation and Amorti
Slide 44: Debt Funding
Debt Funding Maturity Profile of Senior Debt Facilities • Successful refinancing amid volatile market conditions 400 For personal use only 400 • US$225m (A$210m) raised in debut 400 transaction in US Private Placement Market - maturities FY19, FY20 and FY24 - forex risk fully hedged • Refinanced A$7
Slide 45: Interest Expense
Interest Expense Oct 11 Oct 10 Change For personal use only $m $m (%) Interest Expense 38.5 36.5 Interest Income (6.1) (3.6) Interest Expense (Net) 32.4 32.9 -1.5% Slight reduction in interest expense • Stable interest rates • Benefit of improved cash flow management • Interest cover for the half re
Slide 46: Conclusions
For personal use only Conclusions
Slide 47: Growth Strategies
Growth Strategies For personal use only Performance Sales 1.7% Sales 5.2% L4L (ALH loss) Sales 3.8% Sales 6.5% EBITA 0.8% EBITA 32.3% L4L EBITA 35.0% EBITA 27.9% Future Direction • How the locals like it – Culture • IBA and Liquor • Organised P&C growth • Grow store network • Channel clarity Allianc
Slide 48: Outlook
Outlook • Trading Impacts For personal use only · Difficult trading conditions impacting on the Group’s FY11 and 1H FY12 results continue: - Highly cautious, value conscious consumer - High promotional ‘offtake’ - Continued deflation · Acquisition of Franklins and sale of stores to independent retai
Slide 49: 'Champion of the Independent'
For personal use only 'Champion of the Independent' 47
Slide 50: Appendices
Appendices 1. Group Results and Reconciliation For personal use only 2. Group Results by Division 3. EBITA by Division 4. Dividend and Capital Management Policy 5. Trend Metrics (Financial & Operational) 6. Directory of Terms 48
Slide 51: Group Results and Reconciliation
Group Results and Reconciliation FY12 1H FY11 1H FY12 1H FY11 1H For personal use only $m $m cps cps EBITA 203.7 199.4 Net interest (32.4) (32.9) Profit before 171.3 166.5 tax and amortisation Tax (51.3) (48.5) Non controlling interest (3.4) (3.0) Underlying PAT 116.6 115.0 15.2 15.0 Intangible amor
Slide 52: Group Results By Division
Group Results By Division Wholesale Sales FY12 1H FY11 1H Variance (%) Sales $m For personal use only Mitre 10: $m $m Campbells $427. 2 : 7% Wholesale: IGA Distribution 3,687.6 3,624.6 1.7% $849.9 : 14% Australian Liquor Marketers 1,108.0 1,095.0 1.2% Campbells Wholesale 849.9 819.0 3.8% Mitre 10 42
Slide 53: EBITA By Division
EBITA By Division $M ■ Food Distribution ■ Liquor Distribution ■ Cash & Carry Distribution ■ Hardware Distribution For personal use only 260 Total Total $205.9 $206.8 Total 220 $191.4 6.8 8.7 Total $176.7 Total 16 10.4 $157. 2 13.5 180 9.9 13.1 15.8 14.6 14.6 14.4 140 13.2 174.6 100 173.2 163.3 146.
Slide 54: Dividend and Capital Management Policy
Dividend and 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 For personal use only • The proposed 1H12 interim dividend of 11.5 cents per share, which represents: · 76
Slide 55: Trend Metrics - Financial
Trend Metrics . Financial Half Year FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 For personal use only Revenues: Total Revenue $ millions 4,763 4,952 5,311 5,657 5,984 6,126 Sales (wholesale & retail) $ millions 4,733 4,919 5,270 5,612 5,940 6,130 Sales (wholes
Slide 56: Trend Metrics - Operational
Trend Metrics . Operational Branded Stores - Grocery Oct 08 Apr 09 Oct 09 Apr 10 Oct 10 Apr 11 Oct 11 For personal use only (IGA – 3 channels + Friendly Grocer + Eziway) Supa IGA 425 430 440 446 449 463 468 IGA 720 717 720 718 735 734 723 Xpress 129 131 140 156 170 183 178 IGA branded stores 1,274 1
Slide 57: Directory of Terms
Directory of Terms Metcash’s Business Areas & Terms For personal use only 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
Slide 58: Directory of Terms - Financial Terms
Directory of Terms Financial Terms For personal use only CAGR Compound Annual Growth Rate over 4 years (FY08 to FY12) Net operating cash flow (not adjusted for significant items) / [Profit after tax pre significant items + Cash realisation ratio Depreciation + Amortisation (tax effected) ] CODB Cost
Slide 59: Contact Information
Contact Information For additional information contact: Adrian Gratwicke, Chief Financial Officer For personal use only Phone: 61 2 9741 3248 Fax: 61 2 9741 3027 E-mail: adrian.gratwicke@metcash.com Or visit our website: www.metcash.com 57
Slide 60: Disclaimer
Disclaimer This presentation contains summary provide financial product advice in respect of conditions, results of operations and information about Metcash Limited Metcash shares or other securities. financial condition, specific provisions and For personal use only (ABN 32 112 073 480) (Metcash) a