Metcash Limited · ASX:MTS
Metcash — FY2018 Earnings Presentation
43 slides from Metcash's earnings presentation, Jun 25, 2018
Slide 1: FY18 Full Year Results
FY18 Full Year Results 25 June 2018
Slide 2: Group update and divisional results
Group update and divisional results JEFF ADAMS GROUP CHIEF EXECUTIVE OFFICER
Slide 3: Our Purpose & Vision
OUR PURPOSE & VISION CHAMPIONING 9 cvvvauss WE BELIEVE INDEPENDENCE IS WORTH FIGHTING FOR, IN TREATING OUR PEOPLE, RETAILERS AND SUPPLIERS ] TREATED; AND IN GIVING BACK TO THE COMMUNITIES INDEPENDENCE IS WORTH FIGHTING FOR WHERE WE LIVE AND WORK » CO @& gf BEST STORE PASSIONATE ABOUT A FAVOURITE PLA
Slide 4: Group overview
Group overview 1 ▪ Group sales up 4.3% to $14.5bn 2,3 ▪ Group EBIT up 9.2% to $332.7m – predominantly driven by growth in Hardware earnings ▪ Prior year included a 53rd trading week which contributed sales of $253.5m 3 ▪ Food EBIT broadly flat at $188.6m – improved earnings after adjusting for 53rd
Slide 5: Results overview by pillar
Results overview by pillar FY18 FY17 % $m $m Change Sales revenue (%) Sales revenue Food 8,899.6 9,011.4 (1.2%) 14% Liquor 3,465.5 3,278.5 5.7% Food 62% Hardware1 2,098.6 1,578.5 33.0% 24% Liquor Total sales revenue (52 trading weeks) 14,463.7 13,868.4 4.3% 53rd trading week2 - 253.5 - Hardware Tota
Slide 6: Food - sales
Food - sales Supermarkets1 FY18 FY17 % ▪ Total sales declined 1.4% to $7.41bn Supermarkets $m $m Change ▪ Intense competition continued across all states Total revenue 7,406.5 7,651.5 (3.2%) ▪ Continued rollout of competitor footprint, particularly in WA 53rd trading week - (140.6) - ▪ Growth on the
Slide 7: Food - sales (cont.)
Food - sales (cont.) Convenience1 FY18 FY17 % ▪ Total sales decreased 0.5% to $1.49bn Convenience $m $m Change ▪ Sales in 2H18 increased 3.7% versus a decrease of Total revenue 1,493.1 1,528.5 (2.3%) 4.6% in 1H18 as the business cycled revisions to key 53rd trading week - (28.0) - contracts Total re
Slide 8: Food - EBIT
Food - EBIT Food1 FY18 FY17 % ▪ EBIT2 broadly flat at $188.6m Food $m $m Change ▪ FY17 includes EBIT related to $168.6m of sales from 53rd Total revenue trading week (Supermarkets: $140.6m and Convenience: 8,899.6 9,011.4 (1.2%) (52 trading weeks) $28.0m) ▪ Positive contribution from Convenience bus
Slide 9: Food – initiatives update
Food – initiatives update Winning Range (“Mini DSA”) DSA ▪ Warehouse: ~6,000 SKUs deleted and ▪ Focus on delivering high quality and ~2,900 introduced competitive stores ▪ “Winning Range” agreed with retailers and ▪ A further 75 completed in FY18, total implementation underway now completed 325 ▪ Po
Slide 10: Liquor - sales
Liquor - sales ▪ Total sales1 increased 5.7% to $3.47bn with increased volumes from both existing and new contract customers FY18 FY17 % Liquor $m $m Change and from the annualisation of Porters Sales revenue 3,465.5 3,333.1 4.0% ▪ Wholesale sales through IBA bannered network increased 8.8% as whole
Slide 11: Liquor - EBIT
Liquor - EBIT ▪ EBIT increased 2.1% to $68.4m FY18 FY17 % ▪ FY17 includes EBIT related to $54.6m of sales from 53rd $m $m Change trading week Total revenue 3,465.5 3,278.5 5.7% ▪ Increase in sales weighted to lower margin wholesale (52 trading weeks) earnings ▪ Adverse impact of costs associated wit
Slide 12: Liquor – initiatives update
Liquor – initiatives update Store investment Core range ▪ Improve quality of IBA store network and ▪ Focused on higher value premium shopper experience products (wine and spirits) ▪ 111 cool rooms upgrades in year (total ▪ Supports differentiated, localised upgrades ~500) offer ▪ 67 stores ‘refreshe
Slide 13: Hardware - sales
Hardware - sales ▪ Total sales1 increased $520.1m to $2.1bn FY18 FY17 % ▪ FY18 includes full year of HTH sales (FY17: 7 months) $m $m Change ▪ Strong construction activity in the year. Some Sales revenue 2,098.6 1,608.8 30.4% softening in 4Q18, but market still favourable 53rd trading week (30.3) ▪
Slide 14: Hardware - EBIT
Hardware - EBIT ▪ EBIT increased by $20.5m to $69.0m ▪ FY17 includes EBIT related to $30.3m of sales from 53rd FY18 FY17 % trading week $m $m Change ▪ FY18 includes a full year of HTH earnings (FY17: 7 months) Total revenue 2,098.6 1,578.5 32.9% ▪ Gross realised synergies of ~$20m delivered in FY18
Slide 15: Hardware – initiatives and integration update
Hardware – initiatives and integration update Store investment HTH integration Success of Sapphire program supports acceleration ▪ Integration largely complete with synergy of rollout benefits exceeding target ▪ Total of 30 stores upgraded ▪ New trading terms introduced across IHG in ▪ Average retai
Slide 16: Strategic focus – next phase
Strategic focus – next phase A five year program focused on: Growth initiatives ▪ Investing the right way for the benefit of all our stakeholders Accelerating existing transformation initiatives ▪ Making what works best happen faster Improving our infrastructure ▪ Delivering the systems and processe
Slide 17: Five year aspirations
Five year aspirations Food ▪ Grow the Grocery business ▪ Brand clarity – network of the future ▪ Winning Range ▪ Acceleration of IGA DSA upgrade program ▪ Private label (Community Co, Black & Gold) ▪ Express format (DSA program) – 10 store trial in FY19 ▪ As strong in Fresh as we are in Grocery ▪ A
Slide 18: Five year aspirations (cont.)
Five year aspirations (cont.) Liquor ▪ Continue to grow the IBA retail network ▪ Retail store trial (acquisition of 10 stores) ▪ Increase presence in premium market – expansion of Porters Liquor ▪ e-commerce trials ▪ ‘Best Store in Town’ ▪ Range and stores tailored to community ▪ IBA category and ra
Slide 19: Five year aspirations (cont.)
Five year aspirations (cont.) Hardware ▪ ‘Best Store in Town’ ▪ Sapphire transformation (~40 stores per year) ▪ Core Range ▪ Store in Store – Stihl, Weber, Hardings Plumbing roll out ▪ Dual brand strategy (Mitre 10 & HTH) ▪ Digital – Click & Collect now across all brands (growing strongly) ▪ Leverag
Slide 20: Financials
Financials BRAD SOLLER GROUP CHIEF FINANCIAL OFFICER
Slide 21: Financial overview
Financial overview 1 ▪ Group EBIT up 9.2% to $332.7m ▪ Underlying profit after tax up $20.8m (10.7%) to $215.6m ▪ Working Smarter and HTH integration costs of $19.6m (post tax) ▪ Impairments of $345.5m (post tax) ▪ Reported loss after tax $149.5m ▪ Strong operating cash flows ▪ Strong balance sheet
Slide 22: Profit & Loss
Profit & Loss FY18 FY17 % $m $m Change Sales revenue 14,463.7 14,121.9 2.4% 53rd trading week - (253.5) - Total revenue (52 trading weeks) 14,463.7 13,868.4 4.3% EBITDA1 400.7 368.3 8.8% Depreciation and amortisation (68.0) (63.5) (7.1%) EBIT1 332.7 304.8 9.2% Net finance costs1 (26.4) (33.6) 21.4%
Slide 23: Impairment of goodwill and other net assets
Impairment of goodwill and other net assets ▪ Impairment of goodwill and other net assets of $352m in the Food pillar recognised in FY18 ▪ $318m charge to goodwill and other intangible assets ▪ $34m charge to other net assets ▪ Impairment reflects the change in assumptions concerning future cash flo
Slide 24: Working Smarter
Working Smarter ▪ Entering final year of three year program Working Smarter will make doing business with Metcash ▪ Successful in driving cost savings and protecting margins simpler for customers, suppliers and our people through: ▪ FY18 gross savings delivered of ~$45m. Total program savings to dat
Slide 25: Cashflows
Cashflows FY18 FY17 $m $m Net cash from operating activities1 288.6 304.6 Net cash used in investing activities (56.1) (198.6) Capital expenditure (47.0) (44.4) Proceeds from sale of assets and net loan repayments 6.8 41.2 Acquisitions of businesses (15.9) (195.4) Dividends paid and other financing
Slide 26: Balance Sheet
Balance Sheet 30 April 30 April 2018 2017 $m $m Trade receivables and prepayments 1,184.2 1,133.3 Current assets - customer charge cards agreement1 274.0 276.0 Current liabilities - customer charge cards agreement1 (274.0) (276.0) Inventories 784.4 759.2 Trade payables and provisions (1,896.2) (1,81
Slide 27: Net cash / (debt)
Net cash / (debt) FY18 FY17 ▪ Net debt reduced by $123.6m to give a net cash Net debt $m $m position of $42.8m at year-end Gross debt (118.4) (177.3) ▪ Average net debt of ~$150m over FY18 Cash and cash equivalents 161.2 96.5 ▪ A further ~$120m of debt facilities cancelled in the Net cash / (debt) 4
Slide 28: Capital management review
Capital management review ▪ Metcash advised in December 2017 it was undertaking a capital management review reflecting: ▪ The company’s strong financial position ▪ The expected continuation of a low debt position through strong operating cashflows ▪ The appointment of a new CEO ▪ The review determin
Slide 29: Capital management – Buy-Back announced
Capital management – Buy-Back announced ▪ Target size ▪ ~$125m, but scalable upwards ▪ Discount ▪ 8% - 14% of market price (5 day VWAP to 10 August 2018) ▪ Composition ▪ Capital component: $0.61 per share ▪ Balance is a fully franked dividend ▪ Key dates (refer Appendix 6) ▪ 27 June: Last day shares
Slide 30: Capital management – dividends
Capital management – dividends ▪ Dividend payout ratio maintained at ~60% of underlying earnings ▪ FY18 final dividend ▪ 7.0 cents per share, fully franked ▪ Ex-dividend date: 10 July 2018 ▪ Record date: 11 July 2018 ▪ Payment date: 8 August 2018 ▪ Total dividends for FY18 of 13.0 cents per share, f
Slide 31: Group Outlook
Group Outlook JEFF ADAMS GROUP CHIEF EXECUTIVE OFFICER
Slide 32: Group Outlook
Group Outlook ▪ Food ▪ There has been some improvement in sales through the first seven weeks of FY19 ▪ We do not expect a material change in FY19 to the highly competitive market conditions experienced in FY18 ▪ The announcement regarding Drakes Supermarkets in South Australia is not expected to ha
Slide 33: Appendices
Appendices 1. Financial history 2. Revision – Customer Charge Cards Agreement 3. Sales revenue reconciliation 4. Accounting Standards – Revenues and Leases 5. Bannered store numbers 6. Off market buy-back timetable 7. Contact details 33
Slide 34: 1. Financial history
1. Financial history FY18 FY171 FY16 FY15 FY14 Financial Performance Sales revenue ($m) 14,463.7 14,121.9 13,402.5 13,244.3 13,045.1 2 EBIT ($m) 332.7 304.8 286.7 310.6 378.7 2 Net finance costs ($m) (26.4) (33.6) (38.3) (68.4) (67.6) Underlying profit after tax ($m) 215.6 194.8 178.3 173.6 218.4 Re
Slide 35: 2. Revision – Customer Charge Cards Agreement
2. Revision – Customer Charge Cards Agreement $m FY18 FY18 FY17 FY17 Change Change Adjusted Actual Restated Food 180.2 8.4 188.6 180.0 8.1 188.1 Liquor 68.4 - 68.4 67.0 - 67.0 Hardware 69.0 - 69.0 48.5 - 48.5 Total Pillar EBIT 317.6 8.4 326.0 295.5 8.1 303.6 Corporate 6.7 - 6.7 1.2 - 1.2 Total EBIT
Slide 36: 3. Sales revenue reconciliation
3. Sales revenue reconciliation 1 $m FY17 53rd week FY17 Actual (excluding 53rd week) Supermarkets 7,651.5 (140.6) 7,510.9 Convenience 1,528.5 (28.0) 1,500.5 Food 9,180.0 (168.6) 9,011.4 Liquor 3,333.1 (54.6) 3,278.5 Hardware 1,608.8 (30.3) 1,578.5 Sales revenue 14,121.9 (253.5) 13,868.4 1. The 53rd
Slide 37: 4. Accounting Standards – Revenues and Leases
4. Accounting Standards – Revenues and Leases AASB 15 Revenue from Contracts with Customers • Effective from FY19 - restatements to be made to comparative year balances • Key change is the derecognition of ~$2 billion in charge-through revenue. This change will not impact gross margin or EBIT • Othe
Slide 38: 5. Bannered store numbers
5. Bannered store numbers April April 2018 2017 Pillar Supermarkets 1,674 1,683 Campbells 18 18 Liquor 2,794 2,517 Hardware 710 740 TOTAL 5,196 4,958 Supermarkets Liquor Hardware Store movement Number of stores at April 2017 1,683 2,517 740 Stores joined banner group during the period 55 734 5 Store
Slide 39: 5. Bannered store numbers (cont.)
5. Bannered store numbers (cont.) April April 2018 2017 Supermarkets Supa IGA 376 397 IGA 808 823 IGA-Xpress 209 206 Total IGA bannered stores 1,393 1,426 Friendly Grocer / Eziway 281 257 Total Supermarkets 1,674 1,683 Liquor Cellarbrations 574 553 Bottle-O & Bottle-O Neighbourhood 239 238 IGA Liquo
Slide 40: 6. Off market buy-back timetable
6. Off market buy-back timetable Announcement of Buy-Back 25 June Last day shares can be acquired to be eligible to participate in Buy-Back 27 June Buy-Back ex-entitlement date 28 June Buy-Back record date 29 June Mailing of Buy-Back booklet to shareholders 4 July Tender period opening date 16 July
Slide 41: 7. Contact details
7. Contact details For additional information contact: Steve Ashe, Head of Corporate Affairs & Investor Relations Phone: +61 2 9751 8368 E-mail: steve.ashe@metcash.com Merrin Hodge, Investor Relations Manager Phone: +61 2 9647 0866 Email: merrin.hodge@metcash.com Or visit our website: www.metcash.co
Slide 42: 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
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