Metcash Limited · ASX:MTS
Metcash — H1 2007 Earnings Presentation
37 slides from Metcash's earnings presentation, Oct 31, 2006
Slide 1: Company Results
Company Results Half Year ending 31 October 2006 Andrew Reitzer Chief Executive Officer
Slide 2: Overview – Half Year Oct 2006
OVERVIEW – HALF YEAR 31 OCT 2006 2007 An excellent result with wholesale sales up 34% to $4.6b and net profit after tax (before non-recurring items, being restructure costs and Action retail losses) up 36% to $75.9m. This has produced a normalised EPS of 9.77cents. The result reflects both a sol
Slide 3: Financial Highlights
FINANCIAL HIGHLIGHTS – HALF YEAR 31 OCT 2006 2007 Total Revenue up 37% to $4.8 billion Wholesale Sales rose 34% to $4.6 billion EBITA grew 47% to $140 million and EBITA margin rose to 3.12% from 2.76% last year Cost of Doing Business as a percentage of gross profit fell by 0.51% to 68.37%
Slide 4: Wholesale Sales
WHOLESALE SALES 2007 FIRST HALF 2007 SALES UP 34% 5,000 4,500 4,000 SALES - $'M 3,500 NOTES: 1. HALF YEARS = 26 WEEK 3,000 PERIODS 2. DATA IS FOR 2,500 WHOLESALE SALES – 2,000 HENCE 2007 EXCLUDES ACTION RETAIL 1,500 SALES 2005 2006 2007 2002 2003 2004 3. ALL YEARS AIFRS AIFRS AIFRS EXCLUDE $'Million
Slide 5: Market Share
MARKET SHARE NATIONAL METCASH MARKET SHARE - ALL CUSTOMERS 20.0% UP TO 18.9% FROM 12.5% IN 2002 SINCE 19.0% COMPLETION 18.0% OF FAL 17.0% 16.0% ACQUISITION MAT - % 15.0% METCASH HAS 14.0% GAINED A 13.0% FURTHER 0.8% 12.0% MARKET 11.0% SHARE 10.0% QTR TO 2002 2003 2004 2005 2006 1/10/06 MAT % 12.5% 1
Slide 6: EBITA
EBITA 2007 FIRST HALF 2007 EBITA UP 51.3% 160.0 140.0 120.0 100.0 EBIT - $'M 80.0 60.0 NOTES: 40.0 1. HALF YEARS = 26 WEEK PERIODS 20.0 2. 2005 EXCLUDES FRANKLINS - 2005 2006 2007 3. ACTION LOSS 2002 2003 2004 EXCLUDED IN AIFRS AIFRS AIFRS FY07 $'Millions 55.6 71.7 84.1 85.8 95.2 144.0 CONSISTENT WI
Slide 7: EBITA Margin
EBITA MARGIN 2007 FIRST HALF 2007 EBITA MARGIN UP 36 BPS 3.30% SINCE 2002 3.10% EBITA 2.90% MARGIN HAS 2.70% INCREASED EBIT - % 2.50% 0.97% 2.30% REFLECTING 2.10% VOLUME 1.90% ECONOMIES, 1.70% IMPROVED 1.50% TERMS 2005 2006 2007 2002 2003 2004 AIFRS AIFRS AIFRS NEGOTIATION MARGIN % 2.15% 2.46% 2.68%
Slide 8: Operating Cashflow After Tax
OPERATING CASHFLOW AFTER TAX FIRST HALF 2007 PATBDA UP STRONGLY 2007 100.0 PERIOD-END CASHFLOW AGAIN SUBJECT TO TIMING METCASH 90.0 OPERATIONS 80.0 CONTINUE TO CASHFLOW - $'M 70.0 THROW OFF 60.0 SIGNIFICANT 50.0 CASHFLOWS (AS 40.0 EVIDENCED BY 30.0 PATBDA SHOWN IN 20.0 GRAPH) ENABLING 10.0 TRADING 0
Slide 9: CODB as % of GP
CODB AS % OF GP 2007 75.00% FIRST HALF 2007 CODB DOWN 51 BPS IN THE LAST 6 74.00% MONTHS NOTE – INCREASE METCASH 73.00% HELPS US RE 5C 72.00% HAS REDUCED ARGUMENTS! CODB/ GP - % 71.00% CODB A 70.00% FURTHER 69.00% 0.51% 68.00% REFLECTING 67.00% ITS 66.00% CONTINUING 65.00% 2005 2006 2007 ABILITY TO
Slide 10: PBT as % of Sales
PBT AS % OF SALES FIRST HALF 2007 PBT AS % OF SALES UP 14 BPS NOTES: 2007 3.00% 1. HALF YEARS = 26 WEEK PERIODS 2.80% 2. STATED EXCLUSIVE OF 2.60% CULS/ CUPS FINANCING COSTS IN FY06 AND 2.40% PBT/ SALES - % RESTRUCTURE COSTS IN FY07 2.20% 3. FY06 IMPACTED BY 2.00% INCREASED INTEREST COSTS OF ~$9M (F
Slide 11: PAT
PAT 2007 FIRST HALF 2007 NORMALISED PAT UP 36% 80.0 70.0 60.0 PAT - $'m NOTES: 50.0 1. HALF YEARS = 26 WEEK PERIODS 40.0 2. NORMALISED PAT IS 30.0 STATED BEFORE CULS/ CUPS 20.0 FINANCING COSTS IN FY06 & RESTRUCTURE 10.0 2005 2006 2007 COSTS & ACTION 2002 2003 2004 LOSS IN FY07 AIFRS AIFRS AIFRS 3. F
Slide 12: EPS
EPS FIRST HALF 2007 REPORTED EPS UP 25% NOTES: 2007 11.00 ADJUSTED EPS UP 18% 1. HALF YEARS = 26 WEEK PERIODS 2. REPORTED EPS IS 10.00 ADJUSTED FOR AGAAP GOODWILL AMORTISATION IN YEARS PRE 2005 9.00 EPS (Cents) 3. FY06 MATERIALLY IMPACTED BY FAL RELATED 8.00 FINANCING COSTS (CULS/ CUPS) 4. FY06 ALSO
Slide 13: DPS
DPS 2007 FIRST HALF 2007 DPS UP 1.5 CENTS 8.0 7.0 6.0 DPS (Cents) 5.0 4.0 NOTES: 3.0 1. HALF YEARS = 26 WEEK 2.0 PERIODS 2. FY06 1.0 IMPACTED BY TIMING ISSUES 0.0 ASSOCIATED 2005 2006 2007 2002 2003 2004 WITH FAL AIFRS AIFRS AIFRS DEAL CENTS 2.0 4.0 5.0 5.5 5.5 7.0 3. METCASH DIVIDEND FINANCIAL YEAR
Slide 14: Dividend Policy
DIVIDEND POLICY The Board’s intention is to return earnings to shareholders whilst retaining 2007 adequate funds within the business to invest in future growth opportunities In the past the company’s dividend payout ratio has ranged between approximately 58-77% of Reported EPS On a pre-goodwil
Slide 15: Group Summary
GROUP SUMMARY 2007 AN EXCELLENT RESULT IN A PERIOD OF SIGNIFICANT CHANGE GROUP SUMMARY FIRST HALF VARIANCE (Published Data) FY06 FY07 % SALES - $'M 3,447 4,732 37.3% CODB/ GP - % 68.88% 68.37% -0.51%pts EBITA TO SALES - % 2.76% 2.96% 0.20%pts EBITA - $'M 95.2 140.0 47.1% Notes Sales include $319.6m
Slide 16: IGA>D – Financials
IGA>D - FINANCIALS 2007 IGA>D CONTINUES TO BE THE POWERHOUSE OF THE GROUP IGAD FIRST HALF VARIANCE (Published Data) FY06 FY07 % SALES TO INDEPENDENT CUSTOMERS - $'M 1,787 2,464 37.9% SALES TO ACTION STORES (IN OUR HANDS) - $M - 203 TOTAL IGAD WHOLESALE SALES - $'M 1,787 2,668 49.3% EBITA TO SALES -
Slide 17: IGA>D – Operating Performance
IGA>D – OPERATING PERFORMANCE Strong underlying performance in ‘legacy’ business: 2007 Legacy Business 10.3% Less: Inflation (3.0)% = Pre-Inflation Growth 7.3% Less: New Stores (2.0)% = Real L4L Growth 5.3% Total IGA>D market share per AC Nielsen up to 18.9% for quarter ended 31 Octobe
Slide 18: IGA>D – Operating Performance
IGA>D – OPERATING PERFORMANCE 2007 IGA Store development: COMPLETED PLANNED ON THE PLANS NO. SQM NO. SQM NO. SQM NEW STORES 20 26,000 36 53,000 257 367,000 EXTENSIONS 11 7,000 19 11,000 66 40,000 REFURBISHMENTS 28 26 45 Total of 56 new stores planned for FY07 (initially reoprted ~70) 14 stores
Slide 19: Action
ACTION ACTION 2ND HALF 1ST HALF VARIANCE 2007 FY06 FY07 % SALES - $'M 509.4 319.6 -37.3% EBITA - $'M 1.8 (4.0) -319.0% Notes Includes Action + Quickstop Data estimated from underlying books and records • EBITA Loss inevitable as reduced volumes don't cover the overhead as stores change hands (i.e. o
Slide 20: Action – Store Divestment
ACTION - STORE DIVESTMENT ACTION STORE DIVESTMENTS 2007 PER LAST UPDATED BRIEFING POSITION OVER THE COURSE Total stores acquired 67 67 OF THE LAST 7 Less: Stores managed until closure (short leases etc) -7 -6 YEARS METCASH Less: Stores managed until new lease negotiated -2 -2 HAS = Stores for divest
Slide 21: IGA>D Fresh
IGA>D FRESH 2007 • IGA>Fresh established and operating through 3 warehouses • Slower than expected start, but promising sales still being achieved: – IGA Fresh sales ex-3 new DC’s $46 million – Fresh Sales ex-Perishable DC’s $76 million – Sales Direct to Store $57 million – Charge Through Sales $108
Slide 22: FAL Integration
FAL INTEGRATION • FAL integration now complete 2007 • Western Australia • IGA>D WA operations fully established • Market share at 32.1% • Voice pick implemented with full productivity benefits to flow in second half • Frozen and chilled DC still on track to be converted by March 07 • Queensland • Ri
Slide 23: FAL Integration – Profit & Synergies
FAL INTEGRATION - PROFIT & SYNERGIES FAL ACQUISITION PROFIT & SYNERGY GAINS FIRST HALF FY07 2007 $'M $'M FULL YEAR GAINS EXPECTED 80-90 METCASH IS ON GAINS EXPECTED FOR FIRST HALF 32-36 TRACK TO (Being 40% in line with Earnings Guidance) FULLY REALISE VOLUME GAINS (IGA>D + CCC) 40 EXPECTED - INCLUDE
Slide 24: ALM – Financials
ALM - FINANCIALS 2007 ALM FIRST HALF VARIANCE (Published Data) FY06 FY07 % SALES - $'M 1,150.4 1,198.4 4.2% EBITA TO SALES - % 1.22% 1.0% -0.17%pts EBITA - $'M 14.0 12.5 -10.7% Add back: Additional IBA investment 1.3 13.8 -1.4% GOOD SALES PERFORMANCE – UP 4.2% ADJUSTING FOR ADDITIONAL ‘INVESTMENT’ I
Slide 25: ALM – Operating Performance
ALM - OPERATING PERFORMANCE 2007 Sales Growth of 4.2% positive in light of tough market conditions EBITA of $12.5 million down $1.5 million from last year reflects this highly competitive environment Additional $1.3 million invested in: Banner consolidation Additional marketing spend Two
Slide 26: ALM – IBA Store Growth
ALM - IBA STORE GROWTH 2007 30/4/06 30/10/06 TARGET 30/4/07 CELLARBRATIONS 223 342 433 IGA 448 458 460 LIQUORWISE 172 147 0 BOTTLE O 0 57 571 LOCAL 196 228 0 LIQUORWISE PROMOTIONAL 969 1,063 995 GROUPS TOTAL 2,008 2,295 2,459
Slide 27: Campbells Wholesale – Financials
CAMPBELLS WHOLESALE - FINANCIALS 2007 CAMPBELLS WHOLESALE FIRST HALF VARIANCE (Published Data) FY06 FY07 % SALES - $'M 509.4 661.6 29.9% EBITA TO SALES - % 1.78% 2.2% 0.41%pts EBITA - $'M 9.1 14.5 60.0% CW IS ON TRACK TO PRODUCE A RECORD YEAR, CAPITALISING ON SYNERGIES FROM THE FAL ACQUISITION AND I
Slide 28: Campbells Wholesale – Operating Performance
CAMPBELLS WHOLESALE - OPERATING PERFORMANCE Campbells Wholesale business model now reflects distinct customer segments with 4 2007 separate distribution solutions to satisfy the varying needs of each customer type CCC CSD 25 Metro C&C (with 3 in WA) 4 Stockless DCs 4 Specialist Confectionery DCs Sal
Slide 29: Supply Chain Initiatives
SUPPLY CHAIN INITIATIVES • Metcash has implemented significant improvements to its supply chain 2007 • Initiatives have been designed to: • Improve inventory management; • Shorten order-to-delivery cycle times; and • Reduce the cost of doing business. Key Elements of the Description Impact Status Tr
Slide 30: Supply Chain Initiatives
SUPPLY CHAIN INITIATIVES • Initiatives in the process of further development include : 2007 Key Elements of the Description Impact Status Transformation Control Primary freight Move to factory gate pricing and • Reduction in freight costs consolidate inbound freight . • Improve receiving function in
Slide 31: Balance Sheet – Extract
BALANCE SHEET - EXTRACT 2007 Metcash Limited Restatement of BS for FAL Fair Value adjustment, see note 7 Balance Sheet Extract Restated FY Apr 06HY Oct 06 (AIFRS) (AIFRS) Inventory up $75.8 million but days inventory down 0.5 days to 19.9 days $million $million Inventory 533.3 609.1 Increase in cred
Slide 32: Cashflow – Extract
CASHFLOW - EXTRACT 2007 Metcash Limited Cash Flow Extract HY Oct 05 HY Oct 06 (AIFRS) (AIFRS) $000s $000s $000s $000s EBITDA 87,836 155,617 Net Interest Paid (15,835) (27,943) Taxation Paid (24,539) (31,192) 47,462 96,482 Working capital movement 36,878 (49,474) Reversal of prior year beneficial cre
Slide 33: Capital Management
CAPITAL MANAGEMENT • Metcash sets its capital structure with the objective of minimising its 2007 weighted average cost of capital whilst retaining flexibility to pursue growth opportunities as they arise • The Board believes that, from an operational trading perspective, it is important to achieve
Slide 34: Metcash TSR
METCASH TSR 2007 • Under current management vs competitors and market. Note: Total Shareholder Returns (TSR) represents share price appreciation and dividend returns to shareholders. 5.00 4.50 4.00 MTS TSR: 56% 3.50 3.00 Share price 2.50 2.00 1.50 1.00 WOW TSR: 19% 0.50 CML TSR: 15% 0.00 ASX 200 TSR
Slide 35: Growth Plans
GROWTH PLANS Management’s focus in the first half summarised as follows: 2007 OBJECTIVE ACHIEVEMENT Grow core business Strong Sales Growth – IGA>D legacy + 10.3% – Campbells Wholesale + 6.0% – ALM + 4.2% Complete FAL integration Done Metfoods Joint Venture Established – first tender above expectatio
Slide 36: Earnings Guidance
EARNINGS GUIDANCE • Sales continue to perform strongly in November 2007 • First half (Adjusted) EPS of 9.77 cents in line with expectations, reflecting: • Strong performance achieved in the ‘legacy’ business; • Achievement of FAL profit and synergy gains (41% of targeted 80- 90million) • FAL restruc
Slide 37: Champion of the Independent
_—_————— "CHAMPION OF THE INDEPENDENT" PV UCAS “THE THIRD FORCE” _