Metcash Limited · ASX:MTS
Metcash — FY2009 Earnings Presentation
49 slides from Metcash's earnings presentation, June 2009
Slide 1: Champion of the Independent Retailer – 2009 Company Results
“Champion of the Independent Retailer” 2009 Company Results Financial Year Ending 30 April 2009 Andrew Reitzer Chief Executive Officer
Slide 2: Group Headlines
1 GROUP HEADLINES 2009 Strong consumer support for independent retailers translates to a strong Group result FY09 FY08 Variance % WHOLESALE SALES ($m) 10,974 1 10,045 1 9.3% EBITA ($m) - Reported 382.5 341.3 2 12.1% EBITA MARGIN (%) - Reported 3.49% 2 3.40% +9bps CODB / GP (%) 62.41% 65.21% -280bps
Slide 3: Financial Highlights – Group
2 2009 FINANCIAL HIGHLIGHTS – GROUP
Slide 4: Wholesale Sales
3 WHOLESALE SALES 2009 Group wholesale sales up 9.3% (pcp 6.3%) Driven principally by strong consumer support for core IGA independent retailers Sales growth accelerated from 1H09 reported growth of 8.2% +9.3% on pcp R 13.7% CAG 12,000 10,974 10,045 10,000 9,451 7,705 $M 8,000 6,565 6,000 NOTES:
Slide 5: Market Share
4 MARKET SHARE 2009 Market share (MAT) for the year ended 12 April 09 was 19.0% Market share maintained 20% 18.8% 19.0% 18.5% 18.6% 16% MAT 13.5% NOTES: 1. Market share data collated 12% by Nielsen is for defined dry grocery product categories 2. MAT as at respective full year date 3. PCP adjusted t
Slide 6: EBITA
5 EBITA 2009 FY09 FY08 Variance % EBITA ($m) – Reported 382.5 1 341.3 12.1% EBITA ($m) – pre NRI 382.5 1,2 335.1 14.1% Good leverage on 9.3% wholesale sales growth 420.0 18.4 % 382.5 R 380.0 CAG 335.1 340.0 310.7 300.0 $M 260.0 NOTES: 226.9 1. FY09 ‘EBITA pre NRI’ and ‘EBITA reported’ are the 220.0
Slide 7: EBITA Margin
6 EBITA MARGIN 2009 EBITA margin up 15 bps on FY08 (+12 bps on 1H09) reflecting: Volume benefits (both seasonality impact of Christmas and Easter plus underlying growth) CODB improvement (next slide) +15 bps on pcp 4.00% 3.49% 3.50% 3.29% 3.34% 2.96% 2.95% 3.00% 2.50% 2.00% NOTES: 1. EBITA margi
Slide 8: CODB as % of GP
7 CODB AS % OF GP 2009 CODB decreases 280 bps this year, reflecting: Cycling out of retail operations and associated exit costs (as reported in1H09) Constant focus on cost control Constant supply chain improvement Warehouse and distribution cost decreasing as facilities and technology improv
Slide 9: PAT
8 PAT 2009 FY09 FY08 Variance PAT ($m) - Pre NRI 219.7 1 193.1 13.8% PAT ($m) - Pre IA, NRI 225.9 2 199.0 13.5% PAT ($m) - Reported 202.5 197.4 2.6% Normalised PAT PAT Reported PAT pre NRI +13.8% on sales growth of 9.3% 250.0 219.7 220.0 % NOTES: R 20.8 193.1 CAG 1. PAT in graph and CAGR stated pre
Slide 10: Operating Cashflow
9 OPERATING CASHFLOW 2009 Operations again generate strong cashflows ($248.1m) Management continues to reinvest in core businesses to keep the company's retail customers competitive with dominant chains PATBDA Operating Cashflow 260.0 248.1 242.7 252.3 220.0 228.3 197.6 $M 205.6 177.5 NOTES: 180.0
Slide 11: EPS
10 EPS 2009 FY09 FY08 Variance EPS - Pre IA, NRI 29.53 1 26.07 13.3% EPS - Pre NRI 28.73 2 25.29 13.6% EPS - Reported 26.47 25.86 2.4% Double digit EPS growth for third Exceeds upper end year in a row of guidance range 28.3-29.3 cps EP S Repo rted EP S pre NRI 32.0 29.68 28.73 28.0 29.68 25.29 NOTES
Slide 12: DPS
11 DPS 2009 The Board has declared a final dividend of 14.0 cents a share (100% franked) The total dividend of 24cps represents a payout ratio of: 91% of Reported EPS (81% for FY08) 81% of EPS - pre IA & NRI 2 4 .0 2 4 .0 2 1.0 2 0 .0 17 .0 Cents 16 .0 11.5 12 .0 9 .5 NOTES: 8 .0 1. Metcash divi
Slide 13: Divisional Highlights – IGA>D
2009 DIVISIONAL HIGHLIGHTS – IGA>D
Slide 14: IGA>D – Financials
13 IGA>D - FINANCIALS 2009 1.29x operating FY09 FY08 Variance (%) leverage WHOLESALE SALES ($m) 6,674.4 5,994.5 1 11.3% EBITA ($m) 315.5 275.1 14.7% NOTES: EBITA MARGIN (%) 4.73% 4.59% +14bps 1. Wholesale sales – excludes retail sales in MTS hands. Wholesale Sales up 11.3% with comp store sales up 9
Slide 15: IGA>D – Sales Performance
14 IGA>D – SALES PERFORMANCE 2009 Total IGA>D market share of 19.0% MAT to 12 Apr 09 IGA>D growth in the market still ahead of market growth: − MAT to 12 Apr 09 was 8.3% against market growing at 7.4% Trends identified in 1H09 have strengthened in 2H09 − Entrepreneurial IGA store owners driving
Slide 16: IGA>D – Retail Development
15 IGA>D - RETAIL DEVELOPMENT 2009 Branded Stores (IGA – 3 channels + Friendly Grocer + Eziway) COMPLETED COMPLETED COMPLETED 1H 2H FULL YEAR NO. SQM NO. SQM NO. SQM New stores up 2 on 1H09 forecast New Stores1 21 23,685 22 28,303 43 51,988 FY10 new stores forecast at 44 Stores converted to IGA from
Slide 17: IGA>D – Corporate Brands
16 IGA>D – CORPORATE BRANDS 2009 Black & Gold Meeting value consumer needs 1,011 SKUs (Apr 09) - up 87 SKUs from 924 (Oct 08) 30 SKUS to be launched in the next 3 months, up to a target of 1,100 SKUs (Apr 10) Sales growing at 12% p.a. IGA Signature Premium label range 342 SKUs in launch
Slide 18: IGA Fresh Strategy – Execution
17 IGA FRESH STRATEGY - EXECUTION 2009 Strategic Rationale: Provide independent retailers with complete, consistent and quality Fresh food offer to meet customer needs Produce Total Run Rate Fresh Run Date Event Rate $’m $’m Nov 07 IGA Fresh formally launched and structure commences Intrinsic pa
Slide 19: IGA Fresh Strategy – Operational Review
18 IGA FRESH STRATEGY - OPERATIONAL REVIEW 2009 Performance Annualised run rate: Produce ~ $390m, total Fresh sales ~ $950m (inclusive of acquisitions) Small shortfall to ~$1b target due to last remaining acquisition in process of finalisation YTD category growth: Meat + 24%, Deli + 30%, Bak
Slide 20: IGA Fresh Strategy – Private Label Brands
19 IGA FRESH STRATEGY - PRIVATE LABEL BRANDS 2009 Produce “Field Fresh” launched Jul 08 Range commenced with pre-packs. Cut fruit and loose fruit ranges now introduced. 70 SKUs with total target of 100 SKUs by Oct 09 − Total traded SKUs fluctuate based on produce seasonality Bakery 257 S
Slide 21: IGA>D – Supply Chain Initiatives
20 IGA>D – SUPPLY CHAIN INITIATIVES 2009 IGA>D continually searches for opportunities to improve the efficiency and effectiveness of its supply chain Initiatives to drive CODB reduction going forward include: Start Due Business Project Date Date IGA>D VIC ‘Mini-loader’ automated storage and retrie
Slide 22: IGA>D – Supply Chain Initiatives (Mini-loader)
21 IGA>D - SUPPLY CHAIN INITIATIVES 2009 Mini-loader (Automated Storage and Retrieval System) under construction at Laverton Storage “Cube” and “Put” station Phase 1 (General Merchandise) section completed Full completion scheduled for FY10 Increased Range Improved Productivity - Allows warehouse ra
Slide 23: Divisional Highlights – ALM
2009 DIVISIONAL HIGHLIGHTS - ALM
Slide 24: ALM – Financials
23 ALM - FINANCIALS 2009 FY09 FY08 Variance (%) SALES ($m) 2,639.5 2,499.3 5.6% Excellent EBITA ($m) 33.8 31.2 8.2% Leverage at 1.46X EBITA MARGIN (%) 1.28% 1.25% +3bps Strong sales growth up 5.6% (pcp 1.9%) Up on 1H09 sales growth of 5.1%. IBA sales up 16% including sales to: Cellarbrations +
Slide 25: ALM – IBA Store Growth
24 ALM - IBA STORE GROWTH 2009 IBA stores and alliance partnerships remain a focus: IBA – store numbers now 2,308 with Liquor Force Buying Group continuing to migrate into 3 other banners or non bannered groups IBA Oct 07 Apr 08 Oct 08 Apr 09 Cellarbrations 458 467 502 509 Bottle O / Bottle O 55
Slide 26: Divisional Highlights – Campbells Wholesale
2009 DIVISIONAL HIGHLIGHTS - CAMPBELLS WHOLESALE
Slide 27: Campbells Wholesale – Financials
26 CAMPBELLS WHOLESALE - FINANCIALS 2009 FY09 FY08 Variance (%) SALES ($m) 1,660.4 1,550.8 7.1% Leverage at EBITA ($m) 33.0 30.6 7.8% 1.1X EBITA MARGIN (%) 1.99% 1.97% +2bps Sales up 7.1% driven by Primary category sales up 10.6% fuelled by growth in foodservice, soft drinks and confectionery Mo
Slide 28: Campbells Wholesale – Operating Performance
27 CAMPBELLS WHOLESALE - OPERATING PERFORMANCE 2009 22 metropolitan cash and 17 country distribution Specialist food service 4 stockless DCs, 4 Specialist carry stores centres business - WA & QLD Confectionery DCs Walk-in ABN customers 85% business is pick, pack SFG acquired in March 0
Slide 29: Financials – Balance Sheet – Cashflow – Debt Facilities
28 2009 FINANCIALS - BALANCE SHEET - CASHFLOW - DEBT FACILITIES - INTEREST EXPENSE
Slide 30: Balance Sheet – Extract
29 BALANCE SHEET - EXTRACT 2009 30-Apr-08 30-Apr-09 $m $m Movement Commentary Approximate 2 day reduction in creditor days reflects changing mix of $m % business (Fresh on shorter terms) and some timing. Trade and other payables -1,153.9 -1,188.0 -34.1 3% Increase in inventories reflect a range of f
Slide 31: Cashflow – Extract
30 CASHFLOW - EXTRACT 2009 FY08 FY09 Inc/ Apr 08 Apr 09 (Dec) $m $m $m $m $m Commentary EBITDA 383.1 422.9 39.8 Higher interest expense (per slide 32) offset by interest income. Net Interest Paid (53.0) (54.7) (1.7) Non-cash items include $3.8m MTM credit reversal, & $3.2m lines fees amortised in FY
Slide 32: Debt Facilities
31 DEBT FACILITIES 2009 Metcash has successfully extended its $700m syndicated loan facility until May 2012 Whilst there is a higher margin cost to the new facility, the Group has secured certainty of funding for the next 3 years The Group’s balance sheet is strong, supported by adequate fundi
Slide 33: Interest Expense
32 INTEREST EXPENSE 2009 Interest Expense Apr 08 Apr 09 Commentary - 1H 27.7 37.8 1H09 reflects higher cash rates plus reversal of $3.8m MTM collar termination - 2H 34.2 32.4 2H09 explained below Interest Expense (Total) 61.9 70.2 Interest Income (10.8) (9.2) 2H08 includes $3.8m MTM credit from coll
Slide 34: Conclusions – Key Messages – Earnings Guidance
33 2009 CONCLUSIONS - KEY MESSAGES - EARNINGS GUIDANCE
Slide 35: Key Messages
34 KEY MESSAGES 2009 PERFORMANCE Sales +11.3% Sales +7.1% Sales +5.6% EBIT +14.7% EBIT + 7.8% EBIT + 8.2% Operating leverage at 1.3x – in line with Operating leverage at 1.1x Operating leverage ~1.5x expectations during Fresh ‘start up’ GROWTH Fresh (Teamwork) Confectionery expansion IBA and L
Slide 36: Earnings Guidance – FY10
35 EARNINGS GUIDANCE – FY10 2009 Trading environment remains volatile and financial uncertainties continue to impact wealth and discretionary consumer spending However, for the time being and given MTS’s focus on selling consumer essentials, no likely weakening is foreseen in the markets served
Slide 37: Champion of the Independent – The Third Force
36 “Champion of the Independent” 2009 “The Third Force”
Slide 38: Appendices
2009 APPENDICES 1. Segment Note – Unallocated & Corporate 2. Reconciliation – Group Results 3. Split of Business 4. Dividend and Capital Management Policy 5. Trend Metrics (Financial & Operational) 6. Metcash TSR 7. Directory of Terms
Slide 39: Segment Note – Unallocated & Corporate
38 SEGMENT NOTE - UNALLOCATED & CORPORATE 2009 Apr 08 Apr 09 $m $m Corporate - Share Based Payments (4.8) (4.5) - Non Recurring Item - net 6.2 - - Other 3.0 4.7 Included in Group EBITA (‘Above the line’) 4.4 (0.2) Unallocated - Intangible Amortisation (5.9) (6.1) - Interest - net (51.1) (61.0) - Int
Slide 40: Reconciliation – Group Results
39 RECONCILIATION - GROUP RESULTS 2009 Apr 08 Apr 09 $m $m EBITA from Normal Operations 339.9 387.0 Share Based Payments (4.8) (4.5) EBITA after Share Based Payments 335.1 382.5 Net Interest (51.1) (61.0) Profit Before Tax and Amortisation 284.0 321.5 Tax (85.0) (94.9) Minority Interest - (0.7) PAT
Slide 41: Split of Business
40 SPLIT OF BUSINESS 2009 EBITA by division Food Distribution Liquor Distribution Cash & Carry Distribution Total $M 400.0 $382.3 Total 360.0 33.0 (8.6%) $336.9 Total 33.8 (8.9%) 320.0 $304.6 30.6 (9.0%) 28.9 (9.5%) 31.2 (9.3%) 280.0 Total 28.4 (9.3%) $227.7 240.0 Total 21.2 (9.3%) $185.0 200.0 30.7
Slide 42: Dividend & Capital Management
41 DIVIDEND & CAPITAL MANAGEMENT 2009 The Board’s intention is to return earnings to shareholders whilst retaining adequate funds within the business to invest in future growth opportunities The proposed FY09 final dividend of 14.0 cents per share takes the total FY09 dividend to 24.0 cps and re
Slide 43: Trend Metrics – Financial
42 TREND METRICS – FINANCIAL 2009 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FULL YEAR CAGR* Apr 05 Apr 06 Apr 07 Apr 08 Apr 09 Sales (all sources) $ millions 7,010 8,214 9,695 10,116 10,981 12.1% Sales (wholesale) $ millions 6,565 7,705 9,451 10,045 10,974 13.7% EBITDA - reported $ millions 226.5 251.
Slide 44: Trend Metrics – Operational
43 TREND METRICS - OPERATIONAL 2009 Branded Stores Stores Stores Stores Stores (IGA – 3 channels + Friendly Grocer + Eziway) Oct 07 Apr 08 Oct 08 Apr 09 Supa IGA 416 418 425 430 IGA 719 717 720 717 Xpress 249 153 129 131 IGA branded stores 1,384 1,288 1,274 1,278 Friendly Grocer / Eziway 298 323 351
Slide 45: Metcash TSR
44 METCASH TSR 2009 TSR under current management v competitors and market 6.00 5.00 4.00 MTS TSR: 38% Share price (rebased) 3.00 2.00 WOW TSR: 18% 1.00 ASX 200 TSR: 6% 0.00 Jan 01 Sep 02 May 04 Dec 05 Aug 07 Apr 09 MTS WOW ASX 200 Note: Total Shareholder Returns (TSR) represents share price apprecia
Slide 46: Directory of Terms
45 DIRECTORY OF TERMS 2009 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 distribution system; a specialist ‘on-premis
Slide 47: Directory of Terms – Financial Metrics Definitions
46 DIRECTORY OF TERMS 2009 Financial Metrics Definitions CAGR - Compound Annual Growth Rate over 4 years (FY05 to FY09) Cash realisation ratio - Net operating cash flow (not adjusted for non-recurring items) / [Profit after tax pre non recurring items + Depreciation + Amortisation (tax effected)
Slide 48: Directory of Terms
47 DIRECTORY OF TERMS 2009 Intangible Amortisation (IA) – Amortised costs of customer relationships, calculated on a straight line basis over 25 years Moving Average Total (MAT) - A 12 month running average measure of market share. Non-recurring items (NRI) - Items not expected to recur in the ordin
Slide 49: For additional information contact
48 2009 For additional information contact: Adrian Gratwicke, GM Finance Phone: 61 2 9741 3248 Fax 61 2 9741 3027 E-mail [email protected] Or visit our website: www.metcash.com Disclaimer This presentation is for the general information of investors. Metcash Limited gives no warranty and