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Metcash Limited
ABN 32 112 073 480 50 Waterloo Road
Macquarie Park NSW 2113 Australia
PO Box 6226
Silverwater Business Centre NSW 1811 Australia Ph: 61 2 9751 8200
Fax: 61 2 9889 1557
20 October 2009 The Manager, Companies Australian Stock Exchange Company Announcements Office Level 4 20 Bridge Street SYDNEY NSW 2000 Dear Sir/Madam Attached is a copy of a presentation given this morning by Mr Andrew Reitzer,
Metcash CEO, to the Citi Inaugural Australian Investment Conference.
Yours faithfully John Randall Company Secretary
2009“Champion of the Independent Retailer”
METCASH PRESENTATION
Citi Inaugural Australian Investment Conference20 October 2009
Andrew ReitzerChief Executive Officer
2009
1
Company Overview
Listed on Australian Stock Exchange (“MTS”)
Capitalised at ~A$3.3bn
Ranked in top 80 of Australian companies by market capitalisation
Food and liquor wholesaler
Business – Marketing and distribution of food, liquor and other fast moving consumer goods to independently owned supermarkets & liquor outlets
Geographic Footprint – Australia and New Zealand (liquor only)
Market Position – 3rd force in national grocery retailing market
Management Team – Most with Metcash since 1998 and have led business transformation
Defensive business characteristics in event of a slow down of the economy
Core Competencies
Buying and merchandising
Marketing and brand building
Distribution logistics and warehousing
Championing the interests of the independent grocery and liquor sectors
2009
2
Sales ~ $6.7bnEBITA ~ $315.5m
Includes IGA FreshNSW, QLD, VIC, SA & WA6 major DC’s delivering (Dry, chilled, frozen + GM & HBC)~ 2,500 independent stores as customers including ~1,270 IGA branded storesMarket share ~19%Competitive store comps ~9%40 – 60 new stores p/a60 – 70 major refurbs p/a
Sales ~ $2.6bnEBITA ~ $33.8m
NSW, QLD, VIC, SA, WA, NT, TAS & New Zealand18 major DC’s delivering wines, spirits, RTD’s & imported / boutique beers~ 15,000 independent liquor stores, hotels, pubs and other licensed premises~1,600 stores marketed under IBA umbrella’s 3 main store brands
Sales ~ A$1.7bnEBITA ~$33.0m
NSW,QLD, VIC, SA, WA & NT4 distinct sub-divisions servicing differing customer needs:
– Cash & Carry (22 DCs)– Regional Wholesale (17
DCs)– CSD (4 stockless DCs & 4
confectionery DCs )– Foodlink (Foodservice)
Supplies ~ 78,000 customers
Sales ~ A$11.0 bnEBITA ~ A$382.5m
100% Owned100% Owned
Note: All figures for the year ended April 2009
Corporate Structure and Divisional Overview
METCASH LIMITEDMarketing and wholesale distribution company operating in Australia & NZ
2009
3
Financial Highlights - Divisional
Wholesale Sales % by Division EBITA % by Division
Note: All figures for the year ended April 2009
IGA>D61%
ALM24%
Campbells Wholesale
15%
A$6,674.4bn
A$1,660.4bn
IGA>D61%
ALM24%
Campbells Wholesale
15%
A$6.7bn
A$1.7bn
$A2.6bn
IGA>D82%
ALM9%
CampbellsWholesale
9%
A$315.5m
A$33.0mA$33.8m
IGA>D82%
ALM9%
CampbellsWholesale
9%
IGA>D82%
ALM9%
CampbellsWholesale
9%
A$315.5m
A$33.0mA$33.8m
2009
4
Financial Highlights- 5 Year Trend
Total Sales Revenue ($m)Market Share (MAT %)
7,010
8,214
9,69510,116
10,982
4,000
6,000
8,000
10,000
12,000
2005 2006 2007 2008 2009
$M13.5%
18.5% 18.6% 18.8% 19.0%
8.0%
12.0%
16.0%
20.0%
2005 2006 2007 2008 2009
MA
T
EBITA ($m) Cost of doing business/ Gross Profit (%)
68.24% 67.16% 66.86%65.21%
62.41%
50.00%
60.00%
70.00%
80.00%
2005 2006 2007 2008 2009
194.5223.7
309.9
341.3
382.5
140.0
180.0
220.0
260.0
300.0
340.0
380.0
420.0
2005 2006 2007 2008 2009
$ M
2009
5
Financial Highlights- 5 Year Trend
Operating Cashflow ($m)
130.6
242.7
177.5
248.1
197.6
50.0
100.0
150.0
200.0
250.0
300.0
2005 2006 2007 2008 2009
$ M
Profit after Tax ($m)
126.8
81.2
158.6
197.4202.5
50.0
100.0
150.0
200.0
250.0
2005 2006 2007 2008 2009
$ M
Earnings per share (cents) Dividends per share (cents)
9.511.5
17.0
21.0
24.0
5.0
10.0
15.0
20.0
25.0
2005 2006 2007 2008 2009
Ce
nts
29.68
16.99
21.06
25.86 26.47
12.00
16.00
20.00
24.00
28.00
32.00
2005 2006 2007 2008 2009
Cen
ts
2009 PAT before non-recurring item (NRI) was $219.7m. NRI of $17.2 m post tax incurred from terminating interest rate collar in 1H09
2009 EPS calculated on PAT before non-recurring item (NRI) was 28.73 cents
2009
6
Our Business Pillars- IGA>D
About IGA>D
“Champion of the Independent Retailer”
Marketing and distribution specialists – supplies dry grocery and fresh food to independent grocery stores
61% of Metcash sales revenue and 82% EBITA
6 major DCs in NSW, QLD, VIC, SA & WA delivering (dry, chilled, frozen + GM)
Supplies ~2,500 independent stores including ~1,270 IGA branded stores and ~745 FoodWorksstores
Supported by 11 Fresh DC’s delivering fresh produce, meat, bakery and deli products
Marketing and brand building:
3 channels IGA branded independent stores to suit niche markets
Retail standards, appraisals and marketing programs
2 distinct private label brands – Black & Gold and IGA Signature
Future Direction
Implement Project LION strategies (enhance IGA>D and IGA retailer model)
Implement fresh food strategies to grow wholesale and retail sales
Reduce CODB
Grow retail area through new stores and extensions
2009
7
Our Business Pillars- IGA>D
About IGA>D’s Fresh Operations
Strategic Rationale – to provide independent retailers with complete, consistent and quality Fresh food offer to meet customer needs
4 key categories of Produce, Meat, Bakery and Delicatessen serviced
National Produce network established with 11fresh produce DCs and 2 meat processing facilities
Private label fresh produce range – Field Fresh
Bright Supa IGA, Victoria
Future Direction
Grow categories of existing customers
Increase number of customers serviced by national network
Move to increased farm-gate purchasing
Retail ready (MAP) meats
Continue to drive quality and consistency of retailers’ offer
2009
8
Najda’ Cellarbrations, North Geelong, Victoria
Our Business Pillars- Australian Liquor Marketers (ALM)
About ALM
Broad range liquor wholesaler
Operates 18 distribution centres in Australia (NSW, QLD, VIC, SA, WA, NT & TAS) and NZ
Supplies ~15,000 customers including hotels, liquor stores restaurants and other licensed premises
~1,600 stores marketed under Independent Brands Australia’s (IBA) 3 main store brands – Cellarbrations, IGA Plus Liquor and Bottle-O
Future Direction
Sales and equity growth for major IBA brands under Cellarbrations, IGA Plus Liquor and Bottle-O
CODB reduction
Working with major suppliers to channel beer volumes through ALM to maximise beer distribution and consolidate delivery for independent stores
Continue to strengthen Liquor Alliance relationship and look to expand the Thirsty Camel brand
2009
9
Our Business Pillars- Campbells Wholesale
Cash & Carry, Bunbury, Western Australia
About Campbells Wholesale
Focus on convenience, route and hospitality trade channels
Food service and distribution
4 sub-divisions based on customer segment
Campbells Cash & Carry (CCC) -22 metropolitan warehouses
Campbells Wholesale Distribution (CWD) - 17 regional warehouses
Convenience Store Distribution (CSD) – 4 warehouses supported by specialist confectionery distribution centres
FoodLink - foodservice operations in QLD & WA
Future Direction
Continue to provide total supply chain solution to modern petrol and convenience channel
Grow independent convenience sector through the Lucky 7 banner
Expand food service offer nationally
Continued confectionery growth
Expand convenience, hospitality and small business markets
2009
10
Why Independent Retailers Succeed
1. Metcash has formed:Chain of independent retailersThink and behave like a chainBut act locally
2. “Bacon and Eggs Story”CommittedManager is the owner => − Lower costs & − Higher service‘Energised’ independent sector believes in its own future (~1/3rd of profits reinvested)
3. Differentiated OfferIndependentGive back to communityAble to scale store to specific demographic profile of an area Convenient shopping – 20 minutes!Price – fair with great promotionsStore standardsFriendly, personal serviceNiche ranges
4. Metcash provides:Dedicated wholesaler which doesn’t compete with its customers; focused on removing supply chain costsAggregated volume; engaged vendor community keen to investAbility to match market developments eg: fresh / refurbishments / technology
2009
11
Why Metcash Succeeds
Stable, capable Management Team
Divisions aligned to service specific and differentiated needs of respective customer segments
Model is focussed on group's core competencies
Marketing, merchandising and distribution logistics
No competition with customers
Retail-led model provides benefits of a virtual chain with considerably more flexibility
Brand building
Manufacturers keep us competitive with prices
Strong relationships + they want a strong vibrant independent sector
Our costs are less or comparable to the chains at DC and store level
Growth oriented both organically and via acquisitions
Strong balance sheet and operational cash flow allows for significant investment to fuel growth aspirations
2009
12
CORE COMPETENCIES- LOGISTICAL EXCELLENCE- MARKETING & BRAND BUILDING
2009
13
Logistical Excellence
Put to Light / Mini-loaderAdjusting the Logistics Solution to better serve customer needs
CODB ReductionWorld class benchmarkedRecognise need to constantly search for ways to take costs out of the supply chain
Mini-loader / Voice Pick Efficiencies driven through technology investment
Composite DC’sEfficiencies driven through infrastructure investment
Cost to serve Operational Excellence
2009
14
CORE COMPETENCIES- LOGISTICAL EXCELLENCE- MARKETING & BRAND BUILDING
2009
15
Marketing and Brand Building- Independent Grocers of Australia (IGA)
Our Most Significant Point of Difference
2009
16
Marketing and Brand Building- IGA Stores 3 channels
• Large format stores
• Full department offer
• Medium “top up” stores
• Selected department ranging
• Convenience format stores
• Targeted demographic range
IGA – world’s largest voluntary supermarket network
2009
17
Marketing and Brand Building- Championing Independent Retailers
RSA ratings and performanceABS and demographic informationMAP info – strategic growthProperty trust & development – actively looking for new stores and development opportunities
Ensuring our customers succeed
Retail
Excellence
We have developed a talent pool to cover all facets of the industry
Business ManagersFresh Food Sales ManagersState Operations ManagersRetail DevelopmentRMS – General MerchandiseBusiness Development
Offering the services of a chain
Our Structure
Retail
Operations
“We offer a chain store support structure for independents with one major difference. We are consultative rather than dictatorial”
Actively growing our retailers
Customers are confident in the brand and confident in their future
2009
18
Marketing and Brand Building- Retail Standards & Support
Look and Feel
Fit out
Displays
Ambience
Passion
Community focusStaff sourced locallySupport local events & charitiesSponsor sporting teams
Store Standards
Product
Ranging – core grocery and fresh food
Stock levels
ServiceStaff training & knowledgeMerchandising and promotional programsProduct quality and availability
2009
19
Marketing and Brand Building- Retail Development
49
76
103
137 135
109
96
126
178
151
0 0
11
27 27
51 5462
6762
0
20
40
60
80
100
120
140
160
180
200
1999/2000 2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009
Total Extensions & New Stores & Refurbishments
Total new ('000) sq metres
Focus on developing new stores and improving existing stores
2009
20
“Our vision is to make the IGA brand the single most valuable asset we have”
Marketplace point of difference
Annual donations of ~A$4M nationally
Community Chest: The IGA program supports local communities by donating 1-2c per retail unit to "Community Chest".
Our Marketing Programs include IGA Products
IGA Signature - is our premium label range:
Benchmarked against the market leader quality at a lower price.
Range designed to compete with market leaders by offering a price advantage to customers and increasing IGA brand recognition and store loyalty.
Communicates a quality image to our customers. The IGA logo on our products links our products exclusively to IGA stores to promote store loyalty and create product recognition
Marketing & Brand Building- IGA Marketing
Black & Gold
Meeting value customer needs
2009
21
National TV ads (Local Hero tag line)
Magazines & Catalogues
Communication
Research
State and National Conferences / Expo
Retailer of the Year
Training & Development
Regional Meetings
Other Marketing Programs to support retailers include:
IGA proudly supports:
The "Special Olympics" program assisting the intellectually disabled to:
participate in sport, share skills and friendships within their families and the wider community.
Little Athletics Australia
Community focused sports initiative
Opportunity for retailers in all towns and suburbs to participate / promote
More community themes:
Marketing & Brand Building- Our Marketing Programs
2009
22
CONCLUDING REMARKS
2009
23
Concluding Remarks
Defensive stock (non-cyclical)
Selling ‘basic essentials’ (groceries + liquor!) – no discretionary spend
Solid, steady earnings flow and high dividend pay-out
Strong Management Team
Focused on driving core businesses
IGA>D – Increased teamwork score via IGA Fresh + continue to drive store reinvestment with retailers (new Project Lion structure to further drive growth)
ALM – Continue to grow retailers under IBA aligned brands
CW – Continue to expand market share in confectionery and organised petrol and convenience sector + Foodservice expansion
Continue to extract supply chain efficiencies across all divisions
Medium / Long Term Growth
Actively seeking bolt-on and new business opportunities
* Teamwork score = proportionate share of customer / retailers purchasing requirements
2009
24
Concluding Remarks
Earnings Guidance
At AGM on 3 Sep 09, Management reconfirmed EPS (pre IA) growth range of 7%-10% for FY10 (based on FY09 EPS of 29.53 cps)
The trading environment remains strong but uncertainties continue to impact wealth and discretionary consumer spending
Inflation has declined from previous highs with price deflation in some Produce categories
However given MTS’s focus on selling consumer essentials, no likely weakening is foreseen in the markets served by the Group
Capital Management
The Board has undertaken to return high dividends to shareholders in the absence of alternative uses for such funds (payout ratio >75% for last 3 years)
The Board continues to keep its capital management options under a watching brief
2009
25
“Champion of the Independent”
“The Third Force”
2009
26
Disclaimer
This presentation is for the general information of investors.
Metcash Limited gives no warranty and expressly disclaims all liability in relation to the information contained in this presentation. Investors should seek relevantadvice to suit their specific objectives and circumstances.
For additional information contact:
Adrian Gratwicke, GM Finance
Phone: 61 2 9741 3248Fax 61 2 9741 3027E-mail [email protected]
Or visit our website:www.metcash.com