FY20 Half Year Results 5 December 2019 Championing Successful - PowerPoint PPT Presentation

FY20 Half Year Results 5 December 2019 Championing Successful Independents This slide must be copied from pre-formatted slide to retain the lines and logo.

Group update and divisional results Jeff Adams Group Chief Executive Officer 1 1H20 Half YearResults

Our values Our vision Our purpose Best store in town We believe: Championing Independence is worth fighting for; in treating our people, Successful Passionate about independents retailers and suppliers the way we like to be treated; and in Independents A favourite place to work giving back to the communities where we live and work Business partner of choice Support thriving communities 2 1H20 Half YearResults 2 1H20 Half YearResults

Group overview  Group highlights:  Total Food pillar sales (including charge-through) increased 1.2%, with Supermarkets wholesale sales ex tobacco being positive 1 for the first time since FY12  Liquor delivered its sixth consecutive year of earnings growth  Our Trade-focused Hardware pillar continued to perform well despite difficult trading conditions  MFuture programs progressing across all pillars  Statutory results for 1H20 reflect adoption of the new Accounting Standard AASB16 Leases . Prior period comparatives not restated for impact of AASB16. To enable comparison, the results for 1H20 have been adjusted, where appropriate, to exclude the impact of AASB16  Group sales (including charge-through sales) increased 0.5% to $7.2bn, reflecting sales growth in the Food and Liquor pillars, partly offset by a decline in Hardware sales  Reported loss after tax of $151.6m includes an impairment of $237.4m (post tax) following the loss of the 7-Eleven contract (1H19 Pre AASB16: Reported profit after tax of $95.8m)  Underlying profit after tax (pre AASB16) was $95.7m (1H19: $100.3m) 2  Contribution from resolution of onerous lease obligations ~$10m higher in 1H19  Ceasing to supply Drakes in SA from 30 September 2019 1. Metcash ceased supply to Drakes in SA from 30 September 2019. Sales growth has been calculated by removing Drakes sales from the prior period (1 October 2018 to 31 October 2018). 2. In 1H20 underlying profit after tax excludes MFuture restructure costs of $4.8m (post tax) and asset impairment of $237.4m (post tax). In 1H19 underlying profit after tax excludes Working Smarter restructure costs of $4.5m (post tax). 3 1H20 Half YearResults

Group overview continued  Group underlying EBIT (pre AASB16) declined by $8.4m to $149.7m  Food EBIT decreased by $7.8m to $85.2m – contribution from resolution of onerous leases higher in 1H19 and ceasing to supply Drakes from 30 September 2019  Liquor EBIT increased by $0.5m to $29.6m – flow through from higher sales  Hardware EBIT decreased by $0.5m to $37.3m – impacted by lower Trade sales  Corporate EBIT was -$2.4m (1H19: -$1.8m)  Underlying EPS (pre AASB16) declined by 0.9% to 10.5 cents  Operating cash flows lower than 1H19 reflecting increased investment in working capital  Strong balance sheet  Interim dividend of 6.0 cents per share, fully franked 4 1H20 Half YearResults

Results overview by pillar 1H20 1H19 Change $m $m % Sales revenue (%) Sales revenue (including charge-through sales) (including charge-through) Food 4,381.1 4,330.9 1.2% Liquor 1,784.2 1,753.9 1.7% 14% Hardware 1,044.2 1,089.6 (4.2%) Food 25% Total sales revenue (including charge-through sales) 7,209.5 7,174.4 0.5% 61% Liquor Less: Charge-through sales (919.7) (985.2) (6.6%) Hardware Total sales revenue (Statutory Accounts) 6,289.8 6,189.2 1.6% 1H20 1H19 Pre AASB16 Pre AASB16 Change $m $m % Underlying EBIT Food 85.2 93.0 (8.4%) Underlying EBIT (%) Liquor 29.6 29.1 1.7% Hardware 37.3 37.8 (1.3%) 25% Business Pillars 152.1 159.9 (4.9%) Food Corporate (2.4) (1.8) (33.3%) 56% Liquor Total underlying EBIT (pre AASB16) 149.7 158.1 (5.3%) 19% Hardware Add: AASB16 adjustment 1 6.0 - Total EBIT (Statutory Accounts) 155.7 158.1 1. An analysis of AASB16 adjustments by Pillar is shown in the Appendix. 5 1H20 Half YearResults

Food – sales Food 1H20 1H19 Change $m $m %  Total Food sales (including charge-through) increased 1.2% to $4.4bn (1H19: $4.3bn) Food Supermarkets Supermarkets revenue (including charge-through) 3,596.5 3,568.0 0.8%  Total sales (including charge-through) increased 0.8% to $3.6bn (+1.2% ex Drakes impact 1 ) Charge-through sales (472.2) (470.8) 0.3%  Wholesale sales (ex tobacco) improved from -1.9% in 1H19 to -0.3% in 1H20 (+0.3% ex Drakes impact 1 ) Supermarkets revenue (excluding charge-through) 3,124.3 3,097.2 0.9%  Sales improvement supported by successful execution of growth initiatives and a reduction Convenience revenue 784.6 762.9 2.8% in price deflation 2 to -0.1% (1H19: - 1.3%) despite continued price investment in ‘Winning Total revenue as per Statutory Accounts 3,908.9 3,860.1 1.3% Range’  Wholesale sales trajectory improved in all states Wholesale sales (ex tobacco)  Qld was the strongest performing state 2.0% Sales growth in SA (ex Drakes impact 1 ) with Foodland stores performing well  1.0%  0.3% Significant improvement in WA sales trajectory, with sales now broadly in line with 1H19 0.0% IGA retail LfL 3 sales growth of +0.4% (1H19: -0.2%)  Rate of decline (%) -0.3% -1.3% -1.9% -1.0%  Net IGA store closures of 10 (9 openings, 19 closures). Net store openings expected in 2H20 -3.5% -3.8% -2.0% -4.4%  Teamwork score increased to ~74% (1H19: ~72%) -3.0%  Continued improvement in retailer and supplier satisfaction scores -4.0% -5.0% Convenience -6.0%  Total sales increased 2.8% to $784.6m due to sales growth from larger customers, mainly 2H17 1H18 2H18 1H19 2H19 1H20 1 higher tobacco sales As reported Excluding Drakes (SA) 1. Metcash ceased to supply Drakes in SA from 30 September2019. Sales growth has been calculated by removing Drakes sales from the prior period (1 October 2018 to 31 October 2018). 2. Excludes tobacco and produce. 3. Scan data from 1,093 IGA stores. 6 1H20 Half YearResults

Food – EBIT 1H20 1H19 Change Food $m $m %  Total revenue 1 (including charge-through) Reported EBIT of $88.4m includes a positive AASB16 adjustment of $3.2m 4,381.1 4,330.9 1.2%  EBIT (Statutory Accounts) 88.4 93.0 (4.9%) EBIT (pre AASB16) declined $7.8m (-8.4%) to $85.2m mainly due to: Less: AASB16 adjustment (3.2) — —  A ~$10m decline in the EBIT contribution from the resolution of onerous lease obligations; and EBIT (Pre AASB16) 85.2 93.0 (8.4%)  Ceasing to supply Drakes from 30 September 2019 (~$1.5m) EBIT margin² 1.9% 2.1% (20bps) Partly offset by:  Improved wholesale sales (ex tobacco);  Cost savings which more than offset the impact of inflation;  Improved earnings from joint ventures and corporate stores; and  A positive contribution from the Convenience business. 1. Total revenue includes charge-through sales of $472.2m (1H19: $470.8m). 2. EBIT margin: EBIT (pre AASB16) / Total revenue (including charge-through sales). New DSA store: Romeo’s Foodland, Rundle Mall, SA 7 1H20 Half YearResults

Food – MFuture initiatives Brand Clarity Diamond Store Accelerator Small format offer Community Co Systems & Logistics  Three year re-branding program  Automated charge-through now  Program accelerated through  Trial of next generation IGA  A further ~70 products added, (right brand, right offer, right location) trading process simplification and Xpress stores bringing total products in  Enforced standards to protect funding assistance option  Focus on Fresh including meal Community Co private label  IGA rewards being rolled out to all  A further 45 stores completed range to ~350 integrity of brand and better pricing solutions, while also catering for states following successful trials in  New products include: specialty for retailers that comply with WA and QLD the program (1H19: 9 stores) with full grocery shop  New tailored promotional platforms promotional programs an additional 36 in progress  Each store offer tailored for local cheeses, gluten free biscuits,  Retailer engagement delivering strong  Brings total stores through the value added meats, dishwashing to be available 1H21 supporting the demographic products and an expanded range support. Working closely with program to ~450  Trial stores opened at Bondi, Brand Clarity initiative of eggs and fresh ready meals  Partnership with Australia Post to National Retail Council  Average retail sales growth of NSW (May 2019), Chatswood,  Community Co sales increased  Branding of large format store help create Australia’s largest collect ~15%. Sales improvement post NSW (Oct 2019) and North ~50% over 1H19 (SupaValue). First trial store to open in upgrade maintained Sydney, NSW (Nov 2019). Trial & return network  Community Co Tomato Sauce NSW in 2H20  DSA program integral component  Supermarkets and Convenience delivering significant learnings for  Branding of small format store broader network was determined the best tomato of brand strategy logistics networks integrated  Trial to be completed by end of sauce by CHOICE  Construction of new DC in SA complete (The Fresh Pantry by IGA) and trial underway FY20 progressing with completion  Focus now on core IGA brand expected in the 3rd quarter of 2020 Focus is on further improving competitiveness of retailer network 8 1H20 Half YearResults