FY18 Full Year Results 25 June 2018 Group update and div ivis - PowerPoint PPT Presentation

FY18 Full Year Results 25 June 2018

Group update and div ivis isional results JEFF ADAMS GROUP CHIEF EXECUTIVE OFFICER

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Group overview ▪ Group sales up 4.3% 1 to $14.5bn 2,3 up 9.2% to $332.7m – predominantly driven by growth in Hardware earnings ▪ Group EBIT Prior year included a 53 rd trading week which contributed sales of $253.5m ▪ 3 broadly flat at $188.6m – improved earnings after adjusting for 53 rd trading week ▪ Food EBIT Liquor EBIT up $1.4m to $68.4m – continued growth in the IBA network ▪ ▪ Hardware EBIT up $20.5m to $69.0m – inclusion of a full year of HTH earnings and related synergies ▪ Underlying profit after tax 4 up 10.7% to $215.6m ▪ Impact of loss of sales to Drakes Supermarkets in SA recognised in asset impairment Focus on operational efficiencies to help address loss of operating leverage in South Australia beyond FY19 ▪ ▪ Statutory loss after tax of $149.5m – includes goodwill and net asset impairment of $345.5m (post tax) ▪ Working Smarter program cumulative savings of ~$95m ▪ Strong operating cash flows ▪ Strong balance sheet ▪ $125m Off-Market Buy-Back announced ▪ Final dividend of 7.0 cents per share, fully franked 1. FY17 excludes sales of $253.5m relating to the 53 rd trading week and FY18 includes a full year of HTH sales (FY17: 7 months) 2. Group EBIT in FY17 includes the earnings on $253.5m of sales relating to the 53 rd trading week 3. Food EBIT has been increased by $8.4m (FY17: $8.1m) to reflect the reclassification of net transaction costs associated with the Customer Charge Cards Agreement out of EBIT and into finance costs. The revision had no impact on profit/(loss) before tax. A reconciliation is set out in Appendix 2 4. Underlying profit after tax excludes: Working Smarter restructure costs of $7.7m (post tax), HTH integration costs of $11.9m (post tax) and an impairment of goodwill and 4 other net assets of $345.5m (post tax)

Results overvie iew by y pilla illar 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% Hardware 1 2,098.6 1,578.5 33.0% 24% Liquor Total sales revenue (52 trading weeks) 14,463.7 13,868.4 4.3% 53 rd trading week 2 - 253.5 - Hardware Total sales revenue 14,463.7 14,121.9 2.4% EBIT 3 EBIT (%) Food 4 188.6 188.1 0.3% Liquor 68.4 67.0 2.1% 21% Food Hardware 5 69.0 48.5 42.3% 58% Liquor Business Pillars 326.0 303.6 7.4% 21% Corporate 6 6.7 1.2 - Hardware Total EBIT 332.7 304.8 9.2% 1. FY17 includes 7 months of HTH sales of $521.5m 2. Further information on FY17 sales from 53 rd trading week is shown in Appendix 3 3. FY17 EBIT includes earnings on $253.5m of sales related to 53 rd trading week 4. Food EBIT has been increased by $8.4m (FY17: $8.1m) to reflect the reclassification of net transaction costs associated with the Customer Charge Cards Agreement out of EBIT and into finance costs. The revision had no impact on profit/(loss) before tax. A reconciliation is set out in Appendix 2 5. FY18 Hardware EBIT includes full year of earnings from HTH (FY17: 7 months) 5 6. FY18 Corporate EBIT includes reversal of provision against the Huntingwood, NSW DC hail insurance claim settled in 1H18

Food - sale les Supermarkets 1 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 53 rd trading week - (140.6) - ▪ Growth on the Eastern seaboard more than offset by Total revenue declines in SA and WA 7,406.5 7,510.9 (1.4%) (52 trading weeks) ▪ Improvement in SA in 2H18 ▪ WA continued to be most challenging market ▪ Wholesale sales (ex tobacco) decreased 3.6% ▪ 2H18 decrease 3.5% v 3.7% in 1H18 ▪ High level of promotional activity ▪ Deflation continued, albeit at a slower rate in 2H18 (2.1% in 2H18 v 2.7% in 1H18) ▪ Deflation for the year 2.4% (FY17: 2.0%) ▪ QLD negatively impacted by deregulation of trading hours, Commonwealth Games and adverse weather in 2H18 ▪ No net material impact from new and closed stores (28 IGAs opened, 30 IGAs closed) 2 sales decreased 0.9% ▪ IGA Retail LfL ▪ Teamwork score ~70% Summer Hill IGA, NSW 1. All percentage references are based on 52 trading weeks in FY17 2. Scan data from 1,108 IGA stores 6

Food - sale les (c (cont.) Convenience 1 FY18 FY17 % ▪ Total sales decreased 0.5% to $1.49bn Convenience $m $m Change Total revenue 1,493.1 1,528.5 (2.3%) ▪ Sales in 2H18 increased 3.7% versus a decrease of 53 rd trading week 4.6% in 1H18 as the business cycled revisions to key - (28.0) - contracts Total revenue 1,493.1 1,500.5 (0.5%) ▪ Increase in 2H18 sales driven by higher sales to a (52 trading weeks) large contract customer (footprint expansion and stronger LfL sales) ▪ Contracts with two largest customers extended beyond FY19 Hill Street Grocer, Hobart 7 1. All percentage references are based on 52 trading weeks in FY17

Food - EBIT IT Food 1 FY18 FY17 % 2 broadly flat at $188.6m ▪ EBIT Food $m $m Change ▪ FY17 includes EBIT related to $168.6m of sales from 53 rd Total revenue 8,899.6 9,011.4 (1.2%) trading week (Supermarkets: $140.6m and Convenience: (52 trading weeks ) $28.0m) ▪ Positive contribution from Convenience business versus a Total EBIT 2 188.6 188.1 0.3% loss in prior year ▪ Impact of the decline in Supermarkets’ wholesale sales (ex EBIT margin 2.1% 2.1% - tobacco) and lower JV earnings (primarily related to prior year one-off adjustments), largely offset by Working Smarter savings 1. Food EBIT is reported on a combined Supermarkets & Convenience basis 2. Food EBIT has been increased by $8.4m (FY17: $8.1m) to reflect the reclassification of net transaction costs associated with the Customer Charge Cards Agreement out of EBIT and into finance costs. The revision had no impact on profit/(loss) before tax. A reconciliation is set out in Appendix 2 Mt Eliza Supa IGA, Vic Peregian Beach IGA, Qld Wembley Supa IGA, WA 8

Food – in init itia iatives 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 ▪ ▪ Positioned to deliver improved wholesaler Average sales growth > 10% and and retailer efficiencies and sales growth average growth in basket size > 5% ▪ Focus on key learnings with the aim to simplify and accelerate the program Channel Clarity Community Co – mid tier private label range ▪ ▪ Focus on brand that best fits store offer Continued expansion in range and network coverage ▪ ▪ Implementation of first phase (Supa IGA) Positive customer response in progress ▪ ~80 products added in FY18 ▪ Agreement reached with retailer working ▪ ~180 products now on offer group on second phase (IGA) Increased focus on fresh indieDirect ▪ ▪ Strong sales growth in ‘ready meals’ Efficiency benefits through ▪ digitalisation of “Charge Through” Youfoodz introduced into network ▪ Trials and retailer Working Groups in ▪ Case ready mince in NSW, QLD and WA in progress 1H18 9

Liq iquor - sale les 1 increased 5.7% to $3.47bn with increased ▪ Total sales FY18 FY17 % volumes from both existing and new contract customers 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 53 rd trading week (54.6) increased 8.8% as wholesale customers (Thirsty Camel Total revenue in NSW and Tasmania as well as Porters and Big Bargain) 3,465.5 3,278.5 5.7% (52 trading weeks) converted to IBA banner 2 in IBA bannered network increased 1.5% ▪ LfL retail sales (represents 5 consecutive years of sales growth) ▪ Continuation of consumer trend to lower consumption but higher quality ▪ Introduction of NSW Container Deposit Scheme (CDS) ▪ Adverse impact on border town retailers – NSW Government response pending ▪ Beer category most impacted ▪ ~55% of sales through IBA bannered network Kilmore Cellarbrations, Vic 1. All sales percentage references are based on 52 trading weeks in FY17 2. Represents LfL retail sales growth in ~560 IBA bannered stores 10

Liq iquor - EBIT IT ▪ EBIT increased 2.1% to $68.4m FY18 FY17 % ▪ FY17 includes EBIT related to $54.6m of sales from 53 rd $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 with the introduction EBIT 68.4 67.0 2.1% of CDS in NSW (~$0.8m) and increase in provision for bad debts in WA in 1H18 (~$0.5m), partly offset by Working EBIT margin 2.0% 2.0% - Smarter savings ▪ EBIT margin maintained at 2.0% 11