FY19 Full Year Results 24 June 2019 Championing Successful Independents 0 FY19 Full Year Results
Group update and divisional results Jeff Adams Group Chief Executive Officer
Our purpose Our vision Our values Championing Best store in town We believe: Independence is worth fighting Successful for; in treating our people, 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 2 FY19 Full Year Results FY19 Full Year Results
Group overview Reported results reflect adoption of the new Accounting Standard AASB15 Reported Group sales (which excludes charge-through sales) increased 1.8% to $12.7bn Group sales (including charge-through sales) increased 1.4% to $14.6bn Group EBIT declined 1.4% to $330.0m Food EBIT decreased 3.0% to $182.7m Liquor EBIT increased 1.3% to $71.2m Hardware EBIT increased 17.2% to $81.2m Corporate EBIT was -$5.1m (FY18: +$6.7m) – FY18 included the reversal of a provision against the NSW DC insurance claim settled in 1H18 3 FY19 Full Year Results
Group overview (continued) Underlying profit after tax 1 decreased 3.0% to $210.3m Reversal of provision against NSW DC insurance claim in FY18, and increase in finance costs due to the $150m share buy-back in 1H19 Underlying EPS up 1.8% to 22.6 cents reflecting the benefit of the share buy-back Statutory profit after tax of $192.8m (FY18: Loss of $148.2m) FY18 included a charge of $345.5m (post tax) related to the impairment of goodwill and other net assets Solid operating cash flows and strong balance sheet Final dividend of 7.0 cents per share, fully franked Working Smarter program completed – cumulative savings ~$125m MFuture (our next 5 year vision) now underway 1. FY19 Underlying profit after tax excludes Working Smarter restructure costs and SA DC transition costs of $17.5m (post tax). FY18 underlying profit after tax excludes Working Smarter restructure costs and HTH integration costs 4 FY19 Full Year Results of $19.6m (post tax), and impairment of goodwill and other net assets of $345.5m (post tax).
Results – overview by pillar FY18 1 FY19 Change $m $m % Sales revenue (%) Sales revenue (including charge-through sales) (including charge-through) Food 8,794.3 8,768.6 0.3% 15% Liquor 3,666.9 3,474.0 5.6% Food Hardware 2,102.0 2,120.1 (0.9%) Liquor 60% Hardware Total sales revenue (including charge-through sales) 14,563.2 14,362.7 1.4% 25% Less: Charge-through sales 2 (1,902.9) (1,920.5) (0.9%) Total sales revenue (Statutory Accounts) 12,660.3 12,442.2 1.8% EBIT EBIT (%) Food 182.7 188.3 (3.0%) Liquor 71.2 70.3 1.3% 24% Food Hardware 81.2 69.3 17.2% Liquor 55% Hardware Business Pillars 335.1 327.9 2.2% 21% Corporate 3 (5.1) 6.7 - Total EBIT 330.0 334.6 (1.4%) 1. The FY18 results have been adjusted to reflect the adoption of the new Accounting Standard AASB15: Revenue from Contracts with Customers . A reconciliation is provided in Appendix 3 and Appendix 4. 2. Sales revenue has been adjusted to exclude charge-through sales to comply with AASB15. 5 3. Corporate EBIT in FY18 included the reversal of a provision against the Huntingwood, NSW DC hail insurance claim following settlement. FY19 Full Year Results
Food – sales Supermarkets FY19 FY18 Change $m $m % Total sales (including charge-through) declined 0.5% to $7.2bn Food Some improvement in highly competitive market conditions evident in 2H19 Deflation 1 continued to ease in 2H19 reflecting a reduction in the level of promotional Supermarkets revenue (including charge-through) 7,235.3 7,275.0 (0.5%) activity in the market Charge-through sales (957.9) (936.8) 2.3% – Deflation in 2H19 declined to -0.9% (1H19: -1.3%) Supermarkets revenue (excluding charge-through) 6,277.4 6,338.2 (1.0%) – Deflation for the full year declined to -1.1% (FY18: -2.4%) Convenience revenue 3 1,559.0 1,493.6 4.4% Eastern seaboard delivered positive sales growth Total Food revenue as per Statutory Accounts 7,836.4 7,831.8 - WA remained challenging but there was an improvement in sales trajectory Increase in charge-through driven by higher Fresh sales Store closures reduced to 24 (FY18: 30) and were primarily in WA Wholesale sales (ex tobacco) Store openings of 21 brings total openings over the past two years to 49. Store 0.0% openings are generally smaller format stores, in line with strategy. Rate of decline (%) -1.0% Wholesale sales (ex tobacco) for the year declined by -1.5% (FY18: -3.6%) 2H19 decline of -1.3% represents the fourth consecutive half-year period of -2.0% improvement in the rate of decline IGA retail LfL 2 sales trajectory improved to -0.5% (FY18: -0.9%) -3.0% Teamwork score increased 80bps (~72%) -4.0% Continued improvement in retailer and supplier satisfaction scores -5.0% Convenience 1H17 2H17 1H18 2H18 1H19 2H19 Total sales increased 4.4% to $1.6bn due to sales growth from major customers, increased tobacco sales and the addition of new customers. 1. Deflation excludes tobacco and produce. 2. Scan data from 1,118 IGA stores. 6 3. There were no AASB15 adjustments impacting Convenience revenue. FY19 Full Year Results
Food – EBIT Food FY19 FY18 Change $m $m % EBIT decreased $5.6m (3.0%) to $182.7m Total revenue 1 (including charge-through) 8,794.3 8,768.6 0.3% The implementation of AASB15 had a $1.6m positive year-on-year impact on EBIT EBIT 182.7 188.3 (3.0%) The decline in wholesale sales (excluding tobacco) and an incremental investment EBIT margin 2 2.1% 2.1% - in MFuture initiatives of ~$10m (primarily trial of small convenience format store and Loyalty program) was partly offset by: – An incremental contribution from the resolution of onerous lease obligations of ~$7m, all of which occurred in 1H19 – Improved earnings from Supermarket joint ventures – Working Smarter savings helped offset the impact of cost inflation Convenience business made a positive contribution to EBIT New DSA store: Ritchies, Rowville VIC 1. Total revenue includes charge-through sales of $957.9m (FY18: $936.8m). 7 2. EBIT margin: Reported EBIT / Total revenue (including charge-through sales). FY19 Full Year Results
Food – initiatives update Retailer engagement Project Align Diamond Store Accelerator Community Co Small format offer Strategic direction endorsed by the Implementation of new state- A further 79 stores completed the Now in all IGA and Supa IGA stores First of proposed 10 store trial of National Retail Council (NRC) based operational structure program in FY19 nationally next generation IGA Express stores completed opened at Bondi, NSW in May 2019 Working closely with retailer groups Brings total stores that have A further 100 products added in (NRC & State boards) Business brought closer to completed the program to ~400 FY19, total products in range ~280 Focus on Fresh including meal customer for faster decision solutions while also catering for a full Establishment of National Retailer Average sales growth ~10% Sales increased to ~$100m in FY19 making grocery shop Pricing and Promotions Committee Program now simplified to accelerate Community Co Fresh launched to ensure competitive pricing Logistics team repositioned – More efficient operating model roll-out from FY20 including fresh chilled ready meals driving improved performance allows for more competitive pricing Significant improvement in retailer and fresh salads A further ~500 stores identified based and supplier satisfaction surveys Supports improvement in speed of Shopper behaviour to date in-line on demographic analysis Key new lines include Value Add execution and sales with expectations Long-term supply agreements with produce, sliced and specialty cheese, DSA program is core to delivery of retailers in SA, and new five year frozen chickens and ice cream Number of customers up ~25% brand strategy supply agreement with Drakes in Ten products received awards at Fresh represents ~50% of total sales QLD “Product of the Year” recognition (ready meals ~10%) event (five in FY18) 8 FY19 Full Year Results
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