Champion of the Independent Retailer

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Champion of the Independent Retailer
US INVESTOR PRESENTATION
Andrew Reitzer Chief Executive Officer
The Third Force in the Australian Grocery Market
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AGENDA

• Company Overview
• Half Year Highlights
• Strategic Review of Business Divisions
• IGAgtD
• ALM
• CW
• Concluding Remarks
• Appendix contains
• Half Year Presentation 31 October 06
• Half Year Statutory Accounts (Appendix 4D)

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COMPANY OVERVIEW

• Listed on Australian Stock Exchange (MTS)
• Capitalised at A3.5bn
• Ranked in top 80
• Business - Marketing and distribution of food,
  liquor and other fast moving consumer goods to
  independently owned supermarkets liquor outlets
• Core Competencies
• Buying and merchandising
• Marketing and brand building
• Distribution logistics and warehousing
• Championing the interests of the Independent
  grocery sector
• Geographic Footprint - Australia and New Zealand
  (liquor only)
• Revenues - approx A9bn for FY07
• Market Position - 3rd force in national grocery
  retailing market
• Management Team With Metcash since 1998 and
  have led business transformation

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DIVISIONAL OVERVIEW

• Sales A5.5bn
• EBIT 4.3 HY07
• National footprint
• Supplies gt 2,700 independent grocery stores
• Over 1,250 IGA branded stores
• 12 major DCs delivering gt 21,000 SKUs
• Dry, chilled, frozen produce GMHBC
• State of the art systems

• Sales A2.2bn
• EBIT 1 HY07
• National footprint NZ
• Supplies gt 13,000 independent liquor stores,
  restaurants hotels
• Over 2,500 stores marketed under IBA umbrella
  brand
• 22 DCs delivering wines, spirits, RTDs
  imported/ boutique beers
• Specialist on-premise liquor supplier
• State of the art systems

• Sales A1.3bn
• EBIT 2.2 HY07
• National footprint
• 4 distinct sub-divisions servicing differing
  customer needs
• Cash Carry (21 DCs)
• Regional Wholesale (22 DCs)
• Convenience Store Distribution (4 DCs)
• Foodlink (Foodservice) in WA
• Supplies gt 78,000 customers
• State of the art systems

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WHY WE SUCCEED?

• Stable, capable Management Team (refer Appendix)
• Each Division caters specifically for its
  customers needs
• Bulk deliveries in IGAgtD and ALM to Single Pick
  in CW and ALM
• Model is focussed on Groups core competencies
• Marketing, merchandising and distribution
  logistics
• No competition with customers
• Manufacturers keep us competitive with prices
• They want strong third player
• IGA retailers have a differentiated offer
• Owner managed
• Range to local needs, personal service, clean
  store, community involvement, competitive deals
• Able to scale store to specific demographic
  profile of an area (v Chains)
• Energised independent sector believes in its
  own future
• Many of our retailers have some price elasticity
• Their location or format allows them to get away
  with higher prices
• Our costs are less than the chains at DC and
  store level

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TRACK RECORD

• TSR under current management vs competitors and
  market.

Note Total Shareholder Returns (TSR) represents
share price appreciation and dividend returns to
shareholders.
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HALF YEAR HIGHLIGHTS

• Total Revenue up 37 to A4.8 billion
• Wholesale Sales rose 34 to 4.6 billion
• EBITA grew 47 to A140 million and EBITA margin
  rose to 3.12 from 2.76 last year
• Cost of Doing Business as a percentage of gross
  profit fell by 0.51 to 68.37
• PBT as to Sales rose 14 bps to 2.47 (adjusted
  for Action retail losses and goodwill
  amortisation)
• Group NPAT rose 36 to A75.9 million on a
  normalised basis (before significant and
  non-recurring items arising from the FAL
  acquisition)
• After non-recurring items of 9.8 million, NPAT
  for the half year was 66.1 million
• EPS lifted 25 to 8.84 cents (9.77 cents adjusted
  for non-recurring items)
• Cashflow from trading operations was A47 million
  and reflects the reversal of last years
  beneficial creditors cut-off
• Dividends for the year increased 27 to 7 cents
  per share (fully franked)
• Full Year earnings guidance of 22.5-25.0 cents
  reconfirmed
• FAL Integration complete

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IGAgtD STRATEGIC REVIEW

• FAL integration complete
• Successful IGAgtD operating model established in
  Western Australia (32 market share)
• Action stores divested
• Buying synergies
• IGA differentiated model a success
• Comp store growth 4-5
• Market share held at 18.8
• Retailer profitability satisfactory
• Developers now approaching us with opportunities
• Store reinvestment strong
• 50 new stores this year with further 250 still
  on the books
• Extensions refurbishments also strong, but
  significant pent-up opportunity
• No capital cost to MTS, just short-term working
  capital support

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IGAgtD STRATEGIC REVIEW

• Supply chain efficiencies continuing to be driven
• New Mega DC to service significant growth being
  experienced in Queensland on-line end May this
  year
• Voice-pick still being implemented in remaining
  fresh frozen warehouses
• Fresh
• Significant opportunity to increase share of
  customers wholesale purchases
• Excellent assets capabilities acquired as part
  of FAL deal
• Targeted A300m in 3 years, slow progress but
  confident of success
• Foodstuffs JV
• Joint buying venture with Foodstuffs in NZ
• Strong results from first category, others being
  progressed
• Possible opportunity to explore joint buying on
  branded product
• Teamwork score
• Besides Fresh, continue to focus on opportunities
  to increase share of total basket
• Buying synergies on track

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ALM STRATEGIC REVIEW

• Significant market upheaval
• Chains expansion into liquor retailing and hotels
• Manufacturers reassessing supply chains
• Despite coming under pressure ALM has succeeded
  in substantially retaining volume to date (up
  4.2 in first half)
• Margins under pressure investment in brand
  building
• ALM strategy of consolidating banners and
  focussing marketing power
• Liquor Alliance and IBA
• What does the future look like?
• Believe ultimately there is a bright future, but
  need to survive the current market shakeout
• ALM well-placed to be a significant player
  (higher volumes with margins stabilised at lower
  than historic levels)
• Hopeful of expanding wholesale beer operations
• Focussed, well branded and marketed independent
  liquor retail sector

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CAMPBELLS WHOLESALE STRATEGIC REVIEW

• Has transformed itself into highly focussed
  customer service-centric wholesaler, operating
  four distinct service offerings
• Business restructuring necessitated by apparent
  demise of Mom Pop convenience sector which
  has recently seen a resurgence
• CW now a high-tech one stop shop for the
  specialised convenience sector
• Now a significant player in confectionery
  distribution via its Campbells Wholesale division
• Its state of the art single-pick capabilities
  have positioned its CSD division as a leader in
  its field (Supply Agreement with 7-11 other
  opportunities in the pipeline)
• Addition of foodservice business (Foodlink) in WA
  as part of FAL deal very successful, further
  enhancing the Divisions overall capabilities and
  providing possible expansion opportunities
• Very pleasing first half sales 30 EBIT
  60 EBIT Margin 41bps

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CONCLUDING REMARKS

• Strong Management Team
• Focused on driving core businesses
• IGAgtD Teamwork Score (Fresh) Buying Synergies
  Store reinvestment
• ALM Patience Continue to consolidate banners
  under IBA
• CW Continue to expand market share in
  confectionery and organised convenience sector
• Continue to extract supply chain efficiencies
  across all divisions
• Medium/ Long Term Growth
• Well positioned to participate in further
  industry rationalisation domestically
• Will assess opportunities for expansion same
  core business, different geography on their
  merits
• Investment criteria Must be EPS neutral in first
  year will not 'bet the shop potential to be
  significant contributor to Group in time gtA1 bn
  revenue
• Capital Management
• Watching brief
• Defensive stock (non-cyclical)
• Selling basic essentials (groceries liquor!)
  no discretionary spend
• Solid, steady earnings and cashflow

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APPENDICES

• Management Team

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Stable, Experienced Management Team
Date of Appointment 4 May 1998 28 years
experience in the retail/wholesale industry.
Previous positions at Metro Cash Carry include
Group Operations Director, heading operations in
Russia and Israel, Marketing Director, IT
Director and managing various operating
divisions.
With Metcash since September 1997. CEO since Feb
2000. Extensive industry experience, including
owning and operating independent supermarkets and
holding senior positions within a chain store
environment as well as warehouse and distribution
operations.
CEO of ALM since March 1998 Over 32 years
experience in the liquor industry. Previously
held the Chief Executive position at Tooheys
Limited and The Swan Brewery Company Limited.
CEO of CCC since June 1998. Over 22 years
experience in fast moving consumer goods
distribution at wholesale, primarily in
multi-site general management and operations.
Date of Appointment 22 May 1998 Over 35 years
in corporate offices of listed companies with
excellent corporate governance reputations.
Date of Appointment 8 November 2000 31 years of
IT industry experience in the wholesale
distribution industry.
Date of Appointment 4 May 1998 34 years
experience in the retail wholesale industry.
Significant senior management experience in
marketing/ merchandising roles.
With Metcash since April 2000. Over 35 years
experience in the retail wholesale industry.
Significant industrial property development,
construction and logistics experience.
With Metcash since December 2001. Over 28 years
experience in Human Resources with some of
Australias leading FMCG companies.
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"CHAMPION OF THE INDEPENDENT"
THE THIRD FORCE