Metcash Limited Annual Report 2013

FY2013 Annual Report · Metcash Limited

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Annual Report 2013
Delivering value. It’s in our DNA.

Metcash Limited
ABN 32 112 073 480

Metcash Limited (Metcash) is
Australia’s leading wholesale
distribution and marketing
company specialising in
grocery, fresh produce, liquor,
hardware and automotive
parts and accessories.

CONTENTS
Five Year Review
Chairman and CEO Reports
Departing Word
About Metcash – Our DNA
Review of Operations – Metcash Food & Grocery
Review of Operations – Australian Liquor Marketers
Review of Operations – Hardware & Automotive
Corporate Responsibility and Environment
Our Board
Key Management Personnel
Corporate Governance Statement
Financial Report
Directors’ Report
Notes to the Financial Statements
Directors’ Declaration
Auditor’s Independence Declaration
ASX Additional Information
Corporate Information

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68
129
130
133
IBC

Annual General Meeting

Wednesday 28 August 2013
2.30 pm

ASX Auditorium
Exchange Square
20 Bridge Street, Sydney NSW

Five Year
Review

PAT (Underlying) up 6.9%
to $280.7m

EPS (Underlying) down 4.4%
to 32.6 cents per share

Sales up 3.8%
to $13.0bn

EBITA (Underlying)
up 2% to $460.4m

DPS – 28.0 cents
Payout ratio of 86%

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Five Year Review

Financial Performance

Sales ($m)

Underlying EBITA

Interest, net ($m)

Underlying proﬁt after tax ($m)

Proﬁt after tax attributable to parent ($m)

Financial Position

2013

2012

2011

2010

2009

12,976.6

12,501.1

12,364.0

11,517.4

460.4

61.6

280.7

206.0

451.2

67.6

262.5

90.0

438.0

66.3

256.2

241.4

401.2

49.3

244.9

227.6

10,974

371.3

49.8

225.9

202.5

Metcash shareholder equity ($m)

1,624.2

1,335.1

1,442.8

1,377.6

1,279.4

Net tangible assets per share (cents)

Gearing (debt/debt+equity) (%)

(9.5)

33.2

(28.1)

42.6

19.7

36.7

12.5

35.5

13.0

33.5

Share Statistics

Fully paid ordinary shares

880,704,786

771,345,864

768,853,644

765,644,031

764,888,363

Weighted average ordinary shares

859,742,607

770,441,432

767,676,470

765,178,865

764,843,880

Earnings per share (cents)

Underlying earnings per share (cents)

Dividends declared per share (cents)

24.0

32.6

28.0

11.7

34.1

28.0

31.5

33.4

27.0

29.7

32.0

26.0

26.5

29.5

24.0

Other statistics

Number of employees (full-time equivalents) 5,794.0

5,166.0

5,638.0

5,773.0

5,358.0

Metcash Annual Report 2013

Chairman and CEO Reports

CHAIRMAN’S REPORT, Mr Peter L Barnes

Metcash has again produced results in line with its guidance.
Our Food & Grocery business performed reasonably; Australian
Liquor Marketers extremely well; and the Hardware & Automotive
business is performing in line with expectations. Our strategic
acquisitions are also progressing soundly.

Conditions for the independent retail sector however, remain
challenging with low consumer conﬁdence and the self-serviced
supermarket chains locked in a marketing war. As a core wholesaling
business, Metcash is particularly affected by sustained price deﬂation.

An equity raising undertaken in mid 2012 resulted in an additional
109 million shares being issued, to the value of $375 million. These
additional shares impacted the capital structure of the company
resulting in an 11.6% dilution in the underlying earnings per share.
The funds raised have been used to purchase the remaining 49.9%
of Mitre 10 and set up seven hardware joint ventures; further
automation of the NSW Distribution Centre; acquisitions in the
liquor market including three hotel joint ventures; the purchase
of 75.1% of Automotive Brands Group (ABG) and purchase of
Australian Truck and Auto Parts Group (ATAP).

The business remains strong and is well placed to endure the current
trading environment. The Board is pleased to announce a dividend
of 28 cents per share, fully franked for the full year. This represents a
payout ratio of 86% of underlying earnings per share. The dividend
reﬂects the Board’s conﬁdence in the Group’s underlying position, its
future prospects and strong cash ﬂow generation.

Metcash announced an increase in group sales of 3.8% to
$13 billion. Our reported proﬁt after tax rose 129.0% to $206 million.
Underlying proﬁt after tax rose 6.9% to $281 million. Underlying
earnings per share declined 4.4%, reﬂecting the fact that most of
the investments funded by the equity raising occurred partway
through the year and did not deliver a full year’s earnings.

Metcash recorded a strong operating cash ﬂow, rising 5.5% to $300
million, resulting from underlying earnings and improved working
capital performance. This was achieved despite continuing Franklins
retail losses and cash outlays related to provisions raised last year.
Inventory control was improved, and gearing was reduced to 33.2%
reﬂecting the strong Cash Flow and equity proceeds.

The year saw the Board renewal process continue. After 12 years
service Richard Longes retired from the Board as a Non-executive
Director. During this time Richard was Chairman of the Audit,
Risk and Compliance Committee, his contributions to the Board’s
deliberations and decisions were signiﬁcant and greatly appreciated.

Ian Morrice joined the Board as a Non-executive Director in June,
2012. Ian has in excess of 30 years international retail experience,
most recently as Group CEO and Managing Director of The
Warehouse Group Limited (NZ). Patrick Allaway joined the Board as
a Non-executive Director in November 2012. Patrick has 25 years of
banking and ﬁnancial experience. Andrew Reitzer stepped down as
CEO and Executive Director on 30 June 2013 and Ian Morrice was
appointed CEO and Executive Director.

Again I would like to thank our shareholders, dedicated staff, loyal
customers, suppliers and other stakeholders for their continued
support of Metcash.

Metcash Annual Report 2013

Finally the Board would like to acknowledge the outstanding
service of outgoing CEO Andrew Reitzer. Andrew will be missed;
his courage, insight and tenacity have taken Metcash from a
challenged business to a successful ASX100 company.

From the time of his appointment Andrew assembled a strong
executive team and achieved notable successes. The company’s
market capitalisation has increased from $130 million in 1998 to
$3.1 billion today. Revenues have increased signiﬁcantly over this
period from $4.5 to $13 billion. We thank him for the extraordinary
achievements of the last 15 years and wish him well for his life
post-Metcash.

Following an exhaustive review of internal candidates, the Board
appointed Ian Morrice to the role of CEO. Since March Ian has
had the opportunity to familiarise himself with the challenges and
opportunities facing the company and assumed the responsibilities
of CEO on 1 July.

Peter L Barnes – Chairman

CEO’s REPORT, Mr Ian R Morrice

I am delighted to have taken on the role of CEO of Metcash Limited.
The results for the year are creditable in such difﬁcult economic
conditions. Price deﬂation and the deregulation of trading hours in
Western Australia have affected the business. This, together with
some store closures, resulted in a small decline in Metcash Food &
Grocery’s market share.

Metcash Food & Grocery
Metcash Food & Grocery sales fell by 2.3% from $9.3 billion to $9.1
billion, largely due to the closure of Campbells branches, Cornetts
and Walters stores in far north Queensland, and some stores in
Western Australia. Earnings before interest, tax and amortisation
(EBITA) declined 5% from $398 million to $378 million, reﬂecting
the deleveraging effect of deﬂation, signiﬁcant additional investment
in marketing programs and increased utility and transport costs.

We re-established the Supabarn wholesale supply contract and
won a contract to supply Spotless operations in Western Australia
and Queensland. In addition we have almost completed converting
former Franklins stores into independent IGA retailers. Despite more
store closures than originally anticipated, IGA now has a signiﬁcant
strategic footprint in New South Wales.

In response to the competitive environment, Metcash Food &
Grocery focused on marketing and merchandising strategies.
We relaunched the SUPA IGA supermarkets in New South Wales
and developed new advertising campaigns featuring IGA brand
ambassador and well-known personality, comedian Anh Do.
These were very successful in raising IGA’s brand presence and
showcasing our consumer value proposition: ‘Ranging’, ‘Fresh’
and ‘Locked Down Low Prices’. The campaigns also highlighted
the contribution IGA makes to local communities, including the IGA
Community Chest program.

Metcash Food & Grocery opened 51 new IGA stores throughout
Australia during the year. These stores – combined with additional
retailers joining IGA from other banner groups and store extensions
and refurbishments – added a total of 62,693 square metres to the

IGA retail store footprint across Australia. In addition, we ‘bought’
back 50 stores under our store buy-back program, transferring them
from underperforming operators into the hands of focused retailers,
and increasing sales as a result.

I have spent the last few months gaining a deeper understanding
of the business, its strengths and opportunities. I have initiated a
planning process to develop our strategic priorities and growth
opportunities that will be completed by the end of 2013.

In our Convenience division, the KNAPP system is now fully
operational at the Huntingwood Distribution Centre. The system
picks an average of 25,000 single items per day, with the capacity to
increase to 35,000 single items per day in peak periods.

A previously announced project to further automate the Huntingwood
Distribution Centre has commenced. The new system is expected
to go live in September 2014 and will increase the efﬁciency of
the replenishment process, producing denser pallet assembly and
reducing packing and transport costs.

A key priority will be to review the Food & Grocery operations to
respond to the continuing deﬂationary and competitive market
conditions. This will be an ongoing focus for the group as we
continue to invest in our core logistics capabilities, and optimise the
value of recent acquisitions and supply contracts.

I look forward to driving the next stage in Metcash’s evolution.

Also in the cash and carry business, we opened a new concept
store, Value Depot, in Brisbane. To date, the store has exceeded its
forecast sales and EBIT targets.

Mr Ian R Morrice – CEO

Australian Liquor Marketers (ALM)
Once again, our liquor division performed strongly this year, with
sales growth of 24.9% and EBITA of $47 million, an increase of 35%.
Not only did the division hold its position as the second-largest liquor
retailer, it continued to grow volumes while the overall market declined.

ALM’s highlights included a new supply contract with Liquor
Marketing Group Limited and Hotel & Tourism Management Pty
Limited (LMG); improved retail execution; and better retail offers
at the store level from our Independent Brands Australia (IBA)
network, particularly Cellarbrations and The Bottle-O. The latter also
drove organic growth in the underlying business.

ALM also rolled out larger-format retail stores in several locations,
which have performed well and received positive responses from
suppliers and consumers. We made three hotel acquisitions via joint
ventures during the year, and will continue to pursue this strategy
as opportunities arise. This will help us support parts of the existing
retail network while introducing new wholesale revenue streams.

Hardware & Automotive
The Hardware & Automotive division grew sales by 12.6%, and
increased EBITA by 70.8% to $36 million. This was a result of solid
business performance, acquisitions in Mitre 10 and the addition
of ABG.

Mitre 10 continued to strengthen its distribution network by
entering seven new joint ventures. Twenty new Mitre 10 stores
also joined the network in the last 12 months. A total of 52 stores
were converted to Mitre 10 over the past two and a half years,
33 of which have come from a major competitor. The Natbuild
trade alliance was ﬁnalised this year and has further strengthened
Metcash’s position in the trade sector.

The automotive business is performing well and in line with
expectations. The focus is now on future growth, with the $5.6
billion automotive aftermarket sector providing Metcash with
signiﬁcant opportunities.

Metcash’s acquisition of ATAP in May 2013 is the next stage in growing
the Hardware & Automotive business. ATAP’s extensive network
comprises distribution centres in all major cities, including a presence in
New South Wales where ABG did not previously have a distribution
centre. The ATAP network provides access to a fragmented market
that includes approximately 2,500 independent retailers.

DEPARTING WORD FROM FORMER CEO
Mr Andrew Reitzer

After 15 years, the time is right for me to move on. I have thoroughly
enjoyed working at Metcash and am proud of my achievements.

It has been an extraordinary journey from where we started. When
we came to Australia in 1998, Davids Limited – as the company
was known then – was in terrible shape and the independent
grocery sector’s market share was 11%.

Today, Metcash punches above its weight and is a serious
competitor in the sectors in which it operates. What’s most pleasing
is the way our stakeholders have beneﬁted over the last 15 years.

Our shareholders have seen our share price rise and enjoyed
strong dividends. Our customers – the independent retailers – have
experienced network growth and improved competitiveness, and
can now deliver real value to consumers. Our staff members have
access to better careers and beneﬁts; and our suppliers can do
business with a strong third distribution channel.

I am proud of the fact that we are keeping the supermarket chains
at bay by consolidating and growing the independent retail sector;
the way that each of our businesses stay in touch with their local
communities and the way IGA stores and their customers have
contributed more than $60 million to their local communities over
the last decade through the Community Chest program. We have
given consumers a real alternative in the grocery, hardware and
liquor markets.

My sincere thanks to all of our stakeholders for their support, belief
and encouragement during my time as CEO, and I extend my very
best wishes to Ian and the team for the continuing journey.

Mr Andrew Reitzer – Former CEO

Metcash Annual Report 2013

Pioneering distribution and
warehousing expertise is
embedded in our DNA.
These strengths, together with
superior merchandising and
marketing, drive value for our
shareholders and our portfolio
of leading independent stores.

Metcash is acknowledged as a leader in supply chain and operational
logistics. The keys to our success are efﬁciency, investing in the
future and continually lowering the cost of doing business.

We introduced the KNAPP system, with its intelligent ‘single pick’
capability, to serve more than 70,000 convenience stores. By the end
of 2014, the SSI SCHAEFER robotics system will begin operating and
will fully automate the dry goods warehouse at the Huntingwood
Distribution Centre.

Metcash supports independence. We have strength in numbers and
use our network buying power to negotiate the best prices for our
customers – the independent retailers. From our beginnings in food
and liquor, we have diversiﬁed our business to include hardware and
automotive parts.

We have the experience, drive and enthusiasm to ensure independent
retailers have a bright and sustainable future.

4
4

Metcash Annual Report 2013

Our DNA

Champion of the
independent retailer

How
– Network buying power
– Innovation in warehouse
and distribution logistics
– Operational support

Food & Grocery
Supporting independence
and delivering excellence
in fresh and dry grocery
retailing and marketing

Liquor
Wholesaling and distributing
liquor to our network
of independent retailers in
Australia and New Zealand

Hardware & Automotive
Delivering operational
excellence in the automotive
after-market, and hardware
retail and wholesale

Results
– Shareholder value
– Network growth
– A bright and sustainable
future for independent
retailers

Metcash Annual Report 2013

Review of
Operations
Metcash Food
& Grocery

The 2012–13 year was the ﬁrst full year for the restructured
Metcash Food & Grocery pillar. The business is already
seeing results through better buying power and a more
efﬁcient approach to customer support.

Metcash Food & Grocery champions more than 2,500 independent
retailers across Australia. The national network of sophisticated
distribution centres ensures retailers have access to quality stock
at prices that enable them to compete and build successful
businesses.

The retail network that Metcash Food & Grocery supports includes
approximately 1,500 IGA-bannered supermarkets. Other brands
serviced include Friendly Grocer and FoodWorks. The convenience
sector is a signiﬁcant part of the Metcash Food & Grocery pillar
and serves the Lucky 7 brand, more than 70,000 retailers such as
7-Eleven, and a range of other small businesses.

The national network of sophisticated
distribution centres ensures retailers
have access to quality stock at prices
that enable them to compete and
build successful businesses.

In addition to logistics expertise, Metcash Food & Grocery provides
marketing, merchandising, buying and retail operations support for
independent retailers, ensuring they can focus on offering the best
level of service to their customers.

New supply contracts
Market conditions for FY13 were tough. Sales were affected by
continued deﬂation across packaged groceries. Wholesale sales
were down 2.3% to $9.1 billion and EBITA was down 5.0% to
$378 million.

Despite the difﬁcult conditions, there were many signiﬁcant
achievements across Metcash Food & Grocery. The business won
several major supply contracts, which will have a positive impact on
FY14 performance. These include supplying the Supabarn chain in
New South Wales and the Australian Capital Territory; Spotless in
Western Australia and Queensland; Subway in South Australia and
Western Australia; and BP convenience stores.

The network of Metcash Food & Grocery retailers experienced good
growth and investment in quality over the year, with 55 new stores
– including conversions – and 57 extensions and refurbishments
across the group. This commitment to quality continues with the
store buy-back program. Over the year, 50 stores were converted as
part of the buy-back strategy, lifting sales by approximately 20%.

Marketing
Metcash Food & Grocery responded to the challenging economic
conditions by focusing on marketing and merchandising strategies,
particularly around the IGA brand. After the acquired Franklins
stores were converted to SUPA IGA, a relaunch of the SUPA IGA
brand in NSW was undertaken. The relaunch campaign involved
TV commercials, and outdoor, digital and in-store advertising. The
campaign not only built awareness of SUPA IGA, but had a positive
ﬂow-on effect on IGA stores across NSW.

The conversion of Franklins stores to IGA is working well. Despite
more store closures than anticipated, the acquisition has proven to
be worthwhile, signiﬁcantly increasing the IGA footprint in NSW.

Anh Do – author of The Happiest Refugee – fronted two major IGA
brand campaigns: Ranging, and Community Chest. The further
investment in marketing over FY13 demonstrates Metcash Food &
Grocery’s commitment to helping independent retailers showcase
their strengths: stocking their customers’ favourite brands and
assisting the local community.

Harvest Market
A relatively new concept for Metcash Food & Grocery is its fresh-
retail franchise offer, Harvest Market. The model continues to
gain traction, with four franchises established in NSW and several
more in the process of ﬁnal negotiation. The Harvest Market
model enables retailers of fresh fruit and vegetables to beneﬁt
from Metcash Food & Grocery’s buying power, retail expertise and
operational support.

Value Depot
During the year, Metcash’s convenience business welcomed a new
concept store that builds on the previous Campbells offer. Value
Depot opened its doors at Eagle Farm, Queensland in December
2012. We plan to make further reﬁnements to the concept before
converting other Campbells stores.

KNAPP system
Metcash continued to invest in the highest standards of logistical
expertise for its customers. We installed the KNAPP system at the
Huntingwood Distribution Centre in NSW. KNAPP is an automated

Metcash Annual Report 2013

order storage and retrieval system that picks an average of 25,000
single items per day. It has the capacity to pick up to 35,000 single
items per day. The next step – fully automating the warehouse using
SSI SCHAEFER robotics – is now underway at the Huntingwood
Distribution Centre. This system will enable even greater efﬁciencies
in warehousing and distribution by reducing labour costs, related
injuries, pallet packaging and transport costs. Metcash Food &
Grocery’s independent retailers will reap the beneﬁts of these
improvements.

Metcash Annual Report 2013

Review of
Operations
Australian
Liquor
Marketers

Australian Liquor Marketers (ALM) is Metcash’s broad-range
liquor wholesaler. It supplies more than 15,000 hotels, liquor
stores, restaurants and other licensed premises across
Australia. ALM serves customers out of 15 distribution
centres across Australia and New Zealand, providing high-
quality logistics, buying, merchandising, marketing and
retail support. Its wholly owned subsidiary, Tasman Liquor
Company, operates a similar market in New Zealand.

ALM supports nationwide independent retail brands through
Independent Brands Australia (IBA). Established in 2003 by Metcash,
IBA works to create strong national brands by providing liquor
retailers with the right business support framework so they can
compete with the supermarket chains and secure their long-term
sustainability. IBA offers marketing support and a wide variety of
retail services. The four national IBA retail banners are Cellarbrations,
IGA Liquor, The Bottle-O and The Bottle-O Neighbourhood.

ALM supports nationwide independent
retail brands through Independent
Brands Australia (IBA).

ALM’s sales were up 24.9% to $2.9 billion for the year ended April
2013. EBITA was up 35.0% to $47 million. While the overall market
for liquor is declining, IBA continues to grow its share and improve
its performance, driven by improved execution and retail offers at
the store level. Like-for-like beer sales were up 7.0% when market
growth was only 0.2%. The liquor segment achieved overall growth
of 2.8%. IBA’s strategy to lift its mix of wine sales is achieving good
results and IBA management continues to reﬁne these initiatives.

Expansion and joint ventures
ALM has continued pursuing its expansion strategy. During the
year, it launched larger-format concept stores and entered into
joint venture agreements with three hoteliers in Queensland.
These arrangements are designed to expand the supply network
where liquor licensing laws require retail liquor outlets to be part
of a hotel. This venture will increase IBA’s retail footprint and
support independently owned and operated hotels. Similarly, the
Cellarbrations on-premise strategy continues to show excellent
results, with sales to retail customers building signiﬁcantly on
previous years. We are planning further initiatives in the coming
year to grow the already strong sales platform.

Metcash Annual Report 2013

New supply agreement
In August 2012, Metcash signed a 15-year supply agreement with
Liquor Marketing Group and Hotel & Tourism Management Pty
Limited (LMG). The agreement involves supplying approximately
1,700 stores trading under banners such as Bottlemart, Down Under
Cellars, Harry Brown, Sip ‘n Save, Western Cellars, Liquor Legends
and Urban Cellars. The LMG supply contract commenced in October
2012 and management has successfully integrated the increased
supply volume across the network. The rise in sales has beneﬁted
the network, improving Metcash’s operating leverage to reduce the
average cost of doing business.

Established in 2003 by
Metcash, IBA works to create
strong national brands by
providing liquor retailers
with the right business
support framework so
they can compete with
the supermarket chains
and secure their long-term
sustainability.

Metcash Annual Report 2013

Review of
Operations
Hardware
& Automotive

In June 2012, Metcash exercised its right to acquire
the remaining 49.9% of Mitre 10. The following month,
Metcash acquired a 75.1% stake in Automotive Brands
Group (ABG). With the recent addition of Australian Truck
& Auto Parts (ATAP) in May 2013, Metcash’s Hardware &
Automotive division now champions independent retailers
across hardware (including trade) and the $5.6 billion
automotive parts and after-market sector. By entering this
sector, Metcash can offer its core competencies in supply
chain, merchandising, marketing and operational support to
another group of independent retailers.

The year saw a 12.6% increase in sales to $938 million, with EBITA
increasing 70.8% to $36 million. This result was achieved despite a
depressed construction market affecting hardware trade sales.

Metcash’s Hardware
& Automotive division
now champions
independent retailers
across hardware (including
trade) and the $5.6 billion
automotive parts and
after-market sector.

Hardware
Mitre 10 continues to be ‘Mighty Helpful’ to its customers and is
rapidly expanding its national footprint through a series of joint
ventures, alliances and store conversions. In FY13, the hardware
business continued to strengthen, with the Mitre 10 network
developing strategic partnerships to further grow its share of the
hardware trade and retail markets.

In April 2013, Mitre 10 and South Australia–based Banner Hardware
entered an alliance, bringing six retail stores, two manufacturing
plants, a showroom and a distribution centre to the network. In
May 2013, Mitre 10 entered into joint ventures with two leading
hardware trade groups: Dahlsens in northern Australia, and
Capeview Building Supplies in Victoria. These partnerships add
strength to the network, offer further growth opportunities and
increase our hardware trade footprint. Dahlsens operates 11 trade
outlets in Western Australia, the Northern Territory and north

Metcash Annual Report 2013

Queensland, and owns manufacturing facilities. Capeview Building
Supplies operates stores mainly across the Gippsland area
of Victoria.

These joint ventures enable more independent hardware operators
to leverage Mitre 10’s merchandising and marketing skills, helping
them remain competitive and offer better service to their trade
customers. Mitre 10 welcomes all its strategic and joint venture
partners, and is excited about the tremendous growth opportunities
they offer the group.

Over the year, Mitre 10 enjoyed high brand awareness as a major
sponsor of two series of Channel 9’s The Block TV program –
All Stars and Sky High. With an average audience of 1.2 million per
night, the sponsorship was invaluable in promoting and exposing
the ‘Mighty Helpful, Mitre 10’ brand to a diverse range
of consumers.

Automotive
The automotive division experienced many highs during its ﬁrst year
as part of Metcash. A highlight was the Autobarn car – co-driven by
ABG CEO Paul Dumbrell – ﬁnishing ﬁrst in the Bathurst 1000 race.

The automotive business performed in line with expectations,
with sales of more than $83 million during the period. The division
continues to grow with the acquisition of Australian Automotive
Division (AAD), which includes ATAP – a specialist brake, steering
and suspension wholesaler – and its network of Auto Brake Services
(ABS) brake, steering and auto repair specialists. The rapid growth of
Metcash’s Hardware & Automotive division demonstrates its ability to
leverage the core strengths of wholesaling, logistics, marketing and
independent retailer support across several industry groups.

The Hardware & Automotive division will continue to identify ways
to further improve its buying capabilities and retail execution on
behalf of its customers.

The year saw a 12.6%
increase in sales to $938
million, with EBITA
increasing 70.8% to
$36 million. This result
was achieved despite a
depressed construction
market affecting hardware
trade sales.

Metcash Annual Report 2013

Corporate
Social
Responsibility

Metcash is committed to a sustainable future for its leading
portfolio of businesses. The company’s business practices
are governed by social, economic, environmental and ethical
considerations.

We focus our Sustainability and Corporate Social
Responsibility (CSR) projects on four fundamental groups:
the Business, the Products, the Customers and the Suppliers.
We have developed a suite of policies that guide all current
and future business activity in the interests of CSR.

The Business

Safety
Metcash is highly committed to its staff members’ safety. For FY13,
the number of Lost Time Injuries (LTIs) was 148 and the Lost Time
Injury Frequency Rate (LTIFR) was 16.3 per million hours worked.
We reduced the number of serious injuries from 72 last year to 37
this year by focusing on safety training and education. Workers
compensation claims fell more than 25% year on year, from 459 last
year to 385 this year.

Metcash enhanced its data capture systems throughout FY13,
improving accuracy when recording employee, contractor and
labour-hire hours, as well as incident and corrective actions. We
continue to make improvements across the national Occupational
Health and Safety (OH&S) management system, undertaking
proactive education measures, and further consolidating injury
prevention programs and training.

Lost Time Injuries (no. LTI’s)

3
1
7

2
7
5

2
7
3 2
4
4

2
2
2

2
2
1

1
4
8

2
0
0
7

2
0
0
8

2
0
0
9

2
0
1
0

2
0
1
1

2
0
1
2

2
0
1
3

Metcash Annual Report 2013

Sustainability
The Metcash Sustainability Committee adopts policies and guides
projects to ensure CSR goals are met and continue to evolve.

Metcash was re-admitted into the Dow Jones Sustainability Index
(DJSI) 2012. The DJSI tracks the index prices of sustainability
leaders against the ASX200 – sustainable companies consistently
perform better. For the third consecutive year, Metcash was
admitted into the Carbon Disclosure Leaders Index – an initiative
of the Carbon Disclosure Project. The Carbon Disclosure Project
is a not-for-proﬁt organisation providing a global system for
companies and cities to measure, disclose, manage and share vital
environmental information.

The Products
Metcash works with suppliers on issues raised by consumers to
ensure its private label products continue to improve. Our private
label products contain no genetically modiﬁed ingredients. Metcash
is a member of the Roundtable on Sustainable Palm Oil and will
switch to 100% sustainable palm oil by 2015.

New sustainable products – including a pole- and line-caught tuna
range – were released under the IGA Signature brand. Metcash has
been a signatory to the Australian Packaging Covenant since 2000,
and has a process in place to review the packaging of each product
for usability and environmental sensitivity.

The Customers
Metcash’s customers – the independent retailers – are a core focus
of the company’s CSR initiatives.

IGA continues to champion local communities through the
Community Chest program. A percentage of sales from Community
Chest–marked IGA private label products is used to support
community groups and not-for-proﬁt organisations. The Community
Chest program has raised more than $60 million over the past 11
years.

In 2013, we made donations weighing 570 tonnes to Foodbank,
which collects usable but not saleable packaged products and
distributes them to welfare agencies so they can feed vulnerable
members of our community. We also donate pet food to animal
charities.

Our Sustainability@Retail Support Program is a simple way for
retailers to reduce their energy costs. In the past year, seven retailers
have completed energy efﬁciency works and are saving $146,000
per annum. These retailers also saved 880 tonnes of carbon
equivalent emissions in the past year.

The Suppliers
Metcash recognises that environmental and social impacts extend
beyond its own business operations to those of its suppliers and
customers. We have put projects in place to encourage suppliers to
support sustainable business practices.

The Metcash Sustainable Supply Chain Management Program
ensures that suppliers meet minimum standards for safety, ethics
and environmental impact. The program includes third-party
auditing of suppliers.

Diversity
Metcash recognises the beneﬁts of a workforce that offers a range
of skills, backgrounds and experiences. During 2012, the Board
endorsed Metcash’s three-year Diversity and Inclusion Strategy and
Implementation Plan, which focuses on seven strategic priorities:

Metcash has also made progress towards decreasing the female-to-
male pay gap within the business. The average pay for women as
Business Unit Leaders and at all other levels (excluding Executive)
continues to be above 2011 levels. Our restructuring activity over
the past year saw a slight decrease in the signiﬁcant increases
achieved in 2011.

As part of its annual remuneration review process, Metcash
analyses pay levels by gender, identiﬁes any differences and takes
appropriate steps to address them.

The focus for the future will be to build on the results achieved to
date, and continue to foster a diverse workforce by creating an
inclusive culture.

1. Continue to enhance Metcash’s inclusive culture by enhancing

leadership and governance practices

2. Celebrate cultural diversity

3. Improve the proportion of women employed at all levels of the

workforce

4. Effectively manage workplace ﬂexibility

5. Support mature workers’ transition to retirement

6. Establish Indigenous internships

7. Increase the representation of employees with a disability.

Metcash has implemented some actions as part of the above
priorities, including holding ‘Harmony Day’ celebrations; changing
recruitment practices to widen candidate pools, especially for
leadership roles; introducing female networking sessions and
Indigenous internships; and establishing a program to help mature
workers transition into retirement.

In accordance with the requirements of the Workplace Gender
Equality Act 2012, Metcash has lodged its annual public report
with the Workplace Gender Equality Agency. The current workplace
proﬁle is shown in the table on page 22.

The proﬁle indicates Metcash has made signiﬁcant progress
towards increasing female representation in leadership roles.
Women make up 32% of Metcash’s workforce and hold 25% of
leadership roles.

In 2012, Metcash appointed its ﬁrst female Senior Executive,
taking female representation in the Executive Team to 8%. We also
appointed our ﬁrst female Warehouse Supervisors in Victoria and
South Australia. Western Australia increased the number of female
employees in distribution centres, achieving the highest level in
Metcash’s history.

Our talent management processes are designed to identify high-
potential women, leading to an increase in the number of women
participating in senior development programs from one in to ﬁve
this year.

Metcash Annual Report 2013

Ian R Morrice

Fiona E Balfour

Our Board

Peter L Barnes

Andrew Reitzer

Patrick N J Allaway

Peter L Barnes
B Commerce (Hons) MBA
Non-executive Chairman

Date of appointment to
Metcash Limited:
18 April 2005

Member of the
Remuneration Committee

Andrew Reitzer
B Commerce MBL
CEO Metcash Group
of Companies until
30 June 2013

Date of appointment to
Metcash Limited:
18 April 2005

Retired 30 June 2013

Ian R Morrice
MBA
CEO Metcash Group of
Companies with effect
from 1 July 2013

Non-executive Director from
12 June to 28 February 2013

Date of appointment to
Metcash Limited:
12 June 2012

Patrick N J Allaway
BA/LLB
Non-executive Director

Date of appointment to
Metcash Limited:
7 November 2012

Member of the Audit Risk
& Compliance Committee

Peter Barnes is a Director
of News Corporation and
Chairman of Samuel Smith
& Sons Pty Limited. He also
serves as Chairman of the
Melbourne Business School.
Peter was formerly the
Chairman of Ansell Limited
and an executive with Phillip
Morris International Inc.
He has held several senior
management positions in
Australia and overseas.
Peter was appointed
Chairman of Metcash
Limited on 2 September
2010 and has been a
Director with Metcash since
November 1999.

Andrew Reitzer has 35
years experience in the retail
and wholesale industry.
His previous positions at
Metro Cash & Carry Limited
included Group Operations
Director (heading operations
in Russia and Israel),
Marketing Director and
IT Director. He has also
managed various
operating divisions.

Ian Morrice has more than
three decades of retail
experience as Managing
Director, Trading Director
and Retail Director for some
of the UK’s leading retailers,
including Dixons and the
Kingﬁsher group. Ian was
Group CEO and Managing
Director of New Zealand’s
The Warehouse Group from
2004 to 2011.

His key areas of expertise
include strategy; brand and
category development;
multi-channel and new store
format roll-out; product
sourcing; and supply
chain innovation.

Metcash Annual Report 2013

Patrick Allaway is a broad-
based businessperson
with extensive experience
in ﬁnancial services. His
career in investment
banking has seen him hold
positions with Swiss Bank
Corporation in Zurich and
London, and with Citibank
in New York, Sydney and
London.

Over the past eight years,
Patrick has been the
Chairman and co-founder
of Saltbush Capital Markets,
a privately owned boutique
corporate advisory and
funds management
business. He was also a
Non-executive Director
of Macquarie Goodman
Limited until 2006 and
the Interim Chairman
of its Audit Committee.
Patrick’s key areas of
expertise include strategy,
development, mergers and
acquisitions, and capital
management. He has a
Bachelor of Arts/Law from
the University of Sydney
and is a Director
of the University of
Sydney Football Club
Foundation Limited.

Fiona E Balfour
BA (Hons), MBA, Graduate
Diploma Information
Management, FAICD
Non-executive Director

Date of appointment to
Metcash Limited:
16 November 2010

Member of the
Remuneration Committee

Fiona Balfour is an
independent non-executive
director of Salmat Limited
and TAL Australia Limited
and Air Services Australia; a
Councillor of Knox Grammar
School and of Chief
Executive Women; and
a Fellow of the AICD and
Monash University since
2010. She was awarded
the National Pearcey Medal
in 2006. Fiona has more
than 30 years executive
experience in the aviation,
telecommunications,
ﬁnancial services,
education and not-for-proﬁt
sectors. Her professional
expertise is in information
and communications
technology. She has
extensive experience in
global customer-facing
business solutions across
a variety of technologies,
including digital channel
management. She was
a Director of SITA SC
(Geneva) from 2001 to
2006, and a Trustee of the
National Breast Cancer
Foundation from 2007
to 2011.

Michael R Butler

Edwin M Jankelowitz

Neil D Hamilton

V Dudley Rubin

Gregory C Watson

Michael R Butler
B SC, MBA, FAICD
Non-executive Director

Neil D Hamilton
LLB
Non-executive Director

Edwin M Jankelowitz
B Commerce, CA (SA)
Non-executive Director

V Dudley Rubin
CA (SA), H DIP BDP, MBA
Non-executive Director

Gregory C Watson
LLM, Dip Law
General Counsel and
Company Secretary

Date of appointment to
Metcash Limited:
8 February 2007

Date of appointment to
Metcash Limited:
7 February 2008

Date of appointment to
Metcash Limited:
18 April 2005

Chairman of the Audit Risk
& Compliance Committee

Chairman of the
Remuneration Committee

Member of the Audit Risk
and Compliance Committee

Michael Butler has extensive
experience in investment
banking as an Executive
Director of Bankers Trust’s
Corporate Finance Group
and as Executive Vice
President of its Private
Equity Group. He is
currently Chairman of AMP
Superannuation Limited
and N.M. Superannuation
Pty Limited. He has been a
Non-executive Director and
Chairman of various public
and private companies.

Neil Hamilton has more
than 30 years experience
in the legal profession
and in business. His
experience spans a number
of industries, including
investment and funds
management, insurance,
banking and resources.
Neil is Chairman of OZ
Minerals Limited and Miclyn
Express Offshore Limited.
He was appointed Chairman
of the Remuneration &
Nomination Committee on
1 September 2010.

Dudley Rubin is a chartered
accountant and a director of
various companies trading
in Africa. He has 30 years
industry experience and
has been a Director with
Metcash since May 1998.

Greg Watson joined
Metcash in 2005 as Legal
Counsel and was promoted
to General Counsel in
2008. He was appointed
Company Secretary in
2010. Greg has over 23
years professional and
industry experience initially
in private legal practice,
followed by corporate
legal counsel roles with
multinational FMCG
organisations. Greg is a
graduate of the Metcash
Executive Leadership
Program.

Edwin Jankelowitz was
previously CFO of Metcash
and was appointed a Non-
executive Director in 2011.

After qualifying as a
Chartered Accountant,
Edwin spent 12 years with
Adcock Ingram Limited,
reaching the positions of
Group Company Secretary
and Finance Director. He
then consulted in business
management and tax
before taking a position
with Caxton Limited, where
he progressed to Finance
Director, Managing Director
and Chairman. Edwin has
spent more than 39 years
in corporate ofﬁces of
listed companies and was
a member of the Income
Tax Special Court in South
Africa for 20 years.

Metcash Annual Report 2013

Key Management
Personnel 2013

Mark R Laidlaw

Fergus J Collins

Ian R Morrrice

Silvestro Morabito

Andrew Reitzer

Adrian E Gratwicke

Ian R Morrrice
MBA
CEO Metcash Group of
Companies with effect from
1 July 2013
Date of appointment to Metcash
Limited: 12 June 2012
Non-executive Director from 12
June to 28 February 2013

Silvestro Morabito
Associate Diploma in
Food Retailing (FIT)
Executive Diploma in Retail
Management (ACFRS)
COO Food & Grocery
Date of appointment as COO
Metcash Food & Grocery:
January 2012

Ian Morrice has more than three
decades of retail experience as
Managing Director, Trading Director
and Retail Director for some of the
UK’s leading retailers, including
Dixons and the Kingﬁsher group.
Ian was Group CEO and Managing
Director of New Zealand’s The
Warehouse Group from 2004
to 2011.

His key areas of expertise include
strategy; brand and category
development; multi-channel and
new store format roll-out; product
sourcing; and supply chain
innovation.

Silvestro Morabito has more than 33
years experience in grocery retailing
both locally and internationally.
During his 15 years with Safeway
in Victoria, he held various senior
positions in operations and IT.
Silvestro was recruited by Dairy
Farm International Holdings and
held various senior management
roles, including Director of
Operations & Merchandising
Manager for Fresh Foods
(Woolworths NZ) in New Zealand,
and CEO of the Cold Storage
supermarket group in Singapore.

Prior to his appointment as General
Manager, IGA Distribution WA
in 2006, Silvestro was CEO of
Action Supermarkets, overseeing
the sale of the supermarkets and
the consolidation of the FAL retail
brands. He was appointed CEO of
IGA Distribution in 2010.

Andrew Reitzer
B Commerce MBL
CEO Metcash Group
of Companies until
30 June 2013
Date of appointment to Metcash
Limited: 18 April 2005
Retired 30 June 2013

Andrew Reitzer has 35 years
experience in the retail and
wholesale industry. His previous
positions at Metro Cash & Carry
Limited included Group Operations
Director (heading operations in
Russia and Israel), Marketing
Director and IT Director. He has
also managed various operating
divisions.

Adrian E Gratwicke
BA (Hons), ACA, MBA
Chief Financial Ofﬁcer
Date of appointment as Chief
Financial Ofﬁcer: January 2011

Adrian brings more than 25
years commercial and industry
experience to his position as Chief
Financial Ofﬁcer. Since joining
Metcash in April 1998, he has
held several senior roles including
National Accounting Manager;
National Commercial Manager
IGA Distribution; General Manager
Mergers & Acquisitions, Risk and
Investor Relations; and General
Manager Finance.

Fergus J Collins
B Commerce (Hons) (University
of Dublin), B SC MGMT (National
University of Ireland), MBA
CEO Australian Liquor
Marketers (ALM)
Date of appointment as CEO
Australian Liquor Marketers:
February 2007

Fergus Collins joined ALM in
December 2001 as Commercial
Manager Queensland and was
promoted to General Manager
Queensland in May 2004. He
became General Manager,
Independent Brands Australia in
July 2006.

Fergus is a graduate of the Metcash
Executive Leadership Program.

Mark R Laidlaw
B Ec. (Monash University), CPA
CEO Mitre 10 Australia
Date of appointment as CEO Mitre
10 Australia: May 2010

Mark Laidlaw joined IGA
Distribution in April 2001 as
Commercial Manager, Victoria,
and was promoted to General
Manager, Victoria in July 2004. He
has extensive experience in general
management, sales, operations and
commercial management.

Prior to joining Metcash, Mark
worked for Mobil Oil for 18 years
in a range of senior positions,
including National Commercial
Manager, National Property
Manager and Marketing Manager.
He spent four years in Mobil’s
international divisions in London,
France and Germany.

Metcash Annual Report 2013

Corporate
Governance
Statement

The Directors of Metcash Limited (Metcash or Company) support and adhere to the principles of corporate governance set out in the
Metcash Corporate Governance Statement. In supporting these principles, the Directors acknowledge the need for the highest standards of
behaviour and accountability.

The Directors believe that Metcash’s policies and practices have complied in all substantial respects with corporate governance best
practice in Australia, including the ASX Corporate Governance Council Corporate Governance Principles and Recommendations
(Principles).

Summary of compliance with Principles and Recommendations
The table below summarises Metcash’s compliance with the Corporate Governance Council’s recommendations.

RECOMMENDATION

COMPLY
YES/ NO

REFERENCE/
EXPLANATION

PRINCIPLE 1 – LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT

1.1

1.2

1.3

Companies should establish the functions reserved to the Board and those delegated to senior executives and
disclose those functions.

Companies should disclose the process for evaluating the performance of senior executives.

Companies should provide the information indicated in the guide to reporting on Principle 1.

PRINCIPLE 2 – STRUCTURE THE BOARD TO ADD VALUE

2.1

2.2

2.3

2.4

2.5

A majority of the Board should be Independent Directors.

The Chair should be an Independent Director.

The roles of Chair and Chief Executive Ofﬁcer should not be exercised by the same individual.

The Board should establish a Nomination Committee.

Companies should disclose the process for evaluating the performance of the Board, its Committees and
individual Directors.

2.6

Companies should provide the information indicated in the guide to reporting on Principle 2.

PRINCIPLE 3 – PROMOTE ETHICAL AND RESPONSIBLE DECISION-MAKING

3.1

3.2

3.3

Companies should establish a code of conduct and disclose the code or a summary of the code as to:
• the practices necessary to maintain conﬁdence in the Company’s integrity;
• the practices necessary to take into account their legal obligations and the reasonable expectations of their

stakeholders;

• the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.

Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy. The
policy should include requirements for the Board to establish measurable objectives for achieving gender diversity
for the Board to assess annually both the objectives and progress in achieving them.

Companies should disclose in each annual report the measurable objectives for achieving gender diversity set by
the Board and in accordance with the diversity policy and progress towards achieving them.

Yes

Website
www.metcash.com

Page 19

Page 20

Page 21

Pages 19 - 21

Website
www.metcash.com

Page 21

Metcash Annual Report 2013

Summary of compliance with Principles and Recommendations (continued)

3.4

3.5

Companies should disclose in each annual report the proportion of women employees in the whole
organisation, women in senior executive positions and on the Board.

Companies should provide the information indicated in the guide to reporting on Principle 3.

PRINCIPLE 4 – SAFEGUARD INTEGRITY IN FINANCIAL REPORTING

4.1

4.2

The Board should establish an Audit Committee.

The Audit Committee should be structured so that it:
• consists only of Non-executive Directors;
• consists of a majority of Independent Directors;
• is chaired by an Independent Chair, who is not Chair of the Board;
• has at least three members.

4.3

The Audit Committee should have a formal charter.

4.4

Companies should provide the information indicated in the guide to reporting on Principle 4.

PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE

5.1

Companies should establish written policies designed to ensure compliance with ASX Listing Rule
disclosure requirements and to ensure accountability at a senior executive level for that compliance and
disclose those policies or a summary of those policies.

5.2

Companies should provide the information indicated in the guide to reporting on Principle 5.

PRINCIPLE 6 – RESPECT THE RIGHTS OF SHAREHOLDERS

6.1

Companies should design a communications policy for promoting effective communication with shareholders
and encouraging their participation at general meetings and disclose their policy or a summary of that policy.

6.2

Companies should provide the information indicated in the guide to reporting on Principle 6.

PRINCIPLE 7 – RECOGNISE AND MANAGE RISK

7.1

7.2

7.3

Companies should establish policies for the oversight and management of material business risks and disclose a
summary of those policies.

The Board should require management to design and implement the risk management and internal control
system to manage the Company’s material business risks and report to it on whether those risks are being
managed effectively. The Board should disclose that management has reported to it as to the effectiveness of the
Company’s management of its material business risks.

The Board should disclose whether it has received assurance from the Chief Executive Ofﬁcer (or equivalent) and
the Chief Financial Ofﬁcer (or equivalent) that the declaration provided in accordance with section 295A of the
Corporations Act is founded on a sound system of risk management and internal control and that the system is
operating effectively in all material respects in relation to ﬁnancial reporting risks.

Yes

Page 22

Page 21

Page 22

Website
www.metcash.com

Pages 22 - 23

Website
www.metcash.com

Page 23

Page 24

Page 25

Yes

Page 25

7.4

Companies should provide the information indicated in the guide to reporting on Principle 7.

Yes

Pages 24 - 25

PRINCIPLE 8 – REMUNERATE FAIRLY AND RESPONSIBLY

8.1

8.2

The Board should establish a Remuneration Committee.

The Remuneration Committee should be structured so that it:
• consists of a majority of Independent Directors;
• is chaired by an Independent Chair
• has at least three members.

8.3

Companies should clearly distinguish the structure of Non-executive Directors’ remuneration from that of
Executive Directors and senior executives.

8.4

Companies should provide the information indicated in the guide to reporting on Principle 8.

Yes

Page 26

Metcash Annual Report 2013

Principle 1: Lay solid foundation for management
and oversight
Responsibilities of the Board and Management
The Board of Directors is responsible for setting the strategic
direction of Metcash and for overseeing and monitoring its
businesses and affairs.

The Board reviews and approves Metcash’s strategic and business
plans and guiding policies. Day-to-day management of Metcash’s
affairs and implementation of its strategy and policy initiatives are
delegated to the Chief Executive Ofﬁcer and senior executives, who
operate in accordance with Board-approved policies and delegated
limits of authority.

The principal functions of the Board include:
• charting the direction, strategies and ﬁnancial objectives of the

Company;

• monitoring implementation of those strategies and the

operational and ﬁnancial performance and risk of each of the
Company’s activities;

• reviewing major capital expenditure, acquisitions, divestments

and funding;

• reviewing performance, remuneration and succession of senior

management;

• monitoring compliance with legal regulatory requirements,

including occupational health and safety laws, product safety
and the protection of the environment;

• monitoring the Company’s relationships with its stakeholders

and compliance with ethical standards and Metcash’s Code of
Conduct;

• corporate governance generally.

The Board’s Charter can be found on the Company’s website
www.metcash.com under the heading ‘Corporate Governance’.

Evaluating the Performance of Senior Executives
On an annual basis, the Board, having received the advice of the
Remuneration Committee, reviews the performance of the Chief
Executive Ofﬁcer against qualitative and quantitative criteria,
which include proﬁt performance, other ﬁnancial measures and
achievement of the Company’s strategic objectives. During the
2013 ﬁnancial year, the Chief Executive Ofﬁcer’s performance
was reviewed in accordance with the process speciﬁed above.
The Company notes that during 2013 the incoming CEO was
announced and accordingly, the retiring Chief Executive Ofﬁcer’s
objectives included transitional and handover related criteria.

The Company maintains a performance evaluation process which
measures other senior executives against previously agreed Key
Performance Indicators and Key Behavioural Indicators. This process
is performed formally once a year, along with quarterly reviews, and
took place for each senior executive during the 2013 ﬁnancial year.

Senior executives have access to continuing education to update
and enhance their skills and knowledge.

Principle 2: Structure the Board to add value
A majority of the Board should be Independent Directors
Appointment to the Board
The Board’s policy for the selection, appointment and re-
appointment of Directors is to ensure that the Board possesses an
appropriate range of skills, experience and expertise to enable the
Board to most effectively carry out its responsibilities. As part of
this appointment process, the Directors consider Board renewal
and succession plans and whether the Board is of a size and
composition that is conducive to making appropriate decisions.

Prior to Directors standing for re-election, the Nomination Committee
reviews the skills and contribution of the Directors concerned
and decides whether the Committee supports their re-election.
The Committee then recommends its decision to the Board.

When a vacancy exists, or when it is considered that the Board
would beneﬁt from the services of a new Director with particular
skills, the Nomination Committee selects a panel of candidates with
appropriate expertise and experience. This may be supplemented
with advice from external consultants if necessary. The Board, on
the Committee’s recommendation, then appoints the most suitable
candidate who must stand for election at the next general meeting
of shareholders.

Directors are not appointed for a ﬁxed term but, under Metcash’s
Constitution, must be re-elected each three years by rotation and are
subject to Australian Securities Exchange (ASX) Listing Rules and
Corporations Act provisions. The key terms and conditions of each
director’s appointment are set out in a formal appointment letter.

Board Composition
Maintaining a balance of experience and skills is an important
factor in Board composition. For details of the skills, experience and
expertise of the individual Directors, and the period of ofﬁce held by
each Director, please refer to page 14, headed ‘Board of Directors’,
of this report.

As at the date of this report, the Board of Metcash consisted of
eight Directors, seven of whom are considered to be Non-executive,
and six of whom are considered to be Independent Directors. The
Board is currently constituted as follows:

Independent Non-executive Directors
Six Independent Directors hold key positions that include
chairing the Board and the Board Committees of Audit Risk &
Compliance, Remuneration and Nomination. They provide an
external perspective and checks and balances for the interests of all
shareholders.

The Board has adopted a deﬁnition of independence which is
derived from the deﬁnition set out in the Principles. Directors are
considered independent if they are not a member of management
and are free of any business or other relationship that would
materially interfere with, or could reasonably be perceived
to materially interfere with, the independent exercise of their
judgement.
When assessing the independence of a Director, the Board will
consider whether the Director:
• is a substantial shareholder of the Company or an ofﬁcer of, or
otherwise associated directly with, a substantial shareholder of
the Company;

• is employed or has previously been employed in an executive
capacity by the Company or another group member and there
has not been a period of at least three years between ceasing to
hold any such employment and serving on the Board;

• has within the last three years been a principal of a material

professional adviser or a material consultant to the Company or
another group member, or an employee materially associated
with the service provided;

• is a material supplier or customer of the Company or other group

member, or an ofﬁcer of or otherwise associated directly or
indirectly with a material supplier or customer;

• has a material contractual relationship with the Company or

another group member other than as a Director of the Company.

Metcash Annual Report 2013

The Board regularly assesses whether each Non-executive Director is
independent, based on the deﬁnition and criteria above, and in light
of information disclosed by those Directors that may be relevant to
this assessment. Directors are required to declare the nature of any
interest they have in business to be dealt with by the Board.

Non-executive Director
Mr Edwin Jankelowitz retired as an executive of the Company on 14
January 2011. Mr Jankelowitz remained a Director of the Company
from that date. The Board considers Mr Jankelowitz to be a Non –
executive Director and not an Independent Director.

Executive Directors
The Board has one Executive Director being the Chief Executive
Ofﬁcer. During the 2013 ﬁnancial year that role was held by
Mr Andrew Reitzer. Mr Reitzer retired from the Chief Executive
Ofﬁcer role and the Board on 30 June 2013. Mr Ian Morrice was
announced as incoming Chief Executive Ofﬁcer on 27 February
2013 and joined the Executive on 1 March 2013 in the role of CEO
Elect and was formally appointed to the role of Chief Executive
Ofﬁcer on 30 June 2013.

All Directors, whether independent or not, bring an independent
judgement to bear on Board decisions.

Independent Professional Advice
The Board has a policy of enabling Directors to seek independent
professional advice at the Company’s expense. The Board will
review in advance the estimated costs for reasonableness, but will
not impede Directors from seeking advice.

Company Secretary
All Directors have access to the Company Secretary, Mr Greg
Watson, who is accountable to the Board, through the Chairman,
on governance matters.

The Chair should be an Independent Director
The Chair, Mr Peter Barnes, is considered by the Board to be an
Independent Director. The roles of chair and chief executive ofﬁcer
should not be exercised by the same individual.

Six of Company’s Non-executive Directors are considered to be
independent for the reasons set out as follows.
• None of the Directors is a substantial shareholder of the

Company or associated with a substantial shareholder of the
Company (holding 5% or more of Company’s issued shares).
• Messrs Allaway, Barnes, Butler, Hamilton and Longes (retired 30
August 2012), and Mrs Balfour are not employed by, nor have
they previously been employed by, the Company or another
group member. Mr Rubin was employed in executive positions
by Metoz, the former group holding company and now a wholly
owned Metcash subsidiary. That employment ceased on 18 April
2005 when the Metoz scheme became effective.

• A period of more than three years has thus elapsed during which
Mr Rubin remained as a Metcash Director. At all times, he has
been a Non-executive Director of Metcash. Although there has
not been ‘...a period of at least three years between ceasing such
employment and serving on the Board’, it is noted that his role
as a Metoz employee did not put him in a position of authority,
responsibility, and/or directing the activities of the Company
itself and, that this fact, combined with the eight year elapsed
period are important factors in determining his capacity to bring
independent judgement to bear on Metcash Board deliberations.
Given the speciﬁc facts of his situation, the independence test
does not preclude him from being considered independent.
• The Board considered all relevant factors and concluded that Mr

Rubin is an Independent Director.

• None of the Non-executive Directors referred to above have a

contractual relationship with the Company nor have they been a
professional adviser or consultant to the group or an employee
associated with the service provided.

• None of the Non-executive Directors referred to above is a

material supplier or customer of the Company or an ofﬁcer of,
or otherwise associated directly or indirectly with, a material
supplier or customer. Materiality is assessed as supplying
2.5% or more of Metcash’s annual purchases or a customer
representing 2.5% or more of Metcash’s annual sales. Some
of the Non-executive Directors are non-executive directors of
organisations who supply Metcash on normal commercial terms
and conditions. The level of purchases from these suppliers is
not material.

• None of the Non-executive Directors referred to above has a
contractual relationship with the Company or another group
member, other than as a Director of Company.

Metcash Annual Report 2013

The Board should establish a Nomination Committee
The Board has a Nomination Committee (formerly the
Remuneration & Nomination Committee). In light of the increasing
workload of the Remuneration & Nomination Committee, the
Remuneration & Nomination Committee’s responsibilities have
been split and separate charters and committees have now been
established for the oversight of remuneration and nomination.

Nomination Committee
The membership of the Nomination Committee consists of the
Non-executive Directors of the Company.
Responsibilities of the Nomination Committee include to:
• Review and advise the Board with respect to Board membership,
including with respect to composition, competencies, experience
and diversity. The Committee shall also make recommendations
for the appointment and re-election of Directors, and where
necessary, propose candidates for consideration by the Board.

• Assist the Board and the Chair of the Board, as required, in

evaluating the performance of the Board, its Committees and
individual Directors against robust and effective measures
including as outlined in Section 8 of the Metcash Board Charter.
• Ensure that an effective Board induction process is in place and

regularly review its effectiveness.

• Review the time expected to be devoted by Non-executive

Directors in relation to the Company’s affairs and carrying out
their duties as Non-executive Directors.

• The Committee has the authority to:
(a) obtain independent professional or other advice in the fulﬁlment

of its duties at the cost of the Company; and

(b) obtain such resources and information from the Company in the

fulﬁlment of its duties as it may reasonably require.

The Committee is comprised of the Non-executive Directors and is
chaired by the Chair of the Board.

Process for evaluating the performance of the Board, its
Committees and individual Directors
Annual reviews of the Board, its Committees and Directors
are performed using a self-evaluation questionnaire, with an
independent review to be conducted each third year using a
recognised external Board Performance Consultant. This process
was ﬁrst adopted in 2008.

A recognised Board Performance Consultant (Cameron Ralph)
conducted the 2011 ﬁnancial year review.

Principle 3 – promote ethical and responsible decision-making
Establish a Code of Conduct
Metcash has a Code of Conduct that applies to Directors and all
employees. Subjects covered by the Code include:
• equal employment opportunity, discrimination and harassment;
• security of Company records and assets and conﬁdentiality

guidelines;

• conﬂict of interest, acceptance of gifts, entertainment and

services;

• fraud, corruption and irregular transactions;
• legal compliance;
• honest ethical behaviour;
• environmental protection and safe working environment.

The Code can be found on the Company’s website www.metcash.com
under the heading ‘Corporate Governance’.

Compliance with the Code is checked through Company’s
functions and related processes including business assurance and
risk, security, human resources and occupational health and safety.
New staff members are required to attend an induction program
that includes behaviour guidelines. Additionally, Metcash’s staff
appraisal process includes employees’ performance against ‘Key
Behavioural Indicators’ as well as ‘Key Performance Indicators’.

Metcash also has a ‘Business Conduct and Ethics policy which
endeavours to encourage all staff and non-employees to report
any person suspected of poor business conduct and ethical
practices including fraud, corrupt conduct, inappropriate
behaviour or concealment of such conduct, questionable
accounting or auditing practices or substantial mismanagement
of company resources that creates risks to public health, safety
or risks to the environment or any other form of ‘Reportable
Conduct’ that they may become aware of during their
engagement with Metcash. This policy can be found on the
Company’s website www.metcash.com under the heading
‘Corporate Governance’.

Diversity policy
The Metcash Diversity Policy was approved by the Board of
Metcash in May 2011 and was introduced across the business
supported by an educational programme detailing our aspirational
goals, changes to processes and procedures, giving practical advice
and guidance on how the policy was to be implemented.

Self-evaluation by the Board, its Committees and Directors was
conducted in 2013.

The policy is located on the company’s website.

The 2013 annual Board Performance Self-Evaluation Questionnaire
covered the areas of: Board Appointments, Board Leadership,
Teamwork and Management Relations, Board Meetings, Evaluation
and Ethics/Stakeholders/Endowments.

The Directors agreed that the 2013 evaluation process had been
effective and that the individual discussions with the Chairman
as part of that process had been frank and open. The overall
conclusion was that the Board and its Committees comprise an
appropriate level of knowledge and attributes reﬂective of the
Company’s needs and necessary to maintain effective governance.

In order to ensure strict adherence to the policy and to broaden
the scope of diversity initiatives, during the last year, Metcash
established a formal Diversity Strategy with initial attention given to
increasing female representation across the organisation as well as
supporting our mature workforce, creating further opportunities for
workers with disabilities and celebrating cultural diversity including
laying the foundation for an Indigenous talent pipeline.

Although the Company’s approach to diversity is now in a broader
context, management still recognises gender balance issues
continue to exist. Metcash’s measurable objectives for achieving
gender diversity are set by the Board. For the 2013 ﬁnancial year
and for the next ﬁnancial year these are:
• Increasing female representation at the Senior Manager level;
• Increasing women performing Supervisor/Managerial roles

across Metcash; and

• Decreasing the female to male “pay gap” within the business.

Metcash Annual Report 2013

The current workplace proﬁle indicates progress has been made towards
increasing female representation in leadership roles at Metcash.
• Women now make up 32% of Metcash’s workforce with 25%
(up 1% year on year) representation in leaderships positions.
• Western Australia has seen an increase in female representation

of award employees in distribution centres taking it to the
highest level in the history of Metcash.

• During 2012 Metcash appointed its ﬁrst female Senior Executive,

taking female representation of the Executive Team to 8%.
• 2012 saw the appointment of the ﬁrst female Supervisors in

warehouses in Victoria and South Australia.

• Talent management processes have seen a signiﬁcant increase
in the identiﬁcation of high potential women translating to
an increase in the number of women participating in senior
development programs (from one to ﬁve) in the past year.

• Female representation on the Board is 13%.
Progress towards decreasing the female to male “pay gap” within
the business has continued with the average pay for women at
leadership levels (excluding Executive) continuing to be above 2011
levels. However restructuring activity over the past 12 months has
seen a slight decrease on the signiﬁcant increases seen in 2011.

As part of its annual remuneration review process, Metcash undertakes
an analysis of pay levels by gender, identiﬁes any differentials, and
takes appropriate steps to address them. Further analysis comparing
like for like roles will be conducted in the coming year with a formal
remuneration review process through an independent provider.

Current proportion of women at each level across the Company as
reported in the most recent Gender Equality Act submission:
(see table below)

Metcash is now in its second phase of diversity initiatives and
continues to focus on the following key aspects:
• Building a culture around successful ﬂexible working arrangements,

including the introduction of a management tool kit;

• Roll out of an education programme around sub-conscious

bias and how it impacts every-day decision making;

• Continuing a relationship with Job Support to implement

a plan to increase disability employment opportunities through
their programmes;

• Piloting the Indigenous Internship program to increase the
Indigenous employee population within Metcash; and

• Introducing a Transition into Retirement program to support

our mature workforce.

Principle 4 – Safeguard integrity in ﬁnancial reporting
The Board should establish an Audit Committee
The Board has an Audit, Risk & Compliance Committee which
reports regularly to the Board.

The membership of the Audit Risk & Compliance Committee
consists of the Non-executive Independent Directors who are listed
below, together with details of their qualiﬁcations and attendance at
meetings during the past ﬁnancial year.

Member

Richard A Longes
(C) (i)

Michael R Butler
(C) (ii)

Qualiﬁcations

BA, LLB, MBA

B Sc, MBA

Patrick N J Allaway
(iii)

BA, LLB

Ian R Morrice (iv)

MBA

V Dudley Rubin

CA (SA), HDip BDP, MBA

Meetings
eligible
to attend
during 2013
while in
ofﬁce

Meetings
attended
during 2013
ﬁnancial
year

(i) Mr Longes resigned as chairman of the committee on 25 June 2012 and as a member of the

committee on 30 August 2012.

(ii) Mr Butler was appointed as chairman of the committee on 25 June 2012.
(iii) Mr Allaway was appointed to the committee on 7 November 2012.
(iv) Mr Morrice was appointed to the committee on 30 August 2012 and ceased being a member

with effect from 1 March 2013. At all time during his appointment Mr Morrice was an
Independent Non-executive Director.

The function of the Audit Risk & Compliance Committee is to advise
on the establishment and maintenance of a framework of internal
control, effective management of ﬁnancial and other risks, compliance
with laws and regulations and appropriate ethical standards for
the management of Company. It also gives the Board additional
assurance regarding the quality and reliability of ﬁnancial information
prepared for use by the Board in determining policies or for inclusion
in the ﬁnancial statements. In accordance with the Principles, the
Committee consists only of Independent Directors and is chaired by
an Independent Director who is not the Chairman of the Board.

Female

Male

Female

Male

Female

Full Time

Part Time

Full Time

Part Time

Casual

Total

Board

Senior Exec

Senior Managers

Supervisors
Managers

Administration
Employees

Sales Employees

Warehouse
Employees

170

543

158

261

1174

114

141

120

382

180

458

371

244

2179

3451

150

154

222

433

206

426

650

176

714

453

603

1989

Male

Total

180

459

390

500

2703

4521

Total

Female Male

13% 88%

92%

221

19% 81%

635

28% 72%

1104

65% 35%

953

48% 52%

3306

6240

18% 82%

32% 68%

Metcash Annual Report 2013

Committee Charter
The Committee’s Charter, which is summarised below, sets out the
speciﬁc responsibilities delegated to it by the Board and details the
manner in which the Committee will operate. The Charter can be
found on the Company’s website www.metcash.com under the
heading ‘Corporate Governance’.

The principal terms of reference of the Audit Risk & Compliance
Committee are the effective management of ﬁnancial and other
risks through ensuring that systems and management processes
are in place to identify and manage operational, ﬁnancial and
compliance risks.

Speciﬁc areas of review include:
• overseeing the establishment of a framework within which risks
to the Company are identiﬁed and mitigated and risk avoidance
processes are established and the effectiveness of the risk
management process monitored;

• ﬁnancial risk and exposure;
• occupational health and safety;
• environmental issues;
• Hazard Analysis and Critical Control Points (HACCP) based food
safety program; and integrity of information technology systems.

The Committee reviews the effectiveness of risk management
policies and procedures by:
• reviewing monthly ﬁnancial performance against budget and

updated forecasts at least quarterly;

• reviewing the internal audit of the Company’s ﬁnancial controls,
taxation compliance and adherence to policies and regulations;

• reviewing annually the effectiveness and adequacy of the

Company’s insurance program;

• the provision of reliable management and ﬁnancial reporting -

this is done by reviewing and assessing the:
− quality and timing of management reporting to the Board to

enable internal and external reporting of the Company’s risks,
operations and ﬁnancial condition;

− accounting policies and practices against generally

accepted accounting principles and the requirements of the
Corporations Law, Australian Accounting Standards and
Australian Securities Exchange requirements;

− half-yearly and annual ﬁnancial statements;

• assessing compliance with laws and regulations by monitoring

developments and changes in the various rules, laws and
regulations relating to the Company’s business operations and
the responsibilities of Directors and reviewing the extent to
which the Board and the Company are meeting their obligations
to ensure that all requirements are met;

• the maintenance of an effective and efﬁcient audit function – this

is achieved by:
− recommending to the Board the appointment of external and

internal auditors;

− reviewing the effectiveness of the external and internal audit

functions;

− ensuring audit scopes are adequate and cover areas of

anticipated risk;

− reviewing audit ﬁndings and management response;
− reviewing the independence of the external auditor;
− ensuring auditors have the necessary access to Company

information and staff to fulﬁl their obligations.

The Audit Risk & Compliance Committee acts to ensure that
operational, ﬁnancial and compliance risks are managed in
accordance with the Board’s risk tolerance. Metcash has
implemented a Risk Management Framework which is supported
by specialised risk management teams (refer Principle 7 –
Recognise and Manage Risk). The Committee has obtained
assurance regarding the effectiveness of the overall system of
risk management through various means. These means have
included direct enquiry of management, internal and external audit
reports and the monitoring of ﬁnancial and operational results.
The Committee meets regularly, in private, with the Lead External
Audit Partner and the Chief Audit Executive.

A ‘Charter of Audit Independence’ is in place that details the
circumstances in which Company’s external auditor may perform
non-audit related services and the procedures to be followed to
obtain approval for those services where they are permitted. The
Charter also contains Metcash’s policies on the hiring of former
partners and senior managers of the external auditor and the
rotation of lead and review external audit engagement partners. The
Charter can be found on the Company’s website www.metcash.
com under the heading ‘Corporate Governance’.

In principle, the appointment of an external auditor would be based
on a tender process conducted by the Audit Risk & Compliance
Committee. The Committee would select suitable candidates for the
role, issue and evaluate tenders, interview the candidates and then
make a recommendation to the Board.

Principle 5 – Make timely and balanced disclosure
Compliance with ASX listing rule disclosure requirements
The Metcash Market Disclosure Policy is designed to ensure that:
• there is full and timely disclosure of the Company’s activities to

shareholders and the market, in accordance with the Company’s
legal and regulatory obligations; and

• all stakeholders (including shareholders, the market and other
interested parties) have an equal opportunity to receive and
obtain externally available information issued by the Company.

The policy reﬂects the Company’s obligation to comply with the
disclosure requirements of the Listing Rules of the Australian
Securities Exchange (ASX), as well as relevant corporations and
securities legislation.

The policy is reviewed regularly to ensure that the policy reﬂects
any legislative or regulatory requirements or ‘best practice’
developments.

Disclosure responsibilities and procedures
The Company has designated the Chairman, Chief Executive Ofﬁcer
and Company Secretary as ‘Disclosure Ofﬁcers’. The Chairman’s
approval, or that of his delegate, is required for disclosures. The
Company Secretary has responsibility for liaising with the ASX in
relation to all announcement and disclosure issues.

Disclosure Ofﬁcers have responsibility for reviewing proposed
disclosures and making decisions in relation to what information
can or should be disclosed to the market.

All company staff are required to inform a Disclosure Ofﬁcer of
any potential ‘price sensitive’ information concerning Company as
soon as they become aware of it. Staff may speak to their Business
Pillar CEO or a Disclosure Ofﬁcer if they are in doubt as to whether
information is potentially ‘price sensitive’.

The Market Disclosure Policy can be found on the Company’s
website www.metcash.com under the heading ‘Corporate
Governance’.

Metcash Annual Report 2013

Principle 6 – Respect the rights of shareholders
Metcash believes that shareholder and market conﬁdence in all its
dealings is paramount and is committed to ensuring it complies
with continuous disclosure obligations so that its investors have
timely and equal access to important company information.

Information provided to the ASX is made available on the
Company’s website so that all shareholders and other key
stakeholders have timely access to it.

In addition to meeting its continuous disclosure obligations, Metcash
ensures shareholders and the broader investment community have
timely access to important company information through a series of
regular disclosure events during the ﬁnancial year. The calendar for
these events is posted on Company’s website.

The ‘Shareholder Communication Policy’ can be found on the
Company’s website www.metcash.com under the heading
‘Corporate Governance’.

The Company continues to encourage electronic communication
with shareholders to facilitate the speedy, environmentally
responsible and cost effective dissemination of information.
This is being achieved through a program to obtain and update
shareholder email addresses, to alert them to new information on
the Metcash website and to distribute information, including the
Annual Report, to them directly. The Company’s website contains
more than ﬁve years of ASX and media announcements and Annual
Reports. This information is shown under the heading ‘Investor
Centre’. Provision has also been made for electronic proxy voting.

The Board encourages full participation of shareholders at the
Annual General Meeting to ensure a high level of accountability
and discussion of the Company’s strategy and goals. The external
auditor attends the Annual General Meeting to answer shareholder
questions about the conduct of the audit and the preparation and
content of the Auditor’s Report.

Principle 7 – Recognise and manage risk
Polices for the oversight and management of material
business risks
The Board is responsible for designing and reviewing Metcash’s
Risk Management Policy and for determining Metcash’s appetite
for risk, taking into account strategic objectives and other factors
including stakeholder expectations. The level of tolerance for risk
varies according to the risk area.

The Risk and Assurance department with oversight from the
Audit Risk & Compliance Committee, a Committee of the Board,
implement a continuous process of communication with internal
stakeholders at each stage of the risk management process. They
also conduct annual examinations of Metcash’s external and
internal environments, so as to establish the parameters within
which risks must be managed.

Policies on risk oversight and management of material business
risks are summarised in a document entitled ‘Risk Management
Policy’ which can be found on the Metcash website www.metcash.
com under the heading ‘Corporate Governance’.

Company’s risk management philosophy and practices are
documented more fully in the Metcash Risk Management
Framework and Guidelines (Risk Management Framework).

The Company has adopted the Risk Management Standard ISO
31000:2009 as the basis for its Risk Management Framework.
Metcash has implemented its Risk Management Framework
through, amongst other things, the identiﬁcation of material
business risk categories and the development of risk proﬁles for all
the major segments and functions of the business.

Material business risks that have been identiﬁed and included in
the Risk Management Framework are grouped under the following
categories:
• Asset Management;
• Business Continuity;
• Health, Safety, Environment, Community (HSEC);
• Compliance and Legal (Non-HSEC);
• Employee;
• Financial Reporting;
• Criminal Activity;
• Information Technology;
• Reputational;
• Solvency;
• Operations/Warehouse;
• Merchandising, Customer and Supplier (i.e. Supply chain); and
• Strategic/Sustainability.

The risk management process includes the following elements:
• Risk assessment;

- risk identiﬁcation;
- risk analysis;
- risk treatment;

• Monitoring and review; and
• Recording the risk management process.

Metcash Annual Report 2013

The risk management and internal control system provides regular
feedback to management on their effectiveness in managing
business risks. This is supported by the Risk Management platform
database (software) which holds the risk controls library, all
risk categories and events, risk proﬁles for each pillar/business,
business/functional objectives, critical success factors, processes,
compliance data, incidents and corrective actions.

The Risk Management Policy and Risk Management Framework
documents form an integral part of Metcash’s risk management.
The Board continues to review these and provide support in deﬁning
clear accountabilities, responsibilities and embedding Enterprise Risk
Management in planning, strategy and company culture. The Board
and the Audit Risk & Compliance Committee remain responsible for
the oversight of the risk management process.

Chief Executive Ofﬁcer and Chief Financial Ofﬁcer
Declaration
The Chief Executive Ofﬁcer and the Chief Financial Ofﬁcer provided
a declaration in writing to the Board in accordance with section
295A of the Corporations Act that, among other things, Metcash’s
ﬁnancial reports present a true and fair view of Metcash’s ﬁnancial
condition and operational results and are in accordance with
relevant accounting standards (refer to the Directors’ Report).

The Board has received written assurance from the Chief Executive
Ofﬁcer and the Chief Financial Ofﬁcer that the declaration provided
by them in accordance with section 295A of the Corporations Act
(refer to the Directors’ Report) is founded on a sound system of
risk management and internal compliance and control and that the
system is operating effectively in all material respects in relation to
ﬁnancial reporting risks.

Roles and responsibilities
In addition to the speciﬁc responsibilities and reporting roles
of the Group Risk and Assurance Department, the Metcash
Executive Team is regularly required to report to the Board as to the
emergence of any signiﬁcant risk issues and the management of
previously reported material risk issues.

The Audit Risk & Compliance Committee is responsible for
monitoring management’s risk processes other than corporate
strategy, the oversight of which is a Board responsibility. On behalf
of the Board, the Committee monitors those risk events that could
prevent the achievement of the Company’s corporate strategies.

All Metcash employees are responsible for the management of risk
within their areas. Management is responsible for assessing and
monitoring risk and designing cost-effective mitigation to facilitate
the achievement of goals and objectives. Non-management
employees are always responsible for ensuring that risk controls
within their scope of responsibility operate effectively. These
employees are also required to advise management of increasing
or new risk exposures and signiﬁcant operational incidents as they
become aware of them.

This ‘front line’ of risk management is supported by specialised risk
management teams covering speciﬁc areas of risk within Metcash
and by independent reviews conducted by the Metcash Assurance
Department to verify the adequacy and effectiveness of risk
management.

The Board should require management to design and
implement the risk management and internal control system
to manage the Company’s material business risks and report
to it on whether those risks are being managed effectively
Metcash implements a risk oversight and risk management process
that is based on Risk Management Standard ISO 31000:2009. This
system is used to proﬁle all potential risks by identifying, prioritising
and managing such risks across the Company.

Management has reported to the Board as to the effectiveness of
the Company’s management of its material business risks using this
internal system.

The Risk Management Policy and Risk Management Framework
utilised at Metcash covers a wide range of activities and are used
to identify, analyse, evaluate, manage and monitor risks across all
areas of the business. Risk proﬁles are in place for existing and
newly acquired sites. These are prepared in consultation with senior
management, agreed with site business management and are
periodically reviewed and updated by risk team members. Ongoing
risk management activities include:
• conﬁrmation of key controls;
• reporting of incidents: recording and monitoring of key risk

indicators (monitoring of residual risk levels);

• follow-up on risk treatment/action plans;
• escalation of issues; and
• regular reporting processes to all levels of management.

The ongoing process of communication, consultation, monitoring
and review enables management to demonstrate continuous
improvement whilst encouraging greater ownership by individuals
across the business.

Metcash Annual Report 2013

Remuneration Policy
Metcash’s Remuneration Policy can be found on the Metcash
website www.metcash.com under the heading of ‘Corporate
Governance’. It is summarised in the ‘Remuneration Report’
contained within the Directors’ Report. Details of the compensation
of senior executives are also contained in the Remuneration Report.

Metcash’s policy on prohibiting entering into transactions in
associated products which limit the economic risk of participating
in unvested entitlements under any equity-based remuneration
schemes is set out in the Company Code for Directors and
Executives in Respect of Share Transactions which can be found on
Company’s website www.metcash.com.

Non-executive Directors’ compensation and retirement beneﬁts
Refer to the ‘Remuneration Report’ contained within the Directors’
Report. The Remuneration Report explains how the structure of
Non-executive Director remuneration is clearly distinguished from
that of Executive Directors and senior executives. In particular,
Non-executive Directors do not receive any performance based
remuneration.

Termination entitlements of CEO and senior executives
Refer to the ‘Remuneration Report’ contained within the
Directors’ Report.

Principle 8 – Remunerate fairly and responsibly
The Board should establish a Remuneration Committee
The Board has established a Remuneration Committee (formerly the
Remuneration & Nomination Committee).
The membership of the Remuneration Committee consists of the
Non-executive Independent Directors who are listed below, together
with details of their qualiﬁcations and attendance at meetings
during the past ﬁnancial year.

Member

P Barnes

F Balfour

Qualiﬁcations

B Comm (Hons), MBA

BA (Hons), MBA, Grad Dip
Information Management,
FAICD

N Hamilton (C)

LLB

Meetings
eligible to
attend during
2013 while
in ofﬁce

Meetings
attended
during 2013
ﬁnancial year

Responsibilities of the Committee include to:
• advise the Board on remuneration of the CEO and senior

management;

• advise the Board on performance-linked compensation for

management;

• oversee the administration of Metcash’s employee

incentive plans;

• advise the Board on directorship and Board Committee

appointments, Board succession planning and performance
of the CEO; and

• implement processes to assess the effectiveness of the Board

and its Committees.

The Committee consists only of Independent Directors and
is chaired by an Independent Director who is not Chairman
of the Board.

The Charter of the Committee can be found on Company’s website
www.metcash.com under the heading ‘Corporate Governance’.

Metcash Annual Report 2013

Financial
Report
for the Year
Ended 30
April 2013

Directors’ Report
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Auditor’s Independence Declaration
Independent Auditor’s Report

28
64
65
66
67
68
129
130
131

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

Your Directors submit their report of Metcash Limited (the Company) and its controlled entities (the Group) for the year ended
30 April 2013.

DIRECTORS

The names and details of the Company’s Directors in office during the financial year and up to the date of this report are as
follows:

Peter L Barnes (Chairman)
Andrew Reitzer (CEO)*
Ian R Morrice (appointed 12 June 2012)*
Patrick N J Allaway (appointed 7 November 2012)
Fiona E Balfour
Michael R Butler
Neil D Hamilton
Edwin M Jankelowitz
Richard A Longes (retired 30 August 2012)
V Dudley Rubin

* Mr Reitzer will retire as CEO on 30 June 2013 and cease employment with Metcash on 30 September 2013. Mr Morrice was appointed as
CEO to replace Mr Reitzer with effect from 30 June 2013.

Directors were in office for this entire period unless otherwise stated.

OPERATING AND FINANCIAL REVIEW

The Board presents the 2013 Operating and Financial Review, which has been designed to provide shareholders with a clear
and concise overview of Metcash’s operations, financial position, business strategies and prospects. The review also provides
contextual information, including the impact of key events that have occurred during 2013 and material business risks faced by
the business so that shareholders can make an informed assessment of the results and prospects of the Group. The review
complements the financial report and has been prepared in accordance with the recently released guidance set out in RG247.

METCASH’S OPERATIONS

Our Business Model (Incorporating Corporate Information)
Metcash’s core business strategy is to be the ‘champion of the independent retailer’. As a dedicated wholesale distribution,
merchandising and marketing company, Metcash provides independent retailers with the means to compete effectively and
ultimately present a compelling proposition for the end consumer. In this way, Metcash’s success is inextricably linked to the
success of our independent retailers. Our key strengths include our people, purchasing power, world class logistics systems
and extensive merchandising, marketing, retail development and retail operational support capabilities.

Metcash deploys these key competencies across our three business ‘pillars’, which span the food & grocery, liquor, hardware
& automotive sectors across Australia and a smaller liquor business in New Zealand. These divisions supply $13 billion worth
of goods annually to a number of leading retail brands, including IGA, Cellarbrations, Bottle-O, Mitre 10 and Autobarn/Autopro.
Metcash competes against the vertically integrated retail chains and typically operates as the ‘third-force’ within these sectors.
The food & grocery pillar is our largest division, representing 70% of total sales, 82% of segment EBITA, and services more
than 2,500 grocery stores of which approximately 1,450 are branded IGA. In addition, this pillar services approximately 57,000
convenience customers whilst the liquor division services over 15,000 pubs, clubs and bottle shops, the Mitre 10 network
supplies around 825 outlets and ABG services over 240 automotive stores.

Metcash operates major distribution centres in all of the mainland states of Australia that predominantly service the food &
grocery and liquor divisions, including our new ‘mega DC’ in Huntingwood, NSW. These are complemented by a number of
smaller warehouses and our Campbells branch network. Metcash employs just over 6,000 staff across the Group.

Wholesale sales volumes are the key driver of profitability. Metcash targets organic growth in its sales by assisting retailers to
organically grow their sales to consumers. It also aims to increase its ‘teamwork score’, being the proportion of total products
purchased by an independent retailer that are sourced from Metcash, by working with retailer’s to ensure the best range of
products are carried in Metcash warehouses. In addition, Metcash works closely with retailers to find and develop store growth
opportunities whether through expansion of existing footprints or building new stores. Across the Group, growth has also been
delivered through acquisition and expansion into new sectors, including the hardware and automotive sectors.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

Wholesale margins are driven by consumer product appeal, price inflation/deflation, promotional activities and the level of
supplier support through volumetric and other rebates. Profitability is also highly dependent on minimising our ‘cost of doing
business’ (CODB), which comprises the variable and fixed costs of operating the distribution centres and the administrative
support functions. Because some of these costs are fixed, Metcash can ‘leverage’ its profitability through volume growth.
Profitability is also driven by minimising the working capital deployed in the business to reduce funding costs and by ensuring
that growth is achieved through solid returns from capital investments.

Whilst Metcash operates in a highly competitive environment and wholesale profit margins are thin, the Group generates
significant operating cashflows, which are reinvested back into the business to fuel future growth and returned to shareholders
through fully franked dividends.

2013 Operating Result Summary

Summary Results &
Underlying Earnings Reconciliation (Unaudited)
Revenue

2013
$’m

13,095.0

2012
$'m
12,612.3

Segment result (Note 3)
Share based payments and other unallocated amounts (Note 3)
Underlying EBITA
Net finance costs (Note 4)
Underlying profit before tax
Tax expense on underlying profit
Non controlling interests
Underlying earnings (i)
Amortisation of customer relationships (Note 4(v))
Significant items expense (Note 4(vi))
Tax (expense)/benefit on significant items
Net profit for the period from continuing operations attributable

461.2
(0.8)
460.4
(61.6)
398.8
(115.0)
(3.1)
280.7
(12.6)
(1.1)
(1.1)

453.8
(2.6)
451.2
(67.6)
383.6
(112.9)
(8.2)
262.5
(9.7)
(176.7)
41.1

Earnings per share (EPS)
equivalent

2013
cps

2012
cps

32.6

34.1

to equity holders of the parent

265.9

117.2

30.9

15.2

Net loss after tax from discontinued operations attributable to

equity holders of the parent

Net profit for the period

(59.9)
206.0

(27.2)
90.0

24.0

11.7

(i) Underlying earnings represents reported profit after tax from continuing operations attributable to equity holders of the parent, excluding
amortisation of customer relationships and significant items after tax, as reconciled in the table above. Underlying earnings per share
(EPS) is calculated by dividing underlying earnings by the weighted average shares outstanding during the period.

The Directors have provided underlying earnings information after careful consideration of the requirements and guidelines contained in
ASIC Regulatory Guide 230 (Disclosing non-IFRS financial information). Underlying earnings information, including this reconciliation to
net profit, has been provided in order to meet the demands from users of the financial reports for information to better understand aspects
of the Group’s performance. The Directors believe that underlying earnings is the most appropriate measure of the maintainable earnings
of the Group and thereby best reflects the core drivers and ongoing influences upon those earnings. For this reason, the impact of
significant items is excluded from the measurement of underlying earnings and specific information on these items is provided under Note
4 of these financial statements. Underlying earnings and underlying EPS are used for the purposes of providing guidance to shareholders
and the market and are calculated on a consistent basis each year. Underlying earnings and underlying EPS are also used as the basis
for short and long term incentive scheme rewards as detailed in the remuneration report.

The Group generated $13.1 billion of revenue which was up 3.8% against the prior year. Underlying profit for the 2013
financial year was $280.7m, up 6.9% on the 2012 result. The trading environment during 2013 was difficult and impacted
participants across the Australian retail sector. In particular, the effects of on-going deflation, rising utility costs, a highly value
driven consumer and a persistent marketing war between the two large grocery chains impacted profit levels. Profit growth in
the liquor division and from acquisitions was partly offset by a weaker result from the food & grocery division.

Whilst underlying earnings increased, the equivalent underlying EPS result decreased 4.4% on the prior year largely as a
result of the dilutive effect of the 110m new shares issued under the $375m equity raising in June/July 2012. Most of the
investments funded by the equity raising occurred later in the year and accordingly did not deliver a full years’ worth of
earnings during 2013. The equity funds have now been either fully deployed or committed and, aside from the $75m Project
Mustang investment (detailed below), these investments are expected to be EPS accretive in fiscal 2014.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

During 2013 the Group incurred $1.1m of significant items expense, which was all acquisition related. The Franklins corporate
stores recorded a retail loss of $59.9m (2012: $27.2m) after tax for the year and this result has been recorded within
discontinued operations. During the fiscal year Metcash disposed of, either by way of sale or closure, 70 of the 80 Franklins
corporate stores. Plans are in place to dispose or close the remaining 10 stores, which are expected to significantly reduce the
discontinued operations result in 2014.

The reported net profit for the year was up by 129% to $206.0m reflecting the absence of restructure activities undertaken in
fiscal 2012. Importantly, cash generated from operating activities was $299.8m, up 5.5% on prior year. These cash flows were
applied towards funding business activities and providing a fully franked dividend return to our shareholders. The Board is
pleased to announce a final fully franked dividend of 16.5 cents per share (total 2013 dividends 28.0 cents), which is
consistent with the prior year.

Further details in respect of these results are provided below.

Key Developments (Incorporating Significant Changes in the State of Affairs)

During June/July 2012, Metcash raised net proceeds of $368.2m in share capital through a fully underwritten institutional
placement and a retail share placement to existing shareholders to fund growth opportunities. The majority of this funding was
subsequently deployed during 2013 through the following acquisitions and investments totalling $216.3m:

• On 31 July 2012 Metcash acquired the remaining 49.9% equity interest in the Mitre 10 Group for $47.9m, taking our

ownership interest to 100%

• During fiscal 2013, the Mitre 10 group acquired four hardware retail subsidiaries and invested in three associates at a

combined cost of $55.2m. Mitre 10 now has strategic ‘joint venture’ investments in each state, which have
strengthened the network and positioned it for further growth

• Metcash acquired a 75.1% controlling interest in the Automotive Brands group (ABG) for $54.7m on 1 July 2012,
which firmly positions Metcash in the automotive parts aftermarket sector. ABG is the 3rd largest in the sector and
manages the Autobarn franchise and Autopro dealership groups
The liquor division invested $41.6m in new joint venture interests in three hotels in Queensland, with associated
detached bottle shops. It also assisted new retailers into new bottle stores with a retail development program similar
to that operated in food & grocery and signed a 15-year supply contract with the Liquor Marketing Group (LMG) in
October 2012, which is expected to generate approximately $600m in additional sales per annum

•

• Metcash announced Project Mustang, which is a $75m warehouse automation project centred on the new

Huntingwood distribution facility. The capital expenditure represents the latest European robotic technology that will
significantly automate the goods receipt, order selection, pallet assembly and distribution process for both the food &
grocery and liquor divisions in NSW. Initial capital expenditure of $16.9m was outlaid during 2013, with the project
ultimately expected to ‘go live’ during fiscal 2015

Immediately subsequent to fiscal 2013, ABG acquired 100% of the Australian Truck and Auto Parts group for approximately
$84m including acquisition costs and Mitre 10 invested in two more trade hardware groups. These investments, together with
the balance of $58.1m in Project Mustang capex, represent the full deployment of the abovementioned equity raising.

Segment Results

Food & grocery division sales decreased by 2.3% to $9.1 billion, largely due to the closure of 11 Campbells branches, the
impact of WA deregulation as well as the exit of some stores in WA and from the closure of Cornetts and Walters retail stores
as foreshadowed last year. National market share was down marginally reflecting these impacts. The trading conditions
remain tough, with continued deflation, elevated promotional intensity and aggressive marketing campaigns being run by the
major self supply chains.

A full years worth of sales to the Franklins stores (seven months in prior period) assisted the result. The division invested an
additional $8.3m in marketing programs including the National Locked Down Low Price campaign and a major relaunch of
Supa IGA in NSW to support the Franklins store conversions.

Food & grocery EBITA results were down 5.0% to $377.9m, with the group experiencing negative leverage from the effects of
continued deflation with the elevated promotional volumes also causing supply chain peak inefficiencies. These effects, along
with the additional $8.3m in marketing spend, were partly offset by structural cost savings from the Campbells branch closures
and warehouse efficiency improvements like the KNAPP mini loader at Huntingwood that both improved the cost of doing
business.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

Liquor division sales grew strongly by 24.9% to $2.9 billion, partly due to a seven month contribution from the new LMG
supply contract, but also from strong organic volume growth, particularly across its IBA retail brands. Competitive pricing and
improved store execution are delivering strong sales resulting in the division increasing its market share. Further growth was
achieved in Queensland through the establishment of three hotel ‘joint ventures’ (Envy, Queens Arms & Mermaid Tavern).

Liquor division EBITA results increased by 35% to $47.1m reflecting the increased sales volumes as well as leveraging a
reduction in CODB% through warehouse efficiency improvements.

Hardware & Automotive sales increased by 12.6% to $938.4m, largely due to the acquisition of ABG which delivered $83.5m
of sales. Divisional EBITA grew by 70.8% to $36.2m including the ABG contribution and solid growth in Mitre 10 earnings.

Mitre 10 trade sales were relatively flat year on year, reflecting the depressed construction market. Sales were supported by a
number of retail stores converting to Mitre 10 from competitor brands and network strengthening through the establishment of
seven new retail joint ventures. Mitre 10 continued to raise brand awareness by presenting a consistent brand (retail store
‘blue & white’ ‘paint ups’) and continued association with Channel 9’s ‘The Block’ series. The Natbuild alliance commenced,
which going forward will improve network trade buying power.

The new ABG business is performing in line with expectations and delivered a solid EBITA contribution in line with acquisition
expectations. The Autobarn and Autopro brands are considered leaders in customer service and product knowledge. The
business has begun to leverage Metcash’s competencies in supply chain, merchandising and marketing and is positioned for
further growth.

Group Results – Other Key Expenses

Metcash reduced its net finance costs by 8.9% to $61.6m. The improved result was achieved notwithstanding an additional
$7.0m in non-cash expense arising from the unwinding of net present value discounts of long-lived rental subsidy and other
provisions. The savings were mainly achieved due to lower debt levels, in part from equity raising funds but also from a
significant reduction in working capital. The reduction in interest rates also contributed to the solid result.

Tax expense on underlying profit of $115.0m represented an effective tax rate of 28.8%, down 0.6% mostly due to prior period
refunds arising from the application of capital tax losses and research & development claims. Tax expense of $90.1m on fiscal
2013 reported profit reflected an effective tax rate of 30.4%, which is broadly consistent with the 30% Australian corporate tax
rate.

As noted above in the summary, the 2013 Franklins retail store discontinued loss was $59.9m after tax. The store sale
program accelerated during the second half of fiscal 2013. By year end, 46 stores had been sold to independent retailers and
24 stores had been closed (total 70). By the end of June 2013, 74 stores are expected to have been sold or closed and the
remaining 6 stores are expected to be sold or closed by October 2013 (including 4 stores previously closed now expected to
re-open). By the completion of the process, including the 10 franchise stores, a total of 67 stores will have been sold or are
expected to be sold or converted to IGA stores and 23 stores will have closed or are expected to close. The loss also included
redundancy and other costs associated with the store closures and sale process, along with an additional $10.6m in non-cash
expense arising from the unwinding of net present value discounts on rental subsidy provisions. Whilst more stores were
closed than originally anticipated, the overall Franklins acquisition has delivered a strong strategic footprint in NSW,
introduced new retailers to the business and increased operational leverage through the Huntingwood distribution centre.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

Financial Position and Cashflows

Summary Financial Position (Unaudited)

Net working capital
Property, plant & equipment, associate investments and intangible assets
Total funds employed
Net debt
Net tax balances
Net assets/equity

Note

1
2

3
4

2013
$’m

236.6
2,078.1
2,314.7
(758.6)
68.1
1,624.2

2012
$'m

339.3
1,841.1
2,180.4
(940.3)
95.0
1,335.1

1. Net working capital broadly comprises the ‘trading’ components of the balance sheet. Working capital includes trade and other

receivables, inventories, disposal groups and assets held for sale, prepayments, derivative financial instruments (assets and
liabilities), trade and other payables, provisions and other financial liabilities, including the current & non-current components of
these items

2. These non-current assets broadly represent the income earning components of the balance sheet. They include property, plant &

equipment, investments in associates, other financial assets, intangible assets and goodwill

3. Net debt reflects the net borrowings position and includes cash and interest bearing loans and borrowings (current & non-current)
4. Net tax balances include income tax receivable or payable and net deferred tax assets

Net working capital

The net working capital position was managed effectively during the year resulting in a 30% reduction on the prior period to
$236.6m, which is the lowest level achieved for a number of years. The improved result was delivered despite the expansion
of the group through acquisition and featured a $79.8m reduction in inventory through tighter stock control. Additionally, the
disposal of Franklins retail stores released a further $68.9m in assets held for sale.

Total funds employed

As noted in the key developments section, Metcash invested for growth during 2013 as evidenced by the 6.1% increase in
total funds employed. This included a $133.3m increase in intangibles driven by the ABG, Mitre 10 subsidiary and Franklins
acquisitions. Metcash invested $20.2m in associates, including the three Mitre 10 joint ventures. Metcash also deployed
$86.8m in capital expenditure, including $33.9m in relation to the Huntingwood DC.

Net debt

The strong operating cashflow and residual unspent funds from the equity raising were deployed to invest for growth and also
reduce debt levels by $181.7m. This facilitated a reduction in net gearing levels to 31.8%, compared to 41.3% in the prior
period. Metcash had $733m in available debt facilities at balance date with an appropriate tenure and diversification of funding
sources. Part of this headroom was deployed subsequent to year end to fund the $84m ATAP acquisition and two Mitre 10
joint ventures noted below.

Net Assets/Equity

Metcash’s net asset position increased primarily due to the $368.2m equity raising. This was partly offset by the payment of
dividends of $245.7m (Final FY12 and Interim FY13), being in excess of FY13 reported profit of $206.0m, as the Board had
the confidence to declare dividends based on the strong underlying profit result and cash generated by the group. The equity
position also decreased by $47.9m due to the acquisition of the remaining 49.9% non-controlling interest in Mitre 10, taking
Metcash’s ownership interest to 100%.

Other Financial Exposures

Contingent liability details are presented in Note 32 of the financial statements. Metcash is currently in dispute with the
Australian Tax Office (‘ATO’) in relation to the ‘Action Stores’ matter and the ‘Foreign Tax Credit’ matter. The ATO have issued
amended assessments or determinations totalling $72.2m in respect of these matters, against which Metcash has paid
$24.4m (recorded as income tax receivable). Metcash is firmly of the view that it has adopted the appropriate treatment and, if
necessary, intends to challenge these matters through to the Administrative Appeals Tribunal or Federal Court.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

Metcash’s operating lease commitments, which predominantly relate to warehouse and retail stores, are detailed in Note 23 of
the financial statements. Part of the 4.9% increase in commitments has been the extension of the Huntingwood DC lease, as
well as an increase through acquisitions. In certain situations, Metcash will take the head lease on a retail property and sublet
the store to the independent retailer. The acquisition of the Franklins retail stores and the subsequent sale and sublease of
these stores has also increased the amount committed. If the head lease rental expense exceeds the sublease rental income
and the position is considered onerous, a provision is raised for the difference as set out in Note 19(b).

Metcash has a relatively low exposure to interest rate risk and minimal foreign exchange risk. Variable interest rate exposures
on core debt are hedged in accordance with the Treasury Policy between a minimum and maximum range (28% hedged at
year end). The fixed interest and foreign exchange exposure on the US$225m USPP debt facility is effectively converted via
hedges into $210.1m of variable rate funding. Further details are set out in Note 22.

Cashflows

Metcash recorded its strongest ever operating cashflow of $299.8m. This result was achieved due to the solid underlying
earnings result supplemented by lower tax payments and the improvement in working capital. The investing cashflow of
$178.9m correlated to the investment activity described above, whilst the financing cash outflow notably included a reduction
in borrowings.

Business Strategies and Prospects (Incorporating Likely Developments and Expected Results)

Metcash’s core strategy will continue to be the ‘champion of the independent retailer’ and to support our independent retailers
to drive mutually profitable growth. Metcash will also continue to focus on growth through targeted acquisition and investment.

The incoming CEO, Ian Morrice has commenced a formal strategic planning process from which a number of initiatives will be
developed and communicated at 1H 14. While the plan will continue to focus on strategies to champion sustainable
independent businesses, it will also look to identify and pursue new growth opportunities in existing and complementary
sectors for each Metcash division. Initial priorities for Mr Morrice will include reviewing the Food & Grocery operations to
respond to the ongoing deflationary market conditions; developing strategies to better address the online and digital marketing
requirements of each division; driving continued supply chain evolution through the new automated solutions being built for the
Huntingwood DC, and optimising recent acquisitions and supply contracts.

Sales Volumes

Deflation and its deleveraging impact together with the intensely competitive trading environment remain the most challenging
and significant business risks. Metcash’s wholesale sales volumes and therefore its profitability are directly related to the level
of retail sales achieved by our independent retailer customers. Metcash may also face financial exposure to these retailers
through trade receivables, loans and lease commitments in the event of customer default.

In the food & grocery business, the strategy is to support the independent IGA retailers to be competitive and to help them
differentiate themselves from the chains in four key areas: fresh offer (‘200% guarantee’), range (‘favourite brands’), value
(‘locked down low prices’) and community (e.g. Community Chest) in order to present a unique consumer proposition.

Food & grocery plans to drive organic growth principally through new store development, conversions, extensions and
refurbishment activities. Further sales volume growth is expected through the ‘buyback’ program, whereby poorer performing
IGA stores are placed into the hands of more experienced retailers.

Food & grocery also plans to grow sales by securing new customer contracts, with recent examples including the contract to
supply Supabarn in NSW/ACT and also to supply Spotless in WA/Queensland. Food & grocery is also trialling new store
formats, including Value Depot (convenience) and Harvest Market (fresh).

Brand presence will be strengthened through targeted marketing and merchandising strategies, including integrated
campaigns featuring comedian Ahn Do to promote the IGA brand.

The liquor division plans to step up on its recent organic growth by continuing to refine execution levels and the retail offer at
store level, supplemented by supplier support. The strategy to lift wine sales through the network will continue. The division is
also trialling new larger format stores under the Cellarbrations and Bottle-O banners. The liquor division will continue to review
opportunities to grow in key markets through its hotel strategy.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

The hardware & automotive division plans to further strengthen the network through its joint venture activities in Mitre 10 and
to entice retailers to convert to the Mitre 10 brand. The Mitre 10 trade business has been strengthened through the Natbuild
alliance, benefitting Mitre 10 store owners through lower costs. Mitre 10 will continue to build brand presence through its
association with Channel 9’s ‘The Block’ television series. The automotive business will target organic growth in the significant
$5.6 billion automotive aftermarket retail parts sector through increased ranging and customer service by leveraging existing
support structures within the Metcash group.

Margins & the ‘Cost Of Doing Business’ (CODB)

The level of sales price deflation and cost inflation evident in the grocery market, together with the increased propensity of the
consumer to purchase goods when on promotion continue to be material business risks. Sales deflation negatively impacts
profit margins, largely because margins are earned as a percentage of a ‘deflated’ wholesale sales revenue. Sales deflation
and promotional activity will be reviewed in the upcoming strategic review.

Cost inflation, including rising transport, utility and other costs, has a direct impact on the CODB. In the near term, Metcash
plans to deliver cost synergies by integrating the recently acquired businesses with Metcash. CODB improvements are also
expected through IT systems (completion of the national rollout of ‘Power Enterprise’ transaction system and e-commerce
solutions), along with ‘business-as-usual’ initiatives to drive warehouse and support costs down. In the longer term, Project
Mustang (warehouse automation - noted above) is expected to deliver further benefits.

Discontinued Operations – Franklins Retail Stores

Metcash’s strategy has been to sell the 80 Franklins stores to independent retailers and this program of sales has recently
accelerated. By the end of June 2013, 74 stores are expected to have been sold or closed and the remaining 6 stores are
expected to be sold or closed by October 2013, at which point the retail trading losses will cease. The Franklins Rockdale
head office has already been wound down and will be closed in the first quarter.

Expansion

Subsequent to year end, Metcash acquired 100% of the ATAP group through ABG for $84.0m as detailed in Note 33. The
acquisition represents the next stage in Metcash’s growth strategy in the automotive aftermarket sector. The acquisition
provides greater access to 2,500 independents and further opportunity for increased ranging and service levels across the
ABG and ATAP businesses. Metcash will continue to identify further acquisition or investment-led growth opportunities for its
various divisions as part of the Group’s long-term aspirations to grow shareholder value.

End of the Operating and Financial Review.

SHAREHOLDER RETURNS

Basic earnings per share (cents)
Earnings per share from continuing operations before significant items (cents)
Dividend declared per share (cents)
Dividend payout ratio on earnings per share (%) (i)
Return on equity (%) (ii)
Share price at balance date ($)
Dividend yield (%) (i)

(i)
(ii)

Calculated using underlying earnings per share as detailed in the operating and financial review
Calculated using underlying earnings as detailed in the operating and financial review.

YEAR ENDED 30 APRIL

2013

2012

2011

2010

2009

24.0
32.6
28.0
85.9
16.6
4.10
6.8

11.7
34.1
28.0
82.1
18.9
3.98
7.0

31.5
33.4
27.0
80.8
17.2
4.08
6.6

29.7
32.0
26.0
83.3
17.3
4.15
5.8

26.5
29.5
24.0
83.6
17.2
4.12
5.0

EARNINGS PER SHARE

Basic earnings per share
Diluted earnings per share

Metcash Annual Report 2013

2013
CENTS

23.96
23.87

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

DIVIDENDS ON ORDINARY SHARES

(cid:3)(cid:3)

Final dividend for the 2013 year - payable in July 2013
Dividends paid during the year:
Interim dividend for the 2013 year - paid in January 2013
Final dividend for the 2012 year - paid in July 2012
Total dividends paid during the 2013 financial year
Total dividends declared in respect of the 2013 financial year

SUBSEQUENT EVENTS

(cid:3)(cid:3)

CENTS

$’m

16.5

145.3

11.5
16.5
28.0
28.0

101.3
142.6
243.9
246.6

Australian Truck & Auto Parts Group
On 16 May 2013 Metcash announced the acquisition, through Automotive Brands Group (ABG), of 100% of the Australian
Truck & Auto Parts Group (ATAP) for approximately $84.0 million including acquisition costs. The Group assumed control of
ATAP on 20 May 2013 being the date of completion. ATAP is a national wholesaler of brake, clutch and under-car products
and also includes: ABS, the franchisor of a national chain of 53 retail service and brake/clutch repair centres, with 4 corporate
stores and 5 joint venture stores; IBS Auto Solutions, Garmax, Melbourne Clutch & Brake; and Brake Friction Technology.

The acquisition will result in a dilution of the non-controlling interests in ABG to reflect the additional equity contribution by
Metcash. Refer Note 29(f) of the financial statements for further details.

Mitre 10 joint ventures
On 6 May 2013, Metcash announced that Mitre 10 had entered into joint ventures with two hardware trade groups – Dahlsens
and Capeview Building Supplies. Metcash acquired a 36% interest in the Dahlsens joint venture, which includes 11 stores in
the Northern Territory, Western Australia and in Northern Queensland. Metcash acquired an 80% interest in Capeview
Building Supplies, which includes 5 stores throughout Victoria, particularly in the Gippsland region.

Except as noted above, there are no events that have occurred after the end of the financial year that would materially affect
the reported results or would require disclosure in this report.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

DIRECTORS QUALIFICATIONS AND EXPERIENCE

The qualifications and experience of Directors is set out below.

Peter L Barnes
B COMMERCE (HONS), MBA
Non executive Chairman
Member of the Remuneration Committee
Date of Appointment to Metcash Limited:

18 April 2005

Peter Barnes is a Director of News Corporation and Chairman of Samuel Smith & Sons Pty Ltd. He also serves as Chairman
of the Melbourne Business School. Peter was formerly the Chairman of Ansell Limited and an executive with Phillip Morris
International Inc. and held several senior management positions both here in Australia and overseas. Peter was appointed
Chairman of Metcash Limited on 2 September 2010 and has been involved with the Metcash business as a director since
November 1999.

Andrew Reitzer
B COMM, MBL
CEO Metcash Group of Companies until 30 June 2013
Date of Appointment to Metcash Limited:

18 April 2005

Andrew Reitzer has 35 years’ experience in the retail/wholesale industry. Previous positions at Metro Cash and Carry Limited
include Group Operations Director, heading operations in Russia and Israel, Marketing Director, IT Director and managing
various operating divisions.

Ian R Morrice
MBA
CEO Metcash Group of Companies with effect from 30 June 2013
Date of Appointment to Metcash Limited:

12 June 2012

Ian Morrice has over three decades of retail experience as Managing Director, Trading Director and Retail Director for some of
the UK’s leading retailers, including Dixons and The Kingfisher Group. Ian was Group CEO and Managing Director of New
Zealand’s Warehouse Group from 2004 to 2011.

Ian’s key areas of expertise include strategy, brand and category development, multi-channel and new store format roll-out,
product sourcing and supply chain innovation.

Patrick N J Allaway
BA/LLB
Non executive Director
Member of the Audit Risk and Compliance Committee
Date of Appointment to Metcash Limited:

7 November 2012

Patrick Allaway is a broad based business person with extensive experience in financial services. His career in investment
banking has seen him hold positions with Swiss Bank Corporation initially in Zurich and then London; and also with Citibank in
New York, Sydney and London.

Over the past eight years Patrick has been the Chairman and co-founder of a privately owned boutique corporate advisory
and funds management business, Saltbush Capital Markets. Patrick was also a Non executive Director of Macquarie
Goodman Ltd until 2006 and the Interim Chairman of its Audit Committee. Patrick’s key areas of expertise include strategy,
development, mergers & acquisitions and capital management. Patrick has a Bachelor of Arts/Law from Sydney University
and is a Director of the Sydney University Football Club Foundation Ltd.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

Fiona E Balfour
BA (Hons), MBA, GRAD DIP INFORMATION MANAGEMENT, FAICD
Non executive Director
Member of the Remuneration Committee
Date of Appointment to Metcash Limited:

16 November 2010

Fiona Balfour is an independent non-executive director of Salmat Limited, TAL Australia Limited and Airservices Australia, a
Councillor of Knox Grammar School and Chief Executive Women; a Fellow of the AICD and Monash University (2010) and
was awarded the National Pearcey Medal in 2006. Fiona has over thirty years executive experience across Aviation,
Telecommunications, Financial Services, Education and not-for-profits. Her professional expertise is in information and
communications technology. She has extensive experience in global ‘customer–facing’ business solutions across a variety of
technologies – including digital channel management. She is a former Director of SITA SC (Geneva) 2001-06 and a former
Trustee of the National Breast Cancer Foundation 2007-11.

Michael R Butler
B SC, MBA, FAICD
Non executive Director
Chairman of the Audit Risk and Compliance Committee
Date of Appointment to Metcash Limited:

8 February 2007

Michael Butler has extensive experience in investment banking gained as an Executive Director of Bankers Trust’s Corporate
Finance Group and as Executive Vice President of its Private Equity group. He is currently Chairman of AMP Superannuation
Limited and N.M. Superannuation Pty Ltd. He was previously a Non executive Director and Chairman of various public and
private companies.

Neil D Hamilton
LLB
Non executive Director
Chairman of the Remuneration Committee
Date of Appointment to Metcash Limited:

7 February 2008

Neil Hamilton is based in Perth and has over 30 years’ experience in the legal profession and in business with substantial
experience in a number of industries including investment/funds management, insurance, banking and resources.

Neil is Chairman of OZ Minerals Ltd and Miclyn Express Offshore Limited. He was appointed Chairman of the Remuneration
Committee on 1 September 2010.

Edwin M Jankelowitz
B COMM, CA (SA)
Non executive Director
Date of Appointment to Metcash Limited:

18 April 2005

Edwin Jankelowitz was previously CFO of Metcash and was appointed a Non-executive Director in 2011.

After qualifying as a Chartered Accountant he spent 12 years with Adcock Ingram Ltd eventually being promoted to Group
Company Secretary and Finance Director. He then consulted in business management and tax before taking a position with
Caxton Ltd where he progressed to Finance Director, Managing Director and Chairman.

Edwin has spent over 39 years in corporate offices of listed companies and was a member of the Income Tax Special Court in
South Africa for 20 years.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

Richard A Longes
BA, LLB, MBA
Non executive Director
Date of Appointment to Metcash Limited:
Date of Retirement from Metcash Limited:

18 April 2005
30 August 2012

Richard Longes has been a director of a number of public companies and a member of various government bodies and
inquiries for more than 20 years. He is currently Chairman of Austbrokers Holdings Ltd and a Director of Boral Limited and
Investec Bank (Australia) Ltd.

Richard was formerly a co-founder and principal of the corporate advisory and private equity firm, Wentworth Associates, and
prior to that a partner of Freehill Hollingdale & Page, solicitors.

V Dudley Rubin
CA (SA), H DIP BDP, MBA
Non executive Director
Member of the Audit Risk and Compliance Committee
Date of Appointment to Metcash Limited:

18 April 2005

Dudley Rubin is a chartered accountant and is a director of various companies trading in Africa. He has 30 years’ industry
experience and has been involved with the Metcash business as a director since May 1998.

COMPANY SECRETARY

Greg Watson
LLM, Dip Law
General Counsel and Company Secretary

Greg Watson joined Metcash in 2005 as Legal Counsel and was promoted to General Counsel in 2008. He was appointed
Company Secretary in 2010. Greg has over 23 years professional and industry experience initially in private legal practice,
followed by corporate legal counsel roles with multinational FMCG organisations. Greg is a graduate of the Metcash Executive
Leadership Program.

DIRECTORS’ MEETINGS

The number of meetings of Directors (including meetings of committees of Directors) held during the year and the number of
meetings attended is as follows:

Directors
meetings:
Eligible to
attend

Directors
meetings:
Attended

Remuneration:
Eligible to
attend

Remuneration:
Attended

Audit Risk
and
Compliance:
Eligible to
attend

Audit Risk
and
Compliance:
Attended

Peter L Barnes
Andrew Reitzer
Ian R Morrice(i)
Patrick N J Allaway(ii)
Fiona E Balfour
Michael R Butler
Neil D Hamilton
Edwin M Jankelowitz
Richard A Longes(iii)
V Dudley Rubin
(i) Mr Morrice was appointed as a Non-executive Director on 12 June 2012 and as an Executive Director on 1 March 2013.
(ii) Mr Allaway was appointed as a Non-executive Director on 7 November 2012.
(iii) Mr Longes retired as a Non-executive Director on 30 August 2012.

12
10
10
6
12
11
12
11
3
11

12
12
11
6
12
12
12
12
4
12

6
-
-
-
6
-
6
-
-
-

-
-
3
3
-
6
-
-
3
6

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

COMMITTEE MEMBERSHIP

At the date of this report, the Company had an Audit Risk & Compliance Committee and a Remuneration Committee.
Members acting on these Board committees for the full year unless otherwise stated were:

AUDIT RISK & COMPLIANCE

REMUNERATION

Richard A Longes (Chairman)(i)

Michael R Butler (Chairman) (ii)

Patrick N J Allaway(iii)

Ian R Morrice(iv)

Neil D Hamilton (Chairman)

Fiona E Balfour

Peter L Barnes

V Dudley Rubin
(i) Mr Longes retired as chairman of the committee on 26 June 2012 and as a member of the committee on 30 August 2012.
(ii) Mr Butler was appointed as chairman of the committee on 26 June 2012.
(iii) Mr Allaway was appointed to the committee on 7 November 2012.
(iv) Mr Morrice was appointed to the committee on 12 June 2012 and ceased being a member with effect from 1 March 2013.

INTERESTS IN SHARES AND OPTIONS OF THE COMPANY AND RELATED BODIES CORPORATE

As at the date of this report, the Directors held the following shares and options in Metcash Limited:

Peter L Barnes
Andrew Reitzer
Ian R Morrice(i)
Patrick N J Allaway(ii)
Fiona E Balfour
Michael R Butler
Neil D Hamilton
Edwin M Jankelowitz
V Dudley Rubin
(i) Mr Morrice was appointed as a Non-executive Director on 12 June 2012.
(ii) Mr Allaway was appointed as a Non-executive Director on 7 November 2012.

SHARE OPTIONS & PERFORMANCE RIGHTS

Unissued shares

NUMBER OF
ORDINARY SHARES

NUMBER OF OPTIONS
OVER ORDINARY
SHARES

182,034
829,951
21,000
54,000
29,673
54,951
20,000
320,000
17,500

-
-
-
-
-
-
-
-
-

As at the date of this report, there were 13,361,853 unissued ordinary shares under option (13,395,496 at the reporting date).
As at the date of this report, there were 4,471,452 unissued ordinary shares under performance rights (4,489,265 at the
reporting date). Refer to Note 25 of the financial statements for further details of the performance rights and options
outstanding.

Shares issued as a result of options and performance rights

During or since the end of the financial year, no shares in the Company were issued to employees and executives in respect
of the exercise of options or performance rights.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

(i) The Constitution of the Company permits the grant of an indemnity (to the maximum extent permitted by law) in favour of
each Director, the Company Secretary, past Directors and Secretaries, and all past and present Executive Officers. The
Company has entered into Deeds of Indemnity and Access with R A Longes, F J Conroy, C P Curran, T A Haggai, R A
Allan, J J David, Sir Leo Hielscher, B A Hogan, M Wesslink, J L Jardim (Lou Jardin), C dos Santos and M Jablonski
together with all of the current Directors and certain other officers of the Company. This indemnity is against any liability
to third parties (other than related Metcash companies), by such officers unless the liability arises out of conduct
involving a lack of good faith. The indemnity also includes costs or expenses incurred by an officer in unsuccessfully
defending proceedings relating to that person’s position.

(ii) During the financial year, the Company has paid, or agreed to pay, a premium in respect of a contract of insurance
insuring officers (and any persons who are officers in the future) against certain liabilities incurred in that capacity.
Disclosure of the total amount of the premiums and the nature of the liabilities in respect of such insurance is prohibited
by the contract of insurance.

ROUNDING

The amounts contained in this report and in the financial statements have been rounded to the nearest $100,000 (where
rounding is applicable) under the option available to the Company under Australian Securities and Investments Commission
(ASIC) Class Order 98/0100. The Company is an entity to which the Class Order applies.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

REMUNERATION REPORT

MESSAGE FROM THE CHAIRMAN OF THE REMUNERATION COMMITTEE (UNAUDITED)

The Metcash Limited Remuneration Committee presents the Remuneration Report for the year ended 30 April 2013. The
remuneration report outlines the remuneration arrangements for key management personnel (‘KMP’) comprising the Group
Executives and the Non-Executive directors.

Metcash is a marketing and distribution specialist operating in the competitive grocery, liquor, hardware and automotive
industries. As “Champion of the Independent Retailer”, Metcash provides the scale necessary to create competitive buying
power, together with marketing, distribution, financial expertise and support. Metcash’s collective relationships with the
independent retailers and suppliers compete as the ‘Third Force’ in Australia’s consumer staples market against the vertically
integrated chains. Metcash generates wholesale revenue through its distribution and marketing activities, leaving the
independent retailer to earn the retail revenue from sales to the end consumer. The nature of these operations therefore
requires expertise across distribution and retail and competition for high calibre staff in these areas is intense.

Metcash’s Board is committed to a remuneration framework which ensures that Metcash attracts and retains a high quality
Executive team who are appropriately rewarded for achieving financial outcomes for the Company which provide shareholders
with reasonable returns. To achieve this, a significant portion of executive remuneration is ‘at risk’ and subject to Company
performance. The Company’s remuneration policy and structure for its Group Executives comprises a combination of the
following two main components:

•

a fixed component which is the total base salary and includes compulsory employer superannuation contributions;
and

a variable ‘at risk’ component which is performance based and comprises a part cash, part share-based short term
incentive (‘STI’) plan that is linked to both the performance of the Company and individual performance, and a long
term incentive (‘LTI’) program under which executives, at the discretion of the Board, are offered performance rights
which vest if the Company achieves certain hurdles over a three year period.

The combination of fixed and variable ‘at risk’ remuneration ensures that Metcash’s remuneration policies are consistent with
generally accepted best practice.

Events and Board Decisions Affecting Remuneration

KMP fixed annual remuneration was increased effective 1 May 2012, based on business and individual performance and
aligned to market remuneration levels. The ‘at target’ pay levels for KMP are set with reference to other S&P/ASX 51-100
companies and peers within the Consumer Staples group. The weighted average KMP fixed remuneration increase was 7.5%.

As set out in the 2012 Remuneration Report, having considered current market practice and shareholder views, the Board
approved the following changes to the Metcash STI and LTI schemes:

Short term incentive:

• maximum target performance by members of the Executive Team will result in the payment of an STI equal to 12

months fixed remuneration;

• 25% of any STI awarded to a member of the Executive Team will be deferred for a 15 month period;
• should the Executive no longer be employed by the Company on the scheduled vesting date, the deferred

component will be forfeited; and
releasing the deferred 25% component of the STI by way of issuing Metcash equity.

•

Long term incentive:

• commencing with the 2013 financial year, the performance hurdles are indexed by reference to a calculation based
on the inflation/deflation on the Company’s goods sold in the current year as compared to the prior year, thereby
providing targets that reward management performance which exclude the effects of inflation/deflation.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

Mr Reitzer was eligible for a three year cash based LTI with a potential maximum reward of $5 million. The performance
period for this grant commenced on 1 May 2010 and concluded on 30 April 2013. This grant was subject to a growth in
underlying earnings per share performance hurdle. The performance hurdles were not met and no amount was payable to Mr
Reitzer in relation to this grant (refer section 8 for full details of the grant).

On 27 September 2012 the Company confirmed the previously announced intention of Mr Reitzer to retire as CEO in 2013. Mr
Reitzer will step down as CEO effective 30 June 2013 and will cease employment with Metcash on 30 September 2013. The
Board and Mr Reitzer have agreed that Mr Reitzer’s services will be retained as a consultant to the Board for strategic advice
and assistance in relation to key customer, supplier and joint venture relationships, for 3 years following Mr Reitzer’s expected
termination date of 30 September 2013. During the consultancy period, Mr Reitzer will be subject to appropriate non-compete
restrictions. The consultancy fees are set at $350,000 in year one reflecting greater involvement in the handover process and
then $300,000 per annum (to be paid quarterly) in years two and three based on certain service levels, above which additional
fees would be payable. In recognition of the Company’s significant growth under his leadership, and in accordance with his
employment contract, Mr Reitzer will receive a cash payment of $2,029,801 equivalent to 12 months average base salary
upon termination of employment on 30 September 2013 (refer to section 10).

On 27 February 2013 the Company announced the appointment of Mr Ian Morrice as Chief Executive Officer, effective 30
June 2013, to replace Mr Reitzer. Mr Morrice has more than 30 years of retail experience, including Managing Director and
senior executive for some of the United Kingdom’s leading retailers. He was Group CEO and Managing Director of New
Zealand’s Warehouse Group from 2004 to 2011.

Mr Morrice was appointed as an Executive Director effective 1 March 2013, with a fixed salary of $1,500,000 per annum
including superannuation. Mr Morrice is not eligible to participate in the FY2013 STI or LTI programs. From 1 May 2013 and in
keeping with the Board’s vision of aligning executive remuneration with Company performance approximately 64% of Mr
Morrice’s maximum remuneration will be linked to Company results. Mr Morrice will participate in the FY2014 STI program
with a maximum reward equivalent to 12 months fixed remuneration of $1,500,000 and in the FY2014 LTI program with a
maximum reward equivalent to $1,200,000. Accordingly, Mr Morrice’s total maximum remuneration package comprises
approximately 36% fixed remuneration, approximately 36% maximum ‘at risk’ STI and approximately 28% maximum ‘at risk’
LTI, totalling $4,200,000. Refer section 5 for further details of the Company STI and LTI schemes.

Mr Morrice’s remuneration package was determined by the Board, taking into consideration advice from
PricewaterhouseCoopers, which included reference against current ASX 51-100 peer group CEO remuneration levels and
structures.

The Committee has commissioned a full review of the Company’s total rewards framework including the fixed and at risk
infrastructure to ensure the Company’s full remuneration offering is benchmarked to market standards and expectations.

On behalf of the Committee, I commend the guide and this year’s remuneration report to you.

Neil Hamilton
Chairman, Remuneration Committee

Metcash Annual Report 2013

METCASH FINANCIAL REPORT

T 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

EXECUTIVE REMUNERATION

N GUIDE (UNAUDITED)

Overview

This short guide is intended to provide shar
to the Company’s 2013 performance. This g
information set out in sections 3 to 12 of the

reholders with an overview of KMP remuneration outcome
guide is not audited and the information provided is in add
e formal remuneration report.

s for 2013 having regard
ition to the audited

Company Performance

The 2013 financial year was challenging. De
promotional intensity, continued to impact M
and Executives have remained focussed on

eflation evident since 2010, fuelled by the high Australian
Metcash’s core food and grocery business and the industry
n achieving sustainable performance, in spite of these con

dollar and elevated
y in general. The Board
straints.

Total revenue for the year increased by 3.8%
underlying profit after non-controlling interes
in underlying earnings on the prior year, und
profit for the year attributable to equity holde

% to $13,095.0 million and underlying EBITA rose by 2.0%
sts and tax for the year increasing by 6.9% to $280.7 millio
derlying EPS decreased by 4.4% as a result of the equity
ers of the parent increased by 128.9% to $206.0 million (2

% to $460.4 million, with
on. Despite the increase
raising in July 2012. Net
2012: $90.0 million).

A full reconciliation between underlying earn
of the Directors’ Report. The effect of these

nings and reported profit is included in the review and resu
items is shown in the reported figures below.

ults of operations section

$’m

$13,500
$13,000
$12,500
$12,000
$11,500
$11,000
$10,500
$10,000
$9,500

$500

$400

$300

$200

$100

Total Revenue

11,608

ncrease
In
of 5.7%
o

$10,982

Increase
from 2008
of 8.6%

$12,462

Increase
of 7.4%

$12,612

Increase
of 1.2%

$13,095

Increase
of 3.8%

2009

2
2010

2011

2012

2013

EBITA Reported

EBIT

TA Underlying

$352

$371

$394

$401

$431

$438

$451

$460

$373

$236

2009

010

2011

2012

2013

Metcash Annual Report 2013

METCASH FINANCIAL REPORT

T 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

EXECUTIVE REMUNERATION

N GUIDE (UNAUDITED) (Continued)

PBT Reported

PBT Un

nderlying

$450
$400
$350
$300
$250
$200
$150
$100
$50
$-

$300

$250

$200

$150

$100

$50

cents
/share
40.0c
35.0c
30.0c
25.0c
20.0c
15.0c
10.0c
5.0c
0.0c

$320

$290

$327

$349

$348

$362

$384

$399

$299

$158

2009

010

2011

2012

2013

PAT Reported

PAT

Underlying

$226

8
$228

$203

$245

$241

$256

$263

$281

$206

$90

2009

010

2011

2012

2013

EPS Reported

EPS U

Underlying

29.5c

29.7c

26.5c

32.0c

31.5c

33.4c

34.1c

32.6c

24.0c

11.7c

2009

010

2011

2012

2013

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

EXECUTIVE REMUNERATION GUIDE (UNAUDITED) (Continued)

2013 Remuneration Outcomes

Short term incentive

As outlined below, Company performance was reflected in executive remuneration outcomes for 2013. The key metrics used
in determining the quantum of STI payable are total revenue which was $13,095.0 million (2012: $12,612.3 million), underlying
earnings before interest, tax and amortisation of $460.4 million (2012: $451.2 million) and underlying profit before tax which
was $398.8 million (2012: $383.6 million).

Within the Group each Business Pillar and the Corporate Head Office have separate STI schemes, designed to align each
executive's incentives to the financial objectives of the pillar or team concerned and which aggregate to overall Group
objectives.

Two key KPIs are utilised, being – total revenue and underlying profit before tax. The Board considers and forms a matrix to
measure performance starting at a base level that the Board considers to be the minimum level of acceptable performance
(including the cost of the STI payments as the scheme is self funding) to qualify for an STI payment, moving to a target at
which approximately 73% of the STI is achieved with provision to earn up to 100% of the STI at a stretch performance level.
The targets vary from business to business depending on the circumstances and objectives of each pillar. However, they are
all constructed so as to provide a stretch to exceed revenue and profit targets.

STI payments for KMP for the year were paid at an average of approximately 76% of the maximum entitlement, with the
remainder being forfeited. This reflected an 80% achievement against Group revenue and profit targets, whilst business pillar
achievement levels ranged from 40% to 100% of maximum. In accordance with the STI Scheme rules for KMP, 75% of the
STI reward will be paid in July 2013. The remaining 25% of the STI reward will be deferred and released through the issue of
Metcash ordinary shares conditional upon the Executive remaining employed by the Company on 15 April 2014. The number
of shares to be issued will be calculated by dividing the 25% STI reward dollar value by the Metcash (MTS) VWAP for the five
days ending on 31 July 2013. The shares will be issued by 30 April 2014, but will be restricted from trading until 31 July
2014.The actual results by KMP are presented in Tables 6.1 and 6.2.

Long term incentive

The Metcash LTI scheme is designed to incentivise and reward the Company’s executives for implementing strategies to
achieve specific underlying EPS growth targets which are aligned to the Company’s overall strategy of increasing returns to
shareholders.

•

The Performance Rights granted under the Rights Plan in December 2010 did not achieve the minimum performance
hurdle and will be forfeited on 30 June 2013;
The Performance Rights granted under the Rights Plan in December 2011 and December 2012 will be subject to
performance tests in FY2014 and FY2015, respectively. Present forecasts indicate that they are unlikely to meet the
minimum performance hurdles (full details of the scheme are contained in section 7 of this report);
The final 20% tranche of the 2008 options issued to Mr Gratwicke, Mr Morabito and Mr Laidlaw vested in the current
year. The options have an exercise price of $4.27 per option and expire on 7 February 2014 (full details of the
scheme are contained in section 8 of this report);

• Mr Reitzer was eligible for a three year cash based LTI with a potential maximum reward of $5 million. The

performance period for this grant commenced on 1 May 2010 and concluded on 30 April 2013. This grant was
subject to a growth in underlying earnings per share performance hurdle. The performance hurdles were not met and
no amount was payable to Mr Reitzer in relation to this grant (refer section 8 for full details of the grant).

These Performance Rights LTI plans are measured against underlying EPS growth targets over a three year period. The
current year underlying EPS decreased by 4.4% to 32.6 cents per share, impacted by the dilutionary effect of the $375 million
equity raising. As a result, present forecasts indicate that the KMP are unlikely to receive any reward under any of the three
Performance Rights LTI plan periods ending FY2013, FY2014 or FY2015.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

EXECUTIVE REMUNERATION GUIDE (UNAUDITED) (Continued)

Remuneration actually received

The accounting standards require the calculation of remuneration on an accrual basis including the use of sophisticated
valuation models for long term share based incentives. The accounting standards require the recognition of long term
incentives over the associated vesting period based on assumptions that may or may not eventuate and without regard to the
actual economic benefit ultimately derived by the executive from the incentive. Because of potential confusion in interpreting
remuneration table values the Board has provided details of actual remuneration received by executives during the reporting
period in the unaudited table below. These figures represent the fixed remuneration actually paid over 2013, as well as the
value of STI benefits that will be received as a result of performance in 2013, the value of LTI’s for 2013 and the value of
discretionary bonus payments. The audited accounting value of remuneration received during the 2013 financial year,
reported in accordance with statutory obligations and the accounting standards, has been presented in table 10.1 of the
remuneration report.

Table 2.1 Remuneration actually received (unaudited)

Name

A Reitzer

I Morrice(5)

A Gratwicke

S Morabito

F Collins

M Laidlaw

Total

Fixed (1)
$

STI(2)
$

LTI(3)
$

Other(4)
$

Total
$

1,787,731

1,648,000

251,897

795,959

1,096,030

684,868

632,145

484,104

486,675

472,500

325,000

5,248,630

3,416,279

(358,610)

3,077,121

30,807

25,005

146,111

143,728

30,488

17,529

282,704

1,305,068

1,728,816

1,301,096

987,633

8,682,438

(1) Fixed remuneration includes superannuation and accrued annual leave.
(2)

The STI amount represents the 75% cash component payable to the executive in July 2013, which is based on the achievement of the relevant performance
conditions in respect of the 2013 financial year as set out in Table 6.2 of the Remuneration Report. The 25% deferred equity component is not included in the
table because the reward is conditional upon employment of the executive until 15 April 2014.

(3) The value of share based long term incentives calculated in accordance with the accounting standards is reported in Table 10.1 of the Remuneration Report.
The above LTI column is unaudited and records the actual economic value realised by the executive as a result of exercising options or performance rights
vesting. The economic value of performance rights reflects the market value of shares issued to the executive when the performance rights vest and are
converted into shares. The economic value of options represents the difference between the exercise price of the options and the value of the relevant shares
on exercise date.

Other amounts include the value of other benefits that have been determined in accordance with the accounting standards, and are consistent with the

(4)

amounts disclosed in the ‘other benefits’ in Table 10.1 of the Remuneration Report, plus accrued long service leave and reductions in such leave entitlements
and discretionary bonus payments.

Mr Morrice was appointed as an Executive Director on 1 March 2013 and will become the CEO effective 30 June 2013.

(5)

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

WHO DOES THIS REPORT COVER? (AUDITED)

This Remuneration Report, which comprises sections 3 to 12 inclusive, is prepared in accordance with the statutory
requirements (section 300A) of the Corporations Act 2001. The information set out in sections 3 to 12 of this remuneration
report has been audited in accordance with section 308(3C) of the Corporations Act 2001 and accounting standards.

The report sets out the remuneration details for the Non-Executive Directors, the CEO and the group executives of Metcash,
who together have the authority and responsibility for planning, directing and controlling the activities of the Group. For the
purposes of this report, the CEO and the group executives are referred to as the KMP.

Non-Executive Directors(1)

Name
Peter Barnes

Patrick Allaway

Fiona Balfour

Michael Butler

Neil Hamilton

Edwin Jankelowitz

Position
Chairman

Director – appointed 7 November 2012

Director

Richard Longes

Director – retired 30 August 2012

Ian Morrice

Director – 12 June 2012 to 28 February 2013

Dudley Rubin
(cid:3) All non-executive directors held their current positions for the entire 2013 financial year unless otherwise stated.

Director

(cid:894)(cid:1005)(cid:895)

KMP

Name
Andrew Reitzer

Position
Chief Executive Officer & Director

Period KMP
The whole year

Ian Morrice

Executive Director

1 March 2013 to 30 April 2013

Adrian Gratwicke

Chief Financial Officer

The whole year

Silvestro Morabito Chief Operating Officer, Food & Grocery

The whole year

Fergus Collins

Chief Executive Officer, ALM

Mark Laidlaw

Chief Executive Officer, Hardware

The whole year

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

HOW REMUNERATION DECISIONS ARE MADE (AUDITED)

The diagram below illustrates how decisions are made with respect to remuneration of KMP and non-executive directors.

BOARD

Maintains overall responsibility and accountability for oversight of Metcash’s remuneration policy and practices.

Approves, having regard to recommendations of the Remuneration Committee:

•
•

•

the CEO’s remuneration package;
the remuneration and terms of any incentives for any Executive Directors, the Company Secretary and all
other direct reports of the CEO, at least annually; and
the remuneration of Non Executive Directors.

REMUNERATION AND OTHER EXTERNAL
CONSULTANTS

Supports the Remuneration Committee by
providing independent:

•

advice on remuneration quantum and
structure;
benchmarking data and market
practice information about other listed
companies; and
advice regarding legal and regulatory
issues that impact on remuneration
arrangements.

REMUNERATION COMMITTEE

Primarily responsible:

•

reviewing and advising the Board
annually on the remuneration and
components of remuneration for the
CEO and his direct reports;
reviewing and making
recommendations to the Board
regarding the design of all executive
incentive plans and the total proposed
payments from each executive
incentive plan; and
reviewing and recommending to the
Board the level of remuneration for Non
Executive Directors

In performing its role, the Board and Remuneration Committee directly commission and receive information, advice and
recommendations from independent external advisers. In 2012 the Board reviewed the process for engaging and seeking
advice from external advisers and adopted a protocol setting out the process for receiving remuneration recommendations in
relation to KMP which, among other things, is designed to ensure that the recommendations made are free from undue
influence by management. One of the key outcomes of this review was that the Chairman of the Remuneration Committee
appoints and engages directly with remuneration consultants in relation to KMP remuneration matters.

During the 2013 financial year, the Remuneration Committee employed the services of PricewaterhouseCoopers (‘PwC’)
under the Board approved protocol to review and provide recommendations on the appropriateness of the incoming Group
CEO (Mr Morrice) remuneration structure and levels.

Amounts paid to PricewaterhouseCoopers during FY2013 are detailed below:

Remuneration
consultant

Appointed
by

Nature of work

Pricewaterhouse
Coopers

Remuneration
Committee

Review of incoming Group CEO (Mr
Morrice) remuneration structure and
levels.

Fees paid

$8,000

The Board is satisfied that the remuneration recommendations made by PwC were made free from any undue influence. In
addition to the internal protocols referred to above PwC provided a formal declaration confirming that the recommendation
was made free from ‘undue influence’ by the members of the KMP to whom the recommendation related. The Remuneration
Committee engaged Herbert Smith Freehills to provide independent governance and legal advice in relation to senior
executive remuneration matters.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

KMP REMUNERATION (AUDITED)

Policy and Approach

The Board is committed to developing and maintaining a remuneration framework that attracts and retains quality executives
and aligns the interests of the members of the KMP with shareholder interests by rewarding high performance that results in
increased shareholder value. The particular principles that guide the Remuneration Committee when they set KMP
remuneration are listed below.

• Attract and retain talent - Metcash operates in the highly competitive food, liquor, hardware and automotive industries.

Remuneration packages are structured to ensure that they remain market competitive and take into account the
individual’s role and performance. Fixed salaries are determined, in part, by reference to benchmarking data relating to
companies in the ASX Top 51-100. In addition, business specific criteria are considered. The ‘at risk’ components of
remuneration (featuring short and long term elements) are designed to motivate individual and group performance. The
fixed and variable ‘at risk’ remuneration in aggregate is designed to be competitive in the market place and align with
shareholder outcomes.

• Link remuneration to performance - A proportion of KMP remuneration is ‘at risk’, which means that it is only delivered if

certain performance conditions are met. KMP are prohibited by law from hedging their ‘at risk’ remuneration. ‘At risk’
includes both short and long term outcomes to meet market best practice.

• Align remuneration to creation of shareholder value - KMP receive fixed remuneration and short and long term ‘at risk’
incentives designed to motivate and help achieve superior business and financial performance, benefitting shareholders.
Both short and long term KPI’s are designed to provide appropriate alignment between management and shareholders.

• Metcash’s current Key Performance Indicators (KPI’s)

Short term incentive

Metcash’s short term incentive plan is designed to reward executives for delivering on pre-determined revenue and
underlying profit before tax targets. The performance conditions are set at the beginning of each financial year and are
designed to drive successful and sustainable financial and business outcomes which are set with reference to Board
approved objectives, plans and budgets. The CEO and CFO short term incentives are determined with reference to Group
revenue and underlying profit before tax and business pillar CEO’s with reference to Group and pillar revenue and
underlying profit before tax. If the targets are met, 75% of the reward is payable immediately in cash and the remaining
25% is deferred and released as equity, conditional upon subsequent employment. Performance criteria are disclosed in
section 6 of the remuneration report.

If the minimum growth targets are not met, no STI is payable.

The CEO may award discretionary bonus payments to Executives outside the STI scheme where circumstances warrant
such a payment.

Long term incentive

The Company’s LTI plan is the Metcash Performance Rights Plan (‘Rights Plan’). All Performance Rights granted by the
Company are subject to performance hurdles. These hurdles have attached objectives that must be satisfied on a
prolonged basis (usually 3 years) and which directly improve Company value.

The Board considers underlying earnings per share (EPS) to be the most appropriate reflection of the underlying ongoing
profitability of the Company. There is genuine scope for individual executive performance to impact EPS outcomes and so
the Board considers EPS to be a more effective hurdle for its LTI program than largely market-based hurdles such as
relative TSR, which can vary due to external factors such as market sentiment (which do not necessarily reflect Company
or executive performance). In 2012 the Board conducted a review of remuneration and obtained independent advice in
relation to the correlation between shareholder return and remuneration and concluded that underlying earnings per share
remains the best measure of alignment between LTI and shareholder returns. Therefore, the Board has chosen the
measures it believes best meet shareholder alignment.

The Board sets and reviews the Rights Plan EPS hurdle rates annually. The underlying earnings per share targets for each
new grant are based on factors including the Company’s strategic objectives and business plans, financial performance,
state of the industry/market and other operational measures.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

KMP REMUNERATION (AUDITED) (Continued)

The FY2013 plan hurdles were set at between 4% (‘lower bound hurdle rate’) and 7% (‘upper bound hurdle rate’)
compound underlying EPS growth, both adjusted up or down for the effects of actual year-on-year inflation/deflation, over
a three year vesting period as follows:

• Achieving an underlying EPS growth rate equivalent to the lower bound hurdle rate results in 0% vesting.
• Achieving an underlying EPS growth rate equivalent to the upper bound hurdle rate results in 100% vesting.

Pro-rata vesting occurs for EPS growth between the lower and upper bound hurdle rates. Any LTIs that do not vest are
forfeited.

The FY2012 and FY2011 plan hurdles, which are not adjusted for the effects of inflation/deflation, were set at between 5%
and 10% compound underlying EPS growth over a three year vesting period as follows:

•
•

Achieving 5% underlying EPS growth results in 50% vesting.
Achieving 10% underlying EPS growth results in 100% vesting.

Pro-rata vesting occurs for EPS growth over 5% and under 10%. Any LTIs that do not vest are forfeited.

Determination of underlying earnings

Company value improvement is expressed as an increase in revenue, underlying profit before tax and underlying earnings
per share. To provide an accurate and consistent basis of measuring this growth in value, a calculation is used to
determine underlying earnings per share. This reflects reported earnings per share from continuing operations excluding
amortisation of customer relationships and significant items (whether positive or negative). In determining underlying
earnings, the Board takes into account material impacts on earnings arising from significant items. Having regard to STI,
the impacts from these items are taken into account when determining the STI grids. Having regard to LTI, adjustments, as
considered appropriate, are made to the calculation to account for these impacts. A reconciliation of underlying earnings to
net profit is presented in the review and results of operations in the Directors’ Report.

In addition to these core principles, the Board is committed to promoting transparency around its remuneration arrangements
and to providing shareholders and other stakeholders with clear, complete and concise information about Metcash’s
remuneration structures.

Remuneration Framework - key aspects of KMP Remuneration

Fixed Remuneration

What is included in
fixed remuneration?

Fixed remuneration comprises fixed salary, statutory superannuation benefits and any
additional benefits that form part of the arrangement including motor vehicle lease and salary
sacrifice superannuation contributions.

How is fixed
remuneration set?

Fixed remuneration is determined based on the scope and nature of an individual’s role,
qualifications, performance and experience. Market data, including in relation to the ASX 51-
100 and the Company’s peers, is used to benchmark salary levels. Metcash’s policy is to
position fixed remuneration at the 65th percentile of the ASX 100. Remuneration levels need to
be competitive with those of Metcash’s competitors (including much larger businesses such as
Woolworths and Wesfarmers) so that the Company can attract and retain quality people.

How and when is
fixed remuneration
reviewed?

The Remuneration Committee reviews KMP remuneration each year, based on market trends
and individual performance, and recommends any adjustments to the Board. All adjustments
must be approved by the Board.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

KMP REMUNERATION (AUDITED) (Continued)

Short Term Incentive (STI)

What is the STI
program?

What are the KPIs

STI is an ‘at risk’ component of KMP remuneration which gives KMP the opportunity to receive
a reward, dependent on performance against set key performance indicators (KPIs). If these
KPIs are met, 75% of the STI reward amount is payable immediately in cash and the remaining
25% is deferred for 15 months and released through the issue of Metcash shares, conditional
upon the Executive being employed by the Company on 15 April of the year subsequent to the
performance year.
The STI program and the KPIs set under it are intended to motivate and reward high
performance and link performance and reward.
All STIs are structured to encourage the relevant individual to exceed annual revenue and profit
targets.

KPIs are tailored for individual members of the KMP depending on their role and sphere of
influence, but are all financial in nature and based on a combination of group and/or divisional
measures (primarily revenue and underlying profit measures).
The Board believes that financial targets are appropriate because they align with key drivers of
the business and are objectively measurable.

What is the maximum
potential STI level?

KMPs are eligible to receive an STI reward of up to a maximum of 100% of total fixed
remuneration, depending on their performance against KPIs.

Long Term Incentive (LTI)

What is the LTI
program?

LTI is an equity-based ‘at risk’ component of KMP remuneration tied to the Company’s longer
term performance.
Metcash operates a Performance Rights Plan introduced in June 2010. Participation in the
Performance Rights Plan gives members of the KMP an opportunity to acquire shares in the
Company if they achieve outcomes linked to the creation of long term sustainable growth for
shareholders over a performance period of at least three years. Additionally, legacy equity
programs remain open that include option and cash based incentives.
Full details are provided in Sections 7 and 8.

Why was the LTI
program adopted?

The LTI program encourages members of the KMP to focus on long term Company
performance and the achievement of sustainable growth. It provides KMPs with the
opportunity to receive equity based rewards and thereby aligns their interests with
shareholder’s interests and encourages them to take a shareholder’s perspective.

What are the
performance
hurdles?

The Board believes earnings per share growth is the most appropriate measure of value
creation and considers “underlying” earnings per share to be the most accurate and consistent
basis of measuring this growth in value.
“Underlying” EPS represents reported earnings per share from continuing operations excluding
amortisation of customer relationships and significant items which best reflects the underlying
ongoing profitability of the Company. In determining underlying EPS, both positive and negative
significant items are excluded. A reconciliation of underlying earnings to net profit is presented
in the review and results of operations in the Directors’ Report.
The performance rights issued in FY2013 include an adjustment to EPS performance hurdles
for the effects of actual year-on-year inflation/deflation.

What happens to LTIs
when an executive
ceases employment?

When a KMP ceases to be an employee of Metcash their unvested LTIs will lapse, except in
instances of death and disability or special circumstances as determined by the Board.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT

T 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

KMP REMUNERATION (AUDI

ITED) (Continued)

Proportion of fixed and ‘at risk’ remunera

ation

The relative proportions of KMP’s total remu

uneration granted during FY2013 are set below:

Table 5.1 Proportion of fixed and ‘at risk’ remu

uneration

% of To

otal Maximum Remuneration (annualised)
‘At risk’ – performance-
based(1)

emuneration

Fixed Re

Andrew Reitzer(2)
Ian Morrice(3)

Other KMP

STI

LTI

50%

36%

41%

50%

36%

41%

28%

18%

(1)

These amounts are based on the KMP’s maximum
by the closing share price on grant date. This assu
grants made in prior financial years.

STI and LTI opportunities. LTI value is calculated by multiplying the share
mes the performance conditions detailed in section 7 are met. The LTI doe

performance right on grant date
es not include any value for

(2)

There were no ‘at risk’ LTI grants made to the CEO
reward of $5 million. The performance period for thi
underlying earnings per share performance hurdle.
(refer section 8 for full details of the grant).

O in the current year. Mr Reitzer was eligible for a three year cash based LT
is grant commenced on 1 May 2010 and concluded on 30 April 2013. This
The performance hurdles were not met and no amount was payable to Mr

TI with a potential maximum
s grant was subject to a growth in
r Reitzer in relation to this grant

(3)

This represents Mr Morrice’s remuneration structure

e for FY2014.

Together, the STI and LTI components com
amount of KMP remuneration is tied to the s

mprise a significant proportion of total remuneration, which
e.
success of Metcash and the creation of shareholder value

means that a significant

Graph: Proportion of fixed and ‘at risk’ remun

neration

(cid:62)(cid:100)(cid:47)
(cid:1004)(cid:1081)

(cid:94)(cid:100)(cid:47)
(cid:1009)(cid:1004)(cid:1081)

(cid:62)(cid:100)(cid:47)
(cid:1006)(cid:1012)(cid:1081)

(cid:38)(cid:4)(cid:90)
(cid:1007)(cid:1010)(cid:1081)

(cid:38)(cid:4)(cid:90)
(cid:1009)(cid:1004)(cid:1081)

(cid:94)(cid:100)(cid:47)
(cid:1007)(cid:1010)(cid:1081)

(cid:38)(cid:4)(cid:90)
(cid:1008)(cid:1005)(cid:1081)

(cid:100)(cid:47)
(cid:62)(cid:100)
(cid:1012)(cid:1081)
(cid:1005)(cid:1012)

(cid:94)(cid:100)(cid:47)
(cid:1081)
(cid:1008)(cid:1005)(cid:1081)

A Reitzer
FY2013

I Morrice
FY2014

KMP
FY2013

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

KMP REMUNERATION (AUDITED) (Continued)

Company performance and remuneration

A snapshot of Metcash’s performance as measured by a range of financial and other indicators is outlined in the table below.

Table 5.2 – 5 year performance against key annual performance metrics

r
a
e
Y

l
a
i
c
n
a
n
F

Share Performance

Earnings Performance

Liquidity

Closing
share
price ($)

Dividend
p/share
(c/share)

Underlying
EPS
(c/share)

Reported
EPS
(c/share)

Underlying
EBITA ($’m)

Reported
NPAT
($’m)

Cash flow
from
Operations
($’m)

Gearing
(Debt/(Debt
+Equity)

2012/13

2011/12

2010/11

2009/10

2008/09

4.10

3.98

4.08

4.15

4.12

28.0

27.0

26.0

24.0

32.6

34.1

33.4

32.0

29.5

24.0

11.7

31.5

29.7

26.5

460.4

451.2

438.0

401.2

371.3

206.0

90.0

241.4

227.6

202.5

299.8

284.3

142.5

294.7

248.1

33.3%

42.6%

36.7%

35.5%

33.5%

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

DETERMINING STI OUTCOMES (AUDITED)

The STI program focuses behaviour towards achieving superior Company and business unit performance, which deliver better
results to shareholders. Key Performance Indicators are established and measured at different levels throughout the
business:

• Group level - applies to most KMP
• Business level - applies to the KMP from each business pillar

After the end of each financial year, KMP performance is assessed against their individual KPIs to determine the amount of
STI to be awarded. If these KPI are met, 75% of the STI reward amount is paid in July of each year after the release of the
audited accounts. The remaining 25% is deferred for 15 months and released through the issue of Metcash ordinary shares,
conditional upon the Executive being employed by the Company on 15 April of the year subsequent to the performance year.
Any STI not achieved is forfeited. The tables below set out the outcome of the assessment process for the CEO and other
members of the KMP for 2013.

Table 6.1 STI vesting for CEO

KPI

Group Revenue and underlying PBT

($)
2,060,000

80%

Cash Payable
($)
1,648,000

Deferred
Equity
($)
-(1)

($)
412,000

(1) The CEO STI reward is payable in cash, with no deferred component, due to the retirement of the CEO.

Maximum STI

Vested

STI achieved

STI forfeited

Table 6.2 STI vesting other KMP

Maximum STI

Vested

STI achieved

STI forfeited

75% Cash
Payable(1)
($)

25% Deferred
Equity(2)
($)

($)

80%

484,104

806,840

KPI
I Morrice (Executive Director) (3)
Group Revenue and underlying PBT
A Gratwicke (CFO)
Group Revenue and underlying PBT
S Morabito (COO, Food & Grocery)
Group Revenue and underlying PBT
Sales and EBIT for Food & Grocery
F Collins (CEO, ALM)
Group Revenue and underlying PBT
Sales and EBIT for ALM
M Laidlaw (CEO, Hardware)
Group Revenue and underlying PBT
Sales and EBIT for Mitre 10
75% of STI reward amount payable in cash in July 2013
25% of STI reward amount deferred and released through the issue of Metcash ordinary shares, conditional upon the Executive being employed by the

(1)
(2)
Company on 15 April 2014. The number of shares to be issued will be calculated by dividing the 25% STI reward dollar value by the Metcash VWAP for the five
days ending on 31 July 2013. The shares will be issued by 30 April 2014, but will be restricted from trading until 31 July 2014.
(3)
in the FY2013 STI scheme.

Mr Morrice was appointed as an Executive Director on 1 March 2013 and will become the CEO effective 30 June 2013. Mr Morrice is not entitled to participate

325,000
325,000

195,000
130,000

540,750
540,750

350,000
350,000

210,000
262,500

324,450
162,225

108,150
54,075

65,000
43,333

70,000
87,500

70,000
-

108,150
324,450

65,000
151,667

80%
100%

80%
53%

80%
40%

161,368

The following two financial KPIs are used to assess performance for most members of the KMP:

• Group underlying profit before tax (PBT)

• Group revenue from continuing operations - as disclosed in the Statement of Comprehensive Income.

These two KPIs are used because they are clear, objective and regularly reported indicators of the performance of Metcash
and its different businesses, warehouses and stores. The KPIs for the KMP from each business pillar also include targets
linked to the financial performance of their particular business unit, to drive them to strive towards achieving better than target
performance in their areas of direct responsibility.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

DETERMINING STI OUTCOMES (AUDITED) (Continued)

For FY2013, the potential (or maximum) STI payable was typically set at a stretch above target revenue and earnings levels.
Target revenue and earnings were set at a level consistent with guidance provided to the market for FY2013. This stretch
target was largely achieved at Group level during FY2013 and this resulted in the payment of STI rewards at the 80% level.
The Food & Grocery, Mitre 10 and ALM business pillar results were reflected in actual STI rewards closer to their individual
stretch targets.

LONG TERM INCENTIVE (AUDITED)

Objective

The objectives of the LTI program are to ensure the Company is able to attract and retain its key group executives, whilst
incentivising these executives to achieve challenging financial performance hurdles which will increase shareholder value.

Since 2010, the Board has operated the Metcash Performance Rights Plan (‘Rights Plan’).

Summary of Performance Rights

The table below sets out the Performance Rights granted to members of the KMP under the Rights Plan.

Table 7.1 Performance Rights granted to KMP

Participants
Andrew Reitzer

Ian Morrice(1)
Adrian Gratwicke

Silvestro Morabito

Fergus Collins

Mark Laidlaw

Grant
date
Dec 2012
Dec 2011
Dec 2010
-
Dec 2012
Dec 2011
Dec 2010
Dec 2012
Dec 2011
Dec 2010
Dec 2012
Dec 2011
Dec 2010
Dec 2012
Dec 2011
Dec 2010

Vesting
date
7-Sep-15
30-Jun-14
30-Jun-13
-
7-Sep-15
30-Jun-14
30-Jun-13
7-Sep-15
30-Jun-14
30-Jun-13
7-Sep-15
30-Jun-14
30-Jun-13
7-Sep-15
30-Jun-14
30-Jun-13

Number of
rights
granted
-
-
-
-
100,841
73,204
59,770
135,169
72,516
70,171
87,488
55,725
53,923
81,239
46,201
49,166

Fair value
per right (at
grant date)
N/A
N/A
N/A
-
$2.30
$3.62
$3.62
$2.30
$3.62
$3.62
$2.30
$3.62
$3.62
$2.30
$3.62
$3.62

Vested in
FY2013

Forfeited in
FY2013

N/A
N/A
N/A
-
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%

N/A
N/A
N/A
-
0.0%
0.0%
100.0%(2)
0.0%
0.0%
100.0%(2)
0.0%
0.0%
100.0%(2)
0.0%
0.0%
100.0%(2)

Mr Morrice was appointed as an Executive Director on 1 March 2013 and will become the CEO effective 30 June 2013. Mr Morrice is not entitled to participate

The December 2010 Performance Rights did not achieve the minimum underlying EPS performance hurdle. Accordingly, these Performance Rights will be

(1)
in the FY2013 LTI scheme.
(2)
forfeited on 30 June 2013.

The Rights Plan

Performance Rights (granted under the Rights Plan) replaced share options as the Company’s long term incentive vehicle
from 30 June 2010. Further details of Performance Rights are provided in Note 25 to the financial statements.

The key terms of the Rights Plan include:

• Each Performance Right is an entitlement to receive a fully paid ordinary share in the Company on terms and

conditions determined by the Board, including vesting conditions linked to service and performance over a 3 year
period;

• Performance Rights are offered at no cost to participants; and
• Performance Rights do not carry voting or dividend rights, however shares allocated upon vesting of Performance

Rights will carry the same rights as other ordinary shares.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

LONG TERM INCENTIVES – LEGACY PLANS (AUDITED)

May 2010 Cash LTI

In May 2010 a three year retention incentive was granted to Mr Reitzer (Group CEO). The performance period for this grant
commenced on 1 May 2010 and concluded on 30 April 2013. This grant is subject to a growth in underlying earnings per
share performance hurdle and tested at the end of the performance period.

A minimum payment of $3 million was payable for the achievement of a 5% annual compounded growth in underlying
earnings per share for the three years, based on underlying earnings for the 2010 year, and a maximum payment of $5 million
for the achievement of a 10% or better growth in compounded underlying earnings per share over that period. Pro rata
payments are to be made for achievements between 5% and 10%.

In FY2013, the minimum performance hurdle for this grant was not achieved and accordingly the plan has now concluded with
$nil payable.

May 2009 Cash LTI

A long term retention incentive of $1 million was granted in May 2009 to Mr Gratwicke (then GM Finance, now CFO). The
vesting of the long term incentive grant is subject to achievement of the performance hurdles over a five year period (a
compounding 8% increase in underlying earnings per share based on 2009 underlying earnings per share adjusted for
material changes to the number of shares issued) and only payable:

•

on successful achievement of the performance hurdles described above in 2014 and;

if the Executive is still employed by the Company at that time and a member of the Metcash Executive Team.

If the compound annual growth achieved by the Company from the base year is;

•

equal to or greater than the target, then the maximum amount ($1 million) will be paid;

less than 40% of the target at the end of the five year period, no payment will be made or;

greater than or equal to 40% of the target, then the amount paid will be increased to the maximum amount on a pro
rata basis.

Prior to this grant Mr Gratwicke was not invited to participate in any cash based LTI plan. This incentive was provided in 2009
to ensure his equitable treatment in relation to other members of the Executive Team and to ensure effective retention
arrangements were in place.

However, in recognition that Mr Gratwicke has the opportunity to earn benefits from the options issued to him in 2008 (see
discussion under “Options” section below), and as these benefits are not available to the other members of the Executive
Team, in the event he exercises any of his options during the period up to 30 April 2014, the amount which would otherwise
have been payable to him under this 2009 LTI grant will be reduced by an amount equal to the pre-tax profits in respect of
exercising the options.

In this case, pre-tax profit is calculated using the number of options exercised and the difference between the market price of
the options on the day of exercise and the price at which the options were issued. It should be noted that options not
exercised by 7 February 2014 will be cancelled. Therefore, the maximum amount payable to Mr Gratwicke under the retention
plan will be $1 million less any applicable pre-tax profit earned from exercising the 2008 options.

February 2008 Options

Options were issued in February 2008 to Mr Gratwicke (then GM Finance, now CFO) but were not offered to Executive
Directors and other members of the Executive Team. A performance hurdle applies to these options, the hurdle being a
compounding 8% increase in underlying earnings per share based on underlying earnings per share for the 2007 financial
year, which must be achieved in the financial year prior to the financial year in which a tranche of options becomes able to be
exercised.

Before these options are exercised, agreement is obtained from the Remuneration Committee which verifies that the hurdle
has been achieved with confirmation from the Company’s external auditor. The final 20% tranche of these options met the
performance hurdle during FY2013, such that 100% of all options issued have now vested. In total, 500,000 options have
been issued to Mr Gratwicke with an exercise price of $4.27 per share, and which lapse on 7 February 2014.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

LONG TERM INCENTIVES – LEGACY PLANS (AUDITED) (Continued)

Table 8.1 Legacy LTI Table

Name

A Reitzer

A Gratwicke

S Morabito

M Laidlaw

Grant
Date

May-10

May-09

Feb-08

Type

LTI -
Cash
LTI -
Cash
LTI -
Options
LTI -
Options
LTI -
Options

Number
of
Options
granted

Fair
value
per
Option

Maximum
Cash
Payment

Vested
in
FY2013

Forfeited
in
FY2013

Vesting dates

1 May 2010 to 30 April 2013

N/A

1 May 2009 to 30 April 2014

N/A

$5,000,000

$1,000,000

7 Feb 2008 to 7 Feb 2013

500,000

$0.88

7 Feb 2008 to 7 Feb 2013

350,000

$0.88

7 Feb 2008 to 7 Feb 2013

350,000

$0.88

N/A

20%

100%

As at 30 April 2013 and at the date of this report, Mr Morrice and Mr Collins do not hold any outstanding LTI Options and do
not participate in any LTI Cash schemes.

SUMMARY OF SERVICE AGREEMENTS (AUDITED)

The remuneration and other terms of employment for KMP are formalised in service agreements. The material terms of the
KMP’s service agreements are set out below.

Table 9.1 Service Agreements

Name
A Reitzer(1)
I Morrice(2)
A Gratwicke

S Morabito

F Collins

M Laidlaw

Agreement Term
Ongoing unless notice given(1)
Ongoing unless notice given

Ongoing unless notice given

Executive
Notice

Metcash
Notice

Redundancy

3 months

6 months

3 months

15 months

Metcash Notice + 9 months

12 months

9 months

Metcash Notice + 6months

New service contracts entered into post the introduction of the new termination benefits legislation in 2009 contain similar elements to other executives’
service contracts and any termination benefits provided under contracts that are subject to the new law will comply with the new twelve months of base salary
cap.

(1) Mr Reitzer’s contract has not been amended since the new federal legislation relating to termination benefits was introduced in November 2009. On 27

September 2012 the Company announced the intended retirement of Mr Reitzer. Mr Reitzer will step down as the CEO effective 30 June 2013 and will cease
employment with Metcash on 30 September 2013.

(2) Mr Morrice was appointed as an Executive Director on 1 March 2013 and will become the CEO effective 30 June 2013.
(3) Executives who resign or whose employment is terminated for cause and whose short term or long term incentives are unvested at the time, forfeit their

entitlements to those unvested incentives. Executives who are retrenched or who retire from full time work before vesting of short or long term incentives or
who die whilst employed by the Company, may be allowed (or their Estate may be allowed) to keep all or part of those unvested incentives, at the discretion
of the Board.

(4) In some circumstances surrounding termination of employment, the Company may require individuals to enter into non-compete arrangements with the

Company, to protect the Company's rights. These non-compete arrangements may require a payment to the individual in consideration of these
arrangements.

Metcash Annual Report 2013

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Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

10.

REMUNERATION TABLES (AUDITED) (Continued)

Name

Non Executive Director

E Jankelowitz

Chief Executive Officer
A Reitzer

Executives
I Morrice
A Gratwicke
S Morabito
F Collins
M Laidlaw

Value of Options exercised during
the year

Value of Options lapsed during the
year

2013
$

-
-
-
-
-

2012
$

-
949
3,491
4,745
-

2013
$

-
-
-
-
-

2012
$

13,858

102,336

-
-
-
-
9,745

11.

DIRECTORS AND KEY MANAGEMENT PERSONNEL SHARE AND OPTION HOLDINGS (AUDITED)

For details of shares, performance rights and share options held by KMP, refer to Note 26 in the annual financial statements.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

12.

NON-EXECUTIVE DIRECTORS (AUDITED)

Policy

The objectives of Metcash’s policy regarding fees for non-executive directors are to:

• Safeguard independence - To preserve the independence of non-executive directors, fees do not include any

performance-related element; and

• Be market competitive - Fees are set at a level competitive with non-executive directors in the ASX 100 and take

into account the time commitment of overseeing the large and diverse business of the Metcash Group.

To align individual interests with shareholders’ interests, non-executive directors are encouraged to hold Metcash shares.

Non-executive directors fund their own share purchases. All non-executive directors must comply with Metcash’s share trading
policy.

Review of levels of remuneration

Non-executive directors’ remuneration is within an aggregate limit determined, from time to time, by members at a general
meeting. The current limit of $1,600,000 was agreed by members at the Annual General Meeting held on 30 August 2012.

The Remuneration Committee has responsibility for reviewing and recommending the level of remuneration for non-executive
directors. External professional advice is sought before any changes are made to the amount paid to non-executive directors
within the overall maximum amount approved by shareholders.

Structure

Non-executive director remuneration, except for certain legacy entitlements as detailed below, is structured as follows:

• All non-executive directors are paid an annual fixed fee;
• Non-executive directors also performing chairperson or committee duties are paid an additional fixed fee for each

role;

• Non-executive directors are not entitled to participate in any of the Group’s short or long term incentive schemes; and
• No additional benefits are paid to non-executive directors upon retirement from office

Current per annum fixed fee structure

The current per annum fee structure is set out in the following table. These fee levels are within the aggregate limit approved
by members and took effect from the 30 August 2012 Annual General Meeting.

Table 12.1 Non Executive Director Fee Structure

Name
P Barnes
N Hamilton
M Butler1
P Allaway
F Balfour
E Jankelowitz
I Morrice2
D Rubin

Base Fee
$

Chair Fee
$

118,450
118,450
118,450
118,450
118,450
118,450
118,450
118,450

172,500
28,840
28,840
-
-
-
-
-

Committee
Fee
$
11,845
-
-
11,845
11,845
-
11,845
11,845

Super-
annuation
$
16,470
13,256
13,256
11,727
11,727
10,661
11,727
11,727

Total
$

319,265
160,546
160,546
142,022
142,022
129,111
142,022
142,022

(1) Mr Butler was appointed the chairman of the audit committee on the retirement of Mr Longes on 30 August 2012.
(2) Mr Morrice was appointed as an Executive Director on 1 March 2013 and therefore ceased to be a Non Executive Director on this date.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

12.

NON-EXECUTIVE DIRECTORS (AUDITED) (Continued)

Non-Executive Directors’ Remuneration for 2013

The fees paid or payable to non-executive directors in relation to the 2013 financial year are set out in the following table. The
general increase in amounts paid reflects the full year effect of the changes made following the aggregate fee limit increase
that was approved at the 30 August 2012 Annual General Meeting and, for certain directors, changes in roles (including
appointment as a director and appointment/cessation of chairperson/committee memberships).

Table 12.2 Non-Executive Director Remuneration

Fixed
Fees1
$

Post Employment
(Superannuation)2
$

Other
$

M Butler

F Balfour

R Longes3

N Hamilton

P Allaway4

Name
P Barnes

N/A
301,070
N/A
299,000
N/A
145,017
N/A
138,000
N/A
142,175
N/A
126,500
211,619
35,750
N/A
143,000
N/A
52,315
-
-
N/A
129,346
N/A
126,500
N/A
117,587
N/A
115,000
N/A
91,465
-
-
N/A
129,346
N/A
126,500
211,619
1,144,071
N/A
1,074,500
(1) Fixed fees represent base director fees, chairperson and committee fees. Directors fees that are salary sacrificed are included in this amount.
(2) Post employment benefits comprise statutory superannuation obligations.
(3) Mr Longes retired from the Board of Directors on 30 August 2012 and was entitled to a retirement benefit as noted below.
(4) Mr Allaway was appointed as a Non-executive Director on 7 November 2012.
(5) Mr Morrice was appointed as an Executive Director on 1 March 2013 and therefore ceased to be a Non Executive Director on this date.

16,872
15,199
13,052
12,420
12,796
11,385
3,218
12,870
4,708
-
11,641
11,385
10,583
10,350
8,232
-
11,641
11,385
92,743
84,994

Total
$
317,942
314,199
158,069
150,420
154,971
137,885
38,968
155,870
57,023
-
140,987
137,885
128,170
125,350
99,697
-
140,987
137,885
1,236,814
1,159,494

Financial
Year
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012

E Jankelowitz

I Morrice5

D Rubin

Total

Legacy entitlements

Metcash previously operated a retirement benefit scheme for non-executive directors, which was discontinued at the 2005
Annual General Meeting. The benefits were in accordance with Section 8.3(g) and (h) of the Company’s Constitution and
Section 200 of the Corporations Law.

The accrued retirement benefits were frozen as at the date of the 2005 Annual General Meeting. These benefits, which are
inclusive of superannuation, are payable to the following directors in cash upon ceasing to be a director of Metcash Limited.

Retirement benefit (fixed)
P Barnes

$
211,619

On 30 August 2012, Mr Longes retired from the Board of Directors and in accordance with the above provisions, was paid a
retirement benefit of $211,619.

This concludes the remuneration report.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ REPORT
Year ended 30 April 2013

CEO AND CFO DECLARATION

The Chief Executive Officer and Chief Financial Officer declare:

(a) With regard to the integrity of the financial statements of Metcash Limited (the Company) for the financial year ended 30

April 2013, after having made appropriate inquiries, in our opinion:
(i)

The financial statements and associated notes for the consolidated entity comply with the accounting standards
and regulations as required by Section 296 of the Corporations Act 2001 and International Financial Reporting
Standards;
The financial statements and associated notes for the consolidated entity give a true and fair view of the financial
position as at 30 April 2013 and performance of the consolidated entity for the twelve months then ended as
required by Section 297 of the Corporations Act 2001;
As at the date of this declaration, there are reasonable grounds to believe that the Company will be able to pay its
debts as and when they become due and payable.

(iv) As at the date of this declaration, there are reasonable grounds to believe that the members of the Extended

Closed Group (as that term is defined in the Metcash Deed of Cross Guarantee, dated 18 April 2012), will be able
to meet any obligations or liabilities to which they are, or may become subject by virtue of the Deed of Cross
Guarantee.

(b) With regard to the financial records and systems of risk management and internal compliance and control of the

Company for the financial year ended 30 April 2013:
(i)

The financial records of the Company and each entity in the consolidated group have been properly maintained in
accordance with Section 286 of the Corporations Act 2001;
The statements made in (a) and (b)(i) above are founded on a sound system of risk management and internal
compliance and control which is operating effectively, in all material respects, in relation to financial reporting
risks;
The risk management and internal compliance and control systems of the Company relating to financial reporting,
compliance and operations objectives including material business risks are operating efficiently and effectively, in
all material respects. Management has reported to the Board as to the effectiveness of the Company’s
management of its material business risks.

(ii)

(iii)

(ii)

(iii)

(iv) Subsequent to 30 April 2013, no changes or other matters have arisen that would have a material effect on the

operation of risk management and internal control and control systems of the Company.

AUDITOR'S INDEPENDENCE DECLARATION

The auditor’s independence declaration for the year ended 30 April 2013 has been received and is included on page 130.

NON-AUDIT SERVICES

The following non-audit services were provided by the entity’s auditor, Ernst & Young. The Directors are satisfied that the
provision of non-audit services is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The nature and scope of each type of non-audit service provided means that auditor independence
was not compromised.

The amount payable to Ernst & Young should be seen in the context of the tax audit which the Company has undergone and
the significant work which has been required in responding to the Australian Taxation Office queries.
Ernst & Young received or are due to receive the following amounts for the provision of non-audit services:

Tax compliance and advisory
ATO income tax audit advice
Assurance-related
Tax acquisitions/other

Signed in accordance with a resolution of the Directors.

$ 946,493
$ 998,155
$ 37,000
$ 398,543

Andrew Reitzer
Director
Sydney, 24 June 2013

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

STATEMENT OF COMPREHENSIVE INCOME
Year ended 30 April 2013

Revenue
Cost of sales
Gross profit

Distribution costs
Administrative costs
Share of profit/(loss) of associates
Significant items
Finance costs
Profit from continuing operations before income tax
Income tax expense
Net profit for the year from continuing operations
Net loss after tax for the year from discontinued operations
Net profit for the year

Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation adjustments
Cash flow hedge adjustment
Income tax (expense)/benefit on items of other comprehensive income
Other comprehensive income for the year, net of tax
Total comprehensive income for the year

Profit for the year is attributable to:
Equity holders of the parent
Non controlling interests

Total comprehensive income for the year is attributable to:
Equity holders of the parent
Non controlling interests

NOTES

4(i)

2013

$’m

2012

$’m

13,095.0
(11,758.7)
1,336.3

12,612.3
(11,332.1)
1,280.2

12
4(vi)
4(vii)

(430.9)
(453.3)
3.4
(1.1)
(69.3)
385.1
(116.1)
269.0
(59.9)
209.1

0.3
3.6
(0.9)
3.0
212.1

206.0
3.1
209.1

209.0
3.1
212.1

(436.9)
(389.4)
0.3
(176.7)
(80.3)
197.2
(71.8)
125.4
(27.2)
98.2

1.0
(6.4)
1.9
(3.5)
94.7

90.0
8.2
98.2

86.5
8.2
94.7

15.22
15.18

Earnings per share for profit from continuing operations attributable to the ordinary equity holders of the Company:
- basic earnings per share (cents)
- diluted earnings per share (cents)

30.93
30.82

30
30

Earnings per share for profit/(loss) from discontinued operations attributable to the ordinary equity holders of the Company:
(3.53)
- basic earnings per share (cents)
(3.52)
- diluted earnings per share (cents)

(6.97)
(6.95)

30
30

Earnings per share attributable to ordinary equity holders of the Company:
- basic earnings per share (cents)
- diluted earnings per share (cents)

30
30

23.96
23.87

11.69
11.66

The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

STATEMENT OF FINANCIAL POSITION
As at 30 April 2013

ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Disposal groups and assets held for sale
Income tax receivable
Prepayments and other assets
Derivative financial instruments
Total current assets

Non-current assets
Derivative financial instruments
Trade and other receivables
Investments in associates
Other financial assets
Property, plant and equipment
Net deferred tax assets
Intangible assets and goodwill
Total non-current assets

TOTAL ASSETS

LIABILITIES
Current liabilities
Trade and other payables
Interest bearing loans and borrowings
Derivative financial instruments
Provisions
Income tax payable
Other financial liabilities
Total current liabilities

Non-current liabilities
Interest bearing loans and borrowings
Provisions
Derivative financial instruments
Other financial liabilities
Total non-current liabilities

TOTAL LIABILITIES

NET ASSETS

EQUITY
Contributed equity
Other equity
Other reserves
Retained earnings
Parent interest
Non controlling interests
TOTAL EQUITY

NOTES

2013
$’m

2012
$’m

7
8
9
31
32

10
11
12
13
14
5
15

16
17
18
19

17
19
18
20

21
21
21
21

50.3
1,012.9
753.8
47.6
24.4
5.7
0.6
1,895.3

37.7
60.4
91.3
0.3
278.5
61.8
1,708.0
2,238.0

51.5
979.4
833.6
116.5
24.4
6.5
-
2,011.9

27.8
51.3
68.3
0.2
220.7
95.5
1,551.9
2,015.7

4,133.3

4,027.6

1,335.6
57.5
0.5
137.8
18.1
1.7
1,551.2

751.4
166.6
2.7
37.2
957.9

1,369.5
17.8
0.9
147.7
24.9
0.6
1,561.4

974.0
151.4
4.3
1.4
1,131.1

2,509.1

2,692.5

1,624.2

1,335.1

2,284.9
(765.9)
(6.8)
106.7
1,618.9
5.3
1,624.2

1,914.7
(765.9)
26.0
86.3
1,261.1
74.0
1,335.1

The above Statement of Financial Position should be read in conjunction with the accompanying notes.

Metcash Annual Report 2013

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Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

STATEMENT OF CASH FLOWS
Year ended 30 April 2013

Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Dividends received
Interest received
Finance costs
Income tax paid, net of tax refunds
Goods and services tax paid
Net cash generated by operating activities

Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Purchase of property, plant and equipment
Payments for intangibles
Proceeds from sale of discontinued operations
Proceeds from sale of business assets
Payment on acquisition of businesses net of cash acquired
Costs paid on acquisition of businesses
Recovery of acquisition costs from ACCC
Payment on acquisition of associates
Proceeds from loans repaid by other entities
Loans to other entities
Net cash used in investing activities

Cash flows from financing activities:
Proceeds from the issue of ordinary shares
Share issue costs
Payment on acquisition of non controlling interest
Payment of refinancing costs
Proceeds from borrowings – other
Repayments of borrowings – other
Payment of dividends on ordinary shares
Payment of dividends to non controlling interests
Repayment of finance lease principal
Net cash used in financing activities

Net decrease in cash and cash equivalents
Add opening cash brought forward
Effect of exchange rate changes on cash
Cash and cash equivalents at the end of the year

NOTES

2013
$’m

2012
$’m

14,180.6
(13,510.7)
0.6
7.7
(58.5)
(51.3)
(268.6)
299.8

13,713.6
(12,994.5)
1.1
12.7
(76.9)
(110.3)
(261.4)
284.3

22.3
(83.7)
(49.1)
58.3
23.9
(107.4)
(2.6)
3.5
(16.6)
29.7
(57.2)
(178.9)

375.0
(6.8)
(47.9)
-
4,775.0
(4,994.5)
(243.9)
(1.8)
(7.0)
(151.9)

(31.0)
51.5
-
20.5

7.1
(75.9)
(17.9)
-
23.5
(205.5)
-
-
(1.6)
18.0
(18.3)
(270.6)

9.8
-
-
(3.4)
3,973.1
(3,872.3)
(211.7)
(1.8)
(9.2)
(115.5)

(101.8)
152.9
0.4
51.5

29(a)

21
21
21(b)

The above Statement of Cash Flows should be read in conjunction with the accompanying notes.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

CORPORATE INFORMATION

The financial statements of Metcash Limited (the Company) and its controlled entities (the Group) for the year ended 30 April
2013 was authorised for issue in accordance with a resolution of the Directors on 24 June 2013.

Metcash Limited is a for profit company limited by ordinary shares incorporated in Australia whose shares are publicly traded
on the Australian Securities Exchange. The nature of the operations and principal activities of the Group are described in the
Directors’ Report.

(i)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF ACCOUNTING

The financial statements are a general purpose financial report that has been prepared in accordance with the requirements of
the Corporations Act 2001 and Australian Accounting Standards and other authoritative pronouncements of the Australian
Accounting Standards Board.

The financial statements have been prepared using the historical cost basis except for derivative financial instruments which
have been measured at fair value and share rights which have been valued using options pricing models.

The financial statements are presented in Australian dollars and all values are rounded to the nearest $100,000 unless
otherwise stated under the option available to the Company under ASIC Class Order 98/100. The Company is an entity to
which the Class Order applies.

The financial statements present the results of the current year, which comprised the 52 week period that commenced on 30
April 2012 and ended on 28 April 2013. The prior year results comprise a 52 week period that commenced on 2 May 2011 and
ended on 29 April 2012.

(ii)

STATEMENT OF COMPLIANCE

The financial statements comply with Australian Accounting Standards. The financial statements also comply with
International Financial Reporting Standards (IFRS).

(a)

Changes in accounting policy

(i)

The accounting policies adopted are consistent with those of the previous financial year.

(ii)

The Group has adopted all new and amended Australian Accounting Standards and AASB Interpretations that became
applicable during the current financial year. The adoption of these Standards and Interpretations has not had a material
effect on any of the amounts recognised in the current year or any prior year and are not likely to have a material effect
on future reporting periods.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

(b)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Australian Accounting Standards issued but not yet effective/Early adoption of Australian Accounting
Standards

A number of new accounting standards have been issued but were not effective during the year ended 30 April 2013. The Group
has elected not to early adopt any of these new standards or amendments in these financial statements.

AASB 10 Consolidated Financial Statements (applicable to the Group from the financial year ending 30 April 2014) broadens the
situations where an entity is likely to be considered to control another entity and includes new guidance for determining control of
an entity. Based on investments held by the Group at 30 April 2013, the Standard is not expected to have a significant impact on
the entities that are currently consolidated or equity accounted in the year of initial application.

AASB 11 Joint Arrangements (applicable to the Group from the financial year ending 30 April 2014) uses the principle of control
in AASB 10 to define joint control and removes the option to choose to account for jointly controlled entities using the
proportionate consolidation method or the equity method. This Standard is not expected to have a significant impact on the
Group’s financial results and balance sheet in the year of initial application as the Group will continue to equity account for
investments in associates and joint ventures.

AASB 12 Disclosure of Interests in Other Entities (applicable to the Group from the financial year ending 30 April 2014)
introduces new disclosures about judgements made by management in determining whether control exists, and requires
summarised information about joint arrangements, associates, structured entities and subsidiaries with external non-
controlling interests. Based on investments held by the Group at 30 April 2013, this standard is not expected to have any
impact on the Group’s financial results and balance sheet in the year of initial application.

AASB 13 Fair Value Measurement (applicable to the Group from the financial year ending 30 April 2014) establishes a single
source of guidance for determining the fair value of assets and liabilities. This Standard is not expected to have a significant
impact on the Group’s financial results and disclosures in the year of initial application.

Except for the above, the Group has yet to fully assess the impact the following accounting standards and amendments to
accounting standards will have on the financial statements, when applied in future periods:

• AASB 9: Financial Instruments;
• AASB 2011-3: Amendments to Australian Accounting Standard - Improvements to AASB 1049;
• AASB 2011-7: Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements
Standards [AASB 1, 2, 3, 5, 7, 9, 2009-11, 101, 107, 112, 118, 121, 124, 132, 133, 136, 138, 139, 1023 & 1038 and
Interpretations 5, 9, 16 & 17];

• AASB 2011-8: Amendments to Australian Accounting Standards arising from AASB 13 (September 2011) [AASB 1,2, 3,
4, 5, 7, 9, 2009-11, 2010-7, 101, 102, 108, 110, 116, 117, 118,119, 120, 121, 128, 131, 132, 133, 134, 136, 138, 139,
140, 141, 1004, 1023 & 1038 and Interpretations 2, 4, 12 13, 14, 17, 19, 131 & 132];

• AASB 119: Employee Benefits;
• AASB 2012-2: Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and

Financial Liabilities;

• AASB 2011-4: Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel

Disclosure Requirements;

• AASB 2012-3: Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities;

and

• AASB 2010-7: Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) [AASB 1, 3, 4,

5, 7, 101, 102, 108, 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023 & 1038 and Interpretations 2, 5, 10, 12,
19 & 127].

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(iii)

BASIS OF CONSOLIDATION

The financial statements comprise the consolidated financial statements of Metcash Limited and its controlled entities as at 30
April 2013.

The financial statements of controlled entities are prepared for the same reporting period as the parent entity, using consistent
accounting policies. Controlled entities are all those entities over which the Group has the power to govern the financial and
operating policies so as to obtain benefits from their activities. Controlled entities are consolidated from the date on which
control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group.
In preparing the consolidated financial statements, all intercompany balances and transactions have been eliminated in full.

Investments in controlled entities held by Metcash Limited are accounted for at cost in the separate financial statements of the
parent entity less any impairment charges. Dividends received from controlled entities are recorded as a component of other
revenues in the separate income statement of the parent entity, and do not impact the recorded cost of the investment.

The acquisition of controlled entities is accounted for using the purchase method of accounting. The purchase method of
accounting involves allocating the costs of the business combination to the fair value of the assets acquired and the liabilities
and contingent liabilities assumed at the date of acquisition. The difference between the above items and the fair value of the
consideration (including the fair value of any pre-existing investment in the acquiree) is goodwill or a discount on acquisition.

Arrangements within certain business combinations entitle the non-controlling interests to require the Group to acquire their
shareholding via exercise of a put option, subject to specific terms and conditions. Where such an arrangement is deemed to
be part of the business combination a financial liability is recognised on the acquisition date measured at the present value of
the redemption amount under the arrangement.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability will be
recognised in accordance with AASB 139 either in profit or loss or as a change to other comprehensive income.

Non-controlling interests are allocated their share of net profit after tax in the statement of comprehensive income and are
presented within equity in the statement of financial position, separately from the parent shareholders' equity.

For those controlled entities with non-coterminous year ends, management accounts for the relevant period to the Group’s
reporting date have been consolidated. In the opinion of the Directors, the expense of providing additional coterminous
statutory accounts, together with consequential delay in producing the Group’s financial statements, would outweigh any
benefit to shareholders.

(iv)

REVERSE ACQUISITION

In accordance with AASB 3 Business Combinations, in 2005 when Metcash Limited (the legal parent) acquired the Metoz
group (being Metoz Holdings Limited and its controlled entities including Metcash Trading Limited (the legal subsidiary)), the
acquisition was deemed to be a reverse acquisition. The consolidated financial statements are issued under the name of the
legal parent (Metcash Limited) but are a continuation of the financial statements of the deemed acquirer under the reverse
acquisition rules (Metcash Trading Limited).

(v)

(a)

SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

Significant accounting judgements

In the process of applying the Group’s accounting policies, the following judgements were made, apart from those involving
estimations, which have a significant effect on the amounts recognised in the financial statements:

Purchase price allocation
Determining the acquisition date fair value of assets acquired and liabilities assumed on acquisition of controlled entities. The
basis for determining the purchase price allocation is discussed in Note 29.

Contractual customer relationships
Identifying those acquired relationships with customers that meet the definition of separately identifiable intangibles that have
a finite life.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

(v)

(b)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (Continued)

Significant accounting estimates and assumptions

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future
events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of certain assets and liabilities within the next annual reporting period are:

Provision for restructuring
The Group has recognised a provision in accordance with the accounting policy described in Note 2(xxi). The Group has
made assumptions in relation to the cost of employee redundancies and the costs associated with the early exit of stores
earmarked for closure.

Provision for rental subsidy
The Group recognises provisions for rental agreements where the arrangements are estimated to be ‘onerous’ to the Group
(Refer Note 19(b)(i) for further discussion). In measuring these provisions, assumptions are made about future sales of retail
customers, future rental costs and in determining the appropriate discount rate to be used in the cash flow calculations.

Impairment of goodwill
The Group determines whether goodwill is impaired on an annual basis. This requires an estimation of the recoverable
amount of the cash generating units to which the goodwill is allocated. The assumptions used in this estimation of the
recoverable amount and the carrying amount of goodwill are discussed in Note 15.

Impairment of investment in associates
The Group assesses the recoverable amount of its investment in associates when an indicator of impairment is identified. In
assessing the recoverable amount assumptions are made about the growth prospects of the associate and in determining the
discount rate used to calculate the net present value of future cash flows when a discounted cash flow model is used. These
assumptions are discussed in Note 12.

Contractual customer relationships
The useful life of contractual customer relationships of between 5 to 25 years is based on expected future attrition rates based
on historical rates experienced.

(vi)

FOREIGN CURRENCY TRANSLATION

Translation of foreign currency transactions
Both the functional and presentation currency of Metcash Limited and its Australian subsidiaries are Australian dollars ($).
Transactions in foreign currencies are initially recorded in the functional currency at the exchange rate ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at
the reporting date. All exchange differences, other than those that arise as a result of translating foreign subsidiaries from
functional currency to presentation currency are taken to profit or loss in the financial statements.

Translation of financial statements of overseas operations
The functional currency of the overseas subsidiaries is as follows:
Tasman Liquor Company Limited is New Zealand dollars.

•
• Metoz Holdings Limited is South African rand.
• Soetensteeg 2–61 Exploitatiemaatschappij BV is euros.

As at the reporting date the results of the overseas subsidiaries are translated into the presentation currency of Metcash
Limited. Assets and liabilities are translated at the rate of exchange ruling at the reporting date whilst all elements contained
within the statement of comprehensive income are translated at the weighted average exchange rate for the year. The
exchange differences arising on the translation are taken directly to the foreign currency translation reserve.

(vii)

CASH AND CASH EQUIVALENTS

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are
readily convertible to known amounts of cash, which are subject to an insignificant risk of changes in value and have a
maturity of three months or less at the date of acquisition.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(viii)

TRADE AND OTHER RECEIVABLES

Trade receivables are recognised and carried at original invoice amount less a provision for any uncollectable debts. An
estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written
off as incurred.

Trade receivables provided as security under the Group’s securitisation facility as detailed in Note 8 are only de-recognised
when the receivable is settled by the debtor as the Group retains the significant risks and rewards associated with these
receivables until settlement is received.

(ix)

INVESTMENTS AND OTHER FINANCIAL ASSETS

All investments are initially recognised at cost, being the fair value of the consideration given. After initial recognition,
investments which are classified as held for trading or available-for-sale are measured at fair value. Gains or losses on
investments held for trading are recognised in the statement of comprehensive income.

For investments that are actively traded in organised financial markets, fair value is determined by reference to Stock
Exchange quoted market bid prices at the close of business on the relevant reporting date.

(x)

DERIVATIVE FINANCIAL INSTRUMENTS

The Group uses derivative financial instruments (including forward currency contracts and interest rate swaps) to hedge its
risks associated with foreign currency and interest rate fluctuations. Such derivative financial instruments are initially
recognised at fair value on the date at which a derivative contract is entered into and are subsequently remeasured to fair
value. The fair value of derivative contracts is determined by reference to market values for similar instruments. Derivatives
are carried as assets when their fair value is positive and as liabilities when their fair value is negative.

The fair values of forward currency contracts are calculated by reference to current forward exchange rates for contracts with
similar maturity profiles. The fair values of interest rate swaps are determined using a valuation technique based on cash flows
discounted to present value using current market interest rates.

Any gains or losses arising from changes in the fair value of derivatives, except for those that qualify as cash flow hedges, are
taken directly to profit or loss for the year.

For the purposes of hedge accounting, hedges are classified as:

•
•

fair value hedges, when they hedge the exposure to changes in the fair value of a recognised asset or liability; or
cash flow hedges, when they hedge the exposure to variability in cash flows that is attributable either to a particular
risk associated with a recognised asset or liability or to a forecast transaction.

Hedges that meet the strict criteria for hedge accounting are accounted as follows:

•

for cash flow hedges the effective portion of the gain or loss on the hedging instrument is recognised directly in
equity, while the ineffective portion is recognised in profit or loss.
for fair value hedges, the carrying amount of the hedged item is adjusted for gains and losses attributable to the risk
being hedged and the derivative is remeasured to fair value. Gains and losses from both are taken to profit or loss.

Fair value hedges
The change in the fair value of a hedging derivative is recognised in the income statement as finance costs. The change in the
fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is
also recognised in the income statement as finance costs. If the hedged item is derecognised, the unamortised fair value is
recognised immediately in profit or loss.

When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value
of the firm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss
recognised in the profit and loss.

Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognised directly in other comprehensive income in the
cash flow hedge reserve, while any ineffective portion is recognised immediately in the income statement as finance costs.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(x)

DERIVATIVE FINANCIAL INSTRUMENTS (Continued)

The Group uses forward currency contracts as hedges of its exposure to foreign currency risk in forecast transactions and firm
commitments. The ineffective portion relating to foreign currency contracts is recognised in finance costs. Refer to Note 18 for
more details.

Amounts recognised as other comprehensive income are transferred to profit or loss when the hedged transaction affects
profit or loss, such as when the hedged financial income or financial expense is recognised or when a forecast sale occurs.
When the hedged item is the cost of a non-financial asset or non-financial liability, the amounts recognised as other
comprehensive income are transferred to the initial carrying amount of the non-financial asset or liability.

If the forecast transaction or firm commitment is no longer expected to occur, the cumulative gain or loss previously
recognised in equity is transferred to the income statement. If the hedging instrument expires or is sold, terminated or
exercised without replacement or rollover, or if its designation as a hedge is revoked, any cumulative gain or loss previously
recognised in other comprehensive income remains in other comprehensive income until the forecast transaction or firm
commitment affects profit or loss.

Current versus non-current classification
Derivative instruments that are not designated as effective hedging instruments are classified as current or non-current or
separated into current and non-current portions based on an assessment of the facts and circumstances including the
underlying contracted cash flows.

Derivative instruments that are designated as, and are effective hedging instruments, are classified consistently with the
classification of the underlying hedged item. The derivative instrument is separated into a current portion and a non-current
portion only if a reliable allocation can be made.

(xi)

INVESTMENT IN ASSOCIATES

The Group’s investments in its associates are accounted for using the equity method of accounting in the financial statements.
These are the entities in which the Group has significant influence and which are neither subsidiaries nor joint ventures.

The investments in associates are carried in the statement of financial position at cost plus post-acquisition changes in the
Group’s share of net assets of the associate, less any impairment in value. Goodwill relating to an associate is included in the
carrying amount of the investment and is not amortised. The statement of comprehensive income reflects the Group’s share of
the results of operations of the associates.

Where there has been a change recognised directly in the associate’s equity, the Group recognises its share of any changes
and discloses this in the statement of changes in equity.

(xii)

INVENTORIES

Inventories are valued at the lower of cost or net realisable value. Costs incurred in bringing each product to its present
location and condition are accounted for using the standard cost method. Cost is determined by deducting from the supplier’s
invoice price any purchase incentives, allowances, discounts and net marketing income.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and
the estimated costs necessary to make the sale.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(xiii)

PROPERTY, PLANT AND EQUIPMENT

Cost
All classes of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated
impairment losses.

Depreciation
Depreciation is provided on a straight-line basis on all property, plant and equipment, other than freehold land and assets
under construction.

Major depreciation periods are:

Freehold buildings
Plant and equipment

2013
50 years
5 – 15 years

2012
50 years
5 – 15 years

De-recognition
An item of property, plant and equipment is de-recognised upon disposal or when no future economic benefits are expected to
arise from the continued use of the asset.

Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and
the carrying amount of the item) is included in the statement of comprehensive income in the period the item is de-recognised.

(xiv)

IMPAIRMENT OF ASSETS

At each reporting date, the Group assesses whether there is any indication that the value of an asset may be impaired. Where
an indicator of impairment exists, the Group makes a formal estimate of recoverable amount. Where the carrying amount of an
asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount.

Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset,
unless the asset’s value in use cannot be estimated to be close to its fair value less costs to sell and it does not generate cash
inflows that are largely independent of those from other assets or groups of assets. In this case, the recoverable amount is
determined for the cash-generating unit (CGU) to which the asset belongs. When the carrying amount of an asset or CGU
exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset.

Impairment losses are recognised in the statement of comprehensive income.

Goodwill
Goodwill is tested for impairment annually and when circumstances indicate that the carrying value may be impaired.
Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the
goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognised.
Impairment losses for goodwill are not subsequently reversed.

Trade names
Indefinite life trade name balances will be tested annually for impairment at the same time as goodwill is tested. Finite useful
life trade names are tested for impairment when an indicator of impairment is identified.

(xv)

LEASES

Leases are classified at their inception as either operating or finance leases based on the economic substance of the
agreement so as to reflect the risks and benefits incidental to ownership.

Operating leases - Group as a lessee

Operating leases are those leases where the lessor effectively retains substantially all of the risks and benefits of ownership of
the leased item. Operating lease payments are recognised as an expense on a straight-line basis.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(xv)

LEASES (Continued)

Operating leases - Group as a lessor
Leases in which the Group retains substantially all the risks and benefits of the leased asset are classified as operating
leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and
recognised as an expense over the lease term on the same basis as rental income.

Finance leases
Leases that transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item are
capitalised at the inception of the lease at the lower of fair value of the leased property or the present value of the minimum
lease payments.

Capitalised leases are disclosed as property, plant and equipment under lease. A lease liability of equal value is also
recognised.

Minimum lease payments are apportioned between finance charges and a reduction of the lease liability so as to achieve a
constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income.
Capitalised lease assets are depreciated over the shorter of the assets estimated useful life and the lease term.

The cost of improvements to or on leasehold property are capitalised, disclosed as leasehold improvements, and amortised
over the shorter of the unexpired period of the lease or the estimated useful lives of the improvements.

(xvi)

GOODWILL

Goodwill acquired in a business combination is initially measured at cost; being the excess of the cost of the business
combination over the Group’s interest in the net fair value of the acquirer's identifiable assets, liabilities and contingent
liabilities.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised.

When goodwill forms part of a group of cash generating units and an operation within that unit is disposed of, the goodwill
associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or
loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the
operation disposed of and the portion of the groups of cash-generating units retained.

(xvii)

INTANGIBLE ASSETS

Intangible assets acquired separately or in a business combination are initially measured at cost. Following initial recognition,
the cost model is applied to the class of intangible assets.

The useful lives of these intangible assets are assessed to be either finite or indefinite. Where amortisation is charged on
assets with finite lives, this expense is taken to the profit or loss on a straight-line basis.

Intangible assets (excluding software development costs) created within the business are not capitalised and expenditure is
charged against profits in the period in which the expenditure is incurred.

Intangible assets with finite useful lives are tested for impairment where an indicator of impairment exists. Useful lives are also
examined on an annual basis and adjustments, where applicable, are made on a prospective basis.

Trade names are recognised as intangible assets where a registered trade mark is acquired with attributable value. Trade
names are valued on a relief from royalty method. Trade names are considered to be indefinite life intangibles and are not
amortised, unless there is an intention to discontinue use of the name in which case it is amortised over its estimated
remaining useful life.

Contractual customer relationships are recognised as intangible assets when the criteria specified in AASB 138 Intangible
Assets have been met. Contractual customer relationships are assessed to have a finite life and are amortised over the
asset’s useful life.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(xvii)

INTANGIBLE ASSETS (Continued)

Liquor licenses and gaming licenses are valued at cost. They are considered to have an indefinite useful life. As a
consequence, no amortisation is charged. They are tested for impairment annually and whenever an indication of impairment
exists. Any impairment is recognised immediately in profit or loss.

Software development costs incurred on an individual project are carried forward when future recoverability can reasonably be
assured. Following the initial recognition of software development costs, the cost model is applied requiring the asset to be
carried at cost less any accumulated amortisation and accumulated impairment losses. Any costs carried forward are
amortised over the assets’ useful economic lives.

The carrying value of software development costs is reviewed for impairment annually when an asset is not in use or more
frequently when an indicator of impairment arises during a reporting period indicating that the carrying value may not be
recoverable.

Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in the statement of comprehensive income when the asset
is de-recognised.

The estimated useful lives of existing finite life intangible assets are as follows:
-
-
-

Customer contracts – five to twenty five years;
Software development costs – five to ten years; and
Other – ten years.

(xviii) TRADE AND OTHER PAYABLES

Trade payables and other payables are carried at amortised cost. They represent liabilities for goods and services provided to
the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future
payments in respect of the purchase of these goods and services.

(xix)

EMPLOYEE LEAVE BENEFITS

Wages, salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave, are recognised
in provisions in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be
paid when the liabilities are settled. Liabilities expected to be settled within 12 months of the reporting date are classified as
current liabilities and those expected to be settled after 12 months of the reporting date are classified as non-current liabilities.
Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or
payable.

Long service leave
The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of
expected future payments to be made in respect of services provided by employees up to the reporting date using the
projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee
departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on
national government bonds with terms to maturity that match as closely as possible, the estimated future cash outflows.

(xx)

INTEREST-BEARING LOANS AND BORROWINGS

All loans and borrowings are initially recognised at the fair value of the consideration received net of issue costs associated
with the borrowing.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the
effective interest method.

Gains and losses are recognised in profit or loss when the liabilities are de-recognised.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(xxi)

PROVISIONS

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.

Where the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the
reimbursement is recognised as a separate asset but only when the reimbursement is probable. The expense relating to any
provision is presented in the statement of comprehensive income net of any reimbursement.

If the effect of the time value of money is material, provisions are measured at the net present value of the expected future
cash outflows using a current pre-tax rate that reflects the risks specific to the liability. During each period the provision is
increased by an amount that is equal to the provision multiplied by the discount rate. This increment, including any change in
the value of the provision as a result of a change in discount rate, is treated as a finance cost in the Statement of
Comprehensive Income.

Provisions for property lease and remediation costs are raised where the economic entity is committed by the requirements of
the lease agreement. The future lease costs, net of any income from sub-leasing, are discounted to their net present value in
determining the provision.

Dividends payable are recognised when a legal or constructive obligation to pay the dividend arises, typically following
approval of the dividend at a meeting of directors.

(xxii)

SHARE-BASED PAYMENT TRANSACTIONS

The Group provides benefits to employees of the Group in the form of share-based payment transactions, whereby employees
render services in exchange for shares or rights over shares (equity-settled transactions). The Group provides benefits to
executive directors, senior executives and its employees in the form of the Metcash Executive and Senior Managers
Performance Rights Plan (Rights Plan) and the Metcash Employee Option Plan (MEOP).

The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined using an appropriate valuation model, further
details of which are given in Note 25.

In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the
price of the shares of Metcash Limited (market conditions).

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in
which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the
award (vesting date).

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the
extent to which the vesting period has expired and (ii) the number of awards that, in the opinion of the directors of the Group,
will ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for
the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of
fair value at grant date.

Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not
been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the
modification, as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not
yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and
designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a
modification of the original award, as described in the previous paragraph.

The dilutive effect, if any, of outstanding options and performance rights are reflected as additional share dilution in the
computation of earnings per share.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(xxiii) REVENUE RECOGNITION

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can
be reliably measured. The specific recognition criteria described below must also be met before revenue is recognised.

Sale of goods
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed
to the buyer, usually on acceptance of delivery of the goods.

Rendering of services
Revenue from promotional activities is recognised when the promotional activities occur.

Interest
Revenue is recognised as the interest is earned.

Dividends
Revenue is recognised when the right to receive the payment is established.

Rental income
Rental income is accounted for on a straight-line basis over the lease term. Contingent rental income is recognised as income
in the periods in which it is earned.

(xxiv) FINANCE COSTS

Finance costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial
period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other finance costs
are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection
with the borrowing of funds.

Certain provisions are measured at their discounted value. During each period the provision is increased by an amount that is
equal to the provision multiplied by the discount rate. This increment, including any change in the value of the provision as a
result of a change in discount rate, is treated as a finance cost in the Statement of Comprehensive Income.

(xxv)

INCOME TAX

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from,
or paid to the taxation authority. The tax rates and tax laws used to compute the amount are those that are enacted or
substantively enacted by the relevant reporting date.

Deferred income tax is provided on all temporary differences at the reporting date, between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences:

•

except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction
that is not a business combination and, at the time of the transaction, affects neither the accounting nor taxable profit
or loss; and

in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in
joint ventures, except where the timing of the reversal of the temporary differences can be controlled and it is
probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward unused tax assets and
unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary
differences, and the carry-forward of unused tax assets and unused tax losses can be utilised:

•

except where the deferred income tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting nor taxable profit or loss; and

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(xxv)

INCOME TAX (Continued)

•

in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in
joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences
will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can
be utilised.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset
is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the
relevant reporting date.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation
authority.

Income taxes relating to items recognised directly in equity are recognised in equity and not in the statement of
comprehensive income.

(xxvi) OTHER TAXES

Revenues, expenses and assets are recognised net of the amount of GST except:

• when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which

case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as
applicable; and

•

receivables and payables which are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in
the statement of financial position.

Cash flows related to GST are included in the statement of cash flows on a gross basis and the GST component of cash flows
arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, is classified as
an operating cash flow.

Commitments and contingencies are disclosed net of the amount of GST recoverable or payable.

(xxvii) EARNINGS PER SHARE

Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of
servicing equity (other than dividends) divided by the weighted average number of ordinary shares, adjusted for any bonus
element.

Diluted earnings per share are calculated as net profit attributable to members of the parent, adjusted for:

•

costs of servicing equity (other than dividends);

the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been
recognised as expenses; and

other non-discretionary changes in revenues or expenses during the period that would result from the dilution of
potential ordinary shares, divided by the weighted average number of ordinary shares and dilutive potential ordinary
shares, adjusted for any bonus element.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(xxviii) CONTRIBUTED EQUITY

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.

(xxix) NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair
value less costs to sell. Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be
recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only
when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. The
sale must be committed to and should be expected to qualify for recognition as a completed sale within a reasonable period of
time.

In the statement of comprehensive income, income and expenses from discontinued operations are reported separately from
income and expenses from continuing operations, down to the level of profit after taxes, even when the Group retains a non-
controlling interest in the subsidiary after the sale. Once classified as held for sale, property, plant and equipment and
intangible assets are not depreciated or amortised.

(xxx) RETAIL DEVELOPMENT ASSETS

Costs incurred in respect of a greenfields development which involves the lease or acquisition of land and subsequent
construction of a retail store or shopping centre are capitalised as assets under construction and included in property, plant
and equipment. On conclusion of the development the capitalised costs are transferred to non-current assets held for sale
provided they meet the criteria detailed in Note 2(xxix).

Costs incurred in respect of the acquisition of an existing retail store or shopping centre are capitalised as non-current assets
held for sale provided they meet the recognition criteria in Note 2(xxix). Any costs subsequent to acquisition required to
refurbish the site are capitalised as assets under construction during the refurbishment phase. Once the refurbishment is
completed the acquisition costs and refurbishment costs are transferred either to property, plant and equipment or to assets
held for sale.

(xxxi) FINANCIAL GUARANTEE CONTRACTS

Financial guarantee contracts issued by the Group are those contracts that require a payment to be made to reimburse the
holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a
debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs
that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the best
estimate of the expenditure required to settle the present obligation at the reporting date and the amount recognised less
cumulative amortisation.

(xxxii) COMPARATIVE INFORMATION

Certain comparative information was amended in these financial statements to conform to the current year presentation.
These amendments do not impact the Group’s financial results and do not have any significant impact on the Group’s balance
sheet.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

SEGMENT INFORMATION

Identification of reportable segments

The Group has identified its operating segments based on the internal reports that are reviewed and used by the CEO (the
chief operating decision maker) in assessing performance and in determining the allocation of resources.

The operating segments are identified based on the differences in the products and services provided. Discrete financial
information about each of these operating segments is reported to the CEO on at least a monthly basis.

The reportable segments are based on the aggregated operating segments determined by the similarity of the products sold,
as these are the sources of the Group’s major risks and have the most effect on the rates of return.

Information reported to the CEO for the purposes of resource allocation and assessment of performance is more specifically
focused on the category of each type of product. The Group’s reportable segments are therefore as follows:

•

Food and Grocery activities comprise the distribution of dry grocery, perishable and general merchandise supplies to
retail outlets.
Liquor activities comprise the distribution of liquor products to retail outlets and hotels.

•
• Hardware and Automotive comprises the distribution of hardware supplies and automotive parts and accessories to

retail outlets.

On 25 January 2012 the Group announced the amalgamation of IGA>D, IGA Fresh, Campbells Cash and Carry and all the
associated merchandising and marketing functions into a single Food & Grocery business pillar. This amalgamation facilitated
a change in reporting structures with previously disclosed Food Distribution and Cash and Carry Distribution segments now
combined into the Food and Grocery segment. The comparative segment information has been restated.

The Automotive and Hardware operating segments have been combined as one reportable segment as these segments,
separately, do not meet the quantitative thresholds prescribed by AASB 8 Operating Segments.

On 30 November 2012, the Group announced Project Mustang, which is a $75 million warehouse automation project centred
on the Group’s new distribution facility in Huntingwood, NSW. The capital expenditure represents the latest European
technology that will significantly automate the goods receipt, order selection, pallet assembly and distribution processes for
both the Food & Grocery and Liquor businesses that operate within this distribution centre. This project is expected to ‘go live’
during FY2015, at which point the Food & Grocery and Liquor management structures and reporting will be merged in NSW.
As a result, the Food & Grocery and Liquor results will be amalgamated into one reportable segment from 1 May 2014.

Geographically the Group operates predominantly in Australia. The New Zealand operation represents less than 5% of
revenue, results and assets of the Group.

Segment accounting policies

The selling price between segments is at normal selling prices and is paid under similar terms and conditions as any other
customers of the Group. The Food and Grocery segment results include wholesale sales to Franklins retail stores that are
expected to continue to trade but do not include wholesale sales to stores that are expected to close or have closed.

Major customers

The Group does not have a single external customer which represents greater than 10% of the Group's revenue.

Metcash Annual Report 2013

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Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

REVENUES AND EXPENSES

Revenue

(i)
Sale of goods
Rent
Interest from other persons/corporations

Other income

(ii)
Net profit from disposal of property, plant and equipment

(iii) Operating lease rental
Minimum lease payments - warehouse and other
Minimum lease payments - stores

Employee benefit expense

(iv)
Salaries and wages
Defined contribution plan expense
Workers compensation costs
Share based payments
Other employee benefit costs

Other expenses

(v)
Depreciation of property, plant and equipment
Amortisation of software
Amortisation of customer relationships and licence agreements

Impairment
Software development intangibles
Retail development assets
Plant and equipment

Trade receivables impairment provision
Inventories net realisable value provision

Significant items

(vi)
Acquisition and restructure costs/(recovery)
- Distribution centre closure costs
-
-

Acquisition costs (recovery)/expense: Franklins (a)
Acquisition costs: ABG and ATAP (b)

Group restructuring

Lease tail and exit costs

-
- Redundancy costs
-
-
- Other closure costs
-

Impairment - property, plant & equipment
Impairment - goodwill

Profit on disposal of business assets

Associate impairment

Loans and receivables
-
-
Equity accounted investment
- Customer contract intangibles
- Restructure costs (provided)
- Restructure costs (paid)

2013
$’m

2012
$’m

12,976.6
110.7
7.7
13,095.0

12,501.1
98.5
12.7
12,612.3

2.7

0.2

128.4
110.7

433.2
33.2
11.8
0.4
7.1

34.5
12.4
12.6
59.5

-
2.2
0.6
2.8
19.9
6.2

-
(3.5)
4.6
1.1

-
-
-
-
-
-
-

-
-
-
-
-
-
1.1

105.8
98.5

404.0
32.4
11.0
1.3
4.6

34.0
10.7
9.7
54.4

2.2
-
-
2.2
17.5
5.8

22.2
6.3
-
28.5

17.0
11.5
9.9
2.5
8.8
(7.2)
42.5

50.8
24.6
9.1
12.5
8.7
105.7
176.7

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

REVENUES AND EXPENSES (Continued)

(vii) Finance costs
Interest expense
Deferred borrowing cost
Finance costs attributable to discounting of provisions and liabilities (Refer note 2xxiv)

2013
$’m

2012
$’m

58.5
1.8
9.0
69.3

74.9
3.4
2.0
80.3

(a) Acquisition costs (recovery)/expense: Franklins
Metcash completed the acquisition of the IGH Group (Franklins) on 30 September 2011. During the prior year, Metcash
incurred legal and other costs in connection with the legal proceedings brought by the Australian Competition and Consumer
Commission and finally in completing the acquisition.

During the current year, Metcash received a reimbursement of $3.5 million of costs from the Australian Consumer and
Competition Commission (ACCC) as a result of a court order in relation to the prior period legal proceedings.

(b) Acquisition costs: ABG and ATAP
With effect from 1 July 2012 Metcash acquired 75.1% of the Automotive Brands Group (ABG) for $54.7 million. The
transaction costs associated with this acquisition have been disclosed as a significant item as the acquisition is deemed to be
material.

On 16 May 2013 Metcash announced the acquisition, through Automotive Brands Group (ABG), of 100% of the Australian
Truck & Auto Parts Group (ATAP) for approximately $84.0 million including acquisition costs. The transaction costs incurred
during the current year associated with this acquisition have been disclosed as a significant item as the acquisition is deemed
to be material.

INCOME TAX

The major components of income tax expense are:
Current income tax
Current income tax charge
Adjustments in respect of income tax of previous years
Deferred income tax relating to origination and reversal of temporary differences
Income tax expense reported in the statement of comprehensive income

A reconciliation between tax expense and the product of accounting profit
before income tax multiplied by the Group’s applicable income tax rate is as follows:
Accounting profit before income tax
At the Group’s statutory income tax rate of 30% (2012: 30%)
Expenditure not allowable for income tax purposes – continuing operations
Expenditure not allowable for income tax purposes – significant items
Adjustments in respect of income tax of previous years
Income tax expense reported in the statement of comprehensive income at an effective tax rate
of 30% (2012: 30%)

Income tax attributable to continuing operations
Income tax benefit attributable to discontinued operations

2013
$’m

2012
$’m

71.2
(3.9)
48.8
116.1

385.1
115.5
3.1
1.4
(3.9)

116.1

116.1
(26.0)
90.1

109.5
(0.7)
(37.0)
71.8

197.2
59.2
1.4
11.9
(0.7)

71.8

71.8
(11.7)
60.1

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

5. INCOME TAX (Continued)

Deferred income tax
Deferred income tax of the Group at 30 April relates to the following:
Deferred tax liabilities
Intangibles
Accelerated depreciation for tax purposes
Other
Set off against deferred tax assets

Deferred tax assets
Provisions
Other
Unutilised tax losses
Set off from deferred tax liabilities

Recognised net deferred tax assets
Opening balance
Credited/(charged) to net profit for the year
Credited/(charged) to other comprehensive income for the year
Tax benefit associated to share issue costs
Adjustment attributable to finalisation of Franklins acquisition (Note 29)
Acquisitions from business combinations (Note 29)
Closing balance

2013
$’m

2012
$’m

66.8
1.3
-
(68.1)
-

115.6
0.7
13.6
(68.1)
61.8

95.5
(48.8)
(0.9)
2.0
22.8
(8.8)
61.8

47.2
2.3
1.6
(51.1)
-

133.2
1.2
12.2
(51.1)
95.5

6.6
37.0
1.9
-
-
50.0
95.5

At 30 April 2013, there is no recognised or unrecognised deferred income tax liability (2012: $nil) for taxes that would be
payable on the unremitted earnings of certain of the Group’s subsidiaries and associates as the Group has no liability for
additional taxation should these earnings be remitted.

The Group has unrecognised gross capital losses of $16 million (2012: $20 million) that are available indefinitely for offset
against future capital gains.

TAX CONSOLIDATION

Metcash Limited and its 100% owned Australian resident subsidiaries have formed a tax consolidated group with effect from 1
July 2005. Metcash Limited is the head entity of the tax consolidated group. Members of the group have entered into a tax
sharing arrangement in order to allocate income tax expense to the wholly owned subsidiaries on a modified standalone basis.
In addition the agreement provides for the allocation of income tax liabilities between the entities should the head entity default
on its tax payment obligations. With effect from 1 August 2012, Mittenmet Limited joined the tax consolidated group.

TAX EFFECT ACCOUNTING BY MEMBERS OF THE TAX CONSOLIDATED GROUP

Members of the tax consolidated group have entered into a tax funding agreement. The tax funding agreement provides for
the allocation of current taxes to members of the tax consolidated group in accordance with a group allocation method using
modified stand alone tax calculation as the basis for allocation. Deferred taxes of members of the tax consolidated group are
measured and recognised in accordance with the principles of AASB 112 Income Taxes.

Under the tax funding agreement, funding is based upon the amounts allocated and recognised by the member entities.
Accordingly, funding results in an increase/decrease in the subsidiaries’ intercompany accounts with the tax consolidated
group head company, Metcash Limited.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

DIVIDENDS PAID AND PROPOSED

(a) Dividends paid and declared on ordinary shares during the year

Dividends paid on ordinary shares during the year
Final fully franked dividend for 2012: 16.5c (2011: 16.0c)
Interim fully franked dividend for 2013: 11.5c (2012: 11.5c)

Dividends declared (not recognised as a liability as at 30 April 2013)
Final fully franked dividend for 2013: 16.5c (2012: 16.5c)

(b) Franking credit balance of Metcash Limited

Franking account balance as at the end of the financial year at 30% (2012: 30%)
Franking credits that will arise from the payment of income tax payable as at the end of the
financial year
Amount of franking credit on dividends declared but not recognised as a distribution to
shareholders during the year

2013
$’m

2012
$’m

142.6
101.3
243.9

123.0
88.7
211.7

145.3

142.6

2013
$’m

2012
$’m

92.4

135.4

9.3

24.9

(62.3)
39.4

(61.1)
99.2

The franking credit balance of $39.4 million (2012: $99.2 million) includes certain franking credits associated with the income
tax receivable of $24.4 million paid in respect of the Action Stores disputed tax (Note 32).

Dividends paid and declared have been fully franked at the rate of 30% (2012: 30%).

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

CASH AND CASH EQUIVALENTS

Cash at bank and on hand
Bank overdrafts (Note 17)

(a) Reconciliation of net profit after tax to net cash flows from operations

Net profit for the year
Adjustments for:
Depreciation and amortisation
Impairment losses
Net profit on disposal of property, plant and equipment
Net profit on disposal of discontinued operations
Share of associates’ net (profit)/loss
Dividends received from associates
Deferred borrowing costs
Share based payments

Significant items:
Acquisition costs – Costs paid on acquisitions of businesses
Acquisition costs – Recovery of costs from ACCC
Group restructuring – impairment of property, plant & equipment (Note 4(vi))
Group restructuring – impairment of goodwill (Note 4(vi))
Group restructuring – profit on disposal of business assets (Note 4(vi))
Associate impairment – loans and receivables (Note 4(vi))
Associate impairment – equity accounted investment (Note 4(vi))
Associate impairment – customer contract intangible (Note 4(vi))

Changes in assets and liabilities, net of purchase and disposal of subsidiaries
(Increase)/decrease in trade and other receivables
(Increase)/decrease in assets held for sale
(Increase)/decrease in other current assets
(Increase)/decrease in inventories
(Increase)/decrease in deferred tax assets
(Decrease)/increase in payables and provisions
(Decrease)/increase in tax payable
Cash from operating activities

2013
$’m

50.3
(29.8)
20.5

209.1

61.0
2.8
(2.7)
(2.5)
(3.4)
0.6
1.8
0.4

4.6
(3.5)
-
-
-
-
-
-

(31.3)
19.3
1.1
89.6
48.8
(89.1)
(6.8)
299.8

2012
$’m

51.5
-
51.5

98.2

54.4
-
(0.2)
-
(0.3)
1.1
3.4
1.3

-
-
9.9
2.5
(7.2)
50.8
24.6
9.1

13.8
2.7
0.6
154.0
(34.8)
(85.7)
(13.9)
284.3

(b) Non-cash financing and investing activities
Acquisition of assets by means of finance lease

3.1

4.3

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

TRADE AND OTHER RECEIVABLES (CURRENT)

Trade receivables - securitised (i)(Note 17 (iv))
Trade receivables - non-securitised (i)
Allowance for impairment loss

Customer loans (ii)
Allowance for impairment loss

Marketing debtors (iii)
Other receivables (iii)

2013
$’m

738.8
200.7
(47.4)
892.1
43.8
(6.5)
929.4
12.4
71.1
1,012.9

2012
$’m

689.1
194.5
(50.1)
833.5
23.6
(1.6)
855.5
30.5
93.4
979.4

(i)

Trade receivables are non-interest bearing and repayment terms vary by business unit. At 30 April 2013, 82.3% of trade
receivables are required to be settled within 30 days (2012: 83.3%), 17.0% have terms extending from 30 to 60 days
(2012: 15.8%) and 0.7% have terms greater than 60 days (2012: 0.9%). The amount of the allowance for impairment
loss has been measured as the difference between the carrying amount of the trade receivables and the estimated future
cash flows expected to be received from the relevant debtors.

(ii) Customer loans receivable are current and have repayment terms of less than 12 months. $2.3 million (2012: $0.7

million) of loans are non-interest-bearing. $41.5 million (2012: $22.9 million) of loans have a weighted average annual
interest rate of 9.16% (2012: 8.71%).

(iii) Marketing debtors and other receivables are non-interest bearing and have repayment terms of less than 12 months.

IMPAIRED TRADE RECEIVABLES AND OTHER CURRENT RECEIVABLES

During the year ended 30 April 2013 receivables of the value of $49.2 million (2012: $15.7 million) were considered non-
recoverable and written off. As at 30 April 2013, trade receivables and other current receivables with a carrying value of $53.9
million (2012: $51.7 million) were provided for as impaired.

As at 1 May
Reclassified from non-current (Note 11)
Accounts written off as non-recoverable
Charged as an expense during the year
Charged as an expense during the year - significant items
As at 30 April

TRADE DEBTORS AGEING

2013
$’m
51.7
31.5
(49.2)
19.9
-
53.9

2012
$’m
23.9
-
(15.7)
17.5
26.0
51.7

As at 30 April 2013, the ageing analysis of trade receivables for the Group that were not impaired is as follows:

NEITHER
PAST DUE
OR
IMPAIRED
$’m
745.1
83.5%
662.7
79.5%

LESS
THAN 30
DAYS
OVERDUE
$’m
111.7
12.5%
123.4
14.8%

MORE
THAN 30
LESS
THAN 60
$’m
20.8
2.3%
19.7
2.4%

MORE
THAN 60
LESS
THAN 90
$’m
6.8
0.8%
8.4
1.0%

MORE
THAN 90
LESS
THAN 120
$’m
4.1
0.5%
8.4
1.0%

MORE
THAN 120
$’m
3.6
0.4%
10.9
1.3%

TOTAL
$’m
892.1
100.0%
833.5
100.0%

2013

2012

The credit quality of the unimpaired trade receivables is good. Metcash believes that the above trade receivables will be
recovered.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

8. TRADE AND OTHER RECEIVABLES (CURRENT) (Continued)

CUSTOMER LOANS AGEING

As at 30 April 2013, the ageing analysis of current and non current customer loans for the Group that were not impaired is as
follows:

NEITHER
PAST DUE
OR IMPAIRED

LESS
THAN 30
DAYS
OVERDUE

MORE
THAN 30
LESS
THAN 60

MORE
THAN 60
LESS
THAN 90

MORE
THAN 90
LESS
THAN 120

$’m
86.3
92.3%
63.0
92.9%

$’m
3.8
4.0%
1.1
1.6%

$’m
0.4
0.5%
0.6
0.9%

$’m
0.2
0.3%
0.3
0.4%

$’m
0.1
0.2%
0.1
0.1%

MORE
THAN 120

$’m
2.5
2.7%
2.7
4.0%

TOTAL

$’m
93.3
100.0%
67.8
100.0%

2013

2012

The credit quality of the unimpaired customer loans is good. Metcash believes that the above loans will be recovered.

MARKETING AND OTHER RECEIVABLES AGEING

As at 30 April 2013, the analysis of current and non-current marketing and other receivables for the Group that were not
impaired is as follows:

NEITHER
PAST DUE
OR IMPAIRED

LESS THAN
30 DAYS
OVERDUE

MORE
THAN 30
LESS
THAN 60

MORE
THAN 60
LESS
THAN 90

MORE
THAN 90
LESS THAN
120

$’m
85.1
97.0%
128.0
98.9%

$’m
1.0
1.1%
0.4
0.3%

$’m
0.8
0.9%
0.8
0.6%

$’m
0.3
0.3%
0.1
0.1%

$’m
0.5
0.5%
0.0
0.0%

MORE
THAN 120

$’m
0.2
0.2%
0.1
0.1%

TOTAL

$’m
87.9
100.0%
129.4
100.0%

2013

2012

The credit quality of the unimpaired marketing and other receivables is good. Metcash believes that the above marketing and
other receivables will be recovered.

CUSTOMER LOAN SECURITY

For certain customer loans, customers are required to provide security in the event of default. These may include bank and
personal guarantees, fixed and floating charges and security over property assets. The fair value of these securities (against
both current and non-current customer loans) as at 30 April 2013 was $22.5 million (2012: $34.2 million).

INVENTORIES

2013
$’m

2012
$’m

Total finished goods inventories at the lower of cost and net realisable value

753.8

833.6

Inventory write-downs recognised as an expense totalled $6.2 million (2012: $10.9 million). $6.2 million (2012: $5.8 million) of
the write down is included in the cost of sales line item as a cost of inventory and $Nil (2012: $5.1 million) is included in
significant items.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

10.

DERIVATIVE FINANCIAL INSTRUMENTS

Current
Foreign currency forward contracts

Non current
Cross currency interest rate swaps – US Private Placement

2013

$’m

2012

$’m

0.6

37.7

27.8

The above derivatives are designated and effective as hedging instruments and are carried at fair value through other
comprehensive income.

11.

RECEIVABLES (NON-CURRENT)

Customer loans(i)
Allowance for impairment loss
Other receivables(ii)

2013
$’m
56.0
-
4.4

60.4

2012
$’m
77.3
(31.5)
5.5

51.3

(i) Customer loans receivable are non-current and have repayment terms of greater than 12 months. $2.7 million (2012:

$1.9 million) of loans are non-interest bearing. $53.3 million (2012: $75.4 million) of the loans have a weighted average
annual interest rate of 8.75% (2012: 8.15%). Refer to Note 8 for ageing analysis and credit quality.

(ii) Other receivables are non-interest-bearing and have repayment terms greater than 12 months. These receivables are all

neither past due nor impaired. Refer Note 8 for ageing analysis and credit quality.

IMPAIRED CUSTOMER LOANS (NON CURRENT)

As at 30 April 2013, non current customer loans with a carrying value of $Nil (2012: $31.5 million) were provided for as
impaired.

As at 1 May
Reclassified to current (Note 8)
Charge for the year - significant items
As at 30 April

2013
$’m
31.5
(31.5)
-
-

2012
$’m
-
-
31.5
31.5

Refer Note 8 for ageing analysis and credit quality of customer loans that were not impaired.

NON CURRENT RECEIVABLES FAIR VALUE

The fair value of non-current receivables is calculated based on cash flows discounted at a rate reflecting current market rates
adjusted for counterparty credit risk. The fair value and carrying values of non-current receivables of the Group are as follows:

Customer loans

Other receivables

CARRYING
AMOUNT
2013
$’m
56.0

4.4

60.4

CARRYING
AMOUNT
2012
$’m
45.8

5.5

51.3

FAIR
VALUE
2013
$’m
57.9

4.4

62.3

FAIR
VALUE
2012
$’m
46.8

5.5

52.3

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

12.

INVESTMENTS IN ASSOCIATES

As at 1 May
Additions
Share of profit/(loss) of associates
Dividends received
Impairment – significant items
As at 30 April

Interest in associates

PRINCIPAL ACTIVITIES

BALANCE
DATE

Abacus Independent Retail Property Trust
Plumpton Park Developments Pty Limited
Ritchies Stores Pty Ltd
BMS Retail Group Pty Ltd
Kangaroo Flat Supermarket Pty Ltd
Long Gully Supermarket Pty Ltd
Dramet Pty Ltd
Dart Trading Co Pty Ltd
Bamlane Pty Ltd
Mundin Pty Ltd
G'Butt Pty ltd
Mussen Pty Ltd
Ully Pty Ltd
Adcome Pty Ltd
Lecome Pty Ltd
Progressive Trading Pty Ltd (Progressive) (i)
Metfood Pty Limited

Sunshine Hardware Pty Ltd
Northern Hardware Group Pty Ltd
Timberten Pty Ltd
Waltock Pty Limited
Banner 10 Pty Ltd
Mermaid Tavern (Trading) Pty Ltd
Queens Arms Hotel New Farm Pty Ltd
Queens Arms Freehold Pty Ltd

Retail property investment
Property development
Grocery retailing
Grocery retailing
Grocery retailing
Grocery retailing
Grocery retailing
Grocery retailing
Grocery retailing
Grocery retailing
Grocery retailing
Grocery retailing
Grocery retailing
Grocery retailing
Grocery retailing
Grocery retailing
Merchandise services for Metcash and
Foodstuffs
Hardware retailing
Hardware retailing
Hardware retailing
Hardware retailing
Hardware retailing
Liquor retailing and hospitality
Liquor retailing and hospitality
Property investment

30 June
30 June
30 June
30 June
30 June
30 June
30 June
30 June
30 June
30 June
30 June
30 June
30 June
30 April
30 April
30 April
30 April

30 June
30 June
30 June
30 June
30 June
30 April
30 April
30 April

2013
$’m

68.3
20.2
3.4
(0.6)
-
91.3

2012
$’m

92.1
1.6
0.3
(1.1)
(24.6)
68.3

OWNERSHIP
INTEREST
2013

2012

25.0
50.0
26.0
25.1
25.1
25.1
26.0
26.0
26.0
26.0
26.0
26.0
26.0
45.0
50.0
52.2
50.0

49.0
49.9
40.0
49.0
49.0
50.0
50.0
50.0

25.0
50.0
26.0
25.1
25.1
25.1
26.0
26.0
26.0
26.0
26.0
26.0
26.0
45.0
50.0
52.2
50.0

49.0
49.9
-
-
-
-
-
-

(i) Metcash has a direct ownership of 45.4% in Progressive, and an indirect ownership of 6.8% via the 25.1% interest in
BMS Retail Group Pty Ltd. Although the Group’s total ownership interest in Progressive is greater than 50%, it is still
considered to be an associate of the Group, as Metcash Limited does not have the power to govern the financial and
operating policies of Progressive.

The following table illustrates the summarised financial information relating the Group’s investment in associates.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

12. INVESTMENTS IN ASSOCIATES (Continued)

Share of associates’ profit:

Profit before income tax
Income tax expense
Profit after income tax

Share of associates’ statement of financial position:

Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets

13.

OTHER FINANCIAL ASSETS (NON-CURRENT)

Investment in shares (unlisted)

14.

PROPERTY, PLANT AND EQUIPMENT

Year ended 30 April 2013

At 1 May 2012
Opening balance
Additions
Assets transferred from assets under construction
Assets transferred into property, plant and equipment(ii)
Assets transferred out of property, plant and equipment(iii)
Acquisition from business combination (Note 29)
Disposals
Impairment
Depreciation
Closing balance
At 30 April 2013
Cost
Accumulated depreciation & impairment
Net carrying amount

2013

$’m

4.9
(1.5)
3.4

2013

$’m
74.7
126.6
201.3
(87.5)
(59.5)
(147.0)
54.3

2013

$’m

0.3

LAND &
BUILDINGS
$’m

PLANT &
EQUIPMENT(i)
$’m

69.3
19.8
14.1
-
-
-
(16.5)
-
(1.0)
85.7

91.7
(6.0)
85.7

151.4
67.0
(14.1)
37.6
(20.5)
8.6
(3.1)
(0.6)
(33.5)
192.8

386.3
(193.5)
192.8

2012

$’m

0.6
(0.3)
0.3

2012

$’m
69.3
127.6
196.9
(119.7)
(43.2)
(162.9)
34.0

2012

$’m

0.2

TOTAL
$’m

220.7
86.8
-
37.6
(20.5)
8.6
(19.6)
(0.6)
(34.5)
278.5

478.0
(199.5)
278.5

(i) Additions to plant and equipment include additions of $6.3 million (2012: $39.8 million) to assets under construction.
The closing balance of plant and equipment includes assets under construction with a carrying value of $54.9 million
(2012: $43.7 million).

(ii) Amounts previously disclosed as part of current assets have been transferred to property, plant and equipment

consistent with the Group’s accounting policy as detailed in Note 2(xxx).

(iii) Assets that meet the criteria as assets held for sale have been transferred in accordance with the Group’s accounting

policy as detailed in Note 2(xxix).

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

14. PROPERTY, PLANT AND EQUIPMENT (Continued)

Year ended 30 April 2012

At 1 May 2011
Opening balance
Additions
Acquisition from business combination (Note 29)
Disposals
Exchange differences
Impairment charged to significant items
Impairment reversal
Depreciation
Closing balance
At 30 April 2012
Cost
Accumulated depreciation & impairment
Net carrying amount

LAND &
BUILDINGS

PLANT &
EQUIPMENT

$’m

75.3
0.5
-
(5.5)
-
-
-
(1.0)
69.3

77.1
(7.8)
69.3

122.3
75.4
1.2
(1.4)
(0.1)
(13.6)
0.6
(33.0)
151.4

354.1
(202.7)
151.4

TOTAL

$’m

197.6
75.9
1.2
(6.9)
(0.1)
(13.6)
0.6
(34.0)
220.7

431.2
(210.5)
220.7

The carrying value of plant and equipment held under finance leases and hire purchase contracts at 30 April 2013 is $10.6
million (2012: $13.0 million).

15.

INTANGIBLE ASSETS AND GOODWILL

SOFTWARE
DEVELOPMENT
COSTS

CUSTOMER

CONTRACTS GOODWILL

TRADE
NAMES

OTHER

TOTAL

$'m

Year ended 30 April 2013

At 1 May 2012
Net carrying amount
Additions
Acquisition from business
combinations (Note 29)
Adjustment attributable to
finalisation of Franklins
acquisition (Note 29)
Disposals
Amortisation
At 30 April 2013
Net carrying amount
At 30 April 2013
Cost (gross carrying amount)
Accumulated amortisation and
impairment
Net carrying amount

74.1
17.4

-
(0.9)
(12.4)

161.9
36.4

30.4

-
(1.3)
(12.3)

1,283.6
-

70.0

16.2
(2.3)
-

78.2

215.1

1,367.5

180.2

268.1

1,367.5

(102.0)
78.2

(53.0)
215.1

-
1,367.5

30.3
-

14.7

-
-
(1.5)

43.5

45.1

(1.6)
43.5

2.0
-

2.0

-
-
(0.3)

3.7

5.0

(1.3)
3.7

1,551.9
53.8

117.1

16.2
(4.5)
(26.5)

1,708.0

1,865.9

(157.9)
1,708.0

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

15. INTANGIBLE ASSETS AND GOODWILL (Continued)

SOFTWARE
DEVELOPMENT
COSTS

CUSTOMER

CONTRACTS GOODWILL

TRADE
NAMES

OTHER

TOTAL

$'m

Year ended 30 April 2012
At 1 May 2011
Net carrying amount
Additions
Acquisition from business
combination (Note 29)
Disposals
Impairment
Amortisation
At 30 April 2012
Net carrying amount
At 30 April 2012
Cost (gross carrying amount)
Accumulated amortisation and
impairment
Net carrying amount

70.2
16.8

-
-
(2.2)
(10.7)

151.1
1.1

28.1
-
(9.1)
(9.3)

1,040.3
-

256.0
(10.2)
(2.5)
-

74.1

161.9

1,283.6

167.9

(93.8)
74.1

215.5

1,286.1

(53.6)
161.9

(2.5)
1,283.6

27.2
-

3.2
-
-
(0.1)

30.3

30.4

(0.1)
30.3

2.3
-

-
-
-
(0.3)

2.0

3.0

(1.0)
2.0

1,291.1
17.9

287.3
(10.2)
(13.8)
(20.4)

1,551.9

1,702.9

(151.0)
1,551.9

(a) DESCRIPTION OF THE GROUP’S INTANGIBLE ASSETS AND GOODWILL(cid:3)

Software development costs
Development costs have been capitalised at cost and are amortised using the straight-line method over the asset’s useful
economic life. Useful lives range from five to ten years. Software development costs are tested for impairment where an
indicator of impairment exists. Useful lives are also estimated on an annual basis and adjustments, where applicable, are
made on a prospective basis.

Customer contracts
Customer contracts are acquired either through business combinations or through direct acquisition of contractual
relationships. The carrying amount represents the costs less accumulated amortisation. Customer contracts are amortised
over 5 to 25 years. The amortisation has been recognised in the statement of comprehensive income in the line item
"Administrative Costs". If an impairment indication arises, the recoverable amount is estimated and an impairment loss is
recognised to the extent that the recoverable amount is less than the carrying amount.
(cid:3)
Trade names
Trade names have been acquired through business combinations and are carried at cost less any impairment losses. These
intangible assets have been determined to have either a finite or an indefinite useful life. Trade names with indefinite useful
lives will be subjected to impairment testing on an annual basis or whenever there is an indication of impairment. Impairment
testing was carried out in February 2013. Trade names are considered to have a finite useful life when there is an intention to
discontinue use of the name in which case it is amortised over its estimated remaining useful life.

Other
The Group entered into an Alliance Agreement with Lenards Pty Ltd in 2009 to offer customers the opportunity to purchase
products under Lenards Franchise. The agreement fee is being amortised over 10 years, on a straight line basis. The
intangible is carried at cost less accumulated amortisation.

Included in other intangibles are liquor and gaming licences acquired during the year. These are considered to have indefinite
useful lives and will be subjected to impairment testing on an annual basis or whenever there is an indication of impairment.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

(cid:3)

15. INTANGIBLE ASSETS AND GOODWILL (Continued)

(b)

IMPAIRMENT TESTS FOR GOODWILL AND INTANGIBLES WITH INDEFINITE USEFUL LIVES

Goodwill

Description of cash generating units

(i)
Goodwill acquired through business combinations have been allocated to the lowest level within the entity at which the
goodwill is monitored, being the four business pillars (Food & Grocery, ALM, Mitre 10 and ABG). Under AIFRS, goodwill and
intangibles with indefinite lives must be tested annually and when impairment indicators arise, provided the testing is done at
the same time each year. Impairment testing was conducted in February 2013 for all CGUs.

The recoverable amounts of the group of CGUs have been determined based on value in use calculations using cash flow
projections based on financial projections covering a five year period.

(ii)
The Group has applied the following key assumptions in its cash flow projections:

Key assumptions used in valuations

Budgeted gross margins – These have been estimated based on the utilisation of existing assets and on the average gross
margins achieved immediately before the budgeted year, increased for expected efficiency improvements.
Discount rates – The weighted average cost of capital for the Group based on risk free rates of return, the Group’s risk profile
relative to the market, the marginal cost of borrowing for the Group, its average level of gearing and a market risk premium.
Future growth – The long term growth rate is driven by population growth, inflation and market share.

The pre-tax discount rates applied to cash flow projections are between 9.80% and 10.60% depending on the nature of the
business (2012: 8.51%). Cash flows beyond the five-year period are extrapolated using a 1.4% long term growth rate (2012:
2.5%) which is based on the historical population and applicable product inflation and growth rates for each group of CGUs.

Results of testing

(iii)
Based on the testing performed during the current year, no impairment of goodwill was identified in each of the CGUs (2012:
$2.5 million).

Sensitivity to changes in assumptions

(iv)
The table below summarises the goodwill attributed to each group of CGUs and the potential impairment trigger point at the
impairment testing date of February 2013:

Group of CGUs

Food and Grocery
Australian Liquor Marketers
Mitre 10
Automotive Brands Group

Goodwill
$’m
As at 28
February 2013

Discount Rate
at Which
Impairment is
Triggered
%

Increase in
Discount Rate
at Which
Impairment is
Triggered
%

1,163.9
88.9
71.5
22.4

19.92%
18.39%
12.75%
22.81%

10.12%
8.59%
2.55%
12.21%

No impairment is triggered in the above groups of CGUs if cash flows beyond the five-year period were extrapolated at a
growth rate of 0%.

Trade names
(i) Trade names primarily comprise the Mitre 10, Autobarn and Autopro trade names.

(ii) Key assumptions used in assessing the recoverable amount of the Mitre 10, Autobarn and Autopro trade names:

Royalty rate - An estimate based on similar royalty rates for similar types of franchising store formats in a similar industry from
a global analysis.
Budgeted gross margins – These have been estimated based on the utilisation of existing assets and on the average gross
margins achieved immediately before the budgeted year, increased for expected efficiency improvements.
Discount rates – The weighted average cost of capital for the Mitre 10 Group and Automotive Brands Group are based on risk
free rates of return, their respective risk profiles relative to the market, the marginal cost of borrowing for the group, their
average level of gearing and a market risk premium.
Future growth – Mitre 10 and ABG’s growth is driven by population growth, estimated inflation and changes in market share.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

15. INTANGIBLE ASSETS AND GOODWILL (Continued)

(c)

IMPAIRMENT TESTS FOR GOODWILL AND INTANGIBLES WITH INDEFINITE USEFUL LIVES (continued)

(iii) Results of testing
Based on the testing performed during the current year, no impairment of trade names was identified (2012: $Nil).

(iv) Sensitivity to changes in assumptions
No reasonably possible change in any of the above key assumptions would cause the carrying value of the trade names to
materially exceed its recoverable amount.

16.

TRADE AND OTHER PAYABLES

Trade payables
Accruals

2013
$’m

1,081.3
254.3
1,335.6

2012
$’m

1,112.2
257.3
1,369.5

Trade payables and accruals are non-interest-bearing and are normally settled within 30-day terms. Due to the short term
nature of these payables, their carrying value approximates their fair value.

17.

INTEREST BEARING LOANS AND BORROWINGS

Current
Bank overdrafts – working capital(ii)
Bank loans - working capital(ii)
Finance lease obligations(i)

Non-current
Finance lease obligations(i)
Bank loans - syndicated(iii)
Debt securitisation(iv)
US private placement(v)
Deferred borrowing costs

2013
$’m

29.8
22.0
5.7
57.5

6.3
500.0
-
248.9
(3.8)
751.4

2012
$’m

-
11.0
6.8
17.8

9.1
600.0
130.0
240.0
(5.1)
974.0

(i) Finance leases have an average lease term of 4 years with the option to purchase the asset at the completion of the

lease term for the asset’s market value. The weighted average interest rate implicit in the lease is 8.52% (2012: 9.19%).
Certain lease liabilities are secured by a charge over the leased asset.

(ii) Working capital bank loans represent two unsecured revolving facilities totalling $225 million, which expire in October

2013 ($150 million) and February 2014 ($75 million). Interest payable on any loans drawn under these facilities is based
on BBSY or the RBA cash rate plus a margin. These bank loans are subject to certain financial undertakings as detailed
in Note 17(vi) below.

(iii) Syndicated bank loans are three and four year senior unsecured loan note subscription facilities, which expire in

December 2014 ($400 million) and December 2015 ($300 million). Interest payable on the facility is based on BBSY plus
a margin and interest resets are quarterly. The applicable margin is dependent upon an escalation matrix linked to the
senior leverage ratio achieved. These bank loans are subject to certain financial undertakings as detailed in Note 17(vi)
below.

(iv) Under the $400 million debt securitisation facility, an equitable interest has been granted in certain trade receivables to a
special purpose trust, which is managed by a major Australian bank. The facility is subject to the periodic renewal of the
facility agreement and is currently committed until May 2014. The Group has therefore classified the facility as non-
current at April 2013. Interest payable on the facility is based on BBSY plus a margin.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

17. INTEREST BEARING LOANS AND BORROWINGS (Continued)

The terms of the facility require that, at any time, the book value of the securitised receivables must exceed by at least a
certain proportional amount, the funds drawn under the facility. At the end of the financial year, trade receivables of
$738.8 million (2012: $689.1 million) had been securitised, with $Nil (2012: $130 million) of funds drawn under the
facility. The resultant security margin exceeded the minimum required at that time.

The facility may be terminated by the trust manager at short notice in the event of an act of default, which includes the
insolvency of any of the individual companies securitising trade receivables, failure of the Group to remit funds when due,
or a substantial deterioration in the overdue proportion of certain trade receivables.

The Group considers that it does not control the special purpose trust as it does not have power to determine the
operating and financial policies of the trust, nor is the Group exposed to the risks and benefits of the trust. Accordingly,
the Group does not consolidate the trust in its financial statements.

(v) US private placement (USPP) comprises three tranches of fixed coupon debt of US$70 million maturing September

2018, US$35 million maturing September 2019, and US$120 million maturing September 2023. The foreign exchange
and fixed interest rate risk has been hedged using a series of cross currency interest rate swaps that mitigate these risks.
The financial effect of these hedges is to convert the US$225 million of USPP fixed interest rate debt into $210.1 million
of floating rate debt with interest payable at BBSW plus a margin.

The US$225 million USPP debt has been revalued at balance date to $248.9 million (2012: $240 million) and presented
as interest bearing debt as disclosed above. The mark-to-market fair value of the associated cross currency interest rate
swaps are separately disclosed within derivative financial instruments ($37.7 million – Note 10), the cash flow hedge
reserve ($0.8 million – Note 21), and associated deferred tax assets ($0.3 million – Note 5). Together, these four
components reflect the $210.1 million of hedged debt.

The USPP debt is subject to certain financial undertakings as detailed in Note 17(vi) below.

(vi) The Group must comply with three primary covenants which apply to the syndicated bank facility, both working capital

bank facilities and the USPP debt. These covenants are: a fixed charges cover ratio (Earnings Before Interest, Tax,
Depreciation, Amortisation and Net Rent (EBITDAR) divided by Total Net Interest plus Net Rent Expense), a senior
leverage ratio (Total Group Debt divided by Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)) and
minimum shareholders funds (a fixed figure representing the Group share capital and reserves).

(a)

FAIR VALUE

The carrying amount of the Group's current and non-current borrowings approximates their fair value. The weighted average
effective interest rate on the syndicated and working capital bank loans, the debt securitisation and the USPP debt, after
taking into account cross currency and interest rate swaps, at the end of the financial year was 5.55% (2012: 6.51%).

(b) DEFAULTS OR BREACHES

At the reporting date, there were no defaults or breaches on any of the loans.

(c)

INTEREST RATE RISK AND LIQUIDITY RISK

Details regarding interest rate risk and liquidity risk are disclosed in Note 22.

18.

DERIVATIVE FINANCIAL INSTRUMENTS

Current
Interest rate swap contracts
Foreign currency forward contracts

Non current
Interest rate swap contracts
Foreign currency forward contracts

2013
$’m

2012
$’m

0.2
0.3
0.5

2.6
0.1
2.7

0.6
0.3
0.9

4.3
-
4.3

The above derivatives are designated and effective as hedging instruments and are carried at fair value through other
comprehensive income.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

19.

PROVISIONS

Current
Employee entitlements
Rental subsidy (b)(i)
Restructuring (b)(ii)
Other

Non-current
Employee entitlements
Rental subsidy (b)(i)
Restructuring (b)(ii)
Other
Total

(a) Movements in provisions (other than employee entitlements)

1 May 2012
Expense arising during the year
Attributable to acquisition of assets
Attributable to Franklins acquisition
Utilised – continuing operations
Utilised – discontinued operations
Finance cost discount rate adjustment – continuing operations
Finance cost discount rate adjustment – discontinued operations
30 April 2013

1 May 2011
Expense arising during the year
Expense arising from significant items
Attributable to Franklins acquisition
Utilised
Released
Finance cost discount rate adjustment – continuing operations
Finance cost discount rate adjustment – discontinued operations
30 April 2012

(b)

(i)

Nature and timing of provisions

Rental subsidy provision

2013
$’m

2012
$’m

92.8
29.8
9.5
5.7
137.8

5.6
149.5
10.9
0.6
166.6

Rental
subsidy
$’m

Restruc
turing
$’m

Other
$’m

157.7
0.9
-
34.1
(8.8)
(22.4)
4.4
13.4
179.3

34.4
-
2.2
144.4
(16.7)
(11.3)
2.0
2.7
157.7

45.9
5.0
-
-
(31.9)
-
1.4
-
20.4

3.7
1.5
52.6
-
(11.9)
-
-
-
45.9

-
-
6.4
-
(0.1)
-
-
-
6.3

0.3
-
-
-
(0.3)
-
-
-
-

92.4
23.4
31.9
-
147.7

3.1
134.3
14.0
-
151.4

Total
$’m

203.6
5.9
6.4
34.1
(40.8)
(22.4)
5.8
13.4
206.0

38.4
1.5
54.8
144.4
(28.9)
(11.3)
2.0
2.7
203.6

In certain situations, Metcash will take the head lease on a retail property. When this occurs, the properties are typically sub
leased to the retail customers on commercial terms and conditions which equate to ‘back-to-back’ arrangements whereby the
lease expense to the landlord matches the lease rental to the retailer. Atypically, Metcash has assumed leases through
acquisitions whereby the lease rental is considered ‘onerous’. In these situations, where the head lease rental expense
exceeds the expected sub lease rental income, a provision is raised for the difference in rental streams for the period of the
actual or expected sub lease.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

19.

PROVISIONS (Continued)

(ii)

Restructure provision

The provision represents obligations recognised by the Group as a result of the various restructuring initiatives announced in
April 2012 and the decision to vacate the Silverwater and Blacktown distribution centres.

20.

OTHER FINANCIAL LIABILITIES

Current
Financial guarantee contracts
Lease incentives

Non - current
Put options written over non controlling interests (a)
Financial guarantee contracts
Lease incentives
Other payables

2013
$’m

2012
$’m

1.5
0.2
1.7

31.0
2.3
1.4
2.5
37.2

0.2
0.4
0.6

-
-
1.4
-
1.4

(a) Certain minority shareholders have the right under put options to require Metcash to acquire their shareholding, subject to
specific terms and conditions. Where such an arrangement is deemed to be part of the business combination a financial
liability is recognised on the acquisition date measured at the present value of the redemption amount under the option. The
liability is subsequently remeasured at each reporting date at the estimated redemption value, with any change in redemption
value recorded in Administration costs within profit and loss and the net present value unwind is recorded as a finance cost.
Refer Note 29(b) for more details.

21.

(a)

CONTRIBUTED EQUITY AND RESERVES

Ordinary shares:

Ordinary shares issued and fully paid

Movements in ordinary shares on issue
At 1 May
Issued during the year:

2013
$'m

2012
$'m

2,284.9

1,914.7

2013

2012

NUMBER
OF SHARES

NUMBER OF
SHARES

$'m

771,345,864

1,914.7

768,853,644

1,904.9

Exercise of employee options – at 392.5 cents per share
Exercise of employee options – at 426.7 cents per share
Institutional placement – at 350.0 cents per share
Share placement plan – at 303.0 cents per share
Equity raising costs net of tax

-
-
-
-
-
At 30 April

-
-
92,857,143
16,501,779
-
880,704,786

-
-
325.0
50.0
(4.8)
2,284.9

9.8
2,489,364
-
2,856
-
-
-
-
-
-
771,345,864 1,914.7

Fully paid ordinary shares carry one vote per share and carry the right to dividends.

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

21. CONTRIBUTED EQUITY AND RESERVES (Continued)

(b)

Reserves:

SHARE-
BASED
PAYMENTS
RESERVE
$'m

CAPITAL
RESERVE
$'m

CASH
FLOW
HEDGE
RESERVE
$'m

FOREIGN
CURRENCY
TRANSLATION
RESERVE
$'m

22.3
-
1.3
-
23.6
-
0.4
-
-
-
-
(23.4)
0.6

12.8
-
-
-
12.8
-
-
22.1
-
-
-
(34.9)
-

-
-
-
(4.5)
(4.5)
-
-
-
0.6
3.0
(0.9)
-
(1.8)

(6.9)
1.0
-
-
(5.9)
0.3
-
-
-
-
-
-
(5.6)

TOTAL
$'m

28.2
1.0
1.3
(4.5)
26.0
0.3
0.4
22.1
0.6
3.0
(0.9)
(58.3)
(6.8)

At 1 May 2011
Foreign currency translation adjustments
Share-based payments
Movement in fair value of derivatives
At 30 April 2012
Foreign currency translation adjustments
Share-based payments
Acquisition of non controlling interest*
Reclassified to profit or loss during the year
Movement in fair value of derivatives
Tax expense related to fair value movements
Transfer to retained earnings
At 30 April 2013

Nature and purpose of reserves

Share-based payments reserve
This reserve is used to record the value of equity benefits provided to employees and executive directors as part of their
remuneration. Refer to Note 25 for further details of these plans. Once a share option has lapsed the Group no longer has any
obligation to convert these options into share capital. The amount transferred to retained earnings represents the value of
options previously recognised as an expense through the Statement of Comprehensive Income that have now lapsed.

Capital reserve
The capital reserve is used to accumulate realised capital profits. The reserve can be used to pay dividends or issue bonus
shares.

* On 31 July 2012 Metcash Limited effectively acquired, through its wholly owned subsidiary Mittenmet Limited, the remaining
49.9% equity interest in the Mitre 10 Group. As part of the initial 50.1% acquisition a series of Redeemable Convertible
Preference Shares (RCPS) were issued by Mittenmet to former Mitre 10 shareholders. The RCPS entitled the holders to a
49.9% equity interest in Mittenmet and gave Metcash the right to request Mittenmet redeem the RCPS for cash. On 31 July
2012 Metcash exercised its right and the RCPS were redeemed for a consideration of $46.5 million. The redemption is treated
as a transaction between equity holders in accordance with AASB 127 Consolidated and Separate Financial Statements. The
difference between the non controlling interest of $70 million assumed, the redemption consideration of $46.5 million and
transaction costs of $1.4 million has been recognised as a credit to the capital reserve.

The capital reserve consisted of a combination of residual retained profits relating to the non controlling interest of Mittenmet
which was acquired by the Group and legacy amounts relating to profits on disposals of capital assets. These realised
amounts have been transferred to retained earnings.

Cash flow hedge reserve
This reserve records the portion of the unrealised gain or loss on a hedging instrument in a cash flow hedge that is determined
to be an effective hedge.

100

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

21. CONTRIBUTED EQUITY AND RESERVES (Continued)

Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial
statements of foreign subsidiaries. It is also used to record the effect of hedging net investments in foreign operations.

Retained earnings
At 1 May
Profit for the year
Transfer from Capital Reserve and Share Based Payments Reserve
Dividends paid
At 30 April
Other equity
At 30 April

2013
$'m

2012
$'m

86.3
206.0
58.3
(243.9)
106.7

208.0
90.0
-
(211.7)
86.3

(765.9)

The other equity account is used to record the reverse acquisition adjustment on application of AASB 3 Business
Combinations in 2005. Refer also Note 2(b)(iv).

22.

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s principal financial instruments comprise bank loans, bonds and overdrafts, finance and operating leases, cash
and short-term deposits and derivatives.

The main purpose of these instruments is to raise finance for the Group’s operations. The Group has various other financial
assets and liabilities such as trade receivables and payables, which arise directly from its operations.

The Group manages its exposure to key financial risks including interest rate and credit risks in accordance with the Group's
financial risk management policies. The objective of the policy is to support delivery of the Group's financial targets while
protecting future financial security.

The Group enters into a limited number of derivative transactions from time to time principally to manage interest rate and
foreign currency risks arising from the Group’s operations and its sources of finance.

The main risks arising from the Group’s financial instruments are cash flow interest rate risk, foreign exchange risk and credit
risk. The Board reviews and agrees policies for managing each of these risks and they are detailed below.

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognised, in respect of each class of financial instrument,
financial liability and equity instrument are disclosed in Note 2 Summary of Significant Accounting Policies.

RISK EXPOSURES AND LIQUIDITY RISK EXPOSURES

Interest rate risk
The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s bank debt obligations with
a floating interest rate.

Metcash manages this risk by entering into interest rate swap contracts with various major Australian banks. At 30 April 2013
the principal hedged was $200 million with a weighted average hedge maturity of 1 year and a weighted average interest rate
of 5.14%. The Group considers these derivatives to be effective hedges in accordance with AASB 139 Financial Instruments:
Recognition and Measurement and therefore treats them as cash flow hedges. These interest rate swap contracts, which had
a notional principal value of $200 million (2012: $370 million) had a fair value at the end of the financial year of negative $3.4
million (2012: negative $4.9 million). These contracts are exposed to fair value movements if the interest rate curve changes.

Metcash Annual Report 2013

101

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued)

At balance date, the Group had the following mix of financial assets and liabilities exposed to Australian variable interest rate
risk that, except as indicated, are not designated in cash flow hedges:

Financial assets
Cash and cash equivalents
Financial liabilities
Bank overdrafts – working capital
Bank loans - working capital
Bank loans – syndicated
Debt securitisation
US private placement(i)
Less: Interest rate swaps notional principal value - designated as cash flow hedges

Net exposure

2013
$’m

2012
$’m

50.3

51.5

(29.8)
(22.0)
(500.0)
-
(210.1)
200.0
(561.9)
(511.6)

-
(11.0)
(600.0)
(130.0)
(210.1)
370.0
(581.1)
(529.6)

(i)

The US private placement liability is presented inclusive of the associated cross currency interest rate swap hedge
contracts which effectively convert the US$225 million facility into $210.1 million of variable rate funding (Note 17(v)).

Refer to Note 17 for details of bank loans, debt securitisation and US private placement.

The Group's treasury policy requires core debt to be hedged between a minimum and maximum range over certain maturity
periods. Core debt is defined as the minimum level of drawn debt which is expected to occur over the year. As at 30 April
2013, the interest rate swap hedges of $200 million fell within the required range.

Subsequent to the balance sheet date, the Group entered into a number of interest rate swaps and forward rate agreement
(FRA) contracts with various major Australian banks. The additional principal hedged is $175.0 million of interest rate swaps
with a weighted hedge maturity of 2.8 years and a weighted average interest rate of 2.87%. A further $100.0 million of FRAs
were executed with a weighted average maturity of 0.4 years and a weighted average rate of 2.55%.

Sensitivity analysis
The Group constantly analyses its interest rate exposure. Within this analysis, consideration is given to potential renewal of
existing positions, alternative financing, alternative hedging positions and the mix of fixed and floating interest rates.

The table below shows the effect on post tax profit and other comprehensive income at balance date if interest rates had
moved by either 0.25% higher or 0.25% lower. These movements have been selected as they are considered reasonable,
given the current economic climate and the current levels of short and long term Australian interest rates. It is assumed within
this calculation that all other variables have been held constant and that the borrowings are in Australian dollars. It also
includes the impact of the Group’s interest rate derivatives that hedge core debt.

If interest rates were to increase by 0.25% (25 basis points)
If interest rates were to decrease by 0.25% (25 basis points)

PROFIT AFTER TAX
HIGHER/(LOWER)

OTHER COMPREHENSIVE
INCOME
HIGHER/(LOWER)

2013
$’m

(0.9)
0.9

2012
$’m

(0.9)
0.9

2013
$’m

0.2
(0.2)

2012
$’m

0.6
(0.6)

The movements in profit are due to higher/lower interest costs from variable rate bank debt and other loans net of interest rate
derivatives that hedge core debt. The movement in other comprehensive income is due to cash flow hedge fair value
adjustments on interest rate swap contracts.

102

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued)

Liquidity risk and funding management

Liquidity risk is the risk that the Group will be unable to meet its payment obligations when they fall due under normal and
stress circumstances. To limit this risk, the Group manages assets with liquidity in mind, and monitors future cash flows and
liquidity on a daily basis. The Group has five different sources of primary debt funding, of which 53.0% have been utilised at
30 April 2013. The Group monitors forecasts of liquidity reserves on the basis of expected cash flow.

Remaining contractual maturities
Remaining contractual liabilities consist of non-interest bearing trade and other payables amounting to $1,335.3 million (2012:
$1,369.5 million) (Note 16) for the Group and are due in one year or less.

Maturity analysis of financial assets and liabilities based on contracted date
The risk implied from the values shown in the table below reflects a balanced view of cash inflows and outflows. Leasing
obligations, trade payables and other financial liabilities mainly originate from the financing of assets that are used in ongoing
operations such as property, plant, equipment and investments in working capital such as inventories and trade receivables.
These assets are considered in the Group's overall liquidity risk.

The following table reflects the contracted dates of settlement of financial assets and liabilities. Except where these exposures
are provided for, these are also the expected dates of settlement.

Year ended 30 April 2013
Financial assets
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments

Financial liabilities
Trade and other payables
Finance lease liability
Financial guarantee contracts
Put options written over non
controlling interests
Bank and other loans
Derivative financial instruments

Year ended 30 April 2012
Financial assets
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments

Financial liabilities
Trade and other payables
Finance lease liability
Financial guarantee contracts
Bank and other loans
Derivative financial instruments

1 YEAR OR LESS

1-5 YEARS

MORE THAN 5
YEARS

$’m

50.3
1,066.8
0.6
1,117.7

1,335.6
5.7
1.5

-
51.8
0.5
1,395.1

-
60.4
-
60.4

-
6.3
2.3

31.0
500.0
2.7
542.3

-
-
37.7
37.7

-
-
-

-
248.9
-
248.9

1 YEAR OR LESS

1-5 YEARS

MORE THAN 5
YEARS

$’m

TOTAL

$’m

50.3
1,127.2
38.3
1,215.8

1,335.6
12.0
3.8

31.0
800.7
3.2
2,186.3

TOTAL

$’m

51.5
1,031.1
-
1,082.6

-
82.8
-
82.8

-
-
27.8
27.8

51.5
1,113.9
27.8
1,193.2

1,369.5
6.8
0.2
11.0
0.9
1,388.4

-
9.1
-
730.0
4.3
743.4

-
-

-
240.0
-
240.0

1,369.5
15.9
0.2
981.0
5.2
2,371.8

Metcash Annual Report 2013

103

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued)

At balance date, the Group had unused credit facilities available for its immediate use as follows:

TOTAL
FACILITY
$’m

DEBT USAGE
$’m

GUARANTEES
& OTHER
USAGE
$’m

CASH
$’m

FACILITY
AVAILABLE
$’m

Syndicated facility
Securitisation facility
US private placement (i)
Bank guarantee facility (ii)
Working capital/guarantees
Working capital

Cash & cash equivalents

700.0
400.0
210.1
25.3
150.0
75.0
1,560.4
-
1,560.4

500.0
-
210.1
-
29.8
22.0
761.9
-
761.9

-
-
-
24.4
41.1
-
65.5
-
65.5

-
-
-
-
-
-
-
50.3
50.3

200.0
400.0
-
0.9
79.1
53.0
733.0
50.3
783.3

(i) The US Private Placement liability is presented inclusive of the associated cross currency interest rate swap hedge
contracts which effectively convert the US$225 million facility into $210.1 million of variable rate funding. (Note 17(v)).
(ii) Bank guarantee facility is used by Franklins Pty Limited to issue bank guarantees for leases and Work Cover

obligations. The facility is indemnified by Metcash Trading Limited.

Derivative financial liabilities
The table below details the liquidity risk arising from derivative liabilities held by the Group at the reporting date.

Year ended 30 April 2013
Derivative liabilities - net settled
Derivative liabilities - gross settled
- Inflows
- Outflows
Net maturity
Year ended 30 April 2012
Derivative liabilities - net settled
Derivative liabilities - gross settled
- Inflows
- Outflows
Net maturity

1-6 MTHS

6-12 MTHS

1-5 YEARS

>5 YEARS

TOTAL

$’m

(1.0)

37.0
(37.2)
(1.2)

(1.4)

19.4
(19.7)
(1.7)

(1.2)

9.5
(9.6)
(1.3)

(1.8)

3.3
(3.3)
(1.8)

(0.6)

11.8
(11.9)
(0.7)

(2.0)

-
-
-

-
-
(2.0)

-
-
-

(2.8)

58.3
(58.7)
(3.2)

(5.2)

22.7
(23.0)
(5.5)

Net settled derivatives comprise interest rate swap contracts that are used to hedge floating rate interest payable on bank
debts. Gross settled derivatives comprise forward exchange contracts that are used to hedge anticipated purchase
commitments.

Credit risk
The Group trades with a large number of customers and it is Group policy that all customers who wish to trade on credit terms
are subject to credit verification procedures. In addition, where a loan has been provided, the Group will obtain security over
certain assets of the customer wherever possible.

The management of the receivables balance is the key in the minimisation of the Group’s potential bad debt exposure.
Receivables balances are monitored on an ongoing basis and a formal review of all balances occurs every 6 months. Where
necessary, appropriate provisions are established.

As identified in Note 8 (Trade and Other Receivables), the current level of impairment provision represents 4.4% of the
receivables balance.

All derivatives are transacted with financial institutions that have high investment grade credit ratings. As at 30 April 2013, all
derivative counterparts had a credit rating of AA- or better.

104

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued)

The Group has granted a financial guarantee relating to the bank loan of its associate, Adcome Pty Ltd. The guarantee
represents a put option held by Adcome's bank, whereby the holder has the right to require the non Metcash shareholders to
‘put’ their remaining shares in Adcome Pty Ltd back to Metcash within an agreed period and under certain prescribed
circumstances in return for repayment of the debt by Adcome Pty Ltd to the holder. The estimate of the maximum amount
payable in respect of the put option, if exercised, is $52.8 million (2012: $58.3 million), as defined in the option deed. The fair
value of the financial guarantee contract at the reporting date was $3.6 million (2012: $0.2 million) and is recognised as a
financial liability (Note 20).

There are no significant concentrations of credit risk within the Group.

Foreign currency risk
The Group is exposed to foreign exchange fluctuations on transactions and balances in New Zealand dollars in respect of the
Tasman Liquor business unit. These operations represent less than 5% of total sales and total profit after tax, and as such the
exposure is minimal.

In addition, the Group undertakes some foreign currency transactions when purchasing goods and services. The Group enters
into forward foreign exchange contracts to manage the risk associated with anticipated purchase commitments denominated
in foreign currencies.

The amount of foreign exchange cover is based on anticipated future purchases in light of current conditions in foreign
markets, commitments from customers and experience.

The Group’s exposure to foreign exchange risk on principal and interest payments in relation to the US$225 million USPP
facility have been hedged using cross currency interest rate swaps (Note 17(v)).

Price risk
The Group purchases energy in the form of electricity, petrol and oil, LPG and water from various sources. These costs
represent less than 5% of combined Distribution and Administrative expenses. The group enters into periodic contracts for
supply of these products via third party tender. No derivative price instruments are used to manage price risk associated with
these commodities as the Group's exposure to commodity price risk is minimal.

Capital management
The Board’s intention is to return earnings to shareholders while retaining adequate funds within the business to reinvest in
future growth opportunities. A minimum payout ratio of 60% of underlying earnings per share has been set by the Board. A
dividend reinvestment plan is in existence, but has been suspended by the Board. The plan is able to be reinstituted at any
time.

The Group provides benefits to employees of the Group in the form of share-based payment transactions, whereby employees
render services in exchange for shares or rights over shares (equity-settled transactions). The Group provides these benefits
in the form of the Metcash Executive and Senior Managers Performance Rights Plan (Rights Plan) and the Metcash Employee
Option Plan (MEOP). Details are disclosed in Note 25.

The Board and management set out to achieve and maintain Statement of Financial Position ratios that would satisfy an
investment grade rating. Certain Statement of Financial Position ratios are imposed under the Group’s banking facilities, as
summarised in Note 17.

Management monitor capital through the gearing ratio (debt / debt plus total equity). The gearing ratios at 30 April 2013 and
2012 were 33.3% and 42.6% respectively. This is within an acceptable target range.

Metcash Annual Report 2013

105

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued)

Fair value
The Group uses various methods in estimating the fair value of a financial instrument. The different methods have been
defined as follows:

•
•

•

Level 1: the fair value is calculated using quoted prices in active markets
Level 2: the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for
the asset or liability, either directly (as prices ) or indirectly (derived from prices)
Level 3: the fair value is estimated using inputs for the asset or liability that are not based on observable market data.

The table below analyses financial instruments carried at fair value, by valuation method:

Year ended 30 April 2013
Derivative financial assets
Derivative financial liabilities
Financial guarantee contracts

Year ended 30 April 2012
Derivative financial assets
Derivative financial liabilities
Financial guarantee contracts

LEVEL 1

LEVEL 2

LEVEL 3

TOTAL

$’m

-
-
-
-

38.3
(3.2)
(3.8)
31.3

-
-
-
-

-
-

27.8
(5.2)
(0.2)
22.4

-
-

38.3
(3.2)
(3.8)
31.3

27.8
(5.2)
(0.2)
22.4

The carrying amount of the financial assets and liabilities recorded in the financial statements approximates their fair value as
at the reporting date.

23.

COMMITMENTS

(a)

Operating lease commitments

The Group has entered into commercial leases on certain forklifts, land and buildings. Contingent rentals are payable to reflect
movements in the Consumer Price Index on certain leases and to reflect the turnover of certain stores occupying the land and
buildings. Future minimum rentals payable under non-cancellable operating leases as at 30 April are as follows:

Within 1 year
After 1 year but not more than 5 years
More than 5 years
Aggregate lease expenditure contracted for at reporting date

(b)

Operating lease receivables

2013
$’m

206.1
641.3
750.2
1,597.6

2012
$’m

209.5
622.9
691.1
1,523.5

Certain properties under operating lease have been sublet to third parties. The future lease payments expected to be received
at the reporting date are:

Within 1 year
After 1 year but not more than 5 years
More than 5 years
Aggregate lease income contracted for at the reporting date.

106

Metcash Annual Report 2013

2013
$’m

91.6
279.9
390.1
761.6

2012
$’m

83.9
263.2
372.4
719.5

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

23. COMMITMENTS (Continued)

(c)

Finance lease commitments

The Group has finance leases for various vehicles and equipment. The weighted average interest rate implicit in the leases is
8.52% (2012: 9.19%). Future minimum lease payments under finance leases together with the present value of the net
minimum lease payments for the Group are as follows:

Within 1 year
After 1 year but not more than 5 years
More than 5 years

Less amounts representing finance charges
Present value of minimum lease payments

(d)

Capital expenditure commitments

FUTURE MINIMUM
LEASE PAYMENTS

2013
$’m

6.6
7.0
-
13.6
(1.6)
12.0

2012
$’m

7.7
10.4
-
18.1
(2.2)
15.9

PRESENT VALUE OF
MINIMUM LEASE
PAYMENTS
2013
$’m

2012
$’m

5.7
6.3
-
12.0
-
12.0

6.8
9.1
-
15.9
-
15.9

At 30 April 2013, the Group has committed $51.0 million (2012: $Nil) towards significant capital expenditure on the Project
Mustang NSW warehouse automation project. These commitments are not provided for at the reporting date and are
estimated to be due within the next 2 years.

Metcash Annual Report 2013

107

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

24.

RELATED PARTY DISCLOSURES

(a) Subsidiaries

The consolidated financial statements include the financial statements of Metcash Limited and the subsidiaries listed in the
following table.

NAME
A.C.N. 131 933 376 Pty Ltd
Action Holdco Pty Limited
Action Holdings Pty Ltd (i)
Action Projects Proprietary Limited
Action Supermarkets Pty Ltd (i)
Amalgamated Confectionery Wholesalers Pty. Ltd. (i)
Arrow Pty Limited
Australian Asia Pacific Wholesalers Pty Ltd
Australian Liquor Marketers (QLD) Pty Ltd (i)
Australian Liquor Marketers (WA) Pty Ltd (i)
Australian Liquor Marketers Pty Limited (i)
Blue Lake Exporters Pty Ltd
Bofeme Pty Ltd
Casuarina Village Shopping Centre Pty. Ltd.
City Ice and Cold Storage Company Proprietary Limited
Clancy’s Food Stores Pty Limited
Composite Buyers Finance Pty. Ltd.
Composite Buyers Pty Limited
Composite Pty. Ltd.
Cornerstone Retail Pty Ltd
Davids Food Services Pty Ltd
Davids Group Staff Superannuation Fund Pty. Ltd.
Denham Bros. Pty Limited
Drumstar V2 Pty Ltd
FAL Properties Pty. Ltd.
FAL Share Plan Nominees Pty Ltd
FAL Superannuation Fund Pty Ltd
Five Star Wholesalers Pty. Ltd.
Foodchain Holdings Pty Ltd
Foodland Properties Pty Ltd
Foodland Property Holdings Pty. Ltd.
Foodland Property Unit Trust
Garden Fresh Produce Pty Ltd
Garden Fresh Produce Trust
Gawler Supermarkets Pty. Ltd.
Global Liquor Wholesalers Pty Limited (i)
GP New Co Pty Ltd
Green Triangle Meatworks Pty Limited
Harvest Liquor Pty. Ltd.
IGA Community Chest Limited (ii)
IGA Distribution (SA) Pty Limited (i)
IGA Distribution (Vic) Pty Limited (i)
IGA Distribution (WA) Pty Limited (i)
IGA Fresh (Northern Queensland) Pty Limited (i)
IGA Fresh (NSW) Pty Limited (i)
IGA Pacific Pty Limited
IGA Retail Network Limited
IGA Retail Services Pty Limited (i)
Independent Brands Australia Pty Limited (i)
Interfrank Group Holdings Pty Ltd**(i)
Jewel Food Stores Pty. Ltd.
Jewel Superannuation Fund Pty Ltd
Jorgensens Confectionery Pty. Limited
JV Pub Group Pty Ltd

COUNTRY OF INCORPORATION
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia

EQUITY INTEREST
HELD BY THE GROUP
2012 %
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-

2013 %
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

108

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

24.

RELATED PARTY DISCLOSURES (Continued)

NAME
Keithara Pty. Ltd.
Knoxfield Transport Service Pty. Ltd.
M C International Australia Pty Limited
Melton New Co Pty Ltd
Mermaid Tavern (Freehold) Pty Ltd
Metcash Automotive Holdings Pty Ltd***
(previously Automotive Brands Holdings Pty Ltd)
Metcash Export Services Pty Ltd
Metcash Food & Grocery Pty Ltd (i)
Metcash Food & Grocery Convenience Division Pty
Limited (i)
(previously Campbells Cash and Carry Pty. Limited)
Metcash Holdings Pty Ltd
Metcash Management Pty Limited
Metcash Services Proprietary Limited
Metcash Storage Pty Limited
Metcash Trading Limited (i)
Metoz Holding Limited
Metro Cash & Carry Pty Limited
Mirren (Australia) Pty. Ltd.
Mittenmet Pty. Ltd. (i)*
Moorebank Transport Pty Ltd
Moucharo Pty. Ltd.
Newton Cellars Pty Ltd
NFRF Developments Pty Ltd
Nu Fruit Pty. Ltd.
Payless Superbarn (N.S.W.) Pty Ltd
Payless Superbarn (VIC.) Pty. Ltd.
Pinnacle Holdings Corporation Pty Limited
Plympton Properties Pty. Ltd.
Property Reference Pty. Limited
QIW Pty Limited
Queensland Independent Wholesalers Pty Limited
Quickstop Pty Ltd (i)
Rainbow Supermarkets Pty Ltd
Rainbow Unit Trust
Rainfresh Vic Pty. Ltd.
Regeno Pty Limited
Regzem (No 3) Pty. Ltd.
Regzem (No 4) Pty. Ltd.
Rennet Pty. Ltd.
Retail Merchandise Services Pty. Limited
Retail Stores Development Finance Pty. Limited
Rockblock Pty. Ltd.
R.S.D.F. Nominees Pty. Ltd.
Soetensteeg 2 61 Exploitatiemaatschappij BV
SR Brands Pty Ltd
SSA Holdings Pty Ltd (Scanning Systems Australia)
Scanning Systems (Aust) Pty Ltd
Smart IP Co Pty Ltd
Scanning Systems (Fuel) Pty Ltd
Stonemans (Management) Proprietary Limited
Stonemans Self Service Pty. Ltd.
Tasher No 8 Pty. Ltd.
Tasman Liquor Company Limited
Vawn No 3 Pty. Ltd.
Wickson Corporation Pty Limited(i)
Wimbledon Unit Trust

COUNTRY OF INCORPORATION
Australia
Australia
Australia
Australia
Australia
Australia

EQUITY INTEREST HELD
BY THE GROUP
2013 %
100
100
100
100
100
75.1

2012 %
100
100
100
100
-
-

Australia
Australia

Australia

Australia
Australia
Australia
Australia
Australia
South Africa
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Netherlands
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia

100
100

100

100
100
100
100
100
100
100
100
100
100
100
100
51
51
100
100
100
100
100
100
100
100
100
100
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

100
100

100

100
100
100
100
100
100
100
100
50.1
100
100
100
51
51
100
100
100
100
100
100
100
100
100
100
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

Metcash Annual Report 2013

109

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

24.

RELATED PARTY DISCLOSURES (Continued)

* Mittenmet Pty Ltd

The consolidated financial statements include the financial statements of Mittenmet Pty Ltd and the subsidiaries listed in the
following table.

NAME
ACN 008 698 093 (WA) Pty Ltd
Anzam (Aust.) Pty Ltd (i)
Australian Hardware Support Services Pty Ltd (i)
Capeview Hardware Pty Ltd.
Chelsea Heights Operations Pty Limited (i)
DIY Superannuation Pty Ltd (i)
Echuca Hardware Pty Ltd (i)
Faggs Geelong Pty Ltd
Handyman Stores Pty Ltd (i)
Hardware Property Trust
Himaco Pty Ltd (i)
Lilydale Operations Pty Limited (i)
Mega Property Management Pty Ltd (i)
Mitre 10 Pty Ltd (i)
Mitre 10 Australia Pty Ltd (i)
Mitre 10 Mega Pty Ltd (i)
Narellan Hardware Pty Ltd (i)
National Retail Support Services Pty Ltd (i)
Northern NSW Timber and Hardware Pty Ltd
Roma Hardware Pty Ltd

(previously Portland Hardware Pty Ltd)

South Coast Operations Pty Ltd (i)
South West Operations Pty Ltd (i)
Sydney Importing Co Limited (In Liquidation)
Tasmania Hardware Pty Ltd
Trevisan Pty Ltd
Timber and Hardware Exchange Pty Ltd
WA Hardware Services Pty Ltd (i)

Australia
Australia
Australia
Australia
Australia
Australia
Australia

EQUITY INTEREST HELD
BY THE GROUP
2013 %
99.44
100
100
100
100
100
100
75
100
100
100
100
100
100
100
100
100
100
100
100

2012 %
99.44
100
100
-
100
100
100
-
100
100
100
100
100
100
100
100
100
100
100
-

100
100
97.65
80
100
52
100

100
100
97.65
-
-
52
100

(i)

These entities entered into a Deed of Assumption with Metcash Limited on 27 February 2013, a copy of which was
lodged with ASIC on 5 March 2013. In accordance with the Deed of Assumption each entity identified above joined the
Deed of Cross Guarantee (refer Note 24(c)) on 27 February 2013.

** Interfrank Group Holdings Pty Ltd

The consolidated financial statements include the financial statements of Interfrank Group Holdings Pty Ltd and the subsidiaries
listed in the following table:

NAME
Franklins Pty Ltd (i)
Franklins Supermarket Holdings Pty Ltd (i)
Franklins Franchising Pty Ltd (i)
Franklins Bankstown Square Pty Ltd (i)
Franklins Bass Hill Pty Ltd (i)
Franklins Blacktown Pty Ltd (i)
Franklins Bonnyrigg Pty Ltd (i)
Franklins Ulladulla Pty Ltd (i)
Franklins Casula Pty Ltd (i)
Franklins Cronulla Pty Ltd (i)

COUNTRY OF INCORPORATION
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia

EQUITY INTEREST HELD
BY THE GROUP
2013 %
100
100
100
100
100
100
100
100
100
100

2012 %
100
100
100
100
100
100
100
100
100
100

110

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

24.

RELATED PARTY DISCLOSURES (Continued)

NAME
Franklins Drummoyne Pty Ltd (i)
Franklins Liverpool Pty Ltd (i)
Franklins Macquarie Pty Ltd (i)
Franklins Maroubra Pty Ltd (i)
Franklins Merrylands Pty Limited (i)
Franklins Moorebank Pty Limited (i)
Franklins North Rocks Pty Ltd (i)
Franklins Pennant Hills Pty Ltd (i)
Franklins Penrith Nepean Pty Ltd (i)
Franklins Penrith Plaza Pty Ltd (i)
Franklins Rockdale Plaza Pty Ltd (i)
Franklins Singleton Pty Ltd (i)
Franklins Spit Junction Pty Ltd (i)
Franklins Westleigh Pty Ltd (i)
Franklins Wetherill Park Pty Ltd (i)
Franklins Wentworthville Pty Ltd (i)
Fresco Supermarket Holdings Pty Ltd (i)
FW Viva 3 Pty Ltd (i)

EQUITY INTEREST HELD
BY THE GROUP
2013 %
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

2012 %
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

*** Metcash Automotive Holdings Pty Ltd (previously Automotive Brands Holdings Pty Ltd)

The consolidated financial statements include the financial statements of Metcash Automotive Holdings Pty Ltd (previously
Automotive Brands Holdings Pty Ltd) and the subsidiaries listed in the following table.

NAME
Australian Automotive Distribution Pty Limited
Automotive Brands Group Pty Ltd

COUNTRY OF INCORPORATION
Australia
Australia

2013 %
100
100

2012 %
-
-

EQUITY INTEREST HELD
BY ABH GROUP

(b)

Ultimate parent

Metcash Limited is the ultimate parent entity.

(c)

Entities subject to class order relief

Metcash Limited
Pursuant to an order from ASIC under section 340(1) of the Corporations Act 2001 dated 23 April 2012 which is based on
Class Order 98/1418 (Order), relief has been granted to certain controlled entities of Metcash Limited, being those marked (i),
from the Corporations Act requirements for preparation, audit and lodgement of their financial reports. As a condition of the
Order, Metcash Limited and the controlled entities, being those marked as (i) (the Closed Group) entered into a Deed of Cross
Guarantee on 18 April 2012. The entities marked (ii) are also party to the Deed of Cross Guarantee, but are not eligible for
inclusion in the financial reporting relief. The effect of the deed is that Metcash Limited has guaranteed to pay any deficiency
in the event of winding up of these controlled entities. These controlled entities have also given similar guarantees in the event
that Metcash Limited is wound up.

Mittenmet Pty Limited and Interfrank Group Holdings Pty Ltd were added to the Closed Group during the 2013 and 2012,
respectively, including their subsidiaries identified in Note 24(a) and marked (i).

Metcash Annual Report 2013

111

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

24.

RELATED PARTY DISCLOSURES (Continued)

The Statement of Comprehensive Income and Statement of Financial Position of the entities that are members of the ‘Closed
Group’ are as follows:

CLOSED GROUP

2013
$’m

2012
$’m

272.1
(82.2)
189.9
(536.7)
(243.9)
34.6
(556.1)

29.5
958.8
710.3
47.6
0.6
28.8
1,775.6

37.7
36.9
2,591.5
249.8
68.1
1,356.9
4,340.9
6,116.5

1,207.1
0.5
57.5
12.0
142.8
1,419.9

3,565.1
2.7
167.1
3,734.9
5,154.8
961.7

2,284.9
(765.9)
(1.2)
(556.1)
961.7

157.5
(54.2)
103.3
(428.3)
(211.7)
-
(536.7)

24.1
869.1
778.7
116.5
-
29.9
1,818.3

27.8
51.3
2,521.1
190.4
95.6
1,306.7
4,192.9
6,011.2

1,236.6
0.9
17.7
20.9
146.9
1,423.0

3,787.7
4.3
151.1
3,943.1
5,366.1
645.1

1,914.7
(765.9)
33.0
(536.7)
645.1

(i) Statement of Comprehensive Income
Profit before income tax
Income tax expense
Net profit for the year
Retained profits at the beginning of the financial year
Dividends provided for or paid
Reserves transferred
Retained profits at the end of the financial year
(ii) Statement of Financial Position
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Disposal group assets held for sale
Derivative financial instruments
Other
Total current assets
Non-current assets
Derivative financial instruments
Receivables
Investments
Property, plant and equipment
Net deferred tax assets
Intangible assets and goodwill
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Derivative financial instruments
Interest-bearing loans and borrowings
Income tax payable
Provisions
Total current liabilities
Non-current liabilities
Interest-bearing loans and borrowings
Derivative financial instruments
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Other equity
Reserves
Retained profits
Total equity

112

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

24.

RELATED PARTY DISCLOSURES (Continued)

(d)

Transactions with related parties

SALES TO
RELATED
PARTIES
$’m

PURCHASES
FROM
RELATED
PARTIES
$’m

OTHER
TRANSACTIONS
WITH RELATED
PARTIES
$’m

-
-

27.3
25.7

0.6
1.1

22.1
-

500.0
350.0

203.4
240.5

RELATED PARTY

Group
Associates
Sales to associates

Lease charges to associates

Dividends received from associates

Sale of businesses to associates

2013
2012

1,326.7
1,152.9

-
-

Parent
Associates
There were no transactions between the parent and its associates during the year (2012: nil).

Subsidiaries
Dividend received

Interest expense

2013
2012

-
-

Terms and conditions of transactions with related parties
All transactions with related parties are made on normal commercial terms and conditions.
Terms and conditions of the tax funding agreement are set out in Note 5.

Other transactions with Key Management Personnel

Mr Barnes is Chairman of Samuel Smith and Sons Pty Ltd. Mrs Balfour is a director of Salmat Limited. Mr Butler is
Chairman of AMP Superannuation Ltd. All organisations are suppliers to the Group under normal commercial terms and
conditions. The total level of purchases from all companies is less than 0.2% of Metcash’s annual purchases and is not
considered material.

During the year Metcash entered into arrangements in respect of two retail stores with Cheswell Capital Pty Limited
(“Cheswell”). Cheswell is a wholly owned subsidiary of Chester Capital Pty Limited (“Chester”). Mr Jankelowitz is a Non
Executive Director of Chester. The arrangements were concluded on an arm’s length basis under normal commercial terms
and conditions. As part of the arrangements Metcash provided loan funding of $500,000, repayable over 24 months, to
Cheswell. The following details relate to the loan:

Balance at the reporting date
Interest paid (17/12/2012 to 30/04/2013)
Interest rate

$478,114
$ 22,395
10.0% p.a.

Other than noted above there were no loans outstanding to Key Management Personnel or their related entities.

Metcash Annual Report 2013

113

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

24.

RELATED PARTY DISCLOSURES (Continued)

(e)

Amounts due from and payable to related parties

Related party

Group
Associates
Trade receivables - gross
Provision for impairment

Loans receivable – gross
Provision for impairment

Parent
Subsidiaries
Loans receivable
Loans payable

2013
$’m

2012
$’m

114.0
(14.5)
99.5
15.9
(6.5)
9.4

111.5
(17.7)
93.8
48.8
(33.1)
15.7

2,428.6
3,889.5

1,825.5
3,686.6

Terms and conditions of amounts due from and payable to related parties
Loans and trade receivables are due and payable on normal commercial terms and conditions.

25.

SHARE-BASED PAYMENTS

(a) Types of share-based payment plans

The Group has two share-based incentive plans for employees and executive directors of the Group: the Metcash Executives
and Senior Managers Performance Rights Plan (Rights Plan) and the legacy Metcash Employees Option Plan (MEOP). Fully
paid ordinary shares issued under these plans rank equally with all other existing fully paid ordinary shares, in respect of
voting and dividends rights.

Metcash Executives and Senior Managers Performance Rights Plan (Rights Plan)

Metcash has two incentive schemes that operate within the Rights Plan structure:

i. The Short Term Incentive (‘STI’) Rights Plan; and
ii. The Long Term Incentive (‘LTI’) Rights Plan.

The Short Term Incentive (‘STI’) Rights Plan

• Corporate level - applies to most KMP and executives
• Business level - applies to the KMP and executives from each business pillar

After the end of each financial year, Executive performance is assessed against their individual KPIs to determine the amount
of STI to be awarded. If these KPI are met, 75% of the STI reward amount is paid in July of each year after the release of the
audited accounts. The remaining 25% is deferred for 15 months and released through the issue of Metcash ordinary shares,
conditional upon the Executive being employed by the Company on 15 April of the year subsequent to the performance year.
Any STI not paid is forfeited.

For FY2013, the number of shares to be issued will be calculated by dividing the 25% STI reward dollar value by the Metcash
VWAP for the five days ending 31 July 2013. These shares will be issued by 30 April 2014, but will be restricted from trading
until 31 July 2014.

114

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

25.

SHARE-BASED PAYMENTS (Continued)

(a) Types of share-based payment plans (continued)

ii.

The Long Term Incentive (‘LTI’) Rights Plan

The Rights Plan provides selected employees with the opportunity to be rewarded with fully paid ordinary shares as an
incentive to create long term growth in value for Metcash shareholders. The plan is administered by a trustee who may
acquire (and hold in trust) shares for the benefit of participants. These shares are purchased on market or issued to the
trustee once the performance rights vest.

The essential elements of the Rights Plan are as follows:

•

each Performance Right is an entitlement to receive a fully paid ordinary share in the Company on terms and
conditions determined by the Board, including vesting conditions linked to service and performance over a 3 year
period;

• Performance Rights are offered at no cost to the employee and as such, significantly fewer Performance Rights are

•

offered than was the case with options;
persons offered Performance Rights will not be offered options under the MEOP or any other form of long term
incentive;

• Performance Rights do not carry voting or dividend rights, however shares issued upon vesting of Performance

•

Rights will carry the same rights as other ordinary shares;
the number of Performance Rights granted is determined by dividing the value of an employee’s long term incentive
entitlement by the Company’s share price at the time of issue;
the FY2013 plan hurdles were set at between 4% (‘lower bound hurdle rate’) and 7% (‘upper bound hurdle rate’)
compound underlying EPS growth, both adjusted up or down for the effects of actual year-on-year inflation/deflation,
over a three year vesting period as follows:

(cid:882)
(cid:882)

Achieving an underlying EPS growth rate equivalent to the lower bound hurdle rate results in 0% vesting.
Achieving an underlying EPS growth rate equivalent to the upper bound hurdle rate results in 100% vesting.

Pro-rata vesting occurs for EPS growth between the lower and upper bound hurdle rates. Any LTIs that do not vest
are forfeited;

the FY2012 and FY2011 plan hurdles, which are not adjusted for the effects of inflation/deflation, were set at
between 5% and 10% compound underlying EPS growth over a three year vesting period as follows:

(cid:882)
(cid:882)

Achieving 5% underlying EPS growth results in 50% vesting.
Achieving 10% underlying EPS growth results in 100% vesting.

Pro-rata vesting occurs for EPS growth over 5% and under 10%. Any LTIs that do not vest are forfeited; and

underlying earnings per share is calculated on the Group’s underlying profit, adjusted for non-recurring and
significant items such as goodwill impairment or amortisation, or other non cash accounting items.

Metcash Employee Option Plan (MEOP) (Legacy Plan)

Metcash previously issued invitations to eligible employees and executive directors to participate in the Employee Share
Option Plan. The last tranche of options was issued in 2008 and vested on 7 February 2013. The plan will cease in February
2014 when the last options expire.

The exercise price of options was determined as the closing price on the Stock Exchange Automated Trading System
(SEATS), excluding special crossings, overnight sales and exchange traded option exercises of the shares on the grant date,
or such other price as determined by the Board. The vesting of options occurs as follows:

• 60% of the options issued to a participant become exercisable from the third anniversary of the grant date;
• a further 20% become exercisable from the fourth anniversary of the grant date; and
•
the remaining 20% become exercisable from the fifth anniversary of the grant date.

Options must be exercised prior to the sixth anniversary of the grant date, at which time they expire.

Metcash Annual Report 2013

115

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

25.

SHARE-BASED PAYMENTS (Continued)

(a) Types of share-based payment plans (continued)

Where an employee ceases to be employed by any Group company the options issued to that participant will automatically
lapse, except where the employee has ceased to be an employee by reason of total and permanent disability, death,
retirement and such other circumstances as the Board may determine. In these circumstances, the Board may give its written
approval to the participant or their personal representative to exercise the options during such further period as the Board may
determine. In addition, options will lapse on the winding up of the Company or where the participant has acted fraudulently or
dishonestly.

An option may be exercised immediately in the event of:

• any party becoming entitled to acquire shares by way of a compulsory acquisition; or
• a resolution being passed by the Company to which any party becomes or will become “entitled” to 100% of the

issued shares; or

• a participant's employment being terminated by any Group company at any time within the period of six months after

any party who is not at the grant date “entitled” to 50% or more of the shares becomes so entitled.

Exercise prices or option holdings will be pro-rated in the event of a bonus issue, rights issue or reorganisation of the share
capital of the Company.

(b) Summary of rights and options granted

Rights Plan
The following table illustrates the movement in the number of Performance Rights during the year:

Outstanding at the beginning of the year
Granted during the year – LTI
Vested during the year
Reinstated/(expired/forfeited) during the year
Outstanding at the end of the year

The outstanding balance as at 30 April 2013 is represented by:

2013
NUMBER

2012
NUMBER

2,785,319
1,806,964
-
(103,018)
4,489,265

1,399,385
1,512,804
-
(126,870)
2,785,319

VESTING DATE

30 June 2013 – LTI
30 June 2014 – LTI
7 September 2015 – LTI
Total

TOTAL
OUTSTANDING
(NUMBER)

EXERCISABLE
(NUMBER)

REMAINING
CONTRACTUAL
LIFE

1,285,000
1,397,301
1,806,964
4,489,265

2 months
1 year 2 months
2 years 4 months

-
-
-
-

Weighted average fair value
The weighted average fair value of LTI Performance Rights granted during the year was $2.30 per Performance Right (2012:
$3.62).

116

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

25.

SHARE-BASED PAYMENTS (Continued)

(b)

Summary of rights and options granted (continued)

Pricing model

The LTI performance rights issued were valued on the grant date using either the Black-Scholes or the binomial options
pricing models. The following table lists the inputs to the valuations.

Dividend yield
Risk free rate
Expected volatility
Days to vesting
Exercise price
Share price at measurement date

FY2013
Plan LTI

FY2012
Plan LTI

FY2011
Plan LTI

7.55%
3.06%
18.74%
994
-
$3.22

6.41%
3.69%
17.64%
927
-
$4.21

6.19%
5.36%
16.63%
940
-
$4.20

The FY2013 STI performance rights will be issued based on the volume-weighted average price (VWAP) of Metcash’s shares
for the five days ending 31 July 2013. The rights were valued at $1.2 million, represented by the nominal value of the STI
entitlement of the executives as calculated in accordance with the STI Plan rules.

MEOP

The following table illustrates the number of options, exercise prices and movements during the year ended 30 April 2013 and
30 April 2012:

Outstanding at the beginning of the year
Reinstated during the year
Exercised during the year:

Expired during the year
Outstanding at the end of the year

The outstanding balance as at 30 April 2013 is represented by:

2013
EXERCISE
PRICE
$

Various

-
-
Various

2012
EXERCISE
PRICE
$

Various

3.925
4.267
Various

2012
NUMBER
24,126,321
122,150

(2,489,364)
(2,856)
(6,394,266)
15,361,985

2013
NUMBER
15,361,985
500,000

-
-
(2,466,489)
13,395,496

EXPIRY DATE

7 February 2014

EXERCISE
PRICE
$

TOTAL
OUTSTANDING
(NUMBER)

EXERCISABLE
(NUMBER)

REMAINING
CONTRACTUAL
LIFE

4.267

13,395,496

9 months

Metcash Annual Report 2013

117

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

26.

DIRECTORS’ AND EXECUTIVES DISCLOSURES

Details of Key Management Personnel

Executives
Fergus Collins
Adrian Gratwicke
Silvestro Morabito
Mark Laidlaw

CEO Australian Liquor Marketers
Chief Financial Officer
COO Food & Grocery
CEO Hardware

Directors
Peter L Barnes
Andrew Reitzer(i)
Ian R Morrice(i)
Patrick N J Allaway(ii)
Fiona E Balfour
Michael R Butler
Neil D Hamilton
Edwin M Jankelowitz
Richard A Longes(iii)
V Dudley Rubin

Non-executive Chairman
Chief Executive Officer
Executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director

(i) Mr Morrice was appointed as a non-executive Director on 12 June 2012 and was appointed Executive Director on 1 March 2013. Mr Morrice will replace Mr

Reitzer who retires as Group CEO on 30 June 2013.

(ii) Mr Allaway was appointed as a non-executive Director on 7 November 2012.
(iii) Mr Longes retired from the Board on 30 August 2012.

b) Performance Rights holding of Key Management Personnel

Name

Directors
P Barnes
A Reitzer
I Morrice
P Allaway
F Balfour
M Butler
N Hamilton
E Jankelowitz
R Longes
D Rubin
Executives
F Collins
A Gratwicke
M Laidlaw
S Morabito
Total

Balance 1
May 2012

Granted as
remuneration
- LTI

Vested
during the
year

Changed,
forfeited or
lapsed during
the year

Balance 30
April 2013

Balance at
report date

-
-
-
-
-
-
-
-
-
-

109,648
132,974
95,367
142,687
480,676

87,488
100,841
81,239
135,169
404,737

-
-
-
-
-
-
-
-
-
-

-
-
-
-
-

-
-
-
-
-
-
-
-
-
-

-
-
-
-
-

-
-
-
-
-
-
-
-
-
-

197,136
233,815
176,606
277,856
885,413

118

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

26. DIRECTORS’ AND EXECUTIVES DISCLOSURES (Continued)

b) Performance Rights holding of Key Management Personnel (Continued)

Name
Directors
P Barnes
A Reitzer
F Balfour
M Butler
N Hamilton
E Jankelowitz
R Longes
I Morrice
D Rubin
Executives
F Collins
A Gratwicke
M Laidlaw
S Morabito
Total

Balance 1
May 2011

Granted
during the
year

Vested
during the
year

Changed,
forfeited or
lapsed during the
year

Balance 30
April 2012

Balance at
report date

-
-
-
-
-
-
-
-
-

53,923
59,770
49,166
70,171
233,030

55,725
73,204
46,201
72,516
247,646

-
-
-
-
-
-
-
-
-

-
-
-
-
-

-
-
-
-
-
-
-
-
-

-
-
-
-
-

-
-
-
-
-
-
-
-
-

109,648
132,974
95,367
142,687
480,676

c) Option holding of Key Management Personnel (MEOP)

Balance 1
May 2012

Granted
during the
year

Exercised
during the
year

Disposed,
forfeited or
lapsed during
the year

Balance at
30 Apr 2013

Vested
during the
year

Vested and
Exercisable
at 30 Apr
2013

Balance at
report date

-
-
-
-
-
-
-
-
-
-

-
500,000
350,000
350,000
1,200,000

-
-
-
-
-
-
-
-
-
-

-
-
-
-
-

-
-
-
-
-
-
-
-
-
-

-
-
-
-
-

-
-
-
-
-
-
-
-
-
-

-
-
500,000
-
350,000
-
-
350,000
- 1,200,000

-
100,000
70,000
70,000
240,000

-
500,000
350,000
350,000

-
500,000
350,000
350,000
1,200,000 1,200,000

Name
Directors
P Barnes
A Reitzer
I Morrice
P Allaway
F Balfour
M Butler
N Hamilton
E Jankelowitz
R Longes
D Rubin
Executives
F Collins
A Gratwicke
M Laidlaw
S Morabito
Total

Metcash Annual Report 2013

119

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

26. DIRECTORS’ AND EXECUTIVES DISCLOSURES (Continued)

c) Option holding of Key Management Personnel (MEOP) (continued)

Balance 1
May 2011

Granted
during the
year

Exercised
during the
year

Disposed,
forfeited or
lapsed during
the year

Balance at
30 Apr 2012

Vested
during the
year

Vested and
Exercisable
at 30 Apr
2012

Balance at
report date

-
1,200,000
-
-
-
130,000
-
-
-

50,000
510,000
400,000
387,125
2,677,125

-
-
-
-
-
-
-
-
-

-
-
-
-
-

-
-
-
-
-
-
-
-
-

-
(1,200,000)
-
-
-
(130,000)
-
-
-

-
-
-
-
-
-
-
-
-

(50,000)
(10,000)
-
(37,125)
(97,125)

-
-
500,000
-
350,000
(50,000)
-
350,000
(1,380,000) 1,200,000

-
100,000
70,000
70,000
240,000

-
-
500,000
400,000
350,000
280,000
280,000
350,000
960,000 1,200,000

Name
Directors
P Barnes
A Reitzer
F Balfour
M Butler
N Hamilton
E Jankelowitz
R Longes
I Morrice
D Rubin
Executives
F Collins
A Gratwicke
M Laidlaw
S Morabito
Total

Shareholding of Key Management Personnel

Name
Directors
P Barnes
A Reitzer
I Morrice
P Allaway
F Balfour
M Butler
N Hamilton
E Jankelowitz
R Longes
D Rubin
Executives
F Collins
A Gratwicke
M Laidlaw
S Morabito
Total

Balance
at 1 May
2012

177,083
1,750,000
-
-
13,600
50,000
20,000
320,000
128,154
15,000

1,600
63,950
-
32,575
2,571,962

Granted as
remuneration

On market
trade

Options
exercised

Other
adjustments(i)

Balance at
30 April
2013

Balance at
report date

-
-
-
-
-
-
-
-
-
-

-
-
-
-
-

-
(929,951)
21,000
54,000
11,910
-
-
-
-
2,500

-
-
-
-
(840,541)

-
-
-
-
-
-
-
-
-
-

-
-
-
-
-

4,951
9,902
-
-
4,163
4,951
-
-
9,902
-

182,034
829,951
21,000
54,000
29,673
54,951
20,000
320,000
138,056
17,500

490
9,528
-
6,604
50,491

2,090
73,478
-
39,179
1,781,912

(i) Other adjustments represent shares acquired by key management personnel as part of the Share Purchase Plan completed in July 2012.

120

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

26.

DIRECTORS’ AND EXECUTIVES DISCLOSURES (Continued)

Shareholding of Key Management Personnel (continued)

Name
Directors
P Barnes
A Reitzer
F Balfour
M Butler
N Hamilton
E Jankelowitz
R Longes
I Morrice
D Rubin
Executives
F Collins
A Gratwicke
M Laidlaw
S Morabito
Total

Balance
at 1 May
2011

177,083
1,750,000
13,600
50,000
20,000
320,000
128,154
-
15,000

1,600
53,950
-
18,275
2,547,662

Compensation by category

Short-term
Long-term
Post employment
Termination benefits
Share-based payments
Total

Granted as
remuneration

On market
trade

Options
exercised

Other
adjustments

Balance at
30 April
2012

Balance at
report date

-
-
-
-
-
-
-
-
-

-
-
-
-
-

-
-
-
-
-
-
-
-
-

(50,000)
-
-
(22,825)
(72,825)

50,000
10,000
-
37,125
97,125

-
-
-
-
-
-
-
-
-

-
-
-
-
-

177,083
1,750,000
13,600
50,000
20,000
320,000
128,154
-
15,000

1,600
63,950
-
32,575
2,571,962

177,083
1,750,000
13,600
50,000
20,000
320,000
128,154
-
15,000

1,600
63,950
-
32,575
2,571,962

2013

$’m
10.0
(0.2)
0.2
0.2
0.3
10.5

2012

$’m
7.4
(1.5)
0.2
-
0.2
6.3

There were no other transactions and balances with key management personnel other than as disclosed in Note 24.

27.

INFORMATION RELATING TO METCASH LIMITED (THE PARENT ENTITY)

In accordance with the amendment to the Corporations Act 2001, the Company has replaced the separate entity financial
statements with the following note.

Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Contributed equity
Retained earnings
Share based payments reserve
Total equity
Net profit for the year
Total comprehensive income for the year, net of tax

METCASH LIMITED

2013

$’m

2,428.6
7,058.2
3,901.5
3,901.5
3,156.7
2,950.9
205.2
0.6
3,156.7
296.1
296.1

2012

$’m

1,825.5
6,441.6
3,707.7
3,707.7
2,733.9
2,580.7
129.6
23.6
2,733.9
218.3
218.3

Metcash Limited has provided guarantees as part of the Closed Group arrangements as disclosed in Note 24(c).

Metcash Annual Report 2013

121

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

28.

AUDITORS REMUNERATION

Amounts received or due and receivable by
Ernst & Young (Australia) for:
- an audit or review of the financial statements of the entity and any other entity in the Group
- assurance related

Other services in relation to the entity and any other entity in the Group
- tax compliance and advisory
- tax ATO audit
- tax acquisitions/other

29.

BUSINESS COMBINATIONS

During the year the Metcash Group acquired the following entities or assets:

Date of acquisition
10 May 2012
11 May 2012
1 July 2012
1 October 2012
14 February 2013
2 April 2013

(i) Acquisition of business assets

Acquiree
Trevisan Pty Ltd
Fagg’s Geelong Pty Ltd
Automotive Brands Holdings Pty Ltd (ABG)
Tasmania Hardware Pty Ltd
Envy Hotel(i)
Miscamble Bros Mitre 10(i)

Details of the fair value of the assets and liabilities acquired are as follows:

(a) Purchase consideration:
Total purchase consideration
Less: cash acquired
Net purchase consideration
Less: fair value of net identifiable assets acquired (b)
Goodwill

(b) Assets acquired and liabilities assumed:
The assets and liabilities arising from the acquisitions are as follows:
Receivables
Inventories
Property, plant and equipment
Intangibles
Deferred tax (liability)/asset
Provisions and creditors
Put option written over non controlling interests
Interest bearing loans and borrowings
Fair value of net identifiable assets on acquisition date

2013
$

2012
$

2,587,000
37,000
2,624,000

1,845,000
216,958
2,061,958

946,493
998,155
398,543
2,343,191
4,967,191

1,136,292
1,171,504
57,000
2,364,796
4,426,754

% Acquired

100.0% (d)
75.0% (d)
75.1% (c)
80.0% (d)
100.0% (d)
100.0% (d)

ABG
$’m

Other
$’m

Total
$’m

54.7
-
54.7
(32.3)
22.4

15.7
16.7
3.2
45.1
(9.1)
(21.5)
(17.8)
-
32.3

55.0
(2.3)
52.7
(5.1)
47.6

3.1
13.1
5.4
2.0
0.3
(5.4)
(8.1)
(5.3)
5.1

109.7
(2.3)
107.4
(37.4)
70.0

18.8
29.8
8.6
47.1
(8.8)
(26.9)
(25.9)
(5.3)
37.4

The carrying amounts of acquired receivables approximated their gross contractual amounts and the estimated collectible
amounts at the dates of acquisition. The fair value of all identifiable assets and liabilities acquired approximated their carrying
values at the dates of acquisition.

The goodwill recognised on the above acquisitions is attributed to the expected synergies and other benefits from combining
the assets and activities of the acquired entities with those of the Group.

122

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

29.

BUSINESS COMBINATIONS (Continued)

Details of revenue and profit and loss attributable to the business combinations are as follows:

Revenue since acquisition to the reporting date
Profit/(loss) since acquisition to the reporting date

ABG
$’m

83.5
2.5

Other
$’m

62.3
2.8

Total
$’m

145.8
4.7

The Group has not been able to reliably determine the revenue and profit and loss of the acquired entities from the beginning of
the reporting period to the acquisition date and therefore cannot disclose the revenue and profit and loss had the entities been
acquired effective 1 May 2012.

Metcash acquired 75.1% of the equity of Automotive Brands Holdings Pty Ltd (ABG) on 1 July 2012. The name of the
acquired entity was subsequently changed to Metcash Automotive Holdings Pty Ltd. The acquisition positions Metcash firmly
in the automotive parts aftermarket sector. ABG is the third largest in the sector and manages the Autobarn franchise and
Autopro dealership groups.

Costs amounting to $2.4m were incurred in completing the acquisition. These costs have been disclosed as part of Significant
Items in the Statement of Comprehensive Income (refer Note 4(vi)) as they relate to a material acquisition.

The accounting for the ABG business combination is final as at 30 April 2013.

In accordance with the acquisition agreement, Metcash has under certain circumstances the right to acquire the remaining
24.9% equity interest in ABG. The minority shareholder also has the right under certain circumstances to require Metcash to
acquire its shareholding in ABG. The purchase consideration is broadly based on an EBITDA multiple calculation. The
redemption amount of $17.8 million under the put option was recorded as a financial liability at fair value on the acquisition
date.

(d) Other business combinations

During the current year Mitre 10 acquired various businesses in order to broaden its footprint as one of the leading hardware
and home improvement businesses and the Group acquired an interest in a hotel. The total purchase consideration for these
businesses was $55.0 million which resulted in goodwill of $47.6 million being recognised. The business combinations were
not individually significant, and are disclosed above in aggregate.

The costs incurred in completing these acquisitions have been included within Administrative Costs in the Statement of
Comprehensive Income as they do not relate to material acquisitions.

The accounting for the above business combinations is provisional as at 30 April 2013.

(e) Prior period acquisitions

On 30 September 2011 Metcash acquired 100% of the equity in the Franklins Group from Pick n Pay Retailers Pty Ltd. The
fair value of the net assets acquired recognised in the 30 April 2012 financial statements were based on a preliminary
accounting assessment. The final acquisition accounting is as follows:

(i) Purchase consideration:
Cash paid during the current and prior periods
Cash consideration accrued at the end of the year
Total purchase consideration
Less: cash acquired
Net purchase consideration
Add: fair value of net identifiable liabilities assumed (ii)
Goodwill

$’m

188.4
1.2
189.6
-
189.6
66.5
256.1

Metcash Annual Report 2013

123

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

29.

BUSINESS COMBINATIONS (Continued)

(ii) Assets acquired and liabilities assumed:
The assets and liabilities arising from the acquisition are as follows:
Receivables
Inventories
Other current assets
Disposal group assets
Property, plant and equipment
Intangibles
Deferred tax asset
Provisions and creditors
Provision for rental subsidy
Interest bearing loans and borrowings
Fair value of net identifiable liabilities assumed

$’m

7.9
29.3
1.3
104.7
-
23.5
74.5
(98.9)
(178.5)
(30.3)
(66.5)

The preliminary accounting assessment has been adjusted for a decrease of $4.7 million in disposal group assets, an
increase of $34.1 million in the provision for rental subsidy and an increase of $22.8 million in deferred tax assets. Inclusive of
other minor changes, this has resulted in a corresponding increase in goodwill of $16.2 million.

In the prior period the Group acquired a number of businesses for a total cash consideration of $18.5million. There have been
no changes to the accounting for these acquisitions.

(f) Business combinations after the reporting date

On 16 May 2013 Metcash announced the acquisition, through Automotive Brands Group (ABG), of 100% of Australian Truck
& Auto Parts Group (ATAP) for approximately $84.0 million (including acquisition costs) with effect from 20 May 2013. The
acquisition increases Metcash’s market share in the automotive parts aftermarket sector.

The purchase consideration will be contributed fully by Metcash and will not involve any funding from the non-controlling
interests in ABG. Therefore, the acquisition will result in a dilution of the non-controlling interests in ABG to reflect the
additional contribution by Metcash.

At the date this report was authorised for issue the completion audit of the financial information of ATAP was in progress
therefore the Group is not in a position to disclose the details of the fair value of the assets and liabilities acquired.

124

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

30.

EARNINGS PER SHARE

The following reflects the income data used in the basic and diluted earnings per share computations:

Net profit from continuing operations
Earnings used in calculating basic and diluted earnings per share from continuing
operations

Net profit/(loss) from discontinued operations
Earnings used in calculating basic and diluted earnings per share from discontinued
operations

Net profit attributable to ordinary equity holders of Metcash Limited
Earnings used in calculating basic and diluted earnings per share

The following reflects the share data used in the basic and diluted earnings per share computations:

2013
$’m

2012
$’m

265.9

117.2

265.9

117.2

(59.9)

(27.2)

(59.9)

(27.2)

206.0
206.0

90.0
90.0

Weighted average number of ordinary shares used in calculating basic earnings per
share

Effect of dilutive securities:

Share options and performance rights

Weighted average number of ordinary shares used in calculating diluted earnings
per share

31.

DISPOSAL GROUPS AND ASSETS HELD FOR SALE

Discontinued operations (a)
Retail development assets

(a)

Discontinued operations

2013
NUMBER

2012
NUMBER

859,742,607

770,441,432

3,001,697

2,036,999

862,744,304

772,478,431

2013
$’m

2012
$’m

18.1
29.5
47.6

109.5
7.0
116.5

On 30 September 2011, being the date of acquisition of the Franklins Group, Metcash announced its intention to dispose of
Franklins corporate retail stores to independent retailers. These retail operations, along with a surplus property development
joint venture, have been classified as discontinued operations. Accordingly, the inventory, property, plant and equipment,
software intangibles and goodwill associated with the 80 corporate retail stores and the loans and equity accounted
investment in the property joint venture were classified as disposal group assets. Metcash has, either through sale or closure,
disposed of 70 of the 80 stores and believes that it is highly probable that the remaining stores will be disposed of within 12
months of the reporting date. Otherwise, the wholesale operations of the Franklins Group have been classified as continuing
operations within the Food Distribution segment.

Metcash Annual Report 2013

125

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

31.

DISPOSAL GROUPS AND ASSETS HELD FOR SALE (Continued)

The results of the disposal group are as follows.

Revenue from sale of goods
Cost of sales and other costs
Finance costs attributable to discounting of provisions
Operating loss before income tax
Income tax benefit related to operating loss
Operating loss after income tax
Gain on disposal of assets
Income tax expense related to gain on disposal of assets
Net loss from discontinued operations
Net loss is attributable to:
Equity holders of the parent

2013
$'m

109.2
(184.2)
(13.4)
(88.4)
26.8
(61.6)
2.5
(0.8)
(59.9)

2012
$'m

139.2
(175.3)
(2.8)
(38.9)
11.7
(27.2)
-
-
(27.2)

(59.9)

(27.2)

The net cash inflow from operations, per the Statement of Cash Flows, includes cash outflows of $54.2 million (2012: $43.7
million) from discontinued operations. The net cash outflow from investing activities, per the Statement of Cash Flows,
includes cash inflows of $58.3 million (2012: $Nil) from discontinued operations. There were no financing cash flows
specifically related to discontinued operations.

32.

CONTINGENT ASSETS AND LIABILITIES

Bank guarantees to third parties in respect of property lease obligations
Bank guarantees in respect of Work Cover
Standby letter of credit
Face value of the outstanding charges due to American Express (a)
Put options to third parties (b)
Contingent loan to a third party

(a)

American Express charge card

2013
$’m

32.3
32.0
1.2
204.8
15.4
-

2012
$’m

30.1
30.0
1.2
281.0
13.3
0.3

On 9 May 2007 Metcash Trading Limited entered into an agreement with American Express (Amex), due to expire on 30
September 2013, in relation to Customer Charge Cards. Under the agreement, should a customer default on payment, where
Amex has previously made a payment to Metcash Trading Limited, then Metcash Trading Limited must pay Amex an amount
equal to the charge outstanding.

The maximum amount payable shall be limited to the actual face value of the outstanding charge due to Amex. This does not
include any interest or other fees payable by the customer to Amex. Metcash Trading Limited shall have no other obligation to
Amex in respect of the outstanding charge and shall not be liable for any costs, loss or liability of any nature whatsoever
incurred by Amex as a result of the failure by the customer to make payment.

(b)

Put options

The Group has granted put options relating to the sale of retail store assets to certain customers and associates. The holders
of the put option have the right to "put" these non-financial assets back to the Group within an agreed period and under certain
prescribed circumstances. The estimate of the financial effect of the put options, if exercised, is the aggregate of the purchase
price as defined in the option deed or business sale agreement. This amount is recorded as a contingent liability in the above
table.

The Group has entered into certain put option arrangements with joint venture partners which if exercised would result in an
increase in Metcash’s ownership interest in the joint venture. The estimate of the financial effect of the put options, if
exercised, is the aggregate of the purchase price as defined in the option deed or business sale agreement. This amount is
recorded as a contingent liability in the above table.

126

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

32.

CONTINGENT ASSETS AND LIABILITIES (Continued)

(b)

Put options (Continued)

Certain put option arrangements with minority shareholders of partially owned subsidiaries, if exercised, would result in an
increase in Metcash’s ownership interest in the subsidiaries, subject to specific terms and conditions. Where such an
arrangement is deemed to be part of the business combination a financial liability is recognised on the acquisition date
measured at the present value of the redemption amount under the option. Refer Note 20 for more details.

Certain put options granted to third parties represent financial guarantees provided by the Group. These are measured at fair
value and recognised as a financial guarantee contract liability. Refer Note 22 for more details.

(c)

Australian Tax Office

Metcash has been subject to an income tax audit by the Australian Tax Office (ATO) covering the 2005 - 2008 income years,
which has resulted in the following two disputed items. The ATO have advised Metcash that there are no other areas under
consideration and that the audit has otherwise been concluded.

Action Stores
Metcash received notices of amended assessments dated 26 May 2011 and 13 June 2011 from the Australian Taxation Office
(ATO) seeking payment of a total of $48.8 million. The amended assessments are in relation to a disputed tax liability arising
from the sale of various ex-Action Supermarket retail businesses (Action Stores) during the 2007 and 2008 fiscal years that
resulted in a net tax loss. The Action Stores were acquired by Metcash in fiscal 2006 as a part of the acquisition of Foodland
Associated Limited (FAL), and were sold as part of Metcash’s ongoing business activities to enhance Australia’s independent
retailer network. The total amount in dispute comprises primary tax of $32.9 million and then flowing from that, interest and
penalties of $15.9 million.

Metcash intends to challenge the amended assessments, which assert that the net tax losses from the sale of the Action
Stores should be treated as being on capital account. These net tax losses were incurred as part of Metcash’s ordinary
business activities and as such, Metcash has always considered the correct treatment to be on revenue account. Metcash has
received external advice in relation to the dispute. Metcash has lodged objections to these amended assessments, and if
necessary will appeal the decision to the Federal Court.

Metcash is firmly of the opinion that the treatment it has adopted is appropriate to the circumstances. Based on the strength of
its position, Metcash has not recorded an expense in relation to the amended assessments in the current or prior year results
presented in these financial statements.

In accordance with ATO policy, Metcash entered into a 50/50 payment agreement with the ATO in relation to the disputed tax
liability of $48.8 million. Under the agreement, Metcash has paid the ATO 50% of the disputed tax liability ($24.4 million) in
June/July 2011 and in return the ATO has agreed not to seek recovery of the balance until the Commissioner has determined
the objection or when a decision is handed down by the relevant appellate tribune or court (as appropriate). The payment
amount of $24.4 million has been disclosed as income tax receivable in the statement of financial position.

Foreign Tax Credits
Metcash received notices of amended foreign tax credit (FTC) determinations dated 29 May 2012 from the ATO seeking
payment of a total of $23.4 million. The amended determinations are in relation to the imposition of what is effectively double
taxation on interest income derived by Metcash’s foreign subsidiaries on intercompany loans during the 2006 and 2007 fiscal
years. The ATO contends that Metcash is not entitled to any credit for taxes it has already paid on this interest income in
South Africa.

The total amount in dispute comprises primary tax of $23.4 million. The ATO has not sought to impose any penalties or
interest in respect of this amount.

Metcash has received external advice in relation to its position. Metcash is firmly of the view that:

the imposition of double taxation is both inconsistent with the law and contrary to public policy; and

the Commissioner is in any event out of time to issue such amended FTC determinations given the period of time
elapsed since the original determinations.

Metcash Annual Report 2013

127

METCASH FINANCIAL REPORT 2013

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2013

32.

CONTINGENT ASSETS AND LIABILITIES (Continued)

(c)

Australian Tax Office (Continued)

During the year Metcash lodged objections to the amended determinations which were subsequently disallowed by the ATO.
Metcash has appealed the decision to the Administrative Appeals Tribunal, which is expected to be heard during the 2014
fiscal year. Based on the strength of its position, Metcash has not recorded an expense in relation to the amended
determinations in the current year results presented in these financial statements.

As the relevant subsidiaries subsequently became members of the Australian tax group, the FTC dispute is restricted solely to
the 2006 and 2007 income years. There will be no impact in respect of the 2008 and subsequent income years in connection
with this matter.

33.

SUBSEQUENT EVENTS

Except as noted above, there are no events that have occurred after the end of the financial year that would materially affect
the reported results or would require disclosure in this report.

128

Metcash Annual Report 2013

METCASH FINANCIAL REPORT 2013

DIRECTORS’ DECLARATION
Year ended 30 April 2013

In accordance with a resolution of the directors of Metcash Limited, I state that:

1. In the opinion of the directors:

a. The financial statements, notes and the additional disclosures included in the directors’ report designated as audited,

of Metcash Limited are in accordance with the Corporations Act 2001, including:

ii.

Giving a true and fair view of its financial position as at 30 April 2013 and of its performance for the year
ended on that date; and

Complying with Accounting Standards (including the Australian Accounting Interpretations) and Corporations
Regulations 2001; and

b. The financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note

2(a)

c. There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due

and payable.

2. This declaration has been made after receiving the declarations required to be made to the directors in accordance with

section 295A of the Corporations Act 2001 for the financial year ending 30 April 2013.

3. In the opinion of the directors, as at the date of this declaration, there are reasonable grounds to believe that the members
of the Closed Group identified in Note 24 will be able to meet any obligation or liabilities to which they are or may become
subject, by virtue of the Deed of Cross Guarantee.

On behalf of the Board

Andrew Reitzer
Director
Sydney, 24 June 2013

Metcash Annual Report 2013

129

(cid:3)(cid:3)(cid:3)(cid:3)

Auditor's Independence Declaration to the Directors of Metcash Limited

In relation to our audit of the financial report of Metcash Limited for the year ended 30 April 2013, to the best of my knowledge
and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any
applicable code of professional conduct.

Ernst & Young
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
Michael J Wright
Partner
24 June 2013

130

Metcash Annual Report 2013

Independent auditor's report to the members of Metcash Limited

Report on the financial report

We have audited the accompanying financial report of Metcash Limited, which comprises the consolidated statement of
financial position as at 30 April 2013, the consolidated statement of comprehensive income, the consolidated statement of
changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of
significant accounting policies and other explanatory information, and the directors' declaration of the consolidated entity
comprising the company and the entities it controlled at the year's end or from time to time during the financial year.

Directors' responsibility for the financial report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal controls as the directors
determine are necessary to enable the preparation of the financial report that is free from material misstatement, whether due
to fraud or error. In Note 2, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of
Financial Statements, that the financial statements comply with International Financial Reporting Standards.

Auditor's responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance
with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from
material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report.
The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of
the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls
relevant to the entity's preparation and fair presentation of the financial report in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal
controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence

In conducting our audit we have complied with the independence requirements of the Corporations Act 2001. We have given
to the directors of the company a written Auditor’s Independence Declaration, a copy of which is included by reference in the
directors’ report.

Metcash Annual Report 2013

131

Opinion

In our opinion:

the financial report of Metcash Limited is in accordance with the Corporations Act 2001, including:

i. giving a true and fair view of the consolidated entity's financial position as at 30 April 2013 and of its

performance for the year ended on that date; and

ii.

complying with Australian Accounting Standards and the Corporations Regulations 2001; and

the financial report also complies with International Financial Reporting Standards as disclosed in Note 2.

Report on the remuneration report

We have audited the Remuneration Report included in pages 47 to 62 of the directors' report for the year ended 30 April 2013.
The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report,
based on our audit conducted in accordance with Australian Auditing Standards.

Opinion

In our opinion, the Remuneration Report of Metcash Limited for the year ended 30 April 2013, complies with section 300A of
the Corporations Act 2001.

Ernst & Young

Michael J Wright
Partner
Sydney
24 June 2013
(cid:3)

132

Metcash Annual Report 2013

ASX Additional Information
Year ended 30 April 2013

Additional information required by the Australian Securities Exchange and not shown elsewhere in this report is as follows:

The information is current as at 10 July 2013:

Distribution of Equity Securities
The number of shareholders, by size of holding, in each class of share is:

Size of Holding
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-9,999,999,999
Total

Number of shareholders
9,659
25,773
9,541
6,831
185
51,989

There were 3,610 shareholders less than a marketable parcel of Metcash ordinary shares.

Twenty largest shareholders
The names of the 20 largest holders of quoted shares are:

Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
NATIONAL NOMINEES LIMITED
CITICORP NOMINEES PTY LIMITED
JP MORGAN NOMINEES AUSTRALIA LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
CITICORP NOMINEES PTY LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
MILTON CORPORATION LIMITED
AMP LIFE LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
NAVIGATOR AUSTRALIA LTD
NULIS NOMINEES (AUSTRALIA) LIMITED
BKI INVESTMENT COMPANY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
INVIA CUSTODIAN PTY LIMITED
UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD
QUESTOR FINANCIAL SERVICES LIMITED
AUST EXECUTOR TRUSTEES SA LTD

Substantial Shareholders
The following is extracted from the Company’s register of substantial shareholders:

BlackRock Group
UBS AG

Number of Shares
46,960,476
46,029,290

Voting Rights
All ordinary shares (whether fully paid or not) carry one vote per share without restriction.

Number
of Shares
178,034,891
133,990,627
112,531,330
42,096,871
14,967,454
12,040,471
11,048,485
6,777,227
4,905,913
4,657,560
4,377,772
3,769,414
3,661,684
3,249,493
3,011,000
1,745,897
1,677,710
1,468,721
1,443,271
1,253,006

Percentage
of Shares
20.22
15.21
12.78
4.78
1.70
1.37
1.26
0.77
0.56
0.53
0.50
0.43
0.42
0.37
0.34
0.20
0.19
0.17
0.16
0.14

Metcash Annual Report 2013

133

Notes

134

Metcash Annual Report 2013

Notes

Metcash Annual Report 2013

135

Notes

136

Metcash Annual Report 2013

Corporate
Information

ABN 32 112 073 480

Directors
Peter L Barnes (Chairman)
Patrick N J Allaway
Fiona E Balfour
Michael R Butler
Neil D Hamilton
Edwin M Jankelowitz
Ian R Morrice
V Dudley Rubin

Company Secretary
Gregory C Watson

Registered Ofﬁce
50 Waterloo Road
Macquarie Park NSW 2113
Telephone: 61 2 9751 8200

Share Register
Boardroom Pty Limited
GPO Box 3993
Sydney NSW 2001
Telephone: 61 2 9290 9600
Facsimile: 61 2 9279 0664

Auditor
Ernst & Young

Internet Address
www.metcash.com

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National Ofﬁce
Telephone: 61 2 9751 8200
50 Waterloo Road
Macquarie Park NSW 2113
Postal Address
PO Box 6226
Silverwater Business Centre NSW 1811

Metcash Food & Grocery
Head Ofﬁce
Telephone: 61 2 9751 8200
Facsimile: 61 2 9741 3055
50 Waterloo Road
Macquarie Park NSW 2113
Postal Address
PO Box 6226
Silverwater Business Centre NSW 1811

Australian Liquor Marketers
Head Ofﬁce
Telephone: 61 2 9741 3000
Facsimile: 61 2 9741 3009
4 Newington Road
Silverwater NSW 2128
Postal Address
PO Box 6226
Silverwater Business Centre NSW 1811

Mitre 10
Head Ofﬁce
Telephone: 61 3 9703 4200
Facsimile: 61 3 9703 4222
12 Dansu Court
Hallam VIC 3803
Postal Address
Locked Bag 10
Doveton VIC 3177

Automotive Brands Group
Head Ofﬁce
72-92 Station Street
Nunawading VIC 3131
Telephone: 61 3 8878 1111
Facsimile: 61 3 8878 2266