Metcash Limited Annual Report 2015

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FY2015 Annual Report · Metcash Limited

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Metcash Limited Annual Report 2015
Metcash Limited ABN 32 112 073 480

Investing.
Evolving.
Transforming.

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www.metcash.com

Chairman’s Report

CEOs Report

CFOs Report

Financial Highlights

Transformation Update

Corporate Responsibility

Our Board

Corporate Governance

Financial Report

Directors’ Report

Notes to the Financial Statements

Directors’ Declaration

Auditor’s Independence Declaration

Independent Auditor’s Report

ASX Additional Information

Corporate Information

120

121

122

124

IBC

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

Corporate Information
ABN 32 112 073 480

Directors
Peter Barnes (Chairman)
Patrick Allaway
Fiona Balfour
Michael Butler
Tonianne Dwyer
Neil Hamilton
Edwin Jankelowitz
Ian Morrice
Robert Murray

Company Secretary
Gregory C Watson

Share Register
Boardroom Pty Limited
GPO Box 3993
Sydney NSW 2001
Telephone: 1300 737 760 (within Australia)
Telephone: 61 2 9290 9600
Facsimile: 61 2 9279 0664

Auditor
Ernst & Young
680 George Street
Sydney NSW 2000 Australia
Telephone: 61 2 9248 5555
Facsimile: 61 2 9248 5959

CORPORATE INFORMATION

National Office
Telephone: 61 2 9751 8200
50 Waterloo Road
Macquarie Park NSW 2113
Postal Address
PO Box 6226
Silverwater Business Centre NSW 1811
www.metcash.com

Metcash Food & Grocery
Head Office
Telephone: 61 2 9751 8200
Facsimile: 61 2 9741 3009
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
76-92 Station Street
Nunawading VIC 3131
Telephone: 61 3 8878 1111
Facsimile: 61 3 8878 2266

CHAIRMAN’S REPORT

Dear Shareholders

Financial Year (FY) 2015 was the first year of a strategic long-term
Transformation Plan (‘the Plan’) aimed at addressing accelerating
structural changes in the food and grocery market. Successful
implementation of the Plan will enable Metcash and its independent
retail network to adapt to unprecedented competition and changing
consumer preferences.

In FY2015, sales revenue for the Group grew by 1.7% to $13.6

billion. The Group’s core Food & Grocery business was impacted
by challenging market conditions, intensifying competition and the
costs associated with transformation initiatives.

The non-food Pillars of Liquor and Hardware & Automotive

delivered improved results with strong underlying earnings
performances. These businesses are also executing their own
strategic initiatives, aimed at driving network growth and
consolidation within their respective markets. The non-food Pillars
contributed 35.5% of the Group’s FY2015 underlying earnings.

Overall, the Group’s bottom line results were disappointing.

Group underlying profit after tax fell 17.4% to $193.0 million.
Underlying earnings per share were 21.3 cents, a decline of 19.6%.

During the year, Metcash delivered operating cash flows of
$231.7 million, reflecting the Company’s underlying earnings and
improved working capital management.

The Board and management have taken a number of steps to
create a strong financial base to support the Group’s Transformation
Plan. This included resetting the balance sheet to reflect current
difficult trading conditions, with non-cash goodwill impairments and
asset write downs. As a result the Group reported a full year loss of
$384.2 million after tax.

executive Director and Chairman Elect. Three directors will leave the
board post year end.

Mick McMahon has resigned from the Board. Mick has
been a member of the Board for 18 months, providing retail and
supply chain experience to the Board’s deliberations. Mick’s
contributions were considerable, however, his recently expanded
business commitments have reduced his available time and
created some conflicts with his Board responsibilities at Metcash.
After 17 years as a Metcash Board member and past CFO,
Edwin Jankelowitz will retire following the AGM. Edwin has served
the Company not only as a director but as an executive, a member
of the leadership team and a confidant to many in the Company.
Edwin’s outstanding knowledge and comprehension of Metcash
operations are recognised by all. On behalf of all his colleagues,
I thank Edwin for his service and contribution to Metcash.

As previously announced, I will be retiring from the Board
at the conclusion of the AGM. Following an extensive search by
the Non-executive Directors, Rob Murray was selected as my
successor as Chairman of the Board. Rob’s experience in retail,
fast moving consumer goods and executive leadership will be a
great asset for Metcash as it continues its transformation journey.
Rob will lead a Board whose support and dedication I have
greatly appreciated.

To our shareholders, your continued support throughout

a difficult year is greatly appreciated. Metcash’s operational
outcomes and future prospects have resulted in a substantial
decline in market capitalisation. The Board and Management
team are firmly focused on restoring the company’s financial
strength, establishing sustainable operational performance and
delivering shareholder value.

To maintain a prudent capital structure, while ensuring

Finally to the staff at Metcash, its independent retailers and

management has access to the appropriate levels of capital required
to invest in future growth, the Board has suspended the final
dividend payment for FY2015 and does not expect to reinstate
dividend distributions in FY2016.

In June 2015, the Company announced the sale of its

Automotive Division for a consideration of $275 million which values
the division at approximately 10x its earnings before interest and tax.
Funds from this sale will be used to further reduce debt and provide
capital to the businesses.

The combination of the initiatives outlined above should provide

Metcash with a strong financial foundation for the future.

Board renewal has continued during the year. Tonianne Dwyer

joined the board as a Non-executive Director in July 2014. Dudley
Rubin a long standing director retired in August 2014 following last
year’s AGM. In April 2015 Rob Murray joined the board as a Non-

suppliers, the Board acknowledges and thanks them for their
hard work and commitment in a year of significant challenge
and disruption.

Peter L Barnes
Chairman

Metcash Limited Annual Report 20152

CEOs REPORT

Financial Year (FY) 2015 was a challenging, ‘fix the basics’ year, as
Metcash embarked on the first 12 months of its Transformation
Plan in extremely tough market conditions.

The cost of transformation initiatives, significant headwinds

in Food & Grocery and a number of prudent measures to
strengthen the balance sheet have contributed to the lower
reported underlying earnings in the year. As a result, the Group
delivered underlying EBIT of $325.1 million, which is a decline of
16.7% on the prior year.

The initial results from our Transformation Plan are, however,

positive with strong take-up of our key initiatives across the IGA
retail network. Although at an early stage of implementation, we are
seeing sales improvements as a result of more customer-focused
stores with competitive pricing and fresh and localised ranges.
Proving the value independents deliver, the Liquor and
Hardware Pillars delivered excellent results and increased profits,
despite tough market conditions.

During the year, the Group had a significant item charge of

$577.2 million (post-tax) resulting in a reported loss after tax of
$384.2 million. The nature of these charges is further explained in
the CFO’s report on page 4.

Unfortunately, in April 2015, Metcash’s distribution centre
at Huntingwood, NSW, suffered significant damage as a result
of a torrential hail storm. The damage was sufficiently serious
to warrant closure of key areas of the warehouse (including the
automated Project Mustang area) and for the Group’s business
continuity plans to be immediately activated. Metcash was able
to quickly re-establish supply to NSW customers from Victoria,
Queensland, ACT and temporary distribution centres in NSW.

We do not expect full occupancy of the Huntingwood
distribution centre until early in calendar 2016. The disruption will
result in a loss of sales in FY2016. Metcash’s insurance policy is
expected to cover material damage and consequential losses.

Metcash Food & Grocery
The Food & Grocery Pillar had a challenging year, characterised
by increased competitive pressures, ongoing price deflation and
a change in consumer purchasing patterns, with a continued
shift towards fresh foods and private label alternatives, in which
Metcash is under represented. These factors, together with the
transformation investment, resulted in EBIT declining 26.1% to
$216.8 million.

The Group’s strategy is focused on addressing these issues

through initiatives such as Price Match, improving our Fresh Food
offer, the expansion of our Private Label offering and the roll out
of the Diamond Stores Initiative.

Price Match was implemented in approximately 600 stores
and our Private Label pricing strategy in a further approximately
500 stores. These pricing initiatives have improved customer
perception and generated increased sales.

We also have also looked to grow our Fresh business and
recalibrate our packaged grocery offering in line with consumer
demand. During the second half of the financial year, Metcash
rolled out the Diamond Store Accelerator (DSA) program in
52 stores. Diamond Stores bring together key aspects of our
strategic initiatives through store refurbishments, particularly
increasing the range and space dedicated to Fresh categories.
Stores in the DSA program experienced on average an uplift in
wholesale sales (excluding tobacco) of 16%. The program will be
rolled out to a further 100 stores in FY2016.

Pleasingly, the IGA network had a Like-for-Like (LfL)
increase in retail sales of 0.7% in FY2015, reversing a decline of
1.1% in FY2014.

The Convenience Pillar achieved sales revenue growth of
11.3%, with total sales revenue of $1.6 billion in FY2015, up from
$1.4 billion in FY2014.

Although the transformation initiatives will take time to yield

returns, the initial roll-out and lead indicators are encouraging.
The initiatives we are implementing, which require upfront
investment, are essential to moving the Food & Grocery Pillar to
a more sustainable model that can succeed in a dynamic and
highly competitive environment.

Australian Liquor Marketers
The Liquor Pillar performed strongly during FY2015. Although
total sales revenue declined by 1.8% to $3.1 billion, sales
increased by 3.7% through the IBA retail network, reflecting both
the strength of the network and acquisitions.

LfL retail sales in the network increased 2.8% compared to an

overall market decline of 0.8%. The improvement in the IBA retail
network was offset by lower wholesale sales to contract customers.

EBIT was up 10.6% to $57.6 million, from $52.1 million in
FY2014. This was driven by the combination of increased sales
from the higher-margin IBA network, an improved sales mix
skewed towards higher return categories and tight cost control.

Metcash Limited Annual Report 2015CEOs REPORT

$325.1m

EBIT of $325.1 million, which is a decline of

16.7% on the prior year.

Hardware & Automotive
The Hardware & Automotive Pillar’s sales revenue increased
12.5% to $1.3 billion, up from $1.2 billion in FY2014. Hardware
sales increased by 11.3%, exceeding $1 billion for the first time.
The growth in Hardware sales reflected LfL wholesale sales
growth of 3.3% and strong trade sales driven by an improving
construction market.

In FY2016, Metcash will continue to adapt to the tough

market conditions, accelerate our successful initiatives and
reduce the cost base. The improving Fresh proposition will be
accelerated, a further 100 stores will transition to the Diamond
Store program and Metcash will continue to invest to improve
the quality and consistency of the network. We also expect the
Liquor and Hardware Pillars to continue to grow in FY2016.

Automotive sales increased 17.8% to $256.4 million, up

The improved sales from the strategic initiatives in the Food

& Grocery Pillar, together with the growth opportunities in the
other Pillars, will not, however, offset the headwinds in Food &
Grocery in FY2016. That said, Metcash remains confident the
strategy it is deploying will ultimately prove to be effective and
beneficial to our retailers, customers and shareholders. We thank
them for their support as we build a more sustainable platform.
Finally, I would like to thank everyone across the Metcash

network - our staff, independent businesses and suppliers -
for their dedication to making independents successful in a
very challenging year. Independent businesses are vital to our
economy and our communities. They create local jobs, they
respond to local needs and they invest in local economies. We
are committed to their success and despite the challenging
trading environment, we are confident that the IGA network, with
a better and more relevant offer for the shopper, will maintain an
important position in the market place.

Ian Morice
Chief Executive Officer

from $217.7 million in FY2014. This was driven by LfL sales
growth of 1.1% and growth in the network, including the Midas
acquisition which occurred in May 2014.

EBIT for the Pillar was up 16.0% to $57.9 million, from

$49.9 million in FY2014, driven by the higher sales revenue, a
focus on reducing supply chain costs and a higher contribution
from our interests in joint ventures.

During the year, the Board considered a number of options
to enhance the Group’s capital position, including investigating a
potential IPO of the Automotive business. Post year end, Metcash
announced it had reached an agreement with Burson Group
Limited to sell the entire issued share capital of Metcash Automotive
Holdings Pty Ltd for a total consideration of $275 million.

Although Metcash Automotive has performed well under
the Group’s ownership, the sale made sense for both Metcash
and the Automotive business. The purchase price multiple of
approximately 10x FY2015 EBIT recognises the strength of
the business Metcash has built in the auto parts and service
sector over the last three years. Metcash expects to receive net
proceeds after tax of approximately $210 million from the sale.
These proceeds will be redeployed into the Group’s Balance
Sheet and businesses. At the same time, the Automotive
business will become part of a sector specialist owner, with
access to the capital needed to continue to grow the business.

Outlook
Looking to the year ahead, we expect the difficult trading
conditions currently being experienced in the Food & Grocery
Pillar to continue. The Group has taken significant steps to
address these challenges through the Transformation Plan.
It also has a stronger Balance Sheet as a result of the capital
initiatives announced.

One year into our Transformation Plan, the initial signs are
positive, with stores becoming more competitive and sales trends
in pilot stores improving. Core programs such as Price Match,
Private Label and Diamond Store refurbishments have received
strong support from our network of independent retailers.

Metcash Limited Annual Report 20154

CFOs REPORT

During the year, our focus on financial discipline enabled the

Group to apply nearly $100 million to repaying debt. As a result,
at year end, our Net Debt was $667.8 million – its lowest level in
many years. The Group had $1.5 billion of available debt facilities
with an appropriate tenure and diversification of funding sources
and net assets of $1.2 billion.

The Group’s gearing was 36.6%. This will reduce further

next year with the announced sale of the Automotive business
and the proposed suspension of dividends.

Looking to FY2016, the Group is well placed financially
to implement the Transformation Plan in the expected tough
market conditions.

Brad Soller
Chief Financial Officer

In FY2015, Metcash focused on enhancing its financial
discipline and also increased the transparency and disclosure
provided to the market. In a transformation program, particularly
one that will take time to deliver, we believe transparency is
essential for shareholders to understand our business drivers.
To this end, Metcash has increased its disclosure in its FY2015
results presentation, offering more details around sales data
segmentation and borrowing metrics.

In order to provide a secure financial foundation for the

Group’s Transformation Plan, we have reset the Balance Sheet
and adopted a conservative capital management approach.
We also revisited our cost structure, with a focus on procurement
efficiencies, distribution centre consolidation and reviewing our
organisational structure.

Acknowledging the tough market conditions in which
Metcash is now operating, especially in the Food & Grocery
Pillar, we recognised a charge of $577.2 million (after tax). The
significant charge principally relates to a reduction in the Group’s
goodwill and other assets of $640.0 million. This predominantly
relates to the Group’s Food & Grocery Pillar and includes an
impairment of $506.7 million in relation to intangible assets
(goodwill of $441.6 million and other intangible assets of
$65.1 million) and a charge of $133.3 million in relation to other
assets and obligations. The significant items are primarily non-
cash and will not impact the Group’s debt facilities, compliance
with banking covenants or trading terms.

In order to strengthen the Group’s Balance Sheet we have

adopted a conservative capital management approach.
The Company did not declare a final FY2015 dividend and the
Board intends to suspend dividend payments in FY2016. In
addition, on 15 June 2015, we announced the sale of Metcash
Automotive Holdings Pty Ltd to Burson Group Limited for
$275 million. We expect to receive net proceeds of approximately
$210 million after tax, which will be invested in the Group’s
Balance Sheet and businesses.

The Group generated total operating cash flows of
$231.7 million, down from last year’s result of $388.7 million.
This reduction was due in part to timing differences in working
capital of $80 million as well as the lower EBIT contribution
from the Food & Grocery Pillar. In FY2015, Metcash’s investing
activities declined by $136.9 million to $74.9 million. This
largely reflects the positive benefits of $41.0 million from capital
recycling and a lower level of business acquisition compared to
the previous year. The business continued to invest in its network
with capital spend of $85.4 million in FY2015.

Metcash Limited Annual Report 2015FINANCIAL HIGHLIGHTS

Underlying EBIT ($m)

Sales ($m)

Underlying EBIT ($m)
Sales ($m)

Underlying EBIT ($m)

Underlying PAT ($m)

Underlying EBIT ($m)

Underlying PAT ($m)

Underlying EPS (cents)

Underlying PAT ($m)

Underlying EPS (cents)

Operating cash flows ($m)

Underlying EPS (cents)

Operating cash flows ($m)

1
3
,
1
6
2
2
,
6
5
3
0
.
2
9
1
0
.
1
.
3

1
2
,
9
7
6
.
6
3
2
5
1

1
3
1
6
2
4
2
,
4
6
5
1
0
.
2
.
1
5
.
1

1
3
1
,
2
3
4
,
9
3
3
2
6
0
.
4
7
.
1
.
0

1
2
4
,
4
9
7
7
.
6
8
.
6

1
3
,
3
4
9
3
2
3
0
.
9
7
.
0
1
.
3

1
3
6
4
2
4
6
1
.
2
.
5
3
2
5
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4
4
7
.
8

2
4
8
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3

2
5
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8

4
3
3
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1
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3

4
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7
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8

2
3
3
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7

2
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4
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5
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2
2
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0
0
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1
1
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4
2
5

2
2
0
0
1
1
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3

2
2
2
0
0
0
1
1
1
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4
1

2
2
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2
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2

2
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3
3

2
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1
1
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4

2
2
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5

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1

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3

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Sales up X.X%

to $XX.Xbn

Sales ($m)

15000

12000

9000

6000

3000

15000

12000

9000

6000

3000

'2015'

'2014'

9000

300

'2014'

'2013'

6000

'2013'

6000

'2013'

'2012'

3000

'2012'

3000

500

400

200

100

'2015'

'2014'

'2013'

'2012'

'2011'

9000

'2014'

300

'2013'

6000

200

'2012'

3000

100

'2011'

FIVE YEAR REVIEW

FINANCIAL PERFORMANCE

SALES ($M)

OPERATING CASH FLOWS ($M)

100

UNDERLYING EBIT ($M)

300

500

250

FINANCE COSTS, NET ($M)

CASH REALISATION RATIO (%) 1

'2011'
'2011'

'2011'

0
0

15000

500

12000

400

'2014'

'2014'
'2014'

'2013'
'2013'

'2012'
'2012'

'2013'

'2012'

'2014'

'2013'

'2012'

'2013'

'2012'

150
300

150

100

200

100

200

300

400

100

200

300

400

300

500
250

400

'2015'

'2015'
'2015'

'2015'

UNDERLYING PROFIT AFTER TAX ($M)

200

REPORTED (LOSS)/PROFIT AFTER TAX ($M)

4
4
7
.
8

2
5
2
.
8

2
4
8
.
3

4
3
0
.
1

3
9
0
.
3

4
4
1
.
5
3
2
5
1

1
9
3
0

2
6
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1

3
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3

2
4
2
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3
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2
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1
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3
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2
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1

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3
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3
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1
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6
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5

2
3
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1
2
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2
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2
4
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3

2
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7
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1
3

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8

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6
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1

3
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2
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3
2
3
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7

3
2
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5
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3
2
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8
1
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3
0

3
2
.
3
2
6
1
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3
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3
2
.
8

2
1
3

3
1
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2

3
2
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3
2
6
.
5

3
2
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3
2
9
9
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8

2
6
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5

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1
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8
4
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3

3
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2
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2
1
3

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1
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2

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2
1
3

1
4
2
.
5

2
6
.
5

1
4
2
.
5

2
8
4
.
3

2
1
3

Operating cash flows ($m)

2
9
9
.
8

3
8
8
.
7

1
4
2
.
5

2
8
4
2
.
3
3
1
7

Operating cash flows ($m)

400

'2014'

150

'2013'

200

'2012'

100

'2011'

'2014'

150

'2013'

'2012'

'2011'

200

100

'2015'

'2014'

'2013'

'2012'

'2011'

2
0
1
5

2
0
1
1

2
0
1
4

2
0
1
1

2
2
0
0
1
1
5
2

2
0
1
2

2
0
1
3

2
0
1
4

2
2
0
0
1
1
1
4

2
0
1
5

2
0
1
2

2
2
0
0
1
1
1
3

2
2
2
0
0
0
1
1
1
2
4
1

2
0
1
3

2
2
0
0
1
1
5
2

2
2
0
0
1
1
4
3

2
2
2
0
0
0
1
1
1
5
1
4

2
2
2
0
0
0
1
1
1
1
2
5

2
2
0
0
1
1
2
3

2
2
0
0
1
1
3
4

2
2
2
0
0
0
1
1
1
4
1
5

2
0
1
5

2
0
1
2

2
0
1
3

2
2
0
0
1
1
4
1

2
2
2
0
0
0
1
1
1
2
5
1

2
2
0
0
1
1
3
2

2
2
2
0
0
0
1
1
1
1
4
3

2
2
2
0
0
0
1
1
1
2
5
4

2
2
0
0
1
1
3
5

2
2
0
0
1
1
4
1

2
2
0
0
1
1
5
2

2
0
1
3

2
0
1
4

2
0
1
1

2
0
1
5

2015

2014

2013

2012

2011

13,626.2

13,392.7

12,976.6

12,501.1

12,364.0

350

250

300

200

'2014'

150

'2014'

'2013'

'2011'

325.1

300

250

55.1

'2015'

193.0

200

150
'2014'

'2014'

(384.2)

'2013'

250

'2015'

150
'2014'

'2013'

300

390.3

57.2

'2015'

200

233.7

'2015'

447.8

61.6

'2015'

250

300

268.1

'2014'

169.2

'2013'

388.7

'2012'

'2013'

'2012'

'2014'

206.0

'2013'

299.8

'2012'

150

200

100

87.5%

'2011'

162.6%

'2011'

112.9%

'2011'

67.6

'2015'

252.8

'2014'

90.0

'2013'

284.3

'2012'

196.9%

'2011'

100

'2012'

231.7

100

'2012'
50

'2012'

'2012'
50

100

248.3

'2014'

241.4

'2013'

142.5

'2012'

150

200

100

48.4%

'2011'

'2014'

150
'2013'

'2012'

'2011'

200

100

400

441.5

400

430.1

400

66.3

'2015'
250

300

'2015'

250

300

'2015'

250

300

'2015'

250

300

FINANCIAL POSITION

SHAREHOLDER EQUITY ($M)

NET DEBT (HEDGED) ($M)

GEARING RATIO (NET HEDGED) (%)

RETURN ON FUNDS EMPLOYED (%)2

SHARE STATISTICS

1,156.6

667.8

36.6%

15.8%

1,594.0

1,624.2

1,335.1

1,442.8

766.9

32.5%

16.7%

719.8

30.7%

20.0%

910.4

40.5%

20.6%

682.4

32.1%

21.1%

FULLY PAID ORDINARY SHARES

928,357,876

888,338,048

880,704,786

771,345,864

768,853,644

WEIGHTED AVERAGE ORDINARY SHARES

907,012,053

882,676,013

859,742,607

770,441,432

767,676,470

UNDERLYING EARNINGS PER SHARE
(CENTS)

REPORTED (LOSS)/EARNINGS PER SHARE
(CENTS)

DIVIDENDS DECLARED PER SHARE
(CENTS)

21.3

(42.4)

6.5

26.5

19.2

18.5

31.2

24.0

28.0

32.8

11.7

28.0

32.3

31.5

27.0

DIVIDEND PAYOUT RATIO (%)

30.5%

69.8%

89.7%

85.4%

83.6%

OTHER STATISTICS

NUMBER OF EMPLOYEES
(FULL-TIME EQUIVALENTS)

6,398

6,174

5,794

5,166

5,638

1. Cash Flow from operations/Reported NPATDA (depreciation and amortisation not tax effected). In respect of FY2015 only, the ratio was calculated using Underlying

NPATDA, rather than Reported NPATDA, as the $577.2m of Significant Items expense was primarily non-cash.

2. In respect of FY2015, ROFE would have been 13.7% if the impact of the impairment charges on the balance sheet was excluded.

Metcash Limited Annual Report 2015
6

TRANSFORMATION UPDATE

On the path to sustainable growth

During the year, we focused on and
invested in the four strategic priorities
that we are confident will underpin
long-term sustainable growth for
Metcash and the independent
retailers we support:

1. Transforming Metcash

Food & Grocery

2. Driving consolidation and

sustainable network growth

3. World class supply chain

4. Supporting independents

Transforming Food & Grocery
Metcash implemented its transformation initiatives progressively
during the second half of the financial year which are delivering
encouraging lead indicators, and we have made progress against
our targets.

Retail excellence
We achieved our year one target of 50 Diamond Stores, with
52 stores completing the program and an additional 18 stores
refurbished, adopting many components of the ‘Diamond toolkit’.
Through the Diamond Store Accelerator (DSA) program,

Metcash provides retailers with a proven framework,
encompassing our five key growth levers, and also offers
assistance in implementing these initiatives. DSA participants
receive a tool-kit that helps retailers to identify over-spaced,
low-performing categories, which can be reduced to free up
shelf space for more attractive categories. The result is improved
productivity and products that are better aligned with shoppers’
needs, including an increasing number of fresh ‘buy as you
need’ options and localised offers. Retailers also receive support
with store refurbishment and guidelines for in-store execution,
including business check lists, best practice manuals and
processes, training guidelines, and HR policies.

Results from the initial Diamond Stores are excellent,

demonstrating the program’s ability to shift consumers’
perception of independent supermarkets. Our research indicates
that shoppers were more satisfied with the range offered and
positive about our ‘every day’ pricing. As a result, shoppers were
more likely to recommend the stores to family and friends.
This improved shopper satisfaction translated into

substantial sales growth at these initial stores. Retail and
wholesale core grocery sales increased by 16% on the back of
greater traffic and higher average basket sizes. Now more than
10 months into the program, our initial pilot store has achieved
a sustainable uplift of approximately 55% in LfL retail sales.

Next year, we will roll out the DSA program to an additional

100 stores.

SHOPPERS’ POSITIVE REACTION TO DIAMOND STORES

CONSUMER OVERALL SATISFACTION
CONSUMER PRICE PERCEPTION
CONSUMER VIEW OF FRESH
CONSUMERS WILLING TO RECOMMEND STORES

8%
9%
14%
5%

Metcash Limited Annual Report 2015
TRANSFORMATION UPDATE

600

Key achievement: Price Match implemented
in ~600 stores.

50+

Key achievement: Diamond Store Accelerator
Program complete in 50+ stores.

YEAR ONE KEY ACHIEVEMENTS
Diamond Store Accelerator program complete
in 50+ stores ✔
Price Match implemented in ~600 stores ✔
Private Label price match implemented in ~1,100 stores ✔
New fresh ranges and optimised fresh format in
Diamond Stores ✔
Growth achieved in Liquor through consolidating the
IBA retail network ✔
Hardware sales exceed $1billion for the first time ✔

DELIVERING RESULTS
Retail and warehouse sales in Diamond Stores 16%
Warehouse fresh sales from Diamond Stores 24%
Price Match stores sales tracking 330 basis points
Private Label warehouse sales 7.9%
Liquor EBIT 10.6%
Hardware EBIT 7.5%

Competitive pricing
During the year, approximately 1,100 stores participated in either
our Price Match or Private Label competitive pricing programs.
In FY2015, we activated our Price Match campaign in

approximately 600 stores, matching prices of up to 2,200
everyday grocery products with competitors every week.
Measuring LfL progress in these stores during the second half of
the financial year, we identified a 330 basis points improvement
in wholesale sales tracking.

To address the rising importance of private label products,
we also implemented our Private Label pricing match strategy
in an additional 500 stores, with around 500 Black and Gold
products in the program. To further support this initiative, we
introduced ~250 updated Black & Gold products onto the
shelves. Contemporary packaging and competitive pricing
resulted in a 1150 basis point improvement in private label
warehouse sales. We also introduced ~30 new mid-tier private
label products. The combined outcome of these initiatives has
been a 7.9% LfL increase in total private label warehouse sales.
In FY2016, we will extend the Price Match program to
further stores backed by a national advertising campaign. We will
also accelerate the development of new private label ranges for
mid-tier products.

Next year, we will continue to grow the Fresh category sales
and contribution through accelerating DSA stores and rolling out
the successful trials carried out across the network in FY2015.

Shopper-led way
In FY2015, we focused on product ranging for customers and
tailored retail offerings to local catchments. This included developing
plans for our key growth categories and identifying opportunities to
reduce ranges to accommodate a larger Fresh offering.

In FY2016, we aim to achieve further traction with a

consistent approach to category plans across the network.

Retail excellence and network investment
To improve the quality of the store network, during the year we
opened 19 stores and extended 16. We also removed 32 stores
from the network that were no longer economic.

During the year, the Group recruited 30 additional field
staff and developed a retailer tool-kit to assist in developing
retailer capabilities. In FY2015, Metcash developed and launched
training modules of its Training Academy across all business
Pillars. Access to quality training and development is critical for
Independent Retailers and their staff to develop their business
skills and high standards of customer service.

Compelling Fresh offer
During the year, we improved the Fresh offer in Food & Grocery.
After conducting category reviews across meat, seafood, deli,
bakery and produce, we brought in new ranges in the deli and meat
categories, including ‘Black Angus’ meat. For our increasing number
of ‘buy-as-you-need’ shoppers, we introduced pre-packed salads
in more than 400 stores and conducted a trial of ‘Your Kitchen’
ready-prepared meals. The result was a significant improvement
in shoppers’ perceptions of the Fresh range in DSA stores. This
translated into a LfL growth in Fresh sales in DSA Stores of 23%.

Convenience Reset
In FY2015, the Convenience business focused on resetting its two
core business, Campbells Cash & Carry (CWD) and Convenience
Store Distribution (CSD).

CWD now has a national footprint with the acquisition of

FNQ and Hanley Group. During the year, the business refocused
its merchandise range and began developing house brands across
a range of categories which offer increased value to customers.
Expansion into the food services market, including pubs and clubs,
is expected to build momentum in the coming year.

Metcash Limited Annual Report 20158

TRANSFORMATION UPDATE

1,100

Key achievement: Private Label price strategy
implemented in ~1,100 stores.

$1b

Key achievement: Hardware sales exceed
$1 billion for the first time.

In the CSD business, the focus was on developing a total
wholesale solution for convenience stores and petrol stations.
The business added new contracts with BP and Night Owl as
well as expanding its relationship with 7-Eleven.

Driving consolidation and sustainable
network growth
The Liquor Pillar continued to convert independent operators
to the Independents Brand Australia (IBA) retail network while
supporting wholesale customers. The business purchased
Southern Independent Liquor Group (SILG), which operates in
Victoria and Tasmania, trading under the Duncan’s and OzLiquor
banners. This acquisition added more than 100 retail outlets and
more than 400 wholesale customers to the network.

IBA focused on category management and introducing
private label products to enhance its value proposition to retailers
and their customers. Growth was supported by new product
initiatives and digital strategies, including advertising, loyalty and
customer relationship management programs, which will all be
built on in the year ahead.

The Hardware Pillar continued its strategy of consolidation

in the sector with G. Gay & Co and the Yenkens Group joining the
Mitre 10 banner. Metcash has added 87 independent hardware
retailers since taking control of Mitre 10. The business continued
its strategy of improving the performance of its joint ventures by
working together through a structured business plan to deliver
stronger results.

Mitre10 introduced a new store format and approach known

as a “Sapphire” store based on similar principles to the grocery
Diamond store. This initiative leverages an array of capabilities to
deliver value to retailers and consumers. Key areas of focus for the
stores are a new and compelling store layout, competitive pricing
and targeting key categories such as paint and power tools.

In a further effort to support retailers, Hardware worked on
becoming more efficient through site consolidation, increasing
productivity through automation and direct sourcing through China.
In FY2016 there are plans to progress the Sapphire store

initiative in a further 10 stores.

World class supply chain
In FY2015, Metcash focused on supply chain efficiency and
investment in infrastructure to better meet the needs of retail
customers and suppliers. Efficiency initiatives included the Group
rationalising its logistics management structure, consolidating
its warehouses and improving inventory management. It also
adopted a ‘shared use’ model, combining Liquor distribution with
the Food & Grocery non-fresh supply chain.

The Group also deployed a series of automation and
systems initiatives. This included completing the fully automated
full case picking system, Mustang, in the state-of-the-art
distribution facility at Huntingwood NSW. Unfortunately this
facility was badly damaged and closed by severe weather in
April 2015, which has caused delays in fully commissioning the
system. This process will now be completed in FY2017.

Metcash will continue to rationalise, automate and align
its supply chains to customer needs to ensure the benefits are
leveraged across the business.

Supporting successful independents
During the year, Metcash introduced the first elements of a suite
of competitive omni-channel solutions locally tailored for retailers.
This began with the launch of the ‘Metcash One’ digital platform,
allowing individual retailers to establish a digital presence.
The digital platform, which includes web, email and social media
support, is designed to increase engagement with customers and
suppliers. The Hardware business introduced Tradies Online and
‘click and collect’ initiatives during the year.

In FY2015, Metcash introduced its Retail Academy

programs for all the Pillars. This investment is important to
support and attract retailers to the independent network.
These programs aim to develop retailers’ skills and capabilities,
which will in turn drive value to network members.

Summary
The initial results from our Transformation Plan are positive
with the strong take-up of the key initiatives across the IGA
retail network and excellent growth achieved in the Liquor
and Hardware businesses. Although at an early stage of
implementation, the Group is seeing the benefits of a more
customer-focused approach to our businesses.

Metcash Limited Annual Report 2015CORPORATE RESPONSIBILITY

$70m

Since it began in the 1990s, IGA Community
Chest has raised and donated over $70 million
to local community organisations.

51%

Reduction in Lost Time Injuries since FY2011

Sales up X.X%
Sales up X.X%
to $XX.Xbn
to $XX.Xbn

Social
Community
Metcash supports community engagement across all its business
pillars and continues to manage the administration of the IGA
Community Chest program, through which IGA stores raise
funds and distribute them to local schools, clubs and charities.
Since it began in the 1990s, IGA Community Chest has raised
and donated over $70 million to local community organisations.
In FY2015, approximately $3.1 million was donated nationally via
IGA Community Chest.

1
3
1
,
3
2
,
9
9
2
7
6

1
2
1
,
9
2
7
,
6
6
0
5

1
1
2
2
,
,
6
3
0
6
5
4

1
3
,
3
9
2

1
2
,
3
6
4

1
1
,
5
1
7

During the year, these efforts were supplemented by
Metcash’s direct corporate philanthropy, sponsorship programs
and staff time donations. Sponsored organisations included
Special Olympics Australia and St Vincent De Paul Society.
In FY2015, Metcash staff volunteered at community
initiatives such as the Special Children’s Christmas Party held
at Rosehill Racecourse, the Business Clean Up Day and Earth
Hour. A special employee Christmas Hamper drive at the NSW
Corporate Offices resulted in 50 reusable IGA bags and 10 large
boxes filled with food items donated to FoodBank. Most recently,
staff members donated clothing, goods and held a hamper drive
to raise money for Nepal earthquake victims.

2
2
0
0
1
1
4
5

2
2
0
0
1
1
3
4

2
2
0
0
1
1
1
2

2
2
0
0
1
1
2
3

2
0
1
1

2
0
1
5

Work practices
Safety
In FY2015, Metcash continued to improve its overall safety
performance reducing the number of Lost Time Injuries (‘LTI’) by
21% from 136 to 108, and reducing the LTIFR (Lost Time Injury
Frequency Rate) by 30% from 14.63 to 10.24. Total workers’
compensation claims reduced by 69%, dropping from 1,064 claims
made in FY2014 to 329. Total hours lost to injury fell by 39%.

In FY2015 Metcash achieved two significant milestones;
a month with the lowest number of LTIs ever recorded (three
in March 2015); and the first year without an Improvement
Notice being issued by a State Occupational Health and Safety
(OHS) Regulator.

These results were driven through strong OHS leadership
and behavioural and culture change programs such as Metcash’s
‘Desired Safety Behaviours’ and ‘Safety Observation and
Feedback’ walks. Systems were improved in the areas of controls
in contractor compliance, drug and alcohol testing, safety
training, incident response and injury management.

No. Lost Time Injuries

LTIFR

2
2
2

2
2
2
1
2
5

2
1
5

1
5
0

1
1
5
1
3
0
3
6 1
6 1
0
0
8
8

2
1
.
3
0

2
2
2
1
1
1
.
.
.
8
3
8
0 1
0 1
0
6
1
6
.
4
.
3
3
.
0
6
0
3

1
4
.
1
6
0
3
.
2
4

1
0
.
2
4

F
Y
2
0
1
1

F
F
Y
Y
2
2
0
0
1
1
1
2

F
F
Y
Y
2
2
0
0
1
1
2
3

F
F
Y
Y
2
2
0
0
1
1
3
4

F
F
Y
Y
2
2
0
0
1
1
4
5

F
Y
2
0
1
5

F
Y
2
0
1
1

F
F
Y
Y
2
2
0
0
1
1
1
2

F
F
Y
Y
2
2
0
0
1
1
2
3

F
F
Y
Y
2
2
0
0
1
1
3
4

F
F
Y
Y
2
2
0
0
1
1
4
5

F
Y
2
0
1
5

During the year, Metcash introduced additional automated

order-picking infrastructure into the NSW distribution centre,
which will improve productivity while reducing the risk of manual
handling injuries. Metcash continues to evaluate the introduction
of automated systems in other states.

Metcash’s ‘Desired Safety Behaviours’ will become the
cornerstone of the Company’s commitment to improving safety
in warehouses, supported by new observation and feedback
processes. Additionally, work streams focused on improving
hazardous chemicals management, training and inductions,
and insurance management will be introduced. Metcash
management are measured on metrics for remuneration
purposes that include safety key performance indicators.

Wellbeing
Metcash has a Wellbeing Policy offering a range of employee
benefits that include flexible working arrangements, wellbeing days,
health initiatives, paid parental leave and free counselling services.

Work has been done to improve Managers’ understanding

on the benefits of flexible working arrangements for both
employees and the company. This has resulted in our people
being able to achieve a better work life balance.

‘Keeping in Touch’ days have been introduced for employees

on parental leave to help manage their return to the business.
A number of mature employees have also leveraged the

initiatives to assist in their career transition to retirement.

Metcash Limited Annual Report 201510

CORPORATE RESPONSIBILITY

28%

28% of leadership roles are held by women.

Diversity and inclusion
Improving diversity and inclusion continued to be a focus in FY2015
and there was an improvement in gender balance with a 1.3%
increase in women in leadership roles, which now sits at 28%.
Women make up 22% of the Board of Directors and 22% of the
Senior Executives and General Manager roles are held by women.

As part of the annual remuneration review process, Metcash
analyses pay levels by gender, identifies any differences and takes
appropriate steps to address them. This has resulted in a further
decrease in the female-to-male pay gap.

Metcash has introduced the Diversity & Inclusion
Framework as a way of embedding programs and promoting
diversity across the organisation. The Framework focuses on
five key areas – Cultural Diversity, Gender, Indigenous, Mature
Workforce and Disability. This initiative is helping maintain
momentum for delivering our evolving diversity program in
a timely manner.

Other diversity highlights during the year included:
• the Board setting measurable targets aligned to the

Workplace Gender Equality Agency indicators;

• a permanent role being offered to an intern who participated

in the Indigenous Internship Program;

• embedding relationships with disability employment

providers to increase the representation of employees with
a disability; and

• trialling youth programs to provide young people with

opportunities for employment.

Ethics
Consistent with prior years, we communicated Metcash’s anti-
corruption policies to our:

• executive team and Board;
• employees; and
• business partners who are suppliers of Metcash Private

Label products.

26%

Emissions from electricity consumption

reduced by 26% from the previous year across
all corporate sites.

Environment1
During the year Metcash completed a number of projects aimed
at improving its resource efficiency in areas such as materials,
energy and emissions, water and waste.

Materials
During the current reporting period, “Secure Printing” was
introduced across all of Metcash’s corporate sites which
encourages responsible printing by employees by tracking spend.
This initiative reduced paper usage by approximately 12,000
reams, equating to a saving of $371,000 per annum.

Metcash is a signatory to the Roundtable of Sustainable
Palm Oil. In the reporting period, Metcash increased the purchase
of sustainable palm oil for use in its corporate brands by 19%.
Of the Private Label products Metcash produces requiring palm
oil, 82% of these contain sustainable palm oil. The Group has
plans in place to increase this percentage in coming years.

Energy and emissions
Metcash tracks its energy consumption and emissions in
accordance with the National Greenhouse & Energy Reporting
(NGER) Act 2007 and in the Company’s Carbon Disclosure
Project Climate Change response.

During the 2014 calendar year, the Company reduced
emissions of electricity consumption by 26% across corporate
sites. In the 2013 calendar year, Metcash set a target to reduce
electricity consumption at its distribution centres by a further
10% over the next two years, using the 2013 consumption figure
as its base. The Company is on track to achieve this goal.

The reduced consumption is being achieved through a
number of initiatives, including the introduction of LED lighting,
altering lighting configurations and encouraging behavioural
changes at corporate office sites and distribution centres.

During calendar year 2014, Metcash engaged external
specialists to examine opportunities to improve energy efficiency
at all the major distribution centres and also at the Company
owned Campbell’s stores. A number of new projects have been
identified which will be implemented over the coming years
including, the installation of new refrigeration units or retrofitting
existing refrigeration at distribution centres and Campbell’s stores.

1. Environment and sustainability statistics are collected on a calendar year basis and are reported

the following financial year.

Metcash Limited Annual Report 2015CORPORATE RESPONSIBILITY

25%

Metcash now diverts 25% of its total waste

away from landfill.

257,000kg

Metcash donated 257,000 kilograms

of food to Foodbank.

Water
Metcash is reviewing opportunities to introduce native gardens
that require minimal watering at all of its corporate sites to further
reduce water consumption.

In May 2015, Metcash’s efforts in reducing reliance on
water were acknowledged by the Waterwise Business Program.
The Company was presented with a Bronze Recognition Award
for water savings achieved at the Canning Vale distribution
centre in WA.

Foodbank is a non-denominational, non-profit organisation

which acts as a pantry to the charities and community groups
who feed the hungry. It was first established in 1992 in NSW and
now has a presence in every state and the Northern Territory with
distribution centres in all state capitals as well as a number of
regional centres.

Products and services
During the year, the impact of Metcash products and services on
the environment were mitigated by implementing the following:

Biodiversity
During the year the Metcash sustainability team carried out a
materiality assessment. It was pleasing to note that no material
impacts on biodiversity were identified as a result of Metcash’s
direct operations.

Effluents and waste
Metcash is a signatory to the Australian Packaging Covenant,
which covers Metcash branded product packaging, as well as
waste and recycling from all Metcash corporate sites.

In 2014, the Australian Packaging Covenant awarded

Metcash the ‘Highest Performer Award’ for attaining the
highest score in the Retailer Category for its work with suppliers
on packaging. Key areas measured included the amount of
packaging used, ‘recyclability’ of packaging and the percentage
of recycled content in both primary and tertiary packaging.

In 2014, the Company’s recycling target of 9% was
exceeded and Metcash now diverts 25% of its total waste away
from landfill.

Waste to Landfill
Recycling
Cardboard
Paper
Plastic
Co-mingled

TOTAL

Metric Tonnes

% of total

12,258
4,093
2,584
846
653
10

16,351

75%
25%
16%
5%
4%
0%

100%

Metcash donates usable, but no longer saleable, packaged
food products to Foodbank which distributes these products to
charities that support Australians in need. In the reporting period,
Metcash donated over 257,000 kg of food, providing some
32,500 meals. According to Foodbank, this equates to a social
return of over $560,000.

• eliminating phosphate from all laundry and dishwashing

products;

• sourcing the majority of tuna products using sustainable
fishing methods. By September 2015, all canned tuna
products will be harvested without the use of Fish
Aggregating Devices (FAD). (A FAD device is a floating
object that attracts fish and takes advantage of the fact that
tuna congregate around floating objects); and

• ensuring all Private Label paper towel and toilet tissue
products either comply with the Program for the
Endorsement of Forest Certification (PEFC) or are Forest
Stewardship Certified (FSC).

Compliance
Metcash has not identified any non-compliance with
environmental laws or regulations during the reporting period.

Transport

Where practical, vehicle replacements have been with fuel
efficient diesel vehicles. In addition Metcash drivers have been
trained in more efficient driving techniques.

At the beginning of calendar year 2014, Metcash began to
measure domestic and international air travel in order to further
investigate Scope 3 emissions (indirect emissions attributed to
activities such as travel). This is being done so the Company can
gain a better understanding of its environmental footprint. In this
first year, it was found that 2,400 tonnes of CO2e was produced
due to air travel. Strategies are now being introduced to reduce
these emissions such as using video conferencing to reduce the
need for air travel.

Metcash Limited Annual Report 2015

OUR BOARD

Our
Board

Peter Barnes

Ian Morrice

Patrick Allaway

Fiona Balfour

Michael Butler

Tonianne Dwyer

Neil Hamilton

Edwin Jankelowitz

Mick McMahon

Robert Murray

Greg Watson

PETER L BARNES
B COMMERCE (HONS), MBA
Non-executive Chairman
Chairman of the Nomination
Committee
Date of Appointment to
Metcash Limited:
18 April 2005

Peter Barnes is a Director of News
Corporation. Mr Barnes was
formerly the Chairman of Samuel
Smith & Sons Pty Ltd and Ansell
Limited. He was 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.

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 the
Kingfisher Group and Dixons Retail.
Ian was Group Chief Executive
Officer and Group Managing
Director of New Zealand’s
Warehouse Group from 2004 to
2011. Ian is a former Non-executive
Director of Myer Holdings and
advisor to the Board of Spotlight
Retail Group.

PATRICK N J ALLAWAY
BA/LLB
Non-executive Director

Member of the Audit,
Risk & Compliance Committee
Member of the Nomination
Committee
Date of appointment to
Metcash Limited:
7 November 2012

Patrick Allaway is a broad based
business person with extensive
experience in financial services, and
senior executive and non executive
director roles in large multi-national

companies. His 30 year career in
investment banking has seen him
hold positions with Swiss Bank
Corporation in Chicago, Zurich and
London; and also with Citibank in
New York, Sydney and London.
Patrick was Managing Director
Swiss Bank Capital Markets
and Treasury with direct global
responsibility for over 1,000 people
in 16 countries.

Patrick is a Non-executive Director
of Woolworths South Africa, David
Jones and Country Road. He is
a member of the Audit, Risk and
Remuneration Committees for all
three companies and is chair of
all of these committees for David
Jones and Country Road.

Over the past 12 years Patrick has
been the Chairman and co-founder
of a privately owned boutique
corporate advisory business,
Saltbush Capital Markets, advising
select ASX listed companies. 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
commercial experience, capital
markets, business acquisitions and
divestments, business review and
strategic development. Patrick has a
Bachelor of Arts/Law from Sydney
University and is Chairman of Giant
Steps Endowment Fund, and a
Director of the Sydney University
Football Club Foundation Ltd.

FIONA E BALFOUR
BA (Hons), MBA, GRAD DIP
INFORMATION MANAGEMENT,
FAICD
Non-executive Director
Chair of the Remuneration
Committee
Member of the Nomination
Committee
Date of appointment to
Metcash Limited:
16 November 2010

Fiona Balfour is an independent
Non-executive Director of Salmat
Limited, TAL (Dai-ichi Life) Australia
Limited and Airservices Australia
and Treasurer and Councillor of
Knox Grammar School; a Fellow of
the AICD and a Fellow of Monash
University since 2010. She was
awarded the National Pearcey
Medal in 2006.

Metcash Limited Annual Report 2015OUR BOARD

Fiona has more than thirty 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 is a Member and
former Councillor of Chief Executive
Women, a former Director of SITA
SC (Geneva) from 2001 to 2006
and a former Trustee of the National
Breast Cancer Foundation from
2007 to 2011.

Fiona was appointed Chair of the
Remuneration Committee on
z16 October 2014.

MICHAEL R BUTLER
B SC, MBA, FAICD
Non-executive Director
Chairman of the Audit,
Risk & Compliance Committee
Member of the Nomination
Committee
Date of appointment to
Metcash Limited:
8 February 2007

Following an executive career in
investment banking and private
equity at Bankers Trust, Michael
Butler has been a professional non-
executive company director since
1999. He is currently Chairman
of AMP Superannuation Limited,
N.M. Superannuation Pty Ltd and
Adairs Limited, and a Director of
Utility Services Group Limited. He
has previously been a Director and
Chairman of various listed public
companies.

TONIANNE DWYER
BJuris (Hons)/LLB (Hons)
Non-executive Director
Member of the Audit,
Risk & Compliance Committee
Member of the Nomination
Committee
Date of appointment to
Metcash Limited:
24 June 2014

Having completed a law degree in
Western Australia, Tonianne spent
23 years in London where she had
a successful executive career in
investment banking and real estate.

Whilst at Hambros Bank/Societie
Generale she provided financial
advice to large listed and private
companies from a variety of sectors
on corporate actions including
listings, mergers and acquisitions,
divestments and restructurings, in
the UK and Europe.

In 2003 she joined LSE listed Quintain
Estates & Development plc where
she was appointed Head of Funds
Management and in 2006 she was
appointed to the Board. Quintain
was the developer of the two largest
mixed use urban renewal projects
in London – at Wembley and on the
Greenwich Peninsular. Tonianne led
the creation and development of a
successful specialist property fund
management business in Health,
Student Housing and Science Parks
with over £1.25bn in funds under
management.

Returning to Australia in 2010, Ms
Dwyer currently holds independent
directorships in ASX listed DEXUS
Property Group, DEXUS Wholesale
Property Fund, Cardno Limited and
Queensland Treasury Corporation.
She is a member of the Senate of
the University of Queensland, a
Graduate of Australian Institute of
Company Directors and a member
of Chief Executive Women.

NEIL D HAMILTON
LLB
Non-executive Director
Member of the Remuneration
Committee
Member of the Nomination
Committee
Date of appointment to
Metcash Limited:
7 February 2008

Neil Hamilton has over 30 years’
experience in senior management
positions and on boards of
public companies across law,
funds management, investment,
insurance and resources.

Neil is Chairman of OZ Minerals
Ltd and is a senior advisor to
UBS Australia. He is the former
Chairman of Challenge Bank Ltd,
Western Power Corporation, Mount
Gibson Iron Ltd and Iress Market
Technology Ltd and was a Director
of Insurance Australia Group Ltd
and Miclyn Express Offshore Ltd.

EDWIN M JANKELOWITZ
B COMM, CA (SA)
Non-executive Director
Member of the Audit,
Risk & Compliance Committee
Member of the Nomination
Committee
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
40 years in corporate offices
of listed companies and was a
member of the Income Tax Special
Court in South Africa for 20 years.

Edwin is currently Non-executive
Chairman of Kervale Investments
Pty Ltd and a Non-executive
Director of Chester Capital Pty Ltd
and Ritchies Stores Pty Ltd.

MICK P MCMAHON
BEcon; Harvard Business School
Advanced Management Program
Non-executive Director
Member of the Remuneration
Committee
Member of the Nomination
Committee
Date of appointment to
Metcash Limited:
27 November 2013
Date of retirement from Metcash
Limited: 23 June 2015

Mick McMahon is an internationally
experienced business leader with
a broad retail and commercial
background. Mick commenced his
career with Shell in Australia and
transferred to the UK in 1999 where
he held several senior positions in
retail, marketing and strategy.

In 2005, he returned to Australia
as the Managing Director, Coles
Express and in 2007 he was
appointed the Chief Operating
Officer, Coles (Supermarkets, Liquor,
Express). He was the CEO and
Managing Director of ASX listed

SKILLED Group from November
2010 through to January 2015.

Mick is an experienced CEO with
extensive retailing and supply
chain management experience in
supermarkets and convenience,
food, grocery and liquor.

Mick is the Executive Chairman of
Inghams Enterprises and Chairman
of Red Rock Leisure. He has a
Bachelor of Economics from the
University of Tasmania and has
completed the Harvard Business
School Management Program.

ROBERT A MURRAY
MA HONS, ECONOMICS
Non-executive Director
Member of the Nomination
Committee
Date of appointment to
Metcash Limited:
29 April 2015

Robert (Rob) is currently Chairman
of Dick Smith Holdings Limited
and a Non-executive Director of
Southern Cross Austereo and Linfox
Logistics Pty Ltd.

Rob was previously the CEO of Lion
Nathan and CEO of Nestle Oceania
and is a member of the not-for-
profit charity Board of the Bestest
organisation. His areas of expertise
are in retail, FMCG and an in-depth
understanding of consumers.

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 24
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.

Metcash Limited Annual Report 201514

CORPORATE GOVERNANCE

The Directors of Metcash Limited (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 the Company’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 the Company’s compliance with the Corporate Governance Council’s recommendations.

RECOMMENDATION

PRINCIPLE 1 – LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT

COMPLY
YES/ NO

REFERENCE/
EXPLANATION

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

Yes

Website
www.metcash.com

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

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

PRINCIPLE 2 – STRUCTURE THE BOARD TO ADD VALUE

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.

Yes

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

Page 18

PRINCIPLE 3 – PROMOTE ETHICAL AND RESPONSIBLE DECISION-MAKING

3.1

3.2

3.3

3.4

3.5

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 Company’s integrity;
– the practices necessary to take into account their legal obligations and the reasonable

expectations of their stakeholders; and

– 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.

Yes

Website
www.metcash.com

Yes

Website
www.metcash.com

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

Page 18

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.

Yes

Page 18

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

Page 18

Page 16

Page 17

Page 18

1.1

1.2

1.3

2.1

2.2

2.3

2.4

2.5

2.6

Metcash Limited Annual Report 2015CORPORATE GOVERNANCE

PRINCIPLE 4 – SAFEGUARD INTEGRITY IN FINANCIAL REPORTING

4.1

4.2

4.3

4.4

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; and
– has at least three members.

The Audit Committee should have a formal charter.

Yes

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

Page 19

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.

Yes

Website
www.metcash.com

5.2

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

Page 20

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.

Yes

Website
www.metcash.com

6.2

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

Page 20

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

Website
www.metcash.com

Page 21

Yes

Page 21

7.4

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

Page 21

PRINCIPLE 8 – REMUNERATE FAIRLY AND RESPONSIBLY

8.1

8.2

8.3

8.4

The Board should establish a Remuneration Committee.

Yes

Page 22

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

Website
www.metcash.com

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

Yes

Page 22

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

Page 22

Metcash Limited Annual Report 201516

CORPORATE GOVERNANCE

The Company’s policies and practices and their relationship to
the Council’s recommendations are set out in more detail as follows.

PRINCIPLE 2: STRUCTURE THE BOARD TO
ADD VALUE

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 the Company and for overseeing and monitoring its
businesses and affairs.

The Board will at all times recognise its overriding

responsibility to act honestly, fairly, diligently and in accordance
with the law in serving the interests of Metcash’s shareholders, as
well as its employees, customers and the community. It will work
to promote and maintain an ethical environment within Metcash
that establishes these principles as basic guidelines for all of its
employees and representatives at all times.

The Board reviews and approves the Company’s strategic
and business plans and guiding policies. Day-to-day management
of Company’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.

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 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 2015 financial year, the Chief Executive
Officer’s performance was reviewed in accordance with the
process specified above.

The Company maintains a performance evaluation process

which measures other senior executives against previously
agreed Key Performance Indicators and Targets. The target
plans for the Chief Executive Officer and all senior executives
is available to the Board each month for progress review. Each
senior executive reviews their progress against their target plan
progressively through the year with a formal annual appraisal
following the year end. Target plans have been set and agreed
with the Board for the Chief Executive Officer for FY2016 and for
other senior executives agreed by the CEO.

Senior executives have access to continuing education to

update and enhance their skills and knowledge.

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. To that end,
on 29 April 2015, the Board appointed Robert Murray as a Non-
executive Director and Chair elect.

Directors are not appointed for a fixed term but, under the

Company’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.

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 34, headed ‘Directors
qualifications and experience’, in the Operating and Financial Review.
The Board of Metcash is currently constituted as follows:

Independent Non-executive Directors

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.
As at the date of this report, the Board consisted of ten
Directors, nine of whom are considered to be Non-Executive, and
eight of whom are considered to be Independent Directors.

The Board has adopted a definition of independence

which is derived from the definition set out in the Principles.

Metcash Limited Annual Report 2015CORPORATE GOVERNANCE

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; or

Chairman of Samuel Smith & Sons Pty Ltd. He is the former
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.

• 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 the Company.

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, Mr Ian Morrice,
who was appointed as the Company’s Chief Executive Officer on
30 June 2013.

• has a material contractual relationship with the Company or

All Directors, whether independent or not, bring an

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

The Board has assessed whether each Non-executive Director is
independent, based on this definition, and in light of information
disclosed by those Directors that may be relevant to this assessment.

Those Non-executive Directors are considered to be

independent for the reasons set out as follows.

None of the Directors referred to above is substantial
shareholders of the Company or associated with a substantial
shareholder of the Company (holding 5% or more of the Company’s
issued shares).
• Messrs Allaway, Barnes, Butler, Hamilton, Murray, Mrs Balfour,
and Ms Dwyer are not employed by, nor have they previously
been employed by, the Company or another group member.
None of the Non-executive Directors referred to above have a
contractual relationship with the group nor have they been a
professional adviser or consultant to the group or an employee
associated with the service provided.

• Other than as disclosed below, none of the Non-executive

Directors 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 the Company’s annual purchases or a customer
representing 2.5% or more of the Company’s annual sales.

• Fiona Balfour is an independent Non-executive Director of Salmat
Limited a distributor of letterbox media and digital catalogues.

• Mick McMahon is the Executive Chairman of Ingham’s

Enterprises a supplier to the Company.

• Peter Barnes is a Director of News Corporation and former

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 who
is accountable to the Board, through the Chairman, on all
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
The roles of Chief Executive Officer and Chair are not exercised
by the same individual.

THE BOARD SHOULD ESTABLISH A NOMINATION
COMMITTEE
The Board has a Nomination Committee.

The membership of the Nomination Committee consists
of only Non-executive Independent Directors. Details of their
qualifications and attendance at meetings during the past
financial year can be found in this report on pages 34 and 38
respectively of the Operating and Financial Review.

Metcash Limited Annual Report 201518

CORPORATE GOVERNANCE

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

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 and was again conducted in 2015.
The review of the Board evaluates areas including:

Board structure and role; Committees; Board composition
and succession; meeting processes; strategy and planning;
performance monitoring; and communication.

PRINCIPLE 3 – PROMOTE ETHICAL AND
RESPONSIBLE DECISION-MAKING

ESTABLISH A CODE OF CONDUCT
The Company 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; and
• 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 the
Company’s functions and related processes including internal
audit, security, human resources and occupational health and
safety. New staff members are required to attend an induction
program that includes behaviour guidelines. Additionally,
the Company’s staff appraisal process includes employees’
performance against ‘Key Behavioural Indicators’ as well as ‘Key
Performance Indicators’.

The Company also has a ‘Serious Complaints’ policy
which endeavours to protect those who report, in good faith,
violations of the Code of Conduct. 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 Metcash Board

in 2011. It was supported by an educational program detailing
aspirational goals, changes to procedures and gave guidance on
how the Policy was to be implemented. The Policy was revised in
2015 and is located on the Company’s website (www.metcash.
com/community-sustainability/community/people/).

In FY2015, the Company focused on addressing the

following matters across the Group:
• the gender imbalance, particularly across leadership levels;
• investment in Indigenous talent through the Company’s

Indigenous Internship Program; and

• support for mature workers through financial advice and

retirement planning.

In FY2016 the Company will focus on implementing the following
initiatives:
• alignment of gender pay equity in ‘like for like’ roles across the
Company. This will be rolled out over the next three years with
a goal of full compliance by FY2018;

• expanding the Indigenous Internship Program nationwide with
an increase in the number of participants from 3 currently to
10 by FY2018; and

• a reduction in substantiated complaints such as harassment

and discrimination.

The Company has made further progress in increasing female
representation in leadership roles across the Group. In particular;
• women currently comprise just over 31% of Metcash’s

workforce. There has been a 1.3% increase in the number of
females in leadership roles during the year.

• during the year Linda Venables was appointed Chief Logistics
Officer – Food, Liquor and Grocery and joined the Executive
management Team. Currently 18% of the Company’s
executive leadership group are women;

• there was an increase in the Company’s leadership programs
offered during the year, and 29% of participants in these
programs were women; and

• two out of nine Non-executive Directors on the Metcash

Board are women.

The proportion of women at each level of management across
the Metcash Group, as reported in the most recent Workplace
Gender Equality Governance Report, is shown opposite.
The Company is now embedding the diversity initiatives as
reported and continues to focus on the following key aspects:
• building an inclusive culture which encourages and supports
flexible working arrangements, including a full review of
parental policies and practices and supporting our mature
workforce as they transition into retirement;

• continuing the relationship with Job Support to increase

disability employment opportunities; and

• cementing the Indigenous Internship Program with the view

to expand nationwide.

Metcash Limited Annual Report 2015CORPORATE GOVERNANCE

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 Directors. Details of
their qualifications and attendance at meetings during the past
financial year can be found in this report on page 38 of the
Operating and Financial Review.

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 the 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 Non-executive Directors and is chaired by an Independent
Director who is not the Chairman of the Board.

COMMITTEE CHARTER
The Committee’s Charter, 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
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.

The Company 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 the 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 the Company’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.

METCASH WORKPLACE PROFILE 26 APRIL 2015

FEMALE

MALE

FULL TIME

PART TIME

FULL TIME

PART TIME

FEMALE
CASUAL

MALE
CASUAL

FEMALE
TOTAL

MALE
TOTAL

TOTAL

FEMALE
%

MALE
%

Non-executive
Directors

Senior Exec

Senior Managers

Supervisor /
Managers

Administration
Employees

Sales Employees

Warehouse
Employees

153

582

297

137

127

200

371

499

261

2,160

114

162

201

371

22.2% 77.8%

266

533

18.2% 81.8%

24.4% 75.6%

30.4% 69.6%

778

529

1,307

59.5% 40.5%

119

154

102

323

260

578

370

630

41.3% 58.7%

2,597

3,175

18.2% 81.8%

1,191

323

3,507

129

333

448

1,847

4,084

5,931

31.1% 68.9%

This table includes the primary wholesale operating segments (Food & Grocery, Liquor, Hardware & Automotive) and excludes certain retail subsidiaries (mostly partly owned)

Metcash Limited Annual Report 201520

CORPORATE GOVERNANCE

PRINCIPLE 5 – MAKE TIMELY AND
BALANCED DISCLOSURE

PRINCIPLE 6 – RESPECT THE RIGHTS OF
SHAREHOLDERS

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 it 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 the
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 Company’s

website www.metcash.com under the heading
‘Corporate Governance’.

The Company 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,
the Company 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 the
Company’s website.

The Shareholder Communication Policy can be found on

Company’s website www.metcash.com under the heading
‘Corporate Governance’.

The Company continues to encourage electronic

communication with shareholders to facilitate the speedy and
inexpensive dissemination of information. This is being done
through email, the Company website, corporate social media
and direct distribution. The Company’s website contains current
and historical ASX 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.

Metcash Limited Annual Report 2015CORPORATE GOVERNANCE

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 the Company’s
appetite for risk, taking into account the Company’s 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 (ARCC), implements a
continuous process of communication with internal stakeholders
at each stage of the risk management process. They also conduct
annual examinations of the Company’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 – Summary’ which can be found on the
Company’s website www.metcash.com under the heading
‘Corporate Governance’.

The Company’s risk management philosophy and practices

are documented more fully in the Metcash Risk Management
Framework and Guidelines (Risk Management Framework).

Material business risks that have been identified are located

in the Operating and Financial Review at page 31.

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 ARCC 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 ARCC monitors
those risk events that could prevent the achievement of the
Company’s corporate strategies.

All employees are responsible for the management of

risk within their areas. Employees are also required to advise
management of increasing or new risk exposures and significant
operational incidents as they become aware of them.

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 Company 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 ongoing process of communication, consultation,

monitoring and review enables management to demonstrate
continuous improvement whilst encouraging greater ownership
by individuals across the business.

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 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 ARCC 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, the Company’s financial report presents a true and fair
view, in all material respects, of the Company’s financial position
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.

Metcash Limited Annual Report 2015
22

CORPORATE GOVERNANCE

PRINCIPLE 8 – REMUNERATE FAIRLY AND
RESPONSIBLY

THE BOARD SHOULD ESTABLISH A REMUNERATION
COMMITTEE
The Board has established a Remuneration Committee.

Remuneration Policy
The Company’s Remuneration Policy can be found on the
Company’s 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
Directors’ Report.

The Company’s policy on the prohibition of entering into

transactions 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 on the Company’s
website www.metcash.com.

Non-executive Directors’ compensation and retirement
benefits
Refer to the ‘Remuneration Report’ contained within the
Directors’ Report.

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

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

FINANCIAL REPORT

FINANCIAL REPORT
For the year ended 30 April 2015

Director’s Report

Statement of Comprehensive Income

Statement of Financial Position

Statement of Changes in Equity

Statement of Cash Flows

Notes to the Financial Statements

Director’s Declaration

Auditor’s Independence Declaration

Independent Auditor’s Report

120

121

122

Metcash Limited Annual Report 201524

DIRECTORS’ REPORT
Year ended 30 April 2015

Your Directors submit their report of Metcash Limited (the Company) and its controlled entities (the Group) for the year
ended 30 April 2015.

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)
Ian R Morrice (CEO)
Patrick N J Allaway
Fiona E Balfour
Michael R Butler
Tonianne Dwyer (appointed 24 June 2014)
Neil D Hamilton
Edwin M Jankelowitz
Michael (Mick) P McMahon
Robert A Murray (appointed 29 April 2015)
V Dudley Rubin (retired 27 August 2014)

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

OPERATING AND FINANCIAL REVIEW

The Operating and Financial Review 2015 provides shareholders with a concise overview of Metcash’s operations,
financial position, business strategies and prospects. The review outlines the impact of key events during the 2015
financial year (FY2015) and highlights material business risks. The review complements the financial report and has been
prepared in accordance with the guidance set out in ASIC Regulatory Guide 247.

METCASH’S OPERATIONS

1.1. Our Business Model (Incorporating Corporate Information)

Metcash’s purpose is to develop ‘Successful Independents’ by supporting independent retailers. As a dedicated wholesale
distribution, merchandising and marketing company, Metcash provides retailers with the means to present a compelling
proposition for the consumer. Our strengths include: purchasing power; world class logistics systems; extensive
merchandising, marketing, retail development and retail operational support.

Metcash deploys these competencies across our three business ‘Pillars’, which span the food and grocery, liquor and
hardware and automotive sectors across Australia. In New Zealand, we also have a small liquor business. In FY2015,
these divisions generated revenues of $13.6 billion through a number of leading retail brands, several of which are owned
by Metcash. These include IGA, Cellarbrations, Bottle-O, Mitre 10, Autobarn and Autopro. Other brands supplied, but not
owned, by Metcash include 7- Eleven, BP and Liquormart. Metcash competes against the vertically integrated self-service
retail chains.

Food & Grocery is Metcash’s largest Pillar, representing 68% of total revenues. It services approximately 2,500 grocery
stores, of which more than 1,400 are branded IGA. In addition, this Pillar services approximately 50,000 convenience
customers. The Liquor division services more than 12,000 pubs, clubs and bottle shops, the Mitre 10 network supplies
around 800 outlets and the Automotive services network supplies more than 400 stores and service centres.

Metcash operates major distribution centres in all the mainland states of Australia. These are complemented by a number
of smaller warehouses and our Campbell’s branch network.

Metcash employs approximately 6,300 people across the Group.

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

DIRECTORS’ REPORT
Year ended 30 April 2015

1.2. Our Strategic Priorities – Transformation Plan

In March 2014, the Group announced details of its five-year Transformation Plan (The Plan). FY2015 is year one of the
five-year plan. The Plan is focussed on four strategic priorities that underpin the Group’s long-term sustainable growth:

1. Transforming the Food & Grocery division, known as Project Diamond
2. Driving consolidation and sustainable network growth
3. Further enhancing the Group’s world class supply chain
4. Supporting Independents

Project Diamond is a key initiative for the Food & Grocery Pillar. It targets growth by implementing the following five
levers focussed on the end-consumer to drive sales across the network.

 Shopper-led way - ranging products in stores to align with local markets
 Competitive pricing - ensuring every day competitive price across the network
 Compelling fresh - improving the fresh offer in store
 Retail excellence - improving retailer standards across the network
 Network investment - improving the network of stores

The consolidation and sustainable network growth initiative is also focussed on converting independent retailers to the
Group’s liquor, hardware and automotive banners; extending the Group’s retail support team; reinvigorating the Group’s
retail execution; and enhancing category growth opportunities.

Metcash is known for its supply chain logistics capabilities and the Group’s benchmark is world’s best practice.
Consequently the Group is looking to drive efficiencies through further infrastructure investment. For example, our
continued investment in technology is increasing our flexibility to serve customer needs and reducing the Group’s cost of
service.

To enable Successful Independents, this key initiative in the Transformation Plan is directed towards providing better
support to independent retailers, including expanding the Group’s digital platform by introducing competitive omni-channel
solutions. These will be tailored for retailers to provide enhanced analytics and insight capabilities. In addition, the Group
has launched a Retail Academy, part of a program designed to attract new retailers to the independent network and
provide training to enhance their retailing skills.

1.3. Key financial measures of success

Wholesale sales are the key driver of Metcash’s profitability. The Group’s Transformation Plan targets sustained growth in
sales volume by building and supporting a strong network of successful independent retailers.

Metcash supports retailers working with each of its Pillars by assisting with in-store refurbishments, which in Food &
Grocery, includes the new Diamond Store Accelerator program.

Within Food & Grocery, Project Diamond has a strong focus on range through category management, providing a
compelling fresh and private label offer as well as retail excellence in-store. These levers are designed to better fulfil
consumer needs and ultimately increase wholesale sales including increasing our ‘Teamwork Score’ (the proportion of
total products purchased by an independent retailer sourced from Metcash).

Wholesale sales and related margins are also driven by competitive pricing, promotional activities and the level of supplier
support through volumetric and other rebates.

Profitability also depends 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. As a proportion of these costs are
fixed, Metcash can ‘leverage’ its profitability through sales 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 invested capital.

The above factors apply equally to the Liquor and Hardware & Automotive Pillars.

DIRECTORS’ REPORT
Year ended 30 April 2015

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

2.1. Acquisitions and Divestments

During FY2015, the Group invested $42.5 million in bolt-on acquisitions. This included the acquisition of Midas
(automotive services), Liquor Traders (Thirsty Camel - Queensland), Far North Wholesalers (convenience) and G.Gay &
Co (hardware).

As at the end of the financial year, Metcash had completed its investment in Project Mustang, at a cost of approximately
$75 million. The project, centred on the Group’s distribution facility in Huntingwood, NSW, utilises the latest European
warehouse automation technology. It will significantly automate the goods receipt, order selection, pallet assembly and
distribution processes for both the Food & Grocery and Liquor businesses operating within this distribution centre.

Metcash generated $41.0 million in cash from the disposal of surplus properties, largely relating to owned retail tenancies.
The Group will continue to explore opportunities to release capital through the divestment of surplus retail property and
assets held for sale.

2.2. Dividends

During the financial year, Metcash paid the FY2014 final dividend of 9.0 cents per share and the FY2015 interim dividend
of 6.5 cents per share, both fully franked. Of the total dividends of $138.7 million, $54.6 million was paid in cash and $84.1
million was settled by the issue of 40.0 million shares under the Dividend Reinvestment Plan (DRP).

The Board has announced it will not be declaring a final dividend for FY2015 and that it intends to suspend dividend
payments for FY2016.

2.3. Huntingwood Distribution Centre Hail Damage

Metcash’s distribution centre at Huntingwood, NSW, suffered significant damage as a result of a torrential hail storm on 25
April 2015. The damage was sufficiently serious to warrant closure of the dry grocery/liquor warehouse (including the
automated Project Mustang area) and for business continuity plans to be immediately activated. Metcash was able to
quickly re-establish supply to NSW customers from Victorian, Queensland, ACT and other temporary distribution centres
in NSW. The perishable and frozen warehouses were not impacted. At the date of this report, the dry warehouse remains
closed and may not be fully re-opened until early in the 2016 calendar year.

Metcash’s insurance policy is expected to cover the hail event for material damage and consequential loss.

As the hail event occurred immediately prior to the end of the FY2015 financial year, the consequential loss from
increased costs of working and lost sales was not material during FY2015. The hail event is however anticipated to have
an impact on sales and operating costs during FY2016, which will be subject to recovery under the company’s insurance
policy.

2.4. Change of Key Staff

Mr Adrian Gratwicke was CFO until 31 January 2015 and ceased employment on 30 April 2015. Mr Brad Soller
commenced as CFO on 11 February 2015.

Mr Fergus Collins was CEO, Supermarkets Food & Grocery until 1 April 2015 and will cease employment on 1 July 2015.
Mr Ian Morrice is managing the Supermarkets Food & Grocery business until a new CEO, Supermarkets Food & Grocery
is appointed.

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

DIRECTORS’ REPORT
Year ended 30 April 2015

FINANCIAL RESULTS

3.1. Group Overview

Summary Results & Underlying Earnings Reconciliation (Unaudited)

Sales revenue
Earnings before interest, tax, depreciation and amortisation (EBITDA)
Depreciation and amortisation
Earnings before interest and tax (EBIT)
Net finance costs
Underlying profit before tax
Tax expense on underlying profit
Non-controlling interests
Underlying earnings (i)
Significant items expense
Tax benefit on significant items
Net profit/(loss) for the year from continuing operations
Net profit/(loss) after tax from discontinued operations
Net profit/(loss) for the year

Underlying earnings per share (cents)
Reported earnings/(loss) per share (cents)

2015
$m

13,626.2
396.9
(71.8)
325.1
(55.1)
270.0
(75.6)
(1.4)
193.0
(638.8)
61.6
(384.2)
-
(384.2)

21.3
(42.4)

2014
$m

13,392.7
460.1
(69.8)
390.3
(57.2)
333.1
(97.9)
(1.5)
233.7
(56.1)
2.1
179.7
(10.5)
169.2

26.5
19.2

The Group generated $13.6 billion of sales revenue in FY2015, up 1.7% against the prior year. Underlying EBIT of $325.1
million was in line with the guidance provided to the market in December 2014. Underlying profit of $193.0 million for
FY2015 was down 17.4% on the FY2014 result.

The Group reported a net loss of $384.2 million for the year (FY2014: profit $169.2 million). The net loss reflects the
inclusion of $577.2 million after tax of significant items.

Metcash carried out a comprehensive review of the Group’s assets. The review took account of the increasingly
competitive trading environment, particularly in Food & Grocery. As a result of this review Metcash reduced the carrying
value of goodwill and other assets by $640.0 million. This charge has been included as a significant item and excluded
from underlying earnings. The charge comprises an impairment of $506.7 million in relation to intangible assets (goodwill
of $441.6 million and other intangible assets of $65.1 million) and a charge of $133.3 million in relation to other assets and
obligations. Impairment items are primarily non-cash and will not impact the Group’s debt facilities, compliance with
banking covenants or trading terms.

(i) Underlying earnings represents reported profit after tax from continuing operations attributable to equity holders of the parent, excluding significant items
after tax. 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’s
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 in Note 3 of these financial statements.

DIRECTORS’ REPORT
Year ended 30 April 2015

3.2. Segment Results

Sales Revenue
Food & Grocery
Liquor
Hardware & Automotive
Corporate
Metcash Group



Food & Grocery

Sales Revenue

EBIT

2015
$m

2014
$m

9,217.8
3,103.6
1,304.8
-
13,626.2

9,072.4
3,160.8
1,159.5
-
13,392.7

2015
$m

216.8
57.6
57.9
(7.2)
325.1

2014
$m

293.4
52.1
49.9
(5.1)
390.3

The Food & Grocery segment was impacted by an underlying decline in sales stemming from competitive pressures, on-
going deflation and a number of store closures. These factors had an adverse impact on the Pillars’ operating leverage. In
addition, Food & Grocery incurred significant costs associated with implementing the Transformation Plan, including
investment in pricing, through initiatives such as Price Match, and other operating investments.

Total Food & Grocery sales revenue was up 1.6%, there was however an underlying weakness in supermarkets’ core
wholesale sales (excluding tobacco) which were down 2.2%. This reflected an underlying sales decline of 3.3% offset by a
1.1% increase in sales from Diamond Store initiatives. Total sales revenue in the convenience channel increased by
11.3%, largely through new business.

Improved sales were achieved in those stores that implemented the Price Match and/or Black & Gold Partnership
Program, and in particular, for stores that implemented the Diamond Store Accelerator program. By the end of FY2015,
~600 stores were on the Price Match program, a further ~500 stores had implemented the Black & Gold Partnership
Program and 52 stores had refurbished their stores under the Diamond Store Accelerator program.

Segment EBIT declined from $293.4 million to $216.8 million, a decline of 26.1%. The segment experienced significant
negative leverage due to the underlying weakness in non-tobacco sales noted above. Although savings were achieved
through targeted initiatives these were offset by incremental costs associated with the Transformation Plan.

Food & Grocery invested $40 million in implementing the Transformation Plan, including investments in product pricing
under the Price Match and/or Black & Gold Partnership Programs together with investment in digital, capability and
training.



Liquor

The Liquor division performed strongly during FY2015. Although sales revenue declined by 1.8% to $3.1 billion, segment
EBIT increased by 10.6% to $57.6 million. Sales across the core IBA brands grew by 3.7% reflecting strong organic sales
volumes and store conversions to the IBA network. Sales declined within the lower margin non-IBA channel, as a number
of customers were converted to the IBA network or left the network.

The improved segment EBIT of $57.6 million was driven by the combination of increased IBA sales volumes, an improved
sales mix (with a shift to higher margin categories) and tight control of costs.

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

DIRECTORS’ REPORT
Year ended 30 April 2015



Hardware & Automotive

In FY2015, the Hardware & Automotive Pillar’s sales revenue grew by 12.5% to $1.3 billion, with EBIT increasing 16.0%
to $57.9 million. Mitre 10 total sales revenue increased by 11.3% to exceed $1 billion for the first time. The Pillar also
generated an increase in ‘like-for-like’ sales which were up 3.3% for Hardware and 1.1% for Automotive.

Mitre 10 results were achieved through further growth in the network and the rollout of consumer-driven initiatives
focussed on range, price and retail excellence. During the year, an additional 16 independent stores were converted to the
Mitre 10 banner, bringing the total conversions to 87 since 2010. The most recent groups welcomed to the network
included G.Gay & Co, Chermside and Yenckens. The buoyant construction market and strong housing starts flowed
through to increased trade sales.

Automotive performed strongly with overall sales revenue up by 17.8% against last year. During the year the Automotive
Pillar focussed on customer value, cost to serve and building brands. The group acquired the Midas Australia network of
89 franchised stores in May 2014. During the year Automotive reduced its cost of doing business through warehouse
consolidation and direct sourcing. Despite some headwinds from the depreciating AUD/USD exchange rate, which
impacted margins, Automotive EBIT was up against last year.

3.3.

Finance Costs and Tax

Net finance costs decreased by 3.7% to $55.1 million. Savings from lower interest rates, tight working capital
management and prudent capital expenditure were partially offset by non-cash expenses associated with the unwinding of
net present value discounts of long-term rental subsidies and other provisions.

Tax expense on underlying profit of $75.6 million represents an effective tax rate of 28.0%, marginally lower than the prior
year rate of 29.4% due to the application of capital tax losses and research & development allowances.

CASH FLOWS

Summary Cash Flows (Unaudited)

Operating cash flows
Investing cash flows
Dividends paid and other financing activities
Reduction/(increase) in net debt

2015
$m

231.7
(74.9)
(57.7)
99.1

2014
$m

388.7
(211.8)
(224.0)
(47.1)

Operating cash flows for the year were $231.7 million, versus last year’s $388.7 million. The reduced operating cash flows
reflect the reduction in underlying EBITDA of $63.2 million and the reversal of the $80.0 million working capital timing
benefit, due to the timing of Anzac Day, recognised in FY2014.

The underlying cash realisation ratio of 87.5% was below the target level of 100%, due to the reversal in working capital
noted above.

Investing cash flow of $74.9 million was down significantly on the prior year (FY2014: $211.8 million) reflecting a reduction
in acquisition investment to $42.5 million, reduced capital expenditure of $85.4 million and an increase in capital recycling
to $41.0 million through the sell down of surplus assets.

Cash dividends paid decreased by $151.0 million, reflecting the reduced payment levels and the fact that the DRP was
underwritten.

As a result of the above cash flows, Metcash applied $99.1 million towards the repayment of net debt.

DIRECTORS’ REPORT
Year ended 30 April 2015

FINANCIAL POSITION, COMMITMENTS AND CONTINGENCIES

5.1.

Financial Position

Summary Financial Position (Unaudited)

Trade receivables and prepayments
Inventories
Trade payables and provisions
Net working capital
Intangible assets
Property, plant and equipment
Equity accounted investments
Customer loans and assets held for sale
Total funds employed
Net debt
Tax, put options and derivatives
Net assets/equity



Net working capital

2015
$m

2014
$m

989.1
712.5
(1,695.4)
6.2
1,284.5
276.0
102.1
90.6
1,759.4
(667.8)
65.0
1,156.6

1,009.1
743.8
(1,697.3)
55.6
1,765.7
308.4
99.5
134.0
2,363.2
(766.9)
(2.3)
1,594.0

Metcash’s net working capital reduced to $6.2 million (FY2014: $55.6 million), despite a reversal of the prior period timing
benefit of approximately $80 million. This lower working capital balance was achieved due to tight stock control and debtor
management and the inclusion of provisions relating to the significant item impairments.



Intangible assets

The reduction in intangible assets largely reflects the write down of goodwill and other intangible assets of $506.7 million
which are disclosed under significant items.



Property, plant and equipment

Metcash invested $62.3 million in capital expenditure, including the final component of Project Mustang. This increase
was offset by depreciation and amortisation of $39.6 million, impairments of $19.2 million and the disposal of surplus
properties.



Equity accounted investments

Metcash has $102.1 million invested in a number of grocery, hardware and liquor retail joint ventures, where the equity
interest typically ranges between 25% - 50%. Grocery retail joint ventures represent the majority of the investment value,
with the largest individual investment being our 26% investment in Ritchies Stores Pty Ltd.



Customer loans and assets held for sale

Customer loans represent monies advanced to retailers, principally to assist with funding store development. Assets held
for sale includes retail stores that are owned by Metcash and surplus retail freehold property. The $43.4 million reduction
during the year included $12.0 million from net loan collections and $23.2 million from asset sales.



Net debt

The Group ended the year with net debt of $667.8 million (FY2014: $766.9 million). This is the lowest net debt level since
2010. Metcash had $703.0 million in available debt facilities at the reporting date.



Net assets/equity

The decrease in the Group’s net assets position largely reflected the impairment of goodwill and other assets of $577.2
million after tax.

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

DIRECTORS’ REPORT
Year ended 30 April 2015

5.2. Commitments, Contingencies and Other Financial Exposures

Metcash’s operating lease commitments, which predominantly relate to warehouse and retail stores, are detailed in Note
17 of the financial statements. The increase in commitments from $1.52 billion to $1.75 billion is primarily due to an
extension of the lease at the Huntingwood, NSW distribution centre and lease commitments for the new corporate office in
Ryde, NSW.

The Group is exposed to a contingent liability in relation to an agreement with American Express to offer credit facilities to
the Group’s retail network. Further details of this agreement and other contingent liabilities are presented in Note 25 of the
financial statements.

Metcash has a relatively low exposure to interest rate risk and minimal foreign exchange exposures. Variable interest rate
exposures on core debt are hedged in accordance with the Treasury Policy between a minimum and maximum range. At
year end 71% of debt was fixed. The fixed interest and foreign exchange exposure on the US$225.0 million USPP debt
facility is effectively converted via hedges into $210.1 million of variable rate funding. Further details are set out in Note
12.

BUSINESS STRATEGIES AND PROSPECTS (Incorporating Likely Developments and Expected Results)

6.1. Strategy Update

Metcash’s core strategy is to support independent retailers to drive mutually profitable growth. Metcash intends to
implement this strategy through the Transformation Plan. They key steps in the Transformation Plan are outlined in
section 1.2

6.2. Group Capital and Asset Management Initiatives

Metcash has taken a number of steps to strengthen its balance sheet and to ensure it is well-placed to invest in its
strategic plan. This includes:

 Not declaring a FY2015 final dividend and announcing its intention to suspend FY2016 dividends;
 Releasing capital through the divestment of surplus properties and assets
 Disciplined capital expenditure and tight working capital management

On 15 June 2015, Metcash announced it had reached agreement with Burson Group Limited (ASX: BAP) for the sale of
the entire issued share capital of Metcash Automotive Holdings Pty Ltd (“Metcash Automotive”) for a total consideration of
$275 million. This represents both the Group’s and the minority shareholder’s interests in Metcash Automotive. Metcash
expects to receive net proceeds after tax of ~$210 million from the sale. The transaction is expected to complete in July
2015. The Metcash Automotive business generated $256.4 million in sales and contributed $27.8 million in EBIT during
FY2015. Proceeds from the sale will be invested in the Group’s balance sheet and business.

6.3. Material Business Risks

As required by S299A(1) of the Corporations Act 2001, and in accordance with ASIC Regulatory Guide 247 - Effective
Disclosure in an Operating Review, Metcash has identified the significant risks that may impact on the Group achieving its
strategic goals and business operations.

The business risks and the mitigating factors put in place to address those risks are set out below:

a) Market conditions

Adverse market conditions including; increased competition, a decline in economic activity, continuing price deflation, and
adverse interest rate and foreign exchange movements may lead to a decline in sales and profitability.

In order to address these risks Metcash is implementing Project Diamond within the Food & Grocery business, which is
focussed on driving sales across the network. Similar initiatives are being introduced in other business Pillars. Metcash
has also commenced initiatives within the Transformation Plan in relation to the supply chain and cost of doing business.
Metcash’s policy is to hedge key interest rate and foreign exchange exposures.

b) Strategy
Metcash’s strategy may not be responsive to consumer demands and changes in business approach may prove
unsuccessful.

The Transformation Plan has been designed to address this risk. A transformation office has been established to monitor
progress and ensure effective implementation of the Transformation Plan. Metcash will continue to modify its approach to
be responsive to market changes.

DIRECTORS’ REPORT
Year ended 30 April 2015

Independent retail sector health

c)
A decline in the financial strength of the independent retailers could lead to a reduction in sales and an impairment of
assets.

Metcash’s strategy is to support successful independent retailers. Key initiatives embedded in the Transformation Plan
include improving in-store execution, the retail academy, brand building through Diamond standards, analytic insights and
e-initiatives. Metcash has an established governance structure to identify, monitor and manage retail risks and exposures.

d) Operational
Inefficiency or failure within the supply chain or in key support systems, including technology, could impact the ability to
deliver product to customers or result in increased costs. Metcash may be unable to deliver on the operational initiatives in
the Transformation Plan.

Metcash is focussed on aligning its supply chain to customers and suppliers and reducing its cost-to-serve through
operational excellence and automation. Business continuity plans are in place and are activated in the event there is a
failure within the system, this was evidenced following the hail storm that impacted the Huntingwood distribution centre in
April 2015.

e) Funding
Inability to adequately fund the business’ operations and growth plans may lead to difficulty in executing the strategy.

Metcash maintains a prudent approach towards capital management, which includes optimising working capital, targeted
capital expenditure, capital and asset recycling and careful consideration of its dividend payout policy. In addition, banking
facilities are maintained with sufficient tenor, diversity and headroom to fund business operations.

f) Regulatory and compliance
Metcash must comply with various regulatory requirements, which include OH&S, food safety, environmental, workplace
industrial, public liability, privacy & security, financial and legal. Any regulatory breach could have a material negative
impact on the wellbeing of our stakeholders, the Group’s reputation or its financial performance.

Metcash maintains a strong ‘safety-first’ culture and has established standards and ‘Chain of Responsibility’ policies to
identify and limit risk. Metcash also maintains an approved supplier program and product recall mechanisms in order to
manage food safety. Core values and governance structures have been deployed to ensure compliance with regulatory
requirements.

g) People risk
Failure to attract and retain a high performing workforce may impact business performance.

Metcash invests in its people through training and development opportunities, by promoting diversity and workplace
flexibility and maintaining succession planning. The short and long-term incentive schemes align the company’s
remuneration structure to shareholders’ interests.

6.4.

Future Outlook

The difficult trading conditions currently being experienced in the Food & Grocery Pillar are expected to continue in
FY2016. The Group has taken significant steps to address these challenges though the Transformation Plan and will have
a stronger balance sheet as a result of the capital initiatives announced.

The Group is now one year into the Transformation Plan and the initial signs are positive. Key programs such as Price
Match, Private Label and Diamond Store refurbishments have received strong support from our retail network.

The remaining Pillars performed strongly in FY2015 and it is expected these businesses will continue to grow in FY2016.

However the improved sales from the strategic initiatives in the Food & Grocery Pillar, together with the growth
opportunities in the other Pillars, will not offset the headwinds in Food & Grocery in FY2016.

The Group is adapting to address the tough market conditions, accelerating key initiatives and reducing its cost base.

Metcash remains confident that the strategy it is deploying will ultimately prove to be effective and beneficial to
shareholders. Store sales are improving, they are more competitive, the improving Fresh proposition will be accelerated
and a further 100 stores will transition to the Diamond program during the year. The Company will continue to invest in
order to improve the quality and consistency of the network.

End of the Operating and Financial Review.

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

DIRECTORS’ REPORT
Year ended 30 April 2015

SHAREHOLDER RETURNS

Reported earnings per share (cents)
Underlying earnings per share (cents)
Dividend declared per share (cents)
Dividend payout ratio on earnings per share (%) (i)
Weighted average shares outstanding ( millions)
Return on equity (%) (ii)
Average equity ($m)
Share price at the reporting date ($)

2015

(42.4)
21.3
6.5
30.5
907.0
14.0
1,375.3
1.33

YEAR ENDED 30 APRIL
2014

2013

2012

19.2
26.5
18.5
65.4
882.7
14.5
1,609.1
2.78

24.0
31.2
28.0
85.9
859.7
18.1
1,479.7
4.10

11.7
32.8
28.0
82.1
770.4
18.2
1,389.0
3.98

(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.

EARNINGS PER SHARE

Basic earnings per share
Diluted earnings per share

DIVIDENDS ON ORDINARY SHARES

Final dividend for the 2015 year (i)

Dividends paid during the year:
Interim dividend for the 2015 year - paid in January 2015
Final dividend for the 2014 year - paid in July 2014
Gross total dividends paid during the 2015 financial year
Shares issued under the DRP
Shares issued under DRP underwriting agreement
Net dividends paid during the 2015 financial year

Total dividends declared in respect of the 2015 financial year

2015
Cents

(42.4)
(42.4)

Cents

6.5
9.0
15.5

15.5

6.5

2011

31.5
32.3
27.0
80.8
767.7
17.6
1,410.2
4.08

2014
Cents

19.2
19.2

58.7
80.0
138.7
(38.2)
(45.9)
54.6

58.7

(i) On 4 June 2015 the Board announced that a final dividend will not be paid for FY2015 and that it intends to suspend

dividend payments for FY2016.

SUBSEQUENT EVENTS

On 26 May 2015, Metcash entered into 2 bilateral loans of $100.0 million each. These bilateral loans both expire in May
2016 and may only be drawn down to repay other existing debt facilities. In the event that a sale of Metcash's interest in
Metcash Automotive is completed during the life of the loan, then the loans must be repaid in full and the facility cancelled.

Except as noted above, there were 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.

DIRECTORS’ REPORT
Year ended 30 April 2015

DIRECTORS QUALIFICATIONS AND EXPERIENCE

The qualifications and experience of Directors is set out below.

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

18 April 2005

Peter Barnes is a Director of News Corporation. Mr Barnes was formerly the Chairman of Samuel Smith & Sons Pty Ltd
and Ansell Limited. He was 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.

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 the Kingfisher Group and Dixons Retail. Ian was Group Chief Executive
Officer and Group Managing Director of New Zealand’s Warehouse Group from 2004 to 2011. Ian is a former Non
executive Director of Myer Holdings and advisor to the Board of Spotlight Retail Group.

Patrick N J Allaway
BA/LLB
Non executive Director
Member of the Audit, Risk & Compliance Committee
Member of the Nomination Committee
Date of appointment to Metcash Limited:

7 November 2012

Patrick Allaway is a broad based business person with extensive experience in financial services, and senior executive
and non executive director roles in large multi-national companies. His 30 year career in investment banking has seen him
hold positions with Swiss Bank Corporation in Chicago, Zurich and London; and also with Citibank in New York, Sydney
and London. Patrick was Managing Director Swiss Bank Capital Markets and Treasury with direct global responsibility for
over 1,000 people in 16 countries.

Patrick is a Non executive Director of Woolworths South Africa, David Jones and Country Road. He is a member of the
audit, risk and remuneration committees for all three companies and is chair of all of these committees for David Jones
and Country Road.

Over the past 12 years Patrick has been the Chairman and co-founder of a privately owned boutique corporate advisory
business, Saltbush Capital Markets, advising select ASX listed companies. 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 commercial experience, capital markets, business acquisitions and divestments, business review and strategic
development. Patrick has a Bachelor of Arts/Law from Sydney University and is Chairman of Giant Steps Endowment
Fund, and a Director of the Sydney University Football Club Foundation Ltd.

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

16 November 2010

Fiona Balfour is an independent non-executive director of Salmat Limited, TAL (Dai-ichi Life) Australia Limited and
Airservices Australia and Treasurer and Councillor of Knox Grammar School; a Fellow of the AICD and a Fellow of
Monash University since 2010. She was awarded the National Pearcey Medal in 2006. Fiona has more than thirty 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 is a
Member and former Councillor of Chief Executive Women, a former Director of SITA SC (Geneva) from 2001 to 2006 and
a former Trustee of the National Breast Cancer Foundation from 2007 to 2011.

Fiona was appointed Chair of the Remuneration Committee on 16 October 2014.

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

DIRECTORS’ REPORT
Year ended 30 April 2015

Michael R Butler
B SC, MBA, FAICD
Non executive Director
Chairman of the Audit, Risk & Compliance Committee
Member of the Nomination Committee
Date of appointment to Metcash Limited:

8 February 2007

Following an executive career in investment banking and private equity at Bankers Trust, Michael Butler has been a
professional non-executive company director since 1999. He is currently chairman of AMP Superannuation Limited, N.M.
Superannuation Pty Ltd and Adairs Limited, and a director of Utility Services Group Limited. He has previously been a
director and chairman of various listed public companies.

Tonianne Dwyer
BJuris (Hons)/LLB (Hons)
Non executive Director
Member of the Audit, Risk & Compliance Committee
Member of the Nomination Committee
Date of appointment to Metcash Limited:

24 June 2014

Having completed a law degree in Western Australia, Tonianne spent 23 years in London where she had a successful
executive career in investment banking and real estate. Whilst at Hambros Bank/Societie Generale she provided financial
advice to large listed and private companies from a variety of sectors on corporate actions including listings, mergers and
acquisitions, divestments and restructurings, in the UK and Europe.

In 2003 she joined LSE listed Quintain Estates & Development plc where she was appointed Head of Funds Management
and in 2006 she was appointed to the Board. Quintain was the developer of the two largest mixed use urban renewal
projects in London – at Wembley and on the Greenwich Peninsular. Tonianne led the creation and development of a
successful specialist property fund management business in Health, Student Housing and Science Parks with over
£1.25bn in funds under management.

Returning to Australia in 2010, Ms Dwyer currently holds independent directorships in ASX listed DEXUS Property Group,
DEXUS Wholesale Property Fund, Cardno Limited and Queensland Treasury Corporation. She is a member of the Senate
of the University of Queensland, a Graduate of Australian Institute of Directors and a member of Chief Executive Women.

Neil D Hamilton
LLB
Non executive Director
Member of the Remuneration Committee
Member of the Nomination Committee
Date of appointment to Metcash Limited:

7 February 2008

Neil Hamilton has over 30 years’ experience in senior management positions and on boards of public companies across
law, funds management, investment, insurance and resources.

Neil is Chairman of OZ Minerals Ltd and is a senior advisor to UBS Australia. He is the former Chairman of Challenge
Bank Ltd, Western Power Corporation, Mount Gibson Iron Ltd and Iress Market Technology Ltd and was a director of
Insurance Australia Group Ltd and Miclyn Express Offshore Ltd.

Edwin M Jankelowitz
B COMM, CA (SA)
Non executive Director
Member of the Audit, Risk & Compliance Committee
Member of the Nomination Committee
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 40
years in corporate offices of listed companies and was a member of the Income Tax Special Court in South Africa for 20
years.

Edwin is currently Non executive Chairman of Kervale Investments Pty Ltd and a Non executive Director of Chester
Capital Pty Ltd and Ritchies Stores Pty Ltd.

DIRECTORS’ REPORT
Year ended 30 April 2015

Mick P McMahon
BEcon; Harvard Business School Advanced Management Program
Non executive Director
Member of the Remuneration Committee
Member of the Nomination Committee
Date of appointment to Metcash Limited

27 November 2013

Mick McMahon is an internationally experienced business leader with a broad retail and commercial background. Mick
commenced his career with Shell in Australia and transferred to the UK in 1999 where he held several senior positions in
retail, marketing and strategy.

In 2005, he returned to Australia as the Managing Director, Coles Express and in 2007 he was appointed the Chief
Operating Officer, Coles (Supermarkets, Liquor, Express). He was the CEO and Managing Director of ASX listed
SKILLED Group from November 2010 through to January 2015.

Mick is an experienced CEO with extensive retailing and supply chain management experience in supermarkets and
convenience, food, grocery and liquor.

Mick is the Executive Chairman of Inghams Enterprises and Chairman of Red Rock Leisure. He has a Bachelor of
Economics from the University of Tasmania and has completed the Harvard Business School Management Program.

Robert A Murray
MA Hons, Economics
Non executive Director
Member of the Nomination Committee
Date of appointment to Metcash Limited

29 April 2015

Robert (Rob) is currently Chairman of Dick Smith Holdings Limited and a Non executive Director of Southern Cross
Austereo and Linfox Logistics Pty Ltd.

Rob was previously the CEO of Lion Nathan and CEO of Nestle Oceania and is a member of the not-for-profit charity
Board of the Bestest organisation. His areas of expertise are in retail, FMCG and an in-depth understanding of
consumers.

V Dudley Rubin
CA (SA), H DIP BDP, MBA
Non executive Director
Member of the Audit, Risk & Compliance Committee
Member of the Nomination Committee
Date of appointment to Metcash Limited:
Date of retirement from Metcash Limited:

18 April 2005
27 August 2014

Dudley Rubin is a chartered accountant and is a director of various companies trading in Africa. He has over 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 24 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.

Metcash Limited Annual Report 2015

DIRECTORS’ REPORT
Year ended 30 April 2015

COMMITTEE MEMBERSHIP

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

AUDIT, RISK & COMPLIANCE

REMUNERATION

NOMINATION

Michael R Butler (Chairman)

Neil D Hamilton (Chairman)(iii)

Peter L Barnes (Chairman)

Patrick N J Allaway

Tonianne Dwyer(i)

Edwin M Jankelowitz

V Dudley Rubin(ii)

Fiona E Balfour (Chairman) (iv)

Patrick N J Allaway

Peter L Barnes (v)

Mick P McMahon

Fiona E Balfour

Michael R Butler

Tonianne Dwyer(i)

Neil D Hamilton

Edwin M Jankelowitz

Mick P McMahon

Robert A Murray(vi)

V Dudley Rubin(ii)

(i)
Ms Dwyer was appointed to the committee on 24 June 2014.
(ii) Mr Rubin retired as a member of the committees on 27 August 2014.
(iii) Mr Hamilton retired as chairman of the committee on 16 October 2014.
(iv) Mrs Balfour was appointed as chairman of the committee on 16 October 2014.
(v)
(vi) Mr Murray was appointed a Non executive Director and member of the committee on 29 April 2015.

Mr Barnes retired as a member of the committee on 26 August 2014.

DIRECTORS’ REPORT
Year ended 30 April 2015

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:

Board of Directors

Remuneration
Committee

Audit, Risk &
Compliance
Committee

Nomination
Committee

Eligible to
attend

Attended

Eligible to
attend

Attended

Eligible to
attend

Attended

Eligible to
attend

Attended

Peter L Barnes
Ian R Morrice
Patrick N J Allaway
Fiona E Balfour
Michael R Butler
Tonianne Dwyer(i)
Neil D Hamilton
Edwin M Jankelowitz
Mick P McMahon
Robert A Murray(ii)
V Dudley Rubin(iii)

11
11
11
11
11
8
11
11
11
1
4

11
11
11
11
11
8
11
9
11
1
3

3
-
-
6
-
-
6
-
6
-
-

(i) Ms Dwyer was appointed Non-executive Director on 24 June 2014.
(ii) Mr Murray was appointed Non-executive Director on 29 April 2015.
(iii) Mr Rubin retired as Non-executive Director on 27 August 2014.

-
-
6
-
6
5
-
6
-
-
2

3
-
3
3
3
1
3
3
3
-
2

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 in Metcash Limited:

Peter L Barnes
Ian R Morrice
Patrick N J Allaway
Fiona E Balfour
Michael R Butler
Tonianne Dwyer(i)
Neil D Hamilton
Edwin M Jankelowitz
Mick P McMahon
Robert A Murray(ii)
V Dudley Rubin(iii)

(i) Ms Dwyer was appointed as a Non-executive Director on 24 June 2014.
(ii) Mr Murray was appointed Non-executive Director on 29 April 2015.
(iii) Mr Rubin retired as Non-executive Director on 27 August 2014.

SHARE OPTIONS & PERFORMANCE RIGHTS

Unissued shares

Number of ordinary shares

201,243
22,517
106,786
32,804
60,749
40,000
121,318
320,000
30,000
-
30,000

At the date of this report, there were 14,528,495 unissued ordinary shares under performance rights (14,686,780 at the
reporting date). There were no unissued ordinary shares under option at the reporting date or at the date of this report.
Refer to Note 19 of the financial statements for further details of the performance rights and options.

Shares issued as a result of options and performance rights

On 15 April 2015, 47,565 shares were issued to executives, which represented the 25% deferred component of the
FY2014 STI reward (refer Note 19). No other shares in the Company were issued to employees and executives during or
since the end of the financial year in respect of the exercise of options or performance rights.

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

DIRECTORS’ REPORT
Year ended 30 April 2015

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,
M Jablonski, A Reitzer and D Rubin 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.

DIRECTORS’ REPORT
Year ended 30 April 2015

REMUNERATION REPORT

The Metcash Limited Remuneration Committee presents the Remuneration Report for the year ended 30 April 2015. The
report outlines the remuneration arrangements for Key Management Personnel (‘KMP’) comprising the Group Executives
and Non-Executive Directors.

MESSAGE FROM THE CHAIR OF THE REMUNERATION COMMITTEE (UNAUDITED)

Dear shareholder

I am pleased to present the Remuneration Report for the year ended 30 April 2015 (‘FY2015’), my first as Committee
Chair. During the year, the Committee undertook a full program to ensure alignment of executive remuneration to
business outcomes that drive shareholder value. The Committee is also aware that key executive talent is always in
demand and looks to ensure the Company is responsive to the market.

During the year, we refreshed the Remuneration Committee Charter to ensure it reflects best practice. I invite you to
peruse the updated document which can be found in the Corporate Governance section of the Company’s website at
www.metcash.com.

Remuneration framework in FY2015

The Committee continued to oversee the application and development of the Company’s remuneration framework in
FY2015. Specifically:

 KMP fixed remuneration increases were kept low, with individual increases averaging 2.7%. The CEO’s fixed



remuneration has not increased since his appointment in March 2013;
the short-term incentive (‘STI’) opportunity for target performance offered to senior executives was reduced from 73%
of maximum to 50% of maximum for FY2015. The Committee considered this appropriate due to the challenging
business conditions and emphasis on expense management during the year;
as foreshadowed in last year’s Remuneration Report, performance rights under the Transformation Incentive plan
were granted to executive KMP and a further 74 senior managers. These rights will be tested against challenging
ROFE, Revenue and Underlying EPS hurdles;
the CEO, Mr Morrice, and the newly appointed CFO, Mr Soller, were also granted additional performance rights which
will be tested against Metcash’s ROFE and relative total shareholder returns. All the performance rights granted to Mr
Morrice in FY2015 were approved by shareholders at the Company’s AGM held in August 2014; and
remuneration benchmarking policy was changed so that, instead of being constrained to a specific size of company,
Metcash roles are now benchmarked to similar roles in other Australian companies wherever they exist and for which
remuneration data is available. The Committee believes this approach better reflects the diverse companies from
which Metcash recruits and will enable better setting of Metcash executive KMP remuneration.

Short and long-term incentive outcomes in FY2015

Short-term incentive
 The CEOs of the hardware and liquor pillars were awarded STI payments which reflected the strong performance of

their businesses in FY2015.

 The CEO of the supermarkets business was not awarded an STI payment as his division fell short of threshold

performance requirements.

 At the corporate level, the profit target was below threshold, resulting in no STI for the CEO and former CFO. The pillar

CEOs, all of whom had a corporate component in their STI opportunity, also did not receive payment for this
component.

These STI outcomes demonstrate the Committee’s commitment to linking remuneration to the underlying performance of
the business.

Long-term incentive

At the 2014 AGM, the Board undertook to provide an update to shareholders on the progress of the Transformation
Incentive, which has now completed one year out of its three-year performance period. The Company is performing within
expectation against the Group Sales Revenue metric, however needs to make up significant ground against the
Underlying Earnings Per Share metric over the next two years of the plan. Shareholders are reminded that performance
measurement is still at an early stage, and does not provide a clear indication of the plan’s final result. In the context of
current market conditions, the Board is currently examining options for the retention and attraction of key staff.

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

Fiona Balfour
Chair, Remuneration Committee

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

DIRECTORS’ REPORT
Year ended 30 April 2015

EXECUTIVE REMUNERATION GUIDE (UNAUDITED)

2.1 Overview

This short guide is intended to provide shareholders with an overview of KMP remuneration outcomes for FY2015 having
regard to the Company’s FY2015 performance. This guide is not audited and the information provided is in addition to the
audited information set out in Sections 3 to 12 of the formal remuneration report.

2.2 Company Performance

The 2015 financial year was challenging. The key focus was the implementation of the Group’s Transformation Plan,
announced on 21 March 2014. Operational deleverage, tough market conditions and costs associated with the
Transformation Plan impacted Metcash’s core food and grocery business. Solid performances were delivered by the
liquor, hardware and automotive divisions. The Board and Executives have remained focussed on the plan and
maximising profitability, in spite of these challenges.

Sales revenue for the year increased by 1.7% to $13,626.2 million. Underlying EBIT declined by 17% to $325.1 million,
with underlying profit after non-controlling interests and tax for the year decreasing by 17% to $193.0 million and
underlying EPS declining by 20% to 21.3 cents per share. Net profit for the year attributable to equity holders of the parent
decreased to a $384.2m loss (2014: $169.2 million profit). A five year summary of the Group’s performance against key
performance metrics can be found in Table 5.2.

Further details, together with a full reconciliation between underlying earnings and reported profit, is included in the
Operating and Financial Review section of the Directors’ Report. The effect of these items is shown in the reported
amounts below.

2.3 FY2015 Remuneration Outcomes

2.3.1 Short-term incentive

The remuneration of executives is reflective of Company performance for FY2015. The key metrics used in determining
the quantum of the STI payable are sales revenue which was $13,626.2 million (2014: $13,392.7 million), underlying
earnings before interest and tax of $325.1 million (2014: $390.3 million) and underlying profit before tax which was $270.0
million (2014: $333.1 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, sales revenue and underlying profit before tax. The Board utilises a matrix to measure
performance starting at a level that the Board considers to be the minimum level of acceptable performance to qualify for
an STI payment (including the cost of the STI payments as the scheme is self-funding), moving to a target at which
approximately 50% (2014: 73%) of the STI is payable with the ability 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.

STI payments for KMP for the year were paid at an average of approximately 17% of the maximum entitlement, with the
remainder being forfeited. This reflected the Group falling short of its minimum profit targets, whilst business pillar
achievement levels ranged from 0% of maximum in the case of Supermarkets and Convenience to 92.5% of maximum in
the case of Mitre 10.

In accordance with the STI rules for KMP, 75% of STI awarded will be paid in July 2015. The remaining 25% will be
deferred and released through the issue of Metcash ordinary shares conditional upon the Executive remaining employed
by the Company on 15 April 2016. The number of shares issued will be calculated by dividing the 25% STI award dollar
value by the volume weighted average price of Metcash ordinary shares for the five business days prior to 15 August
2015. The shares will be issued by 30 April 2016, but will be restricted from trading until 15 August 2016. The actual
results by KMP are presented in Table 6.1.

DIRECTORS’ REPORT
Year ended 30 April 2015

EXECUTIVE REMUNERATION GUIDE (UNAUDITED) (continued)

2.3.2 Long-term incentive

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

Current LTI plans

The Group has two plans currently on issue. The Transformation Incentive Plan (TI) and Additional Transformation
Incentive Plan (ATI) were established in FY2015 and have various targets related to Group Sales Revenue, Underlying
Earnings Per Share (UEPS), Return on Funds Employed (ROFE) and Relative Total Shareholder Return (RTSR).
These targets are based on the Transformation Plan announced on 21 March 2014.
The TI and ATI were introduced specifically to incentivise senior management to successfully execute the
Transformation Plan with the TI granted to select senior management and the ATI granted exclusively to the Group
CEO and CFO.
Full details of these plans are outlined in Section 7 of this report.

Transformation
Incentive

TI Performance Rights were granted on 17 October 2014, with a three-year performance period
and a deferral of an additional year for a portion of rights that vest.
TI hurdles, vesting conditions and plan details are outlined in Section 7 of this report.

ATI Performance Rights were granted to the CEO, Mr Morrice on 17 October 2014, split over four
and five-year performance periods.
ATI Performance Rights were granted to the CFO, Mr Soller on 11 February 2015 with a four-year
performance period.
ATI hurdles, vesting conditions and plan details are outlined in Section 7 of this report.

Additional
Transformation
Incentive

Legacy LTI plans

These prior period LTI plans are measured against various underlying EPS growth targets over a three-year period. The
current year underlying EPS decreased by 19.6% to 21.3 cents per share. Accordingly, Tranches 1-3 of the Legacy LTI
plan have now concluded with nil vesting.
Full details of these plans are outlined in Section 8 of this report.

Tranche 2
(FY2012-FY2014)

Tranche 3
(FY2013-FY2015)

Tranche 2 Performance Rights, granted in December 2011 did not achieve the minimum
performance hurdle and were forfeited on 30 June 2014.

Tranche 3 Performance Rights, granted in December 2012 did not achieve the minimum
performance hurdle and will be forfeited on 7 September 2015.

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

DIRECTORS’ REPORT
Year ended 30 April 2015

EXECUTIVE REMUNERATION GUIDE (UNAUDITED) (continued)

2.4 Executive remuneration in FY2015

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. They also require the recognition of long-term incentives over their
performance 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.

To avoid potential confusion in interpreting remuneration table values, the Board has provided details of actual
remuneration paid or payable to executives during the reporting period in the table below.

These figures represent the fixed remuneration actually paid over FY2015, the value of STI that will be paid as a result of
performance in FY2015 (75% cash component) the value of STI awarded for FY2014 performance but paid in FY2015
(25% deferred component), the value of any LTI awards that vested in FY2015 and the value of any other payments. The
accounting value of remuneration received during the 2015 financial year, reported in accordance with statutory
obligations and the accounting standards, is presented in Table 10.1 of this report.

Table 2.1 Remuneration received (unaudited)

Name

I Morrice
B Soller(5)
A Gratwicke(6)
F Collins(7)

M Laidlaw

S Marshall

Total

Fixed (1)
$

1,510,526

186,589

628,347

771,233

669,846

576,323

4,342,864

STI(2)
$

64,043

427,144

182,725

673,912

LTI(3)
$

Termination
$

Other(4)
$

Total
$

663,750

650,250

1,510,526

63,683

30,697

15,662

19,251

250,272

1,292,097

1,516,223

1,112,652

778,299

1,314,000

129,293

6,460,069

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

(2) The STI amount represents the 75% 2015 financial year incentive payable to the KMP in cash in July 2015 and the 25% 2014

financial year incentive deferred equity component that vested in April 2015. The 25% 2015 financial year incentive deferred equity
component is not included in the table because the reward is conditional upon employment of the KMP until 15 April 2016.

(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 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.

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

consistent with the 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.

(5) Mr Soller commenced as CFO on 11 February 2015 with his annual fixed remuneration set at $800,000. The amounts disclosed

above reflect Mr Soller’s remuneration from 11 February 2015 to 30 April 2015.

(6) Mr Gratwicke was CFO from 1 May 2014 to 31 January 2015 and ceased employment on 30 April 2015. The amounts disclosed
above reflect Mr Gratwicke’s remuneration from 1 May 2014 to 31 January 2015 as KMP and his termination payment in lieu of a
notice period. In addition, Mr Gratwicke received fixed remuneration of $212,500 between 1 February 2015 and his cessation of
employment on 30 April 2015.

(7) Mr Collins was CEO, Supermarkets MFG from 1 May 2014 to 1 April 2015 and will cease employment on 1 July 2015. The amounts
disclosed above reflect Mr Collins’ remuneration from 1 May 2014 to 1 April 2015 as KMP and his termination payment in lieu of a
notice period. In addition, Mr Collins will receive fixed remuneration of $216,500 between 1 April 2015 and his cessation of
employment on 1 July 2015.

DIRECTORS’ REPORT
Year ended 30 April 2015

WHO DOES THIS REPORT COVER? (AUDITED)

This Remuneration Report, which comprises Sections 3 to 12 inclusive, is prepared in accordance with 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 Key Management
Personnel (KMP).

Non-executive Directors(1)

Name

Peter Barnes

Patrick Allaway

Fiona Balfour

Michael Butler

Tonianne Dwyer

Neil Hamilton

Edwin Jankelowitz

Mick McMahon

Rob Murray

Dudley Rubin

Position

Chairman

Director

Director - appointed 24 June 2014

Director

Director - appointed 29 April 2015

Director - retired 27 August 2014

(1) All Non-executive Directors held their current positions for the entire 2015 financial year unless otherwise stated.

KMP

Name

Ian Morrice

Brad Soller

Position

Period acting as KMP

Chief Executive Officer (CEO) & Director

Full year

Chief Financial Officer (CFO)

11 February 2015 to 30 April 2015

Adrian Gratwicke

Chief Financial Officer (CFO)

1 May 2014 to 31 January 2015

Fergus Collins

Mark Laidlaw

Scott Marshall

Chief Executive Officer, Supermarkets MFG

1 May 2014 to 1 April 2015

Chief Executive Officer, Hardware

Chief Executive Officer, ALM

Full year

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

DIRECTORS’ REPORT
Year ended 30 April 2015

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; and
the remuneration of Non-executive Directors.

REMUNERATION AND OTHER EXTERNAL
CONSULTANTS

Support 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 for:



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 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 2015 financial year, the Remuneration Committee employed the services of PricewaterhouseCoopers to assist
in the review of the Company’s rewards framework under the Board approved protocol. Fees of $97,000 were paid to
PricewaterhouseCoopers in respect of this review. FF

In addition, PricewaterhouseCoopers also provided taxation advice, consulting services and advisory services to
management of the Group. A total of $820,499 was paid to PricewaterhouseCoopers for these services.

The Board is satisfied that the remuneration recommendations made by PricewaterhouseCoopers were made free from
any undue influence. In addition to the internal protocols referred to above, PricewaterhouseCoopers provided a formal
declaration confirming that their recommendations were made free from undue influence by the members of the KMP to
whom the recommendations related. In addition, the Remuneration Committee engaged Herbert Smith Freehills to provide
independent governance and legal advice in relation to senior executive remuneration matters, which did not constitute a
remuneration recommendation.

DIRECTORS’ REPORT
Year ended 30 April 2015

KMP REMUNERATION (AUDITED)

5.1 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 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 by reference to benchmarking data relating to
companies with whom Metcash competes for talent. 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 KPIs are designed to provide appropriate alignment between management
and shareholders.

5.2 Metcash’s current Key Performance Indicators (KPIs):

 Short-term incentive

Metcash’s STI 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 settled in shares,
conditional upon subsequent employment. Performance criteria are disclosed in Section 6 of the remuneration report.

The Group’s STI scorecard for FY2015 includes an individual performance factor, which is linked to key milestones
under the Transformation Plan. Group and divisional financial metrics are used to determine the pool of funds
available to be awarded, and the individual performance factor links individual short-term incentive reward levels
directly to the Transformation Plan.

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

The CEO, subject to Remuneration Committee approval, 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 (of between three to five years) and are aligned with metrics that increase Company value.

The Board sets and reviews the performance hurdle rates for each new grant of Performance Rights. The performance
hurdles in the current LTI plans include Group Sales Revenue, Underlying Earnings per Share, Return on Funds
Employed and Relative Total Shareholder Return. The target, minimum and stretch performance hurdles 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.

 Determination of underlying earnings

Certain performance hurdles are based on underlying earnings as the key measure of earnings growth. To provide an
accurate and consistent basis of measuring this earnings growth, a calculation is performed to determine underlying
earnings. This reflects reported earnings from continuing operations excluding significant items (whether positive or
negative). A reconciliation of underlying earnings to net profit is included in the Operating and Financial Review in the
Directors’ Report.

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

DIRECTORS’ REPORT
Year ended 30 April 2015

KMP REMUNERATION (AUDITED) (continued)

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.

5.3 Remuneration Framework - key aspects of KMP Remuneration

Short-Term Incentive (STI)

What is the STI
program?

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 KMP being employed by the Company on 15
April of the year subsequent to the performance year.
The STI program and the related KPIs are intended to motivate and reward high
performance and link performance and reward. The plan is structured to encourage the
relevant individual to exceed annual revenue and profit targets.

What are the KPIs?

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).

What is the maximum
potential STI level?

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

Long-Term Incentive (LTI)

What is the LTI
program?

The LTI program is an equity-based ‘at risk’ component of KMP remuneration linked to
the Company’s long-term performance.
Metcash operates a Performance Rights Plan, which gives members of the KMP an
opportunity to receive shares in the Company if they achieve outcomes linked to the
creation of long-term sustainable growth for shareholders over a performance period of
three to five years.
There are currently two programmes on issue, the Transformation Incentive and the
Additional Transformation Incentive.
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 KMP with the
opportunity to receive equity-based reward and thereby aligns their interests with
shareholders’ interests and encourages them to take a shareholder’s perspective.

The Group uses a number of performance measures as the basis for the LTI plan
performance hurdles. These include the following:
 Group Sales Revenue, which reflects the Group’s volume of operating activity.


Underlying Earnings per Share, which represents reported earnings per share from
continuing operations excluding significant items. This best reflects the underlying
ongoing profitability of the Group.
Return on Funds Employed, which reflects the efficiency with which working and
invested capital is used to generate ongoing operating profitability.
Relative Total Shareholder Return, which represents the Group’s returns to
shareholders compared to other listed entities.

What are the
performance
measures?



The Board uses a combination of the above performance measures as hurdles in order
to best reflect the size, duration and scope of each specific tranche of LTI.

What happens to LTIs
when an executive
ceases employment?

Ordinarily, in the event of cessation of employment, a KMP’s unvested Performance
Rights will lapse; however this is subject to Board discretion, which may be exercised in
circumstances such as death and disability, retirement, redundancy or special
circumstances.

DIRECTORS’ REPORT
Year ended 30 April 2015

KMP REMUNERATION (AUDITED) (continued)

5.3 Remuneration Framework - key aspects of KMP Remuneration (continued)

Fixed Remuneration

What is included in
fixed remuneration?

How is fixed
remuneration set?

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.

Fixed remuneration is determined according to the scope and nature of the executive’s
role as well as performance and experience. Metcash’s policy is to set fixed
remuneration with regard to markets in which it competes for talent. The present
positioning is at the 62.5th percentile of that range after having considered the need for
remuneration levels to be competitive with those of Metcash’s competitors (which
include much larger businesses) to enable the Company to attract and retain quality
staff.

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.

5.4 Proportion of fixed and ‘at risk’ remuneration

The relative proportions of KMP annualised total remuneration during FY2015 are set out below.

Table 5.1 Proportion of fixed and ‘at risk’ remuneration

Name

I Morrice(2)

B Soller(3)

A Gratwicke(4)

Other KMP

Fixed
Remuneration

30%

67%

57%

39%

‘At risk’ – performance-based(1)

STI

30%

43%

39%

LTI - TI

LTI - ATI

22%

23%

22%

18%

10%

(1)

These amounts are based on the KMP’s maximum STI and LTI opportunities. The LTI reflects the maximum opportunity annualised over the relevant
LTI performance period.

(2) Mr Morrice’s participation in the TI and ATI schemes was approved by the shareholders at the 2014 AGM.
(3) Mr Soller commenced as CFO on 11 February 2015 and is not eligible for the Group’s FY2015 STI scheme.
(4) Mr Gratwicke ceased employment on 30 April 2015. Details of his remuneration can be found in Table 10.1.

The Group introduced the Transformation Incentive (TI) LTI scheme in FY2015. The TI replaces the FY2014, FY2015 and
FY2016 long term incentive scheme grants and has vesting periods of three and four years.

The Group introduced the Additional Transformation Incentive (ATI) LTI scheme in FY2015. The ATI was exclusively
offered to the Group CEO and CFO. Full details of the ATI are provided in Section 7.

5.5 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 – Five-year performance against key annual performance metrics

Share Performance

Performance Earnings Performance

Liquidity

Sales

Financial
Year

Underlying
EPS

Reported
EPS

Closing
share
price

Dividend
p/share

Sales
revenue

Underlying
EBIT

Reported
NPAT

Cash flow
from
Operations

Gearing
(Debt /
(Debt+Equity))

(cents)

($)

(cents)

($b)

($m)

FY2015

FY2014

FY2013

FY2012
FY2011(1)

21.3

26.5

31.2

32.7

32.3

(42.4)

19.2

24.0

11.7

1.33

2.78

4.10

3.98

6.5

18.5

28.0

31.5

4.08

27.0

13.6

13.4

13.0

12.5

12.4

325.1

390.3

447.8

441.5

430.1

(384.2)

169.2

206.0

90.0

241.4

231.7

388.7

299.8

284.3

142.5

(%)

36.6%

32.5%

30.7%

40.5%

32.1%

(1) Opening share price for FY2011 was $4.15

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

DIRECTORS’ REPORT
Year ended 30 April 2015

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 (KPI) 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 award 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 KMP being employed by the Company on 15 April of the year subsequent to the performance
year. Any STI not awarded is forfeited. The tables below set out the outcome of the assessment process for KMP for
FY2015.

Table 6.1 STI vesting

Name

Maximum
STI

($)

I Morrice (Executive Director & CEO)
Group revenue and underlying PBT

1,500,000

B Soller (CFO) (3)

Group revenue and underlying PBT

A Gratwicke (Former CFO) (4)

Group revenue and underlying PBT
F Collins (Former CEO, Supermarkets
MFG) (5)

Group revenue and underlying PBT
Sales and EBIT for Supermarkets

M Laidlaw (CEO, Hardware)

Group revenue and underlying PBT
Sales and EBIT for Mitre 10

S Marshall (CEO, ALM)

Group revenue and underlying PBT
Sales and EBIT for ALM

637,500

198,688
596,063

170,723
512,168

144,375
433,125

Achieved

Forfeited

Cash (1)
($)

Deferred
Equity(2)
($)

-
-

-
355,316

-
182,725

-
118,439

-
60,908

($)

1,500,000

637,500

198,688
596,063

170,723
38,413

144,375
189,492

(%)

0%
0%

0%
93%

0%
56%

(1) 75% of STI reward amount payable in cash in July 2015.
(2) 25% of STI reward amount deferred and released through the issue of Metcash ordinary shares, conditional upon the Executive being employed by the
Company on 15 April 2016. The number of shares to be issued will be calculated by dividing the STI dollar value by the Metcash VWAP for the five days
ending on 15 August 2015. The shares will be issued by 30 April 2016, but will be restricted from trading until 15 August 2016.

(3) Mr Soller commenced as CFO on 11 February 2015 and was not eligible for the Group’s FY2015 STI scheme. Mr Soller received an individual

performance bonus payment in FY2015. Details of the individual performance bonus are outlined in Section 10.
(4) Mr Gratwicke was Group CFO from 1 May 2014 to 31 January 2015 and ceased employment on 30 April 2015.
(5) Mr Collins was CEO, Supermarkets MFG from 1 May 2014 to 1 April 2015 and will cease employment on 1 July 2015.

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

 Group underlying profit before tax (PBT); and
 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.

For FY2015, the maximum STI payable was set at a stretch above target revenue and earnings levels. Target revenue
and earnings were based on FY2015 budget levels, which incorporated the benefits and additional operating expenditure
associated with the Transformation Plan. Threshold performance against KPIs were not achieved for the Group or
Supermarkets MFG during FY2015 which resulted in no STI being awarded. Mitre 10 and ALM results outperformed
target revenue and earnings levels, with Mitre 10 achieving stretch targets for revenue.

DIRECTORS’ REPORT
Year ended 30 April 2015

LONG-TERM INCENTIVE (AUDITED)

7.1 Objective

The objective of the LTI program is 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’). 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 three
to five year period;

 Performance Rights which do not vest are forfeited;
 Performance Rights are offered at no cost to participants;
 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;

 Ordinarily, in the event of cessation of employment, a KMP’s unvested Performance Rights will lapse; however
this is subject to Board discretion, which may be exercised in circumstances such as death and disability,
retirement, redundancy or special circumstances;

 Some or all of a participant’s Performance Rights may vest even if a performance condition has not been



satisfied, if, using its discretion, the Board considers that to do so would be in the interests of the Group;
If a participant’s performance falls below ’meets expectations’ at any time before the Performance Rights vest or
before they are converted to shares, the Board has discretion to lapse some or all of the participant’s
Performance Rights, even if all other targets have been met; and
If there is a change in control of the Group, the Board retains full discretion to vest or lapse some or all
Performance Rights.

In FY2015, the Group issued the Transformation Incentive (TI) and Additional Transformation Incentive (ATI) Performance
Rights under the Rights Plan.

7.2 Transformation Incentive (TI)

The TI was introduced specifically to incentivise senior management to successfully execute the Transformation Plan,
which was announced on 21 March 2014. The TI is assessed at the conclusion of a three-year performance period, based
on the FY2017 financial results. For all KMP except the CFO, 67% of any rights eligible to vest will vest on 15 August
2017 and the remaining 33% will be deferred so that they vest on 15 April 2018. For the CFO, 50% of any rights eligible to
vest will vest on 15 August 2017 and the remaining 50% deferred so that they vest on 15 April 2018.

The TI plan hurdles are based upon meeting specified Group Sales Revenue and Underlying Earnings per Share (UEPS)
targets during FY2017, while meeting a 13% Return on Funds Employed (ROFE) threshold for each of FY2015, FY2016
and FY2017. These hurdles were based on the Group’s Transformation Plan and achievement of minimum thresholds
requires significant outperformance of market expectations for FY2017 Group UEPS. The TI hurdles and the resultant TI
vesting is as follows:

Table 7.1 Transformation Incentive hurdles and vesting

TI Hurdles

Group Sales Revenue - Hurdle

UEPS - Hurdle

Vesting

Minimum
(FY2017)

$14,116m

25.97 cents

50%

Stretch
(FY2017)

$14,990m

28.71 cents

100%

Pro-rata vesting occurs for Group Sales Revenue and UEPS performance in between the minimum and target hurdles
and target and stretch hurdles based on a grid. Failure to achieve the minimum Group Sales Revenue and UEPS hurdles
will result in nil vesting. Failure to reach the 13% ROFE threshold FY2015, FY2016 or FY2017 will result in nil vesting,
regardless of Group Sales Revenue and UEPS performance.

In the event that the Group Sales Revenue and UEPS performance hurdles are achieved in FY2017 and the threshold
ROFE is achieved in FY2015, FY2016 and FY2017, then for all KMP except the CFO, 67% of any rights eligible to vest
will vest on 15 August 2017 (‘TI 67%’) and the remaining 33% will be deferred so that they vest on 15 April 2018 (‘TI 33%
deferred’). For the CFO, 50% of any rights eligible to vest will vest on 15 August 2017 (‘TI 50%’) and the remaining 50%
deferred so that they vest on 15 April 2018 (‘TI 50% deferred’).

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

DIRECTORS’ REPORT
Year ended 30 April 2015

LONG-TERM INCENTIVE (AUDITED) (continued)

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

Table 7.2 Transformation Incentive Performance Rights granted to KMP

Participants

TI Component

Grant Date

Vesting date

Number of rights
granted

Fair value per
right

I Morrice

TI (67%)

17 Oct 2014

15 Aug 2017

TI (33% deferred)

17 Oct 2014

15 Apr 2018

B Soller

TI (50%)

11 Feb 2015

15 Aug 2017

TI (50% deferred)

11 Feb 2015

15 Apr 2018

F Collins (1)

TI (67%)

17 Oct 2014

15 Aug 2017

TI (33% deferred)

17 Oct 2014

15 Apr 2018

M Laidlaw

TI (67%)

17 Oct 2014

15 Aug 2017

TI (33% deferred)

17 Oct 2014

15 Apr 2018

S Marshall

TI (67%)

17 Oct 2014

15 Aug 2017

854,093

427,046

170,819

370,249

185,125

291,625

145,813

246,619

$2.23

$2.16

$1.27

$1.23

$2.23

$2.16

$2.23

$2.16

$2.23

$2.16
(1) Mr Collins forfeited on a pro-rata basis Performance Rights which relate to the period following his cessation as a KMP on 1 April 2015. Mr Collins has

TI (33% deferred)

17 Oct 2014

15 Apr 2018

123,310

discretion to retain Performance Rights relating to his service between 1 May 2014 and 1 April 2015. To reflect his pro-rata service over the performance
period, Mr Collins forfeited 257,080 TI (67%) and 128,540 TI (33% deferred) Performance Rights prior to his cessation as a KMP on 1 April 2015.

Apart from Mr Collins performance rights, no performance rights outlined in Table 7.2 above vested or were forfeited in
FY2015.

7.3 Additional Transformation Incentive (ATI)

The ATI was offered to the CEO and CFO. The ATI was granted to the CEO, Mr Morrice after concluding that an increase
to his total remuneration package was warranted, having regard to the remuneration levels of his peers and the size, scale
and challenges of his role leading a complex and multi-faceted business. In the circumstances, the Board concluded that it
was more appropriate to deliver the increase through a strategically appropriate ‘at risk’ long-term incentive, rather than to
increase his fixed remuneration or short-term incentive opportunity.

The ATI was granted to the newly appointed CFO, Mr Soller recognising the impact of his role on shareholder returns.

Consistent with the TI scheme, the minimum and stretch hurdles were based on the Group’s Transformation Plan.

The CEO’s ATI covers two performance periods and two performance conditions tested separately during each
performance period. The ATI granted to the CFO relates to a single performance period, which includes two
independently tested performance conditions.

Table 7.3 Additional Transformation Incentive attributes

ATI Hurdles

FY2018 performance period
ROFE - Hurdle (%)(1)

ROFE - Vesting (%)
RTSR - Hurdle (2)

RTSR - Vesting (%)

FY2019 performance period
ROFE - Hurdle (%)(1)

ROFE - Vesting (%)
RTSR - Hurdle (3)

RTSR - Vesting (%)

Proportion of total ATI (%)

I Morrice

B Soller

Minimum

Stretch

17%

33%

50%

16.0%

50%
50th

50%

16.0%

50%
50th

50%

19.0%

100%
75th

100%

21.0%

100%
75th

100%

(1) Represents the ROFE for the final year of the respective performance period.
(2) Represents the percentile RTSR ranking against the comparator group over the FY2015-FY2018 performance period.
(3) Represents the percentile RTSR ranking against the comparator group over the FY2015-FY2019 performance period.

The Group’s Relative Total Shareholder Return (RTSR) comparator group comprises entities within the S&P/ASX 100
Index as at 1 May 2014, excluding financial services companies, mining companies and real estate investment trusts. The
Board has the discretion to adjust the comparator group to take into account events including but not limited to delistings,
takeovers, mergers or de-mergers that might occur during the specified performance periods.

DIRECTORS’ REPORT
Year ended 30 April 2015

LONG-TERM INCENTIVE (AUDITED) (continued)

Pro-rata vesting occurs between the minimum and target hurdles and target and stretch hurdles. Failure to reach the
minimum hurdles will result in nil vesting.

Table 7.4 Additional Transformation Incentive Performance Rights granted to Group CEO and CFO

Participants

ATI Component

FY2018 performance period

Number of
rights granted

Grant Date

Vesting date

Fair value
per right

I Morrice

B Soller

FY2019 performance period

I Morrice

ROFE

RTSR

ROFE

RTSR

ROFE

RTSR

266,904

85,410

533,808

17 Oct 2014

11 Feb 2015

15 Aug 2018

17 Oct 2014

15 Aug 2019

$2.10

$1.28

$1.20

$0.09

$1.98

$1.25

None of the performance rights outlined in Table 7.4 above vested or were forfeited in FY2015.

LONG-TERM INCENTIVE – LEGACY PLANS (AUDITED)

Details set out below relate to performance rights issued as part of legacy LTI schemes issued under the Rights Plan. The
last tranche of Performance Rights granted under this scheme was in FY2013.

The Tranche 3 (FY2013-FY2015) plan hurdles were set at between 4% (‘lower bound hurdle rate’) and 7% (‘upper bound
hurdle rate’) compound underlying EPS growth, both adjusted upwards or downwards for the effects of actual year-on-
year inflation/deflation, over a three-year vesting period as follows:

 Achievement of an underlying EPS growth rate equivalent to the lower bound hurdle rate resulted in nil vesting;

and

 Achievement of an underlying EPS growth rate equivalent to the upper bound hurdle rate resulted in 100%

vesting.

Pro-rata vesting occurred for EPS growth between the lower and upper bound hurdle rates. Any rights that did not vest
are forfeited.

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

Table 8.1 Performance Rights granted to KMP

Participants

Tranche

Grant Date

Vesting date

Number of
rights
granted

Fair value
per right

Vested in
FY2015

Forfeited
in FY2015

A Gratwicke

F Collins

M Laidlaw

S Marshall

Tranche 3
(FY2013-FY2015)
Tranche 3
(FY2013-FY2015)
Tranche 3
(FY2013-FY2015)
Tranche 3
(FY2013-FY2015)

Dec-2012

7-Sep-2015

100,841

Dec-2012

7-Sep-2015

87,488

Dec-2012

7-Sep-2015

81,239

Dec-2012

7-Sep-2015

25,150

$2.30

100%(1)

100%(2)

(1) Mr Gratwicke forfeited his Tranche 3 Performance Rights on 31 October 2014.
(2) The Tranche 3 Performance Rights did not achieve the minimum underlying EPS performance hurdle. Accordingly, these Performance Rights will be

forfeited on 7 September 2015.

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

DIRECTORS’ REPORT
Year ended 30 April 2015

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

Agreement Term

I Morrice
B Soller (2)
A Gratwicke (3)
F Collins (4)

M Laidlaw

S Marshall

Ongoing unless notice given

Executive
Notice(1)

6 months

3 months

Metcash
Notice(1)

12 months

6 months

9 months

6 months

Redundancy(1)

12 months

6 months

Metcash Notice + 6 months

(1) 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.

(2) Mr Soller commenced as CFO on 11 February 2015.
(3) Mr Gratwicke was CFO from 1 May 2014 to 31 January 2015 and ceased employment on 30 April 2015.
(4) Mr Collins was CEO, Supermarkets MFG from 1 May 2014 to 1 April 2015 and will cease employment on 1 July 2015.

Ordinarily, in the event of cessation of employment, a KMP’s unvested Performance Rights will lapse; however this is
subject to Board discretion, which may be exercised in circumstances such as death and disability, retirement,
redundancy or special circumstances.

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.

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DIRECTORS’ REPORT
Year ended 30 April 2015

10.

REMUNERATION TABLES (AUDITED) (continued)

Table 10.2 Options

Name

Grant date

A Gratwicke
M Laidlaw
S Marshall

7 February 2008
7 February 2008
7 February 2008

Number of Options exercised

during the year

Number of Options lapsed
during the year

2015
-
-
-

2014
-
-
-

2015
-
-
-

2014
500,000
350,000
350,000

All options issued to KMP as part of legacy LTI schemes lapsed on 7 February 2014. No KMP held options issued by the
Company at any time during FY2015.

11.

OTHER DIRECTOR AND KMP TRANSACTIONS (AUDITED)

Table 11.1 Performance Rights holding of Key Management Personnel

Name

I Morrice
B Soller
A Gratwicke
F Collins (1)
M Laidlaw
S Marshall
Total

Balance at
1 May 2014

Granted during
the year

Vested
during the
year

Changed,
forfeited or lapsed
during the year

Balance at
30 April
2015

-
-
174,045
143,213
127,440
46,467
491,165

2,882,563
512,458
-
577,794
462,583
369,929
4,805,327

-
-
-
(22,420)
(25,145)
-
(47,565)

-
-
(174,045)
(698,587)
(46,201)
(21,317)
(940,150)

2,882,563
512,458
-
-
518,677
395,079
4,308,777

Balance at
report date

2,882,563
512,458
-
-
518,677
395,079
4,308,777

(1) Mr Collins continued to hold 257,242 Performance Rights following his cessation as KMP on 1 April 2015.

Table 11.2 Shareholding of Key Management Personnel

Name

Directors
P Barnes
I Morrice
P Allaway
F Balfour
M Butler
T Dwyer
N Hamilton
E Jankelowitz
M McMahon
R Murray
D Rubin
Executives
B Soller
A Gratwicke
F Collins (3)
M Laidlaw
S Marshall
Total

Balance at
1 May 2014

Granted as
remuneration(1)

187,685
21,000
54,000
30,594
56,656
-
20,620
320,000
30,000
-
17,500

-
118,883
46,406
30,482
-
933,826

-
-
-
-
-
-
-
-
-
-
-

-
-
22,420
25,145
-
47,565

On
market
trade

-
-
50,000
-
-
40,000
100,000
-
-
-
-

-
-
3,352
-
-
193,352

Other
adjustments(2)

Balance at 30
April 2015

Balance at
report date

13,558
1,517
2,786
2,210
4,093
-
698
-
-
-
(17,500)

-
(118,883)
(72,178)
-
-
(183,699)

201,243
22,517
106,786
32,804
60,749
40,000
121,318
320,000
30,000
-
-

-
-
-
55,627
-
991,044

201,243
22,517
106,786
32,804
60,749
40,000
121,318
320,000
30,000
-
-

-
-
-
55,627
-
991,044

(1)

(2)

(3)

Shares granted as remuneration reflect the 25% component of the FY2014 STI plan total reward amount that was deferred and issued as shares on 15
April 2015. These shares are restricted from trading until 15 August 2015.
Other adjustments represent shares issued to KMP as part of the Dividend Reinvestment Plan on 25 July 2014 and 9 January 2015 and changes in KMP
composition.
Mr Collins received 3,352 shares as part of the Dividend Reinvestment Plan and continued to hold 72,178 shares following his cessation as KMP on 1 April
2015.

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

DIRECTORS’ REPORT
Year ended 30 April 2015

12.

NON-EXECUTIVE DIRECTORS (AUDITED)

12.1 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.

12.2 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.

12.3 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.

12.4 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 at the 30 August 2012 Annual General Meeting.

Table 12.1 Non-executive Director Fee Structure

The below table reflects the Non-executive Director fee structure at 30 April 2015.

Name

P Barnes(1)
F Balfour(2)
M Butler
P Allaway
T Dwyer(3)
N Hamilton(4)
E Jankelowitz
M McMahon
R Murray(5)

Base Fee
$
118,450
118,450
118,450
118,450
118,450
118,450
118,450
118,450
118,450

Chair Fee
$
172,500
28,840
28,840
-
-
-
-
-
-

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

Superannuation
$
18,615
13,931
13,931
12,324
12,324
12,324
12,324
12,324
11,253

Total
$
309,565
161,221
161,221
142,619
142,619
142,619
142,619
142,619
129,703

(1) Mr Barnes stepped down from the Remuneration Committee on 26 August 2014.
(2) Ms Balfour was appointed as Chairman of the Remuneration Committee on 16 October 2014.
(3) Ms Dwyer was appointed as a Non-executive Director on 24 June 2014.
(4) Mr Hamilton stepped down as Chairman of the Remuneration Committee on 15 October 2014.
(5) Mr Murray was appointed as a Non-executive Director on 29 April 2015.

DIRECTORS’ REPORT
Year ended 30 April 2015

12.

NON-EXECUTIVE DIRECTORS (AUDITED) (continued)

12.5 Non-executive Directors’ Remuneration for 2015

The fees paid or payable to Non-executive Directors in relation to the 2015 financial year are set out in the following table. The
amounts paid reflect changes made following the aggregate fee limit increase approved at the 30 August 2012 Annual
General Meeting and, for certain Directors, changes in roles.

Table 12.2 Non-executive Director Remuneration

Name

P Barnes

F Balfour

M Butler

P Allaway

T Dwyer(3)
N Hamilton

E Jankelowitz

M McMahon

R Murray(4)
D Rubin(5)

Total

Financial Year

Fixed Fees(1)

Post-Employment
(Superannuation) (2)

2015
2014
2015
2014
2015
2014
2015
2014
2015
2015
2014
2015
2014
2015
2014
2015
2015
2014
2015
2014

$
294,757
302,795
139,577
130,295
147,290
147,290
130,295
130,295
111,085
138,008
147,290
130,863
119,585
130,295
44,983
910
43,432
130,295
1,266,512
1,152,828

$
18,615
17,449
13,206
11,971
13,931
13,532
12,324
11,971
10,547
13,049
13,532
12,376
10,988
12,324
4,161
96
4,017
11,971
110,485
95,575

Total

$
313,372
320,244
152,783
142,266
161,221
160,822
142,619
142,266
121,632
151,057
160,822
143,239
130,573
142,619
49,144
1,006
47,449
142,266
1,376,997
1,248,403

(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) Ms Dwyer was appointed as a Non-executive Director on 24 June 2014.
(4) Mr Murray was appointed as a Non-executive Director on 29 April 2015.
(5) Mr Rubin retired from the Board of Directors on 27 August 2014.

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 director in cash upon ceasing to be a director of Metcash Limited.

Retirement benefit (fixed)
P Barnes

$
211,619

This concludes the remuneration report.

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

DIRECTORS’ REPORT
Year ended 30 April 2015

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 2015, 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 2015 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 2015:
(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 2015, 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 2015 has been received and is included on page 121.

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.

Ernst & Young received or are due to receive the following amounts for the provision of non-audit services:

Tax compliance and advisory
Assurance-related

Signed in accordance with a resolution of the Directors.

$ 443,831
$ 115,200

Ian Morrice
Director
Sydney, 15 June 2015

STATEMENT OF COMPREHENSIVE INCOME
Year ended 30 April 2015

Sales revenue
Cost of sales
Gross profit

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

Net profit/(loss) for the year is attributable to:
Equity holders of the parent
Non-controlling interests

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)
Other comprehensive income/(loss) for the year, net of tax
Total comprehensive income/(loss) for the year

Total comprehensive income/(loss) for the year is attributable to:
Equity holders of the parent
Non-controlling interests

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

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

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

23
23

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

Notes

2015
$m

2014
$m

13,626.2
(12,364.7)
1,261.5

13,392.7
(12,144.5)
1,248.2

3(i)

9
3(vi)
3(vii)

132.5
(516.9)
(546.6)
3.1
(638.8)
(63.6)
(368.8)
(14.0)
(382.8)
-
(382.8)

(384.2)
1.4
(382.8)

0.3
(5.5)
1.8
(3.4)
(386.2)

(387.6)
1.4
(386.2)

(42.4)
(42.4)

-
-

(42.4)
(42.4)

140.7
(479.5)
(516.0)
4.8
(56.1)
(65.1)
277.0
(95.8)
181.2
(10.5)
170.7

169.2
1.5
170.7

1.1
5.0
(1.7)
4.4
175.1

173.6
1.5
175.1

20.4
20.4

(1.2)
(1.2)

19.2
19.2

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

STATEMENT OF FINANCIAL POSITION
As at 30 April 2015

ASSETS
Current assets
Cash and cash equivalents
Trade receivables and loans
Inventories
Assets held for sale
Derivative financial instruments
Prepayments and other assets
Total current assets

Non-current assets
Derivative financial instruments
Trade receivables and loans
Equity-accounted investments
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/(accumulated losses)
Parent interest
Non-controlling interests
TOTAL EQUITY

Notes

2015
$m

2014
$m

8
7
9

10
4
11

12
8
13

12
13
8
14

15
15
15

83.3
1,014.5
712.5
26.1
0.2
13.5
1,850.1

104.2
25.6
101.7
0.4
276.0
124.4
1,284.5
1,916.8

24.7
1,037.8
743.8
41.1
1.8
13.9
1,863.1

46.3
50.3
99.2
0.3
308.4
70.4
1,765.7
2,340.6

3,766.9

4,203.7

1,419.1
63.2
0.8
127.6
9.1
22.3
1,642.1

794.8
144.4
6.3
22.7
968.2

1,457.1
15.3
1.6
127.2
23.9
13.0
1,638.1

824.9
106.0
0.1
40.6
971.6

2,610.3

2,609.7

1,156.6

1,594.0

2,391.9
(765.9)
(1.3)
(475.8)
1,148.9
7.7
1,156.6

2,308.1
(765.9)
(2.9)
47.1
1,586.4
7.6
1,594.0

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

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D

Metcash Limited Annual Report 2015

STATEMENT OF CASH FLOWS
Year ended 30 April 2015

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
Indirect taxes paid
Net cash generated by operating activities

Cash flows from investing activities
Proceeds from sale of business assets
Payments for acquisition of business assets
Payments for intangibles
Payment on acquisition of businesses net of cash acquired
Costs paid on acquisition of businesses
Payment on acquisition of equity-accounted investments
Proceeds from sale of discontinued operations
Proceeds from loans repaid by other entities
Loans to other entities
Net cash used in investing activities

Cash flows from financing activities
Share based payments exercised
Share issue costs
Proceeds from borrowings
Repayments of borrowings
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 increase/(decrease) in cash and cash equivalents
Add opening cash and cash equivalents
Cash and cash equivalents at the end of the year

Notes

2015
$m

2014
$m

22(a)

15
15

14,945.9
(14,312.8)
5.4
8.5
(43.6)
(83.2)
(288.5)
231.7

14,652.7
(13,846.0)
1.6
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(51.5)
(68.2)
(307.8)
388.7

41.0
(62.3)
(23.1)
(32.0)
(0.5)
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(74.9)

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(1.6)
(4.5)
(98.2)

58.6
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(211.8)

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(205.6)
(3.5)
(6.2)
(202.5)

(25.6)
50.3
24.7

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

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

CORPORATE INFORMATION

The financial statements of Metcash Limited (the Company) and its controlled entities (the Group) for the year ended 30 April
2015 were authorised for issue in accordance with a resolution of the Directors on 15 June 2015.

Metcash Limited is a for profit company limited by ordinary shares incorporated and domiciled 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. The registered office of the Company is at 50 Waterloo Road, Macquarie Park NSW 2113.

The basis of preparation for these financial statements and the significant accounting policies applied are summarised in
Appendix A.

SEGMENT INFORMATION

Identification of chief operating decision maker

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. Discrete financial
information about these operating segments is reported on at least a monthly basis.

Identification of reportable segments

The information reported to the CEO is aggregated based on product types and the overall economic characteristics of
industries in which the Group operates. The Group’s reportable segments are therefore as follows:



Food & 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 & Automotive comprises the distribution of hardware supplies and automotive parts and accessories to

retail outlets.

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.

The Group previously announced Project Mustang, which is a $75 million warehouse automation project centred on the
Group’s new distribution facility in Huntingwood, NSW, utilising the latest European technology. The project was completed
during the current year, significantly automating the goods receipt, order selection, pallet assembly and distribution processes
for both the Food & Grocery and Liquor businesses that operate within this distribution centre.

Future plans to further integrate Food & Grocery and Liquor may lead to their aggregation into one reportable segment as
these plans are implemented. In anticipating this change, the Group has integrated its supply chain workforce into a
centralised function.

Geographical distribution

Geographically the Group operates predominantly in Australia. The New Zealand operations represent less than 5% of revenue,
results and assets of the Group.

Segment accounting policies

 With effect from 1 May 2014, segment results were amended to include customer contracts amortisation expense.



Comparatives have been adjusted to reflect this change.
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.
In the prior year, the Food & Grocery segment results included wholesale sales to Franklins retail stores except those
stores that had either closed or were expected to close as at prior reporting dates.

 Segment results exclude results from discontinued operations. Refer to Note 24.

Major customers

The Group does not have a single external customer which represents greater than 10% of the Group's revenue.

Metcash Limited Annual Report 2015
Metcash Limited Annual Report 2015

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NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

REVENUES AND EXPENSES

Other income

(i)
Lease income – rent
Lease income – outgoings recoveries
Interest from other persons/corporations
Net gain from disposal of property, plant and equipment

Operating lease rental

(ii)
Minimum lease rental payments - warehouse and other
Minimum lease rental payments - stores

Employee benefit expense

(iii)
Salaries and wages
Defined contribution plan expense
Other employee benefit expenses
Share based payments

Depreciation and amortisation

(iv)
Depreciation of property, plant and equipment
Amortisation of software
Amortisation of customer relationships and licence agreements

Provisions for impairment, net of reversals

(v)
Trade receivables and loans
Inventories
Retail development assets
Customer contracts
Property, plant and equipment

Significant items (a)

(vi)
Intangibles impairment - goodwill
Intangibles impairment - customer contracts
Intangibles impairment - software
Impairment of property and investments
Onerous lease and other provisions
Impairment of retailer assets and loans
Total impairments and related charges
Acquisition and restructure costs
MAH put option re-measurement gain (Note 14(i))
Total significant items expense before tax
Income tax benefit attributable to these items
ATO audit - Action Stores and FTC
Total significant items expense after tax

Finance costs

(vii)
Interest expense
Deferred borrowing costs
Finance costs from discounting of provisions (Refer appendix A (xxii))

2015
$m

91.3
31.0
8.5
1.7
132.5

117.0
87.4

487.6
41.4
19.0
5.1
553.1

39.6
16.4
15.8
71.8

20.7
15.2
-
-
-
35.9

441.6
52.5
12.6
39.5
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28.7
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2014
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32.6
7.9
8.6
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108.8
83.6

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34.7
21.4
-
56.1
(12.9)
10.8
54.0

49.8
3.2
12.1
65.1

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

REVENUES AND EXPENSES (continued)

(a)

Significant items

As a consequence of the increasingly competitive trading environment, particularly in relation to Food & Grocery, the full
benefits from the Transformation Plan not being realised in FY2015, and the rationalisation of the retail store network,
resulting in store closures, the Group has recognised impairments to goodwill and other assets which are outlined as
significant items below.

Total impairments and related charges - $640.0 million

(i)

Goodwill

As detailed in Note 11, the Cash Generating Unit (CGU) impairment tests resulted in an impairment of goodwill of $422.1
million in the Food & Grocery segment and $19.5 million in the Hardware CGU.

The goodwill impairment within Food & Grocery reflects the increasingly competitive trading environment and the full benefit
from the Transformation Plan not being realised in FY2015. The key market factors expected to affect Food & Grocery include:



Intense competition; with the major chains continuing to invest in price and the discount retailers expanding into
South Australia and Western Australia;

 Consumer focus on value and consumer trends impacting sales mix; and
 Deflationary pricing continuing

These factors, together with the rationalisation of the retail store network resulted in a number of store closures, and has led to
a weakness in underlying sales. Metcash is expected to continue to invest in pricing and other initiatives within the
Transformation Plan. As a result, the sales volume and EBITDA forecasts used in the current year impairment tests are lower
than those used in the prior year. These changes, along with modest forecast growth rates and an increase in the discount
rate, have had a significant impact over the five-year projection period as well as on the terminal value, resulting in an
impairment of $422.1 million.

Hardware is expected to face similar competition from the major chains. Whilst sales increased in FY2015 and are expected to
continue to increase over the forecast period, margins are expected to moderate relative to the prior year valuation. These
factors resulted in an impairment of $19.5 million.

(ii)

Other intangibles

Customer contract impairments of $52.5 million in the Food & Grocery segment reflect the competitive environment outlined
above. Customer contracts recognised on the acquisition of FAL in Western Australia and Franklins in NSW, were impaired
following a revision to cash flows over their remaining estimated useful lives, which are based on approved strategic plans and
forecasts, expected customer attrition rates, based on historical and projected future customer retention expectations and
revised discount rates, as outlined in Note 11(b) for the Food & Grocery CGU.

Metcash has identified certain software components which are not and are not intended to be used, resulting in an impairment
of $12.6 million.

(iii)

Other impairments

In the Food & Grocery segment, Metcash has a programme to dispose of surplus retail property and store assets that are held
for sale. In light of current store performance, retailer financial health and the anticipated disposals programme, specific
impairments have been recognised against these assets.

The competitive and margin pressures outlined above have also led to rationalisation across the retail sector, with certain
retail stores experiencing more difficult trading conditions. Metcash established an onerous lease provision against its head
lease exposures in respect of those stores where the level of rental subsidy or other financial support is expected to exceed
Metcash returns. Metcash has also made provision against retailer assets and loans that are no longer considered
recoverable.

Other significant items – net $1.2 million

The current year restructure cost of $7.0 million relates to redundancy costs associated with the Organisational Review
initiative, which will reduce future operating costs. The gain of $8.2 million in respect of the re-measurement of the Metcash
Automotive Holdings (MAH) put option liability is detailed in Note 14(i).

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

INCOME TAX

The major components of income tax expense are:

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/(loss) before income tax
At the Group’s statutory income tax rate of 30% (2014: 30%)
Expenditure not allowable for income tax purposes – continuing operations
Expenditure not allowable for income tax purposes – significant items
Other amounts assessable for income tax purposes
Other amounts not assessable for income tax purposes
Other amounts allowable for income tax purposes
Adjustments in respect of income tax of previous years
ATO audit settlement
Income tax expense reported in the statement of comprehensive income

Income tax expense
ATO audit settlement
Income tax attributable to significant items in profit from continuing operations before tax
Income tax attributable to other continuing operations
Total income tax expense attributable to continuing operations
Income tax benefit attributable to discontinued operations

2015
$m

2014
$m

70.2
(2.8)
(53.4)
14.0

(368.8)
(110.6)
0.8
130.0
-
(1.3)
(2.1)
(2.8)
-
14.0

-
(61.6)
75.6
14.0
-
14.0

104.0
(2.5)
(5.7)
95.8

277.0
83.1
2.9
4.1
0.2
(1.9)
(0.9)
(2.5)
10.8
95.8

10.8
(12.9)
97.9
95.8
(4.5)
91.3

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

INCOME TAX (continued)

Deferred tax liabilities
Intangibles
Accelerated depreciation for tax purposes
Set off against deferred tax assets

Deferred tax assets
Provisions
Unutilised tax losses
Accelerated depreciation for accounting purposes
Other
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
Adjustment attributable to finalisation of ABG acquisition
Adjustments related to business combinations (Note 22)
Closing balance

2015
$m

2014
$m

42.8
-
(42.8)
-

147.0
5.0
7.2
8.0
(42.8)
124.4

70.4
53.4
1.8
-
(1.2)
124.4

60.6
1.8
(62.4)
-

116.5
7.5
-
8.8
(62.4)
70.4

61.8
5.7
(1.7)
1.3
3.3
70.4

At 30 April 2015, there is no recognised or unrecognised deferred income tax liability (2014: nil) for taxes that would be payable
on the unremitted earnings 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 $16.6 million (2014: $16.0 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.

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.

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

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 2014: 9.0c (2013: 16.5c) (i)
Interim fully franked dividend for 2015: 6.5c (2014: 9.5c) (ii)
Dividends declared during the year
Shares issued under the DRP (i) (ii)
Shares issued under DRP underwriting agreement (i) (ii)
Cash dividends paid on ordinary shares during the year

2015
$m

80.0
58.7
138.7
(38.2)
(45.9)
54.6

2014
$m

145.3
83.7
229.0
(23.4)
-
205.6

Dividends declared (not recognised as a liability as at 30 April 2015)
Final fully franked dividend for 2015: nil (2014: 9.0c) (iii)

80.0

Dividend Reinvestment Plan
On 2 December 2013, the Group reopened the Dividend Reinvestment Plan (DRP) under which eligible shareholders may
elect to reinvest all or part of their dividends in acquiring additional Metcash shares. The Directors may determine offers of
discounts from time to time. The full terms and conditions of the DRP were announced on 2 December 2013 and amended on
19 May 2014.

(i) The DRP participation relating to the FY2014 final dividend was underwritten by a financial institution up to 50%

participation. Of the $80.0 million declared for the FY2014 final fully franked dividend, $58.1 million was paid in cash and
$21.9 million was settled by the issue of 8,234,662 shares under the DRP. A further 6,736,864 shares were issued to the
underwriter for $18.1 million received in cash.

(ii) The DRP participation relating to the FY2015 interim dividend was underwritten by a financial institution up to 75%

participation. Of the $58.7 million declared for the FY2015 interim fully franked dividend, $42.4 million was paid in cash
and $16.3 million was settled by the issue of 9,287,771 shares under the DRP. A further 15,760,531 shares were issued
to the underwriter for $27.8 million received in cash.

(iii) On 4 June 2015 the Board announced that a final dividend will not be paid for FY2015.

(b) Franking credit balance of Metcash Limited

Franking account balance as at the end of the financial year at 30% (2014: 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

Dividends paid and declared have been fully franked at the rate of 30% (2014: 30%).

2015
$m

62.8

9.1

71.9

2014
$m

58.2

19.7

(34.3)

43.6

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

CASH AND CASH EQUIVALENTS

(a) Reconciliation of net profit after tax to net cash flows from operations

Net profit/(loss) for the year

(382.8)

170.7

2015
$m

2014
$m

Adjustments for:
Depreciation and amortisation
Impairment losses (non-significant items)
Net profit on disposal of property, plant and equipment
Net loss on disposal of discontinued operations
Share of profit of equity-accounted investments
Dividends received from equity-accounted investments
Dividends paid to holders of put options written over non-controlling interests (Note 14(i))
Deferred borrowing costs
Share based payments
Credit value adjustments (Note 16)

Significant items not related to operating activities:
Automotive - Acquisition costs
Impairments and related charges (Note 3(vi))
MAH put option re-measurement gain (Note 3(vi))
Restructure costs

Changes in assets and liabilities
(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 property, plant and equipment
Increase/(decrease) in payables and provisions
(Increase)/decrease in deferred tax assets
Increase/(decrease) in tax payable
Cash from operating activities

(b) Non-cash financing and investing activities
Acquisition of assets by means of finance lease

71.8
35.9
(1.7)
-
(3.1)
5.4
0.3
0.8
5.1
3.5

-
640.0
(8.2)
7.0

17.5
12.4
(1.3)
16.1
-
(118.6)
(53.6)
(14.8)
231.7

69.8
46.0
(8.6)
1.1
(4.8)
1.6
1.0
3.2
0.7
2.5

3.7
34.7
-
-

(24.1)
8.1
(8.4)
(5.1)
(1.7)
73.8
(5.7)
30.2
388.7

4.2

4.4

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

TRADE RECEIVABLES AND LOANS

Current
Trade receivables - securitised (i)(Note 16)
Trade receivables - non-securitised (i)
Allowance for impairment loss

Marketing and other receivables (ii)
Trade and other receivables

Customer loans (iii)
Allowance for impairment loss
Customer loans
Total trade receivables and loans - current

Non-current
Customer loans(iii)
Other receivables(ii)
Total trade receivables and loans – non-current

2015
$m

2014
$m

744.3
200.9
(54.3)
890.9
82.6
973.5

61.4
(20.4)
41.0
1,014.5

23.5
2.1
25.6

788.1
182.8
(62.6)
908.3
83.4
991.7

52.1
(6.0)
46.1
1,037.8

46.8
3.5
50.3

(i)

Trade receivables are non-interest bearing and repayment terms vary by business unit. At 30 April 2015, 75.1% of trade
receivables are required to be settled within 30 days (2014: 82.4%), 24.2% have terms extending from 30 to 60 days
(2014: 16.8%) and 0.7% have terms greater than 60 days (2014: 0.8%). 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) Marketing and other receivables are non-interest bearing. Receivables with repayment terms of less than 12 months are

classified as current. These receivables are all neither past due nor impaired.

(iii) Customer loans with repayment terms of less than 12 months are classified as current. As at 30 April 2015, $5.0 million
(2014: $10.6 million) of loans are non-interest-bearing and $79.9 million (2014: $88.3 million) of loans have a weighted
average annual interest rate of 9.2% (2014: 9.4%).

Impaired trade receivables and customer loans

During the year ended 30 April 2015, receivables of the value of $44.2 million (2014: $37.9 million) were considered non-
recoverable and written off. As at 30 April 2015, trade receivables and customer loans with a carrying value of $74.7 million
(2014: $68.6 million) were provided for as impaired.

Movement in allowance for impairment loss

Opening balance
Accounts written off as non-recoverable
Reclassifications from provisions and disposal groups
Arising from business combinations
Charged as an expense during the year – continuing operations
Charged as an expense during the year - discontinued operations
Closing balance

2015
$m

68.6
(44.2)
-
0.9
49.4
-
74.7

2014
$m

53.9
(37.9)
10.8
-
40.8
1.0
68.6

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

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NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

DERIVATIVE FINANCIAL INSTRUMENTS

Current assets
Foreign currency forward contracts

Non-current assets
Cross currency interest rate swaps – US Private Placement (Note 12(v))
Interest rate swap contracts

Current liabilities
Interest rate swap contracts
Foreign currency forward contracts

Non-current liabilities
Interest rate swap contracts

2015
$m

2014
$m

0.2
0.2

104.2
-
104.2

0.6
0.2
0.8

6.3
6.3

1.8
1.8

46.2
0.1
46.3

0.6
1.0
1.6

0.1
0.1

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

EQUITY-ACCOUNTED INVESTMENTS

Equity-accounted investments of the Group represent both associates and joint ventures and are structured through equity
participation in separate legal entities. Metcash invests capital to support the independent retail network, strengthen relationships
and fund growth. Relationships with co-investors are governed by contractual agreements which allow the Group to exercise
either significant influence or joint control over these entities. Where the Group exercises joint control, all key operating decisions
are agreed unanimously, regardless of ownership interest.

The principal place of business for all of the Group’s equity-accounted investments is Australia.

The following table presents key information about the nature, extent and financial effects of the Group’s interests in joint
ventures and associates.

Investee

Principal activities

Reporting date

2015
%

2014
%

Associates
Abacus Independent Retail Property Trust
Ritchies Stores Pty Ltd
BMS Retail Group Pty Ltd(1)
Kangaroo Flat Supermarket Pty Ltd(1)
BMS Retail Group Holdings Pty Ltd(1)
Dramet Holdings Pty Ltd
Dart Trading Co Pty Ltd(3)
Bamlane Pty Ltd(3)
Mundin Pty Ltd(3)
G'Butt Pty ltd(3)
Mussen Pty Ltd(3)
Ully Pty Ltd(3)

Joint ventures
Adcome Pty Ltd
Lecome Pty Ltd
Progressive Trading Pty Ltd
Metfood Pty Limited
Plumpton Park Developments Pty Limited
Northern Hardware Group Pty Ltd
Timberten Pty Ltd
Waltock Pty Limited
Banner 10 Pty Ltd
BRJ Pty Ltd
G Gay Hardware Pty Ltd
Woody’s Timber & Hardware Pty Ltd
LA United Pty Ltd(2)
Mermaid Tavern (Trading) Pty Ltd
Sunshine Coast Hotels Pty Ltd
Queens Arms Hotel New Farm Pty Ltd
Queens Arms Freehold Pty Ltd

Retail property investment
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
Property development
Hardware retailing
Hardware retailing
Hardware retailing
Hardware retailing
Hardware retailing
Hardware retailing
Hardware retailing
Liquor retailing and hospitality
Liquor retailing and hospitality
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 April
30 April
30 April
30 April
30 June
30 June
30 June
30 June
30 June
30 June
30 June
30 June
30 June
30 April
30 June
30 April
30 April

25.0
26.0
-
-
25.1
26.0
-
-
-
-
-
-

45.0
50.0
52.2
50.0
-
49.9
40.0
49.0
49.0
36.0
49.0
49.0
26.0
50.0
50.0
50.0
50.0

25.0
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
50.0
49.9
40.0
49.0
49.0
36.0
-
-
-
50.0
50.0
50.0
50.0

1. During the current year, the BMS retail group completed a corporate restructure by which Long Gully Supermarket Pty Ltd
became the parent entity. Long Gully Supermarket Pty Ltd was then renamed BMS Retail Group Holdings Pty Ltd. Although
the restructure did not have an impact on Metcash’s effective interest in the retail group, Metcash no longer holds a direct
equity interest in BMS Retail Group Pty Ltd and Kangaroo Flat Supermarkets Pty Ltd.

2. The Group has a direct ownership of 26.0% in LA United Pty Ltd (‘LA United’), and an indirect ownership of 18.5% via the

100% interest in Liquor Traders Pty Ltd.

3. These entities were deregistered during the current year.

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

EQUITY-ACCOUNTED INVESTMENTS (continued)

At the reporting date, the equity-accounted investments are not individually material to the Group. The following tables present
the summarised financial information in aggregate for all investments.

Share of investees’ profit

Profit before income tax from continuing operations
Income tax expense
Profit after income tax from continuing operations
Total comprehensive income

At the reporting date, the Group’s share of unrecognised losses is not material.

Share of investees’ net assets

Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets

2015
$m

4.4
(1.3)
3.1
3.1

2015
$m

89.9
145.6
235.5
(114.8)
(45.6)
(160.4)
75.1

2014
$m

6.9
(2.1)
4.8
4.8

2014
$m

81.2
139.8
221.0
(92.9)
(64.4)
(157.3)
63.7

Contingent liabilities and commitments
The Group has entered into certain put option arrangements with co-investors in three equity-accounted investments, which if
exercised would result in an increase in Metcash’s ownership interest in the investment. 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.
At the reporting date, the aggregate exercise price is estimated to be $10.8 million (2014: $2.3 million).

The Group has granted a financial guarantee contract relating to the bank loan of a joint venture, Adcome Pty Ltd. Under the
contract, the bank has the right to require Metcash to repay the debt under certain prescribed circumstances of default. The
estimate of the maximum amount payable in respect of the guarantee, if exercised, is $47.5 million (2014: $46.0 million). Had
the guarantee been exercised at 30 April 2015, the amount payable would have been $42.6 million (2014: $44.0 million). The
fair value of the financial guarantee contract at the reporting date was $0.7 million (2014: $1.9 million) and is recognised as a
financial liability (Note 14).

In addition, the Group had granted put options in prior years relating to the sale of retail store assets to certain equity-
accounted investees. At the reporting date, the aggregate exercise price is estimated to be $nil (2014: $nil).

The Group has determined that the probability of material outflow relating to put arrangements over all other retail stores and
equity-accounted investments is remote.

Restrictions
There are no material restrictions on the ability of the investees to transfer funds to the Group.

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

10.

PROPERTY, PLANT AND EQUIPMENT

Year ended 30 April 2015
Opening balance
Additions
Acquisition from business combinations (Note 22)
Disposals
Assets reclassified to retail development assets
Impairments
Depreciation
Closing balance

At 30 April 2015
Cost
Accumulated depreciation and impairment
Net carrying amount

Year ended 30 April 2014
Opening balance
Additions
Assets reclassified from/(to) retail development assets and intangibles
Acquisition from business combinations (Note 22)
Disposals
Impairments
Depreciation
Closing balance

At 30 April 2014
Cost
Accumulated depreciation and impairment
Net carrying amount

Land &
buildings

88.0
2.3
-
(14.7)
(16.7)
(15.3)
(0.7)
42.9

83.2
(40.3)
42.9

85.7
-
4.0
4.3
(4.5)
(0.7)
(0.8)
88.0

112.3
(24.3)
88.0

Plant &
equipment

220.4
63.7
1.4
(4.2)
(5.4)
(3.9)
(38.9)
233.1

525.6
(292.5)
233.1

192.8
83.6
(14.4)
12.5
(3.3)
(13.6)
(37.2)
220.4

464.7
(244.3)
220.4

Total

308.4
66.0
1.4
(18.9)
(22.1)
(19.2)
(39.6)
276.0

608.8
(332.8)
276.0

278.5
83.6
(10.4)
16.8
(7.8)
(14.3)
(38.0)
308.4

577.0
(268.6)
308.4

Additions to plant and equipment include additions of $27.4 million (2014: $56.6 million) to assets under construction. The
closing balance of plant and equipment includes assets under construction with a carrying value of $16.7 million (2014: $83.1
million).

During the year, borrowing costs of $2.9 million (2014: $1.6 million) were capitalised to the cost of qualifying assets – largely
costs expended on Project Mustang. Borrowing costs were capitalised at rates of between 3.9% and 4.3% (2014: between
4.1% and 4.9%).

The carrying value of plant and equipment held under finance leases and hire purchase contracts at 30 April 2015 is $9.7 million
(2014: $10.2 million).

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

11.

INTANGIBLE ASSETS AND GOODWILL

Software
development
costs

Customer
contracts

Goodwill

Trade names
and other

Year ended 30 April 2015

At 1 May 2014
Net carrying amount
Reclassifications
Additions
Arising from business combinations (Note
22)
Impairments
Amortisation
At 30 April 2015
Net carrying amount
At 30 April 2015
Cost (gross carrying amount)
Accumulated amortisation and impairment
Net carrying amount

Year ended 30 April 2014

At 1 May 2013
Net carrying amount
Additions
Transfers (to)/from property, plant &
equipment
Arising from business combinations
Adjustment attributable to finalisation of
ABG acquisition
Settlement of pre-existing relationships
Reclassified to retail development assets
Impairments
Disposals
Amortisation
At 30 April 2014
Net carrying amount
At 30 April 2014
Cost (gross carrying amount)
Accumulated amortisation and impairment
Net carrying amount

Total

1,765.7
-
22.4

35.3

(506.7)
(32.2)

1,422.7
2.0
-

9.7

(441.6)
-

60.2
0.6
-

20.4

-
(0.8)

992.8

80.4

1,284.5

1,434.4
(441.6)
992.8

1,367.5
-

50.9

6.7
-
(2.4)
-
-
-

86.5
(6.1)
80.4

47.2
-

15.4

-
-
-
-
-
(2.4)

2,016.6
(732.1)
1,284.5

1,708.0
22.0

0.8

69.5

6.7
(2.2)
(2.4)
(3.6)
(1.3)
(31.8)

81.3
(0.8)
19.6

(12.6)
(16.4)

71.1

217.4
(146.3)
71.1

78.2
18.7

(0.5)

0.3

-
-
-
-
-
(15.4)

201.5
(1.8)
2.8

5.2

(52.5)
(15.0)

140.2

278.3
(138.1)
140.2

215.1
3.3

1.3

2.9

-
(2.2)
-
(3.6)
(1.3)
(14.0)

81.3

201.5

1,422.7

60.2

1,765.7

198.6
(117.3)
81.3

272.1
(70.6)
201.5

1,422.7
-
1,422.7

65.5
(5.3)
60.2

1,958.9
(193.2)
1,765.7

(a) Description of the Group’s intangible assets and goodwill

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. (Refer Appendix A(xv)). An impairment of $12.6 million was recognised relating to software as
set out in Note 3(vi).

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

11.

INTANGIBLE ASSETS AND GOODWILL (continued)

(a) Description of the Group’s intangible assets and goodwill (continued)

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 and any impairment losses. 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. (Refer Appendix
A(xv)). An impairment of $52.5 million was recognised relating to customer contracts as set out in Note 3(vi).

Trade names and other
Trade names are acquired either through business combinations or through direct acquisition. The carrying amount represents
costs less accumulated amortisation and 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 are subject to impairment testing on an annual basis
or whenever there is an indication of impairment. 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. (Refer Appendix
A(xv)).

(b)

Impairment tests for goodwill and intangibles with indefinite useful lives

Goodwill

Description of cash generating units

(i)
Goodwill acquired through business combinations is allocated to the lowest level within the entity at which the goodwill is
monitored, being the four cash-generating units (or ‘CGU’s) - Food & Grocery, Liquor, Hardware and Automotive.

Indefinite life intangibles primarily comprise trade names and licences.

(ii)
Except when indicators of impairment exist, goodwill and indefinite life intangibles are tested for impairment annually.

Current year assessment

The recoverable amounts were determined based on value in use calculations using cash flow projections covering a five year
period, which are based on approved strategic plans or forecasts. Estimates beyond the five year period are calculated using
terminal growth rates that are applicable to the trading environment in which the CGU operates.

(iii)
The carrying amounts of goodwill and indefinite life intangibles that are allocated to the Group’s CGUs are as follows:

Allocation of CGU’s

Cash-generating units

Food & Grocery
Liquor
Hardware
Automotive

Allocated goodwill

Other indefinite
life intangibles

Pre-tax

discount rates

2015
$m

756.7
98.8
65.6
71.7

2014
$m

1,171.1
97.5
85.1
69.0

2015
$m

1.1
17.6
27.2
34.5

2014
$m

1.3
2.0
26.9
30.0

2015
%

15.9%
14.1%
14.2%
14.5%

2014
%

13.4%
13.8%
14.0%
14.9%

Key assumptions used in assessment

(iv)
The valuations used to support the carrying amounts of intangible assets are based on forward looking key assumptions that
are, by nature, uncertain. The nature and basis of the key assumptions used to estimate future cash flows and the discount
rates used in the projections, when determining the recoverable amount of each CGU, are set out below and in (iii) above:

Operating cash flows
Operating cash flow projections are extracted from the most recent approved strategic plans or forecasts that relate to the
existing asset base. For each CGU, the cash flow projections for a five year period have been determined based on
expectations of future performance. Key assumptions in the cash flows include sales volume growth, costs of sales and costs
of doing business. These assumptions are based on expectations of market demand and past experience.

The Food & Grocery and Hardware cash flow projections are based on risk adjusted forecasts allowing for estimated changes
in the business, the competitive trading environment, legislation and economic growth.

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

11.

INTANGIBLE ASSETS AND GOODWILL (continued)

(b)

Impairment tests for goodwill and intangibles with indefinite useful lives (continued)

(iv)

Key assumptions used in assessment (continued)

Discount rates
Discount rates are based on the weighted average cost of capital (‘WACC’) for the Group adjusted for an asset-specific risk
premium assigned to each CGU. The asset-specific risk premium is determined based on risk embedded within the cash flow
projections and other factors specific to the industries in which the CGUs operate.

The calculation of WACC is market-driven and key inputs include target capital structure, equity beta, market risk premium,
risk-free rate of return and debt risk premium.

Terminal growth rates
Cash flows beyond the projection period are extrapolated indefinitely using estimated long-term growth rates applicable to the
trading environment in which the CGUs operate. Terminal growth rates applied to long-term cash flows in the current
assessment were Hardware 1.0% (2014: 1.4%) and all other CGUs were 1.5% (2014: 1.4%).

Results of assessment

(v)
Changes to the forecast cash flows had a significant impact over the five-year projection period and the estimated terminal
value, resulting in an impairment of goodwill of $422.1 million in Food & Grocery and $19.5 million in Hardware. The
recoverable amount of the Food & Grocery CGU was $1,164.2 million and the Hardware CGU was $263.7 million, based on
value in use calculations. Further details are provided in Note 3(vi). No impairment of goodwill was identified in any of the
Group’s other CGUs (2014: nil).

Sensitivity to changes in key assumptions

(vi)
As a result of the impairments noted above, the future forecast cashflows of both the Food & Grocery and Hardware CGUs are
now in line with the current carrying values of these CGUs. As a result, any adverse changes in assumptions which are not
offset by a positive change in another assumption would lead to a reduced valuation, on a value-in-use basis, and accordingly
would result in further impairment.

The following items are reasonable sensitivity changes to key assumptions that will increase the impairment charge. These
sensitivities assume that the specific assumption moves in isolation, while other assumptions are held constant.

Food & Grocery CGU

A decrease of 5% in the year one to year five and terminal year forecast EBITDA will result in an additional
impairment charge of $79.7 million; or
A decrease of 0.5% in the terminal growth rate (from 1.5% to 1.0%) will result in an additional impairment charge of
$34.3 million; or
An increase of 1.0% in post-tax discount rates (from 11.34% to 12.34%) will result in an additional impairment charge
of $102.9 million.

Hardware CGU

A decrease of 5% in the year one to year five and terminal year forecast EBITDA will result in an additional
impairment charge of $17.0 million; or
A decrease of 0.25% in the terminal growth rate (from 1.0% to 0.75%) will result in an additional impairment charge of
$5.4 million; or
An increase of 1.0% in post-tax discount rates (from 10.14% to 11.14%) will result in an additional impairment charge
of $27.1 million.

Other CGUs
At the assessment date, no reasonably possible change in key assumptions would cause the carrying amount of the other
CGUs to exceed their respective recoverable amounts. Pre-tax discount rates would need to increase to 21.5% and 17.1% in
the Liquor and Automotive CGUs, respectively, to trigger an impairment.

Metcash Limited Annual Report 2015
Metcash Limited Annual Report 2015

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

12.

INTEREST BEARING LOANS AND BORROWINGS

Current
Bilateral loans(iii)
Finance lease obligations(i)

Non-current
Finance lease obligations(i)
Bank loans - working capital(ii)
Bilateral loans(iii)
Bank loans - syndicated(iv)
US private placement(v)
Deferred borrowing costs

2015
$m

58.6
4.6
63.2

5.3
-
2.2
475.0
317.0
(4.7)
794.8

2014
$m

9.5
5.8
15.3

4.4
15.0
50.0
500.0
258.7
(3.2)
824.9

(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 6.47% (2014: 7.42%).
Certain lease liabilities are secured by a charge over the leased asset.

(ii) Working capital bank loans are represented by three unsecured revolving facilities totalling $275.0 million, one of which

expires in May 2017 ($75.0 million) and two of which expire in June 2017 (total of $200.0 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 12(vi) below.

(iii) Bilateral loans are 5 separate loans – three variable rate term loans of $50.0 million, $5.6 million and $2.2 million; a $2.5
million fixed rate loan secured against freehold property and a $0.5 million overdraft. The $50.0 million loan is based on
BBSY plus a margin and is subject to the financial undertakings as detailed in Note 12(vi) below.

(iv) Syndicated bank loans are senior unsecured loan note subscription facilities. The existing facilities were due to expire in
December 2015 ($250.0 million), June 2018 ($200.0 million) and June 2019 ($225.0 million). Interest payable on the
facilities is based on BBSY plus a margin and interest rate resets are quarterly. The applicable margin is dependent upon
an escalation matrix linked to the senior leverage ratio achieved. These facilities were presented as non-current at 30
April as the Group had an unconditional agreement in place to refinance $350.0 million of facilities under a syndicated
revolving senior unsecured loan that will expire June 2020. This refinancing was completed on 24 March 2015 and takes
effect on 9 June 2015. These bank loans are subject to certain financial undertakings as detailed in Note 12(vi) below.

(v) US private placement (USPP) comprises three tranches of fixed coupon debt of US$70.0 million maturing September
2018, US$35.0 million maturing September 2019, and US$120.0 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$225.0 million of USPP fixed interest rate debt into
$210.1 million of floating rate debt with interest payable on a quarterly basis at BBSW plus a margin.

The US$225.0 million USPP debt has been revalued at the reporting date to $317.0 million (2014: $258.7 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 ($104.2 million – Note 8), the cash
flow hedge reserve (negative $1.9 million – Note 15), other payables (negative $0.6 million), associated deferred tax
liability (negative $0.8 million – Note 4) and retained earnings ($6.0 million). Together, these six components reflect the
$210.1 million of hedged debt.

The USPP debt is subject to certain financial undertakings as detailed in Note 12(vi) below.

(vi) The core borrowings of the Group must comply with three primary covenants which apply to the syndicated bank facility,
the working capital bank facilities, the $50.0 million bilateral facility and the USPP debt. These covenants are: a fixed
charges cover ratio (Underlying 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 Underlying
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)) and minimum shareholders’ funds (a fixed figure
representing the Group share capital and reserves).

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

12.

INTEREST BEARING LOANS AND BORROWINGS (continued)

(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, working capital and bilateral bank loans and the USPP debt, after taking into account
cross currency and interest rate swaps, at the end of the financial year was 4.65% (2014: 4.86%).

(b) Defaults or breaches

At the reporting date, there were no material defaults or breaches on the Group’s core borrowings.

(c)

Interest rate risk and liquidity risk

Details regarding interest rate risk and liquidity risk are disclosed in Note 16.

13.

PROVISIONS

30 April 2015
Current
Non-current

30 April 2014
Current
Non-current

Employee
entitlements
$m

Rental
subsidy
$m

Onerous
arrangements
$m

94.9
5.6
100.5

88.4
5.1
93.5

7.8
85.7
93.5

27.6
85.1
112.7

21.8
53.1
74.9

10.2
15.8
26.0

Other

3.1
-
3.1

1.0
-
1.0

(a) Movements in significant provisions (other than employee entitlements)

Rental subsidy

112.7
(9.1)
-
(17.2)
7.1
93.5

179.3

-
(2.6)
-
(9.7)
(64.6)

8.2
2.1
112.7

Onerous
arrangements
$m

26.0
55.3
0.6
(7.5)
0.5
74.9

20.4

9.1
1.6
1.1
-
(7.4)

1.2
-
26.0

1 May 2014
Expense arising/(released) during the year
Arising from business combinations
Utilised during the year
Finance cost discount rate adjustment
30 April 2015

1 May 2013
Expense arising/(released) during the year

-
-

continuing operations
discontinued operations
Attributable to ABG acquisition adjustment
Reclassified to trade receivables impairment provision
Utilised during the year
Finance cost discount rate adjustment
continuing operations
discontinued operations

-
-

30 April 2014

Total

127.6
144.4
272.0

127.2
106.0
233.2

Total

138.7
46.2
0.6
(24.7)
7.6
168.4

199.7

9.1
(1.0)
1.1
(9.7)
(72.0)

9.4
2.1
138.7

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

13.

PROVISIONS (continued)

(b)

(i)

Nature and timing of provisions

Rental subsidy provision

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 ‘back-to-back’ commercial terms and conditions, whereby the lease expense to the landlord
matches the lease rental to the retailer.

In certain circumstances, 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.

(ii)

Onerous arrangements

The provision represents the present value of various obligations which are deemed to be onerous. These obligations include
onerous retail head lease exposures, property make-good, restructuring and other costs. Depending on the nature of these
obligations, they are expected to be settled over the term of the lease, at the conclusion of the lease or otherwise when the
obligation vests.

14.

OTHER FINANCIAL LIABILITIES

Current
Put options written over non-controlling interests (i)
Financial guarantee contracts (ii)
Lease incentives

Non - current
Put options written over non-controlling interests (i)
Financial guarantee contracts (ii)
Lease incentives
Other payables

2015
$m

2014
$m

21.4
0.7
0.2
22.3

19.3
-
1.1
2.3
22.7

11.7
1.2
0.1
13.0

34.9
0.7
1.3
3.7
40.6

(i) 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 administrative costs within profit and loss and the net present value unwind is recorded as a
finance cost.

In accordance with the acquisition agreement, Metcash has, under certain circumstances, the right to acquire the remaining
16.8% equity interest in the Metcash Automotive Holdings group (MAH). The minority shareholder also has the right, under
certain circumstances, to require Metcash to acquire its shareholding in MAH. The purchase consideration is broadly based
on an EBITDA multiple calculation less net debt. The estimated redemption amount of $29.0 million under the put option
has been recognised as a financial liability. A revaluation gain of $8.2 million was recorded during the year against this
liability. Refer Note 3(vi) for further details.

(ii) The Group has granted a financial guarantee relating to the bank loan of its joint venture Adcome Pty Ltd, which has been

recorded at a fair value of $0.7 million (2014: $1.9 million). Refer Note 9 for further details.

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

15.

CONTRIBUTED EQUITY AND RESERVES

(a)

Ordinary shares

Movements in ordinary shares on issue
At 1 May
Issued during the year:

2015

2014

Number of
shares

888,338,048

2,308.1

880,704,786

2,284.9

-
-
At 30 April

Shares issued under the DRP/underwritten
Share issue costs net of tax

40,019,828
-
928,357,876

84.1
(0.3)
2,391.9

7,633,262
-
888,338,048

23.4
(0.2)
2,308.1

Fully paid ordinary shares carry one vote per share and carry the right to dividends. Shares have no par value.

(b)

Other reserves

Share-based payments reserve
This reserve is used to record the value of equity benefits provided to employees and executives as part of their remuneration.
Refer to Note 19 for further details of these plans. Once a performance right has lapsed the Group no longer has any
obligation to convert these performance rights into share capital. The amount transferred to retained earnings represents the
value of share based payments previously recognised as an expense through the Statement of Comprehensive Income that
have now lapsed.

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. The cash flow hedge reserve movements through comprehensive income are as follows:

Opening balance
Settled during the year
Movement in fair value of derivatives
Tax impact of above movements
Closing balance

2015
$m

1.5
(1.8)
(3.7)
1.8
(2.2)

2014
$m

(1.8)
2.7
2.3
(1.7)
1.5

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.

(c)

Other equity

The other equity account is used to record the reverse acquisition adjustment on application of AASB 3 Business
Combinations in 2005. Refer Appendix A (iv).

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

16.

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 Appendix A.

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 2015,
the principal hedged was $525.0 million with a weighted average hedge maturity of 1.5 years and a weighted average interest
rate of 2.95%. 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 $525.0 million (2014: $400.0 million) had a net fair value at the end of the
financial year of negative $6.9 million (2014: negative $0.6 million). These contracts are exposed to fair value movements
based on changes to the interest rate curve.

At the reporting 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 loans - working capital
Bilateral loans
Bank loans – syndicated
US private placement(i)
Less: Interest rate swaps notional principal value - designated as cash flow hedges

Net exposure

2015
$m

2014
$m

83.3

24.7

-
(58.3)
(475.0)
(210.1)
525.0
(218.4)
(135.1)

(15.0)
(57.0)
(500.0)
(210.1)
400.0
(382.1)
(357.4)

(i)

The US private placement liability is presented inclusive of the associated cross currency interest rate swap hedge
contracts which effectively convert the US$225.0 million facility into $210.1 million of variable rate funding (Note 12(v)).

Refer to Note 12 for details of bank loans, bilateral loans and US private placement.

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

16.

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

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
2015, the interest rate swap hedges of $525.0 million fell within the required range.

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 the reporting 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%
If interest rates were to decrease by 0.25%

Profit after tax
higher/(lower)

2015
$m

(0.2)
0.2

2014
$m

(0.5)
0.5

Other comprehensive
income
higher/(lower)

2015
$m

(1.2)
1.2

2014
$m

0.9
(0.9)

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.

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
stressed 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% have been utilised at
30 April 2015. 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 $1,419.1 million (2014:
$1,457.1 million) for the Group and are due in one year or less.

Metcash Limited Annual Report 2015
Metcash Limited Annual Report 2015

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

16.

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

Maturity analysis of financial liabilities based on contracted date
The following table reflects the gross contracted values of financial liabilities categorised by their contracted dates of
settlement. Except where these exposures are provided for, these are also the expected dates of settlement. The risk implied
from the values shown in the table reflects a balanced view of cash 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.

Year ended 30 April 2015
Trade and other payables
Finance lease liability
Financial guarantee contracts
Put options written over non-controlling interests
Bank and other loans
Derivative liabilities - net settled
Derivative liabilities - gross settled
- Inflows
- Outflows
Net maturity

Year ended 30 April 2014
Trade and other payables
Finance lease liability
Financial guarantee contracts
Put options written over non-controlling interests
Bank and other loans
Derivative liabilities - net settled
Derivative liabilities - gross settled
- Inflows
- Outflows
Net maturity

1 year or less

1 - 5 years

More than 5
years
$m

1,419.1
4.7
0.7
21.4
85.7
3.6

(21.5)
21.7
1,535.4

1,457.1
5.9
1.2
11.7
44.5
0.9

(44.6)
45.8
1,522.5

-
6.5
-
19.3
623.0
3.3

-
-
652.1

-
5.7
0.7
37.4
549.3
(0.1)

-
-
593.0

-
-
-
-
184.6
-

-
-
184.6

-
-
-
-
405.5
-

-
-
405.5

Total

1,419.1
11.2
0.7
40.7
893.3
6.9

(21.5)
21.7
2,372.1

1,457.1
11.6
1.9
49.1
999.3
0.8

(44.6)
45.8
2,521.0

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. The table does not include derivative assets (refer to Note 8). Under the terms of these agreements, the
settlements at expiry include a both a cash payment and receipt. Based on the valuations performed, these cash flows are
expected to be a net inflow.

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

16.

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

At the reporting date, the Group had unused credit facilities available for its immediate use as follows:

Syndicated facility (i)
US private placement (ii)
Securitisation facility (iii)
Bank guarantee facility
Bilateral loans
Working capital/guarantees
Working capital

Cash & cash equivalents

Total facility

Debt usage

Guarantees &
other usage

675.0
210.1
250.0
22.5
65.5
150.0
125.0
1,498.1
-
1,498.1

475.0
210.1
-
-
60.8
-
-
745.9
-
745.9

-
-
-
22.5
0.1
26.6
-
49.2
-
49.2

Cash

-
-
-
-
-
-
-
-
83.3
83.3

Facility
available
$m

200.0
-
250.0
-
4.6
123.4
125.0
703.0
83.3
786.3

(i) At 30 April 2015, the Group had an agreement in place to refinance facilities maturing in June 2015 ($50.0 million) and
December 2015 ($250.0 million). The total facility is $350.0 million and can be utilised from 9 June 2015. Refer Note 12(iv)
for further details.

(ii) The US Private Placement liability is presented inclusive of the associated cross currency interest rate swap hedge
contracts which effectively convert the US$225.0 million facility into $210.1 million of variable rate funding. Refer Note
12(v) for further details.

(iii) Under the $250.0 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 2016 ($175.0 million) and May 2017 ($75.0 million). Interest payable
on the facility is based on BBSY plus a margin.

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 $744.3
million (2014: $788.1 million) had been securitised, with nil (2014: nil) funds drawn under the facility. Accordingly, 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.

Metcash Limited Annual Report 2015
Metcash Limited Annual Report 2015

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

16.

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

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 7 (Trade Receivables and Loans), the current level of impairment provision represents 5.7% of the
receivables balance.

The Group’s derivative financial instruments are with financial institutions with credit ratings of AA- to A+ and at 30 April 2015,
the mark-to-market position of derivative financial assets is $104.4 million. This valuation includes a credit valuation
adjustment of $6.0 million attributable to derivatives counterparty default risk. The changes in counterparty risk had no
material effect in the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial
instruments recognised at fair value.

The Group has granted a financial guarantee relating to the bank loan of its associate, Adcome Pty Ltd, refer to Note 9 for
details.

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 2% 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$225.0 million USPP
facility have been hedged using cross currency interest rate swaps (Note 12(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.

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

16.

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

Capital management
For the purpose of the Group’s capital management, capital includes all accounts classified as equity on the statement of
financial position.

The Board’s intention is to retain adequate funds within the business to reinvest in future growth opportunities and otherwise
return earnings to shareholders.

The Board has announced that it will not be declaring a final dividend in FY2015 and that it intends to suspend dividend
payments for FY2016.

The Board and management set out to achieve and maintain appropriate Statement of Financial Position ratios. Certain
Statement of Financial Position ratios are imposed under the Group’s banking facilities, as summarised in Note 12.

Management monitor capital through the gearing ratio (debt / debt plus total equity). The gearing ratios at 30 April 2015 and
2014 were 36.6% and 32.5% respectively. This is within an acceptable target range.

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). Details are disclosed in
Note 19.

Other than the Board’s announcement regarding dividends, no changes were made in objectives, policies or processes for
managing capital during the reporting periods presented.

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

16.

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.

During the year there were no transfers between Level 1 and Level 2 fair value measurements.

Financial instruments
For financial instruments measured at fair value that are recognised in the financial statements on a recurring basis, the Group
determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorisation (based on the
lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

At the reporting date, the Group held derivative financial instruments which are all reported at Level 2 fair value measurements.
The carrying value of derivative financial assets were $104.4 million (2014: $48.1 million) and derivative financial liabilities were
$7.1 million (2014: $1.7 million).

Other financial instruments measured at fair value are not deemed material to the Group and related fair value changes are not
likely to have a significant impact on the Group’s profit or loss, total assets and liabilities or equity.

The carrying amount of the financial assets and liabilities recorded in the financial statements approximates their fair value as
at the reporting date.

The Group enters into derivative financial instruments with various counterparties, principally financial institutions with
investment grade credit ratings. Derivatives valued using valuation techniques with market observable inputs are mainly interest
rate swaps and foreign exchange forward contracts. The most frequently applied valuation techniques include forward pricing
and swap models, using present value calculations. The models incorporate various inputs including the credit quality of
counterparties, foreign exchange spot and forward rates and interest rate curves for various currencies.

Assets held for sale and property
Certain items of the Group’s assets held for sale and property are measured at fair value less costs to sell (FVLCS) on a non-
recurring basis where historical cost exceeds FVLCS and where a value-in-use (VIU) approach is not appropriate to determine
recoverable amount.

In these specific instances, the determination of FVLCS is based primarily on industry accepted valuation techniques such as
discounted cash flow models, average weekly sales or cap rate valuations with inputs that are not market observable (Level
3). These assets are not considered to be material to the Group as a whole.

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

17.

(a)

COMMITMENTS

Operating lease commitments

The Group has entered into head leases in respect of a number of retail stores, which typically operate over a period of
between 5 to 25 years. Most of these properties are sub-let to retailers under substantially similar terms and conditions (Note
17(b)). Where the lease is considered onerous, or a rental subsidy provision has been recognised on acquisition, a provision
is recognised (refer Note 13). The Group has also entered into commercial leases on other land and buildings, which include
distribution centres and offices, and in respect of forklifts and other assets.

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

2015
$m

2014
$m

222.4
730.5
794.0
1,746.9

206.4
650.9
665.7
1,523.0

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

(c)

Finance lease commitments

2015
$m

98.1
326.6
339.5
764.2

2014
$m

96.2
306.7
337.5
740.4

The Group has finance leases for various vehicles and equipment. The weighted average interest rate implicit in the leases is
6.47% (2014: 7.42%). 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

Present value of
minimum lease
payments

2015
$m

4.7
6.5
-
11.2
(1.3)
9.9

2014
$m

5.9
5.7
-
11.6
(1.4)
10.2

2015
$m

4.6
5.3
-
9.9
-
9.9

2014
$m

5.8
4.4
-
10.2
-
10.2

At 30 April 2015, the Group had no material commitments for capital expenditure.

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

18.

RELATED PARTY DISCLOSURES

A list of the Group’s subsidiaries is included in Appendix B and a list of joint ventures and associates is included in Note 9.

(a) Transactions with related parties

Related party

Group
Joint ventures and associates
Sales to joint ventures and associates
Lease charges to joint ventures and associates
Dividends received from joint ventures and associates
Sale of businesses to joint ventures and associates

2015
$m

2014
$m

1,238.1
18.2
5.4
8.3

1,275.7
20.2
1.6
-

Parent
Joint ventures and associates
There were no transactions between the parent and its equity-accounted investments during the year (2014: nil).

Subsidiaries
Dividend received
Interest expense

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 4.

(b) Compensation of key management personnel of the Group

Short-term
Long-term
Post-employment
Termination benefits
Share-based payments
Total

145.0
186.8

400.0
180.0

2015
$m
6.1
0.1
0.2
1.3
1.7
9.4

2014
$m
7.3
(0.3)
0.2
2.6
0.3
10.1

(i) Mrs Balfour is a director of Salmat Limited and TAL Limited. Mr Butler is Chairman of AMP Superannuation Ltd and an
Advisory Board Member of Market Eye Pty Ltd. Ms Dwyer is a director of DEXUS Property Group. Mr McMahon is
Executive Chairman of Inghams Enterprises and Chairman of Red Rock Leisure. Mr Murray is a director of Linfox
Logistics Pty 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 1.0% of Metcash’s annual purchases and is not considered material.

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

18.

RELATED PARTY DISCLOSURES (continued)

(d) Amounts due from and payable to related parties

Group
Joint ventures and associates
Trade receivables – gross
Provision for impairment

Loans receivable – gross
Provision for impairment

Parent
Subsidiaries
Loans receivable
Loans payable

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.

2015
$m

2014
$m

100.6
(10.2)
90.4

9.7
(3.3)
6.4

104.8
(25.7)
79.1

8.6
-
8.6

2,715.1
4,258.0

2,891.3
4,322.5

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

19.

SHARE-BASED PAYMENTS

(a) Description of share-based payment arrangements

During FY2015 and FY2014 the Group had the following share-based payment incentive schemes for employees:

Scheme name

Description

Short-Term Incentive (STI) schemes

STI program

The STI scheme includes a 25% deferred component.

Long-Term Incentive (LTI) schemes

Transformation Incentive (TI)

TI (67%)

LTI issued to incentivise key employees to successfully execute the Transformation Plan.

TI (33% deferred)

Transformation Incentive LTI deferred for an additional 8 months.

Additional Transformation Incentive (ATI)

ATI FY2018 (ROFE)

ATI FY2019 (ROFE)

ATI FY2018 (RTSR)

ATI FY2019 (RTSR)

Legacy plans

LTI issued to the Group CEO and CFO, designed to incentivise the Group CEO and CFO to
achieve or exceed a specified Return on Funds Employed (ROFE) target in FY2018.

LTI issued to the Group CEO, designed to incentivise the Group CEO to achieve or exceed
a specified ROFE target in FY2019.

LTI issued to the Group CEO and CFO, designed to incentivise the Group CEO and CFO to
outperform other ASX listed entity performance between FY2015 and FY2018 on a Relative
Total Shareholder Return (RTSR) basis.

LTI issued to the Group CEO, designed to incentivise the Group CEO to outperform other
ASX listed entity performance between FY2015 and FY2019 on a RTSR basis.

Legacy LTI - Tranche 2
(FY2012-FY2014)

Legacy LTI scheme issued in December 2011, which failed to meet FY2014 vestment
requirements and expired in June 2014 with all performance rights expiring.

Legacy LTI - Tranche 3
(FY2013-FY2015)

Legacy LTI scheme issued in December 2012, which failed to meet FY2015 vestment
requirements and expires in September 2015.

All performance rights associated with the above schemes are equity-settled performance rights and were issued under the
Metcash Executives and Senior Managers Performance Rights Plan (Rights Plan). Fully paid ordinary shares issued under
this plan rank equally with all other existing fully paid ordinary shares, in respect of voting and dividends rights.

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 three to
five year period;

 Performance rights which do not vest are forfeited;
 Performance rights are offered at no cost to participants;
 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;

 Ordinarily, in the event of cessation of employment, a KMP’s unvested performance rights will lapse; however this
is subject to Board discretion, which may be exercised in circumstances such as death and disability, retirement,
redundancy or special circumstances;



 When testing performance conditions, the Board has full discretion in relation to its calculation and to include or
exclude items if appropriate, including to better reflect shareholder expectations or management performance;
Some or all of a participant’s performance rights may vest even if a performance condition has not been satisfied, if,
using its discretion, the Board considers that to do so would be in the interests of the Group;
If a participant’s performance falls below ’meets expectations’ at any time before the performance rights vest or
before they are converted to shares, the Board has discretion to lapse some or all of the participant’s performance
rights, even if all other targets have been met; and
If there is a change in control of the Group, the Board retains full discretion to vest or lapse some or all performance
rights.



NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

19.

SHARE-BASED PAYMENTS (continued)

(a) Description of share-based payment arrangements (continued)

STI program

The STI program focuses behaviour towards achieving superior Group and business unit performance, which deliver better
results to shareholders. Key performance indicators (‘KPIs’) are established and measured at different levels throughout the
business:

 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.

ii.

Transformation Incentive (TI)

The TI was introduced specifically to incentivise senior management to successfully execute the Transformation Plan, which
was announced on 21 March 2014. The TI is assessed at the conclusion of a three-year performance period, based on the
FY2017 financial results. For all KMP except the CFO, 67% of any rights eligible to vest will vest on 15 August 2017 and the
remaining 33% will be deferred so that they vest on 15 April 2018. For the CFO, 50% of any rights eligible to vest will vest on
15 August 2017 and the remaining 50% deferred so that they vest on 15 April 2018.

The TI plan hurdles are based upon meeting specified Group Sales Revenue and Underlying Earnings per Share (UEPS)
targets during FY2017, while meeting a 13% Return on Funds Employed (ROFE) threshold for each of FY2015, FY2016 and
FY2017. These hurdles were based on the Group’s Transformation Plan and achievement of minimum thresholds requires
significant outperformance of market expectations for FY2017 Group UEPS performance.

iii. Additional Transformation Incentive (ATI)

The ATI was offered to the CEO and CFO exclusively. Consistent with the TI scheme, the minimum, target and stretch hurdles
were based on the Group’s Transformation Plan.

The CEO’s ATI covers to two performance periods (FY2015-FY2018 and FY2015-FY2019), and two performance conditions
(ROFE and Relative Total Shareholder Return (RTSR)) tested separately during each performance period. The CFO’s ATI
relates to a single performance period (FY2015-FY2018), which includes two independently tested performance conditions
(ROFE and RTSR).

iv. Legacy plans

LTI - Tranches 2 and 3
Tranches 2 and 3 of the Legacy LTI schemes were issued in December 2012 and December 2013 respectively. Both tranches
required achievement of compounded UEPS growth targets, adjusted upwards or downwards for the effects of actual year-on-
year inflation/deflation, over a three-year vesting period. No LTI was issued in FY2014.

Both tranches 2 and 3 failed to meet award conditions and have lapsed with expiry of all related performance rights.

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

19.

SHARE-BASED PAYMENTS (continued)

(b) Measurement of fair values

LTI Performance Rights
The weighted average inputs to the valuation of LTI performance rights valued using the Black-Scholes option pricing model
are as follows:

Dividend yield
Risk free rate
Expected volatility
Days to vesting
Exercise price
Share price at grant date
Fair value at grant date

TI
(67%)

5.9%
2.1%
24.6%
1,022
-
$2.50
$2.12

TI
(33%
deferred)
5.7%
2.1%
23.9%
1,263
-
$2.48
$2.04

ATI FY2018
(ROFE)

ATI FY2019
(ROFE)

Legacy LTI
Tranche 3

Legacy LTI
Tranche 2

5.9%
2.2%
23.8%
1,371
-
$2.36
$1.88

5.9%
2.3%
21.2%
1,764
-
$2.64
$1.98

7.6%
3.1%
18.7%
994
-
$3.22
$2.30

6.4%
3.7%
17.6%
927
-
$4.21
$3.62

The weighted average inputs to the valuation of LTI performance rights valued using the Monte Carlo option pricing model are
as follows:

Dividend yield
Risk free rate
Expected volatility
Days to vesting
Exercise price
Share price at grant date
Fair value at grant date

ATI FY2018
(RTSR)
6.3%
2.7%
25.0%
1,371
-
$2.36
$0.99

ATI FY2019
(RTSR)
5.5%
2.9%
25.0%
1,764
-
$2.64
$1.25

Service and non-market performance conditions attached to the arrangements outlined in the above tables were not taken into
account in measuring fair value. Market performance conditions associated with the ATI FY2018 (RTSR) and ATI FY2019
(RTSR) have been reflected in the fair value of the related performance rights. Expected volatility has been based upon an
evaluation of the historical volatility of Metcash’s share price, particularly over the historical period commensurate with the
expected term. Performance rights are only exercisable on their vestment date.

STI Performance Rights
The FY2015 STI performance rights will be issued based on the volume-weighted average price (VWAP) of Metcash’s shares
for the five days ending 15 August 2015. The rights were valued at $0.2 million, represented by the nominal value of the STI
entitlement of the executives as calculated in accordance with the STI Plan rules.

Metcash issued 47,565 performance rights in relation to the FY2014 STI at $2.86 per right (FY2013 STI: 368,909 performance
rights issued at $3.56 per right). The performance right value was based upon the VWAP of Metcash’s shares for the five days
ended 15 August 2014.

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
Granted during the year – STI
Exercised during the year – STI
Reinstated/(expired/forfeited) during the year- LTI
Outstanding at the end of the year

2015
number

2014
number

2,940,325
14,165,807
47,565
(47,565)
(2,419,352)
14,686,780

4,489,265
-
368,909
(368,909)
(1,548,940)
2,940,325

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

19.

SHARE-BASED PAYMENTS (continued)

The outstanding balance of performance rights as at 30 April 2015 is represented by:

Scheme name

Legacy LTI - Tranche 3 (FY2013-FY2015)(1)
TI (67%)
TI (33% deferred)
ATI FY2018 (ROFE)
ATI FY2018 (RTSR)
ATI FY2019 (ROFE)
ATI FY2019 (RTSR)
Total

Vesting date

7 September 2015
15 August 2017
15 April 2018
15 August 2018
15 August 2018
15 August 2019
15 August 2019

Total
outstanding
(number)
1,091,757
7,824,915
3,997,864
352,314
352,314
533,808
533,808
14,686,780

Exercisable
(number)

Remaining
contractual life

4 months
2 years 4 months
3 years
3 years 4 months
3 years 4 months
4 years 4 months
4 years 4 months

-
-
-
-
-
-
-
-

(1) The Tranche 3 Performance Rights did not achieve the minimum underlying EPS performance hurdle. Accordingly, these Performance Rights will be forfeited

on 7 September 2015.

(d) Expense recognised in profit or loss

For details on the related employee benefits expense, see Note 3.

20.

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/(accumulated losses)
Share based payments reserve
Total equity
Net profit/(loss) for the year
Total comprehensive income for the year, net of tax

Metcash Limited

2015
$m

2,715.1
5,387.1
4,258.0
4,258.0
1,129.1
3,057.8
(1,933.8)
5.1
1,129.1
(1,991.1)
(1,991.1)

2014
$m

2,891.3
7,514.6
4,344.5
4,344.5
3,170.1
2,974.0
196.0
0.1
3,170.1
219.3
219.3

Metcash Limited has provided guarantees as part of the Closed Group arrangements as disclosed in Appendix B.

The net assets of Metcash Limited include an impairment provision of $1,944.1 million (2014: nil) against the entity’s
investment in its subsidiary Metcash Trading Limited. This provision was recognised in FY2015. The impairment was triggered
by the reduction in the recoverable amounts of the Group’s CGUs, and in particular the Food & Grocery and Hardware CGUs,
as set out in Note 11.

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

21.

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

22.

BUSINESS COMBINATIONS

During the year, the Metcash Group acquired the following entities or assets:

Date of acquisition

Acquiree

5 May 2014
30 May 2014
30 June 2014
30 March 2015

Midas Australia Pty Ltd
Liquor Traders Pty Ltd
Far North Wholesalers & Hanly Confectionary
Southern Independent Liquor Group

2015
$

2014
$

1,847,000
115,200
1,962,200

443,831
-
443,831
2,406,031

1,564,000
81,000
1,645,000

462,577
696,483
1,159,060
2,804,060

% acquired

100%
100%
100%
100%

During the current year, MF&G acquired Far North Wholesalers & Hanly Confectionary in order to broaden its footprint in the
Far North Queensland region. Automotive acquired Midas Australia Pty Ltd and Liquor acquired Liquor Traders Pty Ltd and
Southern Independent Liquor Group which were synergistic fits to the existing businesses. The total purchase consideration
for these businesses was $34.1 million which resulted in goodwill of $9.7 million being recognised. The business combinations
were not individually significant, and are disclosed below in aggregate.

(a)

Purchase price allocation

Details of the fair value of the assets and liabilities acquired are as follows:

April 2015
$m

34.1
(2.1)
32.0
4.5
1.0
37.5
(27.8)
9.7

Purchase consideration:
Cash consideration
Less: cash acquired
Net cash consideration
Plus: Deferred and contingent consideration
Plus: Settlement of pre-existing relationships
Net purchase consideration
Less: fair value of net identifiable assets acquired
Goodwill

100

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

22.

BUSINESS COMBINATIONS (continued)

(a)

Purchase price allocation (continued)

Assets and liabilities assumed:
Receivables
Inventories
Property, plant and equipment
Intangibles – trade names
Deferred tax liability
Provisions and creditors
Fair value of net identifiable assets on acquisition date

April 2015
$m

2.2
2.9
1.4
25.6
(1.2)
(3.1)
27.8

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. Goodwill acquired on the above business combinations is treated as a capital asset
for tax purposes.

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 2015.

Since acquisition, the acquired businesses have been integrated into the existing business. Accordingly, the Group is not able to
reliably disaggregate the revenue and profit and loss of the acquired businesses from the acquisition date or from the beginning of
the reporting period.

23.

EARNINGS PER SHARE

The following reflects the income data used in the basic and diluted earnings per share (EPS) computations:

Net profit/(loss) from continuing operations
Earnings used in calculating basic and diluted EPS from continuing operations

Net profit/(loss) from discontinued operations

Earnings used in calculating basic and diluted EPS from discontinued operations

Net profit/(loss) attributable to ordinary equity holders of Metcash Limited
Earnings used in calculating basic and diluted EPS

2015
$m

(384.2)
(384.2)

2014
$m

179.7
179.7

(10.5)

169.2
169.2

100

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

101

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

23.

EARNINGS PER SHARE (continued)

The following reflects the share data used in the basic and diluted EPS computations:

2015
number

2014
number

Weighted average number of ordinary shares used in calculating basic EPS

907,012,053

882,676,013

Effect of dilutive securities

Weighted average number of ordinary shares used in calculating diluted EPS

907,012,053

882,676,013

At the reporting date, 14,686,780 performance rights (2014: 2,940,325) were outstanding that could potentially dilute basic
EPS in the future, but were not included in the calculation of diluted EPS because they are anti-dilutive for the periods
presented. Refer Note 19 for more details about performance rights.

Of the interim fully franked dividend of $58.7 million, $44.1 million was settled by the issue of 25,048,302 shares under the
DRP at a discount of 1%. The discount component did not have a material impact on the basic or diluted EPS for all periods
presented.

24.

DISCONTINUED OPERATIONS

Retail operations acquired as part of the Franklins Group acquisition in FY2012 were classified as disposal group assets. In
FY2014, Metcash completed, either through sale or closure, the disposal of all the retail stores acquired. Accordingly, no items
of income or expense were recognised as discontinued operations from 1 May 2014.

25.

CONTINGENT ASSETS AND LIABILITIES

Bank guarantees to third parties in respect of property lease obligations
Bank guarantees in respect of Work Cover
Standby letters of credit
Face value of the outstanding charges due to American Express (a)
Put options to third parties (b)
Put options related to equity-accounted investments (b)

2015
$m

26.7
21.8
0.7
202.8
7.0
10.8

2014
$m

20.0
29.0
1.2
238.9
7.5
2.3

For contingent assets and liabilities related to the Group’s equity-accounted investments, refer to Note 9.

(a)

American Express charge card

On 9 May 2007, Metcash Trading Limited entered into an agreement with American Express (Amex), due to expire on 1 May
2016, 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.

101

102

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

25.

(b)

CONTINGENT ASSETS AND LIABILITIES (continued)

Put options – contingent liabilities

The Group has granted put options relating to the sale of retail store assets to certain customers. 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 of $7.0 million (2014:
$7.5 million) in the above table relates to one retail store. This put option is active until April 2022.

The Group has entered into certain put option arrangements with co-investors, which if exercised would result in an increase
in Metcash’s ownership interest in the equity-accounted 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. The amount
disclosed as a contingent liability of $10.8 million (2014: $2.3 million) in the above table relates to three equity-accounted
investments. These put options are exercisable during specific contracted periods ranging between 2015 and 2022.

The Group has determined that the probability of material outflow relating to put arrangements over all other retail stores and
equity-accounted investments is remote.

(c)

Put options recognised as liabilities

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 14 for details of this $40.7 million
(2014: $46.6 million) liability.

26.

SUBSEQUENT EVENTS

On 15 June 2015, Metcash announced it had reached agreement with Burson Group Limited (ASX: BAP) for the sale of the
entire issued share capital of Metcash Automotive Holdings Pty Ltd (“Metcash Automotive”) for a total consideration of $275
million. This represents both the Group’s and the minority shareholder’s interests in Metcash Automotive. Metcash expects to
receive net proceeds after tax of ~$210 million from the sale. The transaction is expected to complete in July 2015. The
Metcash Automotive business generated $256.4 million in sales and contributed $27.8 million in EBIT during FY2015.
Proceeds from the sale will be invested in the Group’s balance sheet and business.

On 26 May 2015, Metcash entered into 2 bilateral loans of $100.0 million each. These bilateral loans both expire in May 2016
and may only be drawn down to repay other existing debt facilities. In the event that a sale of Metcash's interest in Metcash
Automotive is completed during the life of the loan, then the loans must be repaid in full and the facility cancelled.

Except as noted above, there were 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.

102

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

103

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

APPENDIX A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(i)

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 28
April 2014 and ended on 26 April 2015. The prior year results comprise a 52 week period that commenced on 29 April 2013
and ended on 27 April 2014.

(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

The Group adopted all new and amended Australian Accounting Standards and Interpretations that became applicable during
the current financial year.

The adoption of these Standards and Interpretations did not have a significant impact on the Group’s financial results or
statement of financial position. All other accounting policies are consistent with those of the previous financial year.

(b)

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 as at 30 April 2015. The Group has elected not
to early adopt any of these new standards or amendments in these financial statements. 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 15: Revenue from Contracts with Customers;
AASB 2014-10: Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an
Investor and its Associate or Joint Venture;
AASB 2015-1: Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting
Standards 2012-2014 Cycle;
AASB 2015-2: Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101;
and
AASB 2015-3: Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031
Materiality.

Other standards and interpretations that have been issued but are not yet effective are not expected to have any significant
impact on the Group’s financial statements in the year of their initial application.

103

104

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

APPENDIX A - 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 for the
year ended 30 April 2015. Refer Appendix B for further details.

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 is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
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 entities controlled 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 or relationship with 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 Financial Instruments: Recognition and Measurement 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:

Assessment of control and joint control
Determining the existence of control, joint control or significant influence over the Group’s acquisitions. Where the Group
exercises significant influence or joint control, the acquisitions are accounted for as joint arrangements (refer Appendix A(ix));
and where the Group exercises control, the acquisitions are accounted for as business combinations (refer Appendix A (iii)).

104

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

105

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

APPENDIX A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(v)

(a)

SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (continued)

Significant accounting judgements (continued)

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 22.

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

(b)

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:

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 11(b).

Provision for rental subsidy
The Group recognises provisions for rental agreements on acquisition where the arrangements are estimated to be ‘onerous’
to the Group (Refer Note 13(b)(i) for further discussion). In measuring these provisions, assumptions are made about future
retail sales, rental costs and in determining the appropriate discount rate to be used in the cash flow calculations.

Provision for onerous arrangements and restructuring
The Group has recognised a provision in accordance with the accounting policy described in Appendix A(xix). The Group
assesses obligations for onerous arrangements on retail and other head lease exposures, property make-good, restructuring
and other costs. These estimates are determined using assumptions on retail and warehouse profitability, property related
costs, customer support requirements, redundancy and other closure or restructure costs.

Contractual customer relationships
The useful life of contractual customer relationships of between 5 to 25 years includes estimates of future attrition rates based
on historical rates experienced. Recoverable amounts are assessed using estimates of retail and warehouse profitability,
future attrition rates, discount rates and customer support requirements.

Impairment of equity-accounted investments
The Group assesses the recoverable amount of its equity-accounted investments when an indicator of impairment is
identified. In assessing the recoverable amount, assumptions are made about the growth prospects of the investment 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.

Assets held for sale and property
Where specific items of assets held for sale and property are measured at fair value, the measurement includes estimates of
rental income, capitalisation rates, resale values, and ongoing support requirements.

105

106

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

APPENDIX A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(vi)

CASH AND CASH EQUIVALENTS

Cash and cash equivalents in the statement of financial position comprise cash on hand, at bank and demand deposits with a
maturity of three months or less.

(vii)

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 7 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.

(viii)

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 in other
comprehensive income, 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 in other comprehensive income and carried
forward to the cash flow hedge reserve, while any ineffective portion is recognised immediately in the income statement as
finance costs.

106

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

107

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

APPENDIX A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(viii) 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 8 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.

(ix)

EQUITY-ACCOUNTED INVESTMENTS

The Group’s investments in joint ventures and associates are accounted for using the equity method. Associates are those
entities over which the Group exercises significant influence, but not control or joint control, over the financial and operating
policies. A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets
of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when
decisions about the relevant activities require unanimous consent of the parties sharing control.

Equity-accounted investments are carried in the statement of financial position at cost plus post-acquisition changes in the
Group’s share of net assets of the investee, less any impairment in value. Goodwill relating to an investment 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 investees.

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

For those associates and joint ventures 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.

(x)

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.

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.

107

108

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

APPENDIX A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(xi)

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

2015
50 years
5 – 15 years

2014
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.

(xii)

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 pre-tax 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 at least annually and more frequently if events or changes in 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, representing the lowest level within the entity at which the goodwill is monitored for internal management
purposes) 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 names are 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.

(xiii)

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.

108

Metcash Limited Annual Report 2015

109

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

APPENDIX A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(xiii)

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.

(xiv)

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 acquiree'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.

(xv)

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. Customer contracts are valued by applying a discounted cash flow valuation methodology with
consideration given to customer retention and projected future cash flows to the end of the contract period. Contractual
customer relationships are assessed to have a finite life and are amortised over the asset’s useful life.

109

110

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

APPENDIX A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(xv)

INTANGIBLE ASSETS (continued)

Liquor licences and gaming licences 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 as part of their respective CGUs (refer
Appendix A(xii)) 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 and where the Group has an intention and ability to use the asset. 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 as part of their respective CGUs (refer
Appendix A(xii)) or more frequently when an indicator of impairment exists.

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
Software development costs
Other

(xvi)

TRADE AND OTHER PAYABLES

2015
5-25 years
5-10 years
10 years

2014
5-25 years
5-10 years
10 years

Trade 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.

(xvii)

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 due to be settled within 12 months of the reporting date are classified as 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. 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.

(xviii)

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.

110

Metcash Limited Annual Report 2015

111

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

APPENDIX A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(xix)

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.

(xx)

SHARE-BASED PAYMENT TRANSACTIONS

The Group provides a portion of senior executive and key employee remuneration as equity-settled share-based payments, in
the form of performance rights.

The value of the performance rights issued is determined on the date which both the employee and the Group understand and
agree to the share-based payment terms and conditions (grant date). The value at grant date is based upon the fair value of a
similar arrangement between the Group and an independent third party and is determined using an appropriate valuation
model. The fair value does not consider the impact of service or performance conditions, other than conditions linked to the
share price of Metcash Limited (market conditions). Details of the valuation models used and fair values for each tranche of
performance rights issued are outlined in Note 19.

The fair value of performance rights is recognised as an expense, together with a corresponding increase in equity, over the
period between grant date and the date on which employee becomes fully entitled to the award (vesting date). This expense
is recognised cumulatively by estimating the number of performance rights expected to vest. This opinion is formed based on
the best available information at the reporting date. No adjustment is made for the likelihood of market conditions being met as
the effect of these conditions is included in the determination of fair value at grant date. Where the performance rights are
cancelled, any expense not yet recognised for the award is recognised immediately.

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

111

112

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

APPENDIX A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(xxi)

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 and is classified within ‘other income’.

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 and is classified within ‘other income’. Contingent
rental income is recognised as income in the periods in which it is earned.

(xxii)

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.

(xxiii)

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

112

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

113

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

APPENDIX A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(xxiii)

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.

(xxiv) OTHER TAXES

Revenues, expenses, assets and liabilities 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.

(xxv)

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.

113

114

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

APPENDIX A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(xxvi) 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.

(xxvii) 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.

(xxviii) 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 Appendix A(xxvii).

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 Appendix A(xxvii). 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.

(xxix) 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.

(xxx) 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.

114

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

115

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

APPENDIX B - INFORMATION ON SUBSIDIARIES

Metcash Limited is the ultimate parent entity of the Group. The consolidated financial statements include the financial statements
of Metcash Limited and the subsidiaries listed in the following table. All entities are incorporated in Australia except where
specifically identified.

Name

ACN 008 698 093 (WA) Pty Ltd
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)
Anzam (Aust.) Pty Ltd (i)
Arrow Pty Limited
Australian Asia Pacific Wholesalers Pty Ltd
Australian Hardware Support Services Pty Ltd (i)
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
Capeview Hardware Pty Ltd.
Casuarina Village Shopping Centre Pty. Ltd.
Chelsea Heights Operations Pty Limited (i)
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
DIY Superannuation Pty Ltd (i)
Drumstar V2 Pty Ltd
Echuca Hardware Pty Ltd (i)
Faggs Geelong 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
Franklins Pty Ltd (i)
Franklins Supermarkets 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)

115

Equity interest held by the Group
2014 %
99.4
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
80
100
100
100
100
100
100
100
100
100
100
100
100
100
100
75
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

2015 %
99.4
100
-
100
100
100
100
100
100
100
100
100
100
100
-
-
80
100
100
100
100
100
100
100
100
100
100
100
100
100
100
75
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100

116

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

APPENDIX B - INFORMATION ON SUBSIDIARIES (continued)

Name

Franklins Casula Pty Ltd (i)
Franklins Cronulla Pty Ltd (i)
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)
Garden Fresh Produce Pty Ltd
Gawler Supermarkets Pty. Ltd.
Global Liquor Wholesalers Pty Limited (i)
GP New Co Pty Ltd
Green Triangle Meatworks Pty Limited
Handyman Stores Pty Ltd (i)
Hardware Property Trust
Harvest Liquor Pty. Ltd.
Himaco Pty Ltd (i)
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)
Independent Solutions Pty Ltd (previously Scanning Systems (Aust) Pty Ltd)
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
Keithara Pty. Ltd.
Knoxfield Transport Service Pty. Ltd.
Lilydale Operations Pty Limited (i)
Liquor Traders Pty Ltd
M-C International Australia Pty Limited
Mega Property Management Pty Ltd (i)
Melton New Co Pty Ltd

116

Equity interest held by the Group
2014 %

2015 %

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
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

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

117

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

APPENDIX B - INFORMATION ON SUBSIDIARIES (continued)

Name

Mermaid Tavern (Freehold) Pty Ltd
Metcash Asia Limited (incorporated in China)
Metcash Automotive Holdings Pty Ltd***
Metcash Export Services Pty Ltd
Metcash Food & Grocery Pty Ltd (i)
Metcash Food & Grocery Convenience Division Pty Limited (i)
Metcash Holdings Pty Ltd
Metcash Management Pty Limited
Metcash Services Proprietary Limited
Metcash Storage Pty Limited
Metcash Trading Limited (i)
Metoz Holding Limited (incorporated in South Africa)
Metro Cash & Carry Pty Limited
Mirren (Australia) Pty. Ltd.
Mitre 10 Pty Ltd (i)
Mitre 10 Australia Pty Ltd (i)
Mitre 10 Mega Pty Ltd (i)
Mittenmet Pty. Ltd. (i)
Moorebank Transport Pty Ltd
Moucharo Pty. Ltd.
Narellan Hardware Pty Ltd (i)
National Retail Support Services Pty Ltd (i)
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.
Produce Traders Trust (previously Garden Fresh Produce Trust)
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.
Roma Hardware Pty Ltd (i)
R.S.D.F. Nominees Pty. Ltd.
Soetensteeg 2 61 Exploitatiemaatschappij BV (incorporated in Netherlands)
SSA Holdings Pty Ltd
Scanning Systems (Fuel) Pty Ltd
Smart IP Co Pty Ltd
South Coast Operations Pty Ltd (i)
South West Operations Pty Ltd (i)

117

Equity interest held by the Group
2014 %
100
-
83.2
100
100
100
100
100
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
100
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

2015 %
100
100
83.2
100
100
100
100
100
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
100
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

118

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

APPENDIX B - INFORMATION ON SUBSIDIARIES (continued)

Name

SR Brands Pty Ltd
Stonemans (Management) Proprietary Limited
Stonemans Self Service Pty. Ltd.
Sunshine Hardware Pty Ltd
Tasher No 8 Pty. Ltd.
Tasman Liquor Company Limited (incorporated in New Zealand)
Tasmania Hardware Pty Ltd
Timber and Hardware Exchange Pty Ltd
Vawn No 3 Pty. Ltd.
WA Hardware Services Pty Ltd (i)
Wickson Corporation Pty Limited(i)
Wimbledon Unit Trust

*** Metcash Automotive Holdings Pty Ltd

Equity interest held by the Group
2014 %
100
100
100
84.7
100
100
80
52
100
100
100
100

2015 %
100
100
100
84.7
100
100
80
52
100
100
100
100

The consolidated financial statements include the financial statements of Metcash Automotive Holdings Pty Ltd (‘MAH’) and
its subsidiaries as listed in the following table.

Name

Australian Automotive Distribution Pty Limited
Automotive Brands Group Pty Ltd
Midas Australia Pty Ltd

Equity interest held by MAH
2014 %
100
100
-

2015 %
100
100
100

Entities subject to class order relief
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.

118

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

119

NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2015

APPENDIX B - INFORMATION ON SUBSIDIARIES (continued)

The Statement of Comprehensive Income and Statement of Financial Position of the entities that are members of the ‘Closed
Group’ are as follows:

2015
$m

2014
$m

(i) Statement of Comprehensive Income
Profit/(loss) before income tax
Income tax expense
Net profit/(loss) for the year
Retained profits/(accumulated losses) at the beginning of the financial year
Dividends provided for or paid
Reserves transferred
Retained profits/(accumulated losses) at the end of the financial year

(ii) Statement of Financial Position
Assets
Cash and cash equivalents
Trade receivables and loans
Inventories
Assets held for sale
Derivative financial instruments
Prepayments and other assets
Total current assets

Derivative financial instruments
Trade receivables and loans
Investments
Property, plant and equipment
Net deferred tax assets
Intangible assets and goodwill
Total non-current assets
Total assets

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

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

Equity
Contributed equity
Other equity
Other reserves
Retained profits/(accumulated losses)
Total equity

119

(405.8)
(2.6)
(408.4)
(634.7)
(138.7)
-
(1,181.8)

58.5
987.2
602.6
26.1
0.2
11.2
1,685.8

104.2
28.0
2,686.7
243.1
124.8
835.4
4,022.2
5,708.0

1,295.0
0.8
56.9
6.5
114.7
22.3
1,496.2

3,597.3
6.3
142.6
22.7
3,768.9
5,265.1
442.9

2,391.9
(765.9)
(1.3)
(1,181.8)
442.9

237.0
(86.8)
150.2
(556.1)
(229.0)
0.2
(634.7)

7.8
1,067.8
638.5
41.1
1.8
11.3
1,768.3

46.3
45.5
2,645.5
273.5
71.6
1,342.2
4,424.6
6,192.9

1,346.3
1.6
13.5
20.2
116.6
13.0
1,511.2

3,631.1
0.1
103.6
40.6
3,775.4
5,286.6
906.3

2,308.1
(765.9)
(1.2)
(634.7)
906.3

120

DIRECTORS’ DECLARATION
Year ended 30 April 2015

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 2015 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;

b. The financial statements and notes also comply with International Financial Reporting Standards as disclosed in

Appendix A (ii); and

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 2015.

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 Appendix B 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

Ian Morrice
Director
Sydney, 15 June 2015

120

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

121

122

Metcash Limited Annual Report 2015Metcash Limited Annual Report 2015

123

124

ASX ADDITIONAL INFORMATION

ASX Additional Information – Year ended 30 April 2015
Additional information required by the Australian Securities Exchange and not shown elsewhere in this report is as follows:
The information is current as at 8 July 2015:

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

NUMBER OF SHAREHOLDERS
7,848
17,769
7,016

SIZE OF HOLDING
10,001-100,000
100,001-9,999,999,999
Total

NUMBER OF SHAREHOLDERS
5,922
243
38,798

There were 3,299 shareholders holding less than a marketable parcel of Metcash ordinary shares.

Twenty largest holders of quoted shares
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
BNP PARIBAS NOMS PTY LTD
UBS NOMINEES PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
SHARE DIRECT NOMINEES PTY LTD <10026 A/C>
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
CITICORP NOMINEES PTY LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
BNP PARIBAS NOMS (NZ) LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 3
AMP LIFE LIMITED
NAVIGATOR AUSTRALIA LTD
NULIS NOMINEES (AUSTRALIA) LIMITED
VALADON PTY LTD
MR KIMBERLEY SCOTT & MRS SALLIE ANNE SCOTT
Total

Substantial Shareholders
The following is extracted from the Company’s register of substantial shareholders:

NUMBER OF
SHARES
157,487,212
139,364,686
131,719,769
109,864,226
17,131,952
9,695,522
9,354,659
7,482,169
7,351,971
5,821,000
4,982,049
4,963,703
3,731,465
2,554,440
2,310,054
1,978,787
1,916,696
1,755,783
1,600,000
1,600,000
622,666,143

PERCENTAGE OF
SHARES
16.96
15.01
14.19
11.83
1.85
1.04
1.01
0.81
0.79
0.63
0.54
0.54
0.40
0.28
0.25
0.21
0.21
0.19
0.17
0.17
67.07

Allan Gray Australia Pty Ltd
Lazard Asset Management Pacific Co
J P Morgan Chase & Co and its affiliates
National Australia Bank Limited

NUMBER OF SHARES
110,353,580
66,488,344
59,793,033
50,026,236

Westpac Banking Corporation
State Street Corporation and subsidiaries
BT Investment Management Limited

NUMBER OF SHARES
49,906,543
49,038,460
46,721,068

Voting Rights
All ordinary shares (whether fully paid or not) carry one vote per share without restriction.

Metcash Limited Annual Report 2015Chairman’s Report

CEOs Report

CFOs Report

Financial Highlights

Transformation Update

Corporate Responsibility

Our Board

Corporate Governance

Financial Report

Directors’ Report

Notes to the Financial Statements

Directors’ Declaration

Auditor’s Independence Declaration

Independent Auditor’s Report

ASX Additional Information

Corporate Information

120

121

122

124

IBC

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

Corporate Information
ABN 32 112 073 480

Directors
Peter Barnes (Chairman)
Patrick Allaway
Fiona Balfour
Michael Butler
Tonianne Dwyer
Neil Hamilton
Edwin Jankelowitz
Ian Morrice
Robert Murray

Company Secretary
Gregory C Watson

Share Register
Boardroom Pty Limited
GPO Box 3993
Sydney NSW 2001
Telephone: 1300 737 760 (within Australia)
Telephone: 61 2 9290 9600
Facsimile: 61 2 9279 0664

Auditor
Ernst & Young
680 George Street
Sydney NSW 2000 Australia
Telephone: 61 2 9248 5555
Facsimile: 61 2 9248 5959

CORPORATE INFORMATION

National Office
Telephone: 61 2 9751 8200
50 Waterloo Road
Macquarie Park NSW 2113
Postal Address
PO Box 6226
Silverwater Business Centre NSW 1811
www.metcash.com

Metcash Food & Grocery
Head Office
Telephone: 61 2 9751 8200
Facsimile: 61 2 9741 3009
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
76-92 Station Street
Nunawading VIC 3131
Telephone: 61 3 8878 1111
Facsimile: 61 3 8878 2266

Metcash Limited Annual Report 2015
Metcash Limited ABN 32 112 073 480

Investing.
Evolving.
Transforming.

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