Annual Report 2016
Metcash Limited
ABN 32 112 073 480
Contents
About Us
Chairman’s Report
CEO’s Report
Financial Highlights
Operational Highlights
Corporate Social Responsibility
Board of Directors
Financial Report
Directors’ Report
Financial Statements
Notes to the Financial Statements
Directors’ Declaration
Auditor’s Independence Declaration
Independent Auditor’s Report
ASX Additional Information
Corporate Information
4
7
8
12
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19
20
21
47
51
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95
Metcash Annual Report 2016
Metcash is Australia’s leading
wholesaler and distributor,
supplying and supporting
more than 10,000¹ Independent
Retailers across the food,
grocery, liquor and hardware
industries.
Our focus is to support
Successful Independents to
become the ‘Best Store in Town’,
through our network of strong
retail brands and providing them
with merchandising, operational
and marketing support.
1 Number of Independent Retail customers
3
About Us
Our Model
METCASH
S
U
P
P
L
I
E
R
SHOPPER
LED
A IL E R
T
E
R
DELIVERING
VALUE
Our Values
Integrity is the foundation of our
values:
• Supporting our customers and
suppliers
• Our people are empowered and
accountable
• Adding value in our community
Our Vision
• Business Partner of choice for
Suppliers and Independents
• Best store in every town
• Passionate about Independents
• Thriving communities, giving
shoppers choice
Food & Grocery
Liquor
Hardware
Our retail brands
Metcash Annual Report 2016
Food & Grocery
Liquor
Hardware
Our Distribution Network
Our national distribution network
delivers products to more than 10,000
retail premises and a further ~95,000
wholesale customers across the food,
grocery, liquor and hardware markets.
Our Independent retail and wholesale
customers are supported by distribution
centres in each of the major cities, as
well as nine smaller distribution centres
in regional areas.
WESTERN
AUSTRALIA
PERTH
NORTHERN
TERRITORY
QUEENSLAND
SOUTH
AUSTRALIA
BRISBANE
ADELAIDE
NEW SOUTH
WALES
SYDNEY
MELBOURNE
VICTORIA
Metcash Distribution Centres
TASMANIA
Our Retail Footprint
Supermarkets
Convenience
Hardware
Liquor
1 Includes 5,805 Cellarbrations on-premise customers
Number of retail stores
Number of wholesale customers
~1,000
~90,000
~370
~4,800
1,678
18
378
8,479 1
5
Metcash’s five major
distribution centres occupy
~500,000m² - the equivalent
of 400 Olympic sized
swimming pools.
Two trucks leave one of
our distribution centres
every minute, distributing
products to customers
all over Australia.
Rob Murray
Key Highlights
Solid financial position
Progress towards customer
focused model
Board renewal to
strengthen expertise
Sale of Automotive business
and non-core assets
I feel privileged to have been appointed
Chairman of Metcash at this time of
significant change and opportunity.
I am committed to ensuring the
successful implementation of the
Group’s strategic plan, which is focused
on supporting a healthy and thriving
Independent Retail network.
We have now completed two years
of our five year turnaround and I am
heartened to see solid progress across
all areas of the business, with many of
the Transformation Initiatives gaining
momentum and generating positive
results.
As a Board, we acknowledge the
importance a supportive and
collaborative culture has in the
organisation’s success. The Board is
committed to leading an organisation
where behaviours are as important as
results.
In order to drive a performance culture,
the Group needs to ensure we have
the right capabilities and experience to
support our growth ambitions. In the
past year we have seen both Board and
senior management renewal, bringing
an added depth of experience and
diversity to the business. I welcome our
two most recent Director appointments,
Helen Nash and Murray Jordan, to the
Chairman’s Report
Board, both of whom have extensive
experience in grocery retailing and fast
moving consumer goods.
Neil Hamilton will retire by rotation
at the AGM in August and has advised
that he does not intend to stand for re-
election. Michael Butler has also advised
that he intends to retire from the
Board following the AGM. I would like
to thank them both for the significant
contribution they have made to the
Group during their time on the Board.
We continue to focus on our
customers by developing a model
that supports them across all areas
of their business. We are enormously
proud of the ~105,000* retail and
wholesale customers across the food,
grocery, liquor and hardware sectors.
These independently owned and
operated businesses are an integral
part of the Australian economy. Our
purpose remains to provide them
with merchandising, operational and
marketing support through our strong
collection of retail brands to enable
them to thrive in an increasingly
competitive environment.
Turning to our financial performance,
the Group’s performance for Financial
Year 2016 (FY16) was satisfying with
a reported profit after tax of $216.5m,
which includes $38.2m relating to
profit from the sale of our Automotive
business. Our underlying profit
after tax was $178.3m with growth
in earnings from the Liquor and
Hardware businesses and lower finance
cost offsetting the expected lower
contribution from Food & Grocery.
Importantly, we have built a strong
financial foundation with net debt
reduced by $392.3m over the year
to $275.5m and gearing reduced
significantly to 16.8%.
While our Transformation Initiatives
such as Competitive Pricing, Network
Investment and Core Ranging are
gaining momentum, our markets -
particularly food and grocery - continue
to be characterised by deflation and
increased competition. I am confident
the ongoing implementation of our
Transformation Initiatives, together with
cost-saving measures, will support us in
meeting these challenges and enable us
to invest for growth over the medium-
term.
Shareholder return remains a priority
for the Board and I thank our investors
for their support as we implement
the Transformation Plan. The Board
believes the strengthened balance
sheet and lower debt levels enable
the recommencement of half-yearly
dividend payments in FY17. However,
given the uncertainty of potential capital
transactions, the Board has decided it
would be prudent not to recommence
dividend payments until the FY17 final
dividend when we believe there will be
greater certainty.
Through the leadership of your Board
and senior management team we
are well positioned to continue the
momentum in our business into FY17,
and believe we will see further traction
across the network from our initiatives
underway.
On behalf of the Board, I would like
to take this opportunity to thank our
people, the leadership team, all of our
retailers, suppliers and our shareholders
for your continued support as we
navigate this process of change for the
long-term success of the Group.
Rob Murray
Chairman
7
*Approximate figures based on total active retail and
wholesale customers for FY16
CEO’s Report
Ian Morrice
Key Highlights
Continued growth in
revenues
Values-driven culture to
support business strategy
Balance Sheet
strengthened
Senior management team
renewal to strengthen expertise
I am encouraged by the substantial
progress in Financial Year 2016
(FY16) towards delivering sustainable
growth in revenues and earnings, as
the Transformation of our business
continues to deliver tangible results.
As Metcash completes the second year
of its five year Transformation Plan we
are committed to investing in growth
initiatives and to building a culture of
collaboration and engagement that
supports our people, our suppliers and
our Independent Retailers across our
businesses.
I am satisfied with the results achieved
over the past financial year with sales
improvements, underlying profit
stabilised, strong cashflows and a
significant reduction in debt. In FY17 we
will continue to simplify our business
operations and reduce inefficiencies. At
the heart of everything we do and how
we do it, is our purpose – Supporting
Successful Independents.
Independent Retailers are at the very
core of our communities, providing
choice and a viable alternative to the
larger scale retailers across the food,
grocery, liquor and hardware sectors.
Their origins are rich in history and
their contributions to our diverse
communities are far greater than just
the products and services they provide.
Our focus is to build and strengthen
relationships with our customers to
enable the growth of these iconic
businesses through our expertise
in merchandising, operational and
marketing support.
I am inspired by the strong connections
our retailers have established within
their local communities and the
contributions they make through
local employment, local suppliers and
involvement in their communities.
Over the past year the IGA network has
contributed more than $2m through
IGA Community Chest to assist schools,
clubs and charity organisations across
Australia.
This year we recognised the
achievements of the Frewville Foodland
IGA in South Australia, winner of an
IGA International Retailer of the Year
Excellence Award at the International
IGA Conference. This is just one example
of the very high calibre of Independent
Retailers we support within our
network, who continue to offer great
value to consumers, through their
entrepreneurial spirit, willingness to re-
invest in their business and recognition
of the superior in-store experience for
their customers.
I am humbled by the support that
exists within the Metcash network and
proud of our team’s commitment to
our customers and their businesses.
When our Huntingwood distribution
facility was damaged by hail in April
2015, our business continuity planning
and capability came to the fore
with the network being able to re-
commence supply to NSW customers
from our Queensland and Victorian
facilities within a matter of days. This
is testimony to the strength of our
relationships with our suppliers and
our customers, and the commitment of
our people. I am pleased to note that
Huntingwood is now operational again,
having been out of action for 12 months.
We continue to make progress to
reduce our environmental impact and
recognise there is more to be done.
The introduction of our Energy Council
provides a focal point for initiatives and
a process for evaluation of investments
to be implemented across the Metcash
Group. During the year we exceeded our
target for waste diversion from landfill
by 25% - testimony to our continual
process improvement and strong
leadership.
Health and safety remains a high
priority and significant progress has
been made over the past three years,
with Lost Time Injury Frequency Rates*
almost halved to 8.5 over this period.
This improvement has been achieved
through leadership, behavioural and
cultural initiatives implemented across
the Group.
I am a firm believer that our people
are fundamental to the success of
our business and that of our retailers,
and recognise the critical role a
strong, collaborative, values-driven
culture plays in the sustainability of an
organisation. The way in which we work
is as important as what we do. We have
begun the process to align our values
and culture to support and deliver on
our customer-focused strategy. As a
leadership team, we recognise we have
a way to go and will continue to update
shareholders on our progress.
Over the course of the year we’ve
reviewed our leadership capabilities
and strengthened our Group Leadership
Team with the appointments of Steven
Metcash Annual Report 2016
*Number of lost time injuries per million hours worked
Underlying Profit
after Tax of
$178.3m
Up 2.7% from FY15
Cain as CEO of Supermarkets and
Convenience, Penny Coates as Chief
Human Resources Officer and Mark
Hewlett, Executive General Manager,
New Channels. These appointments,
together with the renewal of other
senior leadership roles, give me
confidence that we have the right
people and experience to deliver for all
our stakeholders.
In 2014 we set out an ambitious
turnaround plan for the Metcash
business. This plan recognised the
need to focus on delivering value to the
end consumer and the need to instil
confidence in our customers, suppliers
and investors. In this regard we are
focused on delivering a wide range of
initiatives across all Pillars including the
implementation of competitive pricing,
the development of a compelling offer
and investment in our store networks.
We have made significant progress on
our plan.
Overview of Group Results
In FY16 Group revenue was $13.5b,
up 1.3% on the previous year and
underlying profit after tax was $178.3m,
up 2.7% on the previous year.
The Liquor and Hardware businesses
continue to perform in line with our
expectations and both delivered
top line and earnings growth. In the
Food & Grocery business we have
made good progress in stabilising
revenue in Supermarkets, however the
Convenience business underperformed
in the year.
team has focused on developing our
exporting opportunities, testing an
on-line presence in China and a new
Convenience format to be piloted in the
second half of 2016.
As part of our Working Smarter program
and simplifying of our business
operations, we have now brought
the Supermarkets and Convenience
businesses together under one
leadership team. The Working Smarter
program is expected to contribute
efficiency savings of ~$100m across all
businesses over the next three years,
with expected gross savings of ~$35m
in FY17. This will help offset the ongoing
inflationary pressure in our cost base.
The Group has a much improved
financial position with net debt now at
$275.5m and gearing reduced to 16.8%.
This provides a strong foundation to
support the Transformation Initiatives
and allows the Group flexibility in
assessing future growth opportunities.
While we continue our Transformation
we are also looking to our future
growth opportunities, with a focus
on innovation and new markets. In
FY16 we introduced New Channels –
an incubator for new and emerging
market opportunities that can leverage
Metcash’s capabilities and deliver
increased value. During the year the
Food & Grocery
Metcash’s Food & Grocery Pillar
recorded revenue of $9.3b during FY16,
an increase of 0.5% on the previous
year result. Supermarkets revenue was
up 0.5% to $7.7b with the Convenience
business increasing sales by 0.4% to
$1.6b. Food & Grocery EBIT was down
17.0% to $179.9m reflecting planned
incremental price investment and the
underperformance of the Convenience
business.
The Convenience business results reflect
a challenging business environment
impacted by an accelerated decline
in the Campbells reseller business
(particularly in tobacco), and margin
pressure from major Convenience Store
Distribution contracts that was not
offset by growth in the Food Services
offering.
The Price Match program is now rolled
out across the network and in ~960
stores, and the Diamond Store rollout
is now in ~150 stores. Diamond Stores
have continued to deliver approximately
16% improvement in retail sales post
investment. We also continue to
9
CEO’s Report
Group Revenue
$13.5b
Up 1.3% on the previous year
(IBA) banners of Cellarbrations and The
Bottle-O. Revenue in FY16 has increased
3.7% to $3.2b while EBIT increased 7.8%
to $62.1m, a solid result in a competitive
marketplace.
A further net ~100 stores have been
incorporated under the IBA banner,
while category management has
enabled us to meet consumer demand
for more premium products. This
includes expanding our Private Label
offering and working closely with
key branded suppliers to support
their marketing efforts. We have also
undertaken approximately 85 store
‘refreshes’ and 220 cool room upgrades,
which are two key initiatives being
undertaken by the Pillar as part of the
Transformation Plan.
Hardware
Hardware revenues were maintained
while improving the quality of retailers
in our network. Revenues in FY16 held
at $1.1b while EBIT improved 9.0% to
$32.8m. EBIT margins improved to 3.1%,
reflecting strong trade performance
and improved contributions from joint
ventures.
During the year, 12 stores were
completed under the Sapphire Store
Initiative, generating an average retail
sales uplift of 17%, and 45 stores
completed Core Ranging Initiatives.
Outlook
Metcash continues to face highly
competitive trading conditions in all our
markets, with the additional impact from
increased Food and Grocery competition
in both the South Australian and
Western Australian markets. The Food
and Grocery business continues to face
headwinds from deflation and a rising
cost base.
The Group will continue to progress the
Transformation Plan (including Working
Smarter) in FY17. We expect further
consolidation and positive momentum
in the Liquor and Hardware Pillars.
The Group’s solid financial position
underpins our intention to recommence
half yearly dividend payments with effect
from the FY17 final dividend, subject to
capital requirements.
I would like to thank our retailers,
suppliers and our people for their
invaluable support during the year. We
continue to make progress towards
sustainable growth in revenue and
earnings to deliver long-term value to
our shareholders.
Ian Morrice
Chief Executive Officer
introduce new Private Label offers into
the network and now have 200 mid-tier
lines available.
The culmination of these initiatives has
enabled the Supermarkets business
to arrest the decline in underlying
revenues as well as maintain EBIT in the
second half of the financial year, with
2H16 profit in line with 1H16. This is a
solid achievement in the face of strong
competitor headwinds and a continued
deflationary price environment.
Overall, our IGA retailers have now
experienced sales growth over four
consecutive half year reporting periods,
a positive indicator of improved health
within the Independent network.
In FY17 we will focus on our Core
Ranging Initiative with a trial currently
underway across a small number of
stores. This will allow the business and
retailers to benefit from higher stock
turn on existing categories and add new
consumer-focused growth categories
such as health foods, meal solutions
and well-being. It is anticipated this
initiative will be progressively rolled out
across the network in FY17.
Liquor
The Liquor business continued its
successful strategy of providing a full
range of services to more independent
businesses and migrating customers
to our Independent Brands Australia
Metcash Annual Report 2016
Our Independent Retailers
are an integral part of the
community – contributing
more than just the products
and services they provide.
11
11
Financial Highlights
Five Year Review
Sales ($m)
EBIT (Underlying) ($m)
PAT (Underlying) ($m)
1
3
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5
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3
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3
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EPS (Underlying) ($m)
Operating cash flows ($m)
3
2
.
8
3
0
.
4
2
4
.
7 1
9
.
1
1
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Metcash Annual Report 2016
Financial Performance
Sales ($m)
Underlying EBIT ($m)
Finance costs, net ($m)
Underlying profit after tax ($m)
Reported profit after tax ($m)
Operating cash flows ($m)
Cash realisation ratio (%) 1
Financial Position
Shareholder equity ($m)
Net debt (hedged) ($m)
Gearing ratio (net hedged) (%)
Return on funds employed (%)
Share Statistics
Fully paid ordinary shares
2
0
1
6
2
0
1
5
2
0
1
4
2
0
1
3
2
0
1
2
13,541.3
13,369.8
13,175.0
12,893.1
12,501.1
275.4
27.0
178.3
216.5
165.8
69.5%
297.3
55.1
173.6
(384.2)
231.7
96.5%
368.4
57.3
218.4
169.2
388.7
437.7
61.7
261.2
206.0
299.8
441.5
67.6
252.8
90.0
284.3
137.1%
94.2%
92.5%
1,369.1
1,156.6
1,594.0
1,624.2
1,335.1
275.5
16.8%
16.6%
667.8
36.6%
14.4%
766.9
32.5%
15.8%
719.8
30.7%
19.6%
910.4
40.5%
20.6%
928,357,876
928,357,876
888,338,048
880,704,786 771,345,864
Weighted average ordinary shares
928,357,876
907,012,053
882,676,013
859,742,607 770,441,432
Underlying earnings per share (cents)
Reported earnings per share (cents)
Dividends declared per share (cents)
19.2
23.3
-
19.1
(42.4)
6.5
24.7
19.2
18.5
30.4
24.0
28.0
32.8
11.7
28.0
Other Statistics
Number of employees (full-time equivalents)
5,807
6,398
6,174
5,794
5,166
1 Cash flow from operations/Underlying NPAT plus Depreciation and Amortisation (depreciation and amortisation not tax effected).
13
Operational Highlights
Metcash has continued to focus on the strategic priorities that will underpin the long-term sustainable growth of our Independent
network. Key initiatives introduced as part of our Transformation Plan have continued to gain momentum, with each of the Pillars
recording positive results. These initiatives have contributed to a growth in sales revenues of 1.3% to $13.5b in FY16.
Food & Grocery
Metcash is focused on achieving sustainable growth in the Food & Grocery Pillar through the implementation of key
initiatives such as Competitive Pricing, Network Investment and Core Ranging. These initiatives have helped to deliver
sales growth in the Food & Grocery Pillar and importantly, generated sales growth for our Independent Retailers over
the past two financial years.
Price Match has gained traction with customers
~960 stores participating in Price Match Program
Retailers have achieved positive and sustained sales uplift
Consumer price perception for IGA improved over five consecutive
survey periods
Investment in store network through Diamond Store (DSA) roll-out
Target of ~150 Diamond Stores achieved
Retail sales uplift of 16%
Wholesale sales uplift of 16%
Sales uplift maintained over growing number of stores
Private Label range, offering customers more choice
Over 175 mid-tier products added to our Private Label range
Wholesale sales growth of 9.7% for Black & Gold products
Core Ranging “Mini DSA” and “Community Co” developed
Improved catalogue and promotional program
Focus on Fresh
‘Your Kitchen’ modules installed in ~200 stores and specialist
cheese counters now in ~125 stores
Fresh retail growth of ~25% maintained in Diamond Stores
Improved customer perception in Diamond Stores
Metcash Annual Report 2016
Liquor
The Liquor business supports the large and diverse independent liquor market across Australia. The focus during the
year has been on converting wholesale customers to the IBA bannered network and investment to improve the quality
of the retail network. The Liquor business achieved sales growth of 3.7% and EBIT growth of 7.8%.
Investment to improve shopper experience
Coolroom upgrade – category managed cool rooms in ~220 stores
Store refresh – ~85 stores upgraded
Further Private Label brands launched
Focus on growing the banner group
Net conversion of ~100 stores to the IBA banner network
IBA wholesale sales growth of 13%
Hardware
The Hardware business supports a network of ~380 Independent Retailers under the Mitre 10 and True Value brands.
During the year the business delivered EBIT growth of 9% through a strong performance in our trade business and joint
venture stores as well as significant cost reductions.
Investment in store network through Sapphire Store roll-out
12 Sapphire Stores completed, with average sales uplift of 17%
350 stores on e-learning platform
Implemented Core Ranging, offering customers more choice
45 stores implemented Core Ranging Initiatives with focus on
power tools, hand tools and paint
15
Corporate Social Responsibility
Donations to Communities
$2 million
this financial year
Our Commitment
We recognise the importance of our
role in the community and the impact
our business operations can have in the
communities where we work and live.
As a business, we are serious about
improving our engagement with our
suppliers, customers and people, and
supporting the communities in which
they operate.
We acknowledge responsibility for the
impact our business operations may
have on the environment. We are always
looking for ways we can contribute
positively across all Metcash locations
and are in the process of developing an
holistic approach to our engagement.
Our long-term view is to have an
integrated approach to community
initiatives, partnering with our
customers, suppliers and our
people to strengthen our level of
engagement. Elements of this will
include volunteering and supporting
community initiatives that resonate with
our customers and supporting charities
through employee donations.
Our People
At Metcash, we are focused on
developing a culture that encourages
diversity and inclusiveness. We also
place high priority on the health and
safety, wellbeing and development of
our people.
Health and Safety
The safety and health of our ~6,400
employees remains our top priority.
A safe working environment for our
people, suppliers and customers
is a fundamental, non-negotiable
commitment to everyone we work with.
We have seen substantial reductions
in Lost Time Injuries (down 25%), Lost
Time Injury Frequency
Rates (down 17%) and Workers
Compensation Claims (down 20%)
during the year. These reductions
have been achieved through ongoing
leadership as well as behavioural and
cultural initiatives that have been
implemented across the business.
We also have a strong focus on early
intervention. In the event of any injury,
we have a case management program
to support and to facilitate the return
of injured workers to the workplace as
soon as possible. We will continue to
implement automation technology into
distribution centres that reduces the
risk of manual handling injuries and
improves productivity. Queensland is
the next State to receive automated
infrastructure.
2
1
5
1
5
0
1
3
6 1
0
8 8
1
2
1
.
8
1
6
.
3
1
4
.
6
1
0
.
2
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.
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1
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1
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1
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4
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1
6
Lost Time Injuries down
25% during the year
Lost Time Injury
Frequency Rate* down
17% during the year
Metcash Annual Report 2016
*Number of lost time injuries per million hours worked
Diversity
Metcash is an inclusive organisation
that encourages diversity with targets
aligned to the Workplace Gender
Equality Agency indicators. The Metcash
workforce is currently comprised of
approximately 34% females, with 30%
of leadership roles currently held by
women. Women now make up 38% of
the Board, placing Metcash ahead of the
ASX 200 average.
We will continue our focus on gender
diversity and will also turn our
attention to improvements in cultural
and workplace flexibility in FY17 and
subsequent years.
Our Environment
Metcash is committed to an integrated
partnership with the community and
recognises that our business operations
do have an impact on the environment.
The Group has set up an internal Energy
Council to assist in identifying initiatives
that can be implemented across our
multiple brands and operations.
We also continue to work with our
people, suppliers and customers to
identify simple programs that we can
implement and support to reduce our
environmental impact.
Energy & Emissions
Metcash has achieved a 7.8% reduction
in electricity emissions across our major
distribution centres over the past three
years. We are still working towards
our 10% target, however substantial
improvements have been made and
we will continue to strive for maximum
emission reductions.
Work Culture
We are focused on aligning our
values and culture. Recognising and
developing our people to their potential
plays a key role in culture change.
We also recognise the importance
of employee feedback, with annual
surveys conducted across all areas of
the business.
Metcash continues to increase
its investment in developing the
capabilities and potential of our people.
In FY16 we invested across a range
of development initiatives, including
leadership and management coaching,
technical training, Work Health and
Safety and role-specific training
programs.
All Metcash employees have the
opportunity to highlight areas for
change through the annual Employee
Opinions surveys. This provides us with
a robust benchmark for continued work
and improvement. The most recent
Employee Opinions survey also shows
that a majority of respondents believe
that at Metcash we live by our values,
providing a strong foundation for the
work we have begun and continue to
do, in growing a strong, collaborative,
values-driven culture.
As part of our commitment to support
Successful Independents and drive
retail excellence, Metcash launched
the Metcash Training Academy (MTA) in
2015. This enables retailers to effectively
induct new employees, increase in-
store compliance and build the right
technical and leadership capabilities
to improve commercial results. To
date, the majority of ALM and Mitre
10 stores and more than 30% of
IGA stores have signed up to MTA,
with more than 19,000 registered
participants across the three Pillars.
Electricity
Emissions
7.8%
down over
the past three
years
Materials
Metcash takes the stewardship of
materials, including paper, packaging
and transport containers seriously.
We continue to look at ways in which
the use of these materials can be
reduced. Some of the many initiatives
implemented in FY16 include:
• Introduction of 100% recyclable PET
plastic meat trays into the
Queensland fresh produce warehouse,
thereby taking 400,000 non-recyclable
trays out of the marketplace each year
and reducing non-recyclable landfill;
• Deployment of re-usable plastic
totes to deliver orders to Convenience
customers in metro NSW and WA
– resulting in 75,300 less cardboard
cartons each year; and
• Centralised, secure printing at all
head offices resulting in the reduction
of more than 6 million sheets of paper
each year.
*Number of lost time injuries per million hours worked
17
Corporate Social Responsibility
Total Waste Diverted
from Landfill
34%
this financial year
We have met our commitment to use
only sustainable tuna by 2015. We no
longer source any products containing
threatened tuna species or those fished
using aggregation devices.
Our Community
Engaging and supporting our
communities and our customers remains
an integral part of who we are.
We continue to administer the IGA
Community Chest Program whereby
IGA stores raise funds to distribute to
groups within their local communities. In
FY16, approximately $2m was donated
nationally and distributed to local
schools, clubs and charities, taking total
donations to more than $72m since the
program’s inception in the late 1990s.
Throughout the organisation a number
of charities are supported by both the
business and our employees, including
the McGrath Foundation, St Vincent de
Paul Society, the Royal Children’s Hospital
Melbourne, and the Cancer Council
National Breast Cancer Foundation.
Metcash also has a partnership with
Foodbank, a national not-for-profit
organisation that re-distributes non-saleable
but usable food to food relief charities. During
FY16, a total of 236 tonnes of usable but not
saleable packaged food was donated by
Metcash, resulting in 314,425 meals being
made available to those in need. This is the
equivalent of a $5.4 million social return on
investment as calculated by Foodbank.
236
Tonnes
USABLE FOOD
DONATED
=
314,000
Meals
PROVIDED TO
THOSE IN NEED
Waste
Approximately 3,100 tonnes, or ~34%
of total waste, has been diverted from
landfill as a result of recycling initiatives
this year. This is significantly ahead of our
2010 goal of diverting 9% of waste from
landfill, and a testament to our ongoing
process improvements and employee
awareness.
Water
Measures to reduce water usage in
Metcash’s Western Australian operations
have recently been recognised by that
State’s Water Corporation. We have also
consolidated our Sydney office footprint
into a 5 Star Green Star rated building
that will contribute to significant energy
and water savings.
Product Responsibility
Metcash is aware of our supply chain
responsibilities surrounding labour
rights and has an ethical sourcing
program for Asian-sourced Metcash
branded products. This includes the
establishment of a direct-sourcing team
based in China who are responsible
for quality assurance and compliance
of Asian-sourced products, giving the
Company greater visibility and control of
product lifecycle from source to shelf.
Metcash Annual Report 2016
Board of Directors
ROBERT A MURRAY
MA HONS, ECONOMICS
Non-executive Chairman
Member of the Nomination
Committee
IAN R MORRICE
MBA
CEO Metcash Group of
Companies
PATRICK N J ALLAWAY
BA/LLB
Non-executive Director
Member of the Audit, Risk &
Compliance Committee,
Member of the Nomination
Committee
FIONA E BALFOUR
BA (Hons), MBA, GRAD DIP IM,
FAICD
Non-executive Director
Chair of People and Culture
Committee, Member of the
Nomination Committee
MICHAEL R BUTLER
B SC, MBA, FAICD
Non-executive Director
Chairman of the Audit, Risk &
Compliance Committee,
Member of the Nomination
Committee
TONIANNE DWYER
BJURIS (HONS)/LLB (HONS)
Non-executive Director
Member of the Audit, Risk &
Compliance Committee,
Member of the Nomination
Committee
NEIL D HAMILTON
LLB
Non-executive Director
Member of the Remuneration
Committee, Member of the
Nomination Committee
MURRAY P JORDAN
MPA
Non-executive Director
Member of the Audit, Risk &
Compliance Committee,
Member of the Nomination
Committee
HELEN NASH
BA (Hons)
Non-executive Director
Member of the Remuneration
Committee, Member of the
Nomination Committee
BRAD SOLLER
BCOMM BACC MCOMM CA (SA)
Company Secretary
For Directors’ biographies, please see page 29 of the Annual Report. For more information on Board evaluation,
please refer to the Corporate Governance page on our website: www.metcash.com/investor-centre/corporate-information
19
Financial Report
For the year ended 30 April 2016
Directors’ Report
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Auditor’s Independence Declaration
Independent Auditor’s Report
21
47
48
49
50
51
90
91
92
Metcash Annual Report 2016
Directors’ Report
For the year ended 30 April 2016
Directors’ report
For the year ended 30 April 2016
Your Directors submit their report of Metcash Limited (the ‘Company’) and its controlled entities (together the ‘Group’ or ‘Metcash’)
for the financial year ended 30 April 2016 (‘FY16’).
Operating and Financial Review
Operating and Financial Review
Operating and Financial Review
Operating and Financial Review
business model
Metcash’s business model
1.1.1.1. Metcash’s
business model
business model
Metcash’s
Metcash’s
Metcash is Australia’s leading wholesaler and distributor, supplying and supporting more than 10,000 independent retailers and
approximately 90,000 other businesses across the food, grocery, liquor and hardware industries. Metcash’s retail customers operate
some of Australia’s leading independent brands including: IGA, Mitre 10 and Cellarbrations.
Metcash operates a low cost distribution model that enables its independent retail customers to compete against the vertically
integrated retail chains. The Group’s core competencies include: purchasing, world class logistics, marketing, retail development and
retail operational support. Metcash operates major distribution centres in all the mainland states of Australia. These are complemented
by a number of smaller warehouses and the Campbell’s branch network.
The Group employs over 5,800 people and supports more than one million people via its network of Successful Independents.
Strategic objectives
2.2.2.2. Strategic objectives
Strategic objectives
Strategic objectives
Metcash’s strategic vision is to:
•
•
•
•
be a business partner of choice for suppliers and independents;
support independent retailers to be the Best Store in Town;
be passionate about independents; and
promote thriving communities, giving shoppers choice.
The strategic vision is supported by several key programs and initiatives aimed at developing shopper-led retail brands. Key strategic
programs are the Transformation Plan and Working Smarter.
Transformation Plan
Transformation Plan
Transformation Plan
Transformation Plan
The Transformation Plan was announced in March 2014 and is aimed at transforming the Supermarkets and Convenience division
through programs that cover competitive pricing, product ranging and investment in the independent store network, as well as
enhancing the Group’s world class supply chain with the aim of supporting independent retailers.
Working Smarter
Working Smarter
Working Smarter
Working Smarter
During the current year, the Group commenced the Working Smarter program. The three year program (FY17 - FY19) aims to reduce
complexity in existing business processes and make it simpler for customers and suppliers to do business with Metcash.
The program spans all business pillars and support functions and includes optimisation of organisational and cross-pillar structures;
buying, promotions and pricing models; supply chain and non-trade procurement. The program is targeting a gross savings run rate of
$100 million by FY19. This will help offset the onoing inflationary pressure on the Group’s cost base.
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
21212121
21
Directors’ Report
For the year ended 30 April 2016
Directors’ report (continued)
For the year ended 30 April 2016
Key developments
3.3.3.3. Key developments
Key developments
Key developments
solid financial foundation
Establishing a solid financial foundation
Establishing a
solid financial foundation
solid financial foundation
Establishing a
Establishing a
During the year, Metcash took a number of steps to ensure the Group has a strong financial foundation to support the Transformation
Plan and allow the Group flexibility to invest in future growth opportunities.
A focus on tight cash management and capital recycling resulted in a $392.3 million reduction in net debt during the year.
On 31 July 2015, the Group sold its entire holding in Metcash Automotive Holdings Pty Ltd (‘MAH’ or ‘Automotive’) to Bursons Group
Limited (ASX:BAP) for a total sale consideration of $285.4 million. The transaction generated net cash flows of $242.1 million (before tax)
to the Group. The proceeds were largely applied against the Group’s interest-bearing borrowings. The sale resulted in a net gain of $34.5
million after tax.
Metcash generated a further $57.3 million from the disposal of surplus retail properties, interests in joint ventures and other retail
assets.
Metcash used these funds to buy back US$200 million of US Private Placement (USPP) notes. In addition, the debt securitisation and
other facility limits were reduced by $126.7 million. At the end of the year, Metcash had $1,184.6 million (2015: $1,498.1 million) in total
facilities.
In line with the Board’s previous announcement, a final dividend was not paid for FY15 and no interim or final dividend was declared for
FY16.
Huntingwood Distribution Centre hail damage
Huntingwood Distribution Centre hail damage
Huntingwood Distribution Centre hail damage
Huntingwood Distribution Centre hail damage
Metcash’s distribution centre at Huntingwood NSW suffered significant damage as a result of a hail storm in April 2015. This resulted in
the closure of the dry grocery/liquor warehouse.
Following the closure of Huntingwood, the Group’s business continuity plans were immediately activated. Metcash was able to quickly
re-establish supply to NSW customers from the Victorian, Queensland and ACT distribution centres. Temporary warehouses were also
established at Silverwater, Wetherill Park and Eastern Creek in NSW. Whilst the Huntingwood warehouse has now been reoccupied, the
automated section is not expected to be fully operational until later in FY17.
Metcash’s insurance policy is expected to cover the hail event for material damage and consequential loss. Metcash recovered $57.0
million in cash from insurers and has recognised a receivable of $29 million at the end of the year.
Changes in key staff
Changes in key staff
Changes in key staff
Changes in key staff
Metcash’s leadership capabilities were renewed and strengthened during the year.
Mr Steven Cain was appointed as CEO Supermarkets on 1 August 2015. Mr Mark Hewlett was appointed as Executive General Manager –
New Channels on 12 August 2015 and Ms Penny Coates was appointed as Chief Human Resources Officer on 7 September 2015.
Mr Peter Struck, former CEO Convenience ceased employment on 29 January 2016. The Convenience business was integrated with
Supermarkets from that date, with Mr Cain appointed as CEO Supermarkets and Convenience on 18 January 2016.
Mr Greg Watson, former General Counsel and Company Secretary, ceased employment on 31 January 2016. Ms Julie Hutton assumed
the role of General Manager Legal and Company Secretary on 6 June 2016. Mr Brad Soller, Chief Financial Officer, temporarily assumed
the role of Company Secretary in the interim period.
Metcash Annual Report 2016
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
22222222
Directors’ report (continued)
For the year ended 30 April 2016
measures
financial measures
4.4.4.4. Key Key Key Key financial
measures
measures
financial
financial
Warehouse earnings
Warehouse earnings
Warehouse earnings
Warehouse earnings
Metcash’s operations are designed to allow significant volumes to be distributed through its warehouse infrastructure. The ability to
leverage warehouse earnings is a key driver of the Group’s profitability.
In addition to warehouse revenue, earnings are impacted by product category mix and the proportion of the Group’s products sold
through the network. Warehouse sales and related margins are driven by competitive pricing, promotional activities and the level of
supplier support through volumetric and other rebates.
The Transformation Plan is a key strategic program aimed at sustainable growth in warehouse earnings.
Cost of doing business
Cost of doing business
Cost of doing business
Cost of doing business
The Group’s profitability depends on the efficiency and effectiveness of its operating model. This is achieved by optimising the Group’s
Cost of Doing Business (CODB) - which comprises the various costs of operating the distribution centres and the administrative support
functions.
Working Smarter is a key strategic program aimed at maximising the effectiveness of the Group’s CODB.
and return on capital
employed and return on capital
Funds employed
Funds
and return on capital
and return on capital
employed
employed
Funds
Funds
The Group’s funds employed is primarily influenced by the seasonal working capital cycle. The Group maintains a strong focus on cash
flow through optimal stock levels and debtors management.
The Group has longer term capital investments in its supply chain capabilities, including warehouse automation technologies and
software development. The Group also manages a portfolio of short-to-medium term investments to support the independent network -
mainly in the form of equity participation or short term loans.
The Board’s intention is to reinvest adequate funds within the business for future growth and otherwise return earnings to shareholders.
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
23
23232323
Directors’ Report
For the year ended 30 April 2016
Directors’ report (continued)
For the year ended 30 April 2016
Review of financial results
5.5.5.5. Review of financial results
Review of financial results
Review of financial results
Group overview
Group overview
Group overview
Group overview
Sales revenue
Sales revenue
Sales revenue
Sales revenue
Earnings before interest, tax, depreciation and amortisation (EBITDA)
Depreciation and amortisation
Earnings before interest and tax (EBIT)
Earnings before interest and tax (EBIT)
Earnings before interest and tax (EBIT)
Earnings before interest and tax (EBIT)
Net finance costs
Underlying profit before tax
Tax expense on underlying profit
Non-controlling interests
Underlying earnings
Underlying earnings ((((iiii))))
Underlying earnings
Underlying earnings
Significant items expense
Tax benefit on significant items
Net profit/(loss) for the year from continuing operations
Net profit after tax for the year from discontinued operations
Net profit/(loss) for the year
Net profit/(loss) for the year
Net profit/(loss) for the year
Net profit/(loss) for the year
Underlying earnings per share (cents) (i(i(i(iiiii))))
Underlying earnings per share (cents)
Underlying earnings per share (cents)
Underlying earnings per share (cents)
Reported earnings/(loss) per share (cents)
2016
2016
20162016
$m$m$m$m
2015
2015
20152015
$m$m$m$m
13131313,,,,545454541111....3333
13,13,13,13,369369369369....8 8 8 8
335.7
(60.3)
272727275.45.45.45.4
(27.0)
248.4
(68.4)
(1.7)
111178787878....3333
-
-
178.3
38.2
222211116.56.56.56.5
11119999....2222
23.3
363.7
(66.4)
297.3
297.3
297.3
297.3
(55.1)
242.2
(67.2)
(1.4)
173173173173....6666
(638.8)
61.6
(403.6)
19.4
(384.2)
(384.2)
(384.2)
(384.2)
19.119.119.119.1
(42.4)
(i)
Underlying earnings represents reported profit after tax from continuing operations attributable to equity holders of the parent,
excluding significant items after tax.
(ii) Underlying earnings per share (EPS) is calculated by dividing underlying earnings by the weighted average shares outstanding
during the period.
The Group generated sales revenue of $13.5 billion, up 1.3% against the prior year comparative period.
Group EBIT for the year declined 7.4% to $275.4 million (FY15: $297.3 million). There was continued improvement in both the Liquor and
Hardware pillars, which was however, more than offset by the decline in Food & Grocery, reflecting the planned investment in price by
the Supermarkets business and a deterioration in the performance of the Convenience business.
Reported profit after tax (including discontinued operations) was $216.5 million (FY15: Loss of $384.2 million). There was an
improvement in underlying profit after tax which increased to $178.3 million (FY15: $173.6 million) reflecting the lower finance costs in
FY16, partly due to a $9.6 million gain resulting from the restructure of finance facilities.
As noted in the ‘Key developments’ section, the Automotive business was sold during the current financial year. The results of this
business, including comparatives have been reclassified to discontinued operations. Refer note 24 of the financial report for further
details on the Automotive sale.
Metcash Annual Report 2016
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
24242424
Directors’ report (continued)
For the year ended 30 April 2016
Segment results
Segment results
Segment results
Segment results
Segment
Segment
Segment
Segment
revenue
revenue
revenue
revenue
Earnings before interest and taxtaxtaxtax
Earnings before interest and
Earnings before interest and
Earnings before interest and
(EBIT)
(EBIT)
(EBIT)
(EBIT)
2016
2016
2016
2016
$m$m$m$m
9,265.4
3,219.3
1,056.6
-
13,13,13,13,545454541.31.31.31.3
2015
2015
2015
2015
$m$m$m$m
9,217.8
3,103.6
1,048.4
-
13,13,13,13,369369369369....8888
2016
2016
20162016
$m$m$m$m
179.9
62.1
32.8
0.6
272727275.45.45.45.4
2015
2015
2015
2015
$m$m$m$m
216.8
57.6
30.1
(7.2)
297.3
297.3
297.3
297.3
Food & Grocery
Liquor
Hardware
Corporate
Metcash Group
Metcash Group
Metcash Group
Metcash Group
Food & Grocery
Total Food & Grocery sales increased by 0.5% to $9.3 billion (FY15: $9.2 billion). Supermarkets sales were up 0.5%, however adjusting for
the estimated impact of disruption from damage to the NSW distribution centre sales would have been up 0.9%. Importantly, the trend
in underlying Supermarkets sales (excluding tobacco) continues to improve.
IGA stores like for like (‘LfL’) retail sales increased 1.4% representing the fourth reporting period of sales growth. This demonstrates the
improving underlying health of the retail network and the positive impact of the Group’s Transformation initiatives.
Convenience sales increased by 0.4% to $1.6 billion (FY15: $1.6 billion). The growth in C-Store Distribution (CSD) revenues was, however,
largely offset by a decline in Campbells reseller revenues.
Food & Grocery EBIT declined 17.0% to $179.9 million (FY15: $216.8 million). Supermarkets EBIT declined by ~$21 million primarily
reflecting the foreshadowed incremental price investment during the year. Supermarkets earnings in the second half were in line with
the first half, reflecting the cost of price investment now being cycled in the earnings base.
Convenience EBIT declined by ~$16 million reflecting the challenging business environment impacted by an accelerated decline in the
Campbells reseller business (particularly in tobacco), and margin pressure from major CSD contracts that was not offset by growth in
Food Services.
Liquor
Total sales increased by 3.7% to $3.2 billion (FY15: $3.1 billion), reflecting the strong performance of the IBA network and the continued
conversion of customers to Metcash’s banner group. Sales through the IBA bannered network increased 13.0% on the prior year.
EBIT increased by 7.8% to $62.1 million (FY15: $57.6 million) reflecting conversion of stores to the IBA bannered network and a strong
focus on cost control.
Hardware
Hardware sales increased 0.8% to $1.06 billion (FY15: $1.05 billion). Wholesale LfL sales were up 2.5%, representing a solid performance
from both the trade business and joint ventures.
EBIT for the pillar was up 9.0% to $32.8 million (FY15: $30.1 million) driven by improved performance of the joint venture stores, supply
chain efficiencies and tight cost control.
Corporate
The Corporate result included a one-off $14.4 million profit on sale of surplus retail properties, partly offset by a restructuring expense of
$9.1 million.
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
25
25252525
Directors’ Report
For the year ended 30 April 2016
Directors’ report (continued)
For the year ended 30 April 2016
Finance costs and tax
Finance costs and tax
Finance costs and tax
Finance costs and tax
Net finance costs include $9.6 million in credit value adjustments and gains related to the finance facility restructure. Excluding this
positive impact, net finance costs reduced by 34% mainly due the proceeds from the sale of the Automotive business, tight working
capital management, prudent capital expenditure and lower cost of debt. Refer note 3 of the financial report for further details on the
finance facility restucture.
Tax expense on underlying profit of $68.4 million represents an effective tax rate of 27.5%, marginally lower than the prior year rate of
27.7% due to the application of capital tax losses and research & development allowances.
Cash flows
Cash flows
Cash flows
Cash flows
Operating cash flows
Investing cash flows
Dividends paid and other financing activities
in net debt
Reduction in net debt
Reduction
in net debt
in net debt
Reduction
Reduction
2016
2016
2016
2016
$m$m$m$m
165.8
237.4
(10.9)
333392.92.92.92.3333
2015
2015
2015
2015
$m$m$m$m
231.7
(74.9)
(57.7)
99.199.199.199.1
The reduction in operating cash flows primarily reflects the lower underlying profit and an increase in working capital. Working capital
was impacted by the Huntingwood hail insurance claim receivable of $29 million. The prior year operating cash flows included the
trading results of the Automotive business, which was sold in July 2015.
Cash inflows from investing activities primarily reflects $242.1 million from the sale of the Automotive business and $57.3 million in
proceeds from the sale of surplus properties and other assets.
As a result of the above cash flows, Metcash applied $392.3 million towards the repayment of debt.
Financial position
Financial position
Financial position
Financial position
Trade receivables and prepayments
Inventories
Trade payables and provisions
Net working capital
Net working capital
Net working capital
Net working capital
Intangible assets
Property, plant and equipment
Equity accounted investments
Customer loans and assets held for sale
Total funds employed
Total funds employed
Total funds employed
Total funds employed
Net debt
Tax, put options and derivatives
Net assets/equity
Net assets/equity
Net assets/equity
Net assets/equity
2016
2016
20162016
$m$m$m$m
967.7
673.6
(1,632.0)
9.9.9.9.3333
1,127.5
251.9
102.9
72.5
1,1,1,1,555566664444.1.1.1.1
(275.5)
80.5
1,31,31,31,369696969....1111
2015
2015
20152015
$m$m$m$m
989.1
712.5
(1,695.4)
6.26.26.26.2
1,284.5
276.0
102.1
90.6
1,759.4
1,759.4
1,759.4
1,759.4
(667.8)
65.0
1,156.6
1,156.6
1,156.6
1,156.6
The key change in the balance sheet relates to the sale of the Automotive division, resulting in a reduction of $208.8 million in funds
employed, including $57.8 million in net working capital. Excluding the impact of Automotive business, net working capital increased
$60.9 million, including the hail insurance receivable.
Metcash generated $57.3 million in cash from the disposal of surplus retail properties, interests in joint ventures and other retail assets.
Together with the $242.1 million in proceeds from the disposal of the Automotive business, this facilitated a $392.3 million reduction in
net debt, resulting in gearing of 16.8% (FY15: 36.6%).
Metcash had $850.5 million in unused debt facilities available at the reporting date for immediate use.
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
Metcash Annual Report 2016
26262626
Directors’ report (continued)
For the year ended 30 April 2016
Commitments, contingencies and other financial exposures
Commitments, contingencies and other financial exposures
Commitments, contingencies and other financial exposures
Commitments, contingencies and other financial exposures
Metcash’s operating lease commitments, which predominantly relate to warehouse and retail stores, reduced from $1,791.9 million to
$1,557.0 million. The reduction is primarily due to current year lease payments and commitments transferred with the sale of the
Automotive business. Further details of lease commitments are presented in note 18 of the financial statements.
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. Put options, including in relation to Ritchies Stores Pty Ltd, are detailed along with other contingent liabilities in note 16
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 59% of debt was
fixed. Further details are set out in note 16 of the financial statements.
Outlook
6.6.6.6. Outlook
Outlook
Outlook
Metcash continues to face highly competitive trading conditions in all its markets, with the additional impact from increased Food and
Grocery competition in both the South Australian and Western Australian markets. The Food & Grocery business continues to face
headwinds from deflation and a rising cost base.
The Group will continue to progress the Transformation Plan (including Working Smarter) in FY17. The Group expects further
consolidation and positive momentum in the Liquor and Hardware pillars.
The Group’s solid financial position underpins its intention to recommence half yearly dividend payments with effect from the FY17 final
dividend, subject to capital requirements.
Material business risks
7. 7. 7. 7. Material business risks
Material business risks
Material business risks
The following section outlines the material business risks that may impact on the Group achieving its strategic objectives and business
operations, including the mitigating factors put in place to address those risks. The material risks are not set out in any particular order
and exclude general risks that could have a material effect on most businesses in Australia under normal operating conditions.
risks
Strategic risks
Strategic
risks
risks
Strategic
Strategic
Consumer behaviour and preferences continue to change and are influenced by factors such as economic conditions, healthy living
trends and increasing choices in both online and in-store retail options. Furthermore changes to the regulatory environment may
impact trading conditions both at the retailer and wholesale level.
Metcash’s business operations and strategic priorities are subject to ongoing review and development. Management regularly reviews
plans against market changes and modifies its approach, where necessary.
Market risks
Market risks
Market risks
Market risks
Adverse market conditions including increased competition from new and existing competitors, a decline in economic activity, the
sustainability of the independent retail network, continuing price deflation, and adverse interest rate and foreign exchange movements
may lead to a decline in sales and profitability. The Group strategy is focused on ensuring the independent retail sector offers a
compelling value proposition to consumers.
Metcash is well progressed in a number of business transformation programs aimed at establishing a strong shopper-led product range,
reducing cost of doing business and making it easier for suppliers and customers to engage with the Group.
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
27
27272727
Directors’ Report
For the year ended 30 April 2016
Directors’ report (continued)
For the year ended 30 April 2016
Operational and compliance risks
Operational and compliance risks
Operational and compliance risks
Operational and compliance risks
Metcash is undergoing a number of business transformation programs, including the Working Smarter initiative, which are aimed at
strengthening business processes and reducing the cost of doing business. There is a risk that these transformation programs fail to
deliver the expected benefits. Metcash has in place governance frameworks to manage these change programs to ensure projects are
delivered in line with plans and are able to adapt as required.
Metcash’s operations require compliance with various regulatory requirements including OH&S, food safety, environmental, workplace
industrial relations, public liability, privacy & security, financial and legal. Any regulatory breach could have a material negative impact
on the wellbeing, reputation or financial results of Metcash or its stakeholders. The Group’s internal processes are regularly assessed
and tested as part of a robust risk and assurance program addressing areas including safety, security, sustainability, chain of
responsibility and food safety. Metcash maintains a strong ‘safety-first’ culture and has established standards and ‘Chain of
Responsibility’ policies to identify and limit risk.
Inefficiency or failure within the supply chain or in key support systems (including technology) could also impact the Group’s ability to
deliver on its strategic objectives. Metcash has comprehensive business continuity plans in place to address significant business
interruptions and failures within operational systems.
risks
Financial risks
Financial
risks
risks
Financial
Financial
Metcash’s ability to reduce its cost of doing business is critical to support independent retailers in remaining competitive in an ongoing
deflationary environment. The competitive trading conditions results in credit risk associated with the Group’s activities with the
independent retailer network. Metcash’s strategy is to support successful independents through appropriate credit management
processes.
Funding and liquidity risk remain material to the Group due to the need to adequately fund business operations, future growth and
absorb any loss events that may arise. Inability to adequately fund business operations and growth plans may lead to difficulty in
executing the Group’s 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 policy. In addition,
banking facilities are maintained with sufficient tenor, diversity and headroom to fund business operations. The Group’s financial risk
management framework is discussed in further detail in note 16 of the financial statements.
People and culture
People and culture
People and culture
People and culture
The increasing competitive landscape and the ongoing need for market participants to remain agile in order to adapt to consumer
preferences, has heightened the competition for talent. The ability to attract and retain talent with the necessary skills and capabilities
to operate in a challenging market whilst being able to effect transformation is critical to Metcash’s success. Metcash is committed to
being Australia’s favourite place to work by unlocking the potential of its people through empowerment and ensuring the Group’s
cultural values align with their values. Integrity is the foundation of the ethical values and standards of behaviour set for all employees
through the Group’s Code of Conduct.
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 Group’s remuneration structure to shareholders’
interests.
End of the Operating and Financial Review
Metcash Annual Report 2016
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
28282828
information
Board information
Board
information
information
Board
Board
Directors’ report (continued)
Directors’ report (continued)
For the year ended 30 April 2016
For the year ended 30 April 2016
Directors’ report (continued)
information
Board information
Board
information
information
Board
Board
Board information
Board
information
information
information
Board
Board
For the year ended 30 April 2016
The directors in office during the financial year and up to the
The directors in office during the financial year and up to the
date of this report are as follows.
date of this report are as follows.
IAN R MORRICE (MBA)
IAN R MORRICE
IAN R MORRICE
IAN R MORRICE
Non-executive Chairman
Chief Executive Officer, Executive Director
ROBERT A MURRAY (MA HONS, ECONOMICS)
ROBERT A MURRAY
ROBERT A MURRAY
ROBERT A MURRAY
Robert (Rob) is currently a Non-executive Director of
Southern Cross Austereo. He is a member of the not-for-
profit charity Board of the Bestest organisation.
ROBERT A MURRAY (MA HONS, ECONOMICS)
ROBERT A MURRAY
ROBERT A MURRAY
ROBERT A MURRAY
The directors in office during the financial year and up to the
ROBERT A MURRAY
ROBERT A MURRAY (MA HONS, ECONOMICS)
ROBERT A MURRAY
ROBERT A MURRAY
date of this report are as follows.
Non-executive Chairman
Non-executive Chairman
Robert (Rob) is currently a Non-executive Director of
Robert (Rob) is currently a Non-executive Director of
Southern Cross Austereo. He is a member of the not-for-
Southern Cross Austereo. He is a member of the not-for-
profit charity Board of the Bestest organisation.
profit charity Board of the Bestest organisation.
Rob has extensive experience in retail and FMCG and an
Rob has extensive experience in retail and FMCG and an
indepth understanding of consumers. He was previously the
indepth understanding of consumers. He was previously the
CEO of Lion Nathan and CEO of Nestle Oceania, and a former
CEO of Lion Nathan and CEO of Nestle Oceania, and a former
Director of Dick Smith Holdings Limited, Super Retail Group
Rob has extensive experience in retail and FMCG and an
Director of Dick Smith Holdings Limited, Super Retail Group
and Linfox Logistics.
indepth understanding of consumers. He was previously the
and Linfox Logistics.
CEO of Lion Nathan and CEO of Nestle Oceania, and a former
Director of Dick Smith Holdings Limited, Super Retail Group
IAN R MORRICE (MBA)
IAN R MORRICE
IAN R MORRICE
IAN R MORRICE
and Linfox Logistics.
IAN R MORRICE
IAN R MORRICE (MBA)
IAN R MORRICE
IAN R MORRICE
Chief Executive Officer, Executive Director
Chief Executive Officer, Executive Director
Ian Morrice has over three decades of retail experience as
Ian Morrice has over three decades of retail experience as
Managing Director, Trading Director and Retail Director for
Managing Director, Trading Director and Retail Director for
some of the UK’s leading retailers, including the Kingfisher
some of the UK’s leading retailers, including the Kingfisher
Group and Dixons Retail. Ian was Group Chief Executive
Group and Dixons Retail. Ian was Group Chief Executive
Officer and Group Managing Director of New Zealand’s
Officer and Group Managing Director of New Zealand’s
Warehouse Group. Ian is a former Non-executive Director of
Warehouse Group. Ian is a former Non-executive Director of
Myer Holdings and advisor to the Board of Spotlight Retail
Myer Holdings and advisor to the Board of Spotlight Retail
Group.
Group.
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. Ian is a former Non-executive Director of
Myer Holdings and advisor to the Board of Spotlight Retail
PATRICK N J ALLAWAY (BA/LLB)
PATRICK N J ALLAWAY
PATRICK N J ALLAWAY
PATRICK N J ALLAWAY
Group.
PATRICK N J ALLAWAY
PATRICK N J ALLAWAY (BA/LLB)
PATRICK N J ALLAWAY
PATRICK N J ALLAWAY
Non-executive Director
Non-executive Director
Patrick is a Non-executive Director of Woolworths South
Patrick is a Non-executive Director of Woolworths South
Africa, David Jones, Country Road and Fairfax Media Limited.
Africa, David Jones, Country Road and Fairfax Media Limited.
He is also Chairman and co-founder of a privately owned
He is also Chairman and co-founder of a privately owned
corporate advisory business, Saltbush Capital Markets,
corporate advisory business, Saltbush Capital Markets,
Chairman of Giant Steps Endowment Fund and a Director of
Chairman of Giant Steps Endowment Fund and a Director of
the Sydney University Football Club Foundation Limited.
the Sydney University Football Club Foundation Limited.
Patrick has extensive experience in financial services, and
Patrick has extensive experience in financial services, and
senior executive and Non-executive Director roles in large
senior executive and Non-executive Director roles in large
multi-national companies, including Swiss Bank Corporation
multi-national companies, including Swiss Bank Corporation
and Citibank.
and Citibank.
Patrick is a Non-executive Director of Woolworths South
Africa, David Jones, Country Road and Fairfax Media Limited.
He is also Chairman and co-founder of a privately owned
corporate advisory business, Saltbush Capital Markets,
Chairman of Giant Steps Endowment Fund and a Director of
the Sydney University Football Club Foundation Limited.
PATRICK N J ALLAWAY (BA/LLB)
PATRICK N J ALLAWAY
PATRICK N J ALLAWAY
PATRICK N J ALLAWAY
Non-executive Director
Non-executive Director
Non-executive Chairman
MICHAEL R BUTLER (BSC, MBA, FAICD)
MICHAEL R BUTLER
MICHAEL R BUTLER
MICHAEL R BUTLER
ROBERT A MURRAY (MA HONS, ECONOMICS)
ROBERT A MURRAY
ROBERT A MURRAY
ROBERT A MURRAY
FIONA E BALFOUR (BA (Hons), MBA, GRAD DIP
FIONA E BALFOUR
FIONA E BALFOUR
FIONA E BALFOUR
INFORMATION MANAGEMENT, FAICD)
The directors in office during the financial year and up to the
date of this report are as follows.
Robert (Rob) is currently a Non-executive Director of
Southern Cross Austereo. He is a member of the not-for-
profit charity Board of the Bestest organisation.
Directors’ report (continued)
For the year ended 30 April 2016
FIONA E BALFOUR (BA (Hons), MBA, GRAD DIP
FIONA E BALFOUR
FIONA E BALFOUR
FIONA E BALFOUR
FIONA E BALFOUR
FIONA E BALFOUR (BA (Hons), MBA, GRAD DIP
FIONA E BALFOUR
FIONA E BALFOUR
INFORMATION MANAGEMENT, FAICD)
INFORMATION MANAGEMENT, FAICD)
Non-executive Director
Non-executive Director
Fiona is an independent Non-executive Director of Salmat
Fiona is an independent Non-executive Director of Salmat
Limited, TAL (Dai-ichi Life Australia) Limited and Airservices
Limited, TAL (Dai-ichi Life Australia) Limited and Airservices
Australia. She is a Fellow of the Australian Institute of
Australia. She is a Fellow of the Australian Institute of
Company Directors and Monash University and a Member of
Fiona is an independent Non-executive Director of Salmat
Company Directors and Monash University and a Member of
Chief Executive Women.
Limited, TAL (Dai-ichi Life Australia) Limited and Airservices
Chief Executive Women.
She has significant executive experience across aviation,
Australia. She is a Fellow of the Australian Institute of
She has significant executive experience across aviation,
telecommunications, financial services, education and the
Company Directors and Monash University and a Member of
telecommunications, financial services, education and the
not-for-profit sector. Fiona has over 15 years’ experience as a
Chief Executive Women.
not-for-profit sector. Fiona has over 15 years’ experience as a
Non-executive Director, including as Director of SITA SC
information
Board information
Board
information
information
Board
Board
She has significant executive experience across aviation,
Non-executive Director, including as Director of SITA SC
(Geneva), Councillor of Chief Executive Women and Trustee
telecommunications, financial services, education and the
(Geneva), Councillor of Chief Executive Women and Trustee
of the National Breast Cancer Foundation. She was awarded
not-for-profit sector. Fiona has over 15 years’ experience as a
of the National Breast Cancer Foundation. She was awarded
the National Pearcey Medal for ‘Lifetime Achievement to the
Non-executive Director, including as Director of SITA SC
the National Pearcey Medal for ‘Lifetime Achievement to the
Information Technology Industry’ in 2006.
(Geneva), Councillor of Chief Executive Women and Trustee
Information Technology Industry’ in 2006.
of the National Breast Cancer Foundation. She was awarded
the National Pearcey Medal for ‘Lifetime Achievement to the
MICHAEL R BUTLER (BSC, MBA, FAICD)
MICHAEL R BUTLER
MICHAEL R BUTLER
MICHAEL R BUTLER
Information Technology Industry’ in 2006.
MICHAEL R BUTLER
MICHAEL R BUTLER (BSC, MBA, FAICD)
MICHAEL R BUTLER
MICHAEL R BUTLER
Non-executive Director
Non-executive Director
Michael is currently Chairman of N.M. Superannuation Pty
Michael is currently Chairman of N.M. Superannuation Pty
Limited and Adairs Limited.
Limited and Adairs Limited.
Following an executive career in investment banking and
Following an executive career in investment banking and
private equity at Bankers Trust, he has been a professional
private equity at Bankers Trust, he has been a professional
non-executive company director since 1999 and acted as
non-executive company director since 1999 and acted as
director, Non-executive Director and chairman of various
Following an executive career in investment banking and
director, Non-executive Director and chairman of various
listed public companies, including AMP Superannuation
private equity at Bankers Trust, he has been a professional
listed public companies, including AMP Superannuation
Limited, Ausdoc Group Limited, Freightways Express
non-executive company director since 1999 and acted as
Limited, Ausdoc Group Limited, Freightways Express
Limited, Hamilton Island Limited, Verticon Group Limited,
director, Non-executive Director and chairman of various
Limited, Hamilton Island Limited, Verticon Group Limited,
Members Equity Bank Pty Limited, AXA Asia Pacific Holdings
listed public companies, including AMP Superannuation
Members Equity Bank Pty Limited, AXA Asia Pacific Holdings
Limited and APN Property Group Limited.
Limited, Ausdoc Group Limited, Freightways Express
Limited and APN Property Group Limited.
Limited, Hamilton Island Limited, Verticon Group Limited,
Members Equity Bank Pty Limited, AXA Asia Pacific Holdings
TONIANNE DWYER (BJuris (Hons)/LLB (Hons))
TONIANNE DWYER
TONIANNE DWYER
TONIANNE DWYER
Limited and APN Property Group Limited.
TONIANNE DWYER
TONIANNE DWYER (BJuris (Hons)/LLB (Hons))
TONIANNE DWYER
TONIANNE DWYER
Non-executive Director
Non-executive Director
Tonianne is an independent Non-executive Director of Dexus
Tonianne is an independent Non-executive Director of Dexus
Property Group, Dexus Wholesale Property Fund and
Property Group, Dexus Wholesale Property Fund and
Queensland Treasury Corporation. She is a member of the
Queensland Treasury Corporation. She is a member of the
Senate of the University of Queensland and a member of
Tonianne is an independent Non-executive Director of Dexus
Senate of the University of Queensland and a member of
Chief Executive Women.
Property Group, Dexus Wholesale Property Fund and
Chief Executive Women.
Ms Dwyer has over 20 years experience in investment
Queensland Treasury Corporation. She is a member of the
Ms Dwyer has over 20 years experience in investment
banking and real estate in the UK and is a graduate of the
Senate of the University of Queensland and a member of
banking and real estate in the UK and is a graduate of the
Australian Institute of Company Directors. She was
Chief Executive Women.
Australian Institute of Company Directors. She was
previously a Non-executive Director of Cardno Limited.
previously a Non-executive Director of Cardno Limited.
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
TONIANNE DWYER (BJuris (Hons)/LLB (Hons))
TONIANNE DWYER
TONIANNE DWYER
TONIANNE DWYER
Warehouse Group. Ian is a former Non-executive Director of
Myer Holdings and advisor to the Board of Spotlight Retail
Group.
Rob has extensive experience in retail and FMCG and an
indepth understanding of consumers. He was previously the
CEO of Lion Nathan and CEO of Nestle Oceania, and a former
Director of Dick Smith Holdings Limited, Super Retail Group
and Linfox Logistics.
Michael is currently Chairman of N.M. Superannuation Pty
Limited and Adairs Limited.
Chief Executive Officer, Executive Director
PATRICK N J ALLAWAY (BA/LLB)
PATRICK N J ALLAWAY
PATRICK N J ALLAWAY
PATRICK N J ALLAWAY
Non-executive Director
IAN R MORRICE (MBA)
IAN R MORRICE
IAN R MORRICE
IAN R MORRICE
Non-executive Director
Non-executive Director
Patrick has extensive experience in financial services, and
senior executive and Non-executive Director roles in large
multi-national companies, including Swiss Bank Corporation
and Citibank.
Patrick is a Non-executive Director of Woolworths South
Ms Dwyer has over 20 years experience in investment
Africa, David Jones, Country Road and Fairfax Media Limited.
banking and real estate in the UK and is a graduate of the
He is also Chairman and co-founder of a privately owned
Australian Institute of Company Directors. She was
corporate advisory business, Saltbush Capital Markets,
previously a Non-executive Director of Cardno Limited.
Chairman of Giant Steps Endowment Fund and a Director of
the Sydney University Football Club Foundation Limited.
Patrick has extensive experience in financial services, and
senior executive and Non-executive Director roles in large
multi-national companies, including Swiss Bank Corporation
and Citibank.
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
Metcash Group |
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
29
29292929
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Metcash Group |
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Metcash Group |
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29292929
FIONA E BALFOUR (BA (Hons), MBA, GRAD DIP
FIONA E BALFOUR
FIONA E BALFOUR
FIONA E BALFOUR
INFORMATION MANAGEMENT, FAICD)
Non-executive Director
Fiona is an independent Non-executive Director of Salmat
Limited, TAL (Dai-ichi Life Australia) Limited and Airservices
Australia. She is a Fellow of the Australian Institute of
Company Directors and Monash University and a Member of
Chief Executive Women.
She has significant executive experience across aviation,
telecommunications, financial services, education and the
not-for-profit sector. Fiona has over 15 years’ experience as a
Non-executive Director, including as Director of SITA SC
(Geneva), Councillor of Chief Executive Women and Trustee
of the National Breast Cancer Foundation. She was awarded
the National Pearcey Medal for ‘Lifetime Achievement to the
Information Technology Industry’ in 2006.
MICHAEL R BUTLER (BSC, MBA, FAICD)
MICHAEL R BUTLER
MICHAEL R BUTLER
MICHAEL R BUTLER
Non-executive Director
Michael is currently Chairman of N.M. Superannuation Pty
Limited and Adairs Limited.
Following an executive career in investment banking and
private equity at Bankers Trust, he has been a professional
non-executive company director since 1999 and acted as
director, Non-executive Director and chairman of various
listed public companies, including AMP Superannuation
Limited, Ausdoc Group Limited, Freightways Express
Limited, Hamilton Island Limited, Verticon Group Limited,
Members Equity Bank Pty Limited, AXA Asia Pacific Holdings
Limited and APN Property Group Limited.
TONIANNE DWYER (BJuris (Hons)/LLB (Hons))
TONIANNE DWYER
TONIANNE DWYER
TONIANNE DWYER
Non-executive Director
Tonianne is an independent Non-executive Director of Dexus
Property Group, Dexus Wholesale Property Fund and
Queensland Treasury Corporation. She is a member of the
Senate of the University of Queensland and a member of
Chief Executive Women.
Ms Dwyer has over 20 years experience in investment
banking and real estate in the UK and is a graduate of the
Australian Institute of Company Directors. She was
previously a Non-executive Director of Cardno Limited.
Metcash Group |
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
29292929
Directors’ Report
For the year ended 30 April 2016
Directors’ report (continued)
For the year ended 30 April 2016
NEIL D HAMILTON (LLB)
NEIL D HAMILTON
NEIL D HAMILTON
NEIL D HAMILTON
Non-executive Director
Neil is Chairman of OZ Minerals Limited and is a senior
advisor to UBS Australia.
He has over 30 years’ experience in senior management
positions and on boards of public companies across law,
funds management, investment, insurance and resources.
He is the former Chairman of Challenge Bank Limited,
Western Power Corporation, Mount Gibson Iron Limited and
Iress Market Technology Limited and was a Director of
Insurance Australia Group Limited and Miclyn Express
Offshore Limited.
MURRAY P JORDAN (MPA)
MURRAY P JORDAN
MURRAY P JORDAN
MURRAY P JORDAN
Non-executive Director
Murray is a Non-executive Director of Chorus Limited, New
Zealand.
He has over ten years experience in grocery retailing and
wholesaling and held key management roles in property
development and investment. Previously, Murray was the
Managing Director of New Zealand grocery retail and
wholesale business Foodstuffs North Island Limited.
HELEN E NASH (BA Hons, GAIDC)
HELEN E NASH
HELEN E NASH
HELEN E NASH
Non-executive Director
Helen is currently a Non-executive Director of Blackmores
Limited, Pacific Brands Limited, and Southern Cross Media
Group.
Helen has more than 20 years’ brand and marketing
experience with Procter & Gamble and IPC Media and ten
years in senior executive roles at McDonald’s Australia
Limited.
FORMER DIRECTORS
FORMER DIRECTORS
FORMER DIRECTORS
FORMER DIRECTORS
Peter L Barnes
Peter L Barnes, former Non-executive Chairman and
Peter L Barnes
Peter L Barnes
Chairman of the Nomination Committee retired on 27
August 2015.
Edwin M Jankelowitz
Edwin M Jankelowitz, former Non-executive Director,
Edwin M Jankelowitz
Edwin M Jankelowitz
Member of the Audit, Risk & Compliance Committee and
Member of the Nomination Committee retired on 27 August
2015.
Mick P McMahon
Mick P McMahon, former Non-executive Director, Member
Mick P McMahon
Mick P McMahon
of the People & Culture Committee and Member of the
Nomination Committee retired on 23 June 2015.
COMPANY SECRETARY
COMPANY SECRETARY
COMPANY SECRETARY
COMPANY SECRETARY
BRAD SOLLER (BComm, BAcc MComm, CA(SA))
BRAD SOLLER
BRAD SOLLER
BRAD SOLLER
Chief Financial Officer
Brad brings a wealth of corporate experience and acumen to
Metcash. Prior to joining Metcash, Brad was the Chief
Financial Officer of David Jones and prior to that, Group Chief
Financial Officer of Lendlease. His other senior financial roles
have included Chief Financial Officer at BAA McArthur Glen
Limited in the UK and Director of Finance at UK listed
electrical retailer, Thorn plc. Brad is a Chartered Accountant
having worked with PwC in both London and Johannesburg.
Greg Watson
Greg Watson, former Company Secretary, retired on 31
Greg Watson
Greg Watson
January 2016. Julie Hutton
Julie Hutton assumed the role of Company
Julie Hutton
Julie Hutton
Secretary on 6 June 2016.
Indemnification and insurance of Directors and Officers
Indemnification and insurance of Directors and Officers
Indemnification and insurance of Directors and Officers
Indemnification and insurance of Directors and Officers
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. 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.
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.
Metcash Annual Report 2016
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
30303030
Directors’ report (continued)
For the year ended 30 April 2016
The following table presents information relating to Company’s Board of Directors and Board sub-committees during the financial
year and up to the date of this report. Information relating to meetings held reflects those meetings the respective Director was
eligible to attend during the year.
Appointed
Appointed
Appointed
Appointed
Retired
Retired
Retired
Retired
Meetings
Meetings
Meetings
Meetings
heldheldheldheld
Meetings
Meetings
Meetings
Meetings
attended
attended
attended
attended
Ordinary shares held
Ordinary shares held
Ordinary shares held
Ordinary shares held
at reporting date
at reporting date
at reporting date
at reporting date
Board of Directors
Board of Directors
Board of Directors
Board of Directors
Robert A Murray (Chairman)(a)
Peter L Barnes (former Chairman)
Ian R Morrice
Patrick N J Allaway
Fiona E Balfour
Michael R Butler
Tonianne Dwyer
Neil D Hamilton
Edwin M Jankelowitz
Murray P Jordan
Mick P McMahon
Helen E Nash
Audit, Risk
Compliance Committee
Audit, Risk &&&& Compliance Committee
Compliance Committee
Compliance Committee
Audit, Risk
Audit, Risk
Michael R Butler (Chairman)
Patrick N J Allaway
Tonianne Dwyer
Edwin M Jankelowitz
Murray P Jordan
Committee
People & Culture Committee
People & Culture
Committee
Committee
People & Culture
People & Culture
Fiona E Balfour (Chair)
Neil D Hamilton
Mick P McMahon
Robert A Murray
Helen E Nash
29 Apr 2015
18 Apr 2005
12 Jun 2012
7 Nov 2012
16 Nov 2010
8 Feb 2007
24 Jun 2014
7 Feb 2008
18 Apr 2005
23 Feb 2016
27 Nov 2013
23 Oct 2015
8 Feb 2007
7 Nov 2012
24 Jun 2014
26 Feb 2014
23 Feb 2016
16 Nov 2010
7 Feb 2008
27 Nov 2013
3 Aug 2015
23 Oct 2015
-
27 Aug 2015
-
-
-
-
-
-
27 Aug 2015
-
23 Jun 2015
-
-
-
-
27 Aug 2015
-
-
-
23 Jun 2015
23 Oct 2015
-
Nomination Committee
Nomination Committee
Nomination Committee
Nomination Committee
Robert A Murray (Chairman)
Peter L Barnes (former Chairman)
Patrick N J Allaway
Fiona E Balfour
Michael R Butler
Tonianne Dwyer
Neil D Hamilton
Edwin M Jankelowitz
Murray P Jordan
Mick P McMahon
Helen E Nash
(a) Mr Murray was appointed as Chairman of the Board on 27 August 2015.
29 Apr 2015
27 Feb 2013
27 Feb 2013
27 Feb 2013
27 Feb 2013
24 Jun 2014
27 Feb 2013
27 Feb 2013
23 Feb 2016
27 Nov 2013
23 Oct 2015
-
27 Aug 2015
-
-
-
-
-
27 Aug 2015
-
23 Jun 2015
-
44,005
N/A
297,517
206,786
82,804
60,749
40,000
121,318
N/A
-
N/A
32,431
8
4
8
8
8
8
8
8
4
2
2
4
6
6
6
2
1
11
11
3
1
5
4
1
4
4
4
4
4
1
-
1
2
7
4
8
8
8
7
7
7
3
2
2
4
6
6
6
2
1
11
11
3
1
5
4
1
4
4
4
4
4
1
-
1
2
From time to time, additional Board committees are established and meetings of those committees are held throughout the year, for
example, to consider material transactions, or to consider material issues that may arise. These committee meetings are not included in
the above table. In addition, the Group holds a strategy session each year. In FY16, this strategy session was held in October 2015. All
Board members attended the FY16 strategy session.
Metcash Group | Financial Report 2016
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Metcash Group |
31
31313131
Directors’ Report
For the year ended 30 April 2016
Directors’ report (continued)
For the year ended 30 April 2016
Remuneration report
Remuneration report
Remuneration report
Remuneration report
the Chair of the People and Culture Committee
Message from the Chair of the People and Culture Committee
Message from
the Chair of the People and Culture Committee
the Chair of the People and Culture Committee
Message from
Message from
Dear Shareholder
I am pleased to present the Remuneration Report for the year ended 30 April 2016 (‘FY16’). During the year, the Committee changed its
name to the People and Culture Committee to reflect the broader scope of its remit which includes culture, diversity and inclusion and
safety.
The Group’s transformation plan has been thoroughly documented since it began in 2014. In my introduction to last year’s Remuneration
Report, I indicated that the Board was examining options for attracting and retaining key talent during this period. During such a
transformation, getting the balance right in executive remuneration is critical to the success of the plan until the transformation initiatives
have been fully implemented and the business is back on an improved and sustainable trajectory.
Aligning remuneration strategy with business strategy
Aligning remuneration strategy with business strategy
Aligning remuneration strategy with business strategy
Aligning remuneration strategy with business strategy
Prior to FY16, incentive structures for Metcash executives, both short and long-term, emphasised operational delivery by utilising revenue
and profit measures as the primary drivers of reward. During the year, the Board concluded that the Group’s prevailing remuneration
framework would not be effective in a period of change and transformation, during which the Supermarkets and Convenience Pillars
would also be facing significant headwinds. In addition, forecasting long-term business results would be less certain during this period.
The Board was particularly concerned that most Group and Supermarkets key executives and senior managers had not been materially
rewarded for the progress made over 2014 and 2015 and believed it was not in shareholders’ interests if this continued in subsequent
years. Furthermore, as I note below, all performance rights under the Group’s long-term incentive scheme for FY15 to FY17, the
Transformation Incentive, lapsed at the end of FY16.
The Board endorsed the following principles to guide executive remuneration during the remaining transformation period:
•
•
•
•
•
short-term revenue and profit should still be strongly incentivised;
interim delivery of transformation plan business objectives should be recognised even if returns don’t flow immediately;
total remuneration should be temporarily reweighted towards short-term incentives (‘STI’), including in FY16 during which specific
additional stretch incentives were used to drive profit growth, over long-term incentives (‘LTI’), in order to bring further focus to the
current-year execution;
LTI opportunity should still be significant enough to ensure business improvements are sustainable; and
there should be a systematic return to a market-aligned remuneration framework when the transformation program is complete
and the business transitions to a sustainable growth trajectory.
Below is an outline of the steps the Board authorised to put these principles into action. The Board is confident that this is a responsible
and appropriate path to take to support management endeavours in positioning the Group for the future.
FY15
FY15
FY15
FY15
FY16
FY16
FY16
FY16
FY17
FY17
FY17
FY17
FY18
FY18
FY18
FY18
FY19
FY19
FY19
FY19
I
I
I
I
T
T
T
T
S
S
S
S
Financial performance
→
Market-aligned design
Financial performance and
transformation progress
Stretch targets introduced to
drive improved profit
outcomes
STI funded by company
financial performance, paid
on participants' balanced
scorecard performance
→
→
Greater weighting in total
remuneration mix
Participant behaviours
factored into STI
determination
Reduce weighting in total
remuneration mix
→ Market-aligned design and
weighting
I
I
I
I
T
T
T
T
L
L
L
L
FY14-FY16 grants consolidated
into one three-year grant as
the Transformation Incentive
→ Covered by Transformation
Incentive
→
Market-aligned design: TSR
and earnings hurdles
→ Increase weighting in total
remuneration mix
→ Market-aligned design and
weighting
Resumption of annual grant
program
Less weighting in total
remuneration mix
Metcash Annual Report 2016
Metcash Group | Financial Report 2016
Metcash Group |
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Metcash Group |
32323232
Directors’ report (continued)
For the year ended 30 April 2016
Overview of Key Management Personnel (‘KMP’) remuneration in FY16
Overview of Key Management Personnel (‘KMP’) remuneration in FY16
Overview of Key Management Personnel (‘KMP’) remuneration in FY16
Overview of Key Management Personnel (‘KMP’) remuneration in FY16
of KMP
Fixed remuneration of KMP
Fixed remuneration
of KMP
of KMP
Fixed remuneration
Fixed remuneration
Acting on the Committee’s recommendation, the Board increased the Group Chief Executive Officer’s (‘Group CEO’) fixed remuneration to
$1.8m effective 1 May 2015. This was the first increase to Mr Morrice’s fixed remuneration since his appointment in March 2013. Prior to
making its recommendation, the Committee considered the results of a benchmarking study conducted by Aon Hewitt, validated the
results of this study with HayGroup data and consulted with its independent advisor PricewaterhouseCoopers.
Other executive KMP who were in their roles for the full year received fixed remuneration increases averaging 6.9%. These increases were
also based on the results of a previous benchmarking study conducted by Aon Hewitt and, where appropriate, advice was sought from
PricewaterhouseCoopers.
STISTISTISTI
The Group CEO’s target STI opportunity was increased from 50% to 83%, following the inclusion of stretch targets.
STI payments awarded to KMP in FY16 ranged from 63.9% to 92.0% of maximum, reflecting strong business and personal performance and
the achievement of stretch objectives designed to improve profit outcomes.
The Board decided to discontinue partial deferral of STI payments to KMP from FY16, replacing it with provisions enabling payments to be
clawed back for cause or material misstatement of the Group’s financial statements.
Details of the FY16 STI plan and payments are provided in Sections 3.2.2 and 4.3.
LTILTILTILTI
Performance rights issued under the Group’s LTI scheme for FY15 to FY17, the Transformation Incentive, were subject to a 13% Return On
Funds Employed (‘ROFE’) threshold for each of FY15, FY16 and FY17. The Group’s FY16 underlying ROFE was 12.5% and as a consequence
7,539,193 rights held by KMP and 40 other participants have lapsed.
With the exception of Mr Cain, no new performance rights were issued in FY16. Performance rights were issued to Mr Cain on his
appointment to the CEO Supermarkets position in August 2015. Mr Cain’s remuneration on commencement was weighted in favour of LTI
to ensure retention during the remaining Transformation period, given the significant contribution his role would make to the achievement
of sustainable business outcomes.
Further details of the Group’s LTI schemes in FY16 are provided in Section 3.2.3.
Board remuneration
Board remuneration
Board remuneration
Board remuneration
There were several appointments to and retirements from the Board in FY16 which are detailed in Section 1 of the Remuneration Report.
The Chairman Mr Murray was appointed to the Board in April 2015 and became Chairman after the August 2015 AGM. Following a study of
Non-executive Director remuneration by Aon Hewitt, there were two changes to the Chairman’s remuneration. Firstly, consistent with ASX
150 practice, the Chairman is now paid a fixed annual fee instead of a Board fee plus a Chair fee. Secondly, as at the date of Mr Murray’s
appointment to the Chair, the Chairman’s fee was increased from $309,565 p.a. (Board plus Chair fees) to $390,000 p.a. These fees reflect
the market median for Chairman roles of similar size and complexity.
There were no other changes to Board remuneration during the year.
On behalf of the Committee, I invite you to review Metcash’s FY16 Remuneration Report.
Fiona Balfour
Fiona Balfour
Fiona Balfour
Fiona Balfour
Chair, People and Culture Committee
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
33
33333333
Directors’ Report
For the year ended 30 April 2016
Directors’ report (continued)
For the year ended 30 April 2016
Contents
Contents
Contents
Contents
1. Overview of the Remuneration Report
2. Remuneration governance
3. Executive remuneration policy
4. FY16 performance and remuneration outcomes
5. KMP service agreements
6. Non-executive Director remuneration
7. Statutory disclosures
1.1.1.1.
Remuneration Report
verview of the Remuneration Report
OOOOverview of the
Remuneration Report
Remuneration Report
verview of the
verview of the
The Directors of Metcash Limited present the Remuneration Report for the Company and its controlled entities (the ‘Group’) for the year
ended 30 April 2016 (‘FY16’). This report forms part of the Directors’ Report and has been audited in accordance with section 308(3C) of the
Corporations Act 2001 and accounting standards.
The report sets out the remuneration arrangements for the Group’s Key Management Personnel (‘KMP’), comprising its Non-executive
Directors, Group Chief Executive Officer (‘Group CEO’) and Group Executives of Metcash, who together have the authority and responsibility
for planning, directing and controlling the activities of the Group. The KMP in FY16 are listed below.
Name
Name
Name
Name
Position
Position
Position
Position
executive
NonNonNonNon----executive
executive
executive
Directors
Directors
Directors
Directors
Robert Murray
Patrick Allaway
Fiona Balfour
Michael Butler
Tonianne Dwyer
Neil Hamilton
Helen Nash
Murray Jordan
Peter Barnes
Edwin Jankelowitz
Mick McMahon
Executive Director
Executive Director
Executive Director
Executive Director
Ian Morrice
Group Executives
Group Executives
Group Executives
Group Executives
Brad Soller
Steven Cain
Mark Laidlaw
Scott Marshall
Chairman – Director for the full financial year, Chairman from 27 August 2015
Director
Director
Director
Director
Director
Director – appointed 23 October 2015
Director – appointed 23 February 2016
Chairman – retired 27 August 2015
Director – retired 27 August 2015
Director – retired 23 June 2015
Group Chief Executive Officer
Chief Financial Officer (‘CFO’)
Chief Executive Officer, Supermarkets – from 1 August 2015
Chief Executive Officer, Supermarkets and Convenience – from 18 January 2016
Chief Executive Officer, Hardware
Chief Executive Officer, ALM
For the remainder of this report, the Group CEO and Group Executives are referred to as the Key Management Personnel.
Metcash Annual Report 2016
Metcash Group | Financial Report 2016
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Metcash Group |
34343434
Directors’ report (continued)
For the year ended 30 April 2016
2.2.2.2.
emuneration governance
RRRRemuneration governance
emuneration governance
emuneration governance
The People and Culture Committee (‘Committee’) is the key governing body in respect of remuneration matters in Metcash. In addition to
Executive and Non-executive Director remuneration, the Committee oversees major people-related programs such as culture, diversity and
inclusion and safety.
The Committee both receives and initiates proposals from management which it assesses and recommends for Board approval, if
appropriate. The Committee may also commission external advisers to provide information and/or recommendations. If
recommendations are sought in respect of KMP remuneration, interaction with external advisers is governed by protocol which ensures
independent advice can be obtained by the Committee. The Committee Chair appoints and engages directly with external advisers on KMP
remuneration matters.
In FY16, the Committee engaged PricewaterhouseCoopers (‘PwC’) to advise on the quantum and structure of the CEO Supermarkets’
remuneration, the quantum and structure of the Group CEO’s remuneration and to review the Group-wide remuneration framework
proposed by management. No remuneration recommendations were provided in this advice. In addition, PwC also provided taxation
advice, consulting services and advisory services to Metcash management.
During the year the Group also commissioned remuneration benchmarking reports from Aon Hewitt and legal advice from Herbert Smith
Freehills. Neither contained remuneration recommendations.
3.3.3.3.
xecutive remuneration policy
EEEExecutive remuneration policy
xecutive remuneration policy
xecutive remuneration policy
3.1.3.1.3.1.3.1.
olicy
PPPPolicy
olicyolicy
at the level necessary to attract and retain the leadership and capability required by the Group;
The overarching objectives of Metcash’s executive remuneration policy are for remuneration to be:
•
•
•
commensurate with the Group’s current-year performance and the executive’s contribution to it; and
commensurate with the Group’s long-term performance reflected in metrics that drive shareholder value.
short-term revenue and profit will still be strongly incentivised;
For the FY16 to FY19 period, during which the Group will be undergoing business transformation, the following principles will be applied in
order to meet the above objectives:
•
•
•
interim delivery of the remaining transformation plan will be recognised even if returns don’t flow immediately;
total remuneration will be temporarily reweighted towards STI over LTI in order to bring an even greater focus to current-year
execution, including in FY16 redirecting part of the annual STI pool into funding stretch objectives to deliver improved profit
outcomes in key businesses;
•
•
LTI opportunity will still be significant enough to ensure business initiatives are sustainable; and
there will be a return to a market-aligned remuneration framework when the transformation program is complete and the business
transitions to a sustainable growth trajectory.
3.2.3.2.3.2.3.2.
omponents
Remuneration Components
Remuneration C
omponents
omponents
Remuneration C
Remuneration C
Fixed remuneration
3.2.1. Fixed remuneration
3.2.1.
Fixed remuneration
Fixed remuneration
3.2.1.
3.2.1.
Fixed remuneration at Metcash is called Total Employment Cost (‘TEC’). TEC comprises salary, statutory superannuation and salary
sacrifice items such as motor vehicle lease and additional superannuation contributions.
TEC levels are set according to the nature and scope of the executive’s role as well as his/her performance and experience. To
benchmark its executive remuneration, Metcash references mainly ASX-listed companies of a comparable size and complexity.
The Committee recommends changes to KMP remuneration each year, taking into consideration market trends and the executive’s
performance. Changes to KMP remuneration the Committee supports are recommended to the Board for approval.
During FY16 the Group CEO’s fixed remuneration was increased in line with the market median. Other KMP who were in their roles for the
full year received fixed remuneration increases averaging 6.9%. These increases were based on the results of a previous benchmarking
study conducted by Aon Hewitt, the results of which were additionally validated with the use of HayGroup data and, where necessary,
independently assessed by PricewaterhouseCoopers.
Metcash Group | Financial Report 2016
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Metcash Group |
35353535
35
Directors’ Report
For the year ended 30 April 2016
Directors’ report (continued)
For the year ended 30 April 2016
3.2.2. STISTISTISTI
3.2.2.
3.2.2.
3.2.2.
The Group’s STI plan is an at-risk, cash-based component of total remuneration. Its purpose is to incentivise senior executives to deliver
annual performance outcomes aligned to shareholder interests. It is based on the achievement of predetermined performance measures
including financial performance targets and individual performance objectives, relevant to the executive’s role.
FY16 STI arrangements for KMP summarised below are in accordance with the Group’s business transformation remuneration policy as
outlined in Section 3.1.
Key result area
Key result area
Key result area
Key result area
Group CEO
Group CEO
Group CEO
Group CEO
CFOCFOCFOCFO
CEO
CEO
CEO
CEO
Supermarkets and
Supermarkets
and
and
and
Supermarkets
Supermarkets
Convenience, , , , CEO
CEO
Convenience
CEO
CEO
Convenience
Convenience
Hardware and CEO ALM
Hardware and CEO ALM
Hardware and CEO ALM
Hardware and CEO ALM
Group revenue and Underlying Profit Before Tax (‘UPBT’)
Pillar revenue and Earnings Before Interest and Tax (‘EBIT’)
Role-specific financial and non-financial objectives (including
stretch objectives)1
1 For the role-specific component to be payable to the Group CEO and CFO, Group UPBT must be at least 75% of budget; and for it to be
payable to the CEOs of Supermarkets and Convenience, Hardware and ALM, Pillar EBIT must be at least 75% of budget. In total, 81 key
business people at Metcash were eligible to participate in stretch incentives as part of the redistribution of the existing STI pool to drive
improved outcomes, including four KMP (Group CEO, CFO, CEO Hardware and CEO ALM).
The target and maximum STI opportunities as a percentage of TEC for KMP are outlined below and include reward for the achievement of
of stretch objectives:
Position
Position
Position
Position
Group CEO
CFO
CEO Supermarkets and Convenience
CEO Hardware
CEO ALM
Target
Target
Target
Target
Maximum
Maximum
Maximum
Maximum
83%
50%
50%
50%
50%
104%
150%
100%
150%
150%
For FY16, KMP STI earnings will be paid in full and be subject to a clawback for cause or material misstatement of the Group’s financial
statements.
3.2.3. LTILTILTILTI
3.2.3.
3.2.3.
3.2.3.
No performance rights issued under the Group’s LTI plans vested in FY16. In addition, all other performance rights in operation prior to
FY16 completed their performance periods at the end of FY15 and lapsed without vesting.
The Group had three LTI plans in operation in FY16, namely:
•
•
•
Transformation Incentive – this plan was established in FY15 and aimed to provide an incentive to senior management to deliver
the Transformation Plan over the period 1 May 2014 to 30 April 2017;
Additional Transformation Incentive – this was granted to the Group CEO and CFO recognising the impact these roles have on
shareholder returns; and
CEO Supermarkets and Convenience Commencement Grant – this was granted to Mr Cain on commencement of his employment at
Metcash. The plan is based on the performance of the Supermarkets and Convenience business over a five year period from 1 May
2015 to 30 April 2020.
Other than the CEO Supermarkets and Convenience Commencement Grant no executives were granted any performance rights in FY16,
due to the three-year horizon of the Transformation Incentive.
Further detail regarding each of the schemes is set out below.
Metcash Annual Report 2016
Metcash Group | Financial Report 2016
Metcash Group |
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Metcash Group |
36363636
Directors’ report (continued)
For the year ended 30 April 2016
Transformation Incentive
Transformation Incentive
Transformation Incentive
Transformation Incentive
The purpose of the Transformation Incentive was to provide an incentive for senior management to successfully execute the
Transformation Plan over the FY15, FY16 and FY17 financial years.
All KMP, except the CEO Supermarkets and Convenience, plus 75 other senior Metcash employees participated in this scheme.
The Transformation Incentive ran from 1 May 2014 to 30 April 2016, after which it lapsed with one year remaining in its performance period.
The Incentive was a Performance Rights grant (the right to acquire Metcash shares at no cost, subject to the satisfaction of performance
and service conditions) and was subject to two performance hurdles:
•
•
Minimum Metcash Return on Funds Employed (‘ROFE’) of 13% in FY15, FY16 and FY17. If this hurdle was not met for any of FY15,
FY16 or FY17, the rights lapse; and
if the ROFE hurdle was met for each of these years, vesting would be subject to Group Sales Revenue and Underlying Earnings Per
Share (‘UEPS’) performance in FY17.
For participants other than the CFO, shares for 67% of vested rights would be allocated on 15 August 2017 and the remaining 33% on 15
April 2018. For the CFO, shares for 50% of vested rights would be allocated on 15 August 2017 and the remaining 50% on 15 April 2018.
Rights which have not vested would be forfeited. There was no re-testing.
The following grants were made to KMP:
Participant
Participant
Participant
Participant
Group CEO
CFO
CEO Hardware
CEO ALM
Grant date
Grant date
Grant date
Grant date
Vesting date
Vesting date
Vesting date
Vesting date
No. of rights
No. of rights
No. of rights
No. of rights
17 October 2014
17 October 2014
15 August 2017
15 April 2018
11 February 2015
11 February 2015
15 August 2017
15 April 2018
17 October 2014
17 October 2014
15 August 2017
15 April 2018
17 October 2014
17 October 2014
15 August 2017
15 April 2018
854,093
427,046
170,819
170,819
291,625
145,813
246,619
123,310
Fair value
Fair value
Fair value
Fair value
per right
per right
per right
per right
$2.23
$2.16
$1.27
$1.23
$2.23
$2.16
$2.23
$2.16
As the Group’s underlying ROFE was below 13% in FY16 the required ROFE hurdle had not been met and all performance rights under the
Transformation Incentive Plan have lapsed.
Additional Transformation Incentive
Additional Transformation Incentive
Additional Transformation Incentive
Additional Transformation Incentive
The purpose of the Additional Transformation Incentive (‘ATI’) was to provide further incentive to the Group CEO and CFO to successfully
execute the Transformation Plan, recognising the impact of their roles on shareholder returns.
The ATI is a Performance Rights grant (the right to acquire Metcash shares at no cost, subject to the satisfaction of performance and service
conditions) and is subject to two performance hurdles:
•
Relative Total Shareholder Returns (‘RTSR’) from 1 May 2014 to 30 April 2018 relative to ASX 100 companies excluding financial
services companies, mining companies and Real Estate Investment Trusts (‘REITs’); and
RTSR from 1 May 2014 to 30 April 2019 relative to ASX 100 companies as at 1 May 2014 excluding financial services companies,
mining companies and REITs. The rights vest against this hurdle as follows:
Relative TSR
Relative TSR
Relative TSR
Relative TSR
esting
% % % % vvvvesting
esting
esting
< 50th percentile
50th percentile
0%
50%
Between 50th and 75th percentiles
Straight line pro-rata vesting
≥ 75th percentile
100%
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
37373737
37
Directors’ Report
For the year ended 30 April 2016
Directors’ report (continued)
For the year ended 30 April 2016
•
Metcash ROFE for FY18 and for FY19. The rights vest against this hurdle as follows:
ROFE
ROFE
ROFE
ROFE
esting
% % % % vvvvesting
esting
esting
Less than threshold
Equal to threshold
0%
50%
Between threshold and target
Straight line pro-rata
Equal to target
75%
Between target and stretch
Straight line pro-rata
Equal to or above stretch
100%
As Metcash policy is not to provide market guidance, ROFE percentages will be disclosed after the test date.
Rights which have not vested are forfeited. There is no re-testing.
The following ATI grants were made to the Group CEO and CFO:
Participant
Participant
Participant
Participant
Grant date
Grant date
Grant date
Grant date
Hurdle
Hurdle
Hurdle
Hurdle
Vesting date
Vesting date
Vesting date
Vesting date
No. of rights
No. of rights
No. of rights
No. of rights
Fair value
Fair value
Fair value
Fair value
per right
per right
per right
per right
Group CEO
17 October 2014
CFO
11 February 2015
RTSR 1
ROFE 1
RTSR 2
ROFE 2
RTSR 1
ROFE 1
15 August 2018
15 August 2018
15 August 2019
15 August 2019
15 August 2018
15 August 2018
266,904
266,904
533,808
533,808
85,410
85,410
$1.28
$2.10
$1.25
$1.98
$0.09
$1.20
CEO Supermarkets and Convenience Commencement Grant
CEO Supermarkets and Convenience Commencement Grant
CEO Supermarkets and Convenience Commencement Grant
CEO Supermarkets and Convenience Commencement Grant
The purpose of this grant was to provide an incentive for Mr Cain to accept Metcash’s offer of employment, retain his services for three
years from commencement of employment and to provide an incentive to successfully execute the Metcash Supermarkets business
turnaround. The grant was divided into two components:
•
•
Sign-on and Retention – Performance Rights which vest if Mr Cain has continuous service in Metcash until the third anniversary of
his commencement of employment in Metcash (1 August 2018). In the event of a takeover or change of control or event reasonably
considered should be treated the same way as a change in control, the rights will vest and be satisfied by an early allocation of
shares.
Performance – Performance Rights tested against Metcash Supermarkets EBIT Compound Annual Growth Rate (‘CAGR’) from 1 May
2015 to 30 April 2020, providing Metcash Supermarkets ROFE averages at least 13.5% over this period.
The rights vest against this hurdle as follows:
Metcash Supermarkets FY20 EBIT CAGR
Metcash Supermarkets FY20 EBIT CAGR
Metcash Supermarkets FY20 EBIT CAGR
Metcash Supermarkets FY20 EBIT CAGR
% of Performance Component vesting
% of Performance Component vesting
% of Performance Component vesting
% of Performance Component vesting
Less than threshold
Equal to threshold
0%
50%
Between threshold and target
Straight-line pro-rata vesting between 50% and 67%
Equal to target
Between target and stretch
Equal to or above stretch
67%
Straight-line pro-rata vesting between 67% and 100%
100%
As Metcash policy is not to provide market guidance, CAGR percentages will be disclosed after the test date.
Metcash Annual Report 2016
Metcash Group | Financial Report 2016
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Metcash Group |
Metcash Group |
38383838
Directors’ report (continued)
For the year ended 30 April 2016
Mr Cain has the right to request early testing and vesting of the Performance Component rights after the third or fourth year. If any vesting
of rights results from early testing, 40% of early vesting rights will be deferred and will vest on 15 August 2020, providing Mr Cain remains
employed in Metcash and has not given notice to resign prior to that date.
Rights which have not vested are forfeited. There is no re-testing.
The following grants were made to Mr Cain:
mponent
CoCoCoComponent
mponent
mponent
Grant date
Grant date
Grant date
Grant date
Vesting date
Vesting date
Vesting date
Vesting date
No. of rights
No. of rights
No. of rights
No. of rights
Fair value
Fair value
Fair value
Fair value
per right
per right
per right
per right
Sign-on and Retention
3 August 2015
1 August 2018
Performance
Performance
3 August 2015
15 August 2018
3 August 2015
15 August 2020
1,062,023
1,274,427
849,618
$1.07
$1.07
$1.01
Total remuneration mix
3.2.4. Total remuneration mix
3.2.4.
Total remuneration mix
Total remuneration mix
3.2.4.
3.2.4.
The chart below outlines the FY16 remuneration mix for total remuneration for KMP. Each remuneration component is shown as a
percentage of total remuneration for at target outcomes and for maximum earnings opportunity.
The fair and face values of equity rights issued were used to estimate target and maximum LTI values respectively.
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
39
39393939
Directors’ Report
For the year ended 30 April 2016
Directors’ report (continued)
For the year ended 30 April 2016
4.4.4.4.
performance and remuneration outcomes
FY16 performance and remuneration outcomes
FY16
performance and remuneration outcomes
performance and remuneration outcomes
FY16
FY16
FY16
risk remuneration outcomes FYFYFYFY12121212----FY16
Group performance and at----risk remuneration outcomes
4.1.4.1.4.1.4.1. Group performance and at
FY16
FY16
risk remuneration outcomes
risk remuneration outcomes
Group performance and at
Group performance and at
The charts below show Metcash financial performance in the five-year period from 1 May 2011 to 30 April 2016.
STI paid to KMP during this period was as follows.
Note: the opening share price in FY2012 was $4.08
Financial year
Financial year
Financial year
Financial year
% of maximum STI paid
FY12
FY12
FY12
FY12
43.5%
FY13
FY13
FY13
FY13
75.6%
FY14
FY14
FY14
FY14
11.9%
FY15
FY15
FY15
FY15
17.1%
FY16
FY16
FY16
FY16
78.9%
STI payments in FY14 and FY15 were low as Supermarkets did not meet its sales and EBIT targets, resulting in nil payment to the Group
CEO and the incumbents of the CEO Supermarkets position during those years.
There was no vesting of performance rights under the LTI program during this period.
Metcash Annual Report 2016
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
40404040
Directors’ report (continued)
For the year ended 30 April 2016
4.2.4.2.4.2.4.2.
KMP remuneration
FY16 KMP remuneration
Actual FY16
Actual
KMP remuneration
KMP remuneration
FY16
FY16
Actual
Actual
The table below is captured in non-IFRS format to enable ease of interpretation:
Name
Name
Name
Name
I Morrice
B Soller
S Cain
M Laidlaw
S Marshall
Total
Total
Total
Total
Employment
Employment
Employment
Employment
CostCostCostCost
$$$$
1,800,000
839,811
937,500
699,963
637,917
STISTISTISTI
$$$$
Share----based
based
Share
based
based
Share
Share
payments1111
payments
payments
payments
$ $ $ $
Termination
Termination
Termination
Termination
$ $ $ $
Other
Other
Other
Other
$$$$
Total
Total
Total
Total
$ $ $ $
1,725,000
1,115,000
600,000
785,000
750,000
-
29,538
-
171,570
90,683
-
-
-
-
-
-
-
-
-
-
3,525,000
1,984,349
1,537,500
1,656,533
1,478,600
1111 The value of deferred rights issued under the FY15 STI plan which vested into shares on 15 April 2016, calculated as the number of vested shares multiplied
by the closing share price on 15 April 2016 of $1.68.
4.3.4.3.4.3.4.3.
STI outcomes
FY16 STI outcomes
FY16
STI outcomes
STI outcomes
FY16
FY16
Name
Name
Name
Name
Components
Components
Components
Components
I Morrice
B Soller
S Cain
M Laidlaw
S Marshall
Group UPBT1
Role-specific objectives
Group UPBT
Role-specific objectives
Pillar EBIT/Group UPBT
Role-specific objectives
Pillar EBIT/Group UPBT
Role-specific objectives
Pillar EBIT/Group UPBT
Role-specific objectives
Target
Target
Target
Target
STISTISTISTI
$$$$
750,000
750,000
212,500
212,500
351,884
117,295
175,844
175,844
162,500
162,500
Maximum
Maximum
Maximum
Maximum
STISTISTISTI
$$$$
STI awarded
STI awarded
STI awarded
STI awarded
% of % of % of % of
maximum
maximum
maximum
maximum
STI STI STI STI
awarded2
awarded
awarded
awarded
$$$$
Maximum
Maximum
Maximum
Maximum
STI forfeited
STI forfeited
STI forfeited
STI forfeited
$$$$
750,000
1,125,000
425,000
850,000
703,768
234,590
351,689
703,377
325,000
650,000
100%
87%
75%
94%
61%
73%
61%
81%
56%
87%
750,000
975,000
318,750
796,250
428,858
171,142
214,310
570,690
182,813
567,187
-
150,000
106,250
53,750
274,910
63,448
137,379
132,687
142,187
82,813
1111 For the Group CEO the UPBT STI target and maximum amounts were set at the same level.
2222 The 81 key business people who participated in the stretch incentive achieved 61% of their objectives. The Group CEO achieved three out of five stretch
objectives and other eligible KMP (B Soller, M Laidlaw and S Marshall) achieved each of their stretch objectives.
In all cases, FY16 Group UPBT and Pillar EBIT exceeded 75% of budget hence enabling payment of the role-specific component. For all
KMP except Mr Cain, this component included payment for meeting additional stretch targets, which were specifically designed to
deliver improved profit results.
5.5.5.5.
service agreements
KMPKMPKMPKMP service agreements
service agreements
service agreements
Name
Name
Name
Name
I Morrice
B Soller
S Cain
M Laidlaw
S Marshall
Agreement Term
Agreement Term
Agreement Term
Agreement Term
Ongoing unless notice given
Ongoing unless notice given
Ongoing unless notice given
Ongoing unless notice given
Ongoing unless notice given
Executive
Executive
Executive
Executive
Notice
Notice
Notice
Notice
Metcash
Metcash
Metcash
Metcash
Notice
Notice
Notice
Notice
6 months
3 months
6 months
3 months
3 months
12 months
6 months
12 months
9 months
6 months
Redundancy
Redundancy
Redundancy
Redundancy
12 months
6 months
12 months
Metcash Notice + 6 months
Metcash Notice + 6 months
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 Group may require individuals to enter into non-compete
arrangements with the Group. These arrangements may require a payment to the individual.
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
41
41414141
Directors’ Report
For the year ended 30 April 2016
Directors’ report (continued)
For the year ended 30 April 2016
6.6.6.6.
executive Director remuneration
NNNNonononon----executive Director remuneration
executive Director remuneration
executive Director remuneration
Policy
Policy
Policy
Policy
6.1.6.1.6.1.6.1.
The objectives of Metcash’s policy regarding Non-executive Director fees are:
•
•
to preserve the independence of Non-executive Directors by not including any performance-related element; and
to be market competitive with regard to Non-executive Director fees in comparable ASX-listed companies and to the time and
professional commitment in discharging the responsibilities of the role.
To align individual interests with shareholders’ interests, Non-executive Directors are encouraged to hold Metcash shares. Non-executive
Directors fund their own share purchases and must comply with Metcash’s share trading policy.
executive Director remuneration
Structure of Non----executive Director remuneration
Structure of Non
executive Director remuneration
executive Director remuneration
Structure of Non
Structure of Non
6.2.6.2.6.2.6.2.
Except for legacy entitlements detailed in Section 6.5, Non-executive Director remuneration is structured as follows:
•
•
all Non-executive Directors are paid a fixed annual fee;
commencing with the appointment of Mr Murray to the position on 27 August 2015, the Board Chairman is paid a fixed annual fee
which is inclusive of all Board, Chair and Committee work;
•
•
•
except for the Board Chairman, additional fees are paid to Non-Executive Directors who chair or participate in Board Committees;
Non-executive Directors are not entitled to participate in the Group’s short or long-term incentive schemes; and
no additional benefits are paid to Non-executive Directors upon retirement from office.
Aggregate fee limit
Aggregate fee limit
Aggregate fee limit
Aggregate fee limit
6.3.6.3.6.3.6.3.
Non-executive Director fees are limited to a maximum aggregate amount approved by shareholders. The current $1,600,000 limit was
approved in 2012.
The Remuneration Committee is responsible for reviewing and recommending Non-executive Director fees. External data is sought before
any changes are made to fee levels.
6.4.6.4.6.4.6.4.
fee structure
FY16 fee structure
FY16
fee structure
fee structure
FY16
FY16
Board
Board
Board
Board
Chair
Non-executive Director
Committee
Committee
Committee
Committee
Audit, Risk and Compliance
Chair
Member
People and Culture
Chair
Member
Nomination
Chair
Member
1 Including superannuation.
Fee p.a.
Fee p.a.
Fee p.a.
Fee p.a.
$$$$1111
390,000
129,703
31,580
12,970
31,580
12,970
-
-
Metcash Annual Report 2016
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
42424242
Directors’ report (continued)
For the year ended 30 April 2016
6.5.6.5.6.5.6.5.
executive Director remuneration
FY16 NonNonNonNon----executive Director remuneration
FY16
executive Director remuneration
executive Director remuneration
FY16
FY16
Name
Name
Name
Name
R Murray
F Balfour
M Butler
P Allaway
T Dwyer
N Hamilton
M Jordan
H Nash
P Barnes
E Jankelowitz
M McMahon
Total
Financial
Financial
Financial
Financial
Year
Year
Year
Year
Fees
Fees
Fees
Fees
$$$$
PostPostPostPost----employment
employment
employment
employment
(Superannuation)
(Superannuation)
(Superannuation)
(Superannuation)
$$$$
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
322,496
910
147,290
139,577
147,290
147,290
130,295
130,295
130,295
111,085
130,295
138,008
24,222
n/a
68,155
n/a
93,999
294,757
42,095
130,863
21,716
130,295
1,258,148
1,223,080
18,697
96
13,993
13,206
13,993
13,931
12,378
12,324
12,378
10,547
12,378
13,049
2,301
n/a
6,475
n/a
6,261
18,615
3,999
12,376
2,063
12,324
104,916
106,468
Other
Other
Other
Other
$$$$
-
-
-
-
-
-
-
-
-
-
-
-
-
n/a
-
n/a
211,6191
-
-
-
-
-
211,619
-
Total
Total
Total
Total
$$$$
341,193
1,006
161,283
152,783
161,283
161,221
142,673
142,619
142,673
121,632
142,673
151,057
26,523
n/a
74,630
n/a
311,879
313,372
46,094
143,239
23,779
142,619
1,574,683
1,329,548
1 Retirement benefit paid to Mr Barnes upon his retirement from the Board in August 2015. This was a legacy entitlement from a
retirement benefit scheme for Non-executive Directors which was discontinued at the 2005 Annual General Meeting. Mr Barnes
was the only remaining participant in the scheme.
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
43
43434343
Directors’ Report
For the year ended 30 April 2016
Directors’ report (continued)
Directors’ report (continued)
For the year ended 30 April 2016
For the year ended 30 April 2016
7.7.7.7. Statutory disclosures
Statutory disclosures
Statutory disclosures
Statutory disclosures
Statutory disclosures
7.7.7.7. Statutory disclosures
Statutory disclosures
Statutory disclosures
7.1.7.1.7.1.7.1.
risk remuneration
Fixed and at----risk remuneration
Fixed and at
risk remuneration
risk remuneration
Fixed and at
Fixed and at
7.1.7.1.7.1.7.1.
risk remuneration
Fixed and at----risk remuneration
Fixed and at
risk remuneration
risk remuneration
Fixed and at
Fixed and at
$$$$
STISTISTISTI
FYFYFYFY16161616
Fixed
Fixed
Fixed
Fixed
remuneration
remuneration
remuneration
remuneration
$$$$
PostPostPostPost----
Termination
Termination
Termination
Termination
employment
employment
employment
employment
Leave2222
benefits
benefits
Leave
Leave
Leave
benefits
benefits
benefits ----
benefits
benefits
benefits
$$$$
$$$$
superannuation
superannuation
superannuation
superannuation
$$$$
PostPostPostPost----
employment
employment
employment
employment
benefits ----
benefits
benefits
benefits
(cash)1111 Other benefits
superannuation
Other benefits
superannuation
(cash)
superannuation
superannuation
Other benefits
Other benefits
(cash)
(cash)
Fixed
Fixed
STISTISTISTI
Fixed
Fixed
$$$$
$$$$
(cash)1111 Other benefits
remuneration
remuneration
Other benefits
(cash)
remuneration
remuneration
Other benefits
Other benefits
(cash)
(cash)
19,221
-
1,725,000
$$$$
$$$$
19,221
1,115,000
-
14,481
600,000
-
19,221
785,000
-
1,725,000
1,808,219
19,221
750,000
-
1,115,000
844,699
91,365
-
4,975,000
600,000
959,510
785,000
665,229
750,000
654,136
4,975,000
4,931,793
FYFYFYFY16161616
I Morrice
B Soller
S Cain4
M Laidlaw
I Morrice
S Marshall
B Soller
Total
S Cain4
1. These amounts represent 100% of the amounts payable under the FY16 STI plan.
M Laidlaw
2.
3. These amounts represent the FY16 expense of the deferred component of the FY15 STI plan that was settled in shares in FY16.
S Marshall
4. Mr Cain commenced employment in Metcash on 1 August 2015 on fixed remuneration including superannuation of $1,250,000 p.a. The amounts disclosed above are in respect of Mr
Directors’ report (continued)
Total
For the year ended 30 April 2016
LTI (share
LTI (share
LTI (share
LTI (share
based
based
based
based
payments)
payments)
payments)
payments)
Termination
Termination
Termination
Termination
$$$$
benefits
benefits
benefits
benefits
-
$$$$
16,194
-
57,619
-
30,454
-
104,267
-
-
-
-
-
-
-
16,327
19,221
37,419
19,221
53,746
14,481
19,221
19,221
91,365
Total
Total
Total
Total
$$$$
Leave2222
Leave
Leave
Leave
2,978,003
$$$$
1,970,937
2,122,744
1,361,293
-
1,337,231
-
9,770,208
-
16,327
37,419
53,746
1,808,219
844,699
959,510
665,229
654,136
4,931,793
(574,437)
(24,177)
548,753
(182,103)
(153,999)
(385,963)
STI (share
STI (share
STI (share
STI (share
based
based
based
based
payments)3333
payments)
payments)
payments)
$$$$
Cain’s remuneration from 1 August 2015 to 30 April 2016.
Including changes in long service leave entitlement.
-
-
-
-
-
-
-
-
-
-
-
-
$$$$
Performance
Performance
Performance
Performance
LTI (share
LTI (share
LTI (share
LTI (share
related
related
related
related
based
based
based
based
%%%%
payments)
payments)
payments)
payments)
$$$$
38.6%
56.2%
54.1%
48.5%
(574,437)
46.8%
(24,177)
48.0%
548,753
(182,103)
(153,999)
(385,963)
STI (share
STI (share
STI (share
STI (share
based
based
based
based
payments)3333
payments)
payments)
payments)
$$$$
-
16,194
-
57,619
30,454
104,267
Total
Total
Total
Total
$$$$
Performance
Performance
Performance
Performance
related
related
related
related
%%%%
2,978,003
1,970,937
2,122,744
1,361,293
1,337,231
9,770,208
38.6%
56.2%
54.1%
48.5%
46.8%
48.0%
Including changes in long service leave entitlement.
1. These amounts represent 100% of the amounts payable under the FY16 STI plan.
2.
LTI (share
LTI (share
LTI (share
LTI (share
3. These amounts represent the FY16 expense of the deferred component of the FY15 STI plan that was settled in shares in FY16.
based
based
based
based
4. Mr Cain commenced employment in Metcash on 1 August 2015 on fixed remuneration including superannuation of $1,250,000 p.a. The amounts disclosed above are in respect of Mr
payments)
payments)
FYFYFYFY15151515
payments)
payments)
$$$$
PostPostPostPost----
employment
employment
employment
employment
benefits ––––
benefits
STI STI STI STI
benefits
benefits
(cash)1111
superannuation
superannuation
(cash)
superannuation
superannuation
(cash)
(cash)
$$$$
$$$$
Cain’s remuneration from 1 August 2015 to 30 April 2016.
STI (share
STI (share
STI (share
STI (share
based
based
based
based
payments) 1111
payments)
payments)
payments)
$$$$
Fixed
Fixed
Fixed
Fixed
remuneration
remuneration
remuneration
remuneration
$$$$
Performance
Performance
Performance
Performance
related
related
related
related
%%%%
Termination
Termination
Termination
Termination
benefits
benefits
benefits
benefits
$$$$
Other
Other
Other
Other
benefits
benefits
benefits
benefits
$$$$
Leave2222
Leave
Leave
Leave
$$$$
Total
Total
Total
Total
$$$$
I Morrice
B Soller3
A Gratwicke5
F Collins6
M Laidlaw
S Marshall
Total
1,491,911
182,519
614,428
754,183
651,231
557,708
4,251,980
-
-
-
-
355,316
182,725
538,041
-
67,3284
-
12,833
-
-
80,161
18,615
4,070
13,919
17,050
18,615
18,615
90,884
-
-
663,750
650,250
-
-
1,314,000
-
-
-
17,864
15,662
19,251
52,777
977,813
26,792
-
70,668
182,103
153,999
1,411,375
-
-
-
32,022
154,353
60,908
247,283
2,488,339
280,709
1,292,097
1,554,870
1,377,280
993,206
7,986,501
39.3%
32.0%
0.0%
6.6%
50.2%
40.0%
28.3%
1. The STI (Cash) reward amount included in the table represents 75% of the total reward amount under the FY15 plan, which is payable in cash in July 2015. The STI (Share Based
Payments) reward amount represents the current year expense in relation to the 25% component of the FY15 plan and FY14 plan total reward amounts that are deferred and settled
in shares. These components are recognised in the financial results over the performance and forfeiture periods, which together are referred to as the ‘service period’. The service
period for the FY15 plan commenced on 1 May 2014 and concludes on 15 April 2016 and the service period for the FY14 plan commenced on 1 May 2013 and concluded on 15 April
2015.
Metcash Group |
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
2. This includes the movement in long service leave entitlement.
3. 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
44444444
February 2015 to 30 April 2015.
4. Mr Soller was not eligible for the FY15 STI scheme. Mr Soller received an individual performance bonus of $79,355 (FY15 expense: $63,161) for achievement of specific objectives in
FY15. Consistent with the Executive STI scheme 75% of the bonus is payable in cash in July 2015 with the remainder deferred, settled in shares and recognised over the service
period from 11 February 2015 to 15 April 2016.
5. 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 remuneration of $212,500 between 1 February 2015 and
his cessation of employment on 30 April 2015. All amounts paid to Mr Gratwicke were in accordance with his contractual entitlements.
6. Mr Collins was CEO, Supermarkets MFG from 1 May 2014 to 1 April 2015 and ceased 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 received fixed remuneration of $216,750 between 1 April 2015 and his
cessation of employment on 1 July 2015. All amounts paid to Mr Collins were in accordance with his contractual entitlements.
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
44444444
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
45454545
Metcash Annual Report 2016
Directors’ report (continued)
For the year ended 30 April 2016
7.7.7.7. Statutory disclosures
Statutory disclosures
Statutory disclosures
Statutory disclosures
7.1.7.1.7.1.7.1.
Fixed and at
Fixed and at----risk remuneration
risk remuneration
risk remuneration
risk remuneration
Fixed and at
Fixed and at
Fixed
Fixed
Fixed
Fixed
$$$$
1,808,219
844,699
959,510
665,229
654,136
4,931,793
STISTISTISTI
$$$$
1,725,000
1,115,000
600,000
785,000
750,000
4,975,000
I Morrice
B Soller
S Cain4
M Laidlaw
S Marshall
Total
FYFYFYFY16161616
remuneration
remuneration
remuneration
remuneration
(cash)1111 Other benefits
Other benefits
Other benefits
Other benefits
(cash)
(cash)
(cash)
superannuation
superannuation
superannuation
superannuation
benefits
benefits
benefits
benefits
Leave2222
Leave
Leave
Leave
payments)
payments)
payments)
payments)
PostPostPostPost----
employment
employment
employment
employment
benefits
benefits ----
benefits
benefits
Termination
Termination
Termination
Termination
$$$$
-
-
-
-
-
-
$$$$
19,221
19,221
14,481
19,221
19,221
91,365
LTI (share
LTI (share
LTI (share
LTI (share
based
based
based
based
$$$$
(574,437)
(24,177)
548,753
(182,103)
(153,999)
(385,963)
STI (share
STI (share
STI (share
STI (share
based
based
based
based
payments)3333
payments)
payments)
payments)
$$$$
-
16,194
-
57,619
30,454
104,267
$$$$
-
-
-
-
-
-
$$$$
-
-
-
16,327
37,419
53,746
Directors’ report (continued)
For the year ended 30 April 2016
7.2.7.2.7.2.7.2.
KMP performance rights holdings
KMP performance rights holdings
KMP performance rights holdings
KMP performance rights holdings
Name
Name
Name
Name
Balance at 1
Balance at 1
Balance at 1
Balance at 1
May 2015
May 2015
May 2015
May 2015
Granted during
Granted during
Granted during
Granted during
the year
the year
the year
the year
Total
Total
Total
Total
$$$$
I Morrice
B Soller
S Cain
M Laidlaw
S Marshall
Total
2,978,003
1,970,937
2,122,744
1,361,293
1,337,231
9,770,208
Performance
Performance
Performance
Performance
related
related
related
related
%%%%
38.6%
56.2%
54.1%
48.5%
46.8%
48.0%
2,882,563
512,458
-
518,677
395,079
4,308,777
-
17,582
3,186,068
102,125
53,978
3,359,753
Vested
Vested
Vested
Vested
during the
during the
during the
during the
year
year
year
year
-
(17,582)
-
(102,125)
(53,978)
(173,685)
Changed,
Changed,
Changed,
Changed,
forfeited or
forfeited or
forfeited or
forfeited or
lapsed
lapsed
lapsed
lapsed
during the
during the
during the
during the
year
year
year
year
-
-
-
(81,239)
(25,150)
(106,389)
Balance at 30
Balance at 30
Balance at 30
Balance at 30
April 2016
April 2016
April 2016
April 2016
Balance at
Balance at
Balance at
Balance at
report date1111
report date
report date
report date
2,882,563
512,458
3,186,068
437,438
369,929
7,388,456
1,601,424
170,820
3,186,068
-
-
4,958,312
1 The difference between the balances as at 30 April 2016 and as at the report date were due to the cancellation of Transformation Incentive
performance rights as noted in Section 3.2.3.
1. These amounts represent 100% of the amounts payable under the FY16 STI plan.
2.
Including changes in long service leave entitlement.
3. These amounts represent the FY16 expense of the deferred component of the FY15 STI plan that was settled in shares in FY16.
Cain’s remuneration from 1 August 2015 to 30 April 2016.
7.3.7.3.7.3.7.3.
KMP shareholdings
KMP shareholdings
KMP shareholdings
KMP shareholdings
Name
Name
Name
Name
Balance at 1
Balance at 1
Balance at 1
Balance at 1
May 2015
May 2015
May 2015
May 2015
Granted as
Granted as
Granted as
Granted as
remunerationnnn1111
remuneratio
remuneratio
remuneratio
On market
On market
On market
On market
trade
trade
trade
trade
Other
Other
Other
Other
adjustments2222
adjustments
adjustments
adjustments
Balance at 30
Balance at 30
Balance at 30
Balance at 30
April 2016
April 2016
April 2016
April 2016
Balance at
Balance at
Balance at
Balance at
report date
report date
report date
report date
4. Mr Cain commenced employment in Metcash on 1 August 2015 on fixed remuneration including superannuation of $1,250,000 p.a. The amounts disclosed above are in respect of Mr
Directors
Directors
Directors
Directors
R Murray
I Morrice
P Allaway
F Balfour
M Butler
T Dwyer
N Hamilton
M Jordan
H Nash
P Barnes
E Jankelowitz
M McMahon
Executives
Executives
Executives
Executives
B Soller
S Cain
M Laidlaw
S Marshall
Total
-
117,517
106,786
32,804
60,749
40,000
121,318
-
-
201,243
320,000
30,000
-
-
55,627
-
1,086,044
-
-
-
-
-
-
-
-
-
-
-
-
17,582
-
102,125
53,978
173,685
44,005
180,000
100,000
50,000
-
-
-
-
32,431
-
-
-
-
100,000
-
-
506,436
-
-
-
-
-
-
-
-
-
(201,243)
(320,000)
(30,000)
-
-
-
-
(551,243)
44,005
297,517
206,786
82,804
60,749
40,000
121,318
-
32,431
-
-
-
44,005
297,517
206,786
82,804
60,749
40,000
121,318
-
32,431
-
-
-
17,582
100,000
157,752
53,978
1,214,922
17,582
100,000
157,752
53,978
1,214,922
Metcash Group |
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
44444444
1 Shares granted as remuneration reflect the 25% component of the FY15 STI plan total reward amount that was deferred and issued as shares on 15
April 2016. These shares are restricted from trading until 15 August 2016.
2 Reflecting changes in KMP composition.
This concludes the remuneration report.
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
45
46464646
Directors’ Report
For the year ended 30 April 2016
Directors’ report (continued)
For the year ended 30 April 2016
Other disclosures
Other disclosures
Other disclosures
Other disclosures
hare options and performance rights
under share options and performance rights
Unissued shares under s
Unissued shares
hare options and performance rights
hare options and performance rights
under s
under s
Unissued shares
Unissued shares
At the date of this report, there were 4,958,312 unissued ordinary shares under performance rights (12,497,505 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 20 of the financial
statements for further details of the performance rights.
options and performance rights
Shares issued as a result of options and performance rights
Shares issued as a result of
options and performance rights
options and performance rights
Shares issued as a result of
Shares issued as a result of
In April 2016, 173,685 shares were issued to executives, which represented the 25% deferred component of the FY15 STI reward (refer
note 20). 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.
audit services
NonNonNonNon----audit services
audit services
audit services
The following non-audit services were provided by the entity’s auditor, Ernst & Young. The Directors are satisfied that the provision of
non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The
nature and scope of each type of non-audit service provided means that auditor independence was not compromised.
The auditor’s independence declaration for the year ended 30 April 2016 has been received and is included on page 94.
1
Ernst & Young received or are due to receive the following amounts for the provision of non-audit services:
Tax compliance and advisory services
Assurance and other advisory services
Subsequent events
Subsequent events
Subsequent events
Subsequent events
$397,000
$557,000
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.
Rounding
Rounding
Rounding
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.
Signed in accordance with a resolution of the Directors.
Ian Morrice
Ian Morrice
Ian Morrice
Ian Morrice
Director
Sydney, 20 June 2016
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
Metcash Annual Report 2016
47474747
Statement of Comprehensive Income
Statement of comprehensive income
For the year ended 30 April 2016
For the year ended 30 April 2016
Sales revenue
Cost of sales
Gross profit
Gross profit
Gross profit
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
Profit/(loss) from continuing operations before income tax
Profit/(loss) from continuing operations before income tax
Profit/(loss) from continuing operations before income tax
Income tax expense from continuing operations
Net profit/(loss) for the year from continuing operations
Net profit/(loss) for the year from continuing operations
Net profit/(loss) for the year from continuing operations
Net profit/(loss) for the year from continuing operations
Net profit after tax for the year from discontinued operations
for the year
Net profit/(loss) for the year
Net profit/(loss)
for the year
for the year
Net profit/(loss)
Net profit/(loss)
Net profit/(loss) for the year is attributable to:
Equity holders of the parent
Equity holders of the parent
Equity holders of the parent
Equity holders of the parent
Non-controlling interests
Other comprehensive income
Other comprehensive income
Other comprehensive income
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
Other comprehensive income/(loss) for the year, net of tax
Other comprehensive income/(loss) for the year, net of tax
Other comprehensive income/(loss) for the year, net of tax
Total comprehensive income/(loss) for the year
Total comprehensive income/(loss) for the year
Total comprehensive income/(loss) for the year
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 attributable to the ordinary equity holders of the Company
Earnings per share attributable to the ordinary equity holders of the Company
Earnings per share attributable to the ordinary equity holders of the Company
Earnings per share attributable to the ordinary equity holders of the Company
From continuing operations for the year
- basic earnings per share (cents)
- diluted earnings per share (cents)
From discontinued operations for the year
- basic earnings per share (cents)
- diluted earnings per share (cents)
From net profit/(loss) for the year
- basic earnings per share (cents)
- diluted earnings per share (cents)
Notes
Notes
Notes
Notes
2016
2016
2016
2016
$m$m$m$m
2015
2015
2015
2015
$m$m$m$m
13,541.3
(12,412.3)
1,129.0
1,129.0
1,129.0
1,129.0
13,369.8
(12,211.5)
1,1,1,1,111158585858....3333
3
8
3
3
4
24
23
23
23
23
23
23
138.4
(475.2)
(509.8)
7.1
-
(41.1)
248.4
248.4
248.4
248.4
(68.4)
180.0
180.0
180.0
180.0
38.2
218.2
218.2
218.2
218.2
216.5
216.5
216.5
216.5
1.7
218.2
(1.0)
1.6
(0.6)
----
218.2
218.2
218.2
218.2
216.5
1.7
218.2
218.2
218.2
218.2
19.2
19.2
4.1
4.1
23.3
23.3
134.0
(449.0)
(540.6)
3.1
(638.8)
(63.6)
(3(3(3(396.96.96.96.6666))))
(5.6)
402.2222))))
((((402.
402.
402.
19.4
(382.8)
(382.8)
(382.8)
(382.8)
(384.2)
(384.2)
(384.2)
(384.2)
1.4
(382.8)
0.3
(5.5)
1.8
(3.4)
(3.4)
(3.4)
(3.4)
(386.2)
(386.2)
(386.2)
(386.2)
(387.6)
1.4
(386.2)
(386.2)
(386.2)
(386.2)
(44.5)
(44.5)
2.1
2.1
(42.4)
(42.4)
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes. The comparatives have
been restated to reclassify the Automotive business to discontinued operations.
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
47
49494949
Statement of Financial Position
Statement of financial position
As at 30 April 2016
As at 30 April 2016
ASSETS
ASSETS
ASSETS
ASSETS
Current assets
Current assets
Current 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
Total current assets
Total current assets
Total current assets
NonNonNonNon----current assets
current assets
current assets
current assets
Derivative financial instruments
Trade receivables and loans
Equity-accounted investments
Property, plant and equipment
Net deferred tax assets
Intangible assets and goodwill
current assets
Total non----current assets
Total non
current assets
current assets
Total non
Total non
TOTAL ASSETS
TOTAL ASSETS
TOTAL ASSETS
TOTAL ASSETS
LIABILITIES
LIABILITIES
LIABILITIES
LIABILITIES
Current liabilities
Current liabilities
Current liabilities
Current liabilities
Trade and other payables
Interest bearing borrowings
Derivative financial instruments
Provisions
Income tax payable
Other financial liabilities
Total current liabilities
Total current liabilities
Total current liabilities
Total current liabilities
NonNonNonNon----current liabilities
current liabilities
current liabilities
current liabilities
Interest bearing borrowings
Provisions
Derivative financial instruments
Other financial liabilities
current liabilities
Total non----current liabilities
Total non
current liabilities
current liabilities
Total non
Total non
TOTAL LIABILITIES
TOTAL LIABILITIES
TOTAL LIABILITIES
TOTAL LIABILITIES
ASSETS
NETNETNETNET ASSETS
ASSETS
ASSETS
EQUITY
EQUITY
EQUITY
EQUITY
Contributed and other equity
Retained earnings/(accumulated losses)
Other reserves
Parent interest
Non-controlling interests
TOTAL EQUITY
TOTAL EQUITY
TOTAL EQUITY
TOTAL EQUITY
Notes
Notes
Notes
Notes
2016
2016
2016
2016
$m$m$m$m
2015
2015
2015
2015
$m$m$m$m
6
7
7
6
8
9
4
10
11
7
12
13
11
12
7
13
14
14
26.4
981.4
673.6
32.1
-
10.8
1,1,1,1,777724242424....3333
12.1
15.9
102.9
251.9
113.5
1,127.5
1,1,1,1,666623232323....8888
3,33,33,33,344448.18.18.18.1
1,356.9
15.7
1.8
140.4
15.8
13.6
1,51,51,51,544.44.44.44.2222
299.4
123.8
3.9
7.7
444434.34.34.34.8888
1,971,971,971,979999....0000
1,31,31,31,369696969....1111
1,626.0
(259.6)
(5.6)
1,360.8
8.3
1,369.1
1,369.1
1,369.1
1,369.1
83.3
1,014.5
712.5
26.1
0.2
13.5
1,850.1
1,850.1
1,850.1
1,850.1
104.2
25.6
102.1
276.0
124.4
1,284.5
1,916.8
1,916.8
1,916.8
1,916.8
3,766.9
3,766.9
3,766.9
3,766.9
1,419.1
63.2
0.8
127.6
9.1
22.3
1,642.1
1,642.1
1,642.1
1,642.1
794.8
144.4
6.3
22.7
968.2
968.2
968.2
968.2
2,610.3
2,610.3
2,610.3
2,610.3
1,156.6
1,156.6
1,156.6
1,156.6
1,626.0
(475.8)
(1.3)
1,148.9
7.7
1,156.6
1,156.6
1,156.6
1,156.6
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
Metcash Annual Report 2016
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
50505050
Statement of Changes in Equity
For the year ended 30 April 2016
Statement of changes in equity
For the year ended 30 April 2016
Contributed
Contributed
Contributed
Contributed
and other
and other
and other
and other
equity
equity
equity
equity
$m$m$m$m
Retained
Retained
Retained
Retained
earnings/
earnings/
earnings/
earnings/
(accumulated
(accumulated
(accumulated
(accumulated
losses)
losses)
losses)
losses)
$m$m$m$m
Other
Other
Other
Other
reserves
reserves
reserves
reserves
$m$m$m$m
Owners
Owners
Owners
Owners
of the parent
of the parent
of the parent
of the parent
$m$m$m$m
NonNonNonNon----
controlling
controlling
controlling
controlling
interests
interests
interests
interests
$m$m$m$m
Total
Total
Total
Total
equity
equity
equity
equity
$m$m$m$m
1,626.0
1,626.0
1,626.0
1,626.0
-
-
-
-
1,626.0
1,626.0
1,626.0
1,626.0
1,542.2
1,542.2
1,542.2
1,542.2
-
84.1
(0.3)
-
1,626.0
1,626.0
1,626.0
1,626.0
(475.8)
(475.8)
(475.8)
(475.8)
216.5
-
-
(0.3)
(259.6666))))
(259.
(259.
(259.
47.147.147.147.1
(384.2)
(138.7)
-
-
(475.8)
(475.8)
(475.8)
(475.8)
((((1.31.31.31.3))))
-
-
(4.3)
-
(5.(5.(5.(5.6666))))
(2.9)
(2.9)
(2.9)
(2.9)
(3.4)
-
-
5.0
((((1.31.31.31.3))))
1,148.9
1,148.9
1,148.9
1,148.9
216.5
-
(4.3)
(0.3)
1,360.8
1,360.8
1,360.8
1,360.8
1,586.4
1,586.4
1,586.4
1,586.4
(387.6)
(54.6)
(0.3)
5.0
1,148.9
1,148.9
1,148.9
1,148.9
7.77.77.77.7
1.7
1,156.6
1,156.6
1,156.6
1,156.6
218.2
(1.4)
-
0.3
8.38.38.38.3
7.67.67.67.6
1.4
(1.3)
-
-
7.77.77.77.7
(1.4)
(4.3)
-
1,369.1
1,369.1
1,369.1
1,369.1
1,594.0
1,594.0
1,594.0
1,594.0
(386.2)
(55.9)
(0.3)
5.0
1,156.6
1,156.6
1,156.6
1,156.6
At 1 May 2015
At 1 May 2015
At 1 May 2015
At 1 May 2015
Total comprehensive income, net of tax
Transactions
owners
Transactions withwithwithwith owners
owners
owners
Transactions
Transactions
Dividends paid (Note 5)
Share-based payments
Transfers and other adjustments
April 2016
At 30 April 2016
At 30
April 2016
April 2016
At 30At 30
At 1 May 2014
At 1 May 2014
At 1 May 2014
At 1 May 2014
Total comprehensive income, net of tax
Transactions
owners
Transactions with with with with owners
owners
owners
Transactions
Transactions
Dividends paid including DRP (Note 5)
Share issue costs net of tax
Share-based payments
At 30 April 2015
At 30 April 2015
At 30 April 2015
At 30 April 2015
Refer note 14 for details on equity and reserves.
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
51515151
49
Statement of Cash Flows
Statement of cash flows
For the year ended 30 April 2016
For the year ended 30 April 2016
Cash flows from operating activities
Cash flows from operating activities
Cash flows from operating activities
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Dividends received
Interest received
Interest gain on finance facility restructure
Finance costs
Income tax paid, net of tax refunds
Net cash generated by operating activities
Net cash generated by operating activities
Net cash generated by operating activities
Net cash generated by operating activities
Cash flows from investing activities
Cash flows from investing activities
Cash flows from investing activities
Cash flows from investing activities
Proceeds from sale of discontinued operations
Proceeds from sale of business assets
Payments for acquisition of business assets
Payment on acquisition of businesses and equity-accounted investments
Proceeds from loans repaid by other entities
Loans to other entities
investing activities
used in)))) investing activities
from/(used in
Net cash from/(
Net cash
investing activities
investing activities
used in
used in
from/(
from/(
Net cash
Net cash
Cash flows from financing activities
Cash flows from financing activities
Cash flows from financing activities
Cash flows from financing activities
Share issue costs, including share based payments
Repayments of borrowings, net
Payment of dividends on ordinary shares
Payment of dividends to non-controlling interests
Repayment of finance lease principal
activities
Net cash used in financing activities
Net cash used in financing
activities
activities
Net cash used in financing
Net cash used in financing
Net increase/(decrease) in cash and cash equivalents
Net increase/(decrease) in cash and cash equivalents
Net increase/(decrease) in cash and cash equivalents
Net increase/(decrease) in cash and cash equivalents
Add opening cash and cash equivalents
Cash and cash equivalents at the end of the year
Cash and cash equivalents at the end of the year
Cash and cash equivalents at the end of the year
Cash and cash equivalents at the end of the year
Notes
Notes
Notes
Notes
2016
2016
2016
2016
$m$m$m$m
2015
2015
2015
2015
$m$m$m$m
15
14
5
14,864.6
(14,620.8)
2.8
4.5
9.5
(31.1)
(63.7)
111165656565.8.8.8.8
14,945.9
(14,601.3)
5.4
8.5
-
(43.6)
(83.2)
231.7
231.7
231.7
231.7
242.1
57.3
(64.9)
(15.6)
30.2
(11.7)
237237237237....4444
(0.6)
(449.5)
-
(5.8)
(4.2)
(46(46(46(460000....1111))))
(5(5(5(56666.9).9).9).9)
83.3
22226666.4.4.4.4
-
41.0
(85.9)
(42.0)
28.2
(16.2)
(74.9)
(74.9)
(74.9)
(74.9)
(0.4)
(37.1)
(54.6)
(1.6)
(4.5)
(98.2)
(98.2)
(98.2)
(98.2)
58.6
58.6
58.6
58.6
24.7
83.383.383.383.3
The above Statement of Cash Flows should be read in conjunction with the accompanying notes.
Metcash Annual Report 2016
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
52525252
Notes to the Financial Statements
Notes to the financial statements
For the year ended 30 April 2016
For the year ended 30 April 2016
orporate information
1.1.1.1. CCCCorporate information
orporate information
orporate information
The financial statements of Metcash Limited (the ‘Company’) and its controlled entities (together the ‘Group’) for the year ended 30 April
2016 were authorised for issue in accordance with a resolution of the Directors on 20 June 2016.
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 1 Thomas Holt Drive, 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
2.2.2.2. Segment information
Segment information
Segment information
The Group has identified its operating segments based on the internal reports that are reviewed and used by the Chief Executive Officer
(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.
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
Food & Grocery activities comprise the distribution of dry grocery, perishable and general merchandise supplies to retail outlets.
Food & Grocery
Food & Grocery
•
Liquor
Liquor activities comprise the distribution of liquor products to retail outlets and hotels.
Liquor
Liquor
• Hardware
Hardware activities comprise the distribution of hardware supplies to retail outlets and trade customers.
Hardware
Hardware
Geographically the Group operates predominantly in Australia. The New Zealand operations represent less than 5% of revenue, results
and assets of the Group.
The selling price between segments is at normal selling prices and is paid under similar terms and conditions as other customers of the
Group. Segment results exclude results from discontinued operations. The comparative segment results have been restated to
reclassify the Automotive pillar to discontinued operations. Refer to note 24 for further details.
The Group does not have a single customer which represents greater than 10% of the Group's revenue.
Segment results
Segment results
Segment results
Segment results
revenue
Segment revenue
Segment
revenue
revenue
Segment
Segment
Segment profit before tax
Segment profit before tax
Segment profit before tax
Segment profit before tax
Food & Grocery
Liquor
Hardware
Segment results
Corporate
Group earnings before interest and tax (‘EBIT’)
Net finance costs
Significant items (refer note 3(b))
Net profit/(loss) before tax from continuing operations
2016
2016
2016
2016
$m$m$m$m
9,265.4
3,219.3
1,056.6
13,541.3
2015
2015
2015
2015
$m$m$m$m
9,217.8
3,103.6
1,048.4
13,369.8
2016
2016
2016
2016
$m$m$m$m
179.9
62.1
32.8
274.8
0.6
275.4
(27.0)
-
248.4
2015
2015
2015
2015
$m$m$m$m
216.8
57.6
30.1
304.5
(7.2)
297.3
(55.1)
(638.8)
(396.6)
Metcash Group | Financial Report 2016
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Metcash Group |
Metcash Group |
51
53535353
Notes to the Financial Statements
For the year ended 30 April 2016
Notes to the financial statements (continued)
For the year ended 30 April 2016
evenue and expenses
3.3.3.3. RRRRevenue and expenses
evenue and expenses
evenue and expenses
(i)(i)(i)(i) Other income
Other income
Other income
Other income
Lease income – rent
Lease income – outgoings recoveries
Interest from other persons/corporations
Other interest income – credit value adjustments and finance facility restructure (a)
Net gain from disposal of surplus property
Net gain from disposal of other property, plant and equipment
(ii)(ii)(ii)(ii) Operating lease
expenses
Operating lease expenses
expenses
expenses
Operating lease
Operating lease
Property rent – stores
Property rent – warehouse and other properties
Property outgoings
Equipment and other leases
Employee benefit expensessss
(iii) Employee benefit expense
(iii)
Employee benefit expense
Employee benefit expense
(iii)
(iii)
Salaries and wages
Defined contribution plan expense
Share based payments
Working Smarter restructure expense
Other employee benefit expenses
(iv)
Depreciation and amortisation
(iv) Depreciation and amortisation
Depreciation and amortisation
Depreciation and amortisation
(iv)
(iv)
Depreciation of property, plant and equipment
Amortisation of software
Amortisation of other intangible assets
(v)(v)(v)(v) Provisions for impairment, net of reversals
Provisions for impairment, net of reversals
Provisions for impairment, net of reversals
Provisions for impairment, net of reversals
Trade receivables and loans
Inventories
Property, plant and equipment
(vi)
(b)
Significant items (b)
(vi) Significant items
(b)(b)
Significant items
Significant items
(vi)
(vi)
Impairment of goodwill, other assets and related charges
Acquisition and restructure costs
Automotive put option re-measurement gain (Note 13)
Total significant items expense before tax
Income tax benefit attributable to these items
Total significant items expense after tax
(vii)
Finance costs
(vii) Finance costs
Finance costs
Finance costs
(vii)
(vii)
Interest expense
Deferred borrowing costs
Finance costs from discounting of provisions
Metcash Annual Report 2016
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
54545454
2016
2016
2016
2016
$m$m$m$m
81.6
26.5
4.5
9.6
14.4
1.8
138.4
84.9
81.5
37.9
21.8
226.1
480.1
37.1
(3.7)
9.1
42.0
564.6
35.3
16.0
9.0
60.3
18.7
18.9
8.3
45.9
-
-
-
-
-
-
31.0
1.1
9.0
41.1
2015
2015
2015
2015
$m$m$m$m
92.9
30.9
8.5
-
-
1.7
134.0
91.4
84.1
41.2
22.0
238.7
453.9
38.3
5.1
-
46.0
543.3
35.8
16.3
14.3
66.4
20.7
15.2
-
35.9
640.0
7.0
(8.2)
638.8
(61.6)
577.2
52.7
0.8
10.1
63.6
Notes to the financial statements (continued)
For the year ended 30 April 2016
3.3.3.3. Revenue and expenses (continued)
Revenue and expenses (continued)
Revenue and expenses (continued)
Revenue and expenses (continued)
Finance facility restructure
(a)(a)(a)(a) Finance facility restructure
Finance facility restructure
Finance facility restructure
During the year, Metcash bought back US$200 million of US Private Placement (USPP) notes, leaving a residual USPP debt and facility of
US$25 million. In addition, US$200 million of cross currency interest rate swap contracts were terminated and $425.0 million of interest
rate swap contracts were closed out by an offsetting interest rate swap contract. The buyback of the notes and termination of swaps
resulted in a net gain of $9.6 million during the year, including the reversal of credit value adjustments against the swaps. Other facility
limits were also reduced by $126.7 million. Refer note 16 for further details of the Group’s borrowing facilities.
Significant items
(b) Significant items
(b)
Significant items
Significant items
(b)(b)
During the prior year, the Group recognised $638.8 million in impairments and related charges within ‘significant items’. These expenses
arose as a consequence of a highly competitive trading environment (particularly in relation to Food & Grocery) and a rationalisation of
the retail store network, resulting in store closures.
The impairment charge primarily included $506.7 million relating to intangible assets (note 10) and $39.5 million relating to property
and investments (notes 8 and 9).
Income tax
4.4.4.4. Income tax
Income tax
Income tax
Major components of income tax expense
Major components of income tax expense
Major components of income tax expense
Major components of income tax expense
Current income tax charge
Adjustments in respect of income tax of previous years
Deferred income tax relating to origination and reversal of temporary differences
Total income tax expense
expense
ncome tax expense
Classification of income tax
Classification of i
expense
expense
ncome tax
ncome tax
Classification of i
Classification of i
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 expense attributable to discontinued operations
Total income tax expense
2016
2016
2016
2016
$m$m$m$m
76.3
(4.8)
10.3
81.8
-
68.4
68.4
13.4
81.8
2015
2015
2015
2015
$m$m$m$m
70.2
(2.8)
(53.4)
14.0
(61.6)
67.2
5.6
8.4
14.0
Reconciliation of
from continuing operations
income tax expense from continuing operations
Reconciliation of income tax expense
from continuing operations
from continuing operations
income tax expense
income tax expense
Reconciliation of
Reconciliation of
The following table presents a reconciliation between the tax expense implied by the Group’s applicable income tax rate and the actual
expense for the year.
Accounting profit/(loss) from continuing operations before income tax
At the Group’s statutory income tax rate of 30% (2015: 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
Income tax expense attributable to continuing operations
248.4
74.5
4.8
-
0.6
(2.9)
(3.8)
(4.8)
68.4
(396.6)
(119.0)
0.8
130.0
-
(1.3)
(2.1)
(2.8)
5.6
Metcash Group | Financial Report 2016
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Metcash Group |
Metcash Group |
53
55555555
Notes to the Financial Statements
For the year ended 30 April 2016
Notes to the financial statements (continued)
For the year ended 30 April 2016
Income tax (continued)
4.4.4.4. Income tax (continued)
Income tax (continued)
Income tax (continued)
Components of d
eferred tax assets
Components of deferred tax assets
eferred tax assets
eferred tax assets
Components of d
Components of d
Provisions
Unutilised tax losses
Accelerated depreciation for accounting purposes
Other
Intangible assets (set off of deferred tax liabilities)
Movements in
deferred tax assets
Movements in deferred tax assets
deferred tax assets
deferred tax assets
Movements in
Movements in
Opening balance
Credited/(charged) to net profit for the year
Credited/(charged) to other comprehensive income for the year
Adjustments related to business combinations
Closing balance
2016
2016
2016
2016
$m$m$m$m
2015
2015
20152015
$m$m$m$m
131.7
2.5
4.8
8.9
(34.4)
113.5
124.4
(10.3)
(0.6)
-
113.5
147.0
5.0
7.2
8.0
(42.8)
124.4
70.4
53.4
1.8
(1.2)
124.4
The Group has unrecognised gross capital losses of $12.6 million (2015: $16.6 million) that are available indefinitely for offset against future
capital gains.
Tax consolidation
Tax consolidation
Tax consolidation
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
Tax effect accounting by members of the tax consolidated group
Tax effect accounting by members of the tax consolidated group
Tax effect accounting by members of the tax consolidated group
Members of the tax consolidated group have entered into a tax funding agreement. The tax funding agreement provides for the
allocation of current taxes to members of the tax consolidated group in accordance with a group allocation method using modified
stand alone tax calculation as the basis for allocation. Deferred taxes of members of the tax consolidated group are measured and
recognised in accordance with the principles of AASB 112 Income Taxes.
Under the tax funding agreement, funding is based upon the amounts allocated and recognised by the member entities. Accordingly,
funding results in an increase/decrease in the subsidiaries’ intercompany accounts with the tax consolidated group head company,
Metcash Limited.
Metcash Annual Report 2016
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
56565656
Notes to the financial statements (continued)
For the year ended 30 April 2016
ividends paid and proposed
5.5.5.5. DDDDividends paid and proposed
ividends paid and proposed
ividends paid and proposed
paid and declared on ordinary shares during the year
Dividends paid and declared on ordinary shares during the year
Dividends
paid and declared on ordinary shares during the year
paid and declared on ordinary shares during the year
Dividends
Dividends
Dividends paid on ordinary shares during the year
Dividends paid on ordinary shares during the year
Dividends paid on ordinary shares during the year
Dividends paid on ordinary shares during the year
Final fully franked dividend for 2015: nil (2014: 9.0c)
Interim fully franked dividend for 2016: nil (2015: 6.5c)
Dividends declared during the year
Shares issued under the DRP
Shares issued under DRP underwriting agreement
Cash dividends paid on ordinary shares during the year
liability as at 30 April)
Dividends declared (not recognised as a liability as at 30 April)
Dividends declared (not recognised as a
liability as at 30 April)
liability as at 30 April)
Dividends declared (not recognised as a
Dividends declared (not recognised as a
Final fully franked dividend for 2016: nil (2015: nil)
2016
2016
2016
2016
$m$m$m$m
-
-
-
-
-
-
-
2015
2015
2015
2015
$m$m$m$m
80.0
58.7
138.7
(38.2)
(45.9)
54.6
-
In line with the Board’s previous announcement, a final dividend was not paid for FY15 and no interim or final dividend was declared in
relation to FY16.
Under the Dividend Reinvestment Plan (DRP), eligible shareholders may elect to reinvest all or part of their dividends in acquiring
additional Metcash shares. The full terms and conditions of the DRP were announced on 2 December 2013 and amended on 19 May 2014.
nking credit balance of Metcash Limited
FraFraFraFranking credit balance of Metcash Limited
nking credit balance of Metcash Limited
nking credit balance of Metcash Limited
Franking account balance as at the end of the financial year at 30% (2015: 30%)
Franking credits that will arise from the payment of income tax payable at the reporting date
Franking credits on dividends declared but not distributed to shareholders during the year
Tax rates
Tax rates
Tax rates
Tax rates
Dividends paid and declared in 2015 were fully franked at the rate of 30%.
2016
2016
2016
2016
$m$m$m$m
129.7
15.2
-
144.9
2015
2015
2015
2015
$m$m$m$m
62.8
9.1
-
71.9
Metcash Group | Financial Report 2016
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Metcash Group |
Metcash Group |
55
57575757
Notes to the Financial Statements
For the year ended 30 April 2016
Notes to the financial statements (continued)
For the year ended 30 April 2016
rade receivables and loans
6.6.6.6. TTTTrade receivables and loans
rade receivables and loans
rade receivables and loans
Current
Current
Current
Current
Trade receivables - securitised (Note 16)
Trade receivables - non-securitised
Allowance for impairment loss
Marketing and other receivables
Trade and other receivables
Customer loans
Allowance for impairment loss
Customer loans
Total trade receivables and loans - current
NonNonNonNon----current
current
current
current
Customer loans
Allowance for impairment loss
Customer loans
Other receivables
Total trade receivables and loans – non-current
Movements in allowance for impairment loss
Movements in allowance for impairment loss
Movements in allowance for impairment loss
Movements in allowance for impairment loss
Opening balance
Charged as an expense during the year
Accounts written off as non-recoverable
Related to acquisitions and disposals of businesses
Closing balance
2016
2016
2016
2016
$m$m$m$m
732.6
186.3
(45.0)
873.9
82.1
956.0
33.1
(7.7)
25.4
981.4
21.8
(6.8)
15.0
0.9
15.9
2016
2016
2016
2016
$m$m$m$m
74.7
18.7
(32.7)
(1.2)
59.5
2015
2015
2015
2015
$m$m$m$m
744.3
200.9
(54.3)
890.9
82.6
973.5
61.4
(20.4)
41.0
1,014.5
23.5
-
23.5
2.1
25.6
2015
2015
20152015
$m$m$m$m
68.6
49.4
(44.2)
0.9
74.7
Weighted average interest
Weighted average interest
Weighted average interest
Weighted average interest
Trade receivables, marketing and other receivables are non-interest bearing and repayment terms vary by business unit. As at 30 April
2016, $5.1 million (2015: $5.0 million) of customer loans are non-interest bearing and $49.8 million (2015: $79.9 million) of customer
loans have a weighted average annual interest rate of 8.9% (2015: 9.2%).
of trade receivables
aturity of trade receivables
MMMMaturity
of trade receivables
of trade receivables
aturity
aturity
At 30 April 2016, 77.8% of trade receivables are either due or required to be settled within 30 days (2015: 77.4%), 21.5% have terms
extending from 30 to 60 days (2015: 21.9%) and 0.7% have terms greater than 60 days (2015: 0.7%).
Customer loan security
Customer loan security
Customer loan security
Customer loan security
The Group has access to security against most customer loans in the event of default. Security held may include bank and personal
guarantees, fixed and floating charges and security over property and other assets. Due to the large number and the varied nature of
security held, their fair value cannot be practicably estimated. A provision for impairment is raised when the fair value of the security
does not cover the carrying value of the loan and the loan is not deemed to be recoverable.
Metcash Annual Report 2016
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
58585858
Notes to the financial statements (continued)
For the year ended 30 April 2016
ontinued)
Trade receivables and loans (c(c(c(continued)
6.6.6.6. Trade receivables and loans
ontinued)
ontinued)
Trade receivables and loans
Trade receivables and loans
trade receivables and loans
unimpaired trade receivables and loans
Ageing of unimpaired
Ageing of
trade receivables and loans
trade receivables and loans
unimpaired
unimpaired
Ageing of
Ageing of
Days overdue
Days overdue
Days overdue
Days overdue
$m$m$m$m
%%%%
$m$m$m$m
%%%%
$m$m$m$m
%%%%
receivables
Trade receivables
Trade
receivables
receivables
Trade
Trade
Customer loans
Customer loans
Customer loans
Customer loans
Marketing and other
Marketing and other
Marketing and other
Marketing and other
receivables
receivables
receivables
receivables
At 30 April 2016
At 30 April 2016
At 30 April 2016
At 30 April 2016
Neither past due nor impaired
Less than 30 days
Between 30 and 60 days
Between 60 and 90 days
Between 90 and 120 days
More than 120 days
Total
At 30 April 2015
At 30 April 2015
At 30 April 2015
At 30 April 2015
Neither past due nor impaired
Less than 30 days
Between 30 and 60 days
Between 60 and 90 days
Between 90 and 120 days
More than 120 days
Total
837.2
32.8
2.8
0.8
0.2
0.1
873.9
818.1
61.2
8.1
3.5
-
-
890.9
95.8%
3.8%
0.3%
0.1%
-
-
100%
91.8%
6.9%
0.9%
0.4%
-
-
100.0%
31.0
-
0.3
-
1.6
7.5
40.4
55.7
0.8
0.2
2.1
0.5
5.2
64.5
76.7%
-
0.7%
-
4.0%
18.6%
100.0%
86.4%
1.2%
0.3%
3.3%
0.7%
8.1%
100.0%
50.9
30.6
0.5
0.5
0.1
0.4
83.0
56.5
26.2
0.3
0.9
0.1
0.7
84.7
The Group expects that the unimpaired trade receivables and loans presented above are fully recoverable.
instruments
Derivative financial instruments
7.7.7.7. Derivative financial
instruments
instruments
Derivative financial
Derivative financial
Current assets
Current assets
Current assets
Current assets
Foreign currency forward contracts
NonNonNonNon----current assets
current assets
current assets
current assets
Cross currency interest rate swaps – US Private Placement (Note 16)
Interest rate swap contracts
Current liabilities
Current liabilities
Current liabilities
Current liabilities
Interest rate swap contracts
Foreign currency forward contracts
current liabilities
NonNonNonNon----current liabilities
current liabilities
current liabilities
Interest rate swap contracts
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
57
59595959
2016
2016
2016
2016
$m$m$m$m
-
-
12.0
0.1
12.1
0.7
1.1
1.8
3.9
3.9
61.3%
36.9%
0.6%
0.6%
0.1%
0.5%
100.0%
66.7%
30.9%
0.4%
1.1%
0.1%
0.8%
100.0%
2015
2015
2015
2015
$m$m$m$m
0.2
0.2
104.2
-
104.2
0.6
0.2
0.8
6.3
6.3
Notes to the Financial Statements
For the year ended 30 April 2016
Notes to the financial statements (continued)
For the year ended 30 April 2016
accounted investments
quity----accounted investments
8.8.8.8. EEEEquity
accounted investments
accounted investments
quity
quity
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
Investee
Investee
Investee
Principal activities
Principal activities
Principal activities
Principal activities
Reporting date
Reporting date
Reporting date
Reporting date
2016
2016
2016
2016
%%%%
2012012012015555
%%%%
Associates
Associates
Associates
Associates
Abacus Independent Retail Property Trust
Ritchies Stores Pty Ltd
BMS Retail Group Holdings Pty Ltd
Dramet Holdings Pty Ltd
Retail property investment
Grocery retailing
Grocery retailing
Grocery retailing
Joint ventures
Joint ventures
Joint ventures
Joint ventures
Adcome Pty Ltd
Lecome Pty Ltd
Progressive Trading Pty Ltd
Metfood 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
Mermaid Tavern (Trading) Pty Ltd
Sunshine Coast Hotels Pty Ltd
Queens Arms Hotel New Farm Pty Ltd
Queens Arms Freehold Pty Ltd
Grocery retailing
Grocery retailing
Grocery retailing
Merchandise services
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 April
30 April
30 April
30 April
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
-
-
49.0
49.0
-
49.0
46.0
26.0
-
-
-
-
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
46.0
26.0
50.0
50.0
50.0
50.0
During the year, the Group acquired controlling equity interests in Northern Hardware Group Pty Ltd, Timberten Pty Ltd and Mermaid
Tavern (Trading) Pty Ltd. Refer Appendix B for further information related to controlled entities.
Contingent liabilities and commitments
Contingent liabilities and commitments
Contingent liabilities and commitments
Contingent liabilities and commitments
Refer notes 13 and 16 for details of the Group’s contingent liabilities in relation to equity-accounted investments.
Share of investees’ profit
Share of investees’ profit
Share of investees’ profit
Share of investees’ profit
At the reporting date, the equity-accounted investments are not individually material to the Group. In aggregate, the Group’s share of
income from equity-accounted investments was $7.1 million (FY15: 3.1 million) during the year, which includes a $3.1 million (FY15: $1.3
million) share of income tax expense incurred by the investees.
At the reporting date, the Group’s share of unrecognised gains or losses is not material.
Metcash Annual Report 2016
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
60606060
Notes to the financial statements (continued)
For the year ended 30 April 2016
accounted investments (continued)
Equity----accounted investments (continued)
8.8.8.8. Equity
accounted investments (continued)
accounted investments (continued)
Equity
Equity
hare of investees’ net assets
SSSShare of investees’ net assets
hare of investees’ net assets
hare of investees’ net assets
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Notes to the financial statements (continued)
For the year ended 30 April 2016
roperty, plant and equipment
9.9.9.9. PPPProperty, plant and equipment
roperty, plant and equipment
roperty, plant and equipment
2012012012016666
$m$m$m$m
69.9
123.7
193.6
(94.8)
(35.8)
(130.6)
63.0
2016
Year ended 30 April
Year ended 30 April 2016
2016
2016
Year ended 30 April
Year ended 30 April
Opening balance
Additions
Disposal of Automotive (Note 24)
Other disposals
Assets classified as held for sale
Impairments
Depreciation
Closing balance
2016
At 30 April 2016
At 30 April
2016
2016
At 30 April
At 30 April
Cost
Accumulated depreciation and impairment
Net carrying amount
Year ended 30 April 2015
Year ended 30 April 2015
Year ended 30 April 2015
Year ended 30 April 2015
Opening balance
Additions
Disposals
Assets classified as held for sale
Impairments
Depreciation
Closing balance
At 30 April 2015
At 30 April 2015
At 30 April 2015
At 30 April 2015
Cost
Accumulated depreciation and impairment
Net carrying amount
Land &
Land &
Land &
Land &
buildings
buildings
buildings
buildings
$m$m$m$m
Plant &
Plant &
Plant &
Plant &
equipment
equipment
equipment
equipment
$m$m$m$m
45.9
-
-
(6.4)
(11.8)
(1.0)
(0.3)
26.4
32.7
(6.3)
26.4
88.0
2.3
(14.7)
(16.7)
(12.3)
(0.7)
45.9
83.2
(37.3)
45.9
230.1
57.1
(9.8)
(5.2)
(3.8)
(7.3)
(35.6)
225.5
380.1
(154.6)
225.5
220.4
65.1
(4.2)
(5.4)
(6.9)
(38.9)
230.1
525.6
(295.5)
230.1
2012012012015555
$m$m$m$m
89.9
145.6
235.5
(114.8)
(45.6)
(160.4)
75.1
Total
Total
Total
Total
$m$m$m$m
276.0
57.1
(9.8)
(11.6)
(15.6)
(8.3)
(35.9)
251.9
412.8
(160.9)
251.9
308.4
67.4
(18.9)
(22.1)
(19.2)
(39.6)
276.0
608.8
(332.8)
276.0
Additions to plant and equipment include $30.8 million (2015: $27.4 million) of assets under construction. The closing balance of plant and
equipment includes $41.6 million (2015: $16.7 million) of assets under construction.
The carrying value of assets held under finance leases and hire purchase contracts at 30 April 2016 is $8.2 million (2015: $9.7 million).
Metcash Group | Financial Report 2016
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59
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Notes to the Financial Statements
For the year ended 30 April 2016
Notes to the financial statements (continued)
For the year ended 30 April 2016
Intangible assets and goodwill
10.10.10.10. Intangible assets and goodwill
Intangible assets and goodwill
Intangible assets and goodwill
Year ended 30 April 2016
Year ended 30 April 2016
Year ended 30 April 2016
Year ended 30 April 2016
Opening balance
Additions
Disposal of Automotive (Note 24)
Other disposals
Reclassifications
Amortisation
Closing balance
At 30 April 2016
At 30 April 2016
At 30 April 2016
At 30 April 2016
Cost
Accumulated amortisation and impairment
Net carrying amount
Year ended 30 April 2015
Year ended 30 April 2015
Year ended 30 April 2015
Year ended 30 April 2015
Opening balance
Reclassifications
Additions
Arising from business combinations
Impairments
Amortisation
Closing balance
At 30 April 2015
At 30 April 2015
At 30 April 2015
At 30 April 2015
Cost
Accumulated amortisation and impairment
Net carrying amount
Software
Software
Software
Software
development
development
development
development
costs
costs
costs
costs
$m$m$m$m
Customer
Customer
Customer
Customer
contracts
contracts
contracts
contracts
$m$m$m$m
Trade names
Trade names
Trade names
Trade names
and other
and other
and other
and other
$m$m$m$m
Goodwill
Goodwill
Goodwill
Goodwill
$m$m$m$m
Total
Total
Total
Total
$m$m$m$m
71.1
7.9
(1.6)
(0.5)
-
(16.0)
60.9
223.2
(162.3)
60.9
81.3
(0.8)
19.6
-
(12.6)
(16.4)
71.1
217.4
(146.3)
71.1
140.2
-
(29.0)
-
-
(9.5)
101.7
234.4
(132.7)
101.7
201.5
(1.8)
2.8
5.2
(52.5)
(15.0)
140.2
278.3
(138.1)
140.2
80.4
0.3
(34.5)
-
(4.7)
(0.3)
41.2
43.5
(2.3)
41.2
60.2
0.6
-
20.4
-
(0.8)
80.4
86.5
(6.1)
80.4
992.8
1.9
(71.7)
(0.6)
1.3
-
923.7
1,365.3
(441.6)
923.7
1,422.7
2.0
-
9.7
(441.6)
-
992.8
1,434.4
(441.6)
992.8
1,284.5
10.1
(136.8)
(1.1)
(3.4)
(25.8)
1,127.5
1,866.4
(738.9)
1,127.5
1,765.7
-
22.4
35.3
(506.7)
(32.2)
1,284.5
2,016.6
(732.1)
1,284.5
Impairment tests for goodwill and intangibles with indefinite useful lives
Impairment tests for goodwill and intangibles with indefinite useful lives
Impairment tests for goodwill and intangibles with indefinite useful lives
Impairment tests for goodwill and intangibles with indefinite useful lives
Description of cash generating units
Goodwill acquired through business combinations is allocated to the lowest level within the entity at which the goodwill is monitored,
being the three cash-generating units (or ‘CGU’s) - Food & Grocery, Liquor and Hardware. Indefinite life intangibles primarily comprise
trade names and licences.
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.
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Notes to the financial statements (continued)
For the year ended 30 April 2016
Intangible assets and goodwill (continued)
10.10.10.10. Intangible assets and goodwill (continued)
Intangible assets and goodwill (continued)
Intangible assets and goodwill (continued)
Allocation of CGUs
The carrying amounts of goodwill and indefinite life intangibles are allocated to the Group’s CGUs as follows:
Allocated goodwill
Allocated goodwill
Allocated goodwill
Allocated goodwill
Trade names and other
Trade names and other
Trade names and other
Trade names and other
intangibles
intangibles
intangibles
intangibles
2016
2016
2016
2016
$m$m$m$m
756.1
100.1
67.5
2015
2015
2015
2015
$m$m$m$m
756.7
98.8
65.6
2016
2016
2016
2016
$m$m$m$m
1.0
13.0
27.2
2015
2015
2015
2015
$m$m$m$m
1.1
17.6
27.2
PostPostPostPost----tax discount rates
tax discount rates
tax discount rates
tax discount rates
2016
2016
2016
2016
%%%%
2015
2015
2015
2015
%%%%
11.3%
10.1%
10.1%
11.3%
10.1%
10.1%
generating units
CashCashCashCash----generating units
generating units
generating units
Food & Grocery
Liquor
Hardware
Key assumptions used in assessment
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 the table 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.
•
•
Cash flow projections are based on risk adjusted forecasts allowing for estimated changes in the business, the competitive trading
environment, legislation and economic growth.
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. Pre-tax equivalents of the adopted discount rates are derived iteratively and differ based
on the timing and extent of tax cash flows. Pre-tax rates were 15.5% for Food & Grocery, 14.0% for Liquor and 14.3% for Hardware.
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. A terminal growth of 1.5% was applied to all CGUs. In the
prior year a terminal growth rate of 1.0% was applied to the Hardware CGU and 1.5% for all other CGUs.
Results of assessment
Based on the current assessment, no impairment of goodwill was identified in any of the Group’s CGUs. In the prior year, an impairment
of $422.1 million in Food & Grocery and $19.5 million in Hardware were recorded.
Sensitivity to changes in key assumptions
The following items are reasonable sensitivity changes to key assumptions that will cause an impairment. These sensitivities assume
that the specific assumption moves in isolation, while other assumptions are held constant.
•
Food & Grocery CGU – The recoverable amount of the CGU exceeded its carrying amount by $21.7 million. This difference would
have been nil if (a) the forecasted EBIT for all projection years (including the terminal year) was 1.6% lower; or (b) the post-tax
discount rate was 16 basis points higher; or (c) the terminal growth rate was 23 basis points lower.
• Hardware CGU - The recoverable amount of the CGU exceeded its carrying amount by $31.9 million. This difference would have
been nil if the post-tax discount rate was 113 basis points higher. At the assessment date, no reasonably possible change in other
key assumptions would cause the carrying amount of the CGU to exceed its recoverable amount.
•
Liquor CGU - At the assessment date, no reasonably possible change in key assumptions would cause the carrying amount of the
Liquor CGU to exceed its recoverable amount.
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Notes to the Financial Statements
For the year ended 30 April 2016
Notes to the financial statements (continued)
For the year ended 30 April 2016
Interest bearing borrowings
11.11.11.11. Interest bearing borrowings
Interest bearing borrowings
Interest bearing borrowings
Current
Current
Current
Current
Bank overdrafts
Bilateral loans
Finance lease obligations
current
NonNonNonNon----current
current
current
Bank loans – syndicated
US private placement (USPP)
Bank loans - working capital
Finance lease obligations
Bilateral loans
Deferred borrowing costs
2016
2016
2016
2016
$m$m$m$m
11.3
0.6
3.8
15.7
200.0
36.6
61.0
4.8
-
(3.0)
299.4
2015
2015
2015
2015
$m$m$m$m
-
58.6
4.6
63.2
475.0
317.0
-
5.3
2.2
(4.7)
794.8
Core borrowing facilities
Core borrowing facilities
Core borrowing facilities
Core borrowing facilities
See note 16 for details of the Group’s core borrowing facilities.
Finance lease obligations
Finance lease obligations
Finance lease obligations
Finance lease obligations
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 5.3% (2015: 6.5%). Certain lease liabilities are secured by
a charge over the leased asset.
Financial covenants
Financial covenants
Financial covenants
Financial covenants
The core borrowings of the Group must comply with three primary covenants which apply to the syndicated bank facilities, the working
capital facilities 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). At the reporting date, there were no defaults or breaches on the
Group’s core borrowings.
Fair value
Fair value
Fair value
Fair value
The carrying amounts of the Group's borrowings approximate their fair value. The weighted average effective interest rate on the
syndicated, working capital loans and the USPP debt, after taking into account cross currency and interest rate swaps, at the end of the
financial year was 4.2% (2015: 4.7%).
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Notes to the financial statements (continued)
For the year ended 30 April 2016
Provisions
12.12.12.12. Provisions
Provisions
Provisions
30 April
2016
30 April 2016
2016
2016
30 April
30 April
Current
Non-current
2015
30 April 2015
30 April
2015
2015
30 April
30 April
Current
Non-current
Employee
Employee
Employee
Employee
entitlements
entitlements
entitlements
entitlements
$m$m$m$m
Rental
Rental
Rental
Rental
subsidy
subsidy
subsidy
subsidy
$m$m$m$m
Onerous
Onerous
Onerous
Onerous
arrangements
arrangements
arrangements
arrangements
$m$m$m$m
Other
Other
Other
Other
$m$m$m$m
109.4
7.0
116.4
94.9
5.6
100.5
6.9
74.9
81.8
7.8
85.7
93.5
24.1
41.9
66.0
21.8
53.1
74.9
-
-
-
3.1
-
3.1
Total
Total
Total
Total
$m$m$m$m
140.4
123.8
264.2
127.6
144.4
272.0
Rental subsidy provision
Rental subsidy provision
Rental subsidy provision
Rental subsidy provision
The rental subsidy provision represents the value of certain retail store lease obligations recognised as part of the FY12 acquisition of
Franklins. The provision was initially recognised at the acquisition date fair value and subsequently utilised to settle the obligations. The
provision related to an individual lease is derecognised when the Group has met its obligations in full under that lease.
Onerous arrangements provision
Onerous arrangements provision
Onerous arrangements provision
Onerous arrangements provision
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.
significant provisions (other than employee entitlements)
Movements in significant provisions (other than employee entitlements)
Movements in
significant provisions (other than employee entitlements)
significant provisions (other than employee entitlements)
Movements in
Movements in
1 May 2015
Expense arising/(released) during the year
Disposal of Automotive (Note 24)
Utilised during the year
Finance cost discount rate adjustment
30 April 2016
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
Rental
Rental
Rental
Rental
subsidy
subsidy
subsidy
subsidy
$m$m$m$m
Onerous
Onerous
Onerous
Onerous
arrangements
arrangements
arrangements
arrangements
$m$m$m$m
93.5
(8.0)
-
(10.5)
6.8
81.8
112.7
(9.1)
-
(17.2)
7.1
93.5
74.9
9.0
(1.1)
(19.0)
2.2
66.0
26.0
55.3
0.6
(7.5)
0.5
74.9
Total
Total
Total
Total
$m$m$m$m
168.4
1.0
(1.1)
(29.5)
9.0
147.8
138.7
46.2
0.6
(24.7)
7.6
168.4
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66666666
Notes to the Financial Statements
For the year ended 30 April 2016
Notes to the financial statements (continued)
For the year ended 30 April 2016
Other financial liabilities
13.13.13.13. Other financial liabilities
Other financial liabilities
Other financial liabilities
30 April 2016
30 April 2016
30 April 2016
30 April 2016
Current
Non-current
30 April 2015
30 April 2015
30 April 2015
30 April 2015
Current
Non-current
Put options
Put options
Put options
Put options
over NCI
over NCI
over NCI
over NCI
$m$m$m$m
Financial
Financial
Financial
Financial
guarantee
guarantee
guarantee
guarantee
contracts
contracts
contracts
contracts
$m$m$m$m
Lease
Lease
Lease
Lease
incentives
incentives
incentives
incentives
$m$m$m$m
Other
Other
Other
Other
$m$m$m$m
Total
Total
Total
Total
$m$m$m$m
10.4
-
10.4
21.4
19.3
40.7
2.3
3.7
6.0
0.7
-
0.7
0.2
0.9
1.1
0.2
1.1
1.3
0.7
3.1
3.8
-
2.3
2.3
13.6
7.7
21.3
22.3
22.7
45.0
Put options over non
(NCI)
controlling interests (NCI)
Put options over non----controlling interests
(NCI)
(NCI)
controlling interests
controlling interests
Put options over non
Put options over non
Certain put option arrangements allow minority shareholders to sell their equity interests to Metcash, subject to specific terms and
conditions. The Group has recognised a liability of $10.4 million (2015: $40.7 million) in respect of these put options, measured at the
present value of the redemption amount under the option.
The liability at the end of the financial year relates to put options over three subsidiaries within the Hardware segment. The sale of the
Automotive business (refer note 24 for further details) resulted in a reduction of $29.0 million in the value of these put options during the
year.
Financial guarantee contracts
Financial guarantee contracts
Financial guarantee contracts
Financial guarantee contracts
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 (2015: $47.5 million). Had the guarantee been
exercised at 30 April 2016, the amount payable would have been $43.8 million (2015: $42.6 million). The fair value of the financial
guarantee contract at the reporting date was $6.0 million (2015: $0.7 million) and is recognised as a financial liability.
Contributed equity and reserves
14.14.14.14. Contributed equity and reserves
Contributed equity and reserves
Contributed equity and reserves
Contributed and other equity
Contributed and other equity
Contributed and other equity
Contributed and other equity
At 1 May
Shares issued under the DRP/underwritten
Share issue costs net of tax
At 30 April – contributed equity
Less: other equity
Total contributed and other equity
2016
2016
2016
2016
Number of
Number of
Number of
Number of
shares
shares
shares
shares
928,357,876
-
-
928,357,876
928,357,876
$m$m$m$m
2,391.9
-
-
2,391.9
(765.9)
1,626.0
2015
2015
2015
2015
Number of
Number of
Number of
Number of
shares
shares
shares
shares
888,338,048
40,019,828
-
928,357,876
928,357,876
$m$m$m$m
2,308.1
84.1
(0.3)
2,391.9
(765.9)
1,626.0
Fully paid ordinary shares carry one vote per share and carry the right to dividends. Shares have no par value.
The ‘Other equity’ account was used to record the reverse acquisition adjustment on application of AASB 3 Business Combinations in
2005. Refer Appendix A.3.
Metcash Annual Report 2016
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67676767
Notes to the financial statements (continued)
For the year ended 30 April 2016
Contributed equity and reserves (continued)
14.14.14.14. Contributed equity and reserves (continued)
Contributed equity and reserves (continued)
Contributed equity and reserves (continued)
Other reserves
Other reserves
Other reserves
Other reserves
based
Share----based
Share
based
based
Share
Share
payments reserve
payments reserve
payments reserve
payments reserve
$m$m$m$m
Foreign currency
Foreign currency
Foreign currency
Foreign currency
translation
translation
translation
translation
reserve
reserve
reserve
reserve
$m$m$m$m
Cash flow
Cash flow
Cash flow
Cash flow
hedge reserve
hedge reserve
hedge reserve
hedge reserve
$m$m$m$m
Total
Total
Total
Total
other reserves
other reserves
other reserves
other reserves
$m$m$m$m
0.1
-
5.1
(0.1)
5.1
-
(3.7)
(0.6)
0.8
(4.5)
0.3
-
-
(4.2)
(1.0)
-
-
(5.2)
1.5
(3.7)
-
-
(2.2)
1.0
-
-
(1.2)
(2.9)
(3.4)
5.1
(0.1)
(1.3)
-
(3.7)
(0.6)
(5.6)
At 1 May 2014
Total comprehensive income, net of tax
Share-based payments expense
Share-based payments exercised
At 30 April 2015
Total comprehensive income, net of tax
Share-based payments expense
Share-based payments exercised
At 30 April 2016
Share-based payments reserve
This reserve is used to record the value of equity benefits provided to executives as part of their remuneration. Refer to note 20 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.
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.
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
2016
2016
2016
2016
$m$m$m$m
(2.2)
2.3
(0.7)
(0.6)
(1.2)
2015
2015
2015
2015
$m$m$m$m
1.5
(1.8)
(3.7)
1.8
(2.2)
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Notes to the Financial Statements
For the year ended 30 April 2016
Notes to the financial statements (continued)
For the year ended 30 April 2016
Cash flows from operating activities
15.15.15.15. Cash flows from operating activities
Cash flows from operating activities
Cash flows from operating activities
Net profit/(loss) for the year
Adjustments for:
Depreciation and amortisation
Impairment losses (non-significant items)
Net profit on disposal of property, plant and equipment
Net gain on disposal of discontinued operations
Share based payments
Credit value adjustments (Note 16)
Other adjustments
2016
2016
2016
2016
$m$m$m$m
2015
2015
20152015
$m$m$m$m
218.2
(382.8)
61.7
40.8
(16.1)
(34.5)
(3.7)
-
(4.6)
71.8
35.9
(1.7)
-
5.1
3.5
3.4
Significant items not related to operating activities
-
638.8
Changes in assets and liabilities
(Increase)/decrease in trade and other receivables
(Increase)/decrease in other current assets
(Increase)/decrease in inventories
(Increase)/decrease in tax balances
Increase/(decrease) in payables and provisions
Cash from operating activities
(40.7)
0.9
(36.7)
5.5
(25.0)
165.8
17.5
11.1
16.1
(68.4)
(118.6)
231.7
Non-cash financing and investing activities include $2.3 million (2015: $4.2 million) of assets acquired under finance leases.
Financial risk management
16.16.16.16. Financial risk management
Financial risk management
Financial risk management
Objectives
policies
and policies
Objectives and
policies
policies
and
and
Objectives
Objectives
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 main risks arising from the Group’s financial instruments are 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. The objective of the Group’s risk management policy is to
support delivery of the Group's financial targets while protecting future financial security.
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.
Liquidity r
isk and funding management
Liquidity risk and funding management
isk and funding management
isk and funding management
Liquidity r
Liquidity r
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 three sources of primary debt funding, of which 28% has been utilised at 30 April 2016. The Group monitors forecasts
of liquidity reserves on the basis of expected cash flow.
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Notes to the financial statements (continued)
For the year ended 30 April 2016
Financial risk management (continued)
16.16.16.16. Financial risk management (continued)
Financial risk management (continued)
Financial risk management (continued)
Available credit facilities
At the reporting date, the Group had unused credit facilities available for its immediate use as follows:
Syndicated facility
US private placement
Securitisation facility
Bank guarantee facility
Bilateral loans
Working capital/guarantees
Working capital
Cash and cash equivalents
Total facility
Total facility
Total facility
Total facility
$m$m$m$m
Debt usage
Debt usage
Debt usage
Debt usage
$m$m$m$m
Guarantees &
Guarantees &
Guarantees &
Guarantees &
other usage
other usage
other usage
other usage
$m$m$m$m
Facility available
Facility available
Facility available
Facility available
$m$m$m$m
775.0
23.3
100.0
10.7
0.6
150.0
125.0
1,184.6
1,184.6
200.0
23.3
-
-
0.6
11.3
61.0
296.2
296.2
-
-
-
10.7
-
27.2
-
37.9
37.9
575.0
-
100.0
-
-
111.5
64.0
850.5
26.4
876.9
•
Syndicated facility
Syndicated bank loans are senior unsecured loan note subscription facilities. The facilities are due to expire in June 2018 ($200.0
million), June 2019 ($225.0 million) and June 2020 ($350.0 million). Interest payable on the facilities is based on BBSY plus a margin
and interest rate resets are monthly. The applicable margin is dependent upon an escalation matrix linked to the senior leverage
ratio achieved. These bank loans are subject to certain financial undertakings as detailed in note 11.
• US private placement
US private placement (USPP) comprises two tranches of fixed coupon debt of US$5.0 million maturing September 2019 and
US$20.0 million maturing September 2023. The foreign exchange and fixed interest rate risk has been hedged using cross currency
interest rate swaps. The financial effect of these hedges is to convert the US$25.0 million of USPP fixed interest rate debt into $23.3
million of floating rate debt with interest payable on a quarterly basis at BBSW plus a margin.
The debt was revalued at the reporting date to $36.6 million (2015: US$225.0 million to $317.0 million), as presented in note 11. The
fair value of the associated cross currency interest rate swaps are separately disclosed within derivative financial instruments (note
7). The USPP debt is subject to certain financial undertakings as detailed in note 11.
•
Securitisation facility
Under the $100.0 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 2018. 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 $732.6 million (2015:
$744.3 million) had been securitised, with nil (2015: 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.
• Working capital
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 11.
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
67
70707070
Notes to the Financial Statements
For the year ended 30 April 2016
Notes to the financial statements (continued)
For the year ended 30 April 2016
Financial risk management (continued)
16.16.16.16. Financial risk management (continued)
Financial risk management (continued)
Financial risk management (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.
Net settled derivatives comprise interest rate swap contracts that are used to hedge floating rate interest payable on bank debt. Gross
settled derivatives comprise forward exchange contracts that are used to hedge anticipated purchase commitments. Under the terms of
these agreements, the settlements at expiry include a both a cash payment and receipt.
Year ended 30 April 2016
Year ended 30 April 2016
Year ended 30 April 2016
Year ended 30 April 2016
Trade and other payables
Finance lease obligations
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 2015
Year ended 30 April 2015
Year ended 30 April 2015
Year ended 30 April 2015
Trade and other payables
Finance lease obligations
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
1 year
1 year
1 year
or lor lor lor lessessessess
$m$m$m$m
1 1 1 1 ---- 5 years*
5 years*
5 years*
5 years*
$m$m$m$m
More than 5
More than 5
More than 5
More than 5
years
years
years
years
$m$m$m$m
1,356.9
3.9
2.3
10.4
22.8
0.7
(24.3)
25.4
1,398.1
1,419.1
4.7
0.7
21.4
85.7
3.6
(21.5)
21.7
1,535.4
-
5.1
3.7
-
278.3
3.9
-
-
291.0
-
6.5
-
19.3
623.0
3.3
-
-
652.1
-
-
-
-
20.6
-
-
-
20.6
-
-
-
-
184.6
-
-
-
184.6
Total
Total
Total
Total
$m$m$m$m
1,356.9
9.0
6.0
10.4
321.7
4.6
(24.3)
25.4
1,709.7
1,419.1
11.2
0.7
40.7
893.3
6.9
(21.5)
21.7
2,372.1
* The Group has granted four contingent put options, which are not included in the above maturity analysis table. These options are
recognised at a fair value of nil.
Two of these put options relate to the acquisition of retail supermarkets and another relates to the acquisition by Mitre 10 from co-investors
of an additional ownership interest in an equity-accounted investment. The holders of these put options have the right to put these assets
back to the Group under certain prescribed circumstances. The put option purchase prices are defined within the option deeds and are
active until April 2022. The put option consideration is estimated to be $17.0 million (2015: $17.8 million).
In addition, Metcash has a 26.0% ownership interest in Ritchies Stores Pty Ltd (Ritchies), which is recognised as an equity accounted
investment in the Group's balance sheet (refer note 8). During the year ended June 2015, Ritchies generated sales revenue of $850 million.
At the time of its original acquisition in July 2005, Metcash granted put options to the remaining shareholders over their 74.0% ownership
interests in that business. The holders of these put options have the right to "put" their shares to Metcash subject to a margin related
annual financial hurdle (‘hurdle’) being achieved.
The put options can be exercised annually during a prescribed period immediately following the approval of Ritchies annual financial
statements or in certain limited circumstances by individual shareholders within a prescribed period. The put options can, however, only be
exercised during these periods if Ritchies achieved the hurdle in the previous financial year.
Metcash Annual Report 2016
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
71717171
Notes to the financial statements (continued)
For the year ended 30 April 2016
Financial risk management (continued)
16.16.16.16. Financial risk management (continued)
Financial risk management (continued)
Financial risk management (continued)
Based on the last 5 years reported results, Ritchies has not achieved the hurdle required to enable the shareholders to exercise their put
options, including the financial year ended June 2015 (the latest available audited results). Accordingly, Metcash had previously assessed
the probability of the option being exercised as remote.
Ritchies recently acquired a large retail group and, following this acquisition, it is possible that Ritchies future performance may improve to
a level where the hurdle could be exceeded. Whilst Metcash does not expect Ritchies to achieve the hurdle during fiscal 2016, it is now
considered possible that Ritchies may achieve the hurdle required to permit the shareholders to exercise their put option in a future
financial period.
Should the hurdle be achieved and the shareholders elect to exercise the put option, the purchase consideration payable by Metcash is
based on a multiple of the prior year reported earnings adjusted for a number of material factors that are subject to commercial
negotiation and agreement between the parties.
As the hurdle was not achieved in 2015, it is not possible to determine the specific consideration that would have been payable under the
put option agreement at that time. However, assuming the financial hurdle had been achieved, and based on Ritchies reported financial
results for the year ended June 2015, Metcash estimates that the consideration payable in respect of the Ritchies 2015 financial year would
have been between $85m to $125m.
The determination of the put option consideration and the maturity date include a number of potentially material judgements and
estimates and therefore the actual consideration and timing could vary.
The put option agreement terminates when Metcash ceases to hold shares in Ritchies or if Ritchies lists on the ASX.
Interest rate risk
Interest rate risk
Interest rate risk
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 2016, the principal
hedged was $175.0 million with a weighted average hedge maturity of 3.0 years and a weighted average base interest rate of 2.1%. 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 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
Financial assets
Financial assets
Financial assets
Cash and cash equivalents
Financial
liabilities
Financial liabilities
liabilities
liabilities
Financial
Financial
Bank loans - working capital, including bank overdrafts
Bilateral loans
Bank loans – syndicated
US private placement
Less: Interest rate swaps notional principal value - designated as cash flow hedges
Net exposure
2016
2016
2016
2016
$m$m$m$m
2015
2015
20152015
$m$m$m$m
26.4
83.3
(72.3)
(0.6)
(200.0)
(23.3)
175.0
(121.2)
(94.8)
-
(58.3)
(475.0)
(210.1)
525.0
(218.4)
(135.1)
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 2016, the interest rate
swap hedges of $175.0 million fell within the required range.
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
69
72727272
Notes to the Financial Statements
For the year ended 30 April 2016
Notes to the financial statements (continued)
For the year ended 30 April 2016
Financial risk management (continued)
16.16.16.16. Financial risk management (continued)
Financial risk management (continued)
Financial risk management (continued)
Sensitivity analysis
A 0.25% change in interest rates is estimated to result in a $0.2 million (2015: $0.2 million) change in the Group’s net profit after tax and a
$0.8 million (2015: $1.2 million) change in the Group’s other comprehensive income. 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.
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. It also
includes the impact of the Group’s interest rate derivatives that hedge core debt.
Credit risk
Credit risk
Credit risk
Credit risk
Trade receivables and loans
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.
Receivables and loans are monitored on an ongoing basis and a formal review of all balances occurs every six months. Where necessary,
appropriate provisions are established.
As identified in note 6, the current level of impairment provision represents 5.6% (2015: 6.7%) of the Group’s receivables and loans.
Leases
The Group is exposed to credit risk on ‘back-to-back’ arrangements contained within its property leases. Material lease arrangements
are regularly reviewed and appropriate provisions are established when such arrangements are deemed to be onerous. Refer note 12 for
further details.
Derivative financial instruments
The Group’s derivative financial instruments are with financial institutions with credit ratings of AA- to A and at 30 April 2016, the mark-to-
market position of derivative financial assets is $12.1 million. This valuation includes a credit valuation adjustment of $1.5 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.
Other
The Group has granted a financial guarantee relating to the bank loan of its associate, Adcome Pty Ltd, refer to note 13 for details.
There are no significant concentrations of credit risk within the Group.
Foreign currency risk
Foreign currency risk
Foreign currency risk
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$25.0 million USPP facility have been
hedged using cross currency interest rate swaps (see note 11).
Metcash Annual Report 2016
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
73737373
Notes to the financial statements (continued)
For the year ended 30 April 2016
Capital management
17.17.17.17. Capital management
Capital management
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. In line with the Board’s previous announcement, a final dividend was not paid for FY15 and no interim or final
dividend was declared in relation to FY16.
The Board and management set out to 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 11.
Management monitor capital through the gearing ratio (net debt / net debt plus total equity). The gearing ratios at 30 April 2016 and 30
April 2015 were 16.8% and 36.6% respectively.
No changes were made in objectives, policies or processes for managing capital during the reporting periods presented.
Commitments
18.18.18.18. Commitments
Commitments
Commitments
Operating lease
Operating leasessss
Operating lease
Operating lease
The Group has a number of back-to-back leases for retail stores, which are contracted at substantially offsetting terms and conditions.
The Group also leases distribution centres, offices and warehouse equipment. Contingent rentals are payable to reflect movements in
the Consumer Price Index on certain leases and to reflect the turnover of certain stores.
Future minimum rentals payable under 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
Future lease payments receivable under sub-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 income contracted for at the reporting date
Capital expenditure commitments
Capital expenditure commitments
Capital expenditure commitments
Capital expenditure commitments
At 30 April 2016, the Group had no material commitments for capital expenditure.
2012012012016666
$m$m$m$m
201.2
651.0
704.8
1,557.0
2012012012016666
$m$m$m$m
83.2
274.5
284.6
642.3
2012012012015555
$m$m$m$m
222.8
741.7
827.4
1,791.9
2012012012015555
$m$m$m$m
98.1
326.6
339.5
764.2
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
71
74747474
Notes to the Financial Statements
For the year ended 30 April 2016
Notes to the financial statements (continued)
For the year ended 30 April 2016
Related party disclosures
19.19.19.19. Related party disclosures
Related party disclosures
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 8.
Group
with related parties ---- Group
lances with related parties
and balances
Transactions and ba
Transactions
Group
Group
with related parties
with related parties
lances
lances
and ba
and ba
Transactions
Transactions
Transactions with related parties - Joint ventures and associates
Sales revenue
Lease charges
Dividends received
Sale of businesses and assets
Balances with related parties - Joint ventures and associates
Trade receivables – gross
Provision for impairment
Loans receivable – gross
Provision for impairment
Parent entity
with related parties –––– Parent entity
and balances with related parties
Transactions and balances
Transactions
Parent entity
Parent entity
with related parties
with related parties
and balances
and balances
Transactions
Transactions
Details of key related party transactions and balances in the accounts of the parent entity are set out in note 21.
Compensation of key management personnel of the Group
Compensation of key management personnel of the Group
Compensation of key management personnel of the Group
Compensation of key management personnel of the Group
Short-term
Long-term
Post-employment
Termination benefits
Share-based payments
2012012012016666
$m$m$m$m
1,308.1
15.5
2.8
3.1
100.5
(6.3)
94.2
9.8
(7.1)
2.7
2012012012016666
$m$m$m$m
11.1
0.1
0.2
0.2
(0.3)
11.3
2012012012015555
$m$m$m$m
1,338.1
18.7
5.4
8.3
100.6
(18.4)
82.2
11.0
(3.3)
7.7
2012012012015555
$m$m$m$m
6.1
0.1
0.2
1.3
1.7
9.4
Other transactions with key management personnel
Other transactions with key management personnel
Other transactions with key management personnel
Other transactions with key management personnel
Mrs Balfour is a director of Salmat Limited and TAL (Dai–ichi Life Australia) Limited. Mr Butler was Chairman of AMP Superannuation Ltd. Ms
Dwyer is a director of Dexus Property Group. Mr Murray was a former director of Dick Smith Holdings Ltd and Linfox Logistics Pty Ltd. Ms
Nash is a director of Pacific Brands Group Limited, Blackmores Ltd and Southern Cross Media Group. 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.
Metcash Annual Report 2016
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
75757575
Notes to the financial statements (continued)
For the year ended 30 April 2016
based payments
Share----based payments
20.20.20.20. Share
based payments
based payments
Share
Share
based payment arrangements
Description of share----based payment arrangements
Description of share
based payment arrangements
based payment arrangements
Description of share
Description of share
The Group currently has two active share-based payment incentive schemes for employees and three legacy schemes that are no longer
active – as summarised in the following table.
Scheme name
Scheme name
Scheme name
Scheme name
Description
Description
Description
Description
Additional Transformation Incentive (ATI)
active scheme
Additional Transformation Incentive (ATI) –––– active scheme
active scheme
active scheme
Additional Transformation Incentive (ATI)
Additional Transformation Incentive (ATI)
ATI (FY15 - FY18)
Performance rights issued to incentivise the Group CEO and CFO to achieve or exceed a specified
Return on Funds Employed (ROFE) and Relative Total Shareholder Return (RTSR) target in FY18.
Scheme minimum, target and stretch hurdles were based on the Group’s Transformation Plan. Both
ROFE and RTSR are independently and separately tested.
ATI (FY16 - FY19)
Performance rights issued to incentivise the Group CEO to achieve or exceed a specified ROFE and RTSR
target in FY19. Scheme minimum, target and stretch hurdles were based on the Group’s Transformation
Plan. Both ROFE and RTSR are independently and separately tested.
CEO MFG Commencement Grant
active scheme
CEO MFG Commencement Grant –––– active scheme
active scheme
active scheme
CEO MFG Commencement Grant
CEO MFG Commencement Grant
CEO MFG Retention
Performance rights issued to incentivise Mr Cain, CEO Supermarkets & Convenience ( ‘CEO MFG’), to
retain his services for at least three years from commencement of employment.
CEO MFG Performance
Performance rights issued to incentivise Mr Cain to successfully execute the Metcash Supermarkets
business turnaround. The grant requires MFG Supermarkets to achieve a specified EBIT by FY20. Should
this EBIT be achieved by FY18 or FY19 60% of these rights are eligible, at Mr Cain’s discretion, for early
vesting, with the remainder deferred until 31 July 2020. All performance rights not elected for early
vesting are assessed against FY20 MFG Supermarkets EBIT and are due for vesting on 15 August 2020.
expired as at the reporting date
Legacy plans –––– expired as at the reporting date
Legacy plans
expired as at the reporting date
expired as at the reporting date
Legacy plans
Legacy plans
STI program
Prior to FY16, 25% of the financial year STI was deferred for Group Executives for 15 months and
released through the issue of Metcash ordinary shares, conditional upon the executive being employed
by the Group on 15 April of the year subsequent to the performance year.
The Board decided to discontinue partial deferral of STI payments from FY16 onwards, replacing it with
provisions enabling payments to be clawed back for cause or material misstatements of the Group’s
financial statements.
Legacy LTI - Tranche 3
(FY13-FY15)
Tranche 3 of the Legacy LTI scheme was issued in December 2012 and 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.
Tranche 3 failed to meet award conditions and has lapsed with expiry of all related performance rights.
expired subsequent to the reporting date
Legacy plans –––– expired subsequent to the reporting date
Legacy plans
expired subsequent to the reporting date
expired subsequent to the reporting date
Legacy plans
Legacy plans
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 was comprised of two tranches,
one due for vesting on 15 August 2017 (TI 67%) and the other on 15 April 2018 (TI 33% Deferred). The TI
plan hurdles were based upon meeting specified Group Sales Revenue and Underlying Earnings per
Share (UEPS) targets during FY17. In addition, a Return on Funds Employed (ROFE) threshold of 13%
had to be achieved for each of FY15, FY16 and FY17.
The Group failed to meet the 13% ROFE threshold in FY16, consequently the TI has lapsed subsequent
to the reporting date and all related performance rights have expired.
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
73
76767676
Notes to the Financial Statements
For the year ended 30 April 2016
Notes to the financial statements (continued)
For the year ended 30 April 2016
based payments (continued)
Share----based payments (continued)
20.20.20.20. Share
based payments (continued)
based payments (continued)
Share
Share
fair values
Measurement of fair values
Measurement of
fair values
fair values
Measurement of
Measurement of
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
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
CEO MFG
CEO MFG
CEO MFG
CEO MFG
Retention
Retention
Retention
Retention
CEO MFG
CEO MFG
CEO MFG
CEO MFG
Performance
Performance
Performance
Performance
3.0%
2.1%
34.5%
1,097
-
$1.15
$1.07
3.0%
2.1%
33.1%
1,825
-
$1.15
$1.04
TITITITI
(67%)
(67%)
(67%)
(67%)
5.9%
2.1%
24.6%
1,022
-
$2.50
$2.12
TI (33%
TI (33%
TI (33%
TI (33%
deferred)
deferred)
deferred)
deferred)
ATI FY18
ATI FY18
ATI FY18
ATI FY18
(ROFE)
(ROFE)
(ROFE)
(ROFE)
ATI FY19
ATI FY19
ATI FY19
ATI FY19
(ROFE)
(ROFE)
(ROFE)
(ROFE)
Legacy LTI
Legacy LTI
Legacy LTI
Legacy LTI
Tranche 3
Tranche 3
Tranche 3
Tranche 3
5.7%
2.1%
23.9%
1,263
-
$2.48
$2.04
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
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 ATI ATI ATI FY18
FY18
FY18FY18
(RTSR)
(RTSR)
(RTSR)
(RTSR)
ATI ATI ATI ATI FY19
FY19
FY19FY19
(RTSR)
(RTSR)
(RTSR)
(RTSR)
6.3%
2.7%
25.0%
1,371
-
$2.36
$0.99
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 FY18 (RTSR) and ATI FY19 (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
vesting date.
STI Performance Rights
STI Performance Rights
STI Performance Rights
STI Performance Rights
Metcash issued 173,685 performance rights in relation to the FY15 STI at $1.13 per right (FY14 STI: 47,565 performance rights issued at $2.86
per right). The performance right value was based upon the VWAP of Metcash’s shares for the five business days preceeding 15 August 2015.
Reconciliation of outstanding performance rights
Reconciliation of outstanding performance rights
Reconciliation of outstanding performance rights
Reconciliation of outstanding performance rights
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
Expired/forfeited during the year – LTI
Outstanding at the end of the year
Metcash Annual Report 2016
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77777777
2016
2016
2016
2016
Number
Number
Number
Number
2015
2015
2015
2015
Number
Number
Number
Number
14,686,780
3,186,068
173,685
(173,685)
(5,375,343)
12,497,505
2,940,325
14,165,807
47,565
(47,565)
(2,419,352)
14,686,780
Notes to the financial statements (continued)
For the year ended 30 April 2016
(continued)
based payments (continued)
Share----based payments
20.20.20.20. Share
(continued)
(continued)
based payments
based payments
Share
Share
The outstanding balance of performance rights as at 30 April 2016 is represented by:
Scheme name
Scheme name
Scheme name
Scheme name
CEO MFG Retention
ATI FY18 (ROFE)
ATI FY18 (RTSR)
ATI FY19 (ROFE)
ATI FY19 (RTSR)
CEO MFG Performance
Plus: expired subsequent to
reporting date
Plus: expired subsequent to reporting date
reporting date
reporting date
Plus: expired subsequent to
Plus: expired subsequent to
TI (67%)
TI (33% deferred)
reporting date
Total outstanding at the reporting date
Total outstanding at the
reporting date
reporting date
Total outstanding at the
Total outstanding at the
Key terms and conditions
Key terms and conditions
Key terms and conditions
Key terms and conditions
Vesting date
Vesting date
Vesting date
Vesting date
1 August 2018
15 August 2018
15 August 2018
15 August 2019
15 August 2019
15 August 2020
15 August 2017
15 April 2018
Total
Total
Total
Total
outstanding
outstanding
outstanding
outstanding
(number)
(number)
(number)
(number)
1,062,023
352,314
352,314
533,808
533,808
2,124,045
4,958,312
4,969,191
2,570,002
12,497,505
Exercisable
Exercisable
Exercisable
Exercisable
(number)
(number)
(number)
(number)
Remaining
Remaining
Remaining
Remaining
contractual life
contractual life
contractual life
contractual life
-
-
-
-
-
-
-
-
-
-
2 years 4 months
2 years 4 months
2 years 4 months
3 years 4 months
3 years 4 months
4 years 3 months
1 years 4 months
2 years
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.
•
•
•
Expense recognised in profit or loss
Expense recognised in profit or loss
Expense recognised in profit or loss
Expense recognised in profit or loss
For details on the related employee benefits expense, refer note 3.
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Notes to the Financial Statements
For the year ended 30 April 2016
Notes to the financial statements (continued)
For the year ended 30 April 2016
relating to Metcash Limited (the Parent)
nformation relating to Metcash Limited (the Parent)
21.21.21.21. IIIInformation
relating to Metcash Limited (the Parent)
relating to Metcash Limited (the Parent)
nformation
nformation
In accordance with the amendment to the Corporations Act 2001, Metcash Limited (the Parent) has replaced the separate entity
financial statements with the following note.
financial position
Statement of financial position
Statement of
financial position
financial position
Statement of
Statement of
Current assets – amounts receivable from subsidiaries
Non-current assets – investments in subsidiaries
Total assets
Current liabilities – loans payable to subsidiaries
Net assets/(deficiency)
Contributed equity
Retained earnings/(accumulated losses)
Share based payments reserve
Total equity/(deficiency)
comprehensive income
Statement of comprehensive income
Statement of
comprehensive income
comprehensive income
Statement of
Statement of
Dividends received from subsidiaries
Interest expense on loans from subsidiaries
Impairment of investments in subsidiaries
Write-off of amounts receivable from subsidiaries
Other transactions
Net loss for the year
Total comprehensive loss for the year, net of tax
2016
2016
2016
2016
$m$m$m$m
2015
2015
2015
2015
$m$m$m$m
1,539.3
2,030.7
3,570.0
(4,333.9)
(763.9)
3,057.8
(3,822.5)
0.8
(763.9)
-
(83.0)
(641.3)
(1,175.2)
10.8
(1,888.7)
(1,888.7)
2,715.1
2,672.0
5,387.1
(4,258.0)
1,129.1
3,057.8
(1,933.8)
5.1
1,129.1
145.0
(186.8)
(1,944.1)
-
(5.2)
(1,991.1)
(1,991.1)
During FY16, Metcash conducted a restructure which was designed to simplify intercompany loans between its wholly-owned offshore
subsidiaries, facilitate the payment of intercompany dividends and ultimately enable the liquidation of these offshore subsidiaries.
While the restructure had no impact on the Group’s income statement or balance sheet, the parent entity’s net loss for the year includes
an impairment of $641.3 million against Metcash Limited’s investment in its subsidiary Metcash Trading Limited (2015: $1,944.1 million)
and a $1,175.2 million write off of amounts receivable from Metcash Trading Limited.
On 2 May 2016, being subsequent to the end of the current financial year, Metcash Limited received a dividend from its subsidiary Metoz
Holdings Limited of $2,244.7 million, which increased the net asset position of Metcash Limited by $1,155.1 million from negative $763.9
million up to positive $391.2 million.
Metcash Limited has provided guarantees as part of the Closed Group arrangements as disclosed in Appendix B.
Metcash Annual Report 2016
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79797979
Notes to the financial statements (continued)
For the year ended 30 April 2016
Auditors remuneration
22.22.22.22. Auditors remuneration
Auditors remuneration
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 services
Other services in relation to the entity and any other entity in the Group
- tax compliance and advisory services
- other advisory services
Earnings per share
23.23.23.23. Earnings per share
Earnings per share
Earnings per share
The following reflects the income data used in the basic and diluted earnings per share (EPS) computations:
Earnings used in calculating basic and diluted EPS from continuing operations
Earnings used in calculating basic and diluted EPS from continuing operations
Earnings used in calculating basic and diluted EPS from continuing operations
Earnings used in calculating basic and diluted EPS from continuing operations
Net profit/(loss) from continuing operations
Earnings used in calculating basic and diluted EPS from discontinued operations
Earnings used in calculating basic and diluted EPS from discontinued operations
Earnings used in calculating basic and diluted EPS from discontinued operations
Earnings used in calculating basic and diluted EPS from discontinued operations
Net profit/(loss) from discontinued operations
Earnings used in calculating basic and diluted EPS
Earnings used in calculating basic and diluted EPS
Earnings used in calculating basic and diluted EPS
Earnings used in calculating basic and diluted EPS
Net profit/(loss) attributable to ordinary equity holders of Metcash Limited
The following reflects the share data used in the basic and diluted EPS computations:
Weighted average number of ordinary shares used in calculating basic EPS
Effect of dilutive securities
Weighted average number of ordinary shares used in calculating diluted EPS
2012012012016666
$$$$
2012012012015555
$$$$
2,153,000
86,000
2,239,000
1,847,000
115,200
1,962,200
397,000
471,000
868,000
443,831
-
443,831
3,107,000
2,406,031
2012012012016666
$m$m$m$m
2012012012015555
$m$m$m$m
178.3
(403.6)
38.2
19.4
216.5
(384.2)
2012012012016666
umber
NNNNumber
umber
umber
2012012012015555
umber
NNNNumber
umber
umber
928,357,876
584,895
928,942,771
907,012,053
-
907,012,053
At the reporting date, 12,497,505 performance rights (2015: 14,686,780) were outstanding, of which 11,435,482 were not included in the
calculation of diluted EPS because they are anti-dilutive for the periods presented. Refer note 20 for more details about performance rights.
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80808080
Notes to the Financial Statements
For the year ended 30 April 2016
Notes to the financial statements (continued)
For the year ended 30 April 2016
Discontinued operations
24.24.24.24. Discontinued operations
Discontinued operations
Discontinued operations
On 31 July 2015, the Group sold the entire issued share capital of Metcash Automotive Holdings Pty Ltd to Bursons Group Limited (ASX:BAP)
for a total sale consideration of $285.4 million. The transaction generated net cash flows of $242.1 million to the Group after distribution of
proceeds to non-controlling interests and before tax. The proceeds were largely applied against the Group’s interest-bearing borrowings.
The sale transaction resulted in the disposal of $198.7 million of net assets, including $61.9 million in net working capital, $146.6 million of
fixed and intangible assets, and a $24.9 milion reduction in the value of put options written against non-controlling interests. The disposal
resulted in a net gain of $34.5 million, including a tax expense of $12.1 million.
During the year, the Automotive business contributed $64.5 million of sales revenue (2015: $256.4 million) and $3.7 million of net profit after
tax (2015: $19.4 million) to the Group. The net gain and the results of the Automotive pillar for the current period have been disclosed within
discontinued operations. The comparative income statement has been restated to reclassify the Automotive pillar to discontinued
operations.
During the year, the Automotive business, contributed operating cash flows of negative $1.2 million. Excluding the sale proceeds,
investing and financing cash flows were not material.
Contingent assets and liabilities
25.25.25.25. Contingent assets and liabilities
Contingent assets and liabilities
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
Outstanding debts under the American Express charge card agreement
2012012012016666
$m$m$m$m
26.6
11.3
-
216.3
2012012012015555
$m$m$m$m
26.7
21.8
0.7
202.8
American Express charge card
American Express charge card
American Express charge card
American Express charge card
The Group has a Customer Charge Cards agreement with American Express (Amex) under which Amex settles Metcash’s trade debts and
collects directly from customers. Under the agreement, Metcash retains a contingent liability to Amex should a customer default on
payment to Amex. The maximum amount payable is limited to the actual face value of the outstanding debts due to Amex and does not
include any interest or any other costs incurred by Amex.
The agreement will continue on an evergreen basis unless either party provides a 12 month notice of cancellation. The earliest date on
which the agreement could be cancelled is 24 December 2018.
PPPPut options
ut options
ut options
ut options
Refer note 16 for details of contingent put options outstanding at the balance sheet date.
Subsequent events
26.26.26.26. Subsequent events
Subsequent events
Subsequent events
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.
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81818181
Notes to the financial statements (continued)
For the year ended 30 April 2016
Summary of significant accounting policies
Appendix A ---- Summary of significant accounting policies
Appendix A
Summary of significant accounting policies
Summary of significant accounting policies
Appendix A
Appendix A
BASIS OF ACCOUNTING
BASIS OF ACCOUNTING
BASIS OF ACCOUNTING
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 Group is also undertaking a comprehensive review of its revenue
arrangements ahead of the FY19 application of AASB 15 Revenue from
Contracts with Customers. While preliminary assessments indicate that
the net impact on the income statement is not significant, the Group
expects that some items of revenue may be measured and classified
differently under the new standard.
The financial statements have been prepared using the historical cost
basis except for derivative financial instruments and share-based
payments which are measured at fair value.
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.
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 current financial year comprises the 52 week period that commenced
on 27 April 2015 and ended on 24 April 2016. The prior year results
comprise the 52 week period that commenced on 28 April 2014 and ended
on 26 April 2015.
STATEMENT OF COMPLIANCE
STATEMENT OF COMPLIANCE
STATEMENT OF COMPLIANCE
STATEMENT OF COMPLIANCE
The financial statements comply with Australian Accounting Standards.
The financial statements also comply with International Financial
Reporting Standards (IFRS).
Changes in accounting policy
(a)(a)(a)(a) Changes in accounting policy
Changes in accounting policy
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
applied in the previous financial year.
(b) Australian Accounting Standards issued but not yet effective
(b)
Australian Accounting Standards issued but not yet effective
(b)(b)
Australian Accounting Standards issued but not yet effective
Australian Accounting Standards issued but not yet effective
A number of new accounting standards have been issued but were not
effective as at 30 April 2016. 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 will have on the financial statements, when
applied in future periods:
•
•
•
AASB 9 Financial Instruments;
AASB 15 Revenue from Contracts with Customers;
AASB 16 Leases
While in early stages of assessment, the adoption of AASB 16 Leases in
FY20 is expected to have a significant impact on the Group’s balance
sheet and income statement, given the volume and maturity profile of
the Group’s property leases (see note 18). The Group’s balance sheet is
expected to be grossed up for future lease payments (both receivable
and payable, at their discounted values) and for the unamortised
portion of right-to-use assets. Net rental expense in the income
statement is expected to be replaced by a ‘front-loaded’ interest
expense and a straight-line depreciation expense.
BASIS OF CONSOLIDATION
BASIS OF CONSOLIDATION
BASIS OF CONSOLIDATION
BASIS OF CONSOLIDATION
Controlled entities
The financial statements comprise the consolidated financial statements
of Metcash Limited and its controlled entities for the year ended 30 April
2016. Refer Appendix B for a list of significant controlled entities.
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.
Business combinations
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
acquisition date fair value of net assets acquired, including intangible
assets, contingent liabilities and contingent consideration.
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.
Consolidation procedures
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.
Non-controlling interests are allocated their share of total
comprehensive income and are presented as a separate category within
equity.
The financial statements of controlled entities are prepared for the
same reporting period as the parent entity, using consistent accounting
policies. 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.
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Notes to the Financial Statements
For the year ended 30 April 2016
Notes to the financial statements (continued)
For the year ended 30 April 2016
Summary of significant accounting policies
Appendix A ---- Summary of significant accounting policies
Appendix A
Summary of significant accounting policies
Summary of significant accounting policies
Appendix A
Appendix A
Separate financial statements
Provision for rental subsidy
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.
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).
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES A
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ND ND ND
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES A
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES A
ASSUMPTIONS
ASSUMPTIONS
ASSUMPTIONS
ASSUMPTIONS
Significant accounting judgements
(a)(a)(a)(a) Significant accounting judgements
Significant accounting judgements
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.7); and where the Group
exercises control, the acquisitions are accounted for as business
combinations (refer Appendix A.3).
Purchase price allocation
Determining the acquisition date fair value of assets acquired and
liabilities assumed on acquisition of controlled entities.
Contractual customer relationships
Identifying those acquired relationships with customers that meet the
definition of separately identifiable intangibles that have a finite life.
ificant accounting estimates and assumptions
(b) SignSignSignSignificant accounting estimates and assumptions
(b)
ificant accounting estimates and assumptions
ificant accounting estimates and assumptions
(b)(b)
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 10.
The Group recognises provisions for rental agreements on acquisition
(refer note 12 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.15. 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 objective evidence 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.
TRADE AND OTHER RECEIVABLES
TRADE AND OTHER RECEIVABLES
TRADE AND OTHER RECEIVABLES
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
and an allowance for impairment loss is recognised, measured as the
difference beween the carrying amount of the receivables and the
estimated future cash flows expected to be received from relevant
debtors. Bad debts are written off as incurred.
Trade receivables provided as security under the Group’s securitisation
facility 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.
DERIVATIVE FINANCIAL INSTRUMENTS
DERIVATIVE FINANCIAL INSTRUMENTS
DERIVATIVE FINANCIAL INSTRUMENTS
DERIVATIVE FINANCIAL INSTRUMENTS
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. 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.
Metcash Annual Report 2016
Metcash Group | Financial Report 2016
Metcash Group |
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Metcash Group |
83838383
Notes to the financial statements (continued)
For the year ended 30 April 2016
Summary of significant accounting policies
Appendix A ---- Summary of significant accounting policies
Appendix A
Summary of significant accounting policies
Summary of significant accounting policies
Appendix A
Appendix A
Instruments that meet the strict criteria for hedge accounting 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.
Fair value hedges
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.
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 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.
ACCOUNTED INVESTMENTS
QUITY----ACCOUNTED INVESTMENTS
EEEEQUITY
ACCOUNTED INVESTMENTS
ACCOUNTED INVESTMENTS
QUITY
QUITY
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.
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.
INVENTORIES
INVENTORIES
INVENTORIES
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.
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT
Recognition and measurement
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
De-recognition
2016
2016
20162016
2015
2015
20152015
40-50 years
5-15 years
40-50 years
5-15 years
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.
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.21.
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Notes to the Financial Statements
For the year ended 30 April 2016
Notes to the financial statements (continued)
For the year ended 30 April 2016
Summary of significant accounting policies
Appendix A ---- Summary of significant accounting policies
Appendix A
Summary of significant accounting policies
Summary of significant accounting policies
Appendix A
Appendix A
INTANGIBLE ASSETS
INTANGIBLE ASSETS
INTANGIBLE ASSETS
INTANGIBLE ASSETS
Recognition and measurement
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.
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.
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. Goodwill is not amortised.
Trade names are acquired either through business combinations or
through direct acquisition. 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.
Customer contracts are acquired either through business combinations
or through direct acquisition of contractual relationships. Customer
contacts 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. The amortisation has been recognised in the
statement of comprehensive income in the line item ’administrative
costs‘.
Software development costs incurred on an individual project are
capitalised at cost 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 asset is carried at cost less any accumulated amortisation and
accumulated impairment losses. Any costs carried forward are
amortised over the assets’ useful economic lives.
De-recognition
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.
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.
Useful lives
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.
The estimated useful lives of existing finite life intangible assets are as
follows:
Customer contracts
Software development costs
Other
2016
2016
20162016
2015
2015
20152015
5-25 years
5-10 years
10 years
5-25 years
5-10 years
10 years
Useful lives are reassessed on an annual basis and adjustments, where
applicable, are made on a prospective basis.
ASSETS
FINANCIAL ASSETS
IMPAIRMENT OF NONNONNONNON----FINANCIAL
IMPAIRMENT OF
ASSETS
ASSETS
FINANCIAL
FINANCIAL
IMPAIRMENT OF
IMPAIRMENT OF
At each reporting date, the Group assesses whether there is any
indication that the value of a non-financial asset may be impaired.
Goodwill and indefinite life intangible assets are tested for impairment
at least annually and more frequently if events or changes in
circumstances indicate that the carrying value may be impaired.
Where an indicator of impairment exists, the Group makes a formal
estimate of recoverable amount. Where the carrying amount of a non-
financial 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.
MPLOYEE LEAVE BENEFITS
EEEEMPLOYEE LEAVE BENEFITS
MPLOYEE LEAVE BENEFITS
MPLOYEE 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.
Metcash Annual Report 2016
Metcash Group | Financial Report 2016
Metcash Group |
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Metcash Group |
85858585
Notes to the financial statements (continued)
For the year ended 30 April 2016
Summary of significant accounting policies
Appendix A ---- Summary of significant accounting policies
Appendix A
Summary of significant accounting policies
Summary of significant accounting policies
Appendix A
Appendix A
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 at the reporting date are
discounted using market yields on high-quality corporate bonds with
terms to maturity that match as closely as possible, the estimated
future cash outflows.
BEARING BORROWINGS
INTEREST----BEARING BORROWINGS
INTEREST
BEARING BORROWINGS
BEARING BORROWINGS
INTEREST
INTEREST
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.
All loans and borrowings are initially recognised at the fair value of the
consideration received net of issue costs associated with the borrowing.
BASED PAYMENT TRANSACTIONS
SHARE----BASED PAYMENT TRANSACTIONS
SHARE
BASED PAYMENT TRANSACTIONS
BASED PAYMENT TRANSACTIONS
SHARE
SHARE
After initial recognition, interest-bearing 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.
LEASES
LEASES
LEASES
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.
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.
PROVISIONS
PROVISIONS
PROVISIONS
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.
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 20.
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.
REVENUE RECOGNITION
REVENUE RECOGNITION
REVENUE RECOGNITION
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.
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86868686
Notes to the Financial Statements
For the year ended 30 April 2016
Notes to the financial statements (continued)
For the year ended 30 April 2016
Summary of significant accounting policies
Appendix A ---- Summary of significant accounting policies
Appendix A
Summary of significant accounting policies
Summary of significant accounting policies
Appendix A
Appendix A
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.
NCE COSTS
FINAFINAFINAFINANCE COSTS
NCE COSTS
NCE 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.
INCOME TAX
INCOME TAX
INCOME TAX
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
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.
EARNINGS PER SHARE
EARNINGS PER SHARE
EARNINGS PER SHARE
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.
CURRENT ASSETS HELD FOR SALE AND DISCONTINUED
NONNONNONNON----CURRENT ASSETS HELD FOR SALE AND DISCONTINUED
CURRENT ASSETS HELD FOR SALE AND DISCONTINUED
CURRENT ASSETS HELD FOR SALE AND DISCONTINUED
OPERATIONS
OPERATIONS
OPERATIONS
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.
Net profit after tax from discontinued operations are reported
separately from continuing operations, 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.
Metcash Annual Report 2016
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
87878787
Notes to the financial statements (continued)
For the year ended 30 April 2016
Summary of significant accounting policies
Appendix A ---- Summary of significant accounting policies
Appendix A
Summary of significant accounting policies
Summary of significant accounting policies
Appendix A
Appendix A
FINANCIAL GUARANTEE CONTRACTS
FINANCIAL GUARANTEE CONTRACTS
FINANCIAL GUARANTEE CONTRACTS
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.
COMPARATIVE INFORMATION
COMPARATIVE INFORMATION
COMPARATIVE INFORMATION
COMPARATIVE INFORMATION
Certain comparative information was amended in these financial
statements to conform to the current year presentation. These
amendments do not impact the Group’s financial results and do not
have any significant impact on the Group’s balance sheet.
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
85
88888888
Notes to the Financial Statements
For the year ended 30 April 2016
Notes to the financial statements (continued)
For the year ended 30 April 2016
Information on subsidiaries
Appendix B –––– Information on subsidiaries
Appendix B
Information on subsidiaries
Information on subsidiaries
Appendix B
Appendix B
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.
ACN 008 698 093 (WA) Pty Ltd
A.C.N. 131 933 376 Pty Ltd
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)
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
Community Co Australia Pty Ltd (previously
GP New Co Pty Ltd)
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 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)
Metcash Annual Report 2016
2016
2016
20162016
%%%%
99.4
2015
2015
20152015
%%%%
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
100
80
100
100
100
100
100
100
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
100
75
100
100
100
100
100
100
100
100
100
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 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 Ulladulla Pty Ltd (i)
Franklins Wentworthville Pty Ltd (i)
Franklins Westleigh Pty Ltd (i)
Franklins Wetherill Park 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)
Green Triangle Meatworks Pty Limited
2016
2016
2016
2016
%%%%
100
100
2015
2015
20152015
%%%%
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
Gympie Property Investment Pty Ltd
84.7
84.7
Handyman Stores Pty Ltd (i)
Hardware Property Trust
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 Ltd (i)
Independent Solutions Pty Ltd
Interfrank Group Holdings Pty Ltd(i)
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 Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
89898989
Notes to the financial statements (continued)
For the year ended 30 April 2016
Information on subsidiaries
Appendix B –––– Information on subsidiaries
Appendix B
Information on subsidiaries
Information on subsidiaries
Appendix B
Appendix B
2016
2016
20162016
%%%%
2015
2015
20152015
%%%%
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. Ltd
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)
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
Timberten Pty Ltd (note 8)
Vawn No 3 Pty. Ltd.
WA Hardware Services Pty Ltd (i)
Wickson Corporation Pty Limited(i)
Wimbledon Unit Trust
Jewel Food Stores 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
Mermaid Tavern (Freehold) Pty Ltd
Mermaid Tavern (Trading) Pty Ltd (note 8)
Metcash Asia Limited (incorporated in China)
Metcash Automotive Holdings Pty Ltd and its
subsidiaries
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
Northern Hardware Group 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
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
51
84.7
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
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
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
87
90909090
2016
2016
2016
2016
%%%%
100
2015
2015
20152015
%%%%
100
100
100
100
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
84.7
100
100
80
68.4
100
100
100
100
100
100
100
100
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
84.7
100
100
80
52
-
100
100
100
100
Notes to the Financial Statements
For the year ended 30 April 2016
Notes to the financial statements (continued)
For the year ended 30 April 2016
Information on subsidiaries
Appendix B –––– Information on subsidiaries
Appendix B
Information on subsidiaries
Information on subsidiaries
Appendix B
Appendix B
class order relief
Entities subject to class order relief
Entities subject to
class order relief
class order relief
Entities subject to
Entities subject to
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 2001 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.
The Statement of Comprehensive Income of the entities that are members of the ‘Closed Group’ is as follows:
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
Retained profits/(accumulated losses) at the end of the financial year
2016
2016
2016
2016
$m$m$m$m
282.4
(78.0)
204.4
(1,181.8)
-
(977.4)
2015
2015
20152015
$m$m$m$m
(405.8)
(2.6)
(408.4)
(634.7)
(138.7)
(1,181.8)
Metcash Group | Financial Report 2016
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Metcash Group |
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Metcash Annual Report 2016
Notes to the financial statements (continued)
For the year ended 30 April 2016
Information on subsidiaries
Appendix B –––– Information on subsidiaries
Appendix B
Information on subsidiaries
Information on subsidiaries
Appendix B
Appendix B
The Statement of Financial Position of the entities that are members of the ‘Closed Group’ is as follows:
Assets
Assets
Assets
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
Liabilities
Liabilities
Liabilities
Trade and other payables
Derivative financial instruments
Interest-bearing borrowings
Income tax payable
Provisions
Other financial liabilities
Total current liabilities
Interest-bearing borrowings
Derivative financial instruments
Provisions
Other financial liabilities
Total non-current liabilities
Total liabilities
Net assets
Net assets
Net assets
Net assets
Equity
Equity
Equity
Equity
Contributed and other equity
Other reserves
Retained profits/(accumulated losses)
Total equity
Total equity
Total equity
Total equity
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
89
92929292
2012012012016666
$m$m$m$m
10.4
933.3
622.8
21.7
-
10.2
1,598.4
12.1
15.9
2,583.4
218.3
110.1
817.3
3,757.1
5,355.5
1,284.1
1.8
15.7
15.2
133.8
13.6
1,464.2
3,114.1
3.9
122.4
7.7
3,248.1
4,712.3
643.2
643.2
643.2
643.2
1,626.0
(5.4)
(977.4)
643.2
643.2
643.2
643.2
2012012012015555
$m$m$m$m
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
442.9
442.9
442.9
1,626.0
(1.3)
(1,181.8)
442.9
442.9
442.9
442.9
Directors’ Declaration
Directors’ declaration
For the year ended 30 April 2016
For the year ended 30 April 2016
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:
i. Giving a true and fair view of its financial position as at 30 April 2016 and of its performance for the year ended on that date;
and
ii. 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.2;
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 2016.
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, 20 June 2016
Metcash Group | Financial Report 2016
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Metcash Group |
Metcash Annual Report 2016
93939393
Directors’ Declaration
Metcash Group | Financial Report 2016
Metcash Group |
Metcash Group |
Metcash Group |
94949494
91
Ernst & Young
680 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Metcash Group | Financial Report 2016
Metcash Group |
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Metcash Annual Report 2016
a.
b.
5
Metcash Group | Financial Report 2016
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Metcash Group |
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93
ASX Additional Information
For the year ended 30 April 2016
Additional information required by the Australian Securities Exchange and not shown elsewhere in this report is as follows:
The information is current as at 24 June 2016:
Distribution of Equity Securities
The number of shareholders, by size of holding, in each class of share is:
SIZE OF HOLDING
NUMBER OF SHAREHOLDERS
SIZE OF HOLDING
NUMBER OF SHAREHOLDERS
1-1,000
1,001-5,000
5,001-10,000
7,441
14,553
5,268
10,001-100,000
100,001-9,999,999,999
Total
4,224
180
31,666
There were 3,252 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
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
UBS NOMINEES PTY LTD
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 3
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
BOND STREET CUSTODIANS LIMITED
RBC INVESTOR SERVICES AUSTRALIA PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
NETWEALTH INVESTMENTS LIMITED
WARBONT NOMINEES PTY LTD
UBS NOMINEES PTY LTD
WARBONT NOMINEES PTY LTD
NETWEALTH INVESTMENTS LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
Number of
Shares
Percentage of
Shares
246,833,198
153,295,507
119,290,797
75,192,446
19,590,740
13,875,251
9,970,597
9,500,711
9,423,860
7,336,731
6,197,895
6,040,477
5,395,348
4,561,169
3,977,205
3,166,094
3,040,000
2,494,389
1,598,505
1,595,714
26.588%
16.513%
12.850%
8.100%
2.110%
1.495%
1.074%
1.023%
1.015%
0.790%
0.668%
0.651%
0.581%
0.491%
0.428%
0.341%
0.327%
0.269%
0.172%
0.172%
Total
702,376,634
75.658%
Substantial Shareholders
The following is extracted from the Company’s register of substantial shareholders:
NUMBER OF SHARES
Allan Gray Australia Pty Ltd
119,964,214
National Australia Bank Limited
Westpac Banking Corporation
BT Investment Management Ltd
90,946,001
87,697,300
Lazard Asset Management Pacific Co
NUMBER OF SHARES
60,529,748
51,024,539
Voting Rights
All ordinary shares (whether fully paid or not) carry one vote per share without restriction.
Metcash Annual Report 2016
Name
Number of
Percentage of
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
NATIONAL NOMINEES LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
UBS NOMINEES PTY LTD
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 3
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
BOND STREET CUSTODIANS LIMITED
RBC INVESTOR SERVICES AUSTRALIA PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
NETWEALTH INVESTMENTS LIMITED
WARBONT NOMINEES PTY LTD
UBS NOMINEES PTY LTD
WARBONT NOMINEES PTY LTD
NETWEALTH INVESTMENTS LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
Shares
246,833,198
153,295,507
119,290,797
75,192,446
19,590,740
13,875,251
9,970,597
9,500,711
9,423,860
7,336,731
6,197,895
6,040,477
5,395,348
4,561,169
3,977,205
3,166,094
3,040,000
2,494,389
1,598,505
1,595,714
Shares
26.588%
16.513%
12.850%
8.100%
2.110%
1.495%
1.074%
1.023%
1.015%
0.790%
0.668%
0.651%
0.581%
0.491%
0.428%
0.341%
0.327%
0.269%
0.172%
0.172%
Total
702,376,634
75.658%
Mitre 10 (Head Office)
12 Dansu Court
Hallam VIC 3803
Tel: 61 3 9703 4200
Fax: 61 3 9703 4222
Postal: Locked Bag 10
Doveton VIC 3177
Corporate Information
ABN
32 112 073 480
Directors
Robert Murray (Chair)
Ian Morrice (Group CEO)
Patrick Allaway
Fiona Balfour
Michael Butler
Tonianne Dwyer
Neil Hamilton
Murray Jordan
Helen Nash
Company Secretary
Brad Soller
Share Register
Boardroom Pty Limited
GPO Box 3993
Sydney NSW 2001
Tel: 1300 737 760
Tel: 61 2 9290 9600
Fax: 61 2 9279 0664
Auditor
Ernst & Young
680 George Street
Sydney NSW 2000 Australia
Tel: 61 2 9248 5555
National Office
1 Thomas Holt Drive
Macquarie Park NSW 2113
Postal: PO Box 557
Macquarie Park NSW 1670
Tel: 61 2 9741 3000
Fax: 61 2 9741 3399
www.metcash.com
Metcash Food & Grocery
(Head Office)
1 Thomas Holt Drive
Macquarie Park NSW 2113
Tel: 61 2 9741 3000
Postal: PO Box 557
Macquarie Park NSW 1670
Australian Liquor Marketers
(Head Office)
1 Thomas Holt Drive
Macquarie Park NSW 2113
Tel: 61 2 9741 3000
Postal: PO Box 557
Macquarie Park NSW 1670
Corporate Governance
A copy of the Corporate Governance Statement can be found on our website. Visit www.metcash.com/investor-centre/corporate-information/corporate-governance
95
www.metcash.com