ANNUAL REPORT
2022
Locals
supporting
locals
We reach 95% of Australians
Metcash Annual Report 2022 Metcash works with OneHarvest
(pictured) to supply IGA retailers
with fresh Community Co salads. Our
salad bowls have been developed in a
first‑to‑market offer which includes the
use of post‑consumer recycled content,
reducing the reliance on virgin plastics.
Read more about this and other initiatives
in our Sustainability Report at
www.metcash.com/sustainability.
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As Australia’s leading wholesaler, Metcash
is dedicated to ensuring we provide the
best level of service to our extensive
network of independent retail and
wholesale customers across the Food,
Liquor and Hardware sectors.
Metcash has the widest retail distribution network in Australia.
We service Independent Retailers in all corners of Australia,
including Cape York and Cooktown in the North East, Dampier
and Broome in the North West, Albany and Denmark in the
South West and Tarwin Lower and Foster in the South East.
Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAbout Metcash has major Distribution Centres (DCs)
in Brisbane, Sydney, Melbourne, Adelaide and
Perth. Collectively, team members in our large
DCs worked an extra 250,000 hours in FY22
to ensure retailers’ shelves remained stocked
despite challenging conditions.
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Metcash Annual Report 2022 Responsive and
flexible operations
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About Us
Group Highlights
Strategic Focus
MFuture
Group Chairman’s Report
Group CEO’s Report
Financial Highlights
Food
Hardware
Liquor
Sustainability FY22 Highlights
Our People and Our Board
Directors’ Report
Financial Report
ASX Information
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SHANE WISMAN, LOGISTICS
OPERATIONS MANAGER,
METCASH (PICTURED)
Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAbout About Us
OUR PURPOSE
Metcash is Australia’s leading wholesale
distribution, marketing and independent
retailer services company, with sales
(including charge‑through) of over $17bn1
in FY22. We believe that it is important
to Australia that there is a sustainable,
independent, family‑owned business
sector. Independent retailers are a vital
part of their local communities. We help
them to be the ‘Best Store in Their Town’
by providing merchandising, operational
and marketing support across our Food,
Hardware and Liquor pillars.
RECORD GROUP REVENUE1
$17.4bn
6.4% (+17.2% 2yr)
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Company distribution
Food
Liquor
Hardware
55%
27%
18%
1. FY22 Group reported revenue
(which excludes charge-through sales in
accordance with AASB15) was $15.2bn.
Championing
Successful
Independents
OUR VALUES
Independence is worth fighting
for; in treating our people, retailers
and suppliers the way we like to
be treated; and in giving back to
the communities where we live
and work.
OUR VISION
Best store in their town
Passionate about independents
A favourite place to work
Business partner of choice
Support thriving communities
Creating a sustainable future
Metcash Annual Report 2022 OUR PILLARS
FOOD
HARDWARE
LIQUOR
In Liquor, we are the second‑largest
player in the market supplying ~90% of
independent liquor stores in Australia.
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Our Independent Brands Australia
(IBA) network is home to a number
of successful national brands such
as Cellarbrations, the Bottle‑O,
IGA Liquor and Porters Liquor.
State‑based brands in our portfolio
include Thirsty Camel, Big Bargain
Bottleshop and Duncans. Our IBA
retail network consists of more
than 1,800 tier one bannered stores
across Australia and New Zealand.
We also supply over 12,000 liquor
customers through our Australian
Liquor Marketers (ALM) division which
includes supply agreements with large
and small contract banner groups,
un‑bannered liquor stores, as well as
on‑premise and eCommerce retailers.
Food sales*
Hardware sales*
Liquor sales*
$9,522m
$3,120m
$4,764m
Sales movement
Sales movement
1.4%
4.6% 2yr
* Includes charge-through sales.
20.5%
50.3% 2yr
Sales movement
8.7%
29.5% 2yr
Our Food pillar supports over 1,600 stores including the well-known IGA and Foodland brands. We are also a significant supplier to large contract customers, such as FoodWorks and Drakes Supermarkets in Queensland. The IGA network provides shoppers with a range that is tailored for local customers by local store owners. We ensure that the network remains competitive across a broad range of products through our Low Prices Every Day and Price Match programs. We also offer a growing range of Community Co and Black & Gold private label products. In Convenience, we support tens of thousands of customers nationwide. The businesses we support include restaurants, coffee shops, fresh food outlets as well as forecourt retail and local convenience stores.Our Independent Hardware Group (IHG) is Australia’s largest home improvement wholesaler and the second-largest player in the Australian Hardware market. It is home to the well-known Mitre 10 and Home Hardware brands and supplies more than 1,500 hardware stores nationwide. Our Hardware pillar was expanded in September 2020 with the acquisition of a majority stake in Total Tools Holdings, franchisor to the largest network of specialist tool retailers in Australia. A further 15% was acquired in 2021 increasing the stake to 85%.The IHG network caters to a broad range of Trade and DIY customers serviced from a variety of store formats including large warehouses to convenience operations and Trade centres, as well as frame and truss sites. Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAbout Group Highlights
Continuation of strong momentum
Group Revenue*
Group EBIT
+6.4%
to $17.4bn
+17.7%
to $472m
(+17.2% 2yr)
(+41.0% 2yr)
Profit After Tax
Operating cash flow
6
$300m Underlying
+18.6% (+50.7% 2yr)
$245m Reported
$432m
~91%
Cash Realisation Ratio
Earnings Per Share
Total Dividends per share
30.5cps Underlying
+23.5% (+39.9% 2yr)
+22.9%
to 21.5cps
25.0cps Reported
(+72.0% 2yr)
* Includes charge-through.
Metcash Annual Report 2022 77
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Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAboutAbout
Strategic Focus
Easy to do
business with
Business partner
of choice for
suppliers
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Customer and
Community
Shopper‑led offer
Lean, low cost model and
operating supply chain
Increased retailer competitiveness
driving shareholder value
Metcash Annual Report 2022 MFuture
A five‑year program launched in
2019 aimed at providing a pathway
to sustainable growth, balanced
with cost efficiencies.
Growth
Store upgrade
programs
Store formats
Ranging and
pricing
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Private label
Accelerating
eCommerce
System enhancement –
Project Horizon
Strengthening the network through organic growth
and attractive acquisitions.
Costs
Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAboutAbout Chairman’s Report
I am pleased to report
it has been another
successful year for
Metcash with record
sales growth leading to
a significant increase in
underlying earnings and
returns to shareholders.
Robert Murray
Chairman
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Welcome to Metcash’s 2022 Annual
Report, and my last as Chairman after
nearly seven years in the role.
This year’s results represent continued progress on the
exceptional FY21 performance that I reported to you last
year. The strong results were again driven by the success
of our MFuture initiatives designed to further improve the
competitiveness of our retail network, continuation of the
local neighbourhood shopping trend and the success of
recent strategic acquisitions, particularly Total Tools.
It is important to note that these results were delivered
while facing many new challenges including more lockdowns
associated with the emergence of the Delta and Omicron
COVID variants, major supply chain challenges, flooding and
supply route disruptions in South Australia, New South Wales
and Queensland and, towards the end of the financial year,
Russia’s invasion of Ukraine and lockdowns in China.
A strategic investment in inventory, the flexibility of our
operations and the outstanding efforts of our people helped
our retailers to keep their shelves stocked and continue
serving their local communities through these challenges.
A testament to our people and independent retailers is that
our focus on keeping shelves stocked did not materially
hinder the continued successful execution of our MFuture
initiatives. In addition to progressing key initiatives such as
store upgrade programs, rolling out new store formats and
expanding our private and exclusive labels ranges, good
progress was made on a wide range of digital initiatives.
We also continued to progress Project Horizon, our
technology transformation program aimed at resetting our
core technology and making it easier to do business with us.
This included the successful transition in the year to a new
core financial system.
FINANCIAL RESULTS AND CAPITAL
MANAGEMENT
Group revenue, including charge-through sales, increased
6.4% to $17.4bn with significant underlying growth in each
pillar. Group underlying EBIT increased 17.7% to $472.3m
and underlying profit after tax increased 18.6% to $299.6m.
Underlying earnings per share improved 23.5% to
30.5 cents per share.
The Group’s significant lift in earnings and strong financial
position led to a ~23% increase in total FY22 dividends to
21.5 cents per share, fully franked, representing a ~72%
increase in total dividends on a two-year basis. Together
with the share buy-back completed in August last year,
total returns to shareholders are over $400m.
Metcash Annual Report 2022 NEW GROUP CEO
In October last year, we announced that Doug Jones,
formerly CEO and Senior Vice President of South
African-based Massmart Wholesale, would succeed
Jeff Adams as Group CEO. This followed earlier advice from
Jeff to the Board that he intended to retire from the role to
spend more time with his family based in the US.
Jeff joined Metcash in September 2017, and under his
leadership the Company has seen significant transformation
and growth. He was responsible for the successful
MFuture program designed to provide a pathway to
sustainable growth, including significantly improving the
competitiveness of our retail networks. This positioned our
retailers well for the shift in shopper behaviour through
COVID and was a key driver of the Company’s record sales
performance in each of the last two financial years.
Jeff also oversaw a number of important acquisitions,
including Total Tools, which strengthened our business
portfolio, as well as significant improvements in the
Company’s ESG credentials, retailer relationships and
our people engagement score.
The Board and I sincerely thank Jeff for his outstanding
contribution to Metcash over the past four-and-a-half years.
Doug joined Metcash on 1 February and worked closely
with Jeff to ensure a smooth and seamless transition,
with Doug assuming operational leadership in March.
Most recently, Doug was CEO and Senior Vice President
of Massmart Wholesale, which includes ‘big box’ format
food, liquor and general merchandise stores serving retail,
commercial and wholesale customers; cash and carry stores;
buying groups that service wholesale and independent retail
customers; and a number of eCommerce platforms.
The Board and I are confident that Doug will be a strong
Group CEO of Metcash. He has the ability, energy and
confidence to deliver even greater success for Metcash,
and his performance to date is very supportive of this.
BOARD CHANGES
As noted above, this will be my last Report to you. I have
advised the Board that I will be retiring as Chairman effective
1 August 2022. Given my length of service as Chairman,
and with the successful transition of a new Group CEO,
I believe this is the right time for me to retire from the Board.
Following a prudent and well-considered and managed
succession planning process, Peter Birtles, current
Non-Executive Director and Chair of the Audit, Risk and
Compliance Committee, has been appointed to succeed me
as Chairman. Peter is well placed to take over from me and
I am confident he will be an excellent Chairman of Metcash.
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A testament to our
people and independent
retailers is that our focus
on keeping shelves
stocked did not materially
hinder the continued
successful execution of
our MFuture initiatives.
I have thoroughly enjoyed my time at Metcash and am proud
to have played a role in guiding Metcash’s transition to the
Company it is today. We are well positioned for the future
with a balanced portfolio of highly performing businesses,
healthy retail networks and a strong financial position
and culture.
Earlier this month we were pleased to announce the
appointment of Mark Johnson to the Board. Mark is a highly
experienced company director and has a distinguished
executive career that includes more than 20 years as a
senior partner of PwC during which he held the position
of CEO Australia between 2008 and 2012. He was also
Deputy Chairman of PwC Asia and a member of PwC’s
Global Strategy Council. Mark also led the Consumer
and Industrial Products group at PwC.
Mark’s broad range of financial and industry experience,
including his time advising many large FMCG companies,
will clearly be an asset to the Board and Metcash.
As a consequence of Peter Birtle’s succession to
Chairman, Helen Nash has been appointed to replace
Peter as Chair of the Audit, Risk and Compliance
Committee, and Margie Haseltine has been appointed
Chair of the People and Culture Committee, replacing
Helen. Mark has joined the Audit, Risk and Compliance
Committee and Nomination Committee.
Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAbout 12
CHAIRMAN’S REPORT CONTINUED
REMUNERATION AND CULTURE
No changes were made to Jeff Adams’ remuneration in
FY22, which means the only change to his remuneration
since joining Metcash in 2017 was to his variable remuneration
(STI and LTI opportunities) last year. This was to provide
even stronger alignment in his pay mix to market practice
and increase further the ‘at risk’ component of his total
remuneration.
While Doug Jones’ total remuneration is slightly lower than
his predecessor, we retained the higher weighting to variable
pay in keeping with current practice in our peer group and to
maintain alignment with shareholder interests. We also put
in place a buy-out grant of performance rights with financial
and non-financial hurdles to cover a portion of the on-foot
STI and LTI he forfeited with his previous employer.
We also successfully completed our FY22 programs towards
alignment with the Taskforce on Climate-Related Financial
Disclosures (TCFD) and being able to report under the
Global Reporting Index (GRI) framework, and we completed
the work to estimate our Scope 3 emissions.
Last year’s Annual Report contained our first Sustainability
Report, which I hope you found informative. This year,
in line with our focus on continuous improvement, we
have prepared a more expansive and detailed standalone
Sustainability Report where you will be able to read about
the many initiatives we have underway in this important area,
as well as our achievements.
A summary of the 2022 Sustainability Report can be found
in this Annual Report commencing on page 32, with the full
Sustainability Report available on our website.
Food CEO, Scott Marshall, was provided with a grant of
performance rights, also with financial and non-financial
hurdles attached, to recognise the criticality of Scott in the
important ongoing transformation agenda in Food.
A modest increase in fixed remuneration was awarded to
the Group CFO and the CEOs of Liquor and Hardware,
as foreshadowed last year, and represents the first
increases since their appointments.
STI outcomes for the year ranged from 73% to 85% of
maximum, reflecting the outstanding FY22 performance.
Our FY20 LTI vested at 100%, with the outcome of the
three-year Return on Funds Employed hurdle of 28.2%,
and the outcome of the Absolute Total Shareholder
Return hurdle of 25.5%.
Also, as foreshadowed last year, most Metcash Board fees
remained below peer group medians and a modest increase
of 2.5% took some directors slightly closer to, and others
slightly above, the FY22 market medians with a range of
90% to 108%.
I am very pleased to advise that Metcash has again been
awarded an Employer of Choice citation by the Workplace
Gender Equality Agency. This recognises our deep
commitment to gender pay parity and gender equality in
the workforce. This is the fourth time we have received
the citation.
Workplace engagement and culture continues to be a
key focus for us, and this has pleasingly been reflected in a
further improvement in our workplace engagement survey
results, which now position us in the 62nd percentile of
internationally benchmarked companies.
Further details on our remuneration framework and
outcomes for FY22 can be found in the Remuneration
Report commencing on page 52.
ENVIRONMENTAL, SOCIAL AND
GOVERNANCE (ESG)
We continued to expand our ESG work program and
disclosures across the ‘Our People’, ‘Communities and
Products’ and the ‘Environment and Climate’ categories,
and this underpinned a further improvement in our ESG
credentials. Highlights in the year included tracking in line
with our 2030 Science-Based Emissions Reduction Target,
which requires a 42% reduction in emissions from our 2020
baseline year, carrying out appropriate analysis to set a Net
Zero emissions target by 2040, as well as a target of using
100% renewable energy by 2025.
GOING FORWARD
It is now well over two years since we first saw the shift in
consumer behaviour with more shoppers re-discovering
the convenience and value of their local neighbourhood
stores. While there is no doubt COVID helped to accelerate
this shift, it is important to highlight that the early benefits
of our MFuture program were evident prior to the onset
of COVID. This provided the foundation for our sustained
outperformance over the past two years.
Importantly, this shift and momentum has continued into
the early part of FY23, confirming that shoppers are enjoying
the improved competitiveness of our network stores, and the
service levels that only independent locals can provide.
A higher rate of inflation has also continued into FY23,
and there is uncertainty over its level going forward and
whether it and other cost of living increases will impact
consumer behaviour in the retail networks of our pillars.
We are continuing to work closely with our suppliers and
retailers to help shoppers manage the impact of inflation
by providing better value options through offering a
wider range of products at competitive prices.
All pillars are continuing to manage well through the ongoing
supply chain and COVID-related challenges, and they remain
focused on progressing their MFuture initiatives to further
improve the competitiveness of our retail networks.
THANKS
To all our people, the Metcash leadership team, our
independent retailers, suppliers and our shareholders,
I would like to express my thanks, and that of the entire
Board for your ongoing support.
I would also like to thank my fellow Directors for their
commitment and contribution to Metcash over the past year,
as well as their support to me during my tenure as Chairman.
Metcash is well positioned to continue its success and I wish
Peter, the Board and the broader Metcash team all the best
for the future.
Robert Murray
Chairman
* Sales Revenue referenced within the Chairman’s Report
includes charge-through sales.
Metcash Annual Report 2022 13
Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAbout Group CEO’s Report
This year’s results were
outstanding and represent
continued progress
on the exceptional
FY21 performance.
Doug Jones
Group CEO
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I’m pleased to present this Report to
you on Metcash’s FY22 performance,
my first as Group CEO.
As the Chairman mentioned, I joined Metcash in early
February and assumed operational leadership of the
Company later in March after working closely with
Jeff Adams to ensure a smooth and seamless transition.
I would like to extend my thanks and acknowledgement
to Jeff for his support, counsel and friendship through
my transition, and to congratulate him and his team on
the exceptional FY22 results.
PURPOSE, VISION AND VALUES
Metcash’s Purpose, Vision and Values were something that
resonated with me as I joined the business and engaged with the
Board and senior management. They have served Metcash well
through the challenges of the last few years, and I can assure you
that our purpose of Championing Successful Independents is
alive and well and made real through our values and beliefs.
GROUP HIGHLIGHTS
This year’s results are outstanding and represent continued
progress on the exceptional FY21 performance. They were
delivered while we and many others were facing new external
challenges, and it was pleasing to see the resilience and
flexibility of our business model and operations in action.
The financials were exceptional by almost any measure with
record sales and profit levels this year. There was significant
sales growth on both a one-year and two-year basis, with
Group sales reaching more than $17bn for the first time in
the Company’s history. This reinforces that shoppers, builders
and tradespeople are sticking with their independent local
neighbourhood stores.
Underlying EBIT
$472m
(
41.0% 2yr)
17.7%
Importantly, the strong performance was broad-based
with all Pillars performing well. The investments made in
acquisitions have generated pleasing returns for shareholders,
and our strong cash flows and healthy financial position
enabled the delivery of substantial shareholder returns.
Our retail networks have outperformed. On a two-year
basis, like for like (LfL) sales increased ~15% in the IGA retail
network, ~28% across Hardware’s IHG and Total Tools retail
networks and ~24% in the IBA liquor network. We believe
that a two-year measure is helpful as it enables comparison
to pre-COVID conditions; in Metcash’s case, this highlights
the step change in the business during this period.
The outstanding two-year performance has led to our
independent retail networks emerging significantly stronger
and healthier. There is great confidence from the networks in
our business model, and this is embodied in a higher level of
retailer investment back into their stores.
Across our pillars, Hardware had another great year,
and the Total Tools acquisition has continued to deliver
outstanding results. Liquor performed very well despite
changing COVID-related trading regulations, and Food
again delivered strong underlying earnings growth.
We have an ongoing focus on further improving our ESG
credentials and creating a safe and rewarding environment
for our people.
Metcash Annual Report 2022 15
Our range of ESG projects has expanded substantially,
reflecting the inclusion of sustainability as a core component
of Metcash’s vision. This was recognised with a further
improvement in our DJSI ranking to 21, and being placed
in DJSI’s 69th percentile (FY21: 29 and 56th percentile).
While we recognise that there is always more work to do in
creating a safe work environment, it is pleasing to note that
despite working 250,000 more hours in our large distribution
centres this year, under difficult circumstances and often
with less experienced labour, our overall safety score
improved slightly.
We also made good progress towards being a more diverse
Company that is representative of the Australian population
and were again pleased to have received WGEA’s Employer
of Choice citation for the fourth year.
As the Chairman noted, this year we have prepared an
expanded and separate Sustainability Report where you
can read about the many initiatives we have underway
in this important area. A summary is provided in the
Sustainability section of this report.
GROUP FINANCIALS
Group revenue, including charge-through sales, increased
6.4% (+17.2% over two years ) to $17.4bn with significant
underlying growth in all pillars.
Group underlying EBIT increased 17.7% (+41.0% over
two years) to $472.3m reflecting the robust sales
performance and the success of recent strategic
acquisitions, partly offset by increased costs related to
COVID and supply chain challenges.
Group underlying profit after tax increased 18.6%
(+50.7% over two years ) to $299.6m, and statutory profit
after tax increased 2.7% to $245.4m. Underlying earnings
per share increased 23.5% (+39.9% over two years ) to
30.5 cents reflecting the increase in underlying profit after
tax and the accretive benefit of the Company’s $200m
share buy-back completed in August last year.
Group operating cash flow was $432.3m with the cash
realisation ratio ~91%, in line with our historical guidance. This
was achieved after an increase in working capital, including
a strategic investment in inventory to keep our retailers
adequately stocked through the supply chain challenges
experienced in the year, and the impact of ‘significant items’.
The Group ended the financial year with net debt of
$189.0m (FY21: net cash of $124.6m) reflecting the impact
of ~$400m of shareholder distributions including the
share buy-back and an increase in dividends paid, as well
as strategic investment in inventory. Average net debt for
the year was $241m.
The significant lift in earnings and strong financial position
led to a ~23% (+~72% over two years) increase in total
dividends for the year to 21.5 cents per share, fully franked.
PILLAR FINANCIALS
Food
In Food, total sales (including charge through) increased
1.4% to $9.5bn, or 2.0% on a normalised1 basis (+13.4% over
two years on a normalised basis). Excluding tobacco, total
Food sales increased 5.4% or 3.8% on a normalised basis.
Supermarket sales increased 3.9% or 1.9% on a normalised
basis (+13.8% over two years). LfL sales in the IGA network
increased 2.9% (+14.6% over two years) with continued
support from shoppers rediscovering the convenience
of local neighbourhood shopping and the improved
competitiveness of the network. This has been underpinned
by the success of our MFuture initiatives including our
Network of the Future and Diamond Store Accelerator store
upgrade programs.
The business went to extraordinary lengths to keep its
retailers’ shelves adequately stocked through significant
supply chain and operational disruptions, as well as elevated
and unpredictable demand. Initiatives such as our strategic
investment in inventory, operating seven-day shift patterns
in our large distribution centres, re-routing supply points
around logistics blockages, re-deploying staff to support our
logistics operations and working closely with our suppliers,
government and industry all helped to deliver the strong
performance of our IGA network.
Sales momentum in Supermarkets accelerated in the
fourth quarter, increasing 13.8% or 5.8% normalised
(+9.6% ex-tobacco normalised). LfL sales in the IGA network
increased 6.3% (normalised) in the same period reflecting
market share gains and the impact of inflation.
Food EBIT increased $7.9m or 4.1% to $200.3m. The
improvement was ~$29m or ~17% after adjusting for the
adverse impact of 7-Eleven, a decline in the contribution
from the resolution of onerous lease obligations and there
being no excise increase in FY22. The higher earnings reflects
the Food pillar’s strong trading performance, partly offset by
additional COVID-related costs including additional labour
costs due to absenteeism and penalty rates associated with
extended operating hours at distribution centres. The Food
EBIT margin increased to 2.1% (FY21: 2.0%) despite these
additional costs.
1. Normalised sales have been adjusted to exclude the impact of
a 53rd trading week, and in the Food pillar, also sales to Drakes
and 7-Eleven in the relevant sales period as appropriate.
Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAbout 16
GROUP CEO’S REPORT CONTINUED
Hardware
Hardware sales (including charge-through) increased
20.5% or 18.3% on a normalised basis to $3.1bn reflecting
significant growth in both IHG and Total Tools and the impact
of acquisitions. Combined sales in the IHG and Total Tools
retail networks increased 9% to ~$4.4bn on a LfL basis
(+27.8% over two years).
Residential construction and renovations activity was
adversely impacted by tight supply conditions, tight labour
supply and unseasonal wet weather, leading to a further
strengthening of the pipeline of future activity. Despite this,
sales in IHG increased 12.5% (+32.6% over two years) to $2.8bn
reflecting the impact of inflation and volume growth in Trade.
DIY demand continued to be elevated, but volumes declined
slightly against the exceptional prior year comparative.
The increase in Trade sales led to Trade representing 64%
of the sales mix (FY21: Trade 60%, DIY 40%).
The Independent Hardware Group (IHG) banner group
continued to perform strongly with retail LfL sales
increasing 10.5%, with Trade sales up 12.7% and DIY sales
up 6.7% (+21.8% on a two-year basis, with Trade +11.6%
and DIY +39.1%).
Total Tools sales increased 160.4% to $367m reflecting
increased Trade activity and the impact of additional
majority-owned joint venture stores. Total network sales
increased to $972m (FY21: $868m) with LfL sales up 5.0%
(+48.1% over two years). The network continued to expand,
with a further 11 stores added, bringing total stores to 100.
Hardware EBIT increased a substantial $55.3m or 40.7%
to $191.3m. IHG’s EBIT increased $15.8m or 14.1% to
$127.8m reflecting the strong sales performance, and the
contribution from Company-owned and joint venture stores
acquired during the year. This was partly offset by additional
COVID-related, casual labour and supply chain costs, as well as
additional investment in the network to support the retention
of shoppers gained through COVID. Total Tools EBIT increased
$39.5m to $63.5m reflecting the strong sales performance
and the contribution from majority-owned joint venture stores
acquired during the current and prior years.
The Hardware EBIT margin increased to 6.1% (FY21: 5.3%)
which includes the positive impact of Total Tools and the retail
margin from IHG joint ventures and Company-owned stores.
Liquor
Total Liquor sales (including charge-through) increased
8.7% or 6.6% on a normalised basis to $4.8bn (+27.1% over
two years normalised) with a continuation of strong demand
in the retail network and a recovery in on-premise sales.
Sales growth in the retail network was in both the IBA banner
group and contract customers, supported by continuation of
the shift in preference for local neighbourhood shopping and
less overseas travel and duty-free shopping.
Wholesale sales to the IBA banner group increased 4.4%
(+28.1% over two years) with all brands performing well,
particularly the Bottle-O, Cellarbrations and IGA Liquor.
RTDs, spirits and wine continued to be the strongest growth
categories. Retail LfL sales in the IBA banner group increased
2.5% (+24.0% over two years).
Sales to on-premise customers continued to recover with
the easing of COVID-related restrictions, increasing 30%
compared to the prior corresponding year.
Liquor EBIT increased $8.7m or 9.8% to $97.4m reflecting
the contribution from the increase in sales volumes, which
more than offset an increased weighting of the on-premise
channel in the sales mix, as well as higher costs associated
with the impact of COVID-related costs including those
associated with absenteeism, and higher freight costs
related to route disruptions and increased fuel costs.
The EBIT margin for Liquor was in line with the prior
comparative period at 2.0% despite the additional costs.
MFUTURE INITIATIVES
Our operational focus on keeping shelves stocked through
supply chain and COVID challenges did not materially hinder
the continued successful execution of our MFuture initiatives.
Good progress was made with key initiatives such as the pillar
stores upgrade programs, the Network of the Future program
in Food, initiatives to grow both Trade and DIY in Hardware,
capitalising on growth opportunities in Total Tools and
growing the Owned and Exclusive brands category in Liquor.
We also made good progress with a wide range of digital
initiatives, including the rollout of new eCommerce
platforms in Food and Liquor. In Food, we have ~190 stores
using our IGA Shop Online platform, and sales through our
leading platforms in IHG and Total Tools now represent ~6%
of total network sales in Hardware.
Progress with our MFuture initiatives is discussed in more
detail in the pillar sections of this Report.
PROJECT HORIZON
We delivered the first key milestone of this project during
the year with the transition to a new core financial system,
which was used to successfully complete the year-end close
and audit process.
Project Horizon has two key areas of focus. The first is
replacing, de-risking and modernising our core systems
to enable the repositioning of Metcash to be a modern
technology-led wholesaler through replacing legacy
systems with an integrated Microsoft Dynamics 365
ERP platform. The second is to significantly improve our
processes through standardisation and simplification so
that we are easier to do business with.
In addition to transitioning to a new core financial system,
we expanded what was originally planned for inclusion in
stage one of the Project to now include Campbells point
of sale. This will enable better integration of Campbells
into Metcash and provide greater business stability. We
also accelerated planning work for the forecasting and
replenishing systems and have brought forward its rollout
from the fourth quarter of FY23 to the second quarter.
Horizon is a multi-year, highly complex program that touches
many parts of the business. As would be expected for such
an important project, I have stepped into an active project
sponsorship and governance role, and we have in place all
other appropriate governance processes including oversight
by steering committees and the Board.
The scope expansion and a greater understanding of the
project’s complexity led to an increase in our estimate of
costs for Horizon stage one. These are detailed in our FY22
Results presentation that can be found on our website.
Metcash Annual Report 2022 Co-located Mitre 10 and the 100th Total Tools
stores located in Richmond, VIC
NEW DISTRIBUTION CENTRE
We were excited to recently announce the signing of
a long-term lease for the construction and leasing of a
‘best in class’ Distribution Centre (DC) at Truganina, Victoria.
The new 115,000m² DC, which will replace Metcash’s
existing 90,000m² DC at Laverton, is expected to further
improve the competitiveness of our independent retailers
in Victoria through delivery of greater efficiencies and by
providing access to a wider range of products. It is also
expected to benefit local suppliers by providing an efficient
route to market through access to Metcash’s extensive
distribution network.
The new DC will house products for both our Supermarkets
and Liquor pillars, and be equipped with automation to suit
our retail networks (semi-automated ‘Goods to Person’
and ‘Layer Picking’).
Supporting our decision to proceed was the success of
our new DC at Gepps Cross in South Australia, which has
been operational since December 2020, as well as strong
growth in both our Food and Liquor pillars in Victoria and
the recent renewal of a long-term agreement to supply
FoodWorks stores.
The DC will be built to align with the new 5-Star Green Star
sustainability rating which reflects Australian Excellence in
sustainability building design. Construction is scheduled
to commence in the first half of FY23, with completion
expected mid-2024.
17
GOING FORWARD
We have started the year with good momentum, and
although we face increased uncertainty associated with
higher inflation and living costs, I take great confidence from
Metcash being well positioned for the future. Underpinning
this is the dedication of our people, the resilience and health
of our networks, the robustness of our operating model and
our strong financial position which provides the financial
flexibility to continue progressing our MFuture growth plans.
THANKS
I would like to extend my thanks to our independent retailers
and suppliers, and the entire management team and Board
for your support and encouragement. You have all made me
and my family feel very welcome. I have been very impressed
by the way we work together to deliver on our purpose of
Championing Successful Independents, and I look forward
to what is shaping up as another exciting year ahead for
Metcash and our retailers.
Doug Jones
Group CEO
* Sales Revenue referenced within the Group CEO Report
includes charge-through sales.
Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAbout Financial Highlights
FIVE YEAR REVIEW
Financial Performance
Reported sales revenue ($m)
Underlying EBIT ($m)2
Finance costs, net ($m)
Underlying profit after tax ($m)2
Reported profit/(loss) after tax ($m)
Operating cash flows ($m)
Cash realisation ratio (%)3
Financial Position
Shareholders’ equity ($m)
Net cash/(debt) ($m)
Gearing ratio (%)4
Debt leverage ratio5
Return on funds employed (%)6
Share Statistics
Fully paid ordinary shares
Weighted average ordinary shares
Underlying earnings per share (cents)2
Reported earnings/(loss) per share (cents)
Dividends declared per share (cents)
Dividend payout ratio (%)
Other Statistics
2022
2021
2020
20191
20181
15,164.8
14,315.3
13,025.4
12,660.3
12,442.2
472.3
(48.5)
299.6
245.4
432.3
91%
1,090.4
(189.0)
14.8%
0.36x
31.0%
965.5
982.8
30.5
25.0
21.5
70%
401.4
(42.6)
252.7
239.0
475.5
114%
1,291.1
124.6
(10.7%)
(0.27x)
28.7%
1,022.4
1,021.9
24.7
23.4
17.5
71%
334.9
(52.0)
198.8
(56.8)
117.5
33%
330.0
(28.9)
210.3
192.8
244.9
92%
334.6
(26.4)
216.9
(148.2)
276.3
101%
1,371.6
1,250.1
1,334.2
86.7
(6.7%)
(0.22x)
24.9%
1,016.4
910.1
21.8
(6.2)
12.5
57%
(42.9)
3.3%
0.09x
27.7%
909.3
928.6
22.6
20.8
13.5
60%
42.8
(3.2%)
(0.11x)
24.4%
975.6
975.6
22.2
(15.2)
13.0
59%
Number of employees (full-time equivalents)
8,017
7,010
6,400
6,378
6,378
18
Sales
($m)
8
.
4
6
1
,
5
1
3
.
5
1
3
4
1
,
2
.
2
4
4
,
2
1
3
.
0
6
6
,
2
1
4
.
5
2
0
3
1
,
EBIT (Underlying)
PAT (Underlying)
($m)
($m)
3
.
2
7
4
4
.
1
0
4
6
.
9
9
2
7
.
2
5
2
9
.
6
1
2
3
.
0
1
2
.
8
8
9
1
6
.
4
3
3
.
0
0
3
3
9
.
4
3
3
8
1
Y
F
9
1
Y
F
0
2
Y
F
1
2
Y
F
2
2
Y
F
8
1
Y
F
9
1
Y
F
0
2
Y
F
1
2
Y
F
2
2
Y
F
8
1
Y
F
9
1
Y
F
0
2
Y
F
1
2
Y
F
2
2
Y
F
EPS (Underlying)
Operating cash flows
(cents)
($m)
5
.
0
3
2
.
2
2
6
.
2
2
8
.
1
2
7
.
4
2
8
1
Y
F
9
1
Y
F
0
2
Y
F
1
2
Y
F
2
2
Y
F
5
.
5
7
4
3
.
2
3
4
1
2
Y
F
2
2
Y
F
3
.
6
7
2
8
1
Y
F
9
.
4
4
2
9
1
Y
F
5
.
7
1
1
0
2
Y
F
1. FY18 and FY19 financials are
reported on a pre-AASB16 basis.
2. Underlying EBIT, Underlying PAT
and Underlying EPS excludes the
impact of significant items.
3. Cash flows from operations/
Underlying NPAT + Depreciation
and Amortisation (depreciation and
amortisation not tax effected).
4. Net Debt/(Shareholders’ Equity +
Net Debt).
5. Net Debt/(EBITDA + depreciation
of right-of-use assets).
6. Underlying EBIT/Average funds
employed.
Metcash Annual Report 2022 19
Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAbout BRANDS
FOOD
We are the largest supplier to
independent supermarkets in Australia,
with the widest distribution network and
unmatched reach and delivery frequency.
SUPA IGA Mount Cotton won five
IGA Awards of Excellence in 2020.
20
Metcash Annual Report 2022 The resilience and flexibility
of our operating model was
a key factor in keeping our
retailers’ shelves stocked
during the significant
challenges experienced
during the year.
Food national distribution network
Scott Marshall
CEO, Metcash Food
Major metro distribution centres
Regional distribution centres
21
Our Food pillar supports a network of over 1,600 stores
which include the well‑known IGA and Foodland banners.
We are also a significant supplier to large contract
customers, including Australian United Retailers Limited
which supports the FoodWorks branded stores.
In addition to ensuring product availability for shoppers
during significant supply chain and COVID-related
challenges, we continued to execute our MFuture initiatives
to further improve our retailers’ competitiveness and the
shopper experience.
We have distribution centres in each major capital city
and in several regional locations. Our leading logistics
and distribution capabilities ensure we have an efficient,
flexible and responsive supply chain, and this underpins
our position as a partner of choice.
The IGA network provides shoppers with a range of products
which are tailored to local needs and tastes by store owners.
We ensure that the network remains competitive across a
broad range of products through our Low Prices Every Day
and Price Match programs. We also offer a growing range
of Community Co and Black & Gold private label products.
Our stores are community focused with support provided to
many local community groups through our Community Chest
program together with other support from our retailers,
and local suppliers and businesses through stocking locally
sourced products.
Our retailers are conveniently situated in local
neighbourhoods and are known for being at the heart of
the local community. A large proportion of our stores are
located in regional and remote areas where we are often
relied on as the only store in town.
In Convenience, we support tens of thousands of customers
nationwide. The businesses we support include restaurants,
coffee shops, fresh food outlets as well as forecourt retail
and local convenience stores.
Continuation of our store upgrade program and delivering
greater value for shoppers, including more competitive
prices, are key components of this.
Network of the Future – Refreshed IGA
format strategy
We continued to progress the rollout of our new suite of
brands which have been tailored to shopper preferences
within the local community. A disciplined strategic review
resulted in the development of national brand standards
and the provision of a more consistent offer by each store
format. This has been universally endorsed by our Retailer
Boards in each State.
The full suite of brands includes: Supa Valu (large format),
IGA and IGA Fine Food Market (core), the Local Grocer and
The Fresh Pantry (small format), with Village Grocer the
alternative brand to the IGA suite.
The rollout is progressing well with 211 stores now compliant
with the new standards and a further 400 that are nearing
compliance. There is a total of 209 stores that have
transferred to a new brand or banner group, with a further
~400 in progress. We also completed or have significantly
progressed new signage for ~100 stores. We expect
the network to be fully transitioned to the new suite of
brands in 2024.
Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAbout
FOOD CONTINUED
22
Network of the Future – Diamond Store Accelerator
(DSA) store upgrade program
The DSA program is a key driver for continued improvement
in the quality of our IGA store network. It delivers a more
modernised store and a better experience for shoppers.
Despite the many external challenges, 93 stores were
upgraded in FY22, which is only slightly below our initial
target for the year. This was a great outcome and reflects
the significant dedication and commitment of our Food
team and retailers.
This brings the total number of store upgrades to 715, and
we remain on track to meet our target of having ~90% of
our IGA network of ~1,350 stores upgraded by FY26.
An expected outcome of providing a better experience for
shoppers is increased sales for our retailers and Metcash.
For stores that have been upgraded, the average increase
in sales was more than 12%. This encourages more retailers
to invest in their stores, with Metcash providing financial
support through rebates that reward growth, as well as
program and planning support.
Greater value for shoppers
A competitive advantage of our IGA network is that it
offers the convenience of local neighbourhood shopping,
a wide range of products and brands tailored to the local
community together with friendly local service. We do not
believe shoppers should pay more for these benefits, and
this underpins our strong focus on providing competitive
prices. The continued strong sales performance in the
Food pillar is testament that shoppers have rediscovered
their local IGA, liked what they found, realised they don’t
have to pay more and have developed new habits as a result.
Our strong focus on value led to a further improvement
in the price competitiveness of our products against our
major competitors, of more than 150 basis points. Our Low
Prices Every Day program is made up of ~2,500 essential,
competitively priced products, meaning that customers
can shop at IGA with confidence, knowing that these
products will be the same low price every week. In addition,
all IGA stores that participate in our Price Match program
match the lowest regular shelf price of over 600 essential
comparable products at other major retailers, and our bigger
stores match prices on over 1,400 items. We also continually
benchmark the quality of our private label Black & Gold and
Community Co products and monitor the market to ensure
that the prices of these items remain competitive.
We have recognised that rising inflation and cost of living
expenses are placing pressure on shoppers and, in addition
to our price programs mentioned above, we are helping
shoppers manage these cost increases by providing better
value options through offering a wider range of products
at competitive prices.
Metcash Annual Report 2022 IGA on Bloomfield, Queensland was
named IGA Store of the Year in July 2022.
23
Supply chain
The resilience and flexibility of our operating model was a
key factor in keeping our retailers’ shelves stocked during the
significant challenges experienced during the year.
We continued to invest in our core logistics to further
improve our efficiency and service levels, as well as expand
our capabilities. This included completing the expansion of
our chilled ranging capacity at the Crestmead, Queensland
facility where we also extended our lease until 2036. In South
Australia, our new Gepps Cross DC is successfully providing
a wider range of products and operational efficiencies which
are improving the competitiveness of our retail network in
South Australia. We are also seeing improved efficiencies
from the completion of our Transport Management System
upgrade and Paperless Warehouse initiative.
The success of the new Gepps Cross, South Australia DC,
the strong sales performance in Victoria and the recent
extension of our supply agreement to supply FoodWorks
stores were key factors in our decision to enter into an
agreement for the construction and lease of a new larger
and ‘best in class’ DC in Truganina, Victoria. The new 115,000
square metre DC will replace the current DC in Laverton
and will house both Food and Liquor products. It will provide
capacity to enable a wider product range and deliver
improved service to our retailers, as well as a better route
to market for local suppliers.
The investment reinforces our commitment and focus
on improving the competitiveness of our retail networks.
Construction will commence in the first half of FY23 and
the project is expected to be completed by mid 2024.
* Sales Revenue referenced within this section includes
charge-through sales.
Digital
We continued the rollout of IGA Shop Online, our new digital
eCommerce platform, to the IGA network. The new platform
is now available in all States and is live in ~190 stores, and the
average basket size is significant at ~$120. With a strong
pipeline of committed stores, we are targeting to be live in
~800 stores by FY25. Pleasingly, we are continuing to see
very positive shopper and retailer feedback.
This year we also enhanced our network loyalty program,
IGA Rewards, and continued to roll it out across the network.
The program is now live in ~300 stores with more than
~330,000 members and ~700,000 cardholders.
We also have plans to launch a pilot food and beverage
eCommerce portal called CampbellsPlus. This portal
will enable the extension of the Campbells offer beyond
the current Campbells warehouse range and will focus
on supporting local and artisan brands. The pilot will
commence in the greater Brisbane area in late 2022.
The continued strong sales
performance is testament that
shoppers have rediscovered
their local IGA, liked what
they found, realised they
don’t have to pay more and
have developed new habits
as a result.
Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAbout BRANDS
HARDWARE
We are the second‑largest player in the
Australian Hardware market with retail
network sales of over $4.4bn in FY22.
24
Atkinson’s Mitre 10, WA
Metcash Annual Report 2022 Strong activity levels and
the contribution from
strategic acquisitions led
to sales growth of ~20%
in FY22 and ~50% on a
two‑year basis.
National store network
WA
34 21
17
10 1
NT
2
2
1
1
SA
42 17
6
20
QLD
88 31
22
1
22
NSW
95
40 26
38
VIC
76
43
33
TAS
22
1
1
2
21
3
Mitre 10
Home Hardware and related brands
Total Tools
Thrifty Link and True Value
Distribution centres
25
Demand from the Trade sector was again very strong,
albeit tight product and labour supply together with
unseasonal wet weather had a constraining impact on the
level of residential construction and renovations activity.
The pillar continued to make good progress on its key
MFuture initiatives focused on growing its DIY and
Trade categories.
Growing DIY – Sapphire store upgrades
A key driver of our success in attracting more DIY shoppers
to IHG has been our highly effective Sapphire store
upgrade program.
Similar to Food’s DSA program, the Sapphire program aims
to ensure the stores across the IHG network are leading
edge and tailored to each store’s unique location in the
community it serves. This includes having the right DIY
product categories and service offer to engage and support
local shoppers.
Annette Welsh
CEO, Independent
Hardware Group
Our Independent Hardware Group (IHG) is Australia’s largest
home improvement wholesaler and the second‑largest
player in the Australian Hardware market. It is home to
the well‑known Mitre 10 and Home Hardware brands and
supplies more than 1,500 hardware stores nationwide.
Our Hardware pillar was expanded in September 2020 with
the acquisition of a majority stake in Total Tools Holdings,
franchisor to the largest professional tools market in
Australia. A further 15% was acquired in 2021 increasing
the stake to 85%.
The combined IHG and Total Tools network recorded retail
sales of more than $4.4bn1 in FY22 from over 730 stores
located in metro and regional areas across the country. The
network caters to a broad range of Trade and DIY customers
serviced from a broad range of store formats including large
warehouses to convenience operations and Trade centres,
as well as frame and truss sites.
The culture of IHG is built on being a low cost and transparent
business partner to our retailer members, with an unwavering
commitment to protect and grow a sustainable independent
hardware sector for the long term.
Hardware achieved strong sales growth of over 20% in
FY22, and more than 50% growth on a two-year basis,
driven by strong activity levels and the contribution from
strategic acquisitions.
The increased consumer interest in DIY and rediscovery
of local hardware stores seen in recent years continued
to be a factor in the strong performance, with many new
customers returning to enjoy the knowledgeable and
friendly local service, great product ranges and competitive
prices offered by our retail members.
1.
Includes a combination of scan sales and estimates based on
wholesale data.
Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAbout HARDWARE CONTINUED
Design 10 Showroom, Tooronga, VIC
26
The Sapphire program has continued to deliver great results
for our retailers, with average sales growth for the period
following completion of the program of ~30% in FY22.
The success of the program led to our target for the number
of Sapphire store upgrades being increased last year from
200 to 300 stores by 2025. We are progressing well against
this target with 161 stores now through the program.
An enabler of the Sapphire program is the conversion of
Home Hardware branded stores to the Mitre 10 brand when
they are upgraded as part of the program. This forms part
of our ‘two-brand’ strategy which includes Mitre 10 being
IHG’s primary brand, with Home Hardware positioned as
a strong second brand ensuring that each market has the
most relevant and appropriate brand and format that is
best suited to it. At the end of FY22 there were 359 Mitre 10
stores and 154 Home Hardware stores, as well as 123 smaller
format True Value Hardware and Thrifty Link stores. We are
targeting the mix of Mitre 10 to Home Hardware stores to be
approximately two-thirds to one-third.
The ‘whole of house’ strategy aims to build on our leading
position in Trade through expanding our range and offer to
ensure we are able to supply the vast majority of components
used in the building of a house, including foundations, frame
and truss, lock up, fix and fit out. We have a dedicated
sales team with strong customer relationships and have
appropriate alliances now in place. We also now have
10 frame and truss facilities within the network.
We also completed a new Design 10 showroom in Tooronga,
Victoria as part of our ‘whole of house’ strategy, bringing the
total to five nationally. The showroom includes a display for
builders and their customers of the many category options
that IHG can supply including kitchens, appliances and
laundry products.
A key enabler of connecting with our builder customers is
through our Trade Technology. The use of trade technology
allows IHG to focus on providing the builder with the tools
they need to get in, get out and get on with the job at hand,
reducing costs for the builder and driving loyalty.
Growing Trade
Key initiatives to grow our leading position in Trade include
further expanding our extensive footprint of Trade Centres
and increasing our share of the supply component of a house
build through execution of our ‘whole of house’ strategy.
Our network of Sapphire standard stand-alone Trade
Centres, which focus on servicing the builder, has grown
to 37, and we are well on track for reaching our target of
50 Trade Centre stores by 2024.
New Ravenhall DC
We continued to invest in our distribution capability
with our new Ravenhall, Victoria DC set to open in the
second quarter of FY23. It is a 50,000 square metre modern
facility with space to also house product for Total Tools.
The new DC complements our existing facilities in Berrinba,
Queensland which opened in 2018 and Welshpool,
Western Australia.
Metcash Annual Report 2022 Total Tools, Richmond VIC
Total Tools
The Total Tools acquisition has been very successful, with the
business continuing to grow strongly since the acquisition of
our majority stake in 2020. Over the last two years, like for
like network sales have grown a remarkable ~48%, with total
network sales reaching $972m in FY22.
Total Tools started out over 30 years ago as a buying
group of eight stores and has grown to be the number one
professional tools business in Australia. It is a complementary
business to IHG, targeting tradespeople that use professional
tools for a living with an unrivalled range of the best
professional brands in the world, together with professional
service solutions and advice.
It is the retailer of choice for major professional tool
suppliers and has long-term relationships with key suppliers
such as Milwaukee, Makita and Dewalt. Its large format
stores have, on average, 10,000 product lines with
modern store layouts and eye-catching signage for
easy customer navigation.
The Total Tools store footprint has continued to expand with
a further 11 new stores added in the year to reach a significant
network milestone of 100 stores. Four of these stores were
co-located with Mitre 10 stores, which is proving to be very
successful for both brands. We see further opportunities
for this co-located format.
We plan to keep expanding the Total Tools store network
by around eight to 10 new stores per year to reach our target
of ~130 stores by 2025.
27
The business continued to benefit from the strategy of
having the network comprised of a mix of franchisees and
Metcash majority-owned joint venture stores. A further
15 were added during the year to bring the number of
majority-owned joint venture and Company-owned stores
to 35. The acquisition of joint venture stores enables
franchisees to benefit from the freeing up of capital, while
ensuring they stay involved and vested in the successful
operation of the store.
Digital
We have continued to invest in and advance our leading
digital technologies in both IHG and Total Tools. This is
delivering greater consumer insights, more personalisation
of the offer and increased value for consumers. Online sales
revenue increased a significant 55% in the year to represent
~6% of Hardware sales in FY22. The digital offer now
includes ~65,000 SKUs.
Across Hardware we have ~2.8m loyalty customers that
provide us with a single view of the customer. The IHG loyalty
program has 1.2m customers who are Mitre 10 and Home
Hardware program members. Total Tools also has a very
loyal customer base with its market leading Insider Loyalty
program having over 1.6m members that represent more
than 89% of its sales base (excluding commercial).
* Sales Revenue referenced within this section includes
charge-through sales.
Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAbout BRANDS
LIQUOR
We are the second‑largest player in the
Australian liquor market and home to
some of Australia’s best known liquor store
brands, with sales of $4.8bn in FY22.
28
Cellarbrations, the Entrance, NSW
Metcash Annual Report 2022 Over the past two years,
the Pillar has grown sales
by more than $1bn and
added an additional 1,150
customer accounts.
IBA network of tier one stores
WA
133
NT
28
SA
83
QLD
224
NSW
333
VIC
524
TAS
92
ACT
56
NZ
350
Distribution Centres
29
The outstanding performance of our Liquor pillar in FY22 was
underpinned by a continuation of strong demand in the retail
network and a recovery in on-premise sales. Over the past
two years, the Pillar has grown sales by more than $1bn and
added an additional 1,150 customer accounts.
Sales growth in the retail network was in both the IBA banner
group and contract customers, supported by continuation
of the shift in preference for local neighbourhood shopping
and less overseas and duty free shopping due to overseas
travel restrictions.
The year also included making good progress on our MFuture
initiatives including growing the Owned and Exclusive
brands category, further improving supply chain flexibility
and efficiency, increasing brand awareness and appeal,
and the rollout of our digital initiatives.
Chris Baddock
CEO, Metcash
Liquor
In Liquor, we are the second‑largest player in the market
supplying ~90% of independent liquor stores in Australia.
Our Independent Brands Australia (IBA) network is
home to a number of successful national brands such as
Cellarbrations, the Bottle‑O, IGA Liquor and Porters Liquor.
State‑based brands in our portfolio include Thirsty Camel,
Big Bargain Bottleshop and Duncans.
We also supply over 12,000 liquor customers through our
Australian Liquor Marketers (ALM) division which includes
supply agreements with large and small contract banner
groups, un-bannered liquor stores, as well on-premise and
eCommerce retailers.
Our IBA retail network consists of 1,823 tier one bannered
stores across Australia and New Zealand. These retailers
are supported through our ‘retail services’ which
includes national buying capacity, marketing support,
promotional programs, network investment; and through
providing access to our growing portfolio of Owned and
Exclusive brands.
IBA retailers are positioned conveniently in local
neighbourhoods, with local product ranges tailored to
each location and community, supported by bespoke
promotional programs.
Through our network of 14 distribution centres located in
each State and Territory in Australia, and in New Zealand,
we support independent businesses with a competitively
priced and extensive liquor range, delivered through our
cost effective and efficient supply chain.
Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAbout
LIQUOR CONTINUED
The Bottle-O Silverdale, NSW
30
Brand awareness and appeal
We were delighted that our Cellarbrations brand was
recently named ‘Liquor Store of the Year’ in the annual
2022 Roy Morgan Customer Satisfaction awards. It also
received the prestigious ‘Best of the Best’ award which
is selected from the 37 individual industry winners. This
recognition is a result of sustained and continued investment
in our brand awareness raising activities, supported by
fantastic local service and continued improvement in price
competitiveness. The awards are testament to the true
partnership that exists between our retailers, suppliers
and Metcash.
We also completed our broader brand positioning work for
the IBA network and launched new marketing campaigns
to further build brand awareness and appeal.
Investment in improving the quality of our IBA store network
continued with a further 88 stores and 35 cool rooms being
refreshed in the year. This is an outstanding effort given the
many external challenges faced by our people and retailers.
The business continues to focus on building brand equity
through balanced programs and supplier support as part
of its strategy for increasing ‘foot traffic’ and market share.
Owned and Exclusive Brands (O&E)
During the year we continued to leverage our acquisition in
FY20 of the Kollaras portfolio of O&E brands and worked
towards achieving our target of increasing O&E sales by
more than $100m, or to represent ~5% of total Liquor sales.
Our O&E portfolio was expanded during the year with the
addition of exclusive brands including Cricketers Arms (beer)
and Cougar RTD (Ready to Drink), and the launch of P.O.E.T.S
Country Beer, which we co-created.
We were pleased to have received two bronze and five silver
medals at the recent 2022 London Wine Competition for our
O&E wines. This world-renowned, international wine event
recognises global wine brands that have successfully been
created in three key areas – quality, value and packaging.
Sales for our O&E portfolio increased 23% in FY22. Our
investment to expand O&E not only benefits Metcash, but
also improves margins for retailers and delivers great value
to our shoppers.
Supply chain flexibility and efficiency
As experienced in our Food and Hardware pillars, our Liquor
supply chain faced many external challenges in the year.
We proudly supported our independent retailer partners
throughout this period by using our significant scale and
a strategic investment in inventory to ensure their shelves
continued to be stocked.
We also partnered with key suppliers to realise further supply
chain efficiencies, to help deliver our aspiration of being their
preferred route to market partner. One of our new initiatives
is ALM Connect, a new charge-through service which has
both supplier and retailer support and is due for launch
later in 2022. It involves the development of an ‘extended
aisle’ offer that provides access to non-warehoused ranges.
We have commenced the initial ALM Connect pilot in
Tasmania and early feedback has been very positive.
Metcash Annual Report 2022 INDEPENDENT BEVERAGE PARTNERS
7 M E D A L S A W A R D E D A T T H E
LONDON WINE COMPETITION
Carlo’s IGA Plus
Liquor Birrong, NSW
A world-renowned, international wine event The London Wine Competition looks to recognise, reward and
help promote global wine brands that have successfully been created in three key areas – Quality, Value, and
Packaging. The London Wine Competition is assessed and judged by a leading panel of top-level wine buyers,
consultants and experts with current direct commercial buying responsibility. Notable judges include the Head
Sommeliers’ of Four Seasons Hotels and Resorts, Ritz London, Le Cordon Bleu, Gordon Ramsay Group, and
multiple Masters of Wine.
Our O&E wines received two bronze and five silver medals
at the recent 2022 London Wine Competition.
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The Cellarbrations
brand was named
Liquor Store of
the Year and Best
of the Best in
the Roy Morgan
2022 Customer
Satisfaction Awards.
Digital transformation
In line with increased retailer interest in eCommerce
solutions following the onset of COVID, the business
accelerated its trial of the Shop My Local marketplace
with Click’n’Collect and Click’n’Deliver options available.
We also trialled a branded Cellarbrations offer in Victoria,
with learnings from both trials resulting in a decision to
move forward with a branded eCommerce solution.
Branded eCommerce platforms are now in market for
Cellarbrations, the Bottle-O and Porters, and retailers
that were using Shop My Local have converted to the
new platforms. There are now 156 stores live with the
new platforms, and we have received very positive
shopper and retailer feedback. We also have a liquor ‘aisle’
offer available on our new Food eCommerce platform,
IGA Shop Online.
The average basket size of an online order has grown to
be over $110, and our average quick commerce basket
(DoorDash and UberEats same day delivery partners) is
over $45.
Good progress was made on developing loyalty programs
for the network with Cellarbrations, the Bottle-O and
Porters nearing completion of their programs. Pilot
programs are scheduled for launch in the second half
of 2022.
* Sales Revenue referenced within this section includes
charge-through sales.
Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAbout Sustainability
FY22 Highlights
OUR
PLANET
Net Zero target
Net Zero
emissions
by 2040
OUR
PEOPLE
Female representation at Board/
Group Leadership Team level
43%
32
Renewable energy target
Metcash people engagement survey
100%
renewable energy by 2025
62nd
percentile
of internationally
benchmarked companies
Scope 3 emissions
Awards
~860kt
estimated
NSCA Safety Excellence Award
for best WHS training program
WGEA Employer of Choice
FlexCareers FlexReady
certification
Gold accreditation by
Mental Health Australia
Metcash Annual Report 2022 OUR
CUSTOMERS
OUR PARTNERS
AND COMMUNITY
Australasian Recycling Label
Donations to community organisations
Continued rollout of the
Australasian
Recycling Label
on private label food
and liquor products
$2.4m
IGA Community Chest
Community Co private label range
Food donated to food rescue organisations
33
Expanded range of
Healthier
choice options
55%
equivalent to ~1.3m meals (647t)
Shopper support
Consumer education
Defibrillators
made available
to IGA store network
Providing
education material
for families looking to
live healthier lifestyles
Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAbout SUSTAINABILITY CONTINUED
Creating a sustainable future is a key component of
Metcash’s Corporate Vision. In FY22, we continued
to build on our existing sustainability programs as
well as introducing new initiatives and targets.
As a consequence of our expanded program, this year we
produced our first standalone Sustainability Report that
covers more extensively and transparently the range of
Environmental, Social and Governance topics relevant
to the Metcash Group.
A summary of the highlights for the year is provided
below, and we encourage readers to refer to the
Sustainability Report on our website for further
information (Metcash.com/sustainability).
Energy and emissions
Last year we announced our commitment to a 2030
1.5-degree Science-Based Target. To achieve this a 42%
reduction in emissions is required, and we are currently
tracking to achieve this target. This year we considered
what would be required to take our commitment further
and set a Net Zero emissions target.
Together with our site teams, we determined a list of
opportunities that exist for delivering the necessary
energy efficiency measures, renewable energy and Scope 1
emissions reductions through refrigerant gas replacement
and electrification of our sites and fleet. In considering
the pathway to Net Zero, Metcash has also committed to
100% renewable electricity by 2025 and to a new 5-star
Green Star warehouse in Truganina, Victoria.
As a result of our investigations and forecasts, Metcash
has committed to a Net Zero target by 2040 for Scope
1 and 2 emissions.
We acknowledge that we also have an indirect impact
on the emissions in our value chain. To commence our
journey towards better understanding these indirect
emissions, we investigated best-practice approaches and
methodologies for estimating the extent of our Scope 3
emissions. This included selecting FY20 as the baseline year
to align with our SBT 2030 emissions reduction target.
Metcash’s Scope 3 organisational emissions are estimated
to be 8% of our overall corporate carbon footprint
(when including Scope 1, 2 and 3). The remaining 84%
is derived from upstream and downstream emissions.
We are developing a roadmap to better understand the
opportunities for reducing Scope 3 emissions, which includes
more extensive data collection, determining our sphere of
influence over value chain emissions and creating a heatmap
for interventions.
Climate risk
In 2022 we completed the next phase of our program to
align our climate-related disclosures with the Taskforce for
Climate-Related Financial Disclosures (TCFD). This included
a more detailed State-by-State physical risk assessment
over our operations, Board and senior management capacity
building, reviewing climate exposure of key commodities and
establishing a Climate Change Risk Register.
Retailer network
This year we engaged with our IGA store network and
retailer councils to set an emissions reduction vision. We also
created toolkits to offer practical advice and solutions on
climate and energy, plastics and packaging, food waste and
sustainable sourcing. The uptake of these programs has seen
the launch of a soft-plastics trial, with more than 300 sites
collecting batteries for recycling and 170 stores donating to
food rescue organisations. The environmental footprint of
our independent retail network naturally benefits from local
supply, having a shorter supply chain and less travel required
to shop at our local neighbourhood stores. While recognising
these benefits, the network is continuing to strive towards
further reducing its overall environmental impact.
Our people
Within our business, diversity, culture and engagement
continue to be priorities. In 2022 we launched our
Women in Leadership Program and achieved 46% female
representation at Board/Group Leadership Team level.
Once again Metcash was awarded the Workplace Gender
Equality Agency Employer of Choice for Gender Equality
(WGEA EOCGE) citation, which is the fourth consecutive
year. We are also progressing towards our Group diversity
target of 40/40/20 by 2025.
Metcash has always strived to be an employer of choice
and promoted flexible working. This year we received
FlexReady certification by FlexCareers. The year also
included achieving a further 3.5% improvement in our
overall engagement score.
We remain committed to ‘zero harm’ and this year made
significant achievements across our lead indicators of safety
workplace inspections, hazard reporting and rectification,
and safety communications. Our TRIFR safety performance
indicator improved slightly to 27.00 (FY21: 27.11). While there
is more to do, it was pleasing to deliver an improvement in
the context of unpredictable demand surges, supply chain
and COVID-related challenges and a tight labour market.
34
Metcash Annual Report 2022 35
Responsible sourcing
This year saw the launch of our animal and seafood
responsible sourcing on-pack labelling, the continued rollout
of the Australasian Recycling Label, and the Health Star logo
on our private label products. We also continued to develop
our modern slavery program, which included:
– Conducting deep dives into high risk supplier categories;
– Further tailoring education and training to key Metcash
teams and our retailers;
– Evaluating supplier questionnaire responses and carrying
out follow-up actions;
– Reviewing and improving our grievance and remediation
mechanisms; and
– Reviewing the sourcing of commodities to assess
and update risk allocation compared with our initial
assessment in FY20.
Reporting frameworks
As disclosed last year, Metcash plans to report with
reference to the Global Reporting Initiative (GRI) from next
year. In preparation, we have conducted a Stakeholder
Materiality Assessment and identified and grouped material
ESG topics. As well as determining GRI disclosures, the
materiality assessment will also inform the evolution of
our ESG strategy.
The International Sustainability Standards Board (ISSB) was
recently established to harmonise the reporting framework
of the TCFD, the Climate Disclosures Standards Board
(CDSB) and the Sustainability Accounting Standards Board
(SASB). The ISSB announced that the GRI standards will be
compatible with the ISSB standards. We plan to integrate
the new ISSB standards when they are finalised, while
referencing the Global Reporting Initiative (GRI) in our
FY23 Sustainability Report.
Community
We continue to support charities that have a meaningful local
impact and this year donated ~$2.4m to local organisations
through the Community Chest program. Through in-kind
and further financial support, our retailers provided much
needed on-the-ground local support in flood affected areas
directly, as well as through our Emergency Assistance Fund
and the Rapid Response Plan. Many retailers also volunteered
their time in the initial clean-up and subsequent recovery and
rebuild phases of communities affected.
Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAbout OUR PEOPLE
Doug Jones
Group CEO,
Metcash Group
Alistair Bell
Group CFO,
Metcash Group
Scott Marshall
CEO, Metcash Food
Annette Welsh
CEO, Independent
Hardware Group
BComm, Accounting, Tax,
Auditing, Information Systems,
CA(SA)
Doug Jones is an experienced
executive with extensive
wholesale, retail and
eCommerce experience.
He spent 14 years with
the Johannesburg Stock
Exchange-listed Massmart
group which is majority-
owned by Walmart Inc. It
has leading market positions
in wholesale food, liquor,
home improvement and
general merchandise.
36
B.Ec (Sydney), CA, MAICD
B.Business
Scott began his career with
Metcash in the ALM business
over 29 years ago and was
appointed CEO of ALM in
December 2013. In March 2018
Scott was appointed CEO,
Metcash Food. His areas of
experience cover warehousing
operations and management,
sales, retail operations, State
general management and
marketing management.
Alistair joined Metcash in
2020 as the Group CFO. He
has extensive capital-markets
experience and executive
leadership in managing
international organisations
with portfolios of businesses.
Alistair has held various CFO,
COO and strategy positions
in a range of industries with
ASX-listed, private equity and
multi-national corporations.
Most recently, he was the
Group CFO of GrainCorp
for almost 10 years. Alistair
has broad experience as a
Non-executive Director,
including as Chairman of Audit
and Risk Committees.
Annette joined Metcash
in 2010 and held the roles
of GM of Operations and
GM Merchandise prior to
being appointed CEO of
Independent Hardware Group
in 2020. Annette has global
experience across retail and
wholesale and prior to joining
Metcash worked for Marks &
Spencer and IBM.
OUR BOARD
Robert Murray
Non-Executive Chairman
Doug Jones
Group CEO, Executive Director
Peter Birtles
Non-Executive Director
Margaret Haseltine
Non-Executive Director
MA Hons, Economics (Cantab)
Chair of the Nomination
Committee, Member of
the People and Culture
Committee.
BComm, Accounting, Tax,
Auditing, Information Systems,
CA(SA)
BSc Hons, FCA, MAICD
BA, FAICD
Chair of the Audit, Risk and
Compliance Committee,
Member of the Nomination
Committee.
Member of the People and
Culture Committee, Member
of the Nomination Committee.
Metcash Annual Report 2022 Chris Baddock
CEO, Australian
Liquor Marketers
David Reeve
CIO, Metcash Group
Penny Coates
Chief People and Culture
Officer, Metcash Group
GradCertBus, GAICD
Chris joined Metcash in July
2019 as CEO of Australian
Liquor Marketers (ALM). Chris
has over 30 years of experience
in FMCG including Lion and
Woolworths. Most recently
Chris was Director of Pinnacle
Drinks, a wholly owned
subsidiary of the Woolworths
Endeavour Drinks Group.
David joined Metcash as
Chief Information Officer
in July 2019. He has over 20
years of experience gained
across a wide spectrum of
industries including Financial
Services, Education, Defence
and Airlines. Prior to joining
Metcash, David was CIO of
Macquarie University. He was
responsible for the delivery
of technology capabilities
that enhanced the lives of
students and staff as well
as the clinicians and patients
at MQHealth.
BA Hons, Chartered
Fellow CIPD, GAICD
Penny joined Metcash in 2015
as Chief People and Culture
Officer. Penny has extensive
international HR and line
management experience
gained in the retail, financial
services and professional
services industries. Prior to
joining Metcash, Penny worked
for TAL as its Chief Customer
Service and Operations Officer.
37
Christine Holman
Non-Executive Director
Murray Jordan
Non-Executive Director
Helen Nash
Non-Executive Director
Julie Hutton
Company Secretary
MBA, PG Dip Mgt, GAICD
MPA, MAICD
BA Hons, GAICD
Member of the Audit, Risk and
Compliance Committee and
the Nomination Committee.
Member of the Audit, Risk
and Compliance Committee,
Member of the Nomination
Committee, Member of
the People and Culture
Committee.
Chair of the People and
Culture Committee, Member
of the Nomination Committee.
B Asian Studies (Viet), LLB,
LLM, GAICD
Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAbout DIRECTORS’ REPORT
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 2022 (‘FY22’).
OPERATING AND FINANCIAL REVIEW
METCASH’S BUSINESS MODEL
Metcash is Australia’s leading wholesaler and distributor, supplying and supporting an extensive network of independent retailers which
form part of our bannered network and several other unbannered businesses across the food, liquor and hardware pillars. Metcash’s
retail customers operate some of Australia’s leading independent brands including: IGA, Foodland, Mitre 10, Home Hardware, Total
Tools, Cellarbrations, IGA Liquor and the Bottle-O. We help them to be the ‘Best Store in their Town’ by providing merchandising,
operational and marketing support.
Metcash operates a low-cost distribution model that enables independent retailers to compete against the vertically integrated retail
chains and other competitors. The Group’s core competencies include: procurement, logistics, marketing, retail development and retail
operational support. Metcash operates major distribution centres in all the mainland states of Australia which are complemented by a
number of smaller warehouses and a portfolio of corporate and joint venture stores.
The Group employs over 8,000 people and indirectly supports employment in the independent retail network.
STRATEGIC OBJECTIVES
Metcash’s purpose is ‘Championing successful independents’. Metcash’s vision includes:
supporting independent retailers to be the best store in town;
being passionate about independents;
being a favourite place to work;
being a business partner of choice for suppliers and independents;
supporting thriving communities; and
creating a sustainable future.
38
The strategic vision is underpinned by a number of programs and initiatives across the three pillars (Food, Liquor and Hardware) aimed
at supporting our independent retailers. These include store upgrade programs, new store formats and brand clarity, expanding private
label brands, core ranging and pricing, marketing support, accelerating eCommerce and system enhancements as well as training and
development programs for independent retailers.
The Group commenced the MFuture program at the beginning of FY20. This five-year program spans all pillars and support functions and
adopts a balanced approach to revenue growth and cost savings. The program has a strong focus on accelerating successful current
initiatives, following the shopper into new growth areas, improving the Group’s infrastructure to enable simpler and cheaper processes
and ensuring a sustainable cost base into the future. The program aims to deliver competitive and successful independent retail
networks across all pillars and match store formats to customers shopping missions.
KEY DEVELOPMENTS
Increase in ownership of Total Tools Holdings Pty Ltd (‘Total Tools’) and acquisition of Total Tools independent retail
stores (‘JV Stores’)
In June 2021, Metcash acquired an additional 15% interest in Total Tools, increasing its ownership from 70% to 85%. Cash consideration
of $59.4 million was paid to the minority shareholders. Total Tools is the franchisor to the largest professional tools network in Australia
with 100 bannered stores across Australia as at 30 April 2022, and it is complementary to Metcash’s Independent Hardware Group.
During the year, Total Tools also acquired ownership interests of between 51% and 60% in fifteen Total Tools JV Stores for $37.5 million.
Put and call option arrangements exist which enable Metcash to acquire 100% of these businesses during the first quarter of FY25 and
FY26.
Further details are set out in note 6.1 of the financial report.
COVID-19 pandemic
The Group continues to be subject to COVID-19 related volatility and uncertainty in its trading environment and operations, as well as
from the dynamic economic landscape. In FY22, the Group recognised a $3.0 million impairment charge (FY21: $0.5 million reversal)
primarily in relation to certain inventory items that were impacted by COVID-19 related demand factors. As at balance date, total
provisions for COVID-19 impairments are $8.7 million (FY21: $10.7 million) as detailed in note 3.3 of the financial report.
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Metcash Annual Report 2022DIRECTORS’ REPORT
DIRECTORS’ REPORT
Project Horizon implementation costs
In FY21, Metcash launched Project Horizon, aimed at driving further efficiencies through simplification, as well as growth through making
it easier to do business with Metcash. In addition to these aims, the first stage of this program will also include a focus on the Group’s
technical infrastructure consolidation and replacement, process efficiency foundations and better alignment of the Group’s
infrastructure across the pillars through the development of a single operating system across the Group. Metcash has delivered the first
component, with the core finance module having gone live in November 2021. The remaining components of the first stage are expected
to be progressively delivered through to completion, which is anticipated to occur by the end of calendar year 2023. In FY22, which was
the first full year of the project, the Group incurred $46.9 million (FY21: $17.3 million) of capital expenditure and $31.4 million (FY21: $7.9
million) of expenses on the project. The project expenses included resource costs, accelerated amortisation of legacy software assets
and incremental software licence and maintenance costs. These costs are separately disclosed within significant items in the Statement
of Comprehensive Income to enable a better understanding of the Group’s results.
Capital management initiatives
The Group completed an off-market buyback of 56,821,219 ordinary shares (or 5.6% of total shares in issue) for $200.0 million in August
2021. The ordinary shares were bought back at $3.52 per share, which represented a 14% discount to the Metcash market price of $4.10
(being the volume weighted average price of Metcash ordinary shares on the ASX over the five trading days up to and including 13 August
2021). The buyback comprised a fully franked dividend of $2.67 per share ($151.7 million) and a capital component of $0.85 per share
($48.3 million). These amounts, along with $0.4 million of transaction costs, were debited to the Company’s profit reserve and share
capital account, respectively. The shares bought back were subsequently cancelled.
Changes in key management personnel (KMP)
Doug Jones joined Metcash on 1 February 2022 and was appointed as Group Chief Executive Officer (CEO) and Executive Director on
11 March 2022. Jeff Adams remains in place as the retiring Group CEO to support Doug until Jeff’s retirement in October 2022.
Margaret Haseltine joined the Metcash Board as a Non-executive Director on 3 May 2021. Ms Haseltine joined the People & Culture
Committee and Nomination Committees from her appointment date.
Tonianne Dwyer retired from the Board on 30 June 2021.
Details of Directors’ experience and qualifications are included within this report.
Dividend declaration
The Board has determined to pay a fully franked final FY22 dividend of 11.0 cents per share, which together with the interim dividend of
10.5 cents per share, represent a full year dividend payout ratio of ~70% of underlying profit after tax.
KEY FINANCIAL MEASURES
Warehouse earnings
Metcash’s operations are designed to allow significant volumes to be distributed through its warehouse infrastructure at a relatively fixed
cost base. The ability to leverage volumes through the warehouse is a key driver of profitability for both Metcash and the independent
retail network.
In addition to warehouse revenue, earnings are impacted by product category mix and the proportion of the Group’s products bought by
the network. Warehouse revenue and related margins are driven by competitive pricing, promotional activities and the level of supplier
support through volumetric and other rebates.
Metcash also operates a portfolio of corporate and joint venture retail stores, predominantly in the Hardware pillar.
Metcash has a number of key programs in place to drive sales and margins, including through pricing and promotion, product range,
retail operational standards and consumer alignment.
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, retail stores and the
administrative support functions. During FY22, the efficiency of the supply chain was impacted by global supply chain factors, COVID-19
Safe work practices which were implemented to align with local health regulations as well as significant weather events in Queensland,
New South Wales and South Australia.
The MFuture program includes initiatives aimed at both revenue growth and ensuring the Group has a sustainable cost base.
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Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAbout
DIRECTORS’ REPORT
Funds employed and return on capital
The Group’s funds employed is primarily influenced by the seasonal working capital cycle. The Group has longer term capital
investments predominantly in relation to its supply chain capabilities, including warehouse automation technologies and software
development. In a number of instances, the Group invests alongside the independent retail network, mainly in the form of equity
participation or short-term loans.
The Board’s intention is to continue to invest in the business for future growth while maintaining a strong financial position and
otherwise to assess returning surplus capital to shareholders.
Impact of the 53rd trading week in FY22
The current financial year represents a 53-week trading period (from 26 April 2021 to 1 May 2022) as compared to a 52-week trading
period in the previous financial year (from 27 April 2020 to 25 April 2021). Section 5 of this report provides an overview of the Group’s
financial performance.
Non-IFRS Information
The directors report contains IFRS and non-IFRS financial information. IFRS financial information is financial information that is
presented in accordance with all relevant accounting standards. Non-IFRS financial information is financial information that is not
defined or specified under any relevant accounting standards and may not be directly comparable with other companies’ information.
Non-IFRS measures are used by management to assess and monitor business performance at the Group and segment level and should
be considered in addition to, and not as a substitute for, IFRS information. Non-IFRS information is not subject to audit or review.
Impact of new IFRIC agenda decision on key financial measures
In April 2021, IFRIC published an agenda decision in relation to the accounting treatment of configuration and customisation costs
related to Software-as-a-Service (‘SaaS’) arrangements. The Group has considered the final agenda decision and has clarified its
accounting policy for costs incurred in implementing cloud-based arrangements. That is, costs relating to configuration and
customisation are only capitalised if the implementation activities create an intangible asset that the Group controls in accordance
with the requirements of AASB 138 Intangible Assets. Costs that do not result in intangible assets should be expensed as incurred. The
exception is where they are paid to the suppliers of the cloud-based arrangement to significantly customise the cloud-based software
for the Group. In this case, the costs are recorded as a prepayment for services and amortised over the expected renewable term of
the arrangement.
The change in accounting policy has been applied retrospectively and there was no material impact on the Group’s FY22 financial report.
40
Climate change and sustainability disclosure
Metcash aligns with the Taskforce for Climate-Related Financial Disclosures and full information on our climate response can be
obtained in the ‘Our Planet’ section of the Sustainability Report. The management of climate-related risks and opportunities at Metcash
is overseen by the ESG Council through the Climate Change Risk Register. These various risks are combined and represented in an overall
Climate Risk category in the Group Risk Profile. At the time of writing, the ISSB (Exposure Draft 2) is undergoing industry consultation,
therefore the full scope of the draft and standards are yet to be finalised. However, based on the current draft recommendations,
Metcash has disclosed information related to greenhouse gas emissions and targets, transition risks, physical risks, climate-related
opportunities and climate metrics tied to management performance and remuneration.
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REVIEW OF FINANCIAL RESULTS
Group overview
Sales revenue
Food
Hardware
Liquor
Corporate
Underlying earnings before interest and tax (‘EBIT’)
Net finance costs
Underlying profit before tax
Tax expense on underlying profit
Non-controlling interests
Underlying profit after tax (‘UPAT’) (a)
Significant items
Tax benefit attributable to significant items
Net profit for the year attributable to members
Underlying earnings per share (cents) (b)
Reported earnings per share (cents)
FY22
$m
FY21
$m
15,164.8
14,315.3
200.3
191.3
97.4
(16.7)
472.3
(48.5)
423.8
(122.5)
(1.7)
299.6
(65.6)
11.4
245.4
30.5
25.0
192.4
136.0
88.7
(15.7)
401.4
(42.6)
358.8
(103.7)
(2.4)
252.7
(17.0)
3.3
239.0
24.7
23.4
(a) UPAT is defined as reported profit after tax attributable to equity holders of the parent, excluding significant items identified in note 3.3 of the financial report.
(b) Underlying earnings per share (EPS) is calculated by dividing UPAT by the weighted average number of ordinary shares outstanding during the year.
Group reported revenue, which excludes charge-through sales1, increased 5.9% to $15.2 billion (FY21: $14.3 billion). Including charge-
through sales1, Group revenue increased 6.4% to $17.4 billion (FY21: $16.4 billion), with significant underlying growth in each pillar,
building on the exceptional sales performance in the prior corresponding year.
Group underlying EBIT increased 17.7% to $472.3 million reflecting the robust sales performance and the success of recent strategic
acquisitions, partly offset by increased costs related to COVID and supply chain challenges. On a two-year basis, Group underlying EBIT
increased 41.0%.
The Food pillar continued to perform well delivering EBIT growth of 4.1%, or ~17% after adjusting for the adverse impact of 7-Eleven2, a
decline in the contribution from the resolution of onerous lease obligations and there being no tobacco excise increase in FY22.
In Hardware, EBIT increased a substantial 40.7% reflecting earnings growth in both IHG and Total Tools, buoyed by elevated residential
construction activity and the increased contribution from majority-owned company and joint venture stores in IHG and Total Tools.
In Liquor, EBIT increased 9.8% reflecting the continued robust demand in the retail network and a recovery in on-premise sales following
the easing of COVID-related trading restrictions.
Group underlying profit after tax3 increased 18.6% to $299.6 million, and statutory profit after tax increased 2.7% to $245.4 million.
Underlying earnings per share increased 23.5% to 30.5 cents reflecting the increase in profit after tax and the accretive benefit of the
Company’s $200 million share buyback completed in August last year.
41
Segment results
Food
Hardware
Liquor
Corporate
Metcash Group
Segment revenue (a)
Segment underlying EBIT
FY22
$m
8,379.3
2,033.1
4,752.4
—
FY21
$m
8,316.3
1,624.7
4,374.3
—
15,164.8
14,315.3
FY22
$m
200.3
191.3
97.4
(16.7)
472.3
FY21
$m
192.4
136.0
88.7
(15.7)
401.4
(a) Segment revenue excludes gross charge-through sales to customers of $2.241 billion (FY21: $2.046 billion). Refer note 3.2.
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Food
Total Food sales (including charge-through1) increased 1.4% to $9.5 billion, or 2.0% on a normalised4 basis (+13.4% 2 year normalised4).
Excluding tobacco, total Food sales (including charge-through1) increased 5.4% or 3.8% on a normalised4 basis (+11.9% 2-year
normalised4).
Supermarkets sales increased 3.9% or 1.9% on a normalised4 basis (+13.8% 2yr normalised4). Like for Like (LfL) sales5 in the IGA network
increased 2.9% (+14.6% 2-year basis) with continued support from shoppers rediscovering the convenience of local neighbourhood
shopping and the improved competitiveness of the network. This has been underpinned by the success of our MFuture initiatives
including the Network of the Future and Diamond Store Accelerator programs.
The strongest sales growth (ex tobacco) was in states less impacted by COVID-related restrictions (Western Australia and Queensland).
The business went to extraordinary lengths to keep its retailers’ shelves adequately stocked through significant supply chain and
operational disruptions, as well as elevated and unpredictable demand. Initiatives such as a strategic investment in inventory, operating
7-day shift patterns in large distribution centres, re-routing supply points around logistics blockages, re-deploying staff to support our
logistics operations and working closely with our suppliers, government and industry all helped support the strong performance of our
IGA network.
Sales momentum in Supermarkets accelerated in the fourth quarter of FY22 increasing 13.8% or 6.8% normalised4 (+9.6% ex tobacco
normalised4). LfL sales5 in the IGA network increased 6.3% (normalised4) in the same period, reflecting market share gains and the
impact of inflation.
Wholesale price inflation6 accelerated in the second half with price increases being received from ~60% of the supplier base. Wholesale
price inflation for the year was 0.5% (1H22: deflation of 1.0%, 2H22 inflation of 1.9%).
Food EBIT increased $7.9 million or 4.1% to $200.3 million. The improvement was ~$29 million or ~17% after adjusting for the adverse
impact of 7-Eleven2, a decline in the contribution from the resolution of onerous lease obligations and there being no tobacco excise
increase in FY22. The higher earnings reflects the strong trading performance, partly offset by additional costs related to COVIDSafe work
practices and COVID-related labour costs related to absenteeism and penalty rates associated with extended operating hours at
distribution centres.
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The Food EBIT margin7 improved to 2.1% (FY21: 2.0%) despite these additional costs.
Hardware
Hardware sales (including charge-through1) increased 20.5% or 18.3% on a normalised4 basis to $3.1 billion reflecting significant growth
in both IHG and Total Tools and the impact of acquisitions. Combined sales in the IHG and Total Tools retail networks increased 9% to
~$4.4 billion on a LfL8 basis (+27.8% 2-year basis).
An additional 20 joint venture and company-owned stores were acquired during the year which added ~$95 million of sales.
Residential construction and renovations activity was adversely impacted by tight supply conditions, tight labour supply and unseasonal
wet weather, leading to a further strengthening of the pipeline of future activity. Despite this, sales in IHG increased 12.5% (+32.6% 2-year
basis) to $2.8 billion reflecting the impact of inflation and volume growth in Trade. DIY demand continued to be elevated, but volumes
declined slightly against the exceptional prior year comparative. The increase in Trade sales led to Trade representing 64% of the sales
mix (FY21: Trade 60%, DIY 40%).
Product categories most impacted by the tight supply conditions included timber, LVL, plaster and insulation.
The IHG banner group continued to perform strongly with retail LfL9 sales increasing 10.5%, with Trade sales up 12.7% and DIY sales up
6.7% (+21.8% on a 2-year basis, with Trade +11.6% and DIY +39.1%).
Total Tools sales10 increased 160.4% to $367 million reflecting increased Trade activity and the impact of additional majority-owned joint
venture stores. Total network sales increased to $972 million (FY21: $868 million) with LfL sales up 5.0% (+48.1% 2-year basis). The
network continued to expand, with a further 11 stores added bringing total stores to 100.
Hardware online sales increased by 55% to represent ~6% of network sales, reflecting the impact of COVID-related lockdowns, increased
basket size and conversions.
Hardware EBIT increased a substantial $55.3 million or 40.7% to $191.3 million. IHG’s EBIT increased $15.8 million or 14.1% to $127.8
million reflecting the strong sales performance, and the contribution from company-owned and joint venture stores acquired during the
year. This was partly offset by additional COVID-related, casual labour and supply chain costs, as well as additional investment in the
network to support the retention of shoppers gained through COVID. The IHG wholesale margin was 3.0%. Total Tools EBIT increased
$39.5 million to $63.5 million reflecting the strong sales performance and the contribution from majority-owned joint venture stores
acquired during the current and prior year.
The Hardware EBIT margin7 increased to 6.1% (FY21: 5.3%) which includes the positive impact of Total Tools and the retail margin from
IHG joint ventures and company-owned stores.
Metcash Annual Report 2022DIRECTORS’ REPORT CONTINUED
DIRECTORS’ REPORT
Liquor
Total Liquor sales (including charge-through1) increased 8.7% or 6.6% on a normalised4 basis to $4.8 billion (2-year normalised4 +27.1%)
with a continuation of strong demand in the retail network and a recovery in on-premise sales.
Sales growth in the retail network was in both the IBA banner group and contract customers, supported by continuation of the shift in
preference for local neighbourhood shopping and less overseas travel and duty free shopping.
Wholesale sales to the IBA banner group increased 4.4% (+28.1% 2-year basis) with all brands performing well, particularly the Bottle-O,
Cellarbrations and IGA Liquor. RTDs, spirits and wine continued to be the strongest growth categories. Retail LfL sales11 in the IBA
banner group increased 2.5% (+24.0% 2-year basis).
Sales to on-premise customers continued to recover with the easing of COVID-related restrictions, increasing 31% compared with the
prior corresponding year.
Sales growth across states was strongest in Western Australia, which has been least impacted by COVID-related restrictions.
Liquor EBIT increased $8.7 million or 9.8% to $97.4 million reflecting the contribution from the increase in sales volumes, which more
than offset an increased weighting of the on-premise channel in the sales mix, as well as higher costs associated with the impact of
COVIDSafe work practices, COVID-related costs associated with absenteeism, and higher freight costs related to route disruptions and
increased fuel costs. The EBIT margin7 for Liquor was in line with the prior comparative period at 2.0% despite the additional costs.
Finance costs and tax
Net finance costs increased during the year driven by higher debt utilisation reflecting the impact of the share buy back and an increase
in dividends paid. Tax expense of $122.5 million on underlying profit represents an effective tax rate of 28.9% (FY21: 28.9%).
Significant items
Significant items categories were consistent with the half-year and included Project Horizon implementation costs of $31.4 million (FY21:
$7.9 million), Total Tools put option valuation and business acquisition costs of $27.6 million (FY21: $6.1 million), costs related to the
MFuture program of $3.6 million (FY21: $3.5 million), and COVID-19 allowance for impairment losses of $3.0 million (FY21: reversal $0.5
million).
Refer note 3.3 of the financial report for further information.
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Cash flows
Operating cash flows
Investing cash flows, net (a)
Payments for lease liabilities, net and other financing activities
Payment for off-market buyback of shares, including costs
Proceeds from equity raising, net of share issue costs
Dividends paid to the owners of the parent
(Increase)/decrease in net debt
FY22
$m
432.3
(223.8)
(123.2)
85.3
(200.4)
—
(198.5)
(398.9)
(313.6)
FY21
$m
475.5
(216.0)
(86.8)
172.7
—
13.5
(148.3)
(134.8)
37.9
(a) This includes the payment for acquisition of non-controlling interest of $59.4 million relating to the 15% step acquisition of Total Tools Holdings which is
presented as part of ‘cash flows from financing activities’ in the Statement of Cash Flows.
Group operating cash flows were $432.3 million (FY21: $475.5 million), reflecting a strong cash realisation ratio of 91% (FY21: 114%),
which was achieved notwithstanding the increase in significant items expense. Favourable management of inventory levels and
customer collections over the final weeks helped offset the investment in net working capital that arose as a result of shortening
payment times for our smaller suppliers and ongoing investment in inventory to protect the network from supply constraints.
The Group had net investing outflows of $223.8 million, including capital expenditure of $121.7 million (including $46.9 million on Project
Horizon), acquisitions of businesses of $55.4 million and acquisition of non-controlling interest of $59.4 million representing payments for
an additional 15% interest in Total Tools, increasing the Group’s ownership from 70% to 85%. The acquisitions of businesses were also
predominantly in the Hardware pillar and included an investment in 15 Total Tools ‘JV Stores’.
The Group paid $198.5 million (FY21: $148.3 million) in dividends during the current financial year and successfully completed an off-
market buyback of $200 million, equating to $399m of shareholder distributions. Total dividends paid in FY22 was 20.0 cents per share
(FY21: 14.5 cents per share).
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Financial position
Trade and other receivables
Inventories
Trade payables and provisions
Net working capital
Intangible assets
Property, plant and equipment
Equity-accounted investments
Customer loans and assets held for sale
Total funds employed
Lease balances (net)
Put option liabilities
Tax and derivatives
Net (debt)/cash
Net assets/equity
FY22
$m
1,761.2
1,125.2
(2,478.2)
408.2
798.8
245.9
102.5
30.2
1,585.6
(179.3)
(231.7)
104.8
(189.0)
1,090.4
FY21
$m
1,607.8
1,008.0
(2,234.4)
381.4
722.8
231.8
82.5
41.3
1,459.8
(179.9)
(212.5)
99.1
124.6
1,291.1
Net working capital increased by $26.8 million to $408.2 million, including growth from the acquisition of businesses and also flowing
from the increase in sales. Favourable management of inventory levels and customer collections over the final weeks helped offset the
investment in net working capital that arose as a result of shortening payment times for our smaller suppliers.
Capital expenditure of $121.7 million during the year included $46.9 million incurred in relation to Project Horizon.
Put option liabilities of $231.7 million, predominantly relate to the Total Tools Group (refer note 5.3 of the financial report).
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The Group was in a net debt position as at 30 April 2022 of $189.0 million (FY21: Net cash of $124.6 million) reflecting the impact of the
share buy back, and an increase in dividends paid. Metcash had $598.7 million in unused debt facilities and $104.7 million of cash and
cash equivalents available at the reporting date for immediate use.
COVID-19 uncertainty
The Group has incorporated judgements, estimates and assumptions specific to the impact of the COVID-19 pandemic in determining
the amounts recognised in the financial statements based on conditions existing at reporting date, recognising uncertainty still exists
over the potential impact of any future COVID-19 pandemic-related restrictions and changes in consumer behaviour.
Commitments, contingencies and other financial exposures
Put options, including in relation to Ritchies Stores Pty Ltd, are detailed along with other contingent liabilities in note 5.3 and note 7.3 of
the financial statements.
Metcash has a relatively low exposure to interest rate risk and minimal foreign exchange exposures. Further details are set out in note 5.6
of the financial statements.
OUTLOOK
Strong sales momentum has continued in all pillars in the first seven weeks of FY23 supported by the increased preference for local
neighbourhood shopping and the improved competitiveness of our independent retail networks.
While elevated inflation has continued into 1H23, there is uncertainty over the level of inflation going forward, as well as how the impact
of inflation and other cost of living increases may impact consumer behaviour in the retail networks of our pillars, and Metcash.
We are continuing to work closely with our suppliers and retailers to help shoppers manage the impact of inflation by providing better
value options through offering a wider range of products at competitive prices.
Supply chain challenges, increased DC labour and COVID-related costs are continuing and may remain a reality for all pillars over FY23.
Underpinned by the flexibility of our operating model and dedication of our teams, all pillars are continuing to manage well through the
current challenges and remain focused on progressing their MFuture initiatives to further improve the competitiveness of our retail
networks.
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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 many general risks that could have a material effect on most businesses in Australia under normal operating conditions.
Strategy and disruption risks
Consumer behaviour and preferences continue to change and are influenced by factors such as economic conditions, digital and
technological development and disruption, healthy living trends and increasing choices in both online and in-store retail options. These
changes may impact Metcash’s sales mix and earnings. Metcash’s strategy puts customers and consumers first, with ongoing focus on
our shopper-led range, e-commerce and loyalty, store quality and overall perception of value at checkout.
Metcash is accelerating its investment in digital, expanding our capability and improving our delivery of digital solutions to our retailers
and shoppers. This is being achieved through investment in our online stores, such as the upgraded IGA Online Shop, new and enhanced
IBA bannered online stores, and the continued success of the Mitre10 and Total Tools online platforms.
In executing its strategy, there is a risk that Metcash may experience project execution issues or may not realise the full benefits of
projects that underpin its strategic plan. There is also a risk that projects may experience scope, time or cost variability or overruns.
Metcash’s business operations and strategic priorities are subject to ongoing review and development. Management regularly reviews
plans against market changes and, where necessary, modifies its approach.
COVID-19 risks
The COVID-19 pandemic has continued to impact Metcash and our people. Lockdowns, travel restrictions, and the arrival of the Delta
and Omicron variants led to a number of operational complexities, including high levels of employee absenteeism due to infection or
isolation, and broader disruption to our supply chain. Whilst there were challenges, we continued to serve our independent retailers
across all of our Pillars, and importantly ensured continuity of supply of critical food and grocery products to our retailers, supporting
local communities across Australia.
Going forward, the Group’s operations and those of our customers and suppliers may continue to be impacted by COVID-19 through any
continuation of restrictions such as social distancing, quarantines, travel restrictions, work stoppages, health authority actions,
lockdowns or other related measures. Any of these factors may impact our operational and financial performance.
45
Competition risks
Any increase in competitive activity from new or existing competitors (including in the form of a new market entrant with a wholesale or
other disruptive business model, where suppliers sell directly to the Group’s customers, where customers form their own buying groups
to collectively negotiate and purchase directly from suppliers or where indirect competitors change their business models to compete
directly with the Group) may have a detrimental effect on the Group’s operations, particularly if Metcash fails to respond effectively to
that competitive activity or its response is delayed (for example, as a result of the time required to engage with the Group’s independent
retail network in order to implement an initiative). Increased competition may also adversely impact Metcash’s long-term performance
and profitability.
Key brands risk
Metcash’s success in generating profits and increasing its market share is based on the success of the key brands it owns or licences.
Reliance on key brands makes Metcash vulnerable to brand damage from negative publicity, product tampering or recalls, unauthorised
use of its brands or ineffective brand management by Metcash or its licensees, increasing the risk of asset write downs.
Macroeconomic and Geopolitical risk
General macroeconomic conditions and factors including inflation, low levels of unemployment, monetary policy and variability in
interest rates, changes in governments and their approach to fiscal policy, variability in energy and input costs, and changes in consumer
purchasing behaviour may adversely impact our customers as well as Metcash’s earnings, cost of doing business and profitability. We
seek to manage these risks through maintaining vigilance over our cost structure and delivering on our strategy to grow earnings and
profitability.
Further, geopolitical tensions and actions of nation states, including trade wars, territorial disputes, incursions, and war may adversely
impact Metcash’s operations and supply chain, resulting in delay or unavailability of certain products or inputs, increased cost of doing
business and subsequent impact on profitability. We seek to manage these risks through forecasting and planning to maintain adequate
levels of supply, as well as understanding alternative avenues of supply.
Operational and compliance risks
As Australia’s leading wholesaler, Metcash is reliant upon the success of its suppliers and retailers. Metcash continues to invest in
programs to improve the health of the independent retail network and improving Metcash’s infrastructure to make it simpler to do
business. These programs aim to strengthen Metcash as the business partner of choice for both its suppliers and retailers. As with any
significant change, there is a risk that these transformation programs fail to deliver the expected benefits. Metcash has strengthened its
governance frameworks to manage these change programs through the establishment of dedicated project teams to ensure projects are
delivered and risks are addressed in a timely manner.
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DIRECTORS’ REPORT
Metcash’s operations require compliance with various regulatory requirements including work health and safety, food and product
safety, environmental regulations, workplace industrial relations, public liability, privacy and 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 risk and assurance programs addressing areas including; safety,
security, sustainability, chain of responsibility, quality and food safety. Metcash maintains a strong ‘safety-first’ culture and has
established standards and ‘Chain of Responsibility’ policies to identify and manage risk.
Disruption to, or inefficiency or failure within Metcash’s supply chain, product sourcing ability, or of key support systems could impact
the Group’s ability to deliver on its objectives, its operational capability and financial performance. Metcash’s strategic planning process
and ongoing monitoring of operations ensure its supply chain and support systems are able to scale appropriately to respond to its
business needs.
Property and facilities risk
Metcash leases facilities for the wholesale distribution of grocery, fresh produce, liquor, hardware and other fast-moving consumer
goods. Damage to or destruction of these facilities could result in the loss or reduction of distribution capability and hence adversely
impact Metcash’s financial results. While Metcash has in place insurances that it considers are sufficient for a business of its type and size,
Metcash will be required to pay for the loss on any event up to the deductible and self-insurance retention.
Financial risks
Metcash’s ability to reduce its cost of doing business is critical to support independent retailers in remaining competitive in the
continued challenging environment. Competitive trading conditions and broader adverse economic conditions can increase the credit
risk associated with the Group’s activities. Metcash’s strategy is to support successful independents through appropriate credit
management processes.
Funding and liquidity risk continue to be relevant to the Group due to the need to adequately fund business operations, growth
initiatives and absorb potential loss events that may arise. Inability to adequately fund the Group’s 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 and debt facilities are maintained with sufficient tenure, diversity and headroom to fund business operations.
However, these is a risk that the Group may be unable to refinance or renew its banking and debt facilities following expiry, or will only be
able to refinance or renew those facilities on terms that are less favourable to the Group than existing terms. Further, if Metcash failed to
meet any of the covenants on its debt facilities there is a risk that the Group may be required to repay outstanding debt on notice or take
other actions to remedy the breach. Any requirement to repay outstanding debt on notice, or inability to refinance banking facilities or
obtain capital or financing generally, on favourable terms or at all, may have a material adverse effect on the Group’s financial
performance and position.
The Group’s financial risk management framework is discussed in further detail in note 5.6 of the financial statements.
Trading and customer risks
Metcash’s ability to operate efficiently is critical to support independent retailers in remaining competitive. A disruption to the business
could result in an increased cost to serve retailers and inability to meet customers’ requirements.
Tobacco sales represent a significant proportion of the products Metcash supplies to its independent retailers. Following the
cessation of the legislated annual increase in customs and excise duty in 2020, Metcash implemented mitigation strategies to
support earnings performance following this impact. Metcash continues to achieve gains from price increases on tobacco stock
sales, which are commonly linked to the consumer price index.
In our Food pillar, Metcash services a number of large customers known as Multiple Store Owners (MSOs). These customers own and/or
operate more than one independent retail store, and in some cases can own and/or operate a sizeable number of stores (examples of
larger MSOs include Ritchies Stores Pty Ltd (Ritchies) and Romeo Retail Group). In addition, Metcash Food is a supplier to a number of
contract customers, one of which is Australian United Retailers (AUR), which operates the Foodworks bannered network. In May 2022,
Metcash entered into an agreement to supply AUR for a further five years commencing 1 July 2022. Metcash also extended the term of its
agreement to supply Drakes Supermarket stores in Queensland for a further five years, to 3 June 2029. If any one or more MSOs or AUR
were to materially reduce or cease to source their inventory from Metcash for any reason (including vertically integrating their supply
chain, establishing an alternative buying group, purchasing from another source, entering into a supply agreement with a competitor or
closure of stores due to insolvency or poor performance), this would adversely impact Metcash’s long-term performance and
profitability.
In addition, there are certain large contract customers in the Liquor business whose contracts are renewed on a regular basis. If one or
more of these contract customers decided not to renew their supply contract this too could adversely impact Metcash’s long-term
performance and profitability. Further, the Liquor business also has a number of large suppliers and if one or more of these suppliers
decided to no longer conduct business with Metcash, this too could adversely impact Metcash’s long-term performance and profitability.
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Technology and cyber security risks
Metcash relies on a number of complex information technology systems to support its warehousing and distribution, supply chain,
customer service, marketing and finance operations. A severe disruption to the information technology systems may significantly impact
the operations and value of Metcash. Metcash is embarking on a business transformation program called Project Horizon which will
replace end-of-life technology, reducing operational risk and onerous maintenance costs.
With expanding information privacy and security regulations, and an increasingly hostile cyber environment, Metcash recognises
information privacy and cyber security as an increasing risk. Any impact on the availability, integrity or confidentiality of data could result
in a breach of privacy and security regulations and/or impact Metcash’s commercially sensitive information, which could expose Metcash
to penalties (including financial penalties), and could adversely affect Metcash’s operating and financial position or cause reputational
harm.
Social responsibility, environment and climate change risks
Metcash is committed to ‘Championing successful independents’ and a key element of this is underpinned by ensuring its operations are
conducted in a socially responsible manner.
Metcash has a moderate exposure to environmental risks. Metcash’s operations could be impacted by natural disasters, extreme
weather events or other catastrophic events which could materially disrupt its operations and supply chain. There is also a risk that, with
time, the frequency and intensity of natural disasters and extreme weather events may increase if anthropogenic climate change
accelerates or worsens.
Metcash is conscious of the impact its operations may have on the environment given the breadth of our operations across Australia.
Although Metcash is only a moderate emitter of carbon emissions relative to its peers, we have set a science-based target to reduce our
carbon emissions by 42% by 2030. In addition, Metcash seeks to reduce its environmental impact through programs and initiatives that
manage its energy consumption and waste.
Metcash previously conducted a climate change risk assessment, which considered the physical and transitional risks of climate change
on the Group’s operations. The main drivers of physical climate change risk for Metcash are the potential increase in frequency and
severity of acute climate change events, such as bushfires, drought, floods, extreme storms and cyclones. The assessment concluded
that the highest inherent rated risk is likely to be an increase in insurance premiums year on year. Other lower rated inherent rated risks
include: damage to facilities and equipment, a temporary increase in costs to service our retailers during these events, a temporary
disruption to our supply chain and distribution network, reduced availability and quality of fresh products, a decrease in the availability
of timber products due to the impact of bushfires. Regarding transitional risks, the assessment found there are medium level transition
risks, including potential reputational damage should Metcash not meet stakeholder expectations on climate management, and
additional compliance costs should government introduce new greenhouse gas emission regulations or laws. For further information on
how we manage environmental risks please refer to our most recent Sustainability Report available on our website.
Metcash has a low to moderate exposure to social risks. Our business and our people are driven by our purpose of ‘Championing
successful independents’, and Metcash is proud to support independent retailers who are at the heart of local communities across
Australia. At the core of our Purpose and Vision are our Values – we believe that independence is worth fighting for; in treating our
people, retailers and suppliers the way we like to be treated; and in giving back to the communities where we live and work.
Metcash contributes to our local communities through the IGA Community Chest Program, disaster relief, and through our partnership
with Foodbank. In addition, Metcash maintains an unwavering commitment to supporting remote communities through its partnership
with The Arnhem Land Progress Aboriginal Corporation (ALPA) and the Outback Stores in the Northern Territory, to deliver improved
affordability of food supply and the best possible outcomes for those communities.
Metcash meets the threshold for reporting under the Modern Slavery Act 2018 (Cth) with our most recent statement available at
modernslaveryregister.gov.au and our Anti-Slavery Policy is available on our website. Metcash is taking steps to continually improve its
exposure to modern slavery risks in its supply chain. Further, under recent amendments to the Security of Critical Infrastructure Act 2018
(Cth), Metcash has been declared a ‘critical food and grocery asset’, which will require it to implement certain measures to meet
compliance with the Act. For further information on how we manage social risks please refer to our Sustainability Report.
Work health and safety risk
While a strong emphasis is placed on the implementation of work health and safety standards, the risk of injury or fatality remains
possible. The occurrence of such events may have an adverse effect on the safety of our people and the productivity, operations and
reputation of Metcash.
Metcash is focused on the safety of its staff and customers. The Group’s safety processes have been reviewed in light of COVID-19 and,
where appropriate, additional processes and procedures have been implemented.
People and culture risks
The increasing competitive landscape and low levels of unemployment continues to place pressure on the competition for talent and
labour capacity and the ability to efficiently operate our business. 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. Similarly, the
ability to attract and retain employees to meet our labour capacity needs is crucial for our operational capability and efficiency. Metcash
competes in labour markets to attract and retain its employees and management team. The competitive nature of these labour markets
may result in the loss of key employees and/or labour capacity which may make it more difficult and costly to attract or retain
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employees. If Metcash is unable to attract and retain employees, this may adversely affect the Group’s operations and overall financial
performance.
Interruptions at Metcash’s workplaces arising from industrial disputes, work stoppages and accidents may result in production losses
and delays. Renegotiation of collective agreements may increase Metcash’s operating costs and may involve disputes.
Metcash is committed to being a 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
1 Direct sales from suppliers to retailers, invoiced through Metcash.
2 The previous east coast supply agreement with 7-Eleven concluded on 17 August 2020. To enable comparison, sales in the comparative period have been adjusted
to exclude sales to 7-Eleven.
3 Underlying profit after tax excludes significant items: put option valuation and business acquisition costs of $27.6 million, Project Horizon implementation costs of
$22.0 million, and other costs of $4.6 million (all post tax).
4 Normalised sales have been adjusted to exclude the impact of the 53rd trading week, and in the Food pillar, also sales to Drakes and 7-Eleven in the relevant sales
period as appropriate.
5 Based on scan data from 1,173 IGA stores.
6 Excludes tobacco and produce.
7 EBIT margin: EBIT/Total revenue (including charge-through).
8 Includes a combination of scan sales and estimates based on wholesale data.
9 Based on a sample of 323 network stores that provide scan data (representing >70% sales).
10 Total Tools sales include exclusive brand sales, franchisee fees, joint venture and company-owned store sales and other services.
11 Based on scan data from 480 stores.
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Metcash Annual Report 2022DIRECTORS’ REPORT CONTINUED
DIRECTORS’ REPORT
BOARD INFORMATION
The Directors in office during the financial year and up to the date of this report are as follows.
ROBERT A MURRAY (MA Hons, Economics (Cantab))
Independent Non-executive Chair
Robert (Rob) is the Chair of the Metcash Limited Board of Directors
and is also the Chair of the Nomination Committee and a member of
the People and Culture Committee. Rob was appointed to the Board
on 29 April 2015 and was appointed Chair on 27 August 2015.
MURRAY P JORDAN (MPA and MAICD)
Independent Non-executive Director
Murray has been a member of the Board since 23 February 2016.
He is also a member of the Audit, Risk and Compliance
Committee, the People and Culture Committee and the
Nomination Committee.
Rob has extensive experience in FMCG. He has held positions with
industry leaders, having been CEO of both Lion Nathan and Nestle
Oceania, and he therefore brings with him a deep understanding
of consumers and their requirements as well as the issues faced by
those supplying the industry.
As a former director of Dick Smith Holdings Limited (2014 to 2016),
Super Retail Group Limited (2013 to 2015) and Linfox Logistics,
Rob also has experience in the logistics, electronics, automotive,
leisure and sports industries.
Rob is a non-executive director of Southern Cross Media Group
Limited (since 2014, and Chair since August 2020), Advisory
Chairman of Hawkes Brewing Company (since August 2019) and
is a board member of the not- for- profit charity, the Bestest
Foundation.
DOUG JONES (BComm, Accounting, Tax, Auditing, Information
Systems, CA(SA))
Group Chief Executive Officer, Executive Director
Doug is an experienced executive with extensive wholesale, retail
and eCommerce experience. Doug spent 14 years with the
Johannesburg Stock Exchange-listed Massmart group which is
majority-owned by Walmart Inc. It has leading market positions in
wholesale food, liquor, home improvement and general
merchandise.
Before joining Metcash Doug was CEO and Senior Vice President of
Massmart Wholesale, which includes ‘big box’ format food, liquor,
and general merchandise stores serving retail, commercial and
wholesale customers; cash and carry stores; buying groups that
service wholesale and independent retail customers; and a
number of eCommerce platforms.
Doug is a qualified Chartered Accountant and has previously held
senior finance positions in Makro SA, Amalgamated Beverages
Industries Limited and The South African Breweries, all in
Johannesburg, CocaCola Enterprises in Canada, and Deloitte in
both Canada and South Africa.
Murray has extensive experience in the independent retail sector,
bringing unique insight and perspective to the Board regarding the
challenges faced by independent retailers and the valuable role
they play in the community. Murray was previously Managing
Director of New Zealand business Foodstuffs North Island Limited,
a co-operative wholesale company, supplying independently
owned and operated businesses in the supermarkets, food service
and liquor sectors. He has also held key management positions in
property development and investment.
Murray is a non-executive director of Metlifecare Pty Limited, Asia
Pacific Village Holdings Pty Limited and Asia Pacific Village Group
Pty Limited (each since November 2020), Stevenson Group Limited
(since July 2016) and Chorus Limited (since September 2015), each
a New Zealand company. He is also a trustee of the Starship
Foundation in New Zealand that raises funds for the National
Children’s Hospital, a trustee of the Foodstuffs member protection
and co-operative perpetuation trusts (since January 2019), a
trustee of the Southern Cross Health Trust (since August 2019), a
director of the Southern Cross Medical Care Society (since January
2020) and a former director of Sky City Entertainment Group
Limited (NZ) 2016-2021).
HELEN NASH (BA Hons, GAICD)
Independent Non-executive Director
Helen was appointed to the Board on 23 October 2015. She is the
Chair of the People and Culture Committee (since August 2019)
and is also a member of the Nomination Committee.
Helen has more than 20 years executive experience across three
diverse industries: consumer packaged goods, media and quick
service restaurants.
Helen brings rounded commercial and consumer focused
experience to her role. She initially trained in the UK as a Certified
Management Accountant. 18 years in brands and marketing allow
her to bring a strong consumer lens to the Board. She gained
extensive strategic, operational and general management
experience in her role of Chief Operating Officer at McDonalds
Australia, overseeing business and corporate strategy, store
operations including all company and franchised stores,
marketing, menus, research and development and
information technology.
Helen is a non-executive director of Southern Cross Media Group
Limited (since April 2015) and Inghams Group Limited (since May
2017), and a former non-executive director of Blackmores Limited
(2013 to 2019).
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PETER BIRTLES (BSc (Hons), FCA, MAICD)
Independent Non-executive Director
Peter was appointed to the Board on 1 August 2019. He is Chair of
the Audit, Risk and Compliance Committee (since July 2020) and a
member of the Nomination Committee.
Peter has over 30 years’ experience in retail and consumer goods
industries, including 18 years with Super Retail Group Limited
where he was Managing Director and Chief Executive Officer from
2006 to early 2019, and therefore brings a strong FMCG lens to
his role.
Peter's executive career also includes extensive experience in
accounting and finance having previously held the position of
Chief Financial Officer of Super Retail Group Limited, as well as
other senior financial roles during his 12 years with The Boots
Company in the UK and Australia.
Peter is Chair and non-executive director of Universal Store
Holdings Limited (since October 2020), GWA Group Limited (since
2010), and also a director of APG & Co Pty Limited and Apparel
Group Pty Limited (both since July 2019), as well as Good360
Australia Ltd (since August 2019). Peter was formerly a non-
executive director of Auto Guru Limited (2015 to 2019).
CHRISTINE HOLMAN (MBA, PG Dip Mgt, GAICD)
Independent Non-executive Director
Christine was appointed to the Board on 14 September 2020 and
is a member of the Audit, Risk and Compliance Committee and the
Nomination Committee.
From her previous executive capacity, as both CFO & Commercial
Director of Telstra Broadcast Services, Christine brings a deep
understanding of legacy and emerging technologies and digital
transformations. During her time in private investment
management, Christine assisted management and the Board of
investee companies on strategy development, mergers &
acquisitions, leading due diligence teams, managing large
complex commercial negotiations and developing growth
opportunities.
Christine is a non-executive director of Collins Foods Limited
(since December 2019) and CSR Limited (since October 2016).
She is also a director of The McGrath Foundation (since July 2020),
T20 Cricket World Cup (since January 2018), National Intermodal
Corporation Limited (since August 2018), The State Library of New
South Wales Foundation (since February 2017) and The Bradman
Foundation (since December 2016). Christine is a former non-
executive director of Blackmores Limited (2019 to 2021) and
Wisetech Global Limited (2018 to 2019).
MARGARET HASELTINE (BA, FAICD)
Independent Non-executive Director
Margaret (Margie) has more than 30 years of experience across
supply chains and logistics, customer interface in the FMCG sector,
change management and governance. Her executive career
includes 20 years at Mars Inc. including five years as Chief
Executive Officer of Food in Australia.
Margie is a non-executive director of Tyesoon Limited (since
February 2022), Bapcor Limited (since 2016, and Chair since
February 2021) and Real Pet Food Company Pty Ltd (since March
2022). She is a Fellow of the Australian Institute of Company
Directors.
Margie was formerly a non-executive director of Southern
Hospitality Development Corp (2015 to 2019), Bagtrans (2016 to
2021) and Newcastle Permanent Building Society (2018 to 2022).
Former Director
JEFFERY ADAMS was an Executive Director until 10 March 2022.
TONIANNE DWYER was a Non-Executive Director until 30 June
2021.
Company Secretary
JULIE S HUTTON (B Asian Studies (Viet), LLB, LLM, GAICD)
Julie was previously a partner at law firm Baker & McKenzie where
she specialised in mergers & acquisitions, private equity and
corporate restructures. Julie is a Graduate of the Australian
Institute of Company Directors and was formerly a Non-executive
Director of AVCAL, a national association which represents the
private equity and venture capital industries in Australia.
Indemnification and insurance of Directors
and Officers
Under the Constitution of the Company, the Company indemnifies
(to the full extent permitted by law) current and former Directors
and Company Secretaries and such other current and former
officers as the Board may determine from time to time against all
losses and liabilities incurred as an officer of Metcash or its related
companies. The Company may enter into a deed indemnifying
such officers on these terms. The Company enters into such deeds
with each of its Directors and Company Secretaries from time
to time.
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.
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Metcash Annual Report 2022DIRECTORS’ REPORT CONTINUED
DIRECTORS’ REPORT
The following table presents information relating to membership and attendance at meetings of the Company’s Board of Directors and
Board committees held during the financial year. The information reflects those meetings held and attended during a Director’s period
of appointment as a Director during the year.
Appointed
Retiring/
Resigned
Meetings
held
Meetings
attended
Ordinary
shares held at
reporting date
84,005
-
n/a
40,000
57,839
30,000
57,441
51,189
n/a
51
BOARD OF DIRECTORS
Robert Murray (Chair)(a)
Doug Jones
Jeffery Adams
Peter Birtles
Margaret Haseltine
Christine Holman
Murray Jordan
Helen Nash
Tonianne Dwyer
29 Apr 2015
11 March 2022
—
—
5 Dec 2017
10 March 2022
1 Aug 2019
3 May 2021
14 Sept 2020
23 Feb 2016
23 Oct 2015
—
—
—
—
—
24 Jun 2014
30 June 2021
AUDIT, RISK & COMPLIANCE COMMITTEE
Peter Birtles (Chair) (b)
Christine Holman
Murray Jordan
Tonianne Dwyer
PEOPLE & CULTURE COMMITTEE
Helen Nash (Chair) (c)
Margaret Haseltine
Murray Jordan
Robert Murray
NOMINATION COMMITTEE
Robert Murray (Chair)
Peter Birtles
Margaret Haseltine
Christine Holman
Murray Jordan
Helen Nash
Tonianne Dwyer
1 Aug 2019
14 Sept 2020
23 Feb 2016
24 Jun 2014
23 Oct 2015
3 May 2021
31 Aug 2016
27 Feb 2020
29 Apr 2015
1 Aug 2019
3 May 2021
14 Sept 2020
23 Feb 2016
23 Oct 2015
—
—
—
30 June 2021
—
—
—
—
—
—
—
—
—
—
24 Jun 2014
30 June 2021
(a) Mr Murray was appointed Chair of the Board on 27 August 2015.
(b) Mr Birtles was appointed Chair of the Audit, Risk & Compliance Committee on 1 July 2020.
(c) Ms Nash was appointed Chair of the People & Culture Committee on 1 July 2019.
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6
6
6
6
6
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7
7
7
1
6
6
6
6
1
1
1
1
1
1
1
6
2
4
6
5
5
6
6
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7
7
7
1
6
6
6
6
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1
1
1
1
1
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Each Board meeting generally runs for 1.5 days, while each Committee meeting generally runs for half a day.
In addition, the Board and Group Leadership Team hold a half day strategy and/or professional development session before each Board
meeting, as well as a 2-day strategy session each October. The Board also holds regular calls with the Group CEO to stay abreast of
current matters between meetings. Finally, from time to time, additional Board working groups are established with representatives
from among the Directors or a Director represents the Board on a management steering committee, for example, to consider material
transactions or projects, including to support the decision-making of the full Board in relation to those matters. These
strategy/professional development sessions, update calls and working group/steering committee meetings are not included in the
above table.
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DIRECTORS’ REPORT
REMUNERATION REPORT
On behalf of the Board and the People and Culture Committee,
I am pleased to present our Remuneration Report for the year
ended 30 April 2022
HELEN NASH
Chair, People and Culture Committee
Record sales growth has led to a significant uplift in underlying
earnings and returns to shareholders. Our strong performance over
this financial year could not have been possible without the continued
dedication and commitment of our people. We are proud of how our
leaders, team members, retailers, suppliers, members and customers
have pulled together during another year of COVID-19 restrictions,
elevated demand, and significant supply chain challenges caused by
close contact requirements, infection rates and other factors. Our
people have worked exceptionally hard over the past year to ensure
the best possible support for our retailers and their communities.
The health and wellbeing of our people has continued to be a critical
priority for us. We have worked alongside government agencies and
followed their health teams’ advice, enacted Public Health Orders, and
consulted our team members broadly on our COVID-19 Vaccination
Policy. We have continued to actively support our team members over
the last year, not only through ongoing recognition, but also by
investing in strong preventative health and safety measures and
wellbeing programs.
Our remuneration framework
At Metcash, we are passionate about Championing Successful
Independents, attracting, motivating, and retaining key talent who
drive sustainable company performance while embodying our
Purpose, Vision and Values. Our executive pay comprises Fixed Pay,
Short-Term Incentive (‘STI’) and Long-Term Incentive (‘LTI’)
components and is designed to ensure that executives have a
significant proportion of remuneration at risk, which is payable on the
delivery of positive outcomes for shareholders. No significant changes
were made to our executive remuneration structure in FY22.
We undertake an annual, detailed market benchmarking review of our
director fees and executive pay, comparing fixed and variable rewards
with data sourced through Aon in their capacity as an independent
specialist remuneration data provider. Each Metcash position is
benchmarked against similar roles in our peer group, which includes
ASX listed organisations in a similar industry, both larger and smaller
than Metcash, and across measures of market capitalisation, revenue,
assets and complexity. Our target position against our peer group is
the 50th percentile, however our framework enables the recognition of
deeply experienced, high performing individuals.
Last year, we also took the opportunity to have KPMG review our
practices in setting executive performance objectives, including the
weightings given to financial and non-financial objectives and the
performance ranges used for target setting, (including the
appropriateness of minima and maxima) and also in how the
mechanics of the STI pool and the multipliers used for performance
outcomes operate. KPMG assessed Metcash practices against a group
of 21 comparator companies and found that Metcash practices were
not only broadly consistent with the market but were also best
practice in a number of key dimensions.
All that said, we took an opportunity to reframe the “Our People”
section of our executive scorecards as “Our Future”, focused on
Environment, Social and Governance (‘ESG’) priorities. The current ESG
metrics are reported in more detail in the main body of this Report.
Next year, we will be increasing the weighting on the ESG priorities to
30% of executive scorecards.
Our performance and outcomes
Our FY22 results are outstanding, with another record year,
representing continued progress on the exceptional performance in
FY21. Our Pillars continued to respond proactively to the significant
challenges associated with COVID-19 and in parallel maintained focus
on executing our MFuture plans to further improve the
competitiveness of our independent retail networks, including actively
enabling the Horizon Program.
We have worked hard to retain new and returning shoppers and are
delighted at our record sales performance again this year. Group
revenue (excluding charge through sales) increased 5.9% to $15.2
billion. Including charge through sales, Group revenue increased 6.4%
to $17.4 billion with strong sales growth in all Pillars. The uplift in sales,
together with our strong focus on costs led to EBIT increasing a
significant 17.7% to $472.3 million, despite the pressure of operating
under COVID-19 resource challenges. Underlying net profit after tax
increased 18.6% to $299.6 million and was $245.4 million on a
statutory basis. Underlying earnings per share increased 23.4% to 30.5
cents. Furthermore, we will distribute $408 million to shareholders in
dividends and share buy-backs in relation to the FY22 year.
In addition to the standout financial performance, there was ongoing
improvement in the Company’s ESG credentials as outlined in the
Company’s FY22 results presentation, with further detail to be
provided in this year’s Sustainability Report.
As part of the Aon pay benchmarking review, some changes to KMP
remuneration occurred in FY22.
No changes were made to the Group CEO’s remuneration in FY22. This
has resulted in the retiring Group CEO having had one change to his
remuneration over his five-year tenure, with that increase applying to
his variable remuneration only (STI and LTI opportunity) last year to
give even stronger alignment in his pay mix to market practice and
increase further the ‘at risk’ component of his total remuneration. His
total remuneration remains below his peer group benchmark.
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Metcash Annual Report 2022DIRECTORS’ REPORT CONTINUED
DIRECTORS’ REPORT
GGRROOUUPP
RREEVVEENNUUEE
$15.2 billion
GGRROOUUPP
EEBBIITT
UUPPAATT
NNPPAATT
DDIIVVIIDDEENNDDSS
PPEERR SSHHAARREE
$472.3 million
$299.6 million
$245.4 million
21.5 cents
5.9%
IINNCCRREEAASSEE
FFRROOMM FFYY2211
17.7%
IINNCCRREEAASSEE
FFRROOMM FFYY2211
18.6%
IINNCCRREEAASSEE
FFRROOMM FFYY2211
2.7%
IINNCCRREEAASSEE
FFRROOMM FFYY2211
22.9%
IINNCCRREEAASSEE
FFRROOMM FFYY2211
TTOOTTAALL
SSHHAARREEHHOOLLDDEERR
RREETTUURRNN
32.9%
FFOORR TTHHEE 1122 MMOONNTTHHSS
TTOO 3300 AAPPRRIILL 22002222
SSAAFFEETTYY
GGEENNDDEERR
EEQQUUAALLIITTYY
EEMMPPLLOOYYEEEE
EENNGGAAGGEEMMEENNTT
0.4%
IIMMPPRROOVVEEMMEENNTT IINN TTOOTTAALL
RREECCOORRDDAABBLLEE IINNJJUURRYY
FFRREEQQUUEENNCCYY RRAATTEE ((TTRRIIFFRR))
EMPLOYER
OF CHOICE
AAWWAARRDDEEDD BBYY TTHHEE WWOORRKKPPLLAACCEE GGEENNDDEERR
EEQQUUAALLIITTYY AAGGEENNCCYY
3.5%
IIMMPPRROOVVEEMMEENNTT IINN SSUURRVVEEYY
RREESSUULLTTSS FFRROOMM FFYY2211
Our recently appointed new Group CEO commenced in his role on a
slightly lower total remuneration than his predecessor. We retained
the higher weighting to variable pay in keeping with current practice in
our peer group and to maintain alignment with shareholder interests
from the very start of his tenure. As is frequently the case at Group CEO
level, in joining Metcash, our new Group CEO forfeited on-foot STI and
LTI with his previous employer and Metcash put in place a buy-out
grant to cover a portion of that forfeiture. A $1.2 million buy-out grant
was issued as performance rights, with 50% vesting to each of a one-
and two-year performance period, subject to the achievement of
Earnings Before Tax and Interest (EBIT) targets, tenure hurdles
and behavioural expectations.
Given the increase last year to the CEO Food’s remuneration, taking
him to slightly below his peer group benchmark, no further increase
was applied in FY22. However, given the business importance of the
ongoing transformation agenda in the Food business, the Board
recognised the criticality of the CEO Food during a period of transition
from one Group CEO to the next. Consequently, a retention plan was
put in place in October 2021, comprising both financial and
developmental components. A $1.0 million retention grant
incentivises the CEO Food to remain at Metcash for at least three years.
The grant was issued as performance rights and partially vests at the
end of each of the three years in the performance period, with a heavy
weighting of 50% unavailable until the end of the third year. The
performance metrics comprise the achievement of EBIT targets, tenure
hurdles and behavioural expectations.
As foreshadowed last year, a modest increase was awarded to each of
the Group CFO and the CEOs of Liquor and Hardware, representing the
first increases since their appointments.
Also, as foreshadowed last year, most Metcash Board fees remained
below peer group medians and a modest increase of 2.5% took some
slightly closer to and others slightly above the FY22 market medians
with a range of 90% to 108%.
These remuneration adjustments ensure we remain competitive
against our peer group from a reward perspective. In a tightening
talent market, where wage inflation is likely to be a reality, further
increases in Board fees and KMP salaries may be necessary in FY23 to
ensure ongoing alignment to the market.
53
STI outcomes for KMP are based on pool and scorecard results and
ranged from 73% to 85% of maximum, reflecting another outstanding
performance in which market share gains and improved shareholder
returns were sustained.
Our FY20 LTI vested at 100% reflecting an excellent Return on Funds
Employed (ROFE) outcome of 28.2%, representing an average of the
ROFE in each of the three financial years in the performance period
and an absolute total shareholder return (aTSR) of 25.5%, representing
growth of 89.1% in our share price and dividends over the three-year
performance period ended 30 April 2022.
For non-KMP team members, we have also rewarded performance in
keeping with our ‘pay for performance’ principles, with our exceptional
performers consistently receiving higher merit increases and incentive
payments. To maintain our outstanding record of paying equitably, we
again ensured those sitting lower in our salary bands, our more junior
team members, and those whose pay was lower than their colleagues
of a different gender received higher increases.
I am very pleased to advise that Metcash has again been awarded an
Employer of Choice citation by the Workplace Gender Equality Agency.
This recognises our deep commitment to gender pay parity and
gender equality in the workforce. This is the fourth time we have
received this citation. Metcash also received awards for its learning
and development offerings.
In summary, I believe our remuneration framework and outcomes for
the year deliver a balanced and equitable outcome for all
stakeholders.
Following positive feedback about the changes we made to this
Report, we have retained its structure and high level of disclosure. I
trust you continue to find the Report informative.
HELEN NASH
Chair, People and Culture Committee
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DIRECTORS’ REPORT
CONTENTS OF REPORT
Section 1.
Overview of the Remuneration Report
Section 2.
Remuneration governance
Section 3.
Snapshot of executive remuneration policy
Section 4.
Incentive plan operation
Section 5.
Business Performance and At-Risk Remuneration Outcomes
Section 6.
FY22 remuneration outcomes
Section 7.
KMP service agreements
Section 8.
Non-executive Director remuneration
Section 9.
Statutory disclosures
OVERVIEW OF THE REMUNERATION REPORT
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The Directors present the Remuneration Report for the Company and its controlled entities (the ‘Group’) for the year ended 30 April 2022
(‘FY22’). This report forms part of the Directors’ Report and has been audited in accordance with section 308(3C) of the Corporations Act
2001 and Australian Accounting Standards.
The report sets out the remuneration arrangements for the Group’s Key Management Personnel (KMP), comprising its Non-executive
Directors (‘NED’), 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 FY22 are listed below.
Name
Position
NON-EXECUTIVE DIRECTORS
54
Robert Murray
Peter Birtles
Margaret Haseltine
Christine Holman
Murray Jordan
Helen Nash
Tonianne Dwyer
EXECUTIVE DIRECTOR
Doug Jones 1
Jeff Adams 2
GROUP EXECUTIVES
Alistair Bell
Chris Baddock
Scott Marshall
Annette Welsh
Chair
Director
Director
Director
Director
Director
Director
Group Chief Executive Officer (‘Group CEO’)
Group Chief Executive Officer (‘Group CEO’)
Group Chief Financial Officer (‘Group CFO’)
Chief Executive Officer, Australian Liquor Marketers (‘ALM’)
Chief Executive Officer, Food
Chief Executive Officer, Independent Hardware Group (‘IHG’)
Full year
Full year
Full year
Full year
1. Mr Jones commenced employment on 1 February 2022 as Group CEO-elect and was appointed Group CEO on 11 March 2022.
2. Mr Adams stood aside as operational Group CEO on 10 March 2022 and will retire from Metcash on 6 October 2022.
For the remainder of this report, the Group CEO and Group Executives are referred to as KMP.
Term as KMP in FY22
Full year
Full year
Commenced 3 May 2021
Full year
Full year
Full year
1 May 2021 to 30 June 2021
Commenced 11 March 2022
1 May 2021 to 10 March 2022
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Metcash Annual Report 2022DIRECTORS’ REPORT CONTINUED
DIRECTORS’ REPORT
REMUNERATION GOVERNANCE
The following diagram illustrates Metcash’s remuneration governance framework.
BOARD
TThhee BBooaarrdd iiss rreessppoonnssiibbllee ffoorr oovveerrsseeeeiinngg aanndd aapppprroovviinngg rreeccoommmmeennddaattiioonnss ffrroomm tthhee PPeeooppllee aanndd CCuullttuurree CCoommmmiitttteeee aanndd AAuuddiitt,,
RRiisskk aanndd CCoommpplliiaannccee CCoommmmiitttteeee.. TThhee BBooaarrdd uullttiimmaatteellyy aapppprroovvee tthhee rreemmuunneerraattiioonn oouuttccoommeess ffoorr tthhee GGrroouupp CCEEOO aanndd ootthheerr KKMMPP..
AUDIT, RISK
AND COMPLIANCE
COMMITTEE (‘ARCC’)
The ARCC support the
P&CC by reviewing the
Group’s financial results
which form the basis for
STI and LTI awards and
providing advice relating to
material risk and accounting
issues that may affect the
Board’s deliberations in
determining STI and LTI
award outcomes.
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PEOPLE AND CULTURE
COMMITTEE (‘P&CC’)
The P&CC is the key governing body
in respect of remuneration matters.
In addition to Non-executive Director
and executive remuneration, the
P&CC oversee major people
programs such as culture and
diversity, equity and inclusion. The
P&CC make recommendations to the
Board based on its review of proposals
received from management.
related
‑
MANAGEMENT
Provides information relevant to
people and remuneration decisions
and makes recommendations to the
P&CC. Undertakes work as directed
by the P&CC including obtaining
information from external advisers
to assist the Committee with
decision making.
EXTERNAL ADVISERS
The Committee may commission external
advisers to provide information and/or
recommendations on remuneration. If
recommendations are sought in respect
of KMP remuneration, interaction with
external advisers is governed by protocol,
which ensures the Committee can obtain
independent advice. The Committee
Chair appoints and engages directly with
external advisers on KMP remuneration
matters. Further, remuneration
recommendations obtained from external
advisers are used as a guide, rather than
as a substitute for the Committee’s
thorough consideration of the relevant
matters. The Committee consider the
recommendations, along with other
relevant factors, in making remuneration
decisions. Both the Committee and the
Board are satisfied that the existing
protocols ensure that remuneration
recommendations obtained from external
advisers are free from undue influence
from the KMP to whom the remuneration
recommendations apply.
55
The People & Culture Committee engage and consider advice from independent remuneration consultants where appropriate in relation
to remuneration matters and Non-executive Director fees. During the year, no remuneration recommendations as defined in section 9B
of the Corporations Act 2001 were provided.
Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAbout
DIRECTORS’ REPORT
SNAPSHOT OF EXECUTIVE REMUNERATION POLICY
Our Remuneration Principles
Purpose, Vision
& Values
Enabling our people to
unleash their passion
and give local
Independents
a fighting chance.
Market competitive
Performance based
Shareholder
alignment
Attracting and retaining
people who can make a
difference in
‘Championing
successful
Independents’.
Rewarding the
individual contributions
made to empowering
our local Independents
who turn postcodes
into communities.
Standing side by side
with our local
Independents through
the generations, to
sustain long-term value
for shareholders.
Fair and simple
Making it easy to see
how we recognise those
who make their mark
in our business.
Our Remuneration Framework
Fixed remuneration
Short-Term Incentive
Long-Term Incentive
Salary, superannuation, and salary
sacrificed benefits. Fixed Remuneration
is set at a level that is competitive in the
market with reference to comparably sized
peers. Fixed Remuneration
is referred to as Total
Employment Cost (‘TEC’).
56
12-month performance period. STI pool is
distributed when threshold financial
performance is met and scaled based on
performance up to a prescribed
maximum. Performance is then assessed
against a scorecard of financial (70%) and
strategic (30%) objectives and modified
by a behavioural rating. 33% of the Group
CEO and 25% of other KMP’s vested
awards will be deferred for 1 year into
Performance Rights.
3-year performance period.
Delivered in Performance Rights.
Performance is assessed against Return
on Funds Employed (ROFE) (50%)
and Absolute Total Shareholder
Return (TSR) (50%).
KMP Target Remuneration
KMP Target Reward comprises the three framework components above (Fixed or TEC in dark blue, STI in light blue and LTI in orange)
and is reviewed annually in line with the above principles and market benchmarks. A review may result in no adjustment to
Target Remuneration.
KMP Total Reward
D Jones 1
J Adams 2
A Bell
S Marshall 3
C Baddock
A Welsh
Relationship to Peer
Group Benchmark
Within Target Range
Within Target Range
Within Target Range
Below Target Range
Above Target Range
Above Target Range
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
Fixed
STI Reward
LTI Reward
1
2
3
Represents Mr Jones’ annualised FY22 KMP target remuneration excluding his FY22 LTI buy out grant. Refer Section 4.3 ‘FY 22 Group CEO buy-out grant’
for details.
Represents Mr Adams' annualised FY22 KMP target remuneration including his non-KMP period from 11 March 2022 to 30 April 2022.
Represents Mr Marshall's FY22 KMP target remuneration excluding the additional LTI incentive granted to him in FY22. Refer Section 4.4 ‘FY22 CEO Food retention
LTI grant’ for details.
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Metcash Annual Report 2022DIRECTORS’ REPORT CONTINUED
DIRECTORS’ REPORT
INCENTIVE PLAN OPERATION
‘At-risk’ STI plan
The ‘at-risk’ STI plan provides executives the opportunity to earn an incentive that is contingent upon performance against a
combination of agreed financial and non-financial performance targets, which are set by the Board in consultation with the Group CEO
at the start of each financial year. The operation of the plan was reviewed by KMPG in FY22 and was confirmed as being broadly aligned
to market practice and best practice in its key components.
Feature
Delivery
Description
Delivered in a combination of cash and deferred equity (33% for the Group CEO and 25% for other KMP).
Deferred equity comprises performance rights that convert into fully paid ordinary shares in Metcash, which only
become unrestricted at the end of the deferral period.
Performance
period
1 May each year to 30 April the following year.
Eligibility
The Group CEO and all other KMP participate in the STI plan.
The Group CEO and Group CFO participate in the Group STI pool. The Pillar CEOs participate in their respective
Pillar STI pools which are determined by a combination of their respective pillar EBIT and the consolidated
Group EBIT.
Performance
measures
STI awards are paid out of the Group and Pillar STI pools. STI pools are only released for distribution when the
threshold Group or Pillar underlying EBIT budget result, as applicable, is achieved. The STI pools are generally
made available for distribution on the following basis:
57
Achievement
Distribution of STI pool
Below threshold 95% of budget EBIT
0% - no pool is available for distribution
Threshold 95% of budget EBIT
Budget or ‘Target’ EBIT
50% of the respective STI pools
100% of the respective STI pools
Over-achievement 105% of budget EBIT
150% of the respective STI pools
Once an STI pool is released for distribution and scaled as noted above, a participant’s individual STI award is
determined based on individual performance and behaviours. An individual’s overall performance rating is equally
weighted between their scorecard results and Metcash behaviours. Individual performance and behavioural outcomes
act as a multiplier against the pool reward by a factor of 0% to 150%. Individual results are also scaled so that the
collective individual participants’ results are distributed in a manner consistent with a normal distribution curve.
The STI Balanced Scorecard performance measures vary for each KMP based on the budgets and strategies for
their respective pillars. KPMG also reviewed the mechanics of Metcash’s scorecards, which were found to be in
keeping with the broader market and best practice in the key components.
Financial & Value Creation
Objectives (70%)
Measure
Group
Target
Group
Outcome
Threshold
Target
Stretch
Deliver Financial Results
Sales revenue1
$16.0 billion
$17.4 billion
- 2.5%
Budget
+ 2.5%
Balanced Scorecard
UPAT2
EBIT2
ROFE
Cash conversion
Project Horizon3
$252.4 million
$299.6 million
- 5.0%
Budget
+ 5.0%
$410.6 million
$472.3 million
- 5.0%
Budget
+ 5.0%
25%
96%
31%
91%
95% of
stretch targets
90% of
stretch targets
- 50bps
Budget
+ 50bps
- 1000bps
Budget + 1000bps
- 5.0%
Budget
+ 5.0%
Strategic Objectives (30%) Measure
Our Future (ESG priorities)
Safety (TRIFR)4
Our Business
Engagement
Business metrics5
Group Target
Improvement of 5% on FY21 result
Improvement of 5% on FY21 result
95% of stretch targets
1 Sales revenue (including charge-through sales).
2 Analyst consensus for FY22 at time of setting the FY22 budget was UPAT of $238.0 million and EBIT of $382.9 million which is supportive of the stretch nature of
these earnings targets.
3 These comprise quality and timing of the deliverables, cost of the program and value of the benefits realised.
4 Total Recordable Injury Frequency Rate
5 Examples of business metrics include Team Score (target = maintain FY21 result), Loyalty Programs (target = 12% uplift on FY21), Cost Management
(target = achieve approved budget) and IBA Store Count (target =10% uplift on FY21 result).
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DIRECTORS’ REPORT
Feature
Description
Behavioural ratings act to modify performance against scorecard objectives and can result in an increase for
exceptional behaviour, a decrease for unacceptable behaviour or no change for successful behaviours in the overall
performance rating.
Our Metcash Behaviours are:
Accountability
Continuous
Improvement
Team
Work
Think
Customer
I am open and honest,
accepting responsibility
and delivering on
promises. I act with
integrity.
I learn from success and
failure and seek out a
better way and
collaborate with others to
reach the best outcome.
I am responsible for the
strength and diversity of
my team, and I own my
development. I build a
strong culture.
I understand and
anticipate my customer /
retailer / supplier /
shopper needs and drive
innovation for mutual
benefit.
The maximum reward is only paid on achievement of ‘stretch’ outcomes, which include:
Maximum achievement against Group and/or pillar EBIT financial performance hurdles, as applicable
(‘STI pool’);
Maximum achievement in overall individual performance results against all financial and all non-financial
measures contained in the individual’s Balanced Scorecard; and
An exceptional or successful rating against Metcash’s behaviours framework.
Challenging performance targets are set against each performance measure following a rigorous budget setting
process that considers many factors including market conditions. This process includes draft budgets being initially
prepared by leadership teams, followed by Pillar CEO and CFO reviews. Once these reviews are complete, including
the Pillar CEO and CFO being confident in them, these draft budgets are thoroughly reviewed and challenged by
the Group CEO and Group CFO. Following satisfaction at this level, each Pillar presents the draft budgets to the
Board over a two-day process during which they are challenged on all matters to ensure the Board is comfortable
that the budgets are sufficiently challenging and achievable.
The STI opportunities as a percentage of TEC for KMP are outlined below:
Position
Group CEO (D Jones)
Other KMPs
Below threshold
% of TEC
0%
0%
Threshold
% of TEC
17.5%
15.0%
Target
% of TEC
70.0%
60.0%
Maximum
% of TEC
157.5%
135.0%
The Group CEO’s pay mix reflects peer group practice for Group CEOs and is therefore different to other KMP.
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Target setting
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STI
opportunities
Deferred vesting
criteria
The deferred performance rights are conditional and only vest if the executive remains employed by the Company
up to and including 15 April of the year following the performance period. Shares are issued to participants by
25 April and are then restricted from trading until the annual results release which typically occurs in late June.
Valuing deferred
awards
The number of performance rights issued to participants is calculated by dividing 33% (Group CEO) and 25% (other
KMP) of the STI award dollar value by the volume weighted average price (VWAP) of Metcash ordinary shares over
the 20 trading days prior to the end of the performance period which ends on 30 April.
Board discretion The Board may exercise discretion to adjust the STI pool to more appropriately reflect the performance of the
Group or a specific Pillar. The Board also retain discretion to adjust vesting outcomes in any circumstances to
ensure they are appropriate.
Clawback
KMP STI awards are subject to clawback for cause or material misstatement of the Group’s financial statements.
Metcash Annual Report 2022DIRECTORS’ REPORT CONTINUED
DIRECTORS’ REPORT
‘At-risk’ LTI plan
The Group’s LTIs are designed to enable Metcash to attract and retain key executives (including all KMP), whilst incentivising these
executives to achieve challenging hurdles aligned to shareholder value.
Feature
Delivery
Performance
period
Description
Delivered in Performance Rights. Each Performance Right is a right to acquire Metcash shares at no cost,
subject to the satisfaction of performance and service conditions.
LTI grant
FY22-FY24 LTI
FY21-FY23 LTI
FY20-FY22 LTI
Performance period
1 May 2021 to 30 April 2024
1 May 2020 to 30 April 2023
1 May 2019 to 30 April 2022
Eligibility
The Group CEO and all other KMP participate in the LTI plan.
Performance
measures
At each performance period, the LTI grants are subject to two performance conditions: ROFE and TSR.
ROFE
ROFE is calculated as underlying EBIT divided by the average of funds employed at the beginning and end of
the financial year. The overall ROFE result will be determined as the average of the individual ROFE result in
respect of each of the three financial years over the performance period.
TSR
TSR is measured as the growth in share price over the performance period plus dividends paid to
shareholders and assumes dividends are reinvested when they are paid. The opening and closing share
prices used in the calculation are typically set with reference to the VWAP of Metcash shares over the 20
business days prior to the end of the Metcash financial year. The Board may exercise discretion to include
other share capital transactions, including buybacks and otherwise adjust the calculation for capital
transactions as deemed appropriate. The TSR result is expressed as a percentage and reported as the
compound annual growth rate over the performance period.
59
Vesting hurdles
ROFE and TSR
The rights vest against the ROFE and TSR hurdles as follows:
Vesting scale
Threshold
Target
Stretch
Equal to or above maximum
Vesting %
25%
50%
75%
100%
ROFE
Vesting occurs on a straight-line basis between each hurdle, with nil vesting below threshold. Full vesting
will only occur if Metcash achieves a ROFE of greater than 26% over the performance period.
TSR
Vesting occurs on a straight-line basis between each hurdle, with nil vesting below threshold. Full vesting
will only occur if Metcash achieves a TSR CAGR of 10% or higher over the performance period. The opening
VWAP in relation to the FY20-FY22 LTI was $2.71 per share (VWAP to 30 April 2019), the FY21-FY23 LTI was
$2.58 per share (pre-COVID-19 VWAP to 16 March 2020) and the FY22-FY24 LTI was $3.74 per share (VWAP to
30 April 2021).
Board discretion
The grant is subject to the Board’s absolute discretion, at all times.
Clawback
KMP LTI awards are subject to clawback for cause or material misstatement of the Group’s financial
statements.
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DIRECTORS’ REPORT
FY22 Group CEO buy-out grant
Feature
Delivery
Performance
period
Eligibility
Performance
measures
Description
Delivered in Performance Rights. Each Performance Right is a right to acquire Metcash shares at no cost,
subject to the satisfaction of performance and service conditions.
LTI grant
Tranche 1
Tranche 2
Group CEO
Performance period
1 February 2022 to 31 January 2023
1 February 2022 to 31 January 2024
To secure Mr Jones’ appointment, Mr Jones’ on-foot executive incentives with his previous employer required
a buyout. This grant, which represented only a portion of his on-foot incentives, is subject to two
performance conditions:
a service condition and;
a Group underlying EBIT performance hurdle for each tranche, as set out in section 6 below. The EBIT
hurdles align to the Group’s annual budget and STI metrics.
In addition, Mr Jones’ ongoing performance and behaviours must be deemed as acceptable over each
performance period by the Board.
Vesting hurdles
Vesting occurs when all the performance measures have been satisfied. Failure to achieve any of the
two performance conditions will result in nil vesting. Each tranche is tested separately and operates
independently.
Board discretion
The grant is subject to the Board’s absolute discretion, at all times.
Clawback
The grant is subject to clawback for cause or material misstatement of the Group’s financial statements.
60
FY22 CEO Food retention LTI grant
Feature
Delivery
Performance
period
Eligibility
Performance
measures
Description
Delivered in Performance Rights. Each Performance Right is a right to acquire Metcash shares at no cost,
subject to the satisfaction of performance and service conditions.
LTI grant
Tranche 1
Tranche 2
Tranche 3
CEO Food
Performance period
1 October 2021 to 30 September 2022
1 October 2021 to 30 September 2023
1 October 2021 to 30 September 2024
This is a retention incentive issued to Mr Marshall and is subject to two performance conditions:
a service condition and;
a Food underlying EBIT performance hurdle for each tranche, as set out in section 6 below. The EBIT
hurdles align to the Group’s annual budget and STI metrics.
In addition, Mr Marshall’s ongoing performance and behaviours must be deemed as acceptable over each
performance period by the Board.
Vesting hurdles
Vesting occurs when all the performance measures have been satisfied. Failure to achieve any of the
two performance conditions will result in nil vesting. Each tranche is tested separately and operates
independently.
Board discretion
The grant is subject to the Board’s absolute discretion, at all times.
Clawback
The grant is subject to clawback for cause or material misstatement of the Group’s financial statements.
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Metcash Annual Report 2022DIRECTORS’ REPORT CONTINUED
DIRECTORS’ REPORT
BUSINESS PERFORMANCE AND AT-RISK REMUNERATION OUTCOMES
The charts below show Metcash’s financial performance and percentage of maximum STI paid to KMP in the five-year period ended 30
April 2022.
Earnings per Share
Share Price
40
20
-
(20)
400
300
200
100
-
(100)
(200)
100%
6.00
80%
60%
40%
20%
0%
5.00
4.00
3.00
2.00
1.00
-
FY18
FY19
FY20
FY21
FY22
FY18
FY19
FY20
FY21
FY22
Underlying EPS (cps)
Statutory EPS (cps)
% Maximum STI paid
Closing Share Price ($)
% Maximum STI paid
Net Profit
Return on Funds Employed (ROFE)1
100%
80%
60%
40%
20%
0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
FY20
Statutory NPAT ($m)
FY21
FY22
% Maximum STI paid
FY18
FY19
FY20
FY21
FY22
ROFE (%)
% Maximum STI paid
FY18
FY19
Underlying NPAT ($m)
100%
80%
60%
40%
20%
0%
100%
80%
60%
40%
20%
0%
1.
ROFE is calculated based on average of opening and closing funds employed and based on underlying EBIT.
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Other Group performance metrics over the last five years were as follows:
Financial year
Revenue ($b)
Cash realisation ratio (%)
Dividends declared per share (cents)
Average STI payments to KMP as a % of maximum
FY18
12.4
101%
13.0
47.0%
FY20
FY21
FY22
61
FY19
12.7
92%
13.5
13.0
33%
12.5
14.3
114%
17.5
84.1%
15.2
91%
21.5
78.1%
57.5%
43.0%
Following an exceptional year in FY21, the Group and the pillars have continued to deliver strong EBIT results in FY22. All pillars have
delivered EBIT results above the ‘maximum’ vesting level with Group EBIT increasing 17.7% on FY21 outcomes. Accordingly, the STI
outcomes awarded to KMP ranged from 73% to 85% of maximum.
In FY21, the Group and the pillars performed exceptionally well, delivering EBIT results against already stretching targets at a 19.9%
increase on FY20 outcomes in extremely challenging circumstances.
In FY20, whilst the Group and the Food pillar delivered strong EBIT results, the Board exercised its discretion to reduce the overall STI
award to the ‘on target’ level. The Liquor pillar was determined to have performed ‘on target’ and the Hardware pillar ‘below target’.
In FY19, the Group delivered EBIT results that were marginally above target level. The Food and Hardware pillars performed marginally
above target level and the Liquor pillar performed at target.
In FY18, Hardware and Corporate delivered EBIT results at or above the maximum hurdle. The Liquor pillar performed at target level and
the Food pillar performed between threshold and target.
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DIRECTORS’ REPORT
FY22 REMUNERATION OUTCOMES
Actual FY22 KMP remuneration
The table below reflects actual cash payments made or due to KMP in respect of performance during FY22. The table does not comply
with IFRS requirements. The required statutory disclosures are shown in section 9 of this report:
KMP
D Jones4
J Adams (retiring)5
A Bell
C Baddock
S Marshall
A Welsh
Total
employment
cost
$
249,375
1,548,000
768,750
717,500
1,000,000
717,500
FY22
STI cash1
$
194,006
1,164,644
570,797
605,391
860,625
593,282
FY21 STI
deferred2
$
-
794,351
86,640
202,388
288,182
213,413
LTI3
$
-
2,059,038
-
720,666
918,840
180,178
Total
$
443,381
5,566,033
1,426,187
2,245,945
3,067,647
1,704,373
1
2
3
Represents the cash component of the FY22 STI reward amount of 67% (Group CEO) and 75% (other KMP) payable in cash in July 2022. The deferred equity
component of the FY22 STI reward of 33% (Group CEO) and 25% (other KMP) is not presented above because the reward is conditional upon the executive being
employed by the Company on 15 April 2023. Shares are issued to participants by 25 April 2023 and are then restricted from trading until the close of 26 June 2023.
Represents the deferred equity component of the FY21 STI reward of 33% (Group CEO) and 25% (other KMP) which were deferred as equity. The KMPs have
subsequently met the continuity of employment service condition. Accordingly, the performance rights have vested and the shares were issued to the KMPs in
April 2022. The shares are restricted from trading until the close of 27 June 2022. The amounts presented above are based on the number of rights vested
multiplied by the VWAP of Metcash shares over the 20 business days ending 30 April 2021 of $3.74 per share.
The FY20-FY22 LTI will vest during FY22 at 100%, subject only to the KMP remaining in employment until 15 August 2022. The amounts presented above are based
on the number of rights that will vest multiplied by the VWAP of Metcash shares over the 20 business days until 30 April 2022 of $4.65 per share.
4 Mr Jones commenced employment on 1 February 2022 as Group CEO-elect and was appointed Group CEO on 11 March 2022, with a fixed remuneration of
$1,750,000. The amounts disclosed above reflect Mr Jones’ total fixed remuneration and actual STI award for the period from 11 March 2022 to 30 April 2022 as
KMP. In addition, Mr Jones received total fixed remuneration of $188,125 and FY22 STI cash award of $144,553 as non-KMP relating to the period from 1 February
2022 to 10 March 2022.
5 Mr Adams stood aside as operational Group CEO on 10 March 2022 and will retire from Metcash on 6 October 2022. The amounts disclosed above reflect Mr
Adams’ total fixed remuneration and actual STI and LTI award for the period from 1 May 2021 to 10 March 2022 as KMP. In addition, Mr Adams received total
actual FY22 remuneration of $441,593 as non-KMP relating to the period from 11 March 2022 to 30 April 2022. In line with Metcash’s good leavers policy, the Board
exercised its discretion not to issue performance rights in relation to 33% of Mr Adams’ FY22 STI reward which was deferred to and will be payable in cash on the
date of his retirement and retain (on a pro-rata basis) 100,354 and 192,048 of his FY21-FY23 and FY22-FY24 LTI performance rights, respectively, which will be
tested in accordance with existing performance conditions.
FY22 STI outcomes
Metcash’s performance in FY22 exceeded expectations driven by the exceptional performance of our executive team.
Performance against each financial STI measure comfortably exceeded ‘stretch’ targets, allowing each STI pool to be funded to its
maximum level.
As outlined on the following page, these financial results combined with KMP exceeding expectations against their overall individual
objectives resulted in STI outcomes ranging from 73% to 85% of maximum. Across the KMP, performance against a number of targets,
mainly non-financial targets, while being solid, were below target in the balanced scorecard which adversely affected their overall STI
reward.
The Board view these FY22 STI outcomes as an appropriate recognition of the KMP’s performance. This outcome also recognises that
FY22 performance was reflected in strong outcomes for shareholders, customers and the broader workforce (who were also eligible for
maximum bonus payments in FY22).
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Metcash Annual Report 2022DIRECTORS’ REPORT CONTINUED
DIRECTORS’ REPORT
The FY22 STI outcomes against each of the KMPs Balanced Scorecards are summarised below:
Balanced Scorecard Outcomes
D Jones
Group CEO
J Adams
(retiring)
Group CEO
A Bell
Group CFO
C Baddock
CEO ALM
S Marshall
CEO Food
A Welsh
CEO IHG
FINANCIAL & VALUE CREATION OBJECTIVES (70%)
Sales revenue1
UPAT
Stretch
Stretch
Stretch
Stretch
Stretch
Stretch
Stretch
Stretch
Stretch
Stretch
Stretch
Stretch
Below target Below target
Below target
N/A
N/A
N/A
Stretch
N/A
Stretch
Stretch
N/A
Stretch
Stretch
N/A
Stretch
Stretch
N/A
Stretch
Stretch
N/A
Stretch
Stretch
N/A
Target
Target Below target
Below target Below target
Target Below target
Strong & Positive Culture
Below target Below target
Below target
Target
Target
Below target Below target
Below target
Stretch Below target
Stretch
Target
EBIT
ROFE
Cash Conversion
Working Capital
Project Horizon Delivery
STRATEGIC OBJECTIVES (30%)
Our Future (ESG priorities)
Safety
Our Business
Improve Pillar Metrics
Finance Initiatives
Behaviours
Overall rating
Above target Above target
N/A
N/A
N/A
Above target
Target
N/A
Exceptional
Strong
Strong
Strong
Exceptional
Stretch
Above target
N/A
N/A
Strong
Above target Above target
Above target Above target
Stretch Above target
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STI % of maximum awarded
75%
73%
73%
83%
85%
82%
1.
Sales revenue (including charge-through sales).
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The table below reflects the KMP’s FY22 STI outcomes when compared against target and maximum potential STI:
KMP
D Jones3
J Adams (retiring)4
A Bell
C Baddock
S Marshall
A Welsh
Target
potential STI
$
Maximum
potential STI
$
STI
awarded %
of maximum
STI
cash1
$
STI
deferred2
$
Total
STI awarded
$
Maximum
STI forfeited
$
171,165
1,053,500
461,250
430,500
600,000
430,500
385,120
2,370,375
1,037,813
968,625
1,350,000
968,625
73.3%
73.3%
73.3%
83.3%
85.0%
81.7%
194,066
1,164,644
570,797
605,391
860,625
593,282
95,555
573,631
190,266
201,797
286,875
197,762
289,561
1,738,275
761,063
807,188
1,147,500
791,044
95,559
632,100
276,750
161,437
202,500
177,582
1.
2.
The cash component of the FY22 STI reward of 67% (Group CEO) and 75% (other KMP) is payable in cash in July 2022.
The deferred equity component of the FY22 STI reward of 33% (Group CEO) and 25% (other KMP) is deferred and released through the issue of Metcash
performance rights, conditional upon the executive being employed by the Company on 15 April 2023. Shares are issued to participants by 25 April 2023 and are
then restricted from trading until the close of 26 June 2023.
3. Mr Jones commenced employment on 1 February 2022 as Group CEO-elect and was appointed as Group CEO on 11 March 2022 with a fixed remuneration of
$1,750,000. The amounts disclosed above reflect Mr Jones’ STI award for the period from 11 March 2022 to 30 April 2022 as KMP. In addition, Mr Jones received an
STI award of $215,752 as non-KMP relating to the period from 1 February 2022 to 10 March 2022.
4. Mr Adams stood aside as operational Group CEO on 10 March 2022 and will retire from Metcash on 6 October 2022. The amounts disclosed above reflect Mr
Adams’ STI award for the period from 1 May 2021 to 10 March 2022 as KMP. In line with Metcash’s good leavers policy, the Board exercised its discretion not to
issue performance rights in relation to 33% of Mr Adams’ FY22 STI reward which was deferred to and will be payable in cash on the date of his retirement.
Accordingly, Mr Adams received an STI cash award of $282,975 as non-KMP relating to the period from 11 March 2022 to 30 April 2022.
Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAbout
DIRECTORS’ REPORT
FY21 STI deferred equity component outcomes
The following table presents the vesting of the FY21 STI deferred equity component, following completion of the employment service
condition on 15 April 2022:
Participant
J Adams (retiring)1
A Bell
C Baddock
S Marshall
A Welsh
Vesting date
15 April 2022
15 April 2022
15 April 2022
15 April 2022
15 April 2022
No. of
rights held
No. of rights
vested
No. of rights
forfeited
212,393
38,771
54,114
77,054
57,062
212,393
38,771
54,114
77,054
57,062
—
—
—
—
—
1. Mr Adams stood aside as operational Group CEO on 10 March 2022 and will retire from Metcash on 6 October 2022.
The number of performance rights were calculated by dividing 33% (Group CEO) and 25% (other KMP) of the FY21 STI award dollar value
by the VWAP of Metcash ordinary shares over the 20 trading days ending 30 April 2021 of $3.74 per share. The FY21 STI deferred equity
component subsequently vested on 15 April 2022 following the KMP’s completion of the service condition. These performance rights
have now been released as shares and are restricted for trading until the close of 27 June 2022.
Long-term incentives
Details of LTI grants made to KMP during the financial year
FY22-FY24 LTI grant
The following FY22-FY24 LTI grant was made to KMP during FY22:
Participant
Grant date
Hurdle
Vesting date
No. of rights
Fair value
per right
$
Grant
entitlement
(% of TEC)1
64
D Jones2
1 February 2022
J Adams (retiring)3
1 September 2021
A Bell
12 July 2021
C Baddock
12 July 2021
S Marshall
12 July 2021
A Welsh
12 July 2021
ROFE
TSR
ROFE
TSR
ROFE
TSR
ROFE
TSR
ROFE
TSR
ROFE
TSR
15 August 2024
15 August 2024
15 August 2024
15 August 2024
15 August 2024
15 August 2024
15 August 2024
15 August 2024
15 August 2024
15 August 2024
15 August 2024
15 August 2024
139,990
139,990
183,823
183,823
60,160
60,160
56,150
56,150
80,214
80,214
56,150
56,150
3.72
1.88
3.50
1.77
3.38
1.71
3.38
1.71
3.38
1.71
3.38
1.71
80%
76%
60%
60%
60%
60%
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The grant entitlement is expressed as a percentage of the face value of performance rights divided by the participants’ annual TEC at grant date.
1
2 Mr Jones commenced employment on 1 February 2022 as Group CEO-elect and was appointed as Group CEO on 11 March 2022 with a fixed remuneration of
$1,750,000. Mr Jones was granted an FY22-FY24 LTI grant on a pro-rata basis, under the same vesting timelines and performance conditions as the other
participants.
3 Mr Adams stood aside as operational Group CEO on 10 March 2022 and will retire from Metcash on 6 October 2022. In FY22, Mr Adams was issued 367,646
performance rights in relation to the FY22-FY24 LTI grant. Mr Adams retained (on a pro-rata basis) 175,598 FY22-FY24 LTI performance rights, which remain on
foot subject to existing performance hurdles and timeframes. The number of performance rights retained was determined on a pro-rata basis up to the date of
cessation of employment. The balance of 192,048 performance rights will be forfeited on his retirement.
FY21-FY23 LTI grant
The following FY21-FY23 LTI grant was made to the Group CEO during FY22:
Participant
Grant date
J Adams (retiring)1 1 September 2021
Hurdle
ROFE
TSR
Vesting date
No. of rights
15 August 2023
15 August 2023
266,473
266,473
Fair value
per right
$
3.67
2.55
Grant
entitlement
(% of TEC)1
76%
1
2
The grant entitlement is expressed as a percentage of the face value of performance rights divided by the participants’ annual TEC at grant date.
As a result of the COVID-19-related uncertainty in the early months of FY20, Mr Adams’ FY21-FY23 LTI grant was not put forward to shareholders for approval at
the 2020 AGM. Mr Adams’ FY21-FY23 LTI grant was put to shareholders and approved at the 2021 AGM held on September 2021. Mr Adams stood aside as
operational Group CEO on 10 March 2022 and will retire from Metcash on 6 October 2022. In FY22, Mr Adams was issued 532,946 performance rights in relation to
the FY21-FY23 LTI grant. Mr Adams retained (on a pro-rata basis) 432,592 FY21-FY23 LTI performance rights, which remain on foot subject to existing performance
hurdles and timeframes. The number of performance rights retained was determined on a pro-rata basis up to the date of cessation of employment. The balance
of 100,354 performance rights will be forfeited on his retirement.
Metcash Annual Report 2022DIRECTORS’ REPORT CONTINUED
DIRECTORS’ REPORT
FY22 Group CEO buy-out grant
The FY22 Group CEO buy-out grant operates under the following terms.
Participant
Grant date
Hurdles
No. of rights
Fair value
per right
$
Grant
entitlement
(% of TEC)1
D Jones
1 February 2022
Service condition to 31 January 2023.
FY23 Group underlying EBIT performance
hurdle 2
Service condition to 31 January 2024.
FY24 Group underlying EBIT performance
hurdle 2
160,428
3.97
34.3%
160,428
3.80
34.3%
1
2
The grant entitlement is expressed as a percentage of the face value of performance rights issued divided by the participants’ annual TEC at grant date. The face
value of the shares and performance rights were based on the VWAP of Metcash ordinary shares over the 20 trading days ended 30 April 2021 of $3.74 per share.
The Group underlying EBIT performance hurdle for each tranche requires achievement against a minimum level of EBIT in relation to the FY23 and FY24 financial
years respectively, which are each tested at the end of each performance period based on the prevailing Board approved forecast. The EBIT hurdles align to the
Group’s annual budget and STI metrics.
The two tranches are tested independently and will vest as soon as is practicable after 31 January 2023 and 31 January 2024 respectively,
following Board review and approval.
FY22 CEO Food retention LTI grant
The FY22 CEO Food LTI grant operates under the following terms.
Participant
Grant date
Hurdles
No. of rights
Fair value
per right
$
Grant
entitlement
(% of TEC)1
S Marshall
8 October 2021
Service condition to 30 September 2022.
FY23 Food EBIT performance hurdle2
Service condition to 30 September 2023.
FY24 Food EBIT performance hurdle2
Service condition to 30 September 2024.
FY25 Food STI pool performance hurdle2
54,376
80,214
133,690
3.82
3.66
3.52
20%
30%
50%
65
1
3
The grant entitlement is expressed as a percentage of the face value of performance rights issued divided by the participants’ annual TEC at grant date. The face
value of the shares and performance rights were based on the VWAP of Metcash ordinary shares over the 20 trading days ended 30 April 2021 of $3.74 per share.
The Food underlying EBIT performance hurdle for each tranche requires achievement against a minimum level of EBIT in relation to the FY23, FY24 and FY25
financial years respectively, which are each tested at the end of each performance period based on the prevailing Board approved forecast. The EBIT hurdles
align to the Group’s annual budget and STI metrics.
The three tranches are tested independently and will vest as soon as is practicable after 30 September 2022, 30 September 2023 and 30
September 2024 respectively, following Board review and approval.
LTI Vesting outcomes
FY20-FY22 LTI grant
The plan is expected to vest on 15 August 2022 at 100%, subject only to the active participants remaining in employment until
15 August 2022.
The FY20-FY22 LTI grant vesting results are set out below:
Performance condition Weighting
Performance result
ROFE
ATSR
50%
50%
ROFE performance over the three-year plan period was 28.2%
ATSR CAGR performance over the three-year plan period was 25.5%
Vesting result (%)
100%
100%
The ROFE vesting scale ranged from 23.2% (threshold 25% vesting) to 26% (maximum 100% vesting). The TSR vesting scale ranged from
6% CAGR (threshold 25% vesting) to 10% CAGR (maximum 100% vesting). Vesting occurs on a straight-line basis between each hurdle,
with nil vesting below threshold. Full vesting only occurs if Metcash achieves a ROFE of greater than 26% and TSR CAGR of greater than
10% over the performance period.
The Board applied their customary diligence when performance testing this LTI grant and ensured that all significant items were
prudently considered, before determining 100% vesting outcomes. Significant items primarily comprised valuation adjustments related
to the Total Tools put options and non-capitalisable Project Horizon implementation costs which included resource costs, accelerated
amortisation of legacy software assets and incremental software licence and maintenance costs.
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Participant
Hurdle
No. of
rights held
No. of rights
expected to vest
No. of rights
expected to be forfeited
J Adams (retiring)
C Baddock
S Marshall
A Welsh
ROFE
ATSR
ROFE
ATSR
ROFE
ATSR
ROFE
ATSR
221,402
221,402
77,491
77,491
98,800
98,800
19,374
19,374
221,402
221,402
77,491
77,491
98,800
98,800
19,374
19,374
-
-
-
-
-
-
-
-
FY21-FY23 LTI grant
The ATSR component is currently performing at the maximum level on the vesting scale. This interim performance assessment is based
on a VWAP of $4.65 per share, measured across the 20 business days to 30 April 2022. In FY22, the Group provided for the ROFE
component based on the maximum level of performance.
FY22-FY24 LTI grant
The ATSR component is currently performing at the maximum level on the vesting scale. This interim performance assessment is based
on a VWAP of $4.65 per share, measured across the 20 business days to 30 April 2022. In FY22, the Group provided for the ROFE
component based on the maximum level of performance.
Remuneration mix
The chart below outlines the FY22 remuneration mix for KMP at the end of the year including the deferral of the 33% (Group CEO) and
25% (other KMP) of STI ‘at risk’ equity component. Each remuneration component is shown as a percentage of total remuneration
measured at Target and at Maximum earnings opportunity. LTI values have been measured at grant date, based on the face value of
incentives granted in FY22.
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The KMP remuneration weighting as a percentage of TEC during FY22 was as follows:
D Jones
J Adams
1
2
A Bell
C Baddock
S Marshall
3
A Welsh
0
40%
41%
45%
45%
45%
45%
Target
19%
9%
32%
D Jones
19%
9%
31%
J Adams
20%
20%
20%
20%
8%
8%
8%
8%
27%
A Bell
27%
C Baddock
27%
S Marshall
27%
A Welsh
30%
30%
34%
34%
34%
34%
Maximum
31%
31%
15%
16%
34%
34%
34%
34%
12%
12%
12%
12%
24%
23%
20%
20%
20%
20%
TEC
STI cash
STI deferred equity
LTI
TEC
STI cash
STI deferred equity
LTI
1. Represents Mr Jones’ annualised FY22 KMP remuneration excluding his FY22 LTI buy out grant. Refer Section 4.3 ‘FY 22 Group CEO buy-out grant’ for details.
2. Represents Mr Adams' annualised FY22 KMP remuneration including his non-KMP period from 11 March 2022 to 30 April 2022.
3. Represents Mr Marshall's FY22 KMP remuneration excluding the additional LTI incentive granted to him in FY22. Refer Section 4.4 ‘FY22 CEO Food retention LTI
grant’ for details.
KMP SERVICE AGREEMENTS
Name
D Jones
A Bell
C Baddock
S Marshall
A Welsh
Agreement term
Executive notice
Metcash notice
Redundancy
Four years (based on 482 visa limitations)1
Ongoing unless notice given
Ongoing unless notice given
Ongoing unless notice given
Ongoing unless notice given
12 months
12 months
12 months
12 months
12 months
12 months
12 months
12 months
12 months
12 months
12 months
12 months
12 months
12 months
12 months
1. Mr Jones’ visa expires in November 2025.
In the event of cessation of employment, a KMP’s unvested performance rights will ordinarily lapse, however, this is subject to Board
discretion which may be exercised in circumstances such as death, disability, retirement, redundancy or special circumstances.
In some circumstances on 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.
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Minimum shareholding guidelines
Minimum shareholding guidelines have been implemented for all KMP commencing as of the effective date specified below or upon the
date of appointment as KMP, whichever occurs later.
Position
GGrroouupp CCEEOO
OOtthheerr KKMMPP
Value
1 x TEC
0.5 x TEC
Time to achieve
Effective date
5 years
5 years
1 May 2018
1 May 2019
8. NON-EXECUTIVE DIRECTOR REMUNERATION
Remuneration policy
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.
All Non-executive Directors are paid a fixed annual fee. In addition, Committee fees are paid to recognise the additional responsibilities
associated with participating on a Board Committee. The fixed fee to the Board Chair is to remunerate the Chair for all responsibilities,
including participating on any Board Committees.
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.
Aggregate fee limit
Non-executive Director fees are limited to a maximum aggregate amount approved by shareholders. The current limit of $2,000,000 was
approved in 2021.
Minimum shareholding guidelines
Minimum shareholding guidelines have been implemented for all Non-executive Directors of one year’s base fees to be accumulated in
five years from the effective date of 1 May 2019 or upon their date of appointment as a Non-executive Director, whichever occurs later.
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Non-executive Director fee structure
Consistent with all executive remuneration practices in Metcash, extensive annual independent data benchmarking is undertaken on
Board fees. Averaged over the last 4 years, the Board fees have increased by 3% per annum and this results in Metcash sitting below the
market benchmark of our peer group. In FY22, an increase in fees of 2.5% was made, which moves the position to between 95% and
112% of the market benchmark.
BOARD
Chair
Non-executive Director
COMMITTEE
Audit, Risk & Compliance
Chair
Member
People & Culture
Chair
Member
Nomination
Chair
Member
FY22
$1
462,761
156,832
37,472
16,856
37,472
16,856
—
—
FY21
$1,2
451,474
153,007
36,558
16,444
36,558
16,444
—
—
1. Per annum fees as at the end of the financial year, including superannuation.
2.
The increase in per annum fees was effective 1 May 2020 except for the Chairman of the Board which was effective 1 December 2020.
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Non-executive Director remuneration
Name
R Murray
P Birtles
M Haseltine1
C Holman
M Jordan
H Nash
T Dwyer (retired)2
Total
Financial
year
Fees
$
Superannuation
$
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
439,505
417,352
176,775
170,057
158,018
-
158,018
90,271
173,353
169,767
185,472
181,211
26,436
160,873
1,317,577
1,189,531
23,256
21,581
17,530
16,155
15,670
-
15,670
8,576
17,190
16,128
8,832
8,354
2,511
15,283
100,659
86,077
Total
$
462,761
438,933
194,305
186,212
173,688
-
173,688
98,847
190,543
185,895
194,304
189,565
28,947
176,156
1,418,236
1,275,608
1. Ms Haseltine was appointed a Non-executive Director on 3 May 2021.
2. Ms Dwyer retired as a Non-executive Director on 30 June 2021.
Non-executive Director shareholdings
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Name
DIRECTORS
R Murray
P Birtles
M Haseltine1
C Holman
M Jordan
H Nash
T Dwyer (retired)2
Balance at
1 May 2021
Acquired
during the year
Other
adjustments
Balance at
30 April 2022
Balance at
report date
84,005
40,000
-
30,000
57,441
51,189
60,000
-
-
57,839
-
-
-
-
322,635
57,839
-
-
-
-
-
-
(60,000)
(60,000)
84,005
40,000
57,839
30,000
57,441
51,189
-
84,005
40,000
57,839
30,000
57,441
51,189
-
320,474
320,474
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1. Ms Haseltine was appointed a Non-executive Director on 3 May 2021.
2. Ms Dwyer retired as a Non-executive Director on 30 June 2021.
Metcash Annual Report 2022DIRECTORS’ REPORT CONTINUED
DIRECTORS’ REPORT
9. STATUTORY DISCLOSURES
Fixed and ‘at-risk’ remuneration
Fixed
remuneration
STI
cash1
STI
deferred 2, 3
Super-
annuation
Leave4
LTI
(share-based
payments)
$
$
$
$
$
$
Total
$
244,897
194,006
47,777
4,478
43,888
179,536
714,582
—
—
1,548,000
1,164,644
1,800,000
1,612,774
745,494
290,113
694,244
678,419
976,744
949,253
694,244
678,419
—
570,797
259,923
605,391
607,163
860,625
864,547
593,282
640,238
—
—
970,806
697,176
138,453
43,320
202,092
185,194
287,529
251,191
205,588
130,360
—
—
—
— 55,385
— 69,099
—
—
1,625,793
5,364,628
1,385,992
5,565,041
23,256
8,642
23,256
21,581
23,256
21,581
23,256
21,581
—
51,145
35,208
3,638
(8,106)
51,889
29,275
40,574
22,340
—
86,649
47,614
309,496
280,130
731,521
570,642
247,426
212,481
—
1,615,794
684,820
1,838,117
1,764,381
2,931,564
2,686,489
1,804,370
1,705,419
—
548,940
379,354
170,326
13,067
167,528
502,350
1,781,565
4,903,623 3,988,745
4,945,144 4,363,999
1,852,245
1,477,567
97,502 246,519
86,452 315,344
3,180,421
2,999,209
14,269,055
14,187,715
Year
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
Performance-
related
%
59.0%
—
70.1%
66.4%
49.3%
51.2%
60.8%
60.8%
64.1%
62.8%
58.0%
57.6%
—
59.1%
63.2%
62.3%
KMP
D Jones5
J Adams
(retiring)6
A Bell7
C Baddock
S Marshall8
A Welsh
B Soller
(retired)9
Total
1
2
3
The cash component of the FY22 STI reward of 67% (Group CEO) and 75% (other KMP) is payable in cash in July 2022. The cash component of the FY21 STI
reward of 67% (Group CEO) and 75% (other KMP) was paid in cash in July 2021.
The deferred equity component of the FY22 STI reward of 33% (Group CEO) and 25% (other KMP) is deferred and released through the issue of Metcash
performance rights, conditional upon the executive being employed by the Company on 15 April 2023. Shares are issued to participants by 25 April 2023 and are
then restricted from trading until the close of 26 June 2023. The fair value of the deferred share component is amortised over the two-year performance period.
The deferred equity component of the FY21 STI reward of 33% (Group CEO) and 25% (other KMP) vested during the year. Shares were issued to participants in
April 2022 and are restricted from trading until the close of 27 June 2022. The fair value of the deferred share component is amortised over the two-year
performance period.
Includes changes in annual and long service leave entitlements.
4
5 Mr Jones commenced employment on 1 February 2022 as Group CEO-elect and was appointed as Group CEO on 11 March 2022, with fixed remuneration of
$1,750,000. The amounts disclosed above reflect Mr Jones’ remuneration for the period from 11 March 2022 to 30 April 2022 as KMP. In addition, Mr Jones
received total remuneration of $502,049 as non-KMP relating to the period from 1 February 2022 to 10 March 2022. Mr Jones’ LTI also included his FY22 Group
CEO buy-out grant as set out in Section 4.3.
6 Mr Adams stood aside as operational Group CEO on 10 March 2022 and will retire from Metcash on 6 October 2022. The amounts disclosed above reflect Mr
Adams’ remuneration relating to the period from 1 May 2021 to 10 March 2022 as KMP. In addition, Mr Adams received (a) total remuneration of $799,037 as non-
KMP relating to the period from 11 March 2022 to 30 April 2022 and (b) is expected to receive total remuneration of $1,825,556 as non-KMP relating to the period 1
May 2022 to 6 October 2022. The terms of Mr Adams’ employment prohibit him from accepting employment at a competitor company for 12 months following his
cessation of employment on 6 October 2022. In line with Metcash’s good leavers policy, the Board exercised its discretion not to issue performance rights in
relation to 33% of Mr Adams’ FY22 STI reward which was deferred to and will be payable in cash on the date of his retirement and retain 432,592 and 175,598 of
his FY21-FY23 and FY22-FY24 LTI performance rights, respectively, which will be tested in accordance with existing performance conditions.
7 Mr Bell commenced employment on 1 September 2020 and was appointed as Group CFO on 7 December 2020, with fixed remuneration of $750,000. The
amounts disclosed in FY21 above reflect Mr Bell’s remuneration for the period from 7 December 2020 to 30 April 2021 as KMP.
8 Mr Marshall’s LTI includes his FY22 CEO Food retention LTI grant as set out in Section 4.4.
9 Mr Soller retired as Group CFO on 7 December 2020.
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Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAbout
DIRECTORS’ REPORT
KMP performance rights holdings
Name
D Jones2
J Adams (retiring)3
A Bell
C Baddock
S Marshall
A Welsh
Total
Balance at
1 May 2021
—
810,902
155,020
317,772
587,672
241,980
Granted
600,836
1,112,985
159,091
166,414
504,862
169,362
Vested/
Exercised1
—
(543,681)
(38,771)
(54,114)
(241,317)
(93,460)
2,113,346
2,713,550
(971,343)
Forfeited
—
(36,810)
—
—
(18,251)
(4,044)
(59,105)
Balance at
30 April 2022
Balance at
report date
600,836
1,343,396
275,340
430,072
832,966
313,838
600,836
1,343,396
275,340
430,072
832,966
313,838
3,796,448
3,796,448
1
As foreshadowed in the FY21 financial report, a total of 531,949 performance rights from the FY19-FY21 LTI plan partially vested on 15 August 2021. The vested
shares were acquired on market and allocated to the participants on 15 August 2021. In addition, a total of 439,394 performance rights were granted to the KMPs
and have then subsequently vested in relation to the deferred component of the FY21 STI plan.
2 Mr Jones commenced employment on 1 February 2022 as Group CEO-elect and was appointed as Group CEO on 11 March 2022.
3
As set out in section 6, 442,804 performance rights held by Mr Adams in relation to the FY20-22 LTI plan are expected to vest on 15 August 2022. Mr Adams
retained (on a pro-rata basis) 432,592 and 175,598 of his FY21-FY23 and FY22-FY24 LTI performance rights, respectively, which will be tested in accordance with
existing performance conditions. The number of rights retained was determined on a pro-rata basis up to the date of Mr Adams’ retirement on 6 October 2022.
The balance of the performance rights in relation to the FY21-FY23 and FY22-FY24 LTI plans will be forfeited on his retirement.
KMP shareholdings
Name
D Jones3
J Adams (retiring)
A Bell
C Baddock
S Marshall
A Welsh
Total
70
Balance at
1 May 2021
Acquired
during the year1
Sold
during the year
Other
adjustments2
Balance at
30 April 2022
Balance at
report date
—
547,858
—
286,516
387,369
72,209
—
543,681
38,771
54,114
241,317
93,460
—
—
—
(143,258)
(387,369)
—
—
(1,091,539)
—
—
—
—
—
—
38,771
197,372
241,317
165,669
—
—
38,771
197,372
241,317
165,669
1,293,952
971,343
(530,627)
(1,091,539)
1,173,756
1,173,756
Includes vesting of shares in relation to Metcash deferred STI and LTI plans.
Reflects changes in KMP composition following retirement or resignation.
1
2
3 Mr Jones commenced employment on 1 February 2022 as Group CEO-elect and was appointed as Group CEO on 11 March 2022.
This concludes the Remuneration Report.
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Metcash Annual Report 2022DIRECTORS’ REPORT CONTINUED
DIRECTORS’ REPORT
OTHER DISCLOSURES
Unissued shares under share options and performance rights
At the date of this report, there were 7,609,890 performance rights (7,609,890 at the reporting date). There were no share options on issue
at the reporting date or at the date of this report. Refer to note 7.1 of the financial statements for further details regarding performance
rights.
Shares issued as a result of options and performance rights
During the year, a total of 1,374,136 shares and 621,872 shares were acquired on market in relation to the vesting of the FY19-FY21 LTI
grant and FY21 STI deferred equity component, respectively, and these shares were issued to employees and executives. There were no
other shares issued to employees or executives during or since the end of the financial year in respect of the exercise of options or
performance rights.
Indemnification of Auditors
Pursuant to the terms of engagement the Company has with its auditors, EY Australia, the Company has agreed to indemnify EY Australia
to the extent permitted by law and professional regulations, against any losses, liabilities, costs or expenses incurred by EY Australia
where they arise out of or occur in relation to any negligent, wrongful or wilful act or omission by the Company. No payment has been
made to EY Australia by the Company pursuant to this indemnity, either during or since the end of the financial year.
Non-audit services
Details of the non-audit services undertaken by, and amounts paid to the Company’s auditor, EY Australia are detailed in note 7.2 of the
financial statements.
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 2022 has been received and is included on page 117.
Subsequent events
In May 2022, Metcash announced that it entered into an agreement with Australian United Retailers Limited (AUR) to supply its national
network of supermarkets and convenience stores, including its FoodWorks bannered supermarkets, for a further five-year period,
commencing 1 July 2022. In addition, the Group also announced that it extended the term of its agreement to supply Drakes
Supermarkets stores in Queensland for a further five years, up to 3 June 2029.
71
On 27 June 2022, Metcash announced that it has signed a long-term lease agreement with the Goodman Group for the construction and
leasing of a new ‘best in class’ Distribution Centre (DC) at Truganina, Victoria. The new ~115,000m² DC, which will replace Metcash’s
existing ~90,000m² DC at Laverton, is expected to help further improve the competitiveness of our independent retailers in Victoria
through delivery of greater efficiencies and by providing access to a wider range of products. It is also expected to benefit local suppliers
by providing an efficient route to market through access to Metcash’s extensive distribution network. Construction of the DC is scheduled
to commence in the first half of FY23, with completion expected mid-2024.
Other than matters disclosed in this report, 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
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 ASIC Corporations Instrument 2016/191. The Company is an entity to
which the legislative instrument applies.
Signed in accordance with a resolution of the Directors.
DOUG JONES
Director
Sydney, 27 June 2022
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FINANCIAL REPORT
TABLE OF CONTENTS
FINANCIAL STATEMENTS
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1
CORPORATE INFORMATION
NOTE 2
BASIS OF PREPARATION AND ACCOUNTING POLICIES
2.1 Basis of preparation
2.2 Significant accounting policies
2.3 Significant accounting judgements, estimates and assumptions
NOTE 3
GROUP PERFORMANCE
3.1 Segment information
3.2 Sales revenue
3.3 Other income and expenses
3.4 Income taxes
3.5 Earnings per share
NOTE 4
ASSETS AND LIABILITIES
4.1 Trade receivables and loans
4.2 Right-of-use assets, lease receivables and lease liabilities
4.3 Inventories
4.4 Equity-accounted investments
4.5 Property, plant, and equipment
4.6 Intangible assets
4.7 Impairment of non-financial assets
4.8 Provisions
NOTE 5
CAPITAL STRUCTURE, FINANCING AND RISK MANAGEMENT
5.1 Reconciliation of cash flows from operating activities
5.2 Interest-bearing borrowings
5.3 Put options and other financial liabilities
5.4 Contributed equity and reserves
5.5 Dividends
5.6 Financial risk management
5.7 Capital management
NOTE 6
NOTE 7
GROUP STRUCTURE
6.1
Business combinations and acquisition of additional interest in associate and subsidiaries
6.2 Parent entity information
6.3 Related party disclosures
OTHER DISCLOSURES
7.1 Share-based payments
7.2 Auditors remuneration
7.3 Commitments and contingent liabilities
7.4 Subsequent events
APPENDICES
Appendix A
New or amended Accounting Standards and Interpretation
Appendix B
Appendix C
Information on subsidiaries
Equity-accounted investments
Directors’ Declaration
Auditor’s Independence Declaration
Independent Auditor’s Report
73
74
75
76
77
77
77
78
79
79
80
82
83
84
86
89
89
90
91
92
94
95
95
96
98
99
99
102
103
104
105
106
109
109
110
111
112
115
116
117
118
STATEMENT OF COMPREHENSIVE INCOME
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 APRIL 2022
FOR THE YEAR ENDED 30 APRIL 2022
Sales revenue
Cost of sales
Gross profit
Other income
Share of profit from equity-accounted investments
Employee benefit expenses
Depreciation and amortisation
Lease expenses
Provisions for impairment, net of reversals
Other expenses
Finance costs, net
Significant items
Profit before income tax
Income tax expense
Net profit for the year
Other comprehensive loss for the year, net of tax
Total comprehensive income for the year
Net profit for the year is attributable to:
Equity holders of the parent
Non-controlling interests
Total comprehensive income for the year is attributable to:
Equity holders of the parent
Non-controlling interests
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3.1, 3.2
FY22
$m
15,164.8
(13,482.3)
1,682.5
FY21
$m
14,315.3
(12,834.0)
1,481.3
3.3
4.4
3.3
3.3
3.3
3.3
3.3
3.3
3.4
3.5
3.5
23.8
19.2
(823.4)
(175.9)
(67.7)
(41.0)
(145.2)
(48.5)
(65.6)
358.2
(111.1)
247.1
—
247.1
245.4
1.7
247.1
245.4
1.7
247.1
25.0
24.9
24.0
20.1
(727.2)
(163.7)
(69.2)
(42.9)
(121.0)
(42.6)
(17.0)
341.8
(100.4)
241.4
(1.8)
239.6
239.0
2.4
241.4
237.2
2.4
239.6
23.4
23.3
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Earnings per share attributable to the ordinary equity holders of the company:
Basic earnings per share (cents)
Diluted earnings per share (cents)
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAbout
STATEMENT OF FINANCIAL POSITION
STATEMENT OF FINANCIAL POSITION
AS AT 30 APRIL 2022
AS AT 30 APRIL 2022
Notes
FY22
$m
FY21
$m
74
ASSETS
Current assets
Cash and cash equivalents
Trade receivables and loans
Lease receivables
Inventories
Assets held for sale
Other financial assets
Total current assets
Non-current assets
Trade receivables and loans
Lease receivables
Equity-accounted investments
Net deferred tax assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Interest-bearing borrowings
Lease liabilities
Provisions
Income tax payable
Put options and other financial liabilities
Total current liabilities
Non-current liabilities
Interest-bearing borrowings
Lease liabilities
Provisions
Put options and other financial liabilities
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Retained earnings
Other reserves
Equity holders of the parent
Non-controlling interests
TOTAL EQUITY
4.1
4.2
4.3
4.1
4.2
4.4
3.4
4.5
4.2
4.6
5.2
4.2
4.8
5.3
5.2
4.2
4.8
5.3
5.4
5.4
104.7
1,764.0
40.7
1,125.2
9.2
2.3
3,046.1
18.2
234.4
102.5
139.6
245.9
615.4
798.8
2,154.8
5,200.9
2,321.9
45.0
148.1
152.6
33.8
23.5
2,724.9
248.7
882.5
42.9
211.5
1,385.6
4,110.5
1,090.4
818.3
265.0
(3.4)
1,079.9
10.5
1,090.4
124.6
1,622.4
41.5
1,008.0
11.0
2.8
2,810.3
15.7
239.0
82.5
125.8
231.8
618.9
722.8
2,036.5
4,846.8
2,094.7
—
146.6
139.7
25.6
21.9
2,428.5
—
888.0
44.4
194.8
1,127.2
3,555.7
1,291.1
867.0
414.6
(1.7)
1,279.9
11.2
1,291.1
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The above Statement of Financial Position should be read in conjunction with the accompanying notes.
Metcash Annual Report 2022
STATEMENT OF CHANGES IN EQUITY
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 APRIL 2022
FOR THE YEAR ENDED 30 APRIL 2022
Contributed
equity
Retained
earnings
Other
reserves
Equity
holders
of the
parent
Non-
controlling
interests
Total
equity
Notes
$m
$m
$m
$m
$m
$m
At 1 May 2021
867.0
414.6
(1.7)
1,279.9
11.2
1,291.1
Total comprehensive income, net of tax
Transactions with owners
Dividends paid
Recognition of put option liabilities
Share buyback and related costs
Shares issued to employees
Share-based payments expense
At 30 April 2022
At 1 May 2020
Total comprehensive income/(loss), net of tax
Transactions with owners
Dividends paid
Recognition of put option liabilities
Share of associate’s adjustment on initial
adoption of AASB 16 Leases
Proceeds from equity raising, net of costs
Shares issued to employees
Share-based payments expense
At 30 April 2021
5.5
6.1
5.4
7.1
5.5
5.4
7.1
—
—
—
245.4
(198.5)
(44.8)
(48.7)
(151.7)
—
—
—
—
—
—
—
—
(9.4)
7.7
245.4
1.7
247.1
(198.5)
(44.8)
(200.4)
(9.4)
7.7
(2.4)
(200.9)
—
—
—
—
(44.8)
(200.4)
(9.4)
7.7
818.3
265.0
(3.4)
1,079.9
10.5
1,090.4
853.5
505.5
(2.3)
1,356.7
14.9
1,371.6
—
239.0
(1.8)
237.2
2.4
239.6
—
—
—
13.5
—
—
(148.3)
(172.6)
(9.0)
—
—
—
—
—
—
—
(6.3)
8.7
(148.3)
(172.6)
(1.4)
(4.7)
(149.7)
(177.3)
75
(9.0)
13.5
(6.3)
8.7
—
—
—
—
(9.0)
13.5
(6.3)
8.7
867.0
414.6
(1.7)
1,279.9
11.2
1,291.1
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
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STATEMENT OF CASH FLOWS
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 APRIL 2022
FOR THE YEAR ENDED 30 APRIL 2022
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Financing component of lease payments, net
Interest paid, net
Dividends received
Income tax paid, net of tax refunds
Net cash generated from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets
Payments for acquisition of assets
76
Payments for acquisition of subsidiaries, net of cash acquired
Payments for acquisition of additional interest in associate
Receipts from subleases, excluding the financing component
Loans repaid by other entities, net
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings
Repayments of borrowings
Payments for lease liabilities, excluding the financing component
Payment for off-market buyback of shares, including costs
Proceeds from equity raising, net of costs
Payments for on-market purchase of shares
Payments for acquisition of non-controlling interests
Payment of dividends to owners of the parent
Payment of dividends to non-controlling interests
Net cash used in financing activities
Net decrease in cash and cash equivalents
Add: opening cash and cash equivalents
Cash and cash equivalents at the end of the year
Notes
FY22
$m
FY21
$m
4.2
5.1
6.1
6.1
4.2
4.2
5.4
5.4
6.1
5.5
18,796.9
(18,210.9)
(34.3)
(12.3)
9.9
(117.0)
432.3
2.4
(121.7)
(44.4)
(11.0)
42.7
10.3
(121.7)
6,789.1
(6,495.4)
(149.4)
(200.4)
—
(8.3)
(59.4)
(198.5)
(8.2)
(330.5)
(19.9)
124.6
104.7
17,845.6
(17,256.7)
(30.3)
(10.2)
6.0
(78.9)
475.5
0.6
(85.6)
(141.8)
(1.3)
44.3
12.1
(171.7)
3,568.0
(3,758.9)
(122.0)
—
13.5
(5.2)
—
(148.3)
(1.4)
(454.3)
(150.5)
275.1
124.6
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The above Statement of Cash Flows should be read in conjunction with the accompanying notes.
Metcash Annual Report 2022
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022
FOR THE YEAR ENDED 30 APRIL 2022
CORPORATE INFORMATION
The financial statements of Metcash Limited (the ‘Company’) and its controlled entities (together the ‘Group’) for the year ended 30 April
2022 were authorised for issue in accordance with a resolution of the Directors on 27 June 2022.
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.
BASIS OF PREPARATION AND ACCOUNTING POLICIES
Basis of preparation
The financial statements are a general-purpose financial report that has been prepared in accordance with the requirements of the
Corporations Act 2001 and Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting
Standards Board.
The financial statements have been prepared using the historical cost basis except for derivative financial instruments and share-based
payments which are measured at fair value.
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 Corporations Instrument 2016/191. The Company is an entity to which the
legislative instrument applies.
The current financial year comprises a 53-week period that commenced on 26 April 2021 and ended on 1 May 2022. The prior financial
year comprised a 52-week period that commenced on 27 April 2020 and ended on 25 April 2021.
The financial statements comply with Australian Accounting Standards. The financial statements also comply with International
Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
The accounting policies adopted are consistent with those of the previous period. Refer Appendix A for new or amended Accounting
Standards and Interpretations.
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.
Significant accounting policies
2.2.1 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 2022. Refer Appendix B for a list of 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.
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.
Separate financial statements
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 income in the separate financial statements of
the parent entity, and do not impact the recorded cost of the investment unless the dividends effectively represent a return of capital.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
Significant accounting judgements, estimates and assumptions
The Group has incorporated judgements, estimates and assumptions specific to the impact of the COVID-19 pandemic in determining
the amounts recognised in the financial statements based on conditions existing at balance date, recognising uncertainty still exists over
the potential impact of any future COVID-19 pandemic-related restrictions and changes in consumer behaviour.
2.3.1 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.
Note
Note 3.2
Areas
Sales revenue
Note 4.2
Note 4.3
Leases
Inventories
Note 6.1
Business combinations
78
Judgements
- Charge-through sales – In addition to warehouse purchases, customers
purchase goods through the Group’s charge-through platform and have
these goods delivered directly to them from suppliers. The Group earns
a margin on these sales for providing procurement, cross-docking and
settlement services. The Group also bears credit risk on the receivables
from these sales with limited recourse to suppliers.
- The Group determined that it is an agent in these contracts as it does
not control the goods before they are being transferred to customers.
- Determination of lease term of contracts with renewal options.
- Supplier income – The recognition and measurement of supplier
income requires the use of judgement, due to a high degree of variability
and complexity in arrangements with suppliers, and due to timing
differences between stock purchases and the provision of promotional
services.
- 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 (note 4.4); and where the Group exercises control,
the acquisitions are accounted for as business combinations.
- Determining the acquisition date fair value of assets acquired and
liabilities assumed on acquisition of controlled entities.
2.3.2 Significant accounting estimates
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:
Note
Note 4.1
Note 4.4
Note 4.7
Areas
Estimates
Trade receivables and loans
Allowance for impairment loss
Equity-accounted investments
Assessment of recoverable amount
Impairment of non-financial assets
Assessment of recoverable amount
Note 4.2 and 4.8
Provisions
Property provisions, restructuring
Note 5.3
Put option liabilities
Determining put option consideration including Total Tools and Ritchies
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Metcash Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
GROUP PERFORMANCE
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 activities comprise the distribution of a range of products and services to independent supermarket and convenience retail
outlets.
Hardware activities comprise the distribution of hardware products to independent retail outlets and the operation of company
owned retail stores.
Liquor activities comprise the distribution of liquor products to independent retail outlets and hotels.
The Group operates predominantly in Australia. The Group has operations in New Zealand that represent less than 5% of revenue,
results and assets of the Group. The Group does not have a single customer which represents greater than 10% of the Group’s revenue.
Sales between segments are based on similar terms and conditions to those in place with third party customers and are eliminated from
the results below.
Segment results
Food
Hardware
Liquor
Segment total
Corporate
Group underlying earnings before interest and tax (‘EBIT’)
Finance costs, net (Note 3.3)
Significant items (Note 3.3)
Profit before income tax
Sales revenue
Sale of goods
Segment revenue
Segment results
FY22
$m
8,379.3
2,033.1
4,752.4
FY21
$m
8,316.3
1,624.7
4,374.3
15,164.8
14,315.3
79
FY22
$m
200.3
191.3
97.4
489.0
(16.7)
472.3
(48.5)
(65.6)
358.2
FY21
$m
192.4
136.0
88.7
417.1
(15.7)
401.4
(42.6)
(17.0)
341.8
The Group’s revenue principally arises from the sale of goods within its wholesale distribution and retail operations. Sales revenue is
recognised when the Group has delivered goods to its customers, and it is probable that consideration will be collected in exchange.
Revenue is measured based on the consideration expected to be received, net of volumetric and other trade rebates.
Charge-through sales
The Group operates a charge-through platform whereby goods are delivered directly to the Group’s customers by suppliers. The Group
retains the credit risk associated with these transactions; however, the Group does not bear any material inventory risk or exercise any
material discretion in establishing prices. Charge-through transactions are therefore reported on an agency or net ‘commission’ basis
with the gross sale value included in trade receivables and the gross purchase cost included in trade payables. Gross charge-through
sales to customers during the year were $2.241 billion (FY21: $2.046 billion).
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
Other income and expenses
(I) OTHER INCOME
Lease income – rent
Lease income – outgoings recoveries
Net gain from disposal of plant and equipment
(II) EMPLOYEE BENEFIT EXPENSES
Salaries and wages, incentives, and on-costs
Superannuation expense
Share-based payments expense
(III) DEPRECIATION AND AMORTISATION
Depreciation of right-of-use assets
Depreciation of property, plant and equipment
Amortisation of software
Amortisation of other intangible assets
(IV) LEASE EXPENSES
Property rent
Property outgoings
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Equipment and other leases
(V) PROVISIONS FOR IMPAIRMENT, NET OF REVERSALS
Trade receivables and loans
Inventories
Property provisions
Other impairments (net)
(VI) FINANCE COSTS, NET
Interest expense
Transaction fees in relation to customer charge cards (Note 4.1)
Deferred borrowing costs
Finance component of lease payments, net
Finance costs from discounting of liabilities
Interest income
FY22
$m
8.1
15.4
0.3
23.8
763.3
52.7
7.4
823.4
117.0
34.8
19.5
4.6
175.9
5.2
56.5
6.0
67.7
10.3
31.7
(0.1)
(0.9)
41.0
11.0
2.5
1.6
34.3
2.9
(3.8)
48.5
FY21
$m
7.1
16.3
0.6
24.0
673.1
45.4
8.7
727.2
106.8
29.5
22.8
4.6
163.7
3.9
54.7
10.6
69.2
14.1
31.2
(6.8)
4.4
42.9
9.8
2.0
1.7
30.3
2.7
(3.9)
42.6
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SIGNIFICANT ACCOUNTING POLICIES
Finance costs
Finance costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial
period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other finance costs are
expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the
borrowing of funds.
Certain provisions are measured at their discounted value. During each period the provision is increased by an amount that is equal
to the provision multiplied by the discount rate. This increment, including any change in the value of the provision as a result of a
change in discount rate, is treated as a finance cost.
Metcash Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
(VII) SIGNIFICANT ITEMS
Project Horizon implementation costs
Put option valuation and business acquisition costs
MFuture implementation costs
COVID-19 impairments
Total significant items before tax
Income tax benefit attributable to significant items
Total significant items after tax
FY22
$m
FY21
$m
31.4
27.6
3.6
3.0
65.6
(11.4)
54.2
7.9
6.1
3.5
(0.5)
17.0
(3.3)
13.7
Project Horizon implementation costs
In late FY21, Metcash launched Project Horizon, aimed at driving further efficiencies through simplification, as well as growth through
making it easier to do business with Metcash. In addition to these aims, the first stage of this program will also include a focus on the
Group’s technical infrastructure consolidation and replacement, process efficiency foundations and better alignment of the Group’s
infrastructure across the pillars through the development of a single operating system across the Group. Metcash has delivered the first
component, with the core finance module having gone live in November 2021. The remaining components of the first stage are expected
to be progressively delivered through to completion, which is anticipated to occur by the end of calendar year 2023. In FY22, which was
the first full year of the project, the Group incurred $46.9 million (FY21: $17.3 million) of capital expenditure and $31.4 million (FY21: $7.9
million) of expenses on the project. The project expenses included resource costs, accelerated amortisation of legacy software assets
and incremental software licence and maintenance costs. These costs are separately disclosed within significant items in the Statement
of Comprehensive Income to enable a better understanding of the Group’s results.
Put option valuation and business acquisition costs
The carrying amount of the Group’s put option liabilities at balance date was remeasured to reflect the estimated put option exercise
price, with the change in value of $24.0 million (FY21: nil) recorded as a significant item within the Statement of Comprehensive Income,
together with the net present value interest unwind on the put option liability of $5.4 million (FY21: $3.2 million).
81
In addition, a gain of $3.2 million was recognised upon the acquisition of the additional 15% ownership interest in the Total Tools Group
in June 2021, being the difference between the consideration paid to minority shareholders of $59.4 million and the carrying amount of
the put option held by the minority shareholders of $62.6 million. The Group also incurred transaction costs of $1.4 million in relation to
the acquisition of the 15 Total Tools JV Stores and the additional 15% ownership interest in the Total Tools Group. Refer note 6.1 for
further details about the acquisitions.
MFuture implementation costs
The five-year MFuture program initiatives are focused on growth opportunities and maximising the effectiveness of the Group’s cost of
doing business (‘CODB’). During the current year, the Group incurred $3.6 million (FY21: $3.5 million) of implementation costs related to
the MFuture program. These costs are non-routine in nature, and included project development and restructuring costs.
COVID-19 impairments
In FY22, the Group recognised a $3.0 million impairment charge (FY21: $0.5 million reversal of impairment loss) primarily in relation to
certain inventory items that were impacted by COVID-19 related demand factors. The Group continues to be subject to volatility and
uncertainty in its trading environment and operations, as well as from the dynamic economic landscape. Accordingly, the Group has
retained provisions for COVID-19 impairments of $8.7 million (FY21: $10.7 million) at balance date.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
Income Taxes
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
RECONCILIATION OF INCOME TAX EXPENSE
Profit before income tax
At the Group’s statutory income tax rate of 30% (FY21: 30%)
Other assessable/(non-assessable) amounts – net
Adjustments in respect of income tax of previous years
Income tax expense
COMPONENTS OF NET DEFERRED TAX ASSETS
Provisions
Accelerated depreciation for accounting purposes
Other
Intangible assets
MOVEMENTS IN NET DEFERRED TAX ASSETS
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Opening balance
Credited to net profit for the year
Tax benefit associated with share issue/buyback costs
Adjustments related to business combinations
Closing balance
FY22
$m
120.7
0.3
(9.9)
111.1
358.2
107.4
3.4
0.3
111.1
137.8
18.2
16.4
(32.8)
139.6
125.8
12.7
0.1
1.0
139.6
FY21
$m
102.4
0.3
(2.3)
100.4
341.8
102.5
(2.4)
0.3
100.4
131.1
16.5
12.3
(34.1)
125.8
120.0
2.3
(0.2)
3.7
125.8
The Group has unrecognised gross capital losses of $19.5 million (FY21: $19.5 million) that are available indefinitely for offset against
future capital gains.
Tax consolidation
Metcash Limited and its 100% owned Australian resident subsidiaries formed a tax consolidated group with effect from 1 July 2005.
Metcash Limited is the head entity of the tax consolidated group. Members of the group have entered into a tax sharing arrangement in
order to allocate income tax expense to the wholly owned subsidiaries on a modified standalone basis. In addition, the agreement
provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations.
Tax effect accounting by members of the tax consolidated group
Members of the tax consolidated group have entered into a tax funding agreement. The tax funding agreement provides for the
allocation of current taxes to members of the tax consolidated group in accordance with a group allocation method using modified
standalone tax calculations 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 entity, Metcash
Limited.
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Metcash Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
SIGNIFICANT ACCOUNTING POLICIES
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 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 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.
Earnings per share
The following reflects the earnings data used in the basic and diluted earnings per share (EPS) computations:
EARNINGS USED IN CALCULATING BASIC AND DILUTED EPS
Net profit 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
FY22
$m
245.4
FY21
$m
239.0
FY22
Number
FY21
Number
982,848,334
1,021,936,877
3,369,269
3,228,702
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Weighted average number of ordinary shares used in calculating diluted EPS
986,217,603
1,025,165,579
At the reporting date, 7,609,890 performance rights (FY21: 6,496,163) were outstanding, of which 4,240,621 (FY21: 3,267,461) were not
included in the calculation of diluted EPS as they are not dilutive for the periods presented. Refer note 7.1 for more details about
performance rights.
SIGNIFICANT ACCOUNTING POLICIES
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.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
ASSETS AND LIABILITIES
Trade receivables and loans
CURRENT
Trade receivables
Allowance for impairment loss
Trade receivables
Customer charge cards agreement (a)
Other receivables and prepayments
Trade and other receivables
Customer loans
Allowance for impairment loss
Customer loans
FY22
$m
1,415.7
(59.8)
1,355.9
235.9
169.4
1,761.2
3.2
(0.4)
2.8
FY21
$m
1,294.7
(55.4)
1,239.3
211.9
156.6
1,607.8
15.8
(1.2)
14.6
Total trade receivables and loans – current
1,764.0
1,622.4
NON-CURRENT
Customer loans
Allowance for impairment loss
Total trade receivables and loans – non-current
18.2
—
18.2
(a) Amounts receivable under the customer charge card agreements are fully offset by a corresponding amount included in trade and other payables and are
described below.
84
Movements in allowance for impairment loss
Opening balance
Charged as an expense during the year
Accounts written off as non-recoverable
Closing balance
FY22
$m
57.3
10.3
(7.4)
60.2
16.4
(0.7)
15.7
FY21
$m
63.5
8.0
(14.2)
57.3
Weighted average interest
Trade and other receivables are non-interest-bearing and repayment terms vary by pillar. As at 30 April 2022, $nil (FY21: $4.7 million) of
customer loans are non-interest-bearing and $21.4 million (FY21: $27.5 million) of customer loans have a weighted average annual
interest rate of 6.1% (FY21: 5.9%).
Maturity of trade receivables
At 30 April 2022, 90.3% (FY21: 89.2%) of trade receivables are either due or required to be settled within 30 days, 8.7% (FY21: 9.5%) have
terms extending from 30 to 60 days and 1.0% (FY21: 1.3%) have terms greater than 60 days.
Customer charge cards agreement
Under an agreement between Metcash and American Express (Amex), eligible retail customers make trade purchases from Metcash using
their Amex customer charge cards. Metcash’s trade receivable is settled in full by Amex. Amex subsequently collects the amounts
outstanding on the customer charge cards directly from the retailers.
Under the agreement, in the event a customer defaults on their payment obligation to Amex, Metcash must reacquire the trade
receivable from Amex. The maximum amount payable by Metcash to Amex is limited to the actual face value of the outstanding trade
receivable and does not include any interest or any other costs incurred by Amex. Once reacquired, Metcash will seek to collect the trade
receivable from the retail customer through its normal credit processes.
The agreement was renewed during the year and operates on an evergreen basis until either Metcash or Amex provides a 12-month
notice of cancellation. The earliest date on which the agreement could be cancelled is 30 June 2025.
The customer charge cards agreement is presented as part of current trade and other receivables and a matching current liability of
$235.9 million (FY21: $211.9 million) is included within trade and other payables, with no impact to the Group’s net asset position.
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Metcash Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
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. The fair value of the security against a loan is determined when the loan is
not deemed to be recoverable and an allowance for impairment loss is raised to cover any deficit in recoverability.
Ageing of unimpaired trade receivables and loans
Days overdue
AT 30 APRIL 2022
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 2021
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
Trade receivables (a)
Customer loans
$m
%
1,463.8
122.5
4.0
1.5
—
—
91.9%
7.7%
0.3%
0.1%
—
—
$m
19.9
0.1
—
0.3
—
0.7
Other receivables
and prepayments
%
$m
%
95%
169.4
100.0%
1%
—
1%
—
3%
—
—
—
—
—
—
—
—
—
—
1,591.8
100.0%
21.0
100.0%
169.4
100.0%
1,389.5
58.0
3.7
—
—
—
95.7%
4.0%
0.3%
—
—
—
23.4
77.2%
156.6
100.0%
0.2
0.4
0.3
0.5
5.5
0.7%
1.3%
1.0%
1.7%
18.1%
—
—
—
—
—
—
—
—
—
—
1,451.2
100.0%
30.3
100.0%
156.6
100.0%
85
(a) The ageing profile of trade receivables includes amounts receivable under the customer charge cards agreement.
The Group expects that the unimpaired trade receivables and loans presented above are fully recoverable.
SIGNIFICANT ACCOUNTING POLICIES
Trade receivables
Trade receivables are measured at the transaction price determined under the ‘Sales Revenue’ significant accounting policy (Note
3.2).
Allowance for impairment loss
The Group recognises an allowance for impairment loss based on expected credit losses (ECL) for its trade and other receivables. The
Group has established a provision rate matrix, under the simplified approach in calculating ECL, that is based on its historical credit
loss experience, adjusted for forward-looking factors specific to a group of debtors and the economic environment.
SIGNIFICANT ACCOUNTING ESTIMATES
Allowance for impairment loss
The Group uses a provision rate matrix to calculate ECLs for receivables. The provision rates are initially based on the Group’s
historical observed default rates. The Group will calibrate the matrix to adjust the historical credit loss experience with forward-
looking information (e.g., any known changes in market conditions with reference to the most recent gross domestic product data). At
every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.
The assessment of the correlation between historical observed default rates, forecast economic conditions and ECLs is a significant
estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. The Group’s historical
credit loss experience and forecast of economic conditions may also not be representative of customer’s actual default in the future.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
Right-of-use assets, lease receivables and lease liabilities
Right-of-use assets (a)
Leasehold
properties
$m
Motor
vehicles and
equipment
$m
As at 1 May 2021
New and modified leases
Additions through business combinations
Leases exited
Lease remeasurements
Impairments, net
Depreciation
Cash (receipts)/payments
Financing component of lease receipts/(payments)
As at 30 April 2022
Current
Non-current
As at 1 May 2020
New and modified leases
Additions through business combinations
86
Leases exited
Lease remeasurements
Impairments, net
Depreciation
Reclassifications
Cash (receipts)/payments
Financing component of lease receipts/(payments)
As at 30 April 2021
Current
Non-current
565.7
78.2
18.1
(1.0)
13.5
1.4
(101.0)
—
—
574.9
—
574.9
452.4
165.5
36.5
—
3.8
(0.4)
(92.6)
0.5
—
—
565.7
—
565.7
Total
$m
618.9
81.5
18.1
(1.0)
14.1
0.8
(117.0)
—
—
615.4
—
615.4
485.4
199.9
36.5
—
3.8
(0.4)
53.2
3.3
—
—
0.6
(0.6)
(16.0)
—
—
40.5
—
40.5
33.0
34.4
—
—
—
—
(14.2)
(106.8)
—
—
—
53.2
—
53.2
0.5
—
—
618.9
—
618.9
(a) The cost and accumulated depreciation and impairment of the right-of-use assets are presented below:
Cost
Accumulated depreciation and impairment
As at 30 April 2022
Cost
Accumulated depreciation and impairment
As at 30 April 2021
Right-of-use assets
Motor
vehicles and
equipment
$m
Leasehold
properties
$m
856.5
(281.6)
574.9
765.2
(199.5)
565.7
85.5
(45.0)
40.5
89.9
(36.7)
53.2
(b) As at 30 April 2022, lease receivables include a gross carrying amount of $290.5 million (FY21: $299.3 million) and allowance for
impairment losses of $15.4 million (FY21: $18.8 million).
Lease
receivables
(b)(c)
$m
Lease
liabilities
$m
280.5
(1,034.6)
9.0
—
(1.3)
25.2
4.4
—
(56.3)
13.6
275.1
40.7
234.4
292.7
11.4
2.9
(1.3)
16.9
2.7
—
(0.5)
(57.6)
13.3
280.5
41.5
239.0
(88.9)
(18.1)
6.3
(44.7)
—
—
197.3
(47.9)
(1,030.6)
(148.1)
(882.5)
(886.1)
(211.0)
(39.5)
1.1
(21.1)
—
—
—
165.6
(43.6)
(1,034.6)
(146.6)
(888.0)
Total
$m
942.0
(326.6)
615.4
855.1
(236.2)
618.9
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
(c) The future minimum rentals receivable under non-cancellable finance leases are as follows:
Within one year
After one year but not more than five years
More than five years
Unearned finance income
Impairment of receivables
(d) The future minimum rentals receivable under non-cancellable operating leases are as follows:
Within one year
After one year but not more than five years
More than five years
(e) Lease cash receipts and payments are presented in the following lines of the statement of cash flows:
Receipts from subleases, excluding the financing component
Payment for lease liabilities, excluding the financing component
Financing component of lease payments, net
Net cash payments
FY22
$m
53.6
203.4
94.9
351.9
(61.4)
(15.4)
275.1
FY22
$m
2.2
7.6
4.6
14.4
FY22
$m
42.7
(149.4)
(34.3)
(141.0)
FY21
$m
55.1
171.7
139.6
366.4
(67.1)
(18.8)
280.5
FY21
$m
2.1
5.8
6.8
14.7
FY21
$m
44.3
(122.0)
(30.3)
(108.0)
87
(f)
In FY22, the Group recognised rent expense of $11.2 million (FY21: $14.5 million) from short-term leases and variable lease payments.
(g) Extension options are included in a number of lease contracts across the Group. These options are negotiated by management to
provide flexibility in managing the leased-asset portfolio and align with the Group’s business needs. The extension options are
exercisable only by the Group and not by the lessors. The present value of lease payments to be made under these options that are
considered reasonably certain to be exercised have been included in the lease liability balance at 30 April 2022. The undiscounted
potential future payments at current rental rates under options that are not considered reasonably certain to be exercised is
approximately $2.0 billion, which includes potential lease payments within the next five years of approximately $286.4 million.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
SIGNIFICANT ACCOUNTING POLICIES
Group as a lessee
Right-of-use assets
The Group recognises right-of-use assets at the commencement of a lease (i.e., the date the underlying asset is available for use). The
initial measurement of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease
payments made at or before the commencement date, less any lease incentives received. Right-of-use assets are subsequently
measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities.
Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the right-of-use assets are
depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to
impairment assessments under AASB 136 Impairment of Assets.
Depreciation
Depreciation is provided on a straight-line basis on all right-of-use assets. Major depreciation periods are:
Leasehold properties
FY22
FY21
1-30 years
1-30 years
Motor vehicles and equipment
4-5 years
4-5 years
Useful lives are reassessed on an annual basis and adjustments, where applicable, are made on a prospective basis.
Lease liabilities
At the commencement of a lease, the Group recognises lease liabilities measured at the present value of lease payments to be made
over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives
receivable and amounts expected to be paid under residual value guarantees. The lease payments also include renewal periods
where the Group is reasonably certain to exercise the renewal option. Outgoings and other variable lease payments that do not
depend on an index or a rate are recognised as incurred.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date
if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is
increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease
liabilities is remeasured if there is a change in the lease term, a change in the in-substance fixed lease payments or a change in the
assessment to purchase the underlying asset.
88
Group as a lessor
Lease receivables
The Group enters into back-to-back lease agreements with independent retailers where the terms of the lease transfer substantially
all the risks and rewards of ownership to the sublessee and these are classified as a finance lease.
Amounts due from finance leases are recognised as lease receivables at the amount of the Group’s net investment in the lease. Lease
receivables are subsequently remeasured if there is a change in the lease term. Finance lease income is allocated to reporting periods
so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases.
All other leases are classified as operating leases. Rental income from operating leases is recognised on a straight-line basis over the
term of the relevant lease.
Short-term leases and leases of low-value assets
The Group applies a recognition exemption to leases that have a lease term of 12 months or less from the commencement date and
do not contain a purchase option. It also applies a recognition exemption to leases that are considered of low value. Lease payments
and rental income from short-term and low-value leases are recognised on a straight-line basis over the lease term.
SIGNIFICANT ACCOUNTING JUDGEMENT
Determination of lease term of contracts with renewal options
The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to
extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is
reasonably certain not to be exercised.
After initial recognition, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its
control and affects its ability to exercise (or not to exercise) the option to renew.
SIGNIFICANT ACCOUNTING ESTIMATES
Property provisions
The Group recognises provisions for rental agreements on acquisition. 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.
The Group has recognised a provision in accordance with the accounting policy described above. The Group assesses obligations on
property make-good, restructuring and other costs. These estimates are determined using assumptions on property-related costs,
redundancy and other closure or restructure costs.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
Inventories
Inventories
FY22
$m
1,125.2
FY21
$m
1,008.0
SIGNIFICANT ACCOUNTING POLICIES
Inventory cost is measured at purchase price, net of trade rebates and discounts received, and including costs incurred in bringing the
inventory to its present location and condition. Trade rebates include non-volumetric supplier income, which is systematically
allocated against inventory cost using estimates based on expected purchase patterns and earn rates.
Inventories are valued at the lower of cost or net realisable value. Net realisable value is the estimated selling price in the ordinary
course of business, net of estimated costs necessary to make the sale.
Equity-accounted investments
Nature and extent
Appendix C contains key information about the nature and extent of the Group’s equity-accounted investments.
Share of investees’ financial information
The following table illustrates the summarised financial information (proportionate share) of the Group’s equity-accounted investments.
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Revenue
Profit before income tax
Income tax expense
Net profit for the year
FY22
$m
110.9
278.5
389.4
151.2
157.0
308.2
81.2
822.1
27.4
(8.2)
19.2
89
FY21
$m
96.7
232.2
328.9
133.7
136.7
270.4
58.5
751.5
28.7
(8.6)
20.1
At the reporting date, the Group’s share of unrecognised gains or losses is not material.
Refer note 7.3 for details of the Group’s contingent liabilities in relation to equity-accounted investments.
SIGNIFICANT ACCOUNTING POLICIES
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 equity-accounted. 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.
SIGNIFICANT ACCOUNTING ESTIMATES
Impairment of equity-accounted investments
The Group assesses the recoverable amount of its equity-accounted investments when objective evidence of impairment is identified
under AASB 136 Impairment of Assets. 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.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
Property, plant and equipment
YEAR ENDED 30 APRIL 2022
Opening balance
Additions
Additions through business combinations
Disposals
Impairments
Reclassifications
Depreciation
Closing balance
AT 30 APRIL 2022
Cost
Accumulated depreciation and impairment
Net carrying amount
YEAR ENDED 30 APRIL 2021
Opening balance
Additions
Additions through business combinations
90
Disposals
Reclassifications
Depreciation
Closing balance
AT 30 APRIL 2021
Cost
Accumulated depreciation and impairment
Net carrying amount
Land &
buildings
$m
Plant &
equipment
$m
36.8
—
—
—
—
(0.6)
(0.5)
35.7
43.6
(7.9)
35.7
37.7
0.5
—
—
(1.1)
(0.3)
36.8
44.2
(7.4)
36.8
195.0
50.4
12.1
(0.7)
(3.4)
(8.9)
(34.3)
210.2
479.7
(269.5)
210.2
176.3
58.7
9.0
(4.7)
(15.1)
(29.2)
195.0
431.1
(236.1)
195.0
Total
$m
231.8
50.4
12.1
(0.7)
(3.4)
(9.5)
(34.8)
245.9
523.3
(277.4)
245.9
214.0
59.2
9.0
(4.7)
(16.2)
(29.5)
231.8
475.3
(243.5)
231.8
Additions to plant and equipment include $25.3 million (FY21: $30.6 million) of assets under construction. The closing balance of plant
and equipment includes $24.4 million (FY21: $28.3 million) of assets under construction.
SIGNIFICANT ACCOUNTING POLICIES
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
FY22
25-40 years
2-20 years
FY21
25-40 years
2-20 years
Derecognition
An item of property, plant and equipment is derecognised 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 derecognition 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 derecognised.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
Intangible assets
YEAR ENDED 30 APRIL 2022
Opening balance
Additions
Additions through business combinations
Adjustments to business combinations
Disposals
Reclassifications
Amortisation
Closing balance
AT 30 APRIL 2022
Cost
Accumulated amortisation and impairment
Net carrying amount
YEAR ENDED 30 APRIL 2021
Opening balance
Additions
Additions through business combinations
Adjustments to business combinations
Impairment
Disposals
Reclassifications
Amortisation
Closing balance
AT 30 APRIL 2021
Cost
Accumulated amortisation and impairment
Net carrying amount
Software
development
costs
Customer
contracts
Trade names
and other
$m
68.1
71.3
—
—
(0.5)
9.5
(26.0)
122.4
311.7
(189.3)
122.4
55.5
24.6
—
—
(2.0)
(0.7)
16.2
(25.5)
68.1
$m
39.9
—
—
—
—
—
(4.5)
35.4
176.1
(140.7)
35.4
44.3
—
—
—
—
—
—
(4.4)
39.9
231.7
(163.6)
68.1
176.1
(136.2)
39.9
$m
73.8
—
—
—
—
—
(0.1)
73.7
77.2
(3.5)
73.7
40.3
2.0
31.7
—
—
—
—
(0.2)
73.8
77.2
(3.4)
73.8
Goodwill
$m
541.0
—
26.9
(0.2)
(0.4)
—
—
567.3
Total
$m
722.8
71.3
26.9
(0.2)
(0.9)
9.5
(30.6)
798.8
1,549.7
(982.4)
567.3
2,114.7
(1,315.9)
798.8
441.7
—
97.6
1.7
—
—
—
—
541.0
581.8
26.6
129.3
1.7
(2.0)
(0.7)
16.2
(30.1)
722.8
1,523.4
(982.4)
541.0
2,008.4
(1,285.6)
722.8
91
SIGNIFICANT ACCOUNTING POLICIES
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.
Trade names are acquired either through business combinations or through direct acquisition. Trade names are recognised as
intangible assets where a registered trademark 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 through business combinations. 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. The amortisation has been recognised in the statement of comprehensive income.
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FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
Configuration and customisation costs incurred in implementing cloud-based arrangements are only capitalised if the
implementation activities create an intangible asset that the Group controls in accordance with the requirements of AASB 138
Intangible Assets. Costs that do not result in intangible assets should be expensed as incurred. The exception is where they are paid to
the suppliers of the cloud-based arrangement to significantly customise the cloud-based software for the Group. In this case, the
costs are recorded as a prepayment for services and amortised over the expected renewable term of the arrangement.
Derecognition
Gains or losses arising from derecognition 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 derecognised.
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 intangible assets are assessed to either be finite or indefinite. Where amortisation is charged on assets with finite
lives, this expense is recognised in the statement of comprehensive income on a straight-line basis.
The estimated useful lives of existing finite life intangible assets are as follows:
Customer contracts
FY22
15 years
FY21
15 years
Software development costs
5-10 years
5-10 years
Other
10 years
10 years
92
Useful lives are reassessed on an annual basis and adjustments, where applicable, are made on a prospective basis.
Impairment of non-financial assets
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, Liquor and Hardware. Indefinite life intangibles primarily comprise trade names
and licences.
Allocation to CGUs
The carrying amounts of goodwill and indefinite life intangibles are allocated to the Group’s CGUs as follows:
Cash-generating units
Food
Liquor
Hardware
Allocated goodwill
Trade names and
other intangibles
Post-tax discount rates
FY22
$m
214.3
142.7
210.3
567.3
FY21
$m
214.3
142.0
184.7
541.0
FY22
$m
2.1
13.0
58.6
73.7
FY21
$m
2.1
13.1
58.6
73.8
FY22
%
10.6%
9.4%
9.4%
FY21
%
10.6%
9.4%
9.4%
Assessment of recoverable amounts
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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Metcash Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
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 operational performance.
Cash flow projections are based on risk-adjusted forecasts allowing for estimated changes in the business, the competitive trading
environment, legislation and economic growth whilst noting that uncertainties remain over the potential impact of any future COVID-
19 related restrictions and changes to consumer behaviour. Other uncertainties surrounding macroeconomic indicators such as
unemployment and GDP growth create future uncertainty over the Group’s operating cash flows.
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 15.1% (FY21: 15.1%) for Food, 13.4% (FY21: 13.4%) for Liquor and 13.4% (FY21:
13.4%) 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 rate of 1.5% was applied to all CGUs.
Results of assessment
Based on the FY22 assessment, no impairment of goodwill was identified in any of the Group’s CGUs.
Sensitivity to changes in key assumptions
93
At the assessment date, no reasonably likely change in key assumptions would cause the carrying amount of any CGU to exceed its
recoverable amount.
SIGNIFICANT ACCOUNTING POLICIES
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 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.
SIGNIFICANT ACCOUNTING ESTIMATES
Impairment of goodwill
The Group determines whether goodwill is impaired on an annual basis. This requires an estimation of the recoverable amount of the
CGUs to which the goodwill is allocated.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
Provisions
30 APRIL 2022
Current
Non-current
30 APRIL 2021
Current
Non-current
Movements in property provisions
Opening balance
Charged as an expense/(reversals) during the year, net
Utilised during the year, net
Finance cost discount rate adjustment
Closing balance
SIGNIFICANT ACCOUNTING POLICIES
Employee
entitlements
$m
Property
provisions
$m
144.0
12.3
156.3
128.2
11.2
139.4
8.6
30.6
39.2
11.5
33.2
44.7
FY22
$m
44.7
1.6
(9.0)
1.9
39.2
Total
$m
152.6
42.9
195.5
139.7
44.4
184.1
FY21
$m
58.1
(6.8)
(9.3)
2.7
44.7
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Employee Entitlements
Wages, salaries, incentives, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, incentives, annual leave and accumulating sick leave, are
recognised in provisions in respect of employees’ services up to the reporting date. They are measured at the amounts expected to
be paid when the liabilities are settled. Liabilities due to be settled within 12 months of the reporting date are classified as current
liabilities. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid
or payable.
Long service leave
The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected
future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected
future wage and salary levels, experience of employee departures, and periods of service. Expected future payments 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.
Property 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.
Property provisions include the value of certain retail store lease obligations recognised as part of the acquisition of Franklins in FY12.
The provision is initially recognised at the acquisition date fair value and subsequently utilised to settle lease obligations. The
provision related to an individual lease is derecognised when the Group has met or otherwise extinguished its obligations in full under
that lease.
Provisions are also recognised for obligations such as guarantees, property make-good 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.
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.
Metcash Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
SIGNIFICANT ACCOUNTING ESTIMATES
Property provisions
The Group recognises provisions for rental agreements on acquisition. 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.
The Group assesses obligations on property make-good, restructuring and other costs. These estimates are determined using
assumptions on property-related costs, redundancy and other closure or restructure costs.
CAPITAL STRUCTURE, FINANCING AND RISK MANAGEMENT
Reconciliation of cash flows from operating activities
Net profit for the year
ADJUSTMENTS FOR:
Depreciation and amortisation
Provisions for impairment, net of reversals
Share of profit from equity-accounted investments
Movements in put option liabilities
Share-based payments expense
Net gain from disposal of property, plant and equipment
Other adjustments
CHANGES IN ASSETS AND LIABILITIES:
Increase in trade and other receivables
(Increase)/decrease in inventories
(Decrease)/ increase in tax balances
Increase/(decrease) in payables and provisions
Cash flows from operating activities
Interest-bearing borrowings
CURRENT
Bank loans – working capital
NON-CURRENT
Bank loans – syndicated
Bank loans – bilateral
Deferred borrowing costs
95
FY22
$m
247.1
175.9
41.0
(19.2)
30.5
7.4
(0.3)
17.8
(154.3)
(122.3)
(6.0)
214.7
432.3
FY22
$m
45.0
45.0
200.0
51.5
(2.8)
248.7
FY21
$m
241.4
163.7
42.9
(20.1)
3.2
8.7
(0.6)
10.8
(30.7)
37.6
21.5
(2.9)
475.5
FY21
$m
—
——
—
—
—
—
Financial covenants
See note 5.6 for details of the Group’s core borrowing facilities. The core borrowings of the Group must comply with two primary
covenants which apply to the syndicated, bilateral and working capital bank facilities. They include a Fixed Charges Cover Ratio and a
Senior Leverage Ratio. There were no defaults or breaches on the Group’s core borrowings in FY22 and FY21.
Weighted average interest
The weighted average effective interest rate on the syndicated, bilateral and working capital loans was 1.7% (FY21: 1.9%) over the
financial year. These rates exclude line fees on unutilised facility balances.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
SIGNIFICANT ACCOUNTING POLICIES
All loans and borrowings are initially recognised at the fair value of the consideration received net of issue costs associated with
the borrowing.
After initial recognition, interest-bearing 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 derecognised.
Put options and other financial liabilities
30 APRIL 2022
Current
Non-current
30 APRIL 2021
Current
Non-current
Put option liabilities
Total Tools Group put options
Put option
liabilities
$m
Other financial
liabilities
$m
21.1
210.6
231.7
17.7
194.8
212.5
2.4
0.9
3.3
4.2
—
4.2
Total
$m
23.5
211.5
235.0
21.9
194.8
216.7
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The Group has a put option with Total Tools Holdings Pty Ltd (Total Tools), which is the parent entity in the Total Tools Group,
comprising the franchisor operations, 8 company-owned stores and ownership interests in 27 Total Tools independent retail stores
(JV stores).
In June 2021, Metcash acquired an additional 15% interest in Total Tools increasing its ownership from 70% to 85%. The remaining
shareholders in Total Tools have the right to put their 15% ownership interest to Metcash, via a put option, exercisable between
1 November 2023 and 31 January 2024. Metcash has the right to acquire the remaining 15% equity interest via a call option, exercisable
at any time from 1 November 2023. The exercise price of the put option is based on a multiple of the Total Tools Group EBITDA over the
12-month period ending on 29 October 2023, adjusted for a number of items, including net debt and working capital and was valued at
$79.3 million at balance date.
In addition, Total Tools has ownership of between 51% and 60% in 27 Total Tools JV stores, including the 15 JV stores acquired in FY22
(refer note 6.1). Accordingly, at balance date, Metcash holds an effective ownership interest of between 43% and 51% in these JV Stores.
The Total Tools JV Store put option agreements allow individual minority shareholders to sell their remaining equity interests in the
27 JV Stores to Total Tools, subject to the satisfaction of certain criteria, exercisable between May 2024 and July 2024 (13 stores, valued
at $80.1 million) and between May 2025 and July 2025 (14 stores, valued at $51.2 million). Metcash has the right to acquire the remaining
equity interests via call options, exercisable at any time. The exercise price of the put options are based on a multiple of the respective
store’s EBITDA over the 12-month period immediately prior to the respective exercise dates, adjusted for a number of items, including
net debt and working capital.
In accordance with AASB 10 Consolidated Financial Statements, the Group has recognised financial liabilities for the Total Tools put
option and the JV Store put options, has derecognised the non-controlling interests in Total Tools and the JV Stores and has ceased
accounting for the non-controlling interests. Accordingly, the Statement of Comprehensive Income includes 100% of the net profit of
Total Tools and includes 100% of the net profits of the JV Stores.
The above put option liabilities are remeasured at each reporting date at the estimated put option exercise price, with any change in
value recorded as a significant item within the Statement of Comprehensive Income, together with the net present value interest unwind
on the put option liability.
At balance date, the carrying amount of the Total Tools Group put option liabilities is $210.6 million (FY21: $194.8 million). Refer note 3.3
of the financial report for details in relation to the put option valuation adjustments recognised during the period.
Other put options
The Group has also recognised a liability of $21.1 million (FY21: $17.7 million) in respect of an additional three put options written over
non-controlling interests in non-wholly owned subsidiaries within the Hardware pillar. These put option arrangements allow minority
shareholders to sell their equity interests to Metcash, subject to specific terms and conditions. These put options are measured at the
present value of the redemption amount under the option.
Metcash Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
Contingent put option liabilities
Ritchies Stores Pty Ltd (Ritchies) put option
The Group has a put option with Ritchies Stores Pty Ltd (Ritchies). Metcash has a 28.9% (FY21: 26.4%) ownership interest in Ritchies,
which is recognised as an equity-accounted investment on the Group’s balance sheet. The remaining shareholders in Ritchies have the
right to put their 71.1% (FY21: 73.6%) ownership interests to Metcash, via put option, subject to a margin related annual financial hurdle
(‘hurdle’) being achieved.
The put option can be exercised collectively by all shareholders during a prescribed period following the approval of Ritchies’ annual
audited financial report (‘group put option’ representing the remaining 71.1% shareholding) or in certain circumstances by individual
minority shareholders within a prescribed period (‘small shareholder put option’).
Should the hurdle be achieved, and the shareholders elect to exercise any put option, the purchase consideration payable by Metcash is
based on a multiple of the prior year reported earnings, normalised for certain adjustments.
Whilst the financial hurdle was achieved in respect of Ritchies’ 2021 financial year, the group put option was not exercised in relation to
that year. Metcash estimates that the group put option consideration payable to Ritchies shareholders in respect of the 2021 financial
year would have been between $310 million and $320 million.
During FY22, eight small shareholders holding an aggregate of 13,750 shares (or 2.5% stake in Ritchies) exercised their option under the
‘small shareholder put option’ in relation to Ritchies’ 2021 financial year, bringing Metcash’s share in Ritchies to 28.9%.
If any put options were to be exercised in future years, the exercise price will be determined with reference to Ritchies’ results for that
financial year and the consideration payable would reflect those results.
The put option agreement terminates when Metcash ceases to hold shares in Ritchies or if Ritchies lists on the ASX.
The Ritchies put option is recognised at a fair value of nil.
Other put options
In addition, the Group has put and call option agreements with two Total Tools independent retail stores without acquiring any present
ownership interest (‘non-owned stores’). These options are exercisable between May 2024 and July 2024 if certain operating
performance conditions are met and with an exercise price determined using a multiple of EBITDA. These put options are recognised at
their fair values of nil.
97
SIGNIFICANT ACCOUNTING POLICIES
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. The initial recognition of the put option liability is charged directly to retained earnings
and the non-controlling interest is derecognised.
The put option liability is subsequently remeasured at each reporting date at the estimated put option exercise price, with any
change in value recorded within the Statement of Comprehensive Income, together with the net present value interest unwind on the
put option liability.
SIGNIFICANT ACCOUNTING ESTIMATE
The valuations used to determine the carrying amount of put option liabilities are based on forward looking key assumptions that are,
by nature, uncertain. This requires an estimation of future earnings and cash flows which includes assumptions in relation to sales
volume growth, cost of sales and costs of doing business.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
Contributed equity and reserves
Contributed equity
At 1 May
Share buyback and related costs, net of tax
Issued under equity raising, net of share issue costs
At 30 April
FY22
FY21
Number of shares
$m
Number of shares
1,022,362,821
(56,821,219)
—
965,541,602
867.0
(48.7)
—
818.3
1,016,399,606
—
5,963,215
1,022,362,821
$m
853.5
—
13.5
867.0
Fully paid ordinary shares carry one vote per share and carry the right to dividends. Shares have no par value.
In August 2021, the Group completed an off-market buyback of 56,821,219 ordinary shares (or 5.6% of total shares in issue) for $200.0
million. The ordinary shares were bought back at $3.52 per share, which represented a 14% discount to Metcash market price of $4.10
(being the volume weighted average price of Metcash ordinary shares on the ASX over the five trading days up to and including 13 August
2021). The buyback comprised a fully franked dividend of $2.67 per share ($151.7 million) and a capital component of $0.85 per share
($48.3 million). These amounts, along with $0.4 million of transaction costs, were debited to the Company’s profit reserve and share
capital account, respectively. The shares bought back were subsequently cancelled.
In May 2020, Metcash issued 5,963,215 shares under its Share Purchase Plan (‘SPP’) at $2.28 per share which raised $13.5 million of
equity, net of transaction costs.
Other reserves
98
At 1 May 2020
Total comprehensive income, net of tax
Shares issued to employees
Share-based payments expense
At 30 April 2021
Movement in fair value of derivatives
Movement in foreign currency valuations
Total comprehensive (loss)/income, net of tax
Shares issued to employees
Share-based payments expense
At 30 April 2022
Share-based
payments reserve
Foreign currency
translation reserve
Cash flow hedge
reserve
Total
other reserves
$m
2.6
—
(6.3)
8.7
5.0
—
—
—
(9.4)
7.7
3.3
$m
(5.0)
(0.3)
—
—
(5.3)
—
(0.9)
(0.9)
—
—
(6.2)
$m
0.1
(1.5)
—
—
(1.4)
0.9
—
0.9
—
—
(0.5)
$m
(2.3)
(1.8)
(6.3)
8.7
(1.7)
0.9
(0.9)
—
(9.4)
7.7
(3.4)
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SIGNIFICANT ACCOUNTING POLICIES
Share-based payments reserve
The share-based payments reserve is used to record the value of equity benefits provided to executives as part of their remuneration.
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 that
have subsequently 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
The cash flow hedge 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.
Metcash Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
Dividends
DIVIDENDS PAID ON ORDINARY SHARES DURING THE YEAR
Final fully franked dividend for FY21: 9.5c (FY20: 6.5c)
Interim fully franked dividend for FY22: 10.5c (FY21: 8.0c)
DIVIDENDS DETERMINED (NOT RECOGNISED AS A LIABILITY AS AT 30 APRIL)
Final fully franked dividend for FY22: 11.0c (FY21: 9.5c)
FY22
$m
97.1
101.4
198.5
106.2
FY21
$m
66.5
81.8
148.3
97.1
On 27 June 2022, the Board determined to pay a fully franked FY22 final dividend of 11.0 cents per share, sourced from the profit reserve
established by Metcash Limited (Parent Company), with a record date of 13 July 2022 and payable in cash on 10 August 2022. The
Dividend Reinvestment Plan remains suspended with effect from 26 June 2017.
Franking credit balance of Metcash Limited
Franking account balance as at the end of the financial year at 30% (FY21: 30%)
Franking credits that will arise from the payment of income tax payable at the reporting date
Franking credits on dividends determined but not distributed to shareholders during the year
FY22
$m
156.2
23.9
(45.5)
134.6
FY21
$m
216.8
16.5
(41.6)
191.7
Financial risk management
Objectives and policies
The Group’s principal financial instruments comprise bank loans and overdrafts, leases, cash and short-term deposits and derivatives.
The main purpose of these instruments is to finance the Group’s operations. The Group also has various other financial assets and
liabilities such as trade receivables and payables, which arise directly from its operations.
99
The main risks arising from the Group’s financial instruments are liquidity risk, interest rate risk, credit risk and foreign exchange 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.
Liquidity risk and funding management
Liquidity risk is the risk that the Group will be unable to meet its payment obligations when they fall due under normal and extreme
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’s primary sources of debt funding are syndicated, bilateral and working capital facilities, of which 33.6% (FY21: 1.2%)
has been utilised at 30 April 2022. The Group monitors forecasts of liquidity reserves on the basis of expected cash flow.
Available credit facilities
At the reporting date, the Group had the following unused credit facilities available for its immediate use:
AT 30 APRIL 2022
Syndicated facilities
Working capital, including guarantees
Bilateral loans
AT 30 APRIL 2021
Syndicated facilities
Working capital, including guarantees
Total
facilities
$m
Debt
usage
$m
Guarantees
& other usage
$m
Facilities
available
$m
525.0
250.0
126.5
901.5
675.0
230.0
905.0
200.0
45.0
51.5
296.5
—
—
—
—
6.3
—
6.3
—
10.7
10.7
325.0
198.7
75.0
598.7
675.0
219.3
894.3
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
Syndicated facilities
Syndicated bank loans are senior unsecured revolving facilities. The facilities are due to expire in May 2024 ($100.0 million), September
2024 ($125.0 million), September 2025 ($100.0 million) and May 2026 ($200.0 million). Interest is payable on the facilities based on BBSY
plus a margin. 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 5.2.
Working capital
Working capital bank loans are represented by four unsecured revolving facilities totalling $250.0 million. These facilities mature in
September 2022 ($55.0 million), February 2023 ($75.0 million) and July 2023 ($120.0 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 5.2.
Bilateral loans
Bilateral bank loans are represented by three unsecured revolving facilities totalling $126.5 million. These facilities mature in June 2024
($26.5 million), June 2025 ($50.0 million) and December 2028 ($50.0 million). Interest payable on any loans drawn under these facilities is
based on BBSY plus a margin. These bank loans are subject to certain financial undertakings as detailed in note 5.2.
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.
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 both a cash payment and receipt.
AS AT 30 APRIL 2022
Trade and other payables
Bank loans
100
Financial guarantee contracts
Other financial liabilities
Put options written over non-controlling interests
Lease liabilities
Derivative liabilities – gross settled:
— Inflows
— Outflows
Net maturity
AS AT 30 APRIL 2021
Trade and other payables
Financial guarantee contracts
Other financial liabilities
Put options written over non-controlling interests
Lease liabilities
Derivative liabilities – gross settled:
— Inflows
— Outflows
Net maturity
1 year
or less
$m
2,321.9
50.0
0.5
1.9
21.1
193.4
4.9
(4.9)
1 – 5 years
$m
More than
5 years
$m
—
209.6
0.9
—
224.4
637.3
—
—
—
51.5
—
—
—
437.3
—
—
Total
$m
2,321.9
311.1
1.4
1.9
245.5
1,268.0
4.9
(4.9)
2,588.8
1,072.2
488.8
4,149.8
2,094.7
0.4
3.8
17.4
189.9
30.4
(30.4)
—
—
—
191.6
526.1
—
—
—
—
—
—
570.0
—
—
2,094.7
0.4
3.8
209.0
1,286.0
30.4
(30.4)
2,306.2
717.7
570.0
3,593.9
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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.
The Group’s treasury policy provides percentage ranges across yearly periods for the interest rate hedging of net debt. Core debt is
defined as the minimum level of drawn debt which is expected to occur over the year. At 30 April 2022, Metcash has $296.5 million (FY21:
nil) bank debt obligations and has not entered into interest rate swap contracts (FY21: nil).
Metcash Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
At the reporting date, the Group had the following mix of financial assets and liabilities exposed to Australian variable interest rate risk
that, except as indicated, are not designated in cash flow hedges:
FINANCIAL ASSETS
Cash and cash equivalents
FINANCIAL LIABILITIES
Bank loans – syndicated
Bank loans – working capital
Bank loans – bilateral
Net exposure
Sensitivity analysis
FY22
$m
104.7
(200.0)
(45.0)
(51.5)
(191.8)
FY21
$m
124.6
—
—
—
—
As the Group’s treasury policy requires core debt to be appropriately hedged, there are no reasonably likely changes in interest rates that
are expected to have a material impact on the Group’s net profit after tax and other comprehensive income.
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a
financial loss. The Group is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing
activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.
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.
101
Receivables and loans are monitored on an ongoing basis and a formal review of all balances occurs every six months to measure
impairment losses. As identified in note 4.1, the current level of impairment provision represents 3.3% (FY21: 3.4%) of the Group’s
receivables and loans.
Lease receivables
The Group is exposed to credit risk on ‘back-to-back’ arrangements contained within its property leases where Metcash has subleased
properties to retailers. The Group regularly reviews material lease arrangements on an ongoing basis and a formal review of all leases
occurs every six months to measure impairment losses. Refer note 4.2 for further details.
Others
There are no other significant concentrations of credit risk within the Group.
Foreign exchange risk
The Group is exposed to foreign exchange fluctuations on transactions and balances in respect of its operations in New Zealand.
This operation represents less than 5% of the Group’s total sales revenue and total profit after tax.
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.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
SIGNIFICANT ACCOUNTING POLICIES
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 the Statement of Comprehensive
Income for the year.
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 Statement of Comprehensive Income as finance costs. If the hedged item is derecognised, the
unamortised fair value is recognised immediately in the Statement of Comprehensive Income.
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 Statement of Comprehensive Income.
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 Statement of Comprehensive Income 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 Statement of Comprehensive Income. 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 the
Statement of Comprehensive Income.
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.
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 continue to invest in the business for future growth while maintaining a strong financial position
and otherwise to assess returning surplus capital to shareholders.
On 27 June 2022, the Board determined to pay a fully franked FY22 final dividend of 11.0 cents per share. The FY22 final dividend
represents a full year dividend payout ratio of ~70% of underlying profit after tax.
The Board and management set out to maintain appropriate Statement of Financial Position ratios. Certain Statement of Financial
Position ratios are also imposed under the Group’s banking facilities (refer to note 5.2).
Management monitor capital through the debt leverage ratio (net debt / underlying EBITDA - depreciation of ROU assets). The FY22 debt
leverage ratio was 0.36x, which reflects a low gearing position.
No changes were made to the overall objectives, policies or processes for managing capital during the year.
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Metcash Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
GROUP STRUCTURE
Business combinations and acquisition of additional interest in associate and subsidiaries
Acquisition of additional interest in the Total Tools Group
On 28 June 2021, Metcash acquired an additional 15% interest in Total Tools Holdings Pty Ltd, increasing its ownership from 70% to
85%. Cash consideration of $59.4 million was paid to the non-controlling shareholders. The associated carrying amount of the put option
held by the non-controlling shareholders of $62.6 million was extinguished, resulting in a gain of $3.2 million as follows:
Consideration paid
Put option liability partly derecognised
Difference recognised in significant items in the Statement of Comprehensive Income
$m
59.4
(62.6)
(3.2)
Acquisition of subsidiaries
Total Tools ‘JV stores’
In FY22, Total Tools acquired ownership interests of between 51% and 60% in 15 Total Tools independent retail stores. Accordingly,
Metcash holds an effective ownership interest of between 43% and 51% in these ‘JV Stores’.
Details of the purchase consideration and the provisional fair values of the net assets acquired at the date of acquisition are as follows:
Net assets acquired
Cash and cash equivalents
Trade and other receivables
Inventories
Trade payables and provisions
Property, plant and equipment
Other assets
Deferred tax assets
Income tax payable
Net identifiable assets acquired (a)
Non-controlling interest
Goodwill
Total purchase consideration
103
Total Tools
JV Stores
$m
7.9
7.2
26.1
(19.3)
3.3
0.3
1.7
(2.5)
24.7
(10.2)
23.1
37.6
(a) Net identifiable assets acquired include $18.1 million of right-of-use assets and lease liabilities.
From their respective dates of acquisition, the Total Tools JV stores contributed $66.7 million of sales revenue and $5.1 million of
earnings before interest and tax (EBIT) to the Metcash Group, with 14 of the 15 JV stores having been acquired during December 2021.
Put and call options written over non-controlling interests
In accordance with the AASB 10 Consolidated Financial Statements, the Group has recognised financial liabilities for the Total Tools
JV Store put options at their provisional fair values totalling $55.0 million and has derecognised the non-controlling interests of ($10.2
million) related to the acquisitions. Details of these put options are set out in note 5.3 of the financial report. As at the date of acquisition,
the net amount of $44.8 million has been recognised as an adjustment to retained earnings as shown below:
Non-controlling interests derecognised
Adjustment recognised directly in equity (retained earnings)
Fair value of put options recognised as a financial liability
$m
10.2
44.8
55.0
Any changes in the value of the put option financial liabilities that occur subsequent to initial recognition will be recognised in the
Statement of Comprehensive Income and will be disclosed within significant items. Refer note 3.3 for further details.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
Purchase consideration – cash outflow
Cash consideration
Less: Cash and cash equivalents acquired
Net cash outflow – investing activities
$m
37.6
(7.9)
29.7
Transaction costs of $1.4 million incurred in relation to the acquisition of the Total Tools JV stores and the additional 15% ownership
interest in the Total Tools Group are included in significant items in the Statement of Comprehensive Income and in operating cash flows
in the Statement of Cash Flows.
Other subsidiaries acquired
During the year, the Group also entered into a number of other business combinations that were not material to the Group, individually
or in aggregate. The total cash purchase price consideration for these businesses was $14.7 million, of which $3.8 million is allocated to
goodwill.
The accounting for the above business combinations is provisional as at 30 April 2022.
SIGNIFICANT ACCOUNTING POLICIES
Business combinations
The acquisition of controlled entities is accounted for using the acquisition method of accounting. The acquisition 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.
Acquisition of additional interest in associate
During the year, the Group acquired an additional 2.5% interest in the voting shares in Ritchies, increasing its ownership interest to 28.9%
following the exercise of the ‘small shareholder put options’ by eight small shareholders. Cash consideration of $11.0 million was paid to
these shareholders. Refer note 5.3 for further details.
104
Parent entity information
STATEMENT OF FINANCIAL POSITION
Current assets – amounts receivable from subsidiaries
Net assets
Contributed equity (note 5.4)
Accumulated losses
Profit reserve
Share-based payments reserve
Total equity
STATEMENT OF COMPREHENSIVE INCOME
Net profit for the year
Total comprehensive income for the year, net of tax
FY22
$m
FY21
$m
899.9
899.9
818.3
(1,265.4)
1,343.7
3.3
899.9
—
—
1,300.5
1,300.5
867.0
(1,265.4)
1,693.9
5.0
1,300.5
—
—
Profit reserve
The parent entity, Metcash Limited, established a profit reserve in FY17 within its separate financial statements, in accordance with the
Company’s constitution. During the current financial year, the dividend component of the off-market buyback of $151.7 million, the FY21
final dividend of $97.1 million and the FY22 interim dividend of $101.4 million were sourced and paid from the profit reserve.
Closed Group
The parent entity has provided guarantees as part of the Closed Group arrangements as disclosed in Appendix B.
Contingent liabilities
The contingent liabilities in relation to the parent entity are disclosed in note 7.3.
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Metcash Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
Related party disclosures
A list of the Group’s subsidiaries is included in Appendix B and a list of equity-accounted investments is included in Appendix C.
Material transactions and balances with related parties – Group
TRANSACTIONS WITH RELATED PARTIES – EQUITY-ACCOUNTED INVESTMENTS
Sales revenue
Lease and other charges
Dividends received
Interest income from lease receivables
BALANCES WITH RELATED PARTIES – EQUITY-ACCOUNTED INVESTMENTS
Trade receivables – gross
Provision for impairment loss
Lease receivables – gross
Provision for impairment loss
Parent entity
Details of the parent entity are set out in note 6.2.
Compensation of key management personnel of the Group
Short-term
Long-term
Post-employment
Share-based payments
FY22
$
FY21
$
1,332,521,928
1,318,698,814
996,955
9,827,925
2,451,681
1,217,712
6,048,119
2,479,047
110,084,284
121,262,314
—
(148,148)
110,084,284
121,114,166
48,694,583
52,661,428
—
—
48,694,583
52,661,428
105
FY22
$
FY21
$
12,062,190
11,976,242
246,519
198,161
315,344
172,528
3,180,421
2,999,209
15,687,291
15,463,323
Other transactions with key management personnel
Mr Rob Murray is a director of Southern Cross Media Group Limited and Advisory Chairman of Hawkes Brewing Company.
Ms Helen Nash is a director of Inghams Group Limited and Southern Cross Media Group Limited.
Mr Peter Birtles is a director of GWA Group Limited.
Ms Christine Holman is a director of CSR Limited, McGrath Foundation and Collins Food Group Pty Ltd.
Ms Margaret Haseltine is a director of Real Pet Food Company Pty Ltd.
Metcash has business relationships with the above entities, including supply and purchase of trading goods and services. All transactions
with the above entities are conducted on an arm’s length basis in the ordinary course of business.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
OTHER DISCLOSURES
Share-based payments
Description of share-based payment arrangements
In FY22, the Group had the following share-based incentive schemes for employees:
Scheme name
Description
SHORT-TERM INCENTIVES (STI SCHEMES)
FY22 at-risk STI plan
– deferred component
FY21 at-risk STI plan
– deferred component
The FY22 at-risk STI plan included a 33% (Group CEO) and 25% (other KMP and senior executives)
deferred component which will be released through the issue of performance rights conditional upon
the executives remaining employed by the Company until 15 April 2023.
The FY21 at-risk STI plan included a 33% (Group CEO) and 25% (other KMP and senior executives)
deferred component which was released through the issue of performance rights to executives who
remained employed by the Company until 15 April 2022.
LONG-TERM INCENTIVES (LTI SCHEMES)
FY22-FY24 LTI grant
FY21-FY23 LTI grant
FY20-FY22 LTI grant
This grant was issued to KMP and senior executives during FY22 and is subject to two performance
conditions: Return on Funds Employed (‘ROFE’) and Total Shareholder Returns (‘TSR’) over a three-year
period from 1 May 2021 to 30 April 2024.
This grant was issued to KMP and senior executives during FY21 and is subject to two performance
conditions: Return on Funds Employed (‘ROFE’) and Total Shareholder Returns (‘TSR’) over a three-year
period from 1 May 2020 to 30 April 2023.
This grant was issued to KMP and senior executives during FY20 and is subject to two performance
conditions: Return on Funds Employed (‘ROFE’) and Total Shareholder Returns (‘TSR’) over a three-year
period from 1 May 2019 to 30 April 2022.
106
FY22 Group CEO buy-out grant This grant was issued to the Group CEO during FY22 and is subject to two performance conditions:
FY22 CEO Food retention
LTI grant
Service condition and a forecast achievement of a minimum Group underlying EBIT hurdle over two
annual performance periods that are measured between 1 February 2022 and 31 January 2024. The
EBIT hurdles align to the Group’s annual budget and STI metrics. In addition, the Group CEO’s ongoing
performance and behaviours must be deemed as acceptable over each performance period by the
Board.
This grant was issued to the CEO Food during FY22 and is subject to two performance conditions:
Service condition and a forecast achievement of a minimum Food underlying EBIT hurdle over three
annual performance periods that are measured between 1 October 2021 and 30 September 2024. The
EBIT hurdles align to the Food pillar’s annual budget and STI metrics. In addition, the CEO Food’s
ongoing performance and behaviours must be deemed as acceptable over each performance period by
the Board.
Project Horizon LTI plan
This grant was issued to employees dedicated to Project Horizon during FY22 and is subject to two
performance conditions: Service condition and performance conditions such as quality and timing of
the deliverables, cost of the program and value of the benefits realised.
The STI schemes (deferred component) and LTI schemes are also subject to service conditions, usually from grant date to the date of the
allocation of shares.
The FY20-FY22 LTI is expected to vest at 100%. These vested performance rights will be converted to shares and allocated to the
participants under the rights plan on 15 August 2022.
As foreshadowed in FY21, the FY19-FY21 LTI plan partially vested on 15 August 2021 at 90% which was equivalent to 1,686,728
performance rights. Each performance right entitled the participant to one Metcash share. Metcash acquired 1,374,136 shares on market
and allocated these to the participants on 15 August 2021. The balance relating to good leavers was settled in cash.
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Metcash Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
Measurement of fair values
FY22 at-risk STI plan – deferred component
The 33% (Group CEO) and 25% (other KMP and senior executives) components of the FY22 at-risk STI plan will be deferred and released
through the issue of Metcash performance rights conditional upon the executive remaining employed by the Company until 15 April
2023. The number of performance rights will be calculated by dividing 33% (Group CEO) and 25% (other KMP and senior executives)
of the STI award dollar value by the volume-weighted average price (VWAP) of Metcash ordinary shares over the 20 trading days ended
30 April 2022 of $4.65 per share. The FY22 expense for the FY22 at-risk STI plan – deferred component has been based on an estimate of
the fair value of the performance rights. The fair value per grant will be determined in accordance with AASB 2 Share-based payments at
grant date.
FY21 at-risk STI plan – deferred component
The 33% (Group CEO) and 25% (other KMP and senior executives) components of the FY21 at-risk STI plan was deferred and released
through the issue of Metcash performance rights conditional upon the executive remaining employed by the Company until 15 April
2022. The number of performance rights was calculated by dividing 33% (Group CEO) and 25% (other KMP and senior executives) of the
STI award dollar value by the volume-weighted average price (VWAP) of Metcash ordinary shares over the 20 trading days ended 30 April
2021 of $3.74 per share. The fair value per grant was determined in accordance with AASB 2 Share-based payments at grant date.
Performance rights
The weighted average inputs to the valuation of the STI deferred component and LTI performance rights valued at grant date using the
Black-Scholes option pricing model are as follows:
At-risk STI
deferred
FY21
LTI
FY22–FY24
(ROFE)
LTI
FY21–FY23
(ROFE)
LTI
FY20–FY22
(ROFE)
FY22 Group
CEO buy-out
grant
FY22 CEO Food
retention
LTI grant
Project
Horizon
LTI plan
Dividend yield
Risk free rate
Expected volatility
Days to vesting
Share price at grant date
Fair value at grant date
4.5%
0.1%
35%
274
3.97
3.73
4.5%
0.1%
35%
1,095
3.98
3.44
4.2%
0.1%
37%
895
3.62
3.28
4.8%
1.0%
31%
1,121
2.81
2.66
4.5%
0.1%
35%
546
4.01
3.89
4.5%
0.1%
35%
357
4.00
3.62
4.5%
0.1%
35%
1,094
3.92
3.44
107
The weighted average inputs to the valuation of performance rights valued at grant date by an external specialist using the Monte Carlo
option pricing model are as follows:
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Dividend yield
Risk free rate
Expected volatility
Days to vesting
Share price at grant date
Fair value at grant date
LTI
FY22–FY24
(TSR)
LTI
FY21–FY23
(TSR)
LTI
FY20–FY22
(TSR)
4.5%
0.1%
35%
1,095
3.98
1.74
4.2%
0.1%
37%
895
3.62
2.30
4.8%
1.0%
31%
1,121
2.81
1.23
Service and non-market performance conditions attached to the grants were not taken into account in measuring fair value. Market
performance conditions associated with the grants have been reflected in the fair value measurement. Expected volatility is based on 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.
Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAbout
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
SIGNIFICANT ACCOUNTING POLICIES
Share-based payment transactions
The Group provides a portion of senior executive and key employee remuneration as equity-settled share-based payments, in the
form of performance rights.
The value of the performance rights issued is determined on the date which both the employee and the Group understand and agree
to the share-based payment terms and conditions (grant date). The value at grant date is based upon the fair value of a similar
arrangement between the Group and an independent third party and is determined using an appropriate valuation model. The fair
value does not consider the impact of service or performance conditions, other than conditions linked to the share price of Metcash
Limited (market conditions).
The fair value of performance rights is recognised as an expense, together with a corresponding increase in the share-based
payments reserve within equity, over the period between the grant date and the date on which the 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 estimate 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.
Reconciliation of outstanding performance rights
The following table illustrates the movement in the number of performance rights during the year:
108
Outstanding at the beginning of the year
Granted during the year
Vested/exercised during the year
Expired/forfeited during the year
Outstanding at the end of the year
FY22
Number
6,496,163
4,349,521
(2,347,360)
(888,234)
7,609,890
FY21
Number
6,370,539
3,022,580
(2,098,672)
(798,284)
6,496,163
The outstanding balance of performance rights as at 30 April 2022 is represented by:
Scheme name
LTI FY22 – FY24
LTI FY21 – FY23
LTI FY20 – FY221
FY22 Group CEO buy-out grant
Vesting date
15 August 2024
15 August 2023
15 August 2022
As soon as practicable2
FY22 CEO Food retention LTI grant
As soon as practicable3
Project Horizon LTI plan
Others
Total outstanding at the reporting date
15 August 2024
15 August 2022
Total outstanding
(number)
Exercisable
(number)
Remaining
contractual life
2,143,700
2,590,366
2,004,471
320,856
267,380
251,031
32,086
7,609,890
—
—
—
2 years 4 months
1 year 4 months
4 months
— 9 months to 1 year
and 9 months
— 5 months to 2 years
and 5 months
—
—
2 years 4 months
4 months
1.
2.
3.
The FY20-FY22 LTI performance rights plan is expected to vest on 15 August 2022 at 100% subject only to the employees remaining in employment until 15
August 2022. These vested performance rights will be converted to shares and allocated to the participants under the Rights Plan on 15 August 2022.
This LTI comprises two tranches which will be tested independently and will vest as soon as is practicable after 31 January 2023 and 31 January 2024
respectively, following Board review and approval.
This LTI comprises three tranches which will be tested independently and will vest as soon as is practicable after 30 September 2022, 30 September 2023 and 30
September 2024 respectively, following Board review and approval.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
Key terms and conditions
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 dividend rights.
The key terms of the ‘LTI’ and ‘STI plan – deferred component’ plans include:
1. 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 the contractual life of the rights;
2. Performance rights which do not vest are forfeited;
3. Performance rights are offered at no cost to participants;
4. 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;
5. Ordinarily, in the event of cessation of employment, unvested performance rights will lapse; however, this is subject to Board
discretion, which may be exercised in circumstances including death and disability, retirement, redundancy or special
circumstances;
6. 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;
7. 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; and
8.
If there is a change in control of the Group, the Board retains full discretion to vest or lapse some or all performance rights.
Auditors remuneration
FY22
$
FY21
$
2,021,000
1,825,000
109
134,000
335,000
58,000
399,000
2,490,000
2,282,000
Amounts received or due and receivable by the auditor of the parent entity and any
other entity in the Group for:
Auditing the statutory financial report of the parent entity covering the Group
and the statutory financial report of any controlled entities
Fees for other assurance and agreed-upon procedure services
Fees for tax compliance and other
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Commitments and contingent liabilities
Commitments
Capital expenditure commitments
The Group had no material commitments for capital expenditure at 30 April 2022 (FY21: nil).
Contingent liabilities
Bank guarantees to third parties in respect of property lease obligations
Bank guarantees in respect of Work Cover
FY22
$m
4.3
2.0
FY21
$m
8.7
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Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAbout
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
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 $40.0 million (FY21: $37.2 million).
Had the guarantee been exercised at 30 April 2022, the amount payable would have been $31.2 million (FY21: $35.2 million). The fair
value of the financial guarantee contract at the reporting date was $1.4 million (FY21: $0.4 million) and is recognised as a financial
liability.
Put options
Put options, including in relation to Ritchies Stores Pty Ltd, are detailed along with other contingent liabilities in note 5.3 of the
financial statements.
Subsequent events
In May 2022, Metcash announced that it entered into an agreement with Australian United Retailers Limited (AUR) to supply its national
network of supermarkets and convenience stores, including its FoodWorks bannered supermarkets, for a further five-year period,
commencing 1 July 2022. In addition, the Group also announced that it extended the term of its agreement to supply Drakes
Supermarkets stores in Queensland for a further five years, up to 3 June 2029.
On 27 June 2022, Metcash announced that it has signed a long-term lease agreement with the Goodman Group for the construction and
leasing of a new ‘best in class’ Distribution Centre (DC) at Truganina, Victoria. The new ~115,000m² DC, which will replace Metcash’s
existing ~90,000m² DC at Laverton, is expected to help further improve the competitiveness of our independent retailers in Victoria
through delivery of greater efficiencies and by providing access to a wider range of products. It is also expected to benefit local suppliers
by providing an efficient route to market through access to Metcash’s extensive distribution network. Construction of the DC is scheduled
to commence in the first half of FY23, with completion expected mid-2024.
Other than matters disclosed in this report, 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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Metcash Annual Report 2022NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
APPENDIX A – NEW OR AMENDED ACCOUNTING STANDARDS AND INTERPRETATIONS
(a) New or amended Accounting Standards and Interpretations
Several other amendments and interpretations apply for the first time in FY22, but do not have an impact on the financial report of the
Group. These are as follows:
AASB 2019-3 Amendments to AASB 7, AASB 9 and AASB 139 Interest Rate Benchmark Reform on Hedge Accounting
AASB 2021-3 Amendments to AASs – COVID-19-Related Rent Concessions beyond 30 June 2021
(b) Australian Accounting Standards issued but not yet effective
A number of new accounting standards (including amendments and interpretations) have been issued but were not effective as at
30 April 2022. The following are the pronouncements that the Group has elected not to early adopt in these financial statements:
Amendments to AASB 101: Classification of Liabilities as Current or Non-current
Amendments to AASB 3: Reference to Conceptual Framework
Amendments to AASB 9: Fees in the ’10 per cent’ test for derecognition of financial liabilities
Amendments to AASB 108: Definition of Accounting Estimates
Amendments to AASB 1 and AASB Practice Statement 2: Disclosure of Accounting Policies
Amendments to AASB 116: Property, Plant and Equipment: Proceeds before Intended Use
Amendments to AASB 137: Onerous Contracts – Costs of Fulfilling a Contract
The above standards are not expected to have a significant impact on the Group’s financial statements in the year of their initial
application.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
APPENDIX B – INFORMATION ON SUBSIDIARIES
Metcash Limited is the ultimate parent entity of the group. The consolidated financial statements include the financial statements of Metcash
Limited and the Subsidiaries listed in the following table. All entities are incorporated in Australia except where specifically identified.
ENTITIES WITHIN THE CLOSED GROUP
Action Holdings Pty Ltd
Action Supermarkets Pty Ltd
Australian Asia/Pacific Wholesalers Pty Ltd
Australian Hardware Distributors Pty.
Limited
Australian Hardware Support Services Pty
Ltd
Australian Liquor Marketers (QLD) Pty Ltd
Australian Liquor Marketers (WA) Pty Ltd
Australian Liquor Marketers Pty. Limited
Big Bargain Bottleshops Australia Pty Ltd
Capeview Hardware Pty Ltd
City Ice & Cold Storage Company Proprietary
Limited
Clancy’s Food Stores Pty Ltd
Composite Buyers Finance Pty Ltd
Composite Buyers Pty Limited
Community Co Australia Pty Ltd
Danks Holdings Pty Limited
Davids Foodservices Pty Ltd
Davids Group Staff Superannuation Fund
Pty. Ltd.
Echuca Hardware Pty Ltd
Foodland Properties Pty Ltd
Foodland Property Holdings Pty Ltd
Franklins Pty Limited
Franklins Supermarkets Pty Limited
Fresco Supermarket Holdings Pty Ltd
Garden Fresh Produce Pty Ltd
G Gay Hardware Pty Ltd
Global Liquor Wholesalers Pty Limited
Hammer Hardware Stores Pty Ltd
Hardings Hardware Pty Ltd
Himaco Pty Ltd
Home Hardware Australasia Pty Ltd
Home Timber & Hardware Group Pty Ltd
Homestead Hardware Australasia Pty Ltd
HTH Events Pty Ltd
HTH Stores Pty Limited
Hudson Building Supplies Pty Limited
IGA Community Chest Limited
IGA Distribution (SA) Pty Limited
IGA Distribution (Vic) Pty Limited
IGA Distribution (WA) Pty Limited
IGA Fresh (Northern Queensland) Pty
Limited
IGA Fresh (NSW) Pty Limited
IGA Retail Services Pty Limited
Independent Brands Australia Pty Limited
FY22
%
FY21
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Independent Hardware Group Pty Ltd
Interfrank Group Holdings Pty Limited
Jewel Food Stores Pty Ltd
JV Pub Group Pty Ltd
K&B Timber and Hardware Pty Ltd
Keithara Pty Ltd
Liquor Traders Pty Ltd
Liquorsmart Pty Ltd
M-C International Australia Pty Limited
Mega Property Management Pty Ltd
Metcash Food & Grocery Convenience
Division Pty Limited
Metcash Food & Grocery Pty Ltd
Metcash Holdings Pty Ltd
Metcash Management Pty Limited
Metcash Services Proprietary Limited
Metcash Storage Pty Limited
Metcash Trading Limited
Metro Cash & Carry Pty Limited
Mirren (Australia) Pty Ltd
Mitre 10 Australia Pty Ltd
Mitre 10 Mega Pty Ltd
Mitre 10 Pty Ltd
Narellan Hardware Pty Ltd
National Retail Support Services Pty Ltd
Payless Superbarn (N S W) Pty Ltd
QIW Pty Limited
Queensland Independent Wholesalers Pty
Limited
Quickstop Pty Ltd
Roma Hardware Pty Ltd
SE Hardware Pty Limited
South Coast Operations Pty Ltd
South West Operations Pty Ltd
Thrifty-Link Hardware Pty Ltd
Timberten Pty Ltd
UIAL NSW/ACT Pty Ltd
UIAL Tasmania Pty Ltd
Vawn No 3 Pty Ltd
W.A. Hardware Services Pty. Ltd
ENTITIES OUTSIDE OF THE CLOSED GROUP
Central Timber 10 Pty Ltd
Faggs Geelong Pty Ltd
Finlayson Installations Pty Ltd
Finlayson Timber & Hardware Pty Ltd
Foodland Property Unit Trust
Feldman Tools Pty Ltd
Futura Machinery Sales and Service Pty Ltd
FY22
%
FY21
%
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
50
90
100
100
100
51
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
90
100
100
100
42
42
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
FY22
%
FY21
%
FY22
%
FY21
%
Gympie Property Investment Pty Ltd
Hardware Property Trust
IGA Retail Network Limited
Metoz Holding Limited (incorporated in
South Africa) (In liquidation)
Mitre 10 Mega Property Trust
Napier Liquor Merchants Limited
(incorporated in New Zealand)
NFRF Developments Pty Ltd
Northern Hardware Group Pty Ltd
Nu Fruit Pty. Ltd.
Produce Traders Trust
Rainbow Unit Trust
Rainfresh Vic Pty Ltd
Retail Merchandise Services Pty Limited
Sunshine Hardware Pty Ltd
Tasman Liquor Company Limited
(incorporated in New Zealand)
Tasmania Hardware Pty Ltd
Timber and Hardware Exchange Pty Ltd
Total Tools (Importing) Pty Ltd
Total Tools Commercial Pty Ltd
Total Tools Holdings Pty Ltd
Total Tools Industrial Pty. Limited
Total Tools Licensing Pty Ltd
Total Tools Moorabbin Store Pty Ltd
Total Tools New Zealand Limited
Total Tools Online Pty Ltd
Total Tools Stores Pty Ltd
84.7
100
50
100
100
100
51
84.7
51
100
100
51
100
84.7
100
80
68.4
85
85
85
85
85
85
85
85
85
84.7
100
50
100
100
-
51
84.7
51
100
100
51
100
84.7
100
80
68.4
70
70
70
70
70
70
70
70
70
TT Brookvale Pty Ltd
Total Tools Fyshwick Pty Ltd1
Toolshack Pty Ltd1
TT Brooklyn Pty Ltd1
TT Darwin Pty Ltd1
TT Geelong Pty Ltd1
TT Melton Pty Ltd1
TT South Melbourne Pty Ltd1
TT Adelaide West Pty Ltd
TT Mackay Pty Ltd
TT Albury Pty Ltd1
Total Tools Wagga Wagga Pty Ltd1
TT Traralgon Pty Ltd
TT Ferntree Gully Pty Ltd
TT Kilsyth Pty Ltd
TT Dandenong Pty Ltd
TT Narre Warren Pty Ltd
TT Mitcham Pty Ltd
MOTS Support Services Pty Ltd
Phar Management Pty Ltd1
Alltools (Pakenham) Pty Ltd
Four Of Six Pty Ltd
Midland Tools Pty Ltd
Virginia Tools Pty Ltd
Cado Tools Pty Ltd
Total Tools Preston Pty Ltd
Wimbledon Unit Trust
85
43.4
43.4
43.4
43.4
43.4
43.4
43.4
51
51
43.4
43.4
51
51
51
51
51
51
85
43.4
51
51
51
51
51
51
70
35.7
35.7
35.7
35.7
35.7
35.7
35.7
42
42
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
100
100
1.
The Group has an indirect ownership of 43.4% in these entities via its interest in Total Tools Holdings Pty Ltd. While the Group has beneficial ownership of less
than 50% of these entities, the Group has control over key operating and financial decisions in these entities. Accordingly, these entities are accounted for as
controlled entities.
Entities within the closed group as at 30 April 2022
Certain controlled entities of Metcash Limited, collectively referred to as the ‘Closed Group’, are party to a Deed of Cross Guarantee
which meets the requirements of ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 (Instrument). Pursuant to the
Instrument, entities within the Closed Group that have lodged an opt-in notice with ASIC within the requisite time limits are granted relief
from standalone financial reporting and audit requirements of the Corporations Act 2001. Under the Deed of Cross Guarantee, the entities
within the Closed Group, including Metcash Limited, have guaranteed to pay any outstanding debts or claims in the event of a winding
up of any other entity within the Closed Group.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
Summary Statement of Comprehensive Income of the Closed Group
Distributions from subsidiaries outside the Closed Group
Other net income
Significant items
Profit before income tax
Income tax expense
Net profit for the year
Summary Statement of Financial Position of the Closed Group
114
ASSETS
Cash and cash equivalents
Trade receivables and loans
Lease receivables
Amounts due from related parties
Inventories
Other current assets
Total current assets
Investments
Lease receivables
Property, plant and equipment
Net deferred tax assets
Intangible assets and goodwill
Right-of-use assets
Other non-current assets
Total non-current assets
Total assets
LIABILITIES
Trade and other payables
Lease liabilities
Interest-bearing borrowings
Income tax payable
Provisions
Put options and other financial liabilities
Total current liabilities
Interest-bearing borrowings
Lease liabilities
Amounts due to related parties
Provisions
Put options and other financial liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed and other equity, opening balance
Share buyback and related costs
Equity raised, net of costs
Contributed and other equity, closing balance
Retained earnings, opening balance
Net profit for the year
Dividends paid
Share buyback and related costs
Recognition of put option liability
Share of associate’s adjustment on initial adoption of AASB 16 Leases
Retained earnings, closing balance
Other reserves
Total equity
FY22
$m
10.6
322.9
(53.8)
279.7
(85.6)
194.1
FY22
$m
46.7
1,643.0
40.3
13.1
947.5
8.0
2,698.6
325.1
232.2
193.7
124.3
604.8
531.5
18.2
2,029.8
4,728.4
2,146.2
128.0
45.0
25.5
134.4
21.7
2,500.8
248.7
812.4
—
39.8
80.2
1,181.1
3,681.9
1,046.5
867.0
(48.7)
—
818.3
387.7
194.1
(198.5)
(151.7)
—
—
231.6
(3.4)
1,046.5
FY21
$m
4.6
302.7
(17.0)
290.3
(88.6)
201.7
FY21
$m
76.7
1,519.3
41.1
—
874.7
12.0
2,523.8
318.1
236.8
191.3
114.5
562.1
551.2
15.7
1,989.7
4,513.5
1,940.5
129.9
—
22.3
126.7
20.8
2,240.2
—
831.3
22.7
41.7
124.6
1,020.3
3,260.5
1,253.0
853.5
—
13.5
867.0
456.7
201.7
(148.3)
—
(113.4)
(9.0)
387.7
(1.7)
1,253.0
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2022 CONTINUED
APPENDIX C – EQUITY-ACCOUNTED INVESTMENTS
Equity-accounted investments of the Group represent both associates and joint ventures and are structured through equity participation
in separate legal entities. Metcash invests capital to support the independent retail network, strengthen relationships and fund growth.
Relationships with co-investors are governed by contractual agreements which allow the Group to exercise either significant influence or
joint control over these entities. Where the Group exercises joint control, 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, with the exception of Metcash Export
Services Pty Ltd, which primarily deals with customers in China.
The following table presents key information about the Group’s interests in associates and joint ventures.
Investee
ASSOCIATES
Principal activities
Reporting date
Ritchies Stores Proprietary Limited
Dramet Holdings Pty Ltd
Metcash Export Services Pty Ltd
Grocery retailing
Grocery retailing
Grocery retailing
JOINT VENTURES
Adcome Pty Ltd
BMS Retail Group Holdings Pty Ltd
Waltock Pty Ltd
LA United Pty Limited1
Liquor Alliance Proprietary Limited1
Grocery retailing
Grocery retailing
Hardware retailing
Liquor wholesaling
Liquor wholesaling
30 June
30 June
30 April
30 April
30 June
30 June
30 June
30 June
FY22
%
28.9
26.0
15.0
45.0
49.0
49.0
75.3
66.7
FY21
%
26.4
26.0
15.0
45.0
49.0
49.0
75.3
66.7
1.
The Group has a direct ownership of 26.0% in LA United Pty Ltd, an indirect ownership of 49.3% via its interest in Liquor Alliance Pty Ltd. While the Group has
beneficial ownership of more than 50% of the entity, key operating and financial decisions require the unanimous consent of other joint venture partners.
Accordingly, LA United Pty Ltd and Liquor Alliance Pty Ltd are accounted for as joint arrangements.
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DIRECTORS’ DECLARATION
DIRECTOR’S DECLARATION
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.
ii.
Giving a true and fair view of the consolidated entity’s financial position as at 30 April 2022 and of its performance for the
year ended on that date; and
Complying with Accounting Standards (including the Australian Accounting Interpretations) and Corporations Regulations
2001;
b. The financial statements and notes also comply with International Financial Reporting Standards as disclosed in Section 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 ended 30 April 2022.
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 to,
by virtue of the Deed of Cross Guarantee.
On behalf of the Board
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DOUG JONES
Director
Sydney, 27 June 2022
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Metcash Annual Report 2022
ASX INFORMATION
YEAR ENDED 30 APRIL 2022
Additional information required by the Australian Securities Exchange and not shown elsewhere in this report is as follows.
The information is current as at 30 June 2022:
DISTRIBUTION OF EQUITY SECURITIES
The number of shareholders, by size of holding, in each class of share is:
Size of holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 9,999,999,999
Total
Number of
shareholders
6,935
9,773
3,690
2,865
104
23,367
There were 781 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 PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
BRISPOT NOMINEES PTY LTD
NAVIGATOR AUSTRALIA LTD
UBS NOMINEES PTY LTD
BKI INVESTMENT COMPANY LIMITED
POWERWRAP LIMITED
CERTANE CT PTY LTD
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
UBS NOMINEES PTY LTD
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BKI INVESTMENT COMPANY LTD
Total
Number
of shares
Percentage
of shares
350,680,989
166,438,441
129,780,528
79,028,459
30,720,543
30,089,204
7,672,741
5,840,151
3,777,666
3,010,133
2,633,687
2,296,040
2,292,675
1,752,743
1,430,881
1,343,977
1,302,572
1,217,489
1,166,032
1,028,409
36.32%
17.24%
13.44%
8.18%
3.18%
3.12%
0.79%
0.60%
0.39%
0.31%
0.27%
0.24%
0.24%
0.18%
0.15%
0.14%
0.13%
0.13%
0.12%
0.11%
823,503,360
85.29%
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YEAR ENDED 30 APRIL 2022 CONTINUED
SUBSTANTIAL SHAREHOLDERS
The following is extracted from the Company’s register of substantial shareholders:
Pendal Group Limited
State Street Corporation
Commonwealth Bank of Australia
Vinva Investment Management Limited
The Vanguard Group, Inc.
VOTING RIGHTS
All ordinary shares (whether fully paid or not) carry one vote per share without restriction.
Number
of shares
95,623,832
60,899,254
48,756,849
48,451,255
48,338,717
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Metcash Annual Report 2022 METCASH FOOD (HEAD OFFICE)
1 Thomas Holt Drive
Macquarie Park NSW 2113
PO Box 557
Macquarie Park NSW 1670
Telephone: 61 2 9741 3000
AUSTRALIAN LIQUOR MARKETERS (HEAD OFFICE)
1 Thomas Holt Drive
Macquarie Park NSW 2113
PO Box 557
Macquarie Park NSW 1670
Telephone: 61 2 9741 3000
INDEPENDENT HARDWARE GROUP (HEAD OFFICE)
19 Corporate Drive
Heatherton VIC 3202
Telephone: 1300 880 440
CORPORATE GOVERNANCE
A copy of the Corporate Governance Statement can be found on our website.
Visit www.metcash.com/corporateinformation/corporate-governance
125
CORPORATE INFORMATION
DIRECTORS
Doug Jones (Group CEO)
Peter Birtles
Margaret Haseltine
Christine Holman
Murray Jordan
Robert Murray (Chair)
Helen Nash
COMPANY SECRETARY
Julie Hutton
SHARE REGISTER
Boardroom Pty Limited
GPO Box 3993
Sydney NSW 2001
Freecall: 1800 655 325
Telephone: 61 2 9290 9600
AUDITOR
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
Telephone: 61 2 9248 5555
METCASH LIMITED
ABN 32 112 073 480
1 Thomas Holt Drive
Macquarie Park NSW 2113
PO Box 557
Macquarie Park NSW 1670
Telephone: 61 2 9741 3000
FOOD
HARDWARE
LIQUOR
Metcash Annual Report 2022ReportsSustainabilityOur peopleDirectors’ reportFinancial reportPillarsAbout