2014 Metcash Limited Annual Report Successful Independents
Metcash Limited ABN 32 112 073 480 Who We Are 1 Chairman’s Report 2 Financial Highlights 3 CEO’s Report 4 Consumer Insights 6 Review of Operations – Metcash Food & Grocery 8 Review of Operations – Australian Liquor Marketers 10 Review of Operations – Hardware & Automotive 12 Corporate Responsibility 14 Our Board 16 Key Management 18 Corporate Governance 19 Financial Report 29 Directors’ Report 30 Notes to the Financial Statements 70 Directors’ Declaration 133 Auditor’s Independence Declaration 134 Independent Auditor’s Report 135 ASX Additional Information 137 Corporate Information IBC WHO WE ARE
Our purpose Our values Our vision
Integrity is the foundation Growing our markets Successful of our values: and delivering value to our stakeholders INDEPENDENTS Supporting our customers and suppliers Distribution and merchandising excellence Our people are empowered and accountable Retailer and consumer champions Adding value in our community Successful and passionate independents
Our model Our markets
FOOD & GROCERY H S R A E C T T A E I L M E LIQUOR DELIVERING R VALUE HARDWARE
SU PPLIER AUTOMOTIVE
Metcash is Australia’s leading marketing We support independents in creating that and distribution company, operating in offer and to be highly successful by: the wholesale grocery, liquor, hardware – Focusing on the customer – ours and automotive industries. and those of our customers; Our business divisions – Metcash Food – Providing merchandising and & Grocery, Australian Liquor Marketers distribution excellence – our (ALM), Hardware and Automotive – investment in automation and robotics employ over 5,500 people, and support is allowing us to set new standards in more than one million people via our supply chain efficiency; and independent retailer network. – Leveraging the buying power We believe Australian shoppers – trade of our network – to negotiate and retail – want a local, convenient offer. better prices for our customers. Metcash has the capabilities, the drive, and enthusiasm to ensure independent retailers have a bright and sustainable future. Right now, we are investing in this future with a transformation plan that will secure sustainable growth for Metcash, our independents and our shareholders.
Metcash Limited Annual Report 2014 1
CHAIRMAN’S REPORT
The year was characterised by significant In past years, the Board has authorised In November 2013, the Board appointed changes in the Company’s leadership higher payout ratios, reflecting its Mick McMahon, CEO of ASX listed and the development of the strategic desire to return funds to shareholders Skilled Group, an experienced CEO with transformation plan announced to if the business had no alternative extensive retailing and supply chain the market in March 2014. The Board use for it. Currently, it is important management experience in supermarkets was heavily involved in the strategic that management has access to the and convenience, food, grocery and review and is confident that Metcash appropriate levels of capital required to liquor. In June 2014, the Board appointed has a strong, renewed management return Metcash to earnings growth. Tonianne Dwyer. With a background as a team, with the capability to deliver the lawyer and investment banker, Tonianne In this transitional year, the Board has disciplined execution the transformation brings significant experience, including set the full year dividend at 18.5 cents plan will require. multiple directorships of ASX100 and per share and reintroduced the Dividend international companies. She currently In Financial Year (FY) 2014, sales Reinvestment Plan (DRP). The DRP holds independent directorships on the revenues grew by 3.2%, to $13.4 billion. will provide balance sheet support boards of: Dexus Funds Management However, other metrics were depressed and enable Metcash to continue to Limited, Dexus Wholesale Property by challenging market conditions in the invest in the business and implement Limited, Cardno Limited and Queensland group’s core Food & Grocery business its transformation initiatives, while Treasury Corporation. and the cost of the group’s transformation maintaining a prudent capital structure. initiatives. Reported profit after tax fell After 16 years of service, Dudley Rubin 17.9% to $169.2 million. Underlying will retire as a Non-executive Director profit after tax fell 10.9% to $250 million. The capital cost of the at the forthcoming Annual General Underlying earnings per share (EPS) was transformation initiatives Meeting. A former Chairman of the 28.3 cents per share, a decline of 13.2%. across the Metcash Audit, Risk and Compliance Committee, Dudley has provided the Board with Although ongoing price deflation business is forecast to be consistently strong independent advice. hampered performance in Metcash up to $675 million, spent On behalf of the Board, I thank him for Food & Grocery, transformation in this his insightful contributions to strategic business is now well underway and initial over the coming five years. decisions and his dedicated service. results from pilots are encouraging. The non-food pillars delivered solid results, During the year, Metcash delivered To the dedicated Metcash staff, with good sales growth playing through operating cash flows of $388.7 million, independent retailers and suppliers, into strong earnings before interest, tax a growth of 29.7%. This growth the Board acknowledges and thanks and amortisation (EBITA) performances. reflected, underlying earnings, tight them for their support and hard work These businesses are also executing their working capital controls and a timing throughout FY2014. own strategic plans, driving network benefit of approximately $80 million, due In a year of significant change and growth and consolidation within their to the proximity of Easter public holidays challenge, shareholder support to the respective markets. to the group’s year end. In March 2014, company has, and continues to be, Metcash refinanced its $400 million core The capital cost of the transformation greatly appreciated. debt facility, which would have matured initiatives across the Metcash business is in December 2014. The new facility has forecast to be up to $675 million, spent two tranches: $200 million maturing over the coming five years. Part of the June 2018; and $225m maturing in June required funding will be met by Metcash 2019. The company’s relationship banks targeting working capital improvements have been supportive in this refinancing from the Food & Grocery transformation and no debt refinancing will be required initiatives. However, to fund the until FY2016. Peter Barnes Chairman remainder of this game-changing investment the Board has had to make Board renewal continued during FY2014, some difficult capital management with two new appointments and one decisions. As advised in March, the retirement. As a result of these changes, dividend payout ratio has been set to the majority of the Board will have tenure 60% of Underlying EPS. of less than four years’ service.
2 Metcash Limited Annual Report 2014
Financial Highlights
PAT (Underlying) EPS (Underlying) DPS – 18.5 cents Sales up 3.2% EBITA (Underlying) down 10.9% down 13.2% Payout ratio to $13.4bn $406.7m to $250.1m to 28.3 cents per share of 65.4% 13,392 280.7 460.4 34.1 33.4 451.2 32.6 12,976 28 28 32.0 262.5 27 438.0 256.2 26 250.1 12,605 28.3 244.9 12,364 406.7 401.2 18.5 11,517 86% 82% 81% 81% 65.4% 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014
Five Year Review 2014 2013 2012 2011 2010 Financial Performance Sales ($m) 13,392.7 12,976.6 12,501.1 12,364.0 11,517.4 Underlying EBITA ($m) 406.7 460.4 451.2 438.0 401.2 Finance costs, net ($m) 57.2 61.6 67.6 66.3 49.3 Underlying profit after tax ($m) 250.1 280.7 262.5 256.2 244.9 Reported profit after tax ($m) 169.2 206.0 90.0 241.4 227.6 Operating cash flows ($m) 388.7 299.8 284.3 142.5 294.7 Cash realisation ratio (%) 162.6% 112.9% 196.9% 48.4% 107.4%
Financial Position Shareholder equity ($m) 1,594.0 1,624.2 1,335.1 1,442.8 1,377.6 Gearing ratio (net hedged) (%) 32.5% 30.7% 40.5% 32.1% 28.4% Return on funds employed (%) 16.7% 20.0% 20.6% 21.1% 21.4%
Share Statistics Fully paid ordinary shares 888,338,048 880,704,786 771,345,864 768,853,644 765,644,031 Weighted average ordinary shares 882,676,013 859,742,607 770,441,432 767,676,470 765,178,865 Underlying earnings per share (cents) 28.3 32.6 34.1 33.4 32.0 Reported earnings per share (cents) 19.2 24.0 11.7 31.5 29.7 Dividends declared per share (cents) 18.5 28.0 28.0 27.0 26.0 Dividend payout ratio (%) 65.4% 85.9% 82.1% 80.8% 81.3%
Other Statistics Number of employees 5,412.0 5,794.0 5,166.0 5,638.0 5,773.0 (full-time equivalents)
Metcash Limited Annual Report 2014 3 Ceo’s Report
The Financial Year (FY) 2014 was an & Automotive pillars. Once this discipline 1. Transforming Metcash Food important transition year, as Metcash is replicated across our Food & Grocery & Grocery undertook a strategic review and business, we are confident Metcash Our first priority is to return Metcash developed a transformation plan to will return to its previous levels of Food & Grocery to revenue growth by address the structural challenges performance. transforming its traditional model away within the business. Evidence of Transformation plan from a supply-led wholesale business to these challenges was apparent in a consumer-led, retail-oriented operation. the underperformance of our core The last 12 months provided evidence to Metcash Food & Grocery has bought Food & Grocery pillar, which led support the case for change at Metcash. based on supply – not demand – which to a disappointing outcome for Return on funds employed reduced by has impacted consumer appeal and shareholders. 3.3% year-on-year, as Food & Grocery’s increasingly led to some retailers buying growth continued to decline. Between In contrast, our other businesses more products outside the Metcash 2008 and 2011, Food & Grocery’s returned highly creditable results in very system. Given our success is tied to the underlying earnings grew at a compound tough market conditions, gaining market success of independent retailers, we annual rate of 8.8%. However, between share despite falling consumer demand need to invert our approach and focus 2011 and 2014, annual growth has fallen and fierce competition. Once again, our on the needs of retailers and at a rate of -8.2%, as the independent Liquor pillar achieved strong growth in their customers. retailers that Metcash Food & Grocery a flat liquor market, with sales growth supports lost market share to the major The expertise required to drive this of 8.3% and EBITA of $53.8 million, an supermarket chains and a number of major change resulted in a new senior increase of 14.2%. At the same time, stores were either closed or sold. management team being put in place in our Hardware & Automotive pillar grew Food & Grocery, with strong consumer sales by 23.6%, and increased EBITA by This market share loss was due to and retail experience. This team is 47.8% to $53.5 million. In each case, the several factors, including significant focused on improving retail outcomes – success of these businesses came from price deflation and the rising importance not simply wholesale metrics, their strong consumer focus. of private label products. However, making decisions based on extensive their effect was not universal. The data analysis. During the year, we integrated the independent Food & Grocery network wholesale car and truck parts business contains many superb, highly successful In order to develop a transformation plan Australian Truck and Auto Parts Group and profitable retailers, who gained for Food & Grocery, the leadership team (ATAP) into the group, with its national ground against the supermarket chains. spent much of FY2014 working closely franchise network of 53 brake and These successful independents are with our most successful retailers and steering and auto repairs specialists. ‘tuned in’ to their customers, stock suppliers – at an unprecedented level – In May 2014, we added significant localised ranges and have a very to identify levers of growth. Together, we additional scale and another quality compelling fresh offer. If we replicate have developed and tested ideas that will brand to our automotive network, with their approach across our network, there enable independents to be competitive the acquisition of the auto service expert, is significant potential for a resurgence on price and differentiated in their offer Midas. The addition of ATAP, Partco in independent grocery retailing in – and support them in tailoring their and Midas gives Metcash a formidable Australia – and for Metcash to return to ranges to the needs of local shoppers. presence in the $5.6 billion Australian earnings growth. automotive aftermarket. Early initiatives involve using analytics This imperative forms the basis of our and local retailer insights to develop a Metcash is now focused on our four-part transformation plan to make local shopper-led range for each store overarching strategy of supporting all the independent businesses we serve and a tiered range of own-brands – all successful independents. We have the more competitive: arranged ‘how the locals like it’ in that experience, network buying power and catchment. In future, our network will the distribution and merchandising have increasing numbers of stores with excellence to be a champion for both optimum space allocation and format independents and consumers. design, an improved delicatessen and Our shopper focus is already yielding meat offer and a wide range of quality solid results in our Liquor and Hardware produce at consistent prices. We intend
4 Metcash Limited Annual Report 2014 to support retailers in refurbishing up the option of buying online or on smart performance in a way that has never to 400 stores over the next three to phones. The Mitre 10 business will also previously been possible. four years. continue to develop the strong customer By investing now in a reshaped model and supplier relationships necessary to We also began introducing competitive for Metcash Food & Grocery and be successful in the trade market. everyday pricing that will deliver driving even stronger growth in our more than $100 million of value to Metcash Automotive will seek to other business pillars, we are building a customers on an annualised basis. This increase customer value across the company that can, once again, deliver initiative is being piloted in a ‘Price retail, wholesale and service sectors. This shareholder returns. I thank shareholders Match’ campaign in 34 IGA stores will include: each business unit revisiting for their patience and encourage them to across the country, which will be their approach to make sure it is focused participate in our dividend reinvestment rolled out in phases across the network on the consumer; improving training and plan – helping to fund a stronger and in FY2015. development in retail stores to improve sustainable future. customer service; and introducing The results of the initial pilot programs In FY2014, the results of our Liquor and heritage brands and direct sourcing. and other initiatives, have all been very Hardware & Automotive Divisions – and positive. Importantly, all the retailers 3. Enhancing our supply chain our pilot programs in Food & Grocery working with Metcash are strongly – proved the power of independents Metcash is already well known for supportive of the plan – and I thank who are attuned to their customers. We its logistics capabilities – but our them for their insights, collaboration and know what needs to be done to drive benchmark is world’s best practice. continued hard work. We will continue to this focus across the Metcash network. We will continue to drive efficiencies use these pilots to test our assumptions In FY2015, we will focus on executing through further infrastructure investment and fine-tune tactics to leverage these plans. that better aligns our supply chains excellence and drive competitiveness to the needs of retail customers and Finally, I want to thank everyone across across the network. suppliers. Supply chain projects include the Metcash network – our staff, suppliers and independent businesses – The final element of our Food & the already commissioned ‘single pick’ for their dedication and professionalism Grocery transformation will be in the KNAPP system and the first of our fully in a very challenging year. We are united convenience segment where we have automated ‘case pick’ warehouses, in a belief that, prices being equal, distinct advantages that make Metcash which will go live in September 2014 at Australians will support independent the single best distributor to this sector. our Huntingwood distribution facility. businesses, because they are local, We intend to press home this advantage This automated warehouse, known convenient and know their needs better with a strategy that takes a customer as Project Mustang, represents a $75 than anyone else. sector approach to growth and provides million investment that takes Metcash a total store solution to convenience to the leading edge of best practice I look forward to working with all the customers across Australia. In our distribution. stakeholders in the Metcash network to Campbells Cash & Carry business, we secure both a strong, vibrant future of 4. Enabling successful independents are pursuing a clear customer focus, independent retailing in Australia – and particularly around the needs of the To help our existing network members long-term sustainable value for broader food service sector. achieve best practice, and attract new our shareholders. retailers to the independent network, 2. Driving consolidation and we are building a Retail Academy sustainable network growth across each of our business pillars. The Academy will draw on industry best In FY2015, across all our business practice and will help to develop existing pillars, Metcash will continue to focus retailers’ skills and capabilities and on attracting more independent retailers provide new services to members. to join our organised retail banners. Ian Morrice CEO With continued levels of competitive We will also expand our digital strategy, intensity across all our market sectors, with scale solutions for digital channels Metcash’s retail banner groups – such as web page management, provide a compelling proposition digital marketing and online retailing for independent retailers, offering functionality – that can be tailored for them proven solutions that improve retailers’ local needs. Social media will returns and the advantages of scale. continue to be an important channel. Already in February this year, Twitter For ALM, growth initiatives will include: named IGA’s Valentine’s Day campaign customising each store’s offer to as the best in Australia. meet local demand; developing different licensed retail formats; improving In addition, to help our retailers put efficiency for suppliers; and using multiple consumer insights at the heart of channels to reach new customers. decision-making, we are partnering with Teradata, Gartner’s Magic Quadrant Mitre 10’s consumer-driven strategy will provider. This partnership will provide include a private label refresh, improved the analytic capability for independent in-store execution and giving customers retailers to benchmark and improve their
Metcash Limited Annual Report 2014 5 15-40% Shopper led ranging sales/m2 outperformance by stores with range tailored to their catchment. CONSUMER INSIGHTS Metcash helps independents by focusing on what shoppers want brands, convenience and a local offer.
6 Metcash Limited Annual Report 2014 The most commonly of Australian upgraded areas (in the home) supermarket shoppers are kitchens, say they are passionate bathrooms and about sourcing the outdoor areas 60% best produce is spent on of people buy their An renovation and liquor 10 minutes average maintenance from home – and of work per Aussie consume it within $6,151 household 85% 24 hours
On average, consumers will only travel 3-5km from their home or workplace to have their vehicle serviced 3to5km In the Australians are keeping of customers their cars longer with Automotive want a ‘one of retail liquor customers Aftermarket stop shop’ say ‘good value’ is one the average age of of the most important vehicles rising to 10.7 purchasing factors, years supporting an % increased reliance on 71 followed by ‘good the Aftermarket and 76% range’ at 47%. Service sectors Shoppers are making These more more frequent frequent, supermarket trips, 2.7 smaller shops of supermarket trips per week on average account for 50% spend Competitive pricing will of shoppers deliver value to prefer to consumers of support locally owned and managed 62% stores A$100m
Metcash Limited Annual Report 2014 7 Metcash Food & review of Grocery operations
Sales for the year were $9.1 billion, need it. A convenient local offer, that new merchandising support. Solution slightly down by 0.5% on the allows customers to pick up the evening initiatives also include increasing previous year. EBITA fell from meal on the way home - distinguishes speed to market with new product $377.9 million to $304.3 million. us from the chains. To help them developments, consolidating supply These results were impacted capitalise on this differentiator, Diamond and delivery into a single source and by increased competition and participants receive support with store improving availability through multiple Transformation Plan costs as refurbishment, also a shelf-productivity deliveries as well as shorter order-to- well as grocery deflation of toolkit that helps retailers to identify delivery times. 1.4% and elevated fuel discounting over-spaced, low-performing categories In the coming year, Convenience will that resulted in some loss of that, can be reduced to free up space for develop a digital platform to support market share. more attractive categories. Retailers also the Total Wholesale Solution model, receive Diamond guidelines for in-store Despite these challenges, the year saw with launch anticipated in last quarter execution, including business check lists, some fundamental positives. Supplier FY2015. best practice manuals and processes, support remained strong and the Food & training guidelines, and HR policies. Supply Chain Grocery network continued to grow with 53 new stores – including conversions The year also saw Grocery formulating During the year, we completed the – and 63 extension and refurbishments shopper-led strategies based on planned expansion of the successful across the Group. Over the year, 38 consumer insights and research. KNAPP split case pick system. For the stores were transitioned into the hands last 18 months, KNAPP has operated The findings are now changing our of new owners as part of the buy-back as a ‘pick to zero’ system, servicing our consumer facing marketing strategies strategy that delivered a retail sales uplift convenience customers. Testing is well in both the store and in the local area. of >10 %. We continue to invest in the underway and the ‘stocked’ solution In FY2014, Grocery received a positive network for future sustainable growth. went live in June 2014. consumer response to merchandise Grocery initiatives, such as our Coke-Taylor Swift Further supporting our automation promotion and marketing campaigns strategy, the Project Mustang full case The Transformation Plan outlined in that included Anh Do in his role as the picking solution is on track to go live the CEO’s Report is progressing well, face of the IGA brand. in September 2014. During the year, with an excellent early response to our building construction was completed, ‘Price Match’ campaign that aligns with Convenience with 4,000 tonnes of racking erected, IGA’s great value Black & Gold range. To 5.5km of conveyors laid and all de- ensure we have the right resources and In February 2014, Convenience palletising and palletising robots on capabilities to support all the retailers in appointed Peter Struck as its new CEO. site. This is reducing our cost to serve, the network in adopting best practice, Drawing on his extensive experience supporting our transformation initiatives. we are currently recruiting 30 additional in the sector, Peter led a customer field roles. centric review to fully understand future opportunities for Convenience. The During the year, we have been review identified opportunities to develop developing retail excellence standards a sustainable and differentiated offer that are now being rolled-out across to drive both sales and margins while the network. This is being done through leveraging existing logistics capabilities a number of initiatives, including our within the wider Metcash group. ‘Diamond Standard’ program that will optimise productivity in pilot stores in The review has led Metcash to develop FY2015. The Diamond Store Accelerator a Total Wholesale Solution to support pilot has been highly successful in the $7.3billion Petrol and Convenience re-setting space and range to improve channel and the $4.3billion Food Service productivity and better align with market. This solution will include: shopper needs. Increasingly, consumers introducing range improvements, are buying, especially fresh food, as they supported by competitive pricing and
8 Metcash Limited Annual Report 2014 At a glance
We service an additional 2,500+ We support1,450+ IGA branded supermarkets independent retailers (including Foodland)
Metcash Food and Grocery also service FoodWorks, Supabarn and Friendly Grocer in addition to the IGA network 190+ Lucky 7 convenience stores
FIVE major distribution centres for: SIX fresh produce 1.Dry 2.Chilled 3.Frozen 4.General merchandise 5.Deli 6.Bakery distribution centres
Marketing, merchandising, A convenience network of 16 Campbells warehouses and SEVEN buying and retail distribution centres including two in the Northern Territory operations support
Metcash Limited Annual Report 2014 9 review of Australian Liquor operations Marketers
Despite operating in a tough Alliances and joint ventures market with declining volumes, in Our strategic partnership with the Independent Brands FY2014 Australian Liquor Marketers Liquor Alliance – trading under the Australia is a Metcash (ALM) grew sales by 8.3% to $3.2 Thirsty Camel banner – continued to billion, assisted by the five month subsidiary, established in show good growth year-on-year. We contribution of our new distribution December 2003 to create also expanded our joint ventures with contract with Liquor Marketing Queensland hoteliers, adding two more strong national brands. Group Limited and Hotel & Tourism hotels in Brightwater and Bellvista. These IBA creates an effective Management Pty Limited (LMG). additional hotels give the IBA retail brand These contracts increased sales framework for independent a footprint on the Sunshine Coast. volumes, combined with sustained liquor retailers to compete cost reductions from warehouse Supply Chain equally with the chains efficiencies, allowing the Liquor ALM and IBA are committed to providing division to deliver another excellent and secure long-term retailers with the most efficient and cost EBITA result, rising by 14.2% to sustainability. IBA provides effective supply chain model possible. $53.8 million. In FY2014, we continued to grow and strong marketing support ALM’s growing and well-placed network evolve our distribution capabilities, and a wide variety of retail is highly effective as 85% of people buy making excellent progress in continuing services to its independent their liquor 10 minutes from home – and to reduce our supply chain cost of doing retailer network, ensuring consume it within 24 hours. This local business. This included relocating our advantage will continue to drive sales South Australian distribution centre to high standards of execution growth as our retail footprint expands. accommodate the increased volume and access to joint from the LMG contract. Independent Brands Australia (IBA) buying power. In the coming year, we will take more During the year, our IBA retail brands costs out of the supply chain and remained strong. IBA delivered more improve the order to delivery lifecycle than 3% sales growth on the back of an for our retailers. increasingly competitive retail offer. In particular, the Everyday Value Program continued to be popular with customers, creating strong growth for suppliers and retailers alike. Store traffic drivers were also highly effective. IBA grew its store numbers by 101 sites, while also demonstrating good like-for-like growth with the existing network. External customer groups also performed well, with an increasing trend of consumers shopping in the smaller format retail stores. In FY2015, we expect IBA to continue with current strategies to grow its retail footprint and sales. It will also build greater consumer brand awareness through a new approach to digital engagement.
10 Metcash Limited Annual Report 2014 At a glance
Supplies 12,000+ hotels, liquor stores, restaurants and other licensed premises in Australia
15 distribution centres across Australia and New Zealand 140 stores ALM acquired the shares of Liquor Traders Pty High quality logistics, buying, Owns Tasman Liquor Ltd. Liquor Traders controls the Thirsty Camel merchandising, marketing and Company, with a similar brand in Queensland and operates 140 stores retail support operation in New Zealand under that banner
Metcash Limited Annual Report 2014 11 review of Hardware & operations Automotive
In FY2014, Hardware & Automotive and customer service building on the Automotive and Leisure Zone, which grew sales by 23.6% to $1.16 ‘Mighty Helpful’ brand positioning. In added four stores to the network in billion, with EBITA increasing addition, Mitre 10 enjoyed high brand Western Australia. Retail grew 1.6 % 47.8% to $53.5 million. This awareness as a major sponsor of on a like-for-like basis in a sometimes strong performance was driven Channel 9’s The Block ‘Skyhigh’ and mixed market. We continue to see strong by additional trade sales in both ‘Fans V Faves’ series. The program confidence in the retail network, and an existing and new businesses, attracts average audiences of more than improving interest from potential new ongoing conversions and continued 1.2 million. The last series launched Mitre franchise operators with a solid pipeline improvements in supply chain and 10’s new campaign to address price of committed new outlets. store execution. perception, featuring a selection of store Metcash’s position in the automotive owners. Host, Scott Cam, is proving to Hardware service sector was strengthened by the be a successful brand ambassador, who recent strategic acquisition of Midas During the year, Mitre 10 successfully relates well to all consumers. The next Australia. This franchise network of 89 implemented core elements of its series is currently in production. stores adds to our 53-store ABS network strategy in: growing the network; Our trade business also grew, supported already operating in this sector. Our developing omni-channel retailing and by the Natbuild buying group greater scale increases the opportunity delivering consumer-driven initiatives alliance. Our joint venture network for growth and leverage through the focused on range, price and retail covers all states and the trade supply chain. excellence. The strength of the Mitre 10 segment now comprises 51% of the network, in both trade and retail, lies in Our acquisition of Australian Automotive Hardware business. our local store owners and managers Distributions in May 2013 has proceeded understanding their customers. Finally, we created new efficiencies in line with expectations. In December in the supply chain, through further 2013, the Group also acquired Partco In FY2014, an additional 23 independent automation in our distribution centres to supplement our water pump and stores were converted to Mitre 10 – a and improved third party logistics steering and suspension programs. total of 80 since 2010. The most recent facilities in China, reducing the Cost- With operations in Queensland and New groups welcomed to the network include to-Serve. Additional benefits will come South Wales, this product will now be the recently announced G Gay & Co from the recently introduced Dallas distributed nationally. in Ballarat Victoria. Growth also came Warehouse Management System in through our non-branded groups, with During the year, Automotive embarked Victoria, that will be rolled out to the excellent performances from Banner on a significant distribution consolidation other three distribution centres over Hardware in South Australia and project – impacting operations in the next two years. Dahlsens in Queensland and Victoria. four states. In Brisbane, a 10,000m2 Automotive distribution centre was successfully During the year, we fine-tuned the commissioned, relocating four hardware range, bringing in more Automotive had another strong year, Queensland-based businesses under a quality brands and improving value via defined by new acquisitions, aggressive single roof. In both Victoria and South an aggressive catalogue program and integration targets, supplemented by Australia, consolidation will see the competitively priced leading seasonal underlying sales growth, and increased closure of each warehouse. In Western products. Our private label, Buy Right, outlet numbers. We now service more Australia, a 5,000m2 distribution centre was also refreshed. Both the catalogue than 400 outlets in the retail, trade and has been leased and is currently being and Buy Right ranges are now available service sectors. commissioned, when completed in June online, with sales growing steadily over The automotive retail and trade 2014, this will house three businesses, the year. We anticipate increased growth business continued to grow, with nine allowing further closures. The entire in online sales as our digital campaigns new Autobarn stores, and three new consolidation project had a one-off book ramp up. or converted Autopro stores. Growth cost of $2.8 million, largely relating to By year end, the network was 83% was supported by corporate store surplus leases. brand compliant. Programs have been investment, locking in some important introduced to improve in-store execution real estate, and the acquisition of Malz
12 Metcash Limited Annual Report 2014 We created new efficiencies in the supply chain, through further automation in our distribution centres and improved third party logistics facilities in China, reducing the Cost-to-Serve.
At a glance
HARDWARE 400+ Mitre 10 and True Value hardware stores Supplies 400+ independent hardware stores Supplies trade customers through the Natbuild trade alliance
AUTOMOTIVE 255+ Automotive Brands Group stores (ABG): Autobarn, Autopro, CarParts 53 ABS stores Australian Truck & Auto Parts (ATAP), IBS Auto Solutions (IBS), Melbourne Clutch and Brake (MCB), Garmaxx, Partco 89 Midas stores
Metcash Limited Annual Report 2014 13 Corporate Responsibility
Environmental Water methods. By September 2015 all canned tuna products will be 100% Our environmental reporting period In 2012/2013, just over 1.3% of our Fish Aggravating Device (FAD) free’; is aligned with the calendar year. In water consumption was from harvested and 2013 waste and recycling costs were rainwater. According to Carbon $1,746,587 – 0.2% of operational Disclosure Project water reporting – Eden facial tissues, Allure toilet expenditure. Environmental management measures, local water sources were not tissue, and IGA Signature toilet tissue costs amount to $605,000 – 0.06% of significantly affected by our water use. products are made in Australia and operational expenditure. hold PEFC certification; ‘Black & Biodiversity Gold’ and ‘No Frills’ paper towels Materials Risk assessments during the year and toilet tissue are made in Australia Metcash is a signatory to the Australian identified no material impacts on and hold Forest Stewardship Council Packaging Covenant, which covers biodiversity as a result of Metcash’s certification. Metcash branded product packaging, direct operations. We are mindful that Compliance as well as waste and recycling from all Metcash’s supply chain could result in Metcash worksites. In 2012/2013, 73% indirect impacts on biodiversity. This will Metcash has not identified any non- of Metcash’s corporate brand products be risk assessed again in calendar year compliance with environmental laws or reviewed for packaging had recycled 2015. In July 2012, Metcash undertook regulations during the reporting period. content tertiary packaging. In addition, habitat restoration at our newest Transport 29% of products reviewed had recycled greenfield development of a distribution content consumer unit packaging. centre at Huntingwood in NSW. During the year, Metcash mitigated the impact of our tool of trade fleet Energy and emissions Effluents and waste by transitioning to fuel efficient Metcash tracks its energy consumption Metcash manages its waste to landfill diesel vehicles and by disseminating and emissions in accordance with and recycling via our compliance with information about efficient driving the National Greenhouse and Energy the Australian Packaging Covenant. techniques to all drivers. The impacts of Reporting Act 2007 and reports its In 2013, we met our target of keeping our third party contractor are external to energy profile annually via the NGER recycling rates over 9%. Our waste to Metcash’s operational control. Act, as well as in the Dow Jones landfill in 2012/2013 was 4.39% less Labour Practices & Decent Work Sustainability Index and Carbon than 2011/2012. Disclosure Project Climate Change Safety responses. Additionally, Metcash donates usable, but no longer saleable, packaged food In FY2014, Metcash continued to During the calendar year, our energy products to Foodbank, which distributes improve its overall safety performance, efficiency was 91.05 mWh with 0.065% them to charities that support Australians reducing the number of Lost Time of our fuel consumption and 0.02% of in need. In FY 2012/2013, Metcash Injuries by 15% to 126 down from 148, our electricity consumption coming donated 410,027 kg of usable but not and reducing the LTIFR (Lost Time from renewable resources. We also set a saleable food, providing 546,700 meals. Injury Frequency Rate) by 15 to 13.88 target to reduce electricity consumption per million hours worked. Total hours at our five distribution centres by Products and services lost and number of new claims over the period also reduced significantly, by 23% 10%, based on 2012/2013 levels to be Environmental impacts of our products and 31% respectively. achieved by the end of April 2015. and services were mitigated in the Metcash is working towards improved reporting period via: During the year, we established a single overarching Occupational Health & energy efficiency through a variety of – Formulating all laundry and Safety (OHS) Management System projects, including voltage optimisation, dishwashing products with no across the business with automated data lighting initiatives, and operational phosphate, minimising the possibility of capture and reporting systems and tools. efficiencies. algal blooms in receiving waterways; Metcash also continued to strengthen – Sourcing the majority of our tuna its OHS professional team and rolled products using sustainable fishing out extensive OHS Leadership training
14 Metcash Limited Annual Report 2014 Metric Tonnes % of total Metcash is committed to a Waste to Landfill 44,477 90.5% sustainable future for our Recycling 4,660 9.5% portfolio of businesses.
Cardboard 2,453 5.0% Our business practices are governed by economic, Paper 1,658 3.4% environmental, social and Plastic 427 0.9% ethical considerations. Co-mingled 122 0.2%
TOTAL 49,137 100.0%
and coaching programs to all managers. Social Other diversity initiatives during the year Auditing and review programs at all included: Wellbeing levels of management were bolstered – Continuing to raise awareness of and formalised, identifying areas for Metcash has a Wellbeing policy offering the advantages of diversity through improvement and assisting management range of employee benefits: training of senior executives, in deciding on OHS priorities. – Flexible working hours including: managers and employees; In the year ahead, we will continue with a compressed Working Week, – Piloting an indigenous internship process improvement projects, as well purchased leave and work from home program that provides opportunities as driving cultural change through safety arrangements; to attract and develop Aboriginal and leadership activities, and workforce – Wellbeing initiatives, including: Torres Strait Islander employees; and engagement and empowerment two “wellbeing days” a year, free programs. We will also undertake a – Developing relationships with counselling service; national injury management and insurance disability employment providers review to identify further opportunities for – Health initiatives, including: free to increase the representation of improvement in these already flu vaccinations, gym memberships employees with a disability. strong areas. and onsite gyms, MBF Corporate Community Health Plan, quit smoking programs Also in FY2015, Metcash’s dedication and subsidised canteens with healthy In FY2014, we continued to operate the to reducing manual handling injuries in choices; and IGA Community Chest program, through the workplace will come to fruition with which IGA stores raise funds and the go-live of the ‘Mustang’ automated – Family support, including: paid distribute them to local schools, clubs order picking system at the Huntingwood parental leave and subsidised school or charities. Since it began in the 1990s, site. We expect the automated system holiday camps and programs. IGA Community Chest and associated to significantly reduce musculoskeletal programs have raised over $70 million to injuries, personal interactions with mobile support local community organisations. plant and the risk of falling materials. Diversity and Equal Opportunity During the year, these efforts were 350 No. Lost Time LTIFR Women make up almost a third of supplemented by Metcash’s direct Injuries 25.9 the Metcash workforce. Through our corporate philanthropy, including in
300 244 Diversity Policy, in FY2014 management kind / staff time donation, to support 222 25.2 221 21.3 continued the focus on improving Westmead Children’s Hospital, the NSW 250 gender balance within leadership roles Drought Appeal, and the Rural Fire in the workplace. As a result women in Service’s Blue Mountains 16.3
200 148 bushfire appeal.
14.1 management increased from 25% to 126 28%. In the application of the Diversity Ethical 150 Policy there has also been an increase in the number of female candidates In FY2014, we communicated Metcash’s anti-corruption policies to 100% of our: 100 through the recruitment and selection process which resulted in several women – Executive and Board members appointed to roles within Metcash which 50 traditionally have been held by men. – Employees As part of the annual remuneration – Business partners who are suppliers
0 FY09-10 FY10-11 FY11-12 FY12-13 FY13-14 FY09-10 FY11-12 FY12-13 FY10-11 FY13-14 '2007' '2008' '2009''FY09-10''FY10-11''FY11-12''FY12-13''FY13-14' review process, Metcash analyses of Metcash branded products pay levels by gender, identifies any In FY2015 Metcash will measure its differences and takes appropriate sustainability practices guided by the steps to address them. As a result, we adoption of the sustainability reporting continued to decrease the female-to- framework of the Global Reporting male pay gap within the business. Initiative (GRI).
35
30 Metcash Limited Annual Report 2014 15
25
20
15
10
5
0 '2007' '2008' '2009''FY09-10''FY10-11''FY11-12''FY12-13''FY13-14' OUR BOARD Ian Morrice Fiona Balfour
Peter Barnes Patrick Allaway Michael Butler
Peter Barnes IAN MORRICE executive director roles Michael Butler of the AICD and a Fellow B COMMERCE (HONS) MBA in large multi-national B SC, MBA, FAICD of Monash University since MBA Executive Director companies. His 30 year Non executive Director 2010. She was awarded Non executive Chairman CEO Metcash Group of career in investment Chairman of the Audit Risk the National Pearcey Medal Chairman of the Companies banking has seen him hold & Compliance Committee in 2006. Fiona has more Nomination Committee Date of Appointment to positions with Swiss Bank Member of the Nomination than thirty years executive Member of the Metcash Limited Board: Corporation in Chicago, Committee experience in the aviation, Remuneration Committee 12 June 2012 Zurich and London, and Date of Appointment to telecommunications, also with Citibank in New financial services, Date of Appointment to Date of Appointment as Metcash Limited: York, Sydney and London. education and not-for-profit Metcash Limited: CEO Metcash Group of 8 February 2007 Patrick was Managing sectors. Her professional 18 April 2005 Companies: Following a lengthy Director Swiss Bank Capital expertise is in information Peter Barnes is a Director 1 March 2013 executive career in Markets and Treasury with and communications of News Corporation and investment banking and Ian Morrice has over direct global responsibility technology. She has Chairman of Samuel Smith private equity at Bankers three decades of retail for over 1,000 people in 16 extensive experience in & Sons Pty Ltd. He also Trust, Michael Butler experience as Managing countries. global customer-facing serves as Chairman of has been a professional Director, Trading Director business solutions across the Melbourne Business Over the past 12 years non-executive company and Retail Director for a variety of technologies School. Mr Barnes was Patrick has been the director since 1999. He is some of the UK’s leading including digital channel formerly the Chairman Chairman and co-founder currently chairman of AMP retailers, including Dixons management. She is of Ansell Limited and of a privately owned Superannuation Limited and The Kingfisher Group. a Member and former an executive with Phillip boutique corporate and N.M. Superannuation Ian was Group CEO and Councillor of Chief Morris International Inc. advisory business, Pty Ltd and a director of Managing Director of New Executive Women, a and held several senior Saltbush Capital Markets, Utility Services Group Zealand’s Warehouse former Director of SITA management positions advising select ASX listed Limited. He has previously Group from 2004 to 2011. SC (Geneva) from 2001 to both here in Australia companies. Patrick was been a director and Ian’s key areas of expertise 2006 and a former Trustee and overseas. Peter was also a Non executive chairman of various listed include strategy, brand and of the National Breast appointed Chairman of Director of Macquarie public companies. Metcash Limited on category development, Goodman Ltd until Cancer Foundation from 2 September 2010 and multi-channel and new 2006 and the Interim 2007 to 2011. has been involved with the store format roll-out, Chairman of its Audit Fiona Balfour product sourcing and BA (Hons), MBA, GRAD Metcash business Committee. Patrick’s key Tonianne Dwyer supply chain innovation. DIP INFORMATION as a director since areas of expertise include BJuris (Hons)/LLB (Hons) MANAGEMENT, FAICD November 1999. commercial experience, Non executive Director capital markets, business Non executive Director Patrick Allaway Member of the Audit Risk acquisitions and Member of the BA/LLB & Compliance Committee divestments, business Remuneration Committee Non executive Director Member of the Nomination review and strategic Member of the Nomination Member of the Audit Risk Committee development. Patrick has a Committee & Compliance Committee Date of Appointment to Bachelor of Arts/Law from Date of Appointment to Member of the Nomination Metcash Limited: Sydney University and is Metcash Limited: Committee 24 June 2014 Chairman of Giant Steps 16 November 2010 Date of Appointment to Endowment Fund, and Having completed a Fiona Balfour is an Metcash Limited: a Director of the Sydney law degree in Western independent non-executive 7 November 2012 University Football Club Australia, Tonianne spent director of Salmat Limited, Patrick Allaway is a broad Foundation Ltd. 23 years in London where TAL (Dai-ichi Life) Australia based business person she had a successful Limited and Airservices with extensive experience executive career in Australia and Treasurer in financial services, and investment banking and and Councillor of Knox senior executive and non real estate. Grammar School; a Fellow
16 Metcash Limited Annual Report 2014 Tonianne Dwyer Mick McMahon Edwin Jankelowitz
Neil Hamilton Dudley Rubin Greg Watson
Whilst at Hambros Bank Neil Hamilton Mick McMahon Australia and a Councillor Dudley Rubin /Societie Generale she LLB BEcon, Harvard Business of the Australian Industry CA (SA), H DIP BDP, MBA provided financial advice Non executive Director School Advanced Group Non executive Director to large listed and private Chairman of the Management Program Member of the Audit Risk companies from a variety Remuneration Committee Non executive Director & Compliance Committee Edwin Jankelowitz of sectors on corporate Member of the Nomination Member of the B COMM, CA (SA) Member of the Nomination actions including listings, Committee Remuneration Committee Non executive Director Committee mergers and acquisitions, Member of the Nomination Date of Appointment to Member of the Audit Risk Date of Appointment to divestments and Committee Metcash Limited: & Compliance Committee Metcash Limited: restructurings, in the UK 7 February 2008 Date of Appointment to Member of the Nomination 18 April 2005 and Europe. Metcash Limited: Neil Hamilton has over Committee Dudley Rubin is a In 2003 she joined, LSE 27 November 2013 30 years’ experience Date of Appointment to chartered accountant and listed, Quintain Estates & in senior management Mick McMahon is an Metcash Limited: is a director of various Development plc where positions and on boards of internationally experienced 18 April 2005 companies trading in she was appointed Head public companies across business leader with Africa. He has over 30 of Fund Management and Edwin Jankelowitz was law, funds management, a broad retail and years’ industry experience in 2006 she was appointed previously CFO of Metcash investment, insurance and commercial background. and has been involved with to the Board. Quintain was and was appointed a Non- resources. He commenced his career the Metcash business as a the developer of the two executive Director in 2011. Neil is Chairman of OZ with Shell in Australia and director since May 1998. largest mixed use urban After qualifying as a Minerals Ltd and is a transferred to the UK in renewal projects in London Chartered Accountant senior advisor to UBS 1999 where he held several – at Wembley and on the he spent 12 years with Greg Watson Australia. He is the former senior positions in retail, Greenwich Peninsular. Adcock Ingram Ltd LLM, Dip Law Chairman of Challenge marketing and strategy. Tonianne led the creation eventually being promoted General Counsel and Bank Ltd, Western Power In 2005 he returned to and development of a to Group Company Company Secretary Corporation, Mount Gibson Australia as the Managing successful specialist Secretary and Finance Iron Ltd and Iress Market Director, Coles Express and Greg Watson joined property fund management Director. He then consulted Technology Ltd and a was in 2007 he was appointed Metcash in 2005 as Legal business in Health, Student in business management a director of Insurance the Chief Operating Officer Counsel and was promoted Housing and Science Parks and tax before taking a Australia Group Ltd. Coles (Supermarkets, to General Counsel in with over £1.25bn in Funds position with Caxton Ltd Liquor, Express). 2008. He was appointed under management. He was appointed where he progressed to Company Secretary in Chairman of the Mick is an experienced Returning to Australia in Finance Director, Managing 2010. Greg has over 23 Remuneration & CEO with extensive 2010, Ms Dwyer currently Director and Chairman. years professional and Nomination Committee on retailing and supply chain holds independent Edwin has spent over 40 industry experience initially 1 September 2010. management experience directorships on ASX years in corporate offices of in private legal practice, in supermarkets and listed DEXUS Property listed companies and was followed by corporate convenience, food, grocery Group, DEXUS Wholesale a member of the Income legal counsel roles with and liquor. Property Fund, Cardno Tax Special Court in South multinational FMCG Limited and Queensland Mick is the CEO of ASX Africa for 20 years. organisations. Greg is a Treasury Corporation. listed SKILLED Group and Edwin is currently graduate of the Metcash She is a member of the Chairman of Red Rock Chairman of Kervale Executive Leadership Senate of the University of Leisure. He has a Bachelor Investments Pty Ltd and a Program. Queensland, a Graduate of Economics from the Non-executive Director of of Australian Institute of University of Tasmania and Chester Capital Pty Ltd. Directors and a member of has completed the Harvard Chief Executive Women. Business School Advanced Management Program. Mick is a Member of the Business Council of
Metcash Limited Annual Report 2014 17 Key Management
Adrian Gratwicke Scott Marshall
Ian Morrice Fergus Collins Mark Laidlaw
IAN R MORRICE FERGUS COLLINS SCOTT MARSHALL MBA B COMM (HONS) (DUBLIN), B SC MGMT BA Bus Executive Director (IRELAND), MBA CEO Australian Liquor Marketers CEO Metcash Group of Companies CEO Supermarkets, Metcash Food Scott’s Metcash career in the ALM business Date of Appointment to Metcash Limited Board: & Grocery spans 21 years from his start in the 12 June 2012 Fergus Collins joined ALM in December 2001 Queensland warehouse, building knowledge Date of Appointment as CEO Metcash Group of as Commercial Manager Queensland and was and capability through warehousing Companies: promoted to General Manager Queensland operations and management to sales, retail 1 March 2013 in May 2004. He became General Manager, operations and State general management. Independent Brands Australia in July 2006. Scott’s achievement in building strong Ian Morrice has over three decades of retail In February 2007, he was appointed Chief relationships with retailers, suppliers as well experience as Managing Director, Trading Executive Officer and under his leadership, ALM as internal stakeholders has been key in his Director and Retail Director for some of the positioned themselves as a true force in the accomplishments to date. Scott played an UK’s leading retailers, including Dixons and liquor market providing a strong retail offer to integral role in the restructure of ALM in 2007 The Kingfisher Group. Ian was Group CEO consumers which has cemented ALM as the and was responsible for implementing the and Managing Director of New Zealand’s number two player. Everyday Discount strategy to increase foot Warehouse Group from 2004 to 2011. Fergus was appointed CEO Supermarkets traffic ultimately delivering significant sales Ian’s key areas of expertise include strategy, in December 2013, he is a graduate of the growth for the business. Scott was appointed brand and category development, multi-channel Metcash Executive Leadership Program. CEO ALM in December 2013 from his previous and new store format roll-out, product sourcing role as General Manager Merchandise and and supply chain innovation. Marketing at ALM. MARK LAIDLAW B Ec, CPA ADRIAN GRATWICKE CEO Mitre 10 Australia BA (HONS), ACA, MBA Chief Financial Officer Mark Laidlaw joined IGA Distribution in April 2001 as Commercial Manager, Victoria and An experienced finance professional, Mr was promoted to General Manager, Victoria Gratwicke brings over 25 years’ commercial in July 2004. He was appointed CEO of Mitre and industry experience to his position as Chief 10 Australia in May 2010 and has extensive Financial Officer. Since joining Metcash in April experience in general management, sales, 1998, he has held several senior roles including operations and commercial management. National Accounting Manager, National Commercial Manager IGA Distribution, General Prior to joining Metcash Mark worked for Mobil Manager Mergers & Acquisitions, Oil for 18 years in a range of senior position Risk and Investor Relations and General including National Commercial Manager, Manager Finance. National Property Manager and Marketing Manager including 4 years in Mobil’s international division in London, France and Germany.
18 Metcash Limited Annual Report 2014 Corporate Governance
The Directors of Metcash Limited (Metcash or Company) support and adhere to the principles of corporate governance set out in the Metcash Corporate Governance Statement. In supporting these principles, the Directors acknowledge the need for the highest standards of behaviour and accountability. The Directors believe that Company’s policies and practices have complied in all substantial respects with corporate governance best practice in Australia, including the ASX Corporate Governance Council Corporate Governance Principles and Recommendations (Principles). Summary of compliance with Principles and Recommendations The table below summarises Company’s compliance with the Corporate Governance Council’s recommendations.
RECOMMENDATION COMPLY REFERENCE/ YES/ NO EXPLANATION PRINCIPLE 1 – LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT 1.1 Companies should establish the functions reserved to the Board and those delegated to senior Yes Website executives and disclose those functions. www.metcash.com
1.2 Companies should disclose the process for evaluating the performance of senior executives. Yes Page 21 1.3 Companies should provide the information indicated in the guide to reporting on Principle 1. Yes Page 21 PRINCIPLE 2 – STRUCTURE THE BOARD TO ADD VALUE 2.1 A majority of the Board should be Independent Directors. Yes Page 21 2.2 The Chair should be an Independent Director. Yes Page 22 2.3 The roles of Chair and Chief Executive Officer should not be exercised by the same individual. Yes Page 22 2.4 The Board should establish a Nomination Committee. Yes Page 22 2.5 Companies should disclose the process for evaluating the performance of the Board, its Yes Page 23 Committees and individual Directors. 2.6 Companies should provide the information indicated in the guide to reporting on Principle 2. Yes Page 23 PRINCIPLE 3 – PROMOTE ETHICAL AND RESPONSIBLE DECISION-MAKING 3.1 Companies should establish a code of conduct and disclose the code or a summary of the Yes Website code as to: www.metcash.com the practices necessary to maintain confidence in Company’s integrity; the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders; the responsibility and accountability of individuals for reporting and investigating reports of unethical practices. 3.2 Companies should establish a policy concerning diversity and disclose the policy or a Yes Website summary of that policy. The policy should include requirements for the Board to establish www.metcash.com measurable objectives for achieving gender diversity for the Board to assess annually both the objectives and progress in achieving them. 3.3 Companies should disclose in each annual report the measurable objectives for achieving Yes Page 24 gender diversity set by the Board and in accordance with the diversity policy and progress towards achieving them. 3.4 Companies should disclose in each annual report the proportion of women employees in the Yes Page 25 whole organisation, women in senior executive positions and on the Board. 3.5 Companies should provide the information indicated in the guide to reporting on Principle 3. Yes Page 25
Metcash Limited Annual Report 2014 19 Corporate Governance (COnt.)
PRINCIPLE 4 – SAFEGUARD INTEGRITY IN FINANCIAL REPORTING 4.1 The Board should establish an Audit Committee. Yes Page 24 4.2 The Audit Committee should be structured so that it: Yes Page 24 consists only of Non-executive Directors; consists of a majority of Independent Directors; is chaired by an Independent Chair, who is not Chair of the Board; has at least three members. 4.3 The Audit Committee should have a formal charter. Yes Page 25 4.4 Companies should provide the information indicated in the guide to reporting on Principle 4. Yes Website www.metcash.com Page 25 PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE 5.1 Companies should establish written policies designed to ensure compliance with ASX Listing Yes Website Rule disclosure requirements and to ensure accountability at a senior executive level for that www.metcash.com compliance and disclose those policies or a summary of those policies. 5.2 Companies should provide the information indicated in the guide to reporting on Principle 5. Yes Page 26 PRINCIPLE 6 – RESPECT THE RIGHTS OF SHAREHOLDERS 6.1 Companies should design a communications policy for promoting effective communication Yes Website with shareholders and encouraging their participation at general meetings and disclose their www.metcash.com policy or a summary of that policy. Page 26 6.2 Companies should provide the information indicated in the guide to reporting on Principle 6. Yes Page 26 PRINCIPLE 7 – RECOGNISE AND MANAGE RISK 7.1 Companies should establish policies for the oversight and management of material business Yes Page 27 risks and disclose a summary of those policies. 7.2 The Board should require management to design and implement the risk management Yes Page 27 and internal control system to manage Company’s material business risks and report to it on whether those risks are being managed effectively. The Board should disclose that management has reported to it as to the effectiveness of Company’s management of its material business risks. 7.3 The Board should disclose whether it has received assurance from the Chief Executive Officer Yes Page 28 (or equivalent) and the Chief Financial Officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks. 7.4 Companies should provide the information indicated in the guide to reporting on Principle 7. Yes Page 27 PRINCIPLE 8 – REMUNERATE FAIRLY AND RESPONSIBLY 8.1 The Board should establish a Remuneration Committee. Yes Page 28 8.2 The Remuneration Committee should be structured so that it: Page 28 consists of a majority of Independent Directors; is chaired by an Independent Chair has at least three members.
8.3 Companies should clearly distinguish the structure of Non-executive Directors’ remuneration Yes Page 28 from that of Executive Directors and senior executives. 8.4 Companies should provide the information indicated in the guide to reporting on Principle 8. Yes Page 28
20 Metcash Limited Annual Report 2014 The Company’s policies and practices Evaluating the Performance of Senior supplemented with advice from external and their relationship to the Council’s Executives consultants if necessary. The Board, on the recommendations are set out in more detail On an annual basis, the Remuneration Committee’s recommendation, then appoints as follows. Committee reviews the performance of the the most suitable candidate who must stand PRINCIPLE 1: LAY SOLID FOUNDATION Chief Executive Officer against qualitative for election at the next general meeting of FOR MANAGEMENT AND OVERSIGHT and quantitative criteria, which include profit shareholders. To that end, on 27 November 2013, the Board appointed Mick McMahon Responsibilities of the Board and performance, other financial measures and as a Non-executive Director and; on 24 June, Management achievement of the Company’s strategic objectives. During the 2014 financial year, 2014 appointed Tonianne Dwyer, as a Non- The Board of Directors is responsible for the Chief Executive Officer’s performance executive Director. setting the strategic direction of the Company was reviewed in accordance with the process Directors are not appointed for a fixed term and for overseeing and monitoring its specified above. but, under the Company’s Constitution, must businesses and affairs. The Company maintains a performance be re-elected each three years by rotation and The Board reviews and approves the evaluation process which measures other are subject to Australian Securities Exchange Company’s strategic and business plans and senior executives against previously (ASX) Listing Rules and Corporations guiding policies. Day-to-day management of agreed Key Performance Indicators and Act provisions. the Company’s affairs and implementation of Key Behavioural Indicators. This process is Board Composition its strategy and policy initiatives are delegated performed formally twice a year and took to the Chief Executive Officer and senior Maintaining a balance of experience and skills place for each senior executive during the executives, who operate in accordance with is an important factor in Board composition. 2014 financial year. Board-approved policies and delegated limits For details of the skills, experience and of authority. Senior executives have access to continuing expertise of the individual Directors, and the education to update and enhance their skills period of office held by each Director, please The principal functions of the Board include: and knowledge. refer to page 16, headed ‘Our Board’, of – charting the direction, strategies and PRINCIPLE 2: STRUCTURE THE BOARD this report. financial objectives of Company; TO ADD VALUE The Board of Metcash is currently constituted – monitoring implementation of those A majority of the Board should as follows: strategies and the operational and be Independent Directors Independent Non-executive Directors financial performance and risk of each of Company’s activities; Appointment to the Board Independent Directors hold key positions that include chairing the Board and the Board – reviewing major capital expenditure, The Board’s policy for the selection, Committees of Audit Risk & Compliance, acquisitions, divestments and funding; appointment and re-appointment of Directors is to ensure that the Board possesses an Remuneration and Nomination. They provide – reviewing performance, remuneration and appropriate range of skills, experience an external perspective and checks and succession of senior management; and expertise to enable the Board to most balances for the interests of all shareholders. – monitoring compliance with legal and effectively carry out its responsibilities. As part As at the date of this report, the Board regulatory requirements, including of this appointment process, the Directors consisted of ten Directors, nine of whom are occupational health and safety laws, consider Board renewal and succession considered to be Non-Executive, and eight product safety and the protection of the plans and whether the Board is of a size and of whom are considered to be Independent environment; composition that is conducive to making Directors. – monitoring the Company’s relationships appropriate decisions. The Board has adopted a definition of with its stakeholders and compliance Prior to Directors standing for re-election, the independence which is derived from the with ethical standards and the Company’s Nomination Committee reviews the skills and definition set out in the Principles. Directors Code of Conduct; and contribution of the Directors concerned and are considered independent if they are not – corporate governance generally. decides whether the Committee supports a member of management and are free of their re-election. The Committee then any business or other relationship that would The Board’s Charter can be found on the recommends its decision to the Board. materially interfere with, or could reasonably Company’s website www.metcash.com under be perceived to materially interfere with, the the heading ‘Corporate Governance’. When a vacancy exists, or when it is considered that the Board would benefit independent exercise of their judgement. from the services of a new Director with particular skills, the Nomination Committee selects a panel of candidates with appropriate expertise and experience. This may be
Metcash Limited Annual Report 2014 21 Corporate Governance (COnt.)
When assessing the independence of a prior to the 2013 Annual General Meeting All Directors, whether independent or not, Director, the Board will consider whether considered all relevant factors and bring an independent judgement to bear on the Director: concluded Mr Rubin to be an Board decisions. – is a substantial shareholder of the Independent Director; Independent Professional Advice Company or an officer of, or otherwise – None of the Non-executive Directors The Board has a policy of enabling Directors associated directly with, a substantial referred to above has a contractual to seek independent professional advice shareholder of the Company; relationship with the group nor have they at the Company’s expense. The Board will – is employed or has previously been been a professional adviser or consultant review in advance the estimated costs for employed in an executive capacity by the to the Company or an employee reasonableness, but will not impede Directors Company or another group member and associated with the service provided; from seeking advice. there has not been a period of at least – None of the Non-executive Directors Company Secretary three years between ceasing to hold referred to above is a material supplier All Directors have access to the Company any such employment and serving on or customer of the Company or an Secretary who is accountable to the the Board; officer of, or otherwise associated Board, through the Chairman, on all directly or indirectly with, a material – has within the last three years been a governance matters. principal of a material professional adviser supplier or customer. Materiality is The Chair should be an or a material consultant to the Company assessed as supplying 2.5% or more of Independent Director or another group member, or an employee the Company’s annual purchases or a materially associated with the customer representing 2.5% or more of The Chair, Mr Peter Barnes is considered by service provided; the Company’s annual sales; the Board to be an Independent Director. – is a material supplier or customer of the – Peter Barnes is a Director of News The Roles of Chair and Chief Company or other group member, or an Corporation and Chairman of Samuel Executive Officer Should Not Be officer of or otherwise associated directly Smith & Sons Pty Ltd. He also serves as Exercised By The Same Individual Chairman of the Melbourne Business or indirectly with a material supplier The roles of Chief Executive Officer and Chair School. Peter was formerly the Chairman or customer; and are not exercised by the same individual. of Ansell Limited and an executive with – has a material contractual relationship Phillip Morris International Inc. and held The Board Should Establish a Nomination with the Company or another group several senior management positions both Committee member other than as a Director here in Australia and overseas. Peter was The Board has a Nomination Committee. of Company. appointed Chairman of Metcash Limited The membership of the Nomination The Board regularly assesses whether each on 2 September 2010 and has been Committee consists of the Non-executive Non-executive Director is independent, based involved with the Metcash business as a Independent Directors who are listed below, on this definition, and in light of information director since November 1999; and together with details of their qualifications disclosed by those Directors that may be – None of the Non-executive Directors and attendance at meetings during the past relevant to this assessment. referred to above has a contractual financial year. Those Non-executive Directors are considered relationship with the Company or another to be independent for the reasons set out group member, other than as a Director of as follows. the Company. – None of the Directors referred to above Non-executive Director is substantial shareholders of the Mr Edwin Jankelowitz retired as an executive Company or associated with a substantial of the Company on 14 January 2011. Mr shareholder of the Company (holding 5% Jankelowitz remained a director of the or more of the Company’s issued shares); Company from that date. The Board considers – Messrs Allaway, Barnes, Butler, Hamilton Mr Jankelowitz to be a Non-executive Director and Mrs Balfour are not employed by, nor and not an Independent Director. have they previously been employed by, Executive Directors the Company or another group member. Mr Rubin was employed in executive The Board has one Executive Director, positions by Metoz, the former group Mr Ian Morrice, who was appointed as the holding company and now a wholly Company’s Chief Executive Officer on owned Metcash subsidiary. As reported 30 June 2013. in the 2013 Annual Report, the Board
22 Metcash Limited Annual Report 2014 Nomination Committee
Member Qualifications Meetings held Meetings attended during 2014 during 2014 financial financial year year P Allaway BA, LLB 3 3 P Barnes (C) B Comm (Hons), MBA 3 3 F Balfour BA (Hons), MBA, Grad Dip Information 3 3 Management, FAICD M Butler B SC, MBA, FAICD 3 3 N Hamilton LLB 3 3 E Jankelowitz B COMM, CA (SA) 3 3 M McMahon* BEcon, Harvard Business School Advanced 3 1 Management Program V Rubin CA (SA), H DIP BDP, MBA 3 3
* Mr McMahon was appointed as a Non-executive Director on 27 November 2013, and as such was only eligible to attend one meeting. (C) Chairman
Responsibilities of the Committee include to: Process for evaluating the performance of PRINCIPLE 3 – PROMOTE ETHICAL AND – review and advise the Board with the Board, its Committees and Individual RESPONSIBLE DECISION-MAKING respect to Board membership, including Directors Establish a Code of Conduct appointment and re-election of Directors Annual reviews of the Board, its committees The Company has a Code of Conduct that and where necessary propose candidates and directors are performed using a self- applies to Directors and all employees. for consideration by the Board; evaluation questionnaire, with an independent Subjects covered by the Code include: review to be conducted each third year using – assist in evaluating the performance of the – equal employment opportunity, a recognised external Board Performance Board including as outlined in the Section discrimination and harassment; 8 of the Metcash Board Charter; Consultant. This process was first adopted in 2008. – security of Company records and assets – ensure that an effective Board induction and confidentiality guidelines; process is in place and regularly review its In addressing the progress towards key – conflict of interest, acceptance of gifts, effectiveness; and recommendations of the 2011 Cameron Ralph Review, all Board members have entertainment and services; – the Nomination Committee has the been interviewed and completed a – fraud, corruption and irregular authority to: questionnaire. The review of the Board transactions; (a) obtain independent professional or evaluates areas including: Board structure – legal compliance; other advice in the fulfilment of its and role; Committees; Board composition duties at the cost of the Company; and succession; meeting processes; strategy – honest ethical behaviour; and and and planning; performance monitoring; and – environmental protection and safe (b) obtain such resources and information communication. working environment. from the Company in the fulfilment of A recognised Board Performance Consultant The Code can be found on Company’s its duties as it may reasonably require. is currently conducting the 2014 financial website www.metcash.com under the The Committee shall be comprised of the year review. heading ‘Corporate Governance’. Non-executive Directors and shall be chaired Compliance with the Code is checked through by the Chair of the Board. Company’s functions and related processes The Charter of the Committee can be found including internal audit, security, human on Company’s website www.metcash.com resources and occupational health and safety. under the heading ‘Corporate Governance’. New staff members are required to attend an induction program that includes behaviour guidelines. Additionally, the Company’s
Metcash Limited Annual Report 2014 23 Corporate Governance (COnt.)
staff appraisal process includes employees’ The current workplace profile indicates Metcash is now embedding the diversity performance against ‘Key Behavioural continued progress has been made towards initiatives as reported and continues to focus Indicators’ as well as ‘Key Performance increasing female representation in leadership on the following key aspects: Indicators’. roles at Metcash. – Building a culture which encourages The Company also has a Serious Complaints – Women make up 31% of Metcash’s flexible working arrangements, including Policy which endeavours to protect those who workforce with 28% representation in a full review of parental policies and report, in good faith, violations of the Code leaderships roles. An increase of 3% YOY; practices and supporting our mature of Conduct. This policy can be found on the – Western Australia has seen an increase in workforce as they transition into Company’s website www.metcash.com under female representation of award employees retirement; the heading ‘Corporate Governance’. in distribution centres taking it to the – Continuing the relationship with Job DIVERSITY POLICY highest level in the history of Metcash; Support to increase disability employment The Metcash Diversity Policy was approved by – 2013 saw the appointment of the first opportunities; and the Board of Metcash in May 2011 and was female mega centre DC Manager in – Doubling placements since the NSW pilot introduced across the business supported Huntingwood; within the indigenous internship program by an educational programme detailing our – The Logistics senior leadership team and providing interns with permanent aspirational goals, changes to processes increased female population by 29%; opportunities across the group nationally and procedures and giving practical advice on completion of their internship. – Talent management processes have seen and guidance on how the Policy is to be a significant increase in the identification PRINCIPLE 4 – SAFEGUARD INTEGRITY implemented. of high potential women and as a result IN FINANCIAL REPORTING The Policy is located on the Company’s the participation rates of women in senior The Board Should Establish An website. development programs has doubled in the Audit Committee The Company has continued the focus on past year; and The Board has an Audit, Risk & Compliance addressing the need for gender balance – Female representation on the Board for Committee which reports regularly to particularly across leadership levels however FY2014 is 13%. the Board. there has also been attention given to Progress towards decreasing the female The membership of the Audit Risk & increasing the workplace profile for workers to male “pay gap” within the business has Compliance Committee consists of the Non- with disability, creating a pipeline of continued with the average pay for women executive Independent Directors who are indigenous talent through the introduction at both BUL and for all levels (excluding listed below, together with details of their of the indigenous internship program; and Executive) continuing to be above 2011 levels. qualifications and attendance at meetings supporting our mature workforce with during the past financial year. financial advice and flexibility pertaining to As part of its annual remuneration review retirement planning. process, Metcash undertakes an analysis The function of the Audit Risk & Compliance of pay levels by gender, identifies any Committee is to advise on the establishment Metcash’s measurable objectives for differentials, and takes appropriate steps to and maintenance of a framework of internal achieving gender diversity are set by the address them. control, effective management of financial Board and include: Current proportion of women at each level and other risks, compliance with laws and – Increasing female representation across across the Metcash group as reported in regulations and appropriate ethical standards leadership roles; and the most recent Workplace Gender Equality for the management of the Company. It – Decreasing the female to male “pay gap” Governance Report: also gives the Board additional assurance within the business. regarding the quality and reliability of financial
Audit, Risk and Compliance Committee
Member Qualifications Meetings held Meetings attended during 2014 during 2014 financial financial year year Patrick N J Allaway BA, LLB 7 7 Michael R Butler (C) B Sc, MBA 7 7 Edwin M Jankelowitz B COMM, CA (SA) 7 2 V Dudley Rubin* CA (SA), HDip BDP, MBA 7 7 * Mr Edwin M Jankelowitz was only eligible to attend two meetings during the year. (C) Chairman
24 Metcash Limited Annual Report 2014 Workplace Gender Profile
Females Females Females Males Males Males Categories Females Males Total Females Males Full time Part Time Casual Full Time Part Time Casuals Non Exec Director 1 1 7 7 8 13% 88% CEO 1 1 1 0% 100% Senior Executives 1 1 11 11 12 8% 92% Other Executives / 7 7 43 43 50 14% 86% General Managers Senior Manager 47 2 49 157 1 158 207 24% 76% Other Managers 141 10 2 153 364 3 367 520 29% 71% Non Manager Categories Professionals 41 15 56 93 93 149 38% 62% Trade & Technicians 2 2 4 13 1 3 17 21 19% 81% Clerical & Admin 533 124 54 711 341 1 21 363 1074 66% 34% Sales 104 36 117 257 275 6 122 403 660 39% 61% Warehouse 320 122 204 646 2282 95 355 2732 3378 19% 81% 1,197 309 379 1,885 3,587 107 501 4,195 6,080 31% 69% information prepared for use by the Board in Specific areas of review include: – reviewing annually the effectiveness determining policies or for inclusion in the – overseeing the establishment of a and adequacy of the Group’s insurance financial statements. In accordance with the framework within which risks to the program; Principles, the Committee consists only of Company are identified and mitigated and – the provision of reliable management Independent Directors and is chaired by an risk avoidance processes are established and financial reporting - this is done by Independent Director who is not the Chairman and the effectiveness of the risk reviewing and assessing the: of the Board. management process monitored; – quality and timing of management Committee Charter – financial risk and exposure; reporting to the Board to enable The Committee’s Charter, which is – occupational health and safety; internal and external reporting of summarised below, sets out the specific Company’s risks, operations and – environmental issues; responsibilities delegated to it by the financial condition; – Hazard Analysis and Critical Control Points Board and details the manner in which the – accounting policies and practices (HACCP) based food safety program; and Committee will operate. The Charter can be against generally accepted accounting found on Company’s website – integrity of information technology principles and the requirements of www.metcash.com under the heading systems. the Corporations Law, Australian ‘Corporate Governance’. The Committee reviews the effectiveness of Accounting Standards and Australian The principal terms of reference of the risk management policies and procedures by: Securities Exchange requirements; and Audit Risk & Compliance Committee are – reviewing monthly financial performance – half-yearly and annual financial the effective management of financial and against budget and updated forecasts at statements; other risks through ensuring that systems least quarterly; – assessing compliance with laws and and management processes are in place to regulations by monitoring developments identify and manage operational, financial and – reviewing the internal audit of the Group’s and changes in the various rules, compliance risks. financial controls, taxation compliance and adherence to policies and regulations; laws and regulations relating to the Company’s business operations and the responsibilities of Directors and reviewing the extent to which the Board and the
Metcash Limited Annual Report 2014 25 Corporate Governance (COnt.)
Company are meeting their obligations to conducted by the Audit Risk & Compliance The Market Disclosure Policy can be found on ensure that all requirements are met; and Committee. The Committee would select the Company’s website www.metcash.com – the maintenance of an effective and efficient suitable candidates for the role, issue and under the heading ‘Corporate Governance’. audit function – this is achieved by: evaluate tenders, interview the candidates and PRINCIPLE 6 – RESPECT THE RIGHTS OF then make a recommendation to the Board. – recommending to the Board the SHAREHOLDERS appointment of external and internal PRINCIPLE 5 – MAKE TIMELY AND The Company believes that shareholder auditors; BALANCED DISCLOSURE and market confidence in all its dealings is – reviewing the effectiveness of the Compliance with ASX Listing Rule paramount and is committed to ensuring external and internal audit functions; Disclosure Requirements it complies with continuous disclosure obligations so that its investors have timely – ensuring audit scopes are adequate The Metcash Market Disclosure Policy is and equal access to important company and cover areas of anticipated risk; designed to ensure that: information. – reviewing audit findings and – there is full and timely disclosure of the Information provided to the ASX is made management response; Company’s activities to shareholders and the market, in accordance with available on the Company’s website so that all – reviewing the independence of the the Company’s legal and regulatory shareholders and other key stakeholders have external auditor; obligations; and timely access to it. – ensuring auditors have the necessary – all stakeholders (including shareholders, In addition to meeting its continuous access to the Company information the market and other interested parties) disclosure obligations, Metcash ensures and staff to fulfil their obligations. have an equal opportunity to receive and shareholders and the broader investment The Audit Risk & Compliance Committee obtain externally available information community have timely access to important acts to ensure that operational, financial and issued by the Company. company information through a series of compliance risks are managed in accordance regular disclosure events during the financial The policy reflects the Company’s obligation with the Board’s risk tolerance. The Company year. The calendar for these events is posted to comply with the disclosure requirements has implemented a Risk Management on the Company’s website. of the Listing Rules of the Australian Framework which is supported by specialised Securities Exchange (ASX), as well as relevant The Shareholder Communication Policy can risk management teams (refer Principle corporations and securities legislation. be found on the Company’s website 7 – Recognise and Manage Risk). The www.metcash.com under the heading The policy is reviewed regularly to ensure that Committee has obtained assurance regarding ‘Corporate Governance’. the effectiveness of the overall system of the policy reflects any legislative or regulatory The Company continues to encourage risk management through various means. requirements or ‘best practice’ developments. electronic communication with shareholders These means have included direct enquiry Disclosure responsibilities and to facilitate the speedy and inexpensive of management, internal and external audit procedures dissemination of information. This is being reports and the monitoring of financial and The Company has designated the Chairman, done through a program to obtain and update operational results. The Committee meets Chief Executive Officer and Company Secretary shareholder email addresses, to alert them to regularly, in private, with the Lead External as ‘Disclosure Officers’. The Chairman’s new information on the Metcash website and Audit Partner and the Chief Audit Executive. approval, or that of his delegate, is required to distribute information, including the Annual A ‘Charter of Audit Independence’ is in place for disclosures. The Company Secretary has Report, to them directly. The Company’s that details the circumstances in which the responsibility for liaising with the ASX in relation website contains more than five years of Company’s external auditor may perform to all announcement and disclosure issues. ASX and media announcements and Annual non-audit related services and the procedures Disclosure Officers have responsibility for Reports. This information is shown under the to be followed to obtain approval for those reviewing proposed disclosures and making heading ‘Investor Centre’. Provision has also services where they are permitted. The decisions in relation to what information can been made for electronic proxy voting. Charter also contains the Company’s policies or should be disclosed to the market. The Board encourages full participation of on the hiring of former partners and senior All Company staff are required to inform shareholders at the Annual General Meeting managers of the external auditor and the a Disclosure Officer of any potential ‘price to ensure a high level of accountability and rotation of lead and review external audit sensitive’ information concerning the discussion of the Company’s strategy and engagement partners. The Charter can be Company as soon as they become aware of it. goals. The external auditor attends the Annual found on the Company’s website Staff may speak to their Business Pillar CEO General Meeting to answer shareholder www.metcash.com under the heading or a Disclosure Officer if they are in doubt questions about the conduct of the audit ‘Corporate Governance’. as to whether information is potentially ‘ and the preparation and content of the In principle, the appointment of an external price sensitive’. Auditor’s Report. auditor would be based on a tender process
26 Metcash Limited Annual Report 2014 PRINCIPLE 7 – RECOGNISE AND Material business risks that have been mitigation to facilitate the achievement of MANAGE RISK identified and included in the Risk goals and objectives. Non-management Polices for the Oversight and Management Framework are grouped under employees are always responsible for Management of Material Business Risks the following categories: ensuring that risk controls within their scope of responsibility operate effectively. The Board is responsible for designing and – Asset Management; These employees are also required to reviewing Metcash’s Risk Management Policy – Business Continuity; advise management of increasing or new and for determining the Company’s appetite – Health, Safety, Environment, Community risk exposures and significant operational for risk, taking into account the Company’s (HSEC); incidents as they become aware of them. strategic objectives and other factors – Compliance and Legal (Non-HSEC); including stakeholder expectations. The level This ‘front line’ of risk management is of tolerance for risk varies according to the – Employee; supported by specialised risk management teams covering specific areas of risk within risk area. – Financial Reporting; Metcash and by independent reviews The Risk and Assurance department with – Criminal Activity; conducted by the Metcash Assurance oversight from the Audit Risk & Compliance – Information Technology; Department to verify the adequacy and Committee (AR&CC), a Committee of the effectiveness of risk management. Board, implement a continuous process of – Reputational; communication with internal stakeholders at – Solvency; Risk management and internal control systems each stage of the risk management process. – Operations/Warehouse; They also conduct annual examinations of Metcash implements a risk oversight and risk – Merchandising, Customer and Supplier Metcash’s external and internal environments, management process that is based on Risk (i.e. Supply chain); and so as to establish the parameters within which Management Standard ISO 31000:2009. This risks must be managed. – Strategic/Sustainability. system is used to profile all potential risks by Policies on risk oversight and management The risk management process includes the identifying, prioritising and managing such of material business risks are summarised following elements: risks across the Company. in a document entitled ‘Risk Management – Risk assessment; Management has reported to the Board as to Policy – Summary’ which can be found on the the effectiveness of Company’s management – risk identification; Metcash website www.metcash.com under of its material business risks using this the heading ‘Corporate Governance’. – risk analysis; internal system. The Company’s risk management philosophy – risk treatment; The Risk Management Policy and Risk and practices are documented more – Monitoring and review; and Management Framework utilised at Metcash fully in the Metcash Risk Management – Recording the risk management process. cover a wide range of activities and are used Framework and Guidelines (Risk Management to identify, analyse, evaluate, manage and Roles and responsibilities Framework). monitor risks across all areas of the business. In addition to the specific responsibilities The Company has adopted the ISO Risk profiles are in place for existing and and reporting roles of the Group Risk 31000:2009 as the basis for its Risk newly acquired sites. These are prepared and Assurance Department, the Metcash Management Framework. Metcash in consultation with senior management, Executive Team is regularly required to report has implemented its Risk Management agreed with site business management and to the Board as to the emergence of any Framework through, amongst other things, are periodically reviewed and updated by risk significant risk issues and the management of the identification of material business risk team members. Ongoing risk management previously reported material risk issues. categories and the development of risk activities include: profiles for all the major segments and The Audit Risk & Compliance Committee – confirmation of key controls; (AR&CC) is responsible for monitoring functions of the business. – reporting of incidents; management’s risk processes other than corporate strategy, the oversight of which – recording and monitoring of key risk is a Board responsibility. On behalf of the indicators (monitoring of residual risk Board, the AR&CC monitors those risk events levels); that could prevent the achievement of the – follow-up on risk treatment/action plans; Company’s corporate strategies. – escalation of issues; and All Metcash employees are responsible for – regular reporting processes to all levels of the management of risk within their areas. management. Management is responsible for assessing and monitoring risk and designing cost-effective
Metcash Limited Annual Report 2014 27 Corporate Governance (COnt.)
Member Qualifications Meetings held Meetings attended during 2014 during 2014 financial financial year year P Barnes B Comm (Hons), MBA 5 5 F Balfour BA (Hons), MBA, Grad Dip Information 5 5 Management, FAICD N Hamilton LLB 5 5 M McMahon* BEcon, Harvard Business School Advanced 5 2 Management Program
* Mr McMahon was only eligible to attend two meetings during the 2014 financial year.
The ongoing process of communication, Chief Executive Officer and Chief PRINCIPLE 8 – REMUNERATE FAIRLY consultation, monitoring and review enables Financial Officer Declaration AND RESPONSIBLY management to demonstrate continuous The Chief Executive Officer and the Chief The Board Should Establish improvement whilst encouraging greater Financial Officer provided a declaration in a Remuneration Committee ownership by individuals across the business. writing to the Board in accordance with The Board has established a Remuneration The risk management and internal control section 295A of the Corporations Act that, Committee. system provides regular feedback to among other things, Company’s financial The Company’s Remuneration Policy can management on their effectiveness in reports present a true and fair view, in all be found on the Metcash website www. managing business risks. This is supported material respects, of Company’s financial metcash.com under the heading of ‘Corporate by the Risk Management platform database condition and operational results and are Governance’. It is summarised in the (software) which holds the risk controls in accordance with relevant accounting ‘Remuneration Report’ contained within the library, all risk categories and events, risk standards (refer to the Directors’ Report). Directors’ Report. Details of the compensation profiles for each pillar/business, business/ The Board has received written assurance of senior executives are also contained in the functional objectives, critical success factors, from the Chief Executive Officer and the Chief Directors’ Report. processes, compliance data, incidents and Financial Officer that the declaration provided The Company’s policy on prohibiting entering corrective actions. by them in accordance with section 295A of into transactions in associated products The Risk Management Policy and Risk the Corporations Act (refer to the Directors’ which limit the economic risk of participating Management Framework documents form Report) is founded on a sound system of in unvested entitlements under any equity- an integral part of the Company’s risk risk management and internal compliance based remuneration schemes is set out in the management. The Board continues to and control and that the system is operating Company Code for Directors and Executives review these and provide support in defining effectively in all material respects in relation to in Respect of Share Transactions which can clear accountabilities, responsibilities and financial reporting risks. be found on the Company’s website embedding Enterprise Risk Management www.metcash.com. in planning, strategy and company culture. The Board and the AR&CC remain Non-executive Directors’ compensation responsible for the oversight of the risk and retirement benefits management process. Refer to the ‘Remuneration Report’ contained Management has reported to the Board within the Directors’ Report. as to the effectiveness of the Company’s Termination entitlements of CEO and management of its material risks. senior executives Refer to the ‘Remuneration Report’ contained within the Directors’ Report.
28 Metcash Limited Annual Report 2014 FINANCIAL for the Year Ended Report 30 April 2014
Directors’ Report 30 Statement of Comprehensive Income 66 Statement of Financial Position 67 Statement of Changes in Equity 68 Statement of Cash Flows 69 Notes to the Financial Statements 70 Directors’ Declaration 133 Auditor’s Independence Declaration 134 Independent Auditor’s Report 135
Metcash Limited Annual Report 2014 29
30 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 31
32 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 33
34 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 35
36 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 37
38 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 39
40 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 41
42 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 43
44 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 45
46 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 47
48 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 49
50 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 51
52 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 53
54 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 55
56 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 57
58 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 59
60 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 61
62 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 63
64 Metcash Limited Annual Report 2014
134
Metcash Limited Annual Report 2014 65
66 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 67
68 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 69
70 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 71
72 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 73
74 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 75
76 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 77
78 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 79
80 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 81
82 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 83
84 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 85
86 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 87
88 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 89
90 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 91
92 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 93
94 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 95
96 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 97
98 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 99
100 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 101
102 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 103
104 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 105
106 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 107
108 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 109
110 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 111
112 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 113
114 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 115
116 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 117
118 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 119
120 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 121
122 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 123
124 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 125
126 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 127
128 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 129
130 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 131
132 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 133
134 Metcash Limited Annual Report 2014
Metcash Limited Annual Report 2014 135
136 Metcash Limited Annual Report 2014 Year ended 30 April 2014 ASX Additional Information
ASX Additional Information – Year ended 30 April 2014 Additional information required by the Australian Securities Exchange and not shown elsewhere in this report is as follows: The information is current as at 10 July 2014: Distribution of Equity Securities The number of shareholders, by size of holding, in each class of share is:
Size of Holding Number of shareholders 1-1,000 8,853 1,001-5,000 22,867 5,001-10,000 8,832 10,001-100,000 6,658 100,001-9,999,999,999 198 Total 47,408 There were 3,675 shareholders less than a marketable parcel of Metcash ordinary shares. Twenty largest shareholders The names of the 20 largest holders of quoted shares are:
Name Number of Percentage Shares of Shares HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 191,902,762 21.60 J P MORGAN NOMINEES AUSTRALIA LIMITED 144,605,095 16.28 NATIONAL NOMINEES LIMITED 104,017,343 11.71 CITICORP NOMINEES PTY LIMITED 58,123,914 6.54 CITICORP NOMINEES PTY LIMITED
Number of Shares BlackRock Group 75,446,836 Allan Gray Australia Pty Ltd (and its related bodies) 55,970,784 Lazard Asset Management Pacific Co 45,097,871 Maple-Brown Abbott Limited 44,568,515 Voting Rights All ordinary shares (whether fully paid or not) carry one vote per share without restriction.
Metcash Limited Annual Report 2014 137 Notes
138 Metcash Limited Annual Report 2014 Notes
Metcash Limited Annual Report 2014 139 Notes
140 Metcash Limited Annual Report 2014 Corporate Information
Corporate Information National Office ABN 32 112 073 480 Telephone: 61 2 9751 8200 50 Waterloo Road Directors Macquarie Park NSW 2113 Peter Barnes (Chairman) Postal Address Patrick Allaway PO Box 6226 Fiona Balfour Silverwater Business Centre NSW1811 Michael Butler www.metcash.com Tonianne Dwyer Neil Hamilton Metcash Food & Grocery Edwin Jankelowitz Head Office Mick McMahon Telephone: 61 2 9751 8200 Ian Morrice Facsimile: 61 2 9741 3009 Dudley Rubin 50 Waterloo Road Macquarie Park NSW 2113 Company Secretary Postal Address Gregory C Watson PO Box 6226 Silverwater Business Centre NSW 1811 Share Register Boardroom Pty Limited Australian Liquor Marketers GPO Box 3993 Head Office Sydney NSW 2001 Telephone: 61 2 9741 3000 Telephone: 61 2 9290 9600 Facsimile: 61 2 9741 3009 Facsimile: 61 2 9279 0664 4 Newington Road Silverwater NSW 2128 Auditor Postal Address Ernst & Young PO Box 6226 680 George Street Silverwater Business Centre NSW 1811 Sydney NSW 2000 Australia Telephone: 61 2 9248 5555 Mitre 10 Facsimile: 61 2 9248 5959 Head Office Telephone: 61 3 9703 4200 Facsimile: 61 3 9703 4222 12 Dansu Court Hallam VIC 3803 Postal Address Locked Bag 10 Doveton VIC 3177
Automotive Brands Group Head Office 76-92 Station Street Nunawading VIC 3131 Telephone: 61 3 8878 1111 Facsimile: 61 3 8878 2266
colliercreative.com.au #MET0005 www.metcash.com