19 February 20192019 Half Year Financial Summary & OutlookColes directors, team members and Donald Coles, grandson of G J Coles, at the ASX listing ceremony in Sydney – 21 November 20181DisclaimerThis presentation contains summary information about the Group Limited (ACN 004 089 936) (the Group) and its activities current as at the date of this presentation. It isinformation given in summary form only and does not purport to be complete. It should be read in conjunction with Coles’ other periodic and continuous disclosureannouncements filed with the Australian Securities Exchange, available at www.asx.com.auThis presentation is for information purposes only and is not a prospectus or product disclosure statement, financial product or investment advice or a recommendation toacquire the Group shares or other securities. It has been prepared without taking into account the investment objectives, financial situation or needs of individuals. Beforemaking an investment decision, prospective investors should consider the appropriateness of the information having regard to their own investment objectives, financialsituation and needs and seek legal, taxation, business and/or financial advice appropriate to their jurisdiction. Past performance is no guarantee of future performance.No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained inthis presentation. To the maximum extent permitted by law, none of the Group and its related bodies corporate, or their respective directors, employees or agents, nor anyother person, accepts liability for any loss arising from the use of this presentation or its contents or otherwise arising in connection with it, including, without limitation, anyliability from fault or negligence on the part of the Group, its related bodies corporate, or their respective directors, employees or agents.This presentation may contain forward-looking statements including statements regarding the Group’s intent, belief or current expectations with respect to the Group’sbusiness and operations, market conditions, results of operations and financial condition, specific provisions and risk management practices. When used in this presentation,the words ‘forecast’, ‘estimate’, ‘plan’, ‘will’, ‘anticipate’, ‘expect’, ‘may’, ‘believe’, ‘should’ and other similar expressions, as they relate to the Group and its management,are intended to identify forward-looking statements.Forward looking statements involve known and unknown risks, uncertainties and assumptions and other important factors, many of which are beyond the control of the Group,that could cause the actual results, performances or achievements of the Group to be materially different from future results, performances or achievements expressed orimplied by such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date thereof and the Groupis under no obligation to update any of the forward-looking statements contained in this presentation.Changes to the reporting periodAs foreshadowed in the Demerger Scheme Booklet, and advised in the Advance Notice – 2019 Interim Results dated 23 January 2019, Coles has adopted a Retail calendar forstatutory reporting purposes. Retail calendars are adopted by a number of ASX listed and global retailers and enable greater alignment between external statutory resultsand the way the business is reported and managed internally.Reporting calendarsThe change to a Retail calendar has been applied prospectively from 1 July 2018 for statutory reporting purposes. The prior corresponding period statutory results reflect aGregorian calendar and have not been restated. Coles’ statutory result will fully transition to a Retail calendar for both the current and comparative financial periods in 1H21.Under a Gregorian calendar, the annual reporting period is 12 months (from 1 July to 30 June), whilst under a Retail calendar the reporting period is based on a definednumber of weeks, with the annual reporting period ending on the last Sunday in June.Non-IFRS financial informationTo support an understanding of comparable business performance, this Results Release and the associated 2019 half year financial results presentation also present profit & lossdisclosures as follows:
On a Retail calendar basis – applied consistently for the current and comparative periodOn a continuing operations basis – excluding the impact of Kmart, Target & Officeworks which were transferred to Wesfarmers as part of the demergerExcluding significant items – the impact of the $146 million Supply Chain Modernisation restructuring provision. This significant item is disclosed in Coles’ Half Year FinancialReport for the period ended 30 December 2018.
Retail profit & loss disclosures constitute non-IFRS information which has not been audited but is based on IFRS information where available. Coles’ external auditors haveperformed procedures on the adjustments between the Gregorian and Retail profit & loss disclosures for the current and prior corresponding period. Balance sheet and cashflow information is consistent with the statutory results presented in Coles’ Half Year Financial Report.Due to rounding, numbers presented throughout this document may not add up precisely to the totals provided and percentages may not precisely reflect the absolutefigures.1H19 summaryBrenda, who celebrated 50 years working at Coles Malvern in 2018, with her store manager Scott31H19 summaryStrong cash generation, a robust balance sheet and EBIT down 5.8%, driven bydecline in Express earningsTotal sales revenue EBIT (Retail basis)¹Gross financial debtNet capitalexpenditureOperating cash flow²Weighted averagelease expirySupers comp growthDividendSafety$20.9bn+2.6% vs. pcp$733m(5.8)% vs. pcp45 quartersconsecutivegrowth$1,460m141% cashrealisation$390mFY19F: $700-800m80-90%target dividendpayout ratio³30.4 TRIFR516.9%improvementvs. pcp6.0 years+ options$1.6bnDown from$2.0bn41 Excludes significant items of $146m (pre-tax) relating to the Supply Chain Modernisation program.2 Normalised cash flow excludes one-off demerger-related and other extraordinary items.3 Wesfarmers intends to pay an interim dividend in March 2019 which will reflect, in part, Coles’ earnings up to and including 27 November 2018(28 November 2018 being the effective date of the demerger). Coles Board reconfirms a target dividend payout ratio of 80-90% of earnings from28 November 2018 to 30 June 2019, payable in September 2019.4 Initial gross debt drawn at the time of demerger was $2.0bn.5 Total Recordable Injury Frequency Rate.4Other business highlightsLaying the foundations for long term sustainable growth#2#3#4#5#6#1 Over 30% online sales growth and improved customer satisfaction scoresInnovation trials launched with new store formats in Supermarkets and standaloneExpressNew Alliance Agreement signed with Viva Energy, positioning Express to beAustralia’s leading convenience retailerAnnounced partnership with Witron for a ~$950m investment over six years in worldclass automated distribution centresImprovements in team member safety and engagement scoresContinued community and supplier support through drought relief, Redkite,SecondBite and Coles Nurture Fund5Strengthening executive leadership teamJoined Coles in 1H19Alister JordanChief Executive –Coles Express,Coles Online &Corporate AffairsLisa RonsonChief MarketingOfficerLisa RonsonChief MarketingOfficerKris WebbChief PeopleOfficerMatthewSwindellsChief SupplyChain OfficerRoger SniezekChief Information& Digital OfficerCathi ScarceActing ChiefExecutive –Liquor & HotelsLeah WeckertChief FinancialOfficerGreg DavisChief OperatingOfficer –SupermarketsPaul BradshawChief StoreOperationsOfficer –SupermarketsDavidBrewsterChief LegalOfficerDaniella PereiraCompanySecretaryThinus KeeveChief Property &Store CommercialOfficerAlister JordanChief Executive –Coles Express, ColesOnline & CorporateAffairsSteven CainManagingDirector & CEOGroup financial overviewColes Click & Collect has grown at >80% vs. pcp71H19 results – GroupEBIT (pre-significant items) down 5.8% vs. 1H18 on a comparable retail calendaryear basis, driven by a decline in Express earnings
$m
1H19
1H18
Change
Statutory basis (183 days in 1H19; 184 days in 1H18)
Sales revenue
20,235
19,844
2.0%²
EBIT (pre-significant items)¹
713
779
(8.5)%²
EBIT margin (pre-significant items)¹
3.5%
3.9%
(40)bps
Retail basis (27 trading weeks)
Sales revenue
20,867
20,345
2.6%
EBIT (pre-significant items)¹
733
778
(5.8)%
EBIT margin (pre-significant items)¹
3.5%
3.8%
(31)bps
1 Significant items ($146m pre-tax; $102m after tax) relate to the development of two new automated ambient distribution centres – specifically,redundancies and lease exit costs for a number of existing distribution centres that will be closed over a five year period as part of the supply chainmodernisation program.² Note, change is not meaningful given different number of days in each period (183 days in 1H19, 184 days in 1H18).Note: segment financials in this presentation are shown on a retail calendar basis, pre-significant items81H19 results – segment financialsSupermarkets resilient and a strong Liquor result
Retail basis, pre-significant items
$m
1H19
1H18
Change
Revenue
Supermarkets
16,195
15,629
3.6%
Liquor
1,731
1,721
0.6%
Coles Express
2,941
2,996
(1.8)%
Total revenue
20,867
20,345
2.6%
EBIT
Supermarkets
602
600
0.4%
Liquor
85
80
7.0%
Coles Express
51
84
(39.3)%
Other¹
(5)
15
N / M
Total EBIT
733
778
(5.8)%
EBIT margin
Supermarkets
3.7%
3.8%
(12)bps
Liquor
4.9%
4.6%
29bps
Coles Express
1.7%
2.8%
(107)bps
Total
3.5%
3.8%
(31)bps
Note: The results for the half and the prior corresponding period reflect the elimination of a $20m brand fee previously charged from Supermarkets toExpress (previously called Convenience)¹ Includes corporate costs, Coles’ 50% share of flybuys’ net profit, and gains and losses from the property portfolio.9Normalised cash flowStrong cash realisation, driven by favourable seasonal working capital positionNormalised cash flow¹ Cash realisation²
Statutory basis
$m
1H19
1H18
EBIT (pre-significant items)
713
779
Depreciation & amortisation
321
330
EBITDA
1,033
1,109
Change in working capital
286
268
Change in provisions & other
141
134
Operating cash flow
1,460
1,510
1 Normalised cash flow excludes one-off demerger-related and other extraordinary items.² Cash realisation represents operating cash flow before interest and tax divided by EBITDA.Note: favourable seasonal working capital position,expected to normalise in 2H19141 %136 %HY19 HY1810Capital expenditureFY19 net capital expenditure guidance narrowed to $700-800mCapital expenditure breakdown Key capital expenditure initiatives
Store renewals
Higher number of majorrenewals across Supermarkets(25) and Liquorland (14) Liquor Market conversions (15)
Growthinitiatives
New store investment (34) Click & Collect locations (231)
Efficiencyinitiatives
Energy saving initiatives Supply chain improvements
Maintenance
Refrigeration upgrades Store technology investment
Supply chainmodernisationproject
Initial payments to be made in2H19 Total project spend expectedto be approximately $950mover the next 6 years
Statutory basis
$m
1H19
1H18
Store renewals
60
29
Growth initiatives
128
128
Efficiency initiatives
53
22
Maintenance
119
92
Operating capital expenditure
359
271
Property acquisitions
108
71
Property divestments
(77)
(92)
Net capital expenditure
390
250
11Balance sheetRobust balance sheet supporting investment grade credit ratingBalance sheet summaryNet working capital
Inventory days of 25; trade payable days of 29Working capital balance favourable due toseasonal movements in inventory and tradepayables, which unwound in January
Financial debt
Balance sheet leverage ratio of 0.8x¹Gross debt reduced to $1.6bn due toChristmas trading period and timing of supplierpayments
‒
Initial gross drawn debt at the time of
demerger was $2.0bnAASB 16 impact
AASB 16 will result in the majority of operatingleases being brought onto the balance sheetand will apply from 1 July 2019Currently assessing the estimated impact and
will provide further details in conjunction withthe 2H19 retail sales results
Statutory basis
$m
1H19
Cash and cash equivalents
484
Inventories
2,429
Trade and other receivables
560
Trade and other payables
(3,991)
Working capital
(518)
Property, plant and equipment,and investments
4,213
Intangibles
1,660
Provisions
(1,292)
Other
(28)
Capital employed
4,035
Interest bearing liabilities
(1,630)
Net tax balances
267
Total net assets
2,672
1 Calculated as gross debt of $1,630m divided by EBITDA for the 12 months ending 30 December 2018 of $2,052m.121,2004,0554,659 9,914Within 1 year 1 – 5 years More than5 yearsTotalCapital managementColes expects to pay its first dividend in September 2019, targeting an 80-90%dividend payout ratio
Dividends
Bank facility maturity profile ($m)
Wesfarmers’ intention to pay an interim dividend in
March 2019 which will reflect, in part, Coles’earnings up to and including 27 November 2018(28 November 2018 being the effective date ofthe demerger) Coles Board reconfirms a target dividend payoutratio of 80-90% of earnings from 28 November 2018to 30 June 2019 which will be payable inSeptember 2019Debt facilities
Committed to investment grade credit rating withS&P and Moody’sWeighted average debt maturity of 3.7 yearsprovides funding certainty
Lease commitments ($m)
‒
Undrawn facilities of $2.1bn, providingappropriate headroomDiversification of funding sources via debtcapital markets will be assessed over time
‒
Lease commitments
Disciplined management of off-balance sheetleases
‒‒‒
Undiscounted lease commitments of $9.9bnWeight average lease expiry of 6.0 yearsLease options provide Coles with flexibility toextend tenure
1 Includes bank guarantees.445¹2,5401,310150FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26Drawn UndrawnSupermarketsColes Little Shop was loved by our customers!14Supermarkets key metrics45 consecutive quarters of comparable Supermarkets sales growthTotal sales revenue Comp growthGross marginBasket size TransactionsEBITSales per sqmCustomer satisfactionEBIT margin$16.2bn+3.6% vs. pcp3.2%NYE adj. vs. pcp$16,533+0.4% vs. pcp+3.1%vs. pcp+0.5%vs. pcp87.8% (2Q19)+13bps vs. 1Q193.7%(12)bps vs. pcp$602m+0.4% vs. pcp24.1%+15bps vs. pcpNote: The results for the half and the prior corresponding period reflect the elimination of a $20m brand fee previously charged from Supermarkets toExpress (previously called Convenience)15Supermarkets 1H19 resultsResilient 1H19 result despite significant cost headwindsHalf-year results Key commentary Comp sales growth of 3.0% for 1H19 drivenmainly by Little Shop & improved availability Comp sales growth of 3.2% for 1H19, adjustedfor NYE
–
Comp sales growth of 1.5% for 2Q19,adjusted for NYE
Strong growth in average basket size (+3.1%),underpinned by growth in items per basket Transactions 2Q19 adversely impacted byperformance in NSW and unfavourableweather relative to the prior year Gross margin increased by 15bps primarily dueto improved promotional effectiveness,partially offset by more flybuys promotions,harmonisation of online prices and input costpressures in fresh categories EBIT remained in-line with 1H18, despite costpressures relating to the new store EBA,transition from single use plastic bags andhigher energy costs Supply side cost pressures in fresh categoriesresulted in price inflation of 0.5%; excludingfresh categories and tobacco, underlyingprice deflation was 0.8% for the halfNote: The results for the half and the prior corresponding period reflect the elimination of a $20m brand fee previously charged from Supermarkets toExpress (previously called Convenience)
Retail basis
$m
1H19
1H18
Change
Key P&L items
Sales revenue
16,195
15,629
3.6%
EBITDA
887
891
(0.5)%
EBIT
602
600
0.4%
Key metrics
Comparable sales growth (%)
3.0
0.9
219bps
NYE adjusted comparablesales growth (%)
3.2
N/A
N/A
Gross margin (%)
24.1
24.0
15bps
CODB (%)
(20.4)
(20.2)
(27)bps
EBIT margin (%)
3.7
3.8
(12)bps
Sales per square metre ($)
16,533
16,469
0.4%
Price in/(de)flation (%)
0.5
(1.6)
203bps
Price in/(de)flation (%,exc. tobacco and fresh)
(0.8)
(1.1)
30bps
16‘Fresh Tomorrow’ strategy progressTransform food offer Move towards Every Day Low Prices Increased convenience food offer with ~200new fresh product lines launched– Fresh Kitchen and food-to-go range 700 new own brand products, reaching 29%penetration, an increase of 55bps vs. pcp Own brand products won 55 awards, drivenby a focus on product innovation ~180 additional EDLP products, up to ~4,700products Maintained competitiveness despite costinflation in bakery and meat categories Opportunity to gain better recognition fromcustomers on trusted value as promotionalsales are declining faster than EDLP growthFresh Kitchen Own brand Every Day Low PricesColes Christmas ham with crackling, Coles deli chicken kebabs – $1.40 to $1a world firstNew Coles Fresh Kitchen range of freshlyprepared fruit, vegetables and salads17‘Fresh Tomorrow’ strategy progressOffer anytime, anywhere shopping Land the right offer in every location Continued improvement in Coles Onlinecustomer experience, making it easier for ourcustomers
–
Online sales growth of 30% p.a. to ~$1bn ona rolling 12 month basisClick & Collect sales growth of >80% vs. pcp
–
B2B sales of ~$170m p.a., representing doubledigit growth vs. pcp Continued store investment across the fleet
–––
14 new store openings and 7 closures25 supermarkets refurbishedMajority of this new store and refurbishmentactivity occurred in 2Q19
New formats and innovation trials, focussed onimproving the convenience offer
––
Surrey Hills and Ardeer, VictoriaEastgardens, NSW
Coles Online sales and growth (pcp)Coles Eastgardens, NSW0%10%20%30%40%02004006008001H172H171H182H181H19Growth (%)Sales ($m)Sales Growth (pcp)18 ~4,200 Indigenous team members – proudlyone of Australia’s largest Indigenousemployers Improvements in team member safety andengagement scores Continued support to suppliers & communitywith key programs including:
74m meals to Australians in needsince 2011through SecondBite
$30m raised for Redkite since 2013to support families across Australiaimpacted by cancer
$14m provided by the NurtureFund since 2015 to help foodproducers to innovate and grow
Over $16m raised and donatedfor drought relief, supporting 2,500Aussie farmers ($7.1m distributedvia Country Women’s Association)
‘Fresh Tomorrow’ strategy progressReduce costs Win together Completed roll-out of proven initiatives,including:
–
Stockless stock rooms
–
One Team
Current initiatives include:
–
Easy ordering being rolled-out in deli withbakery to follow soonIntegrated transport hub established tooptimise routes including backhaulFaster fresh flows in dairy and meat supplychain
–
–
Partnership with SAP, to digitally transform ourPeople & Culture, goods-not-for-resale andFinance processes Partnership with Witron for an investment inworld class, automated distribution centresInside a Witron distribution centreLiquorWinemaker, Alana Langworthy and her Story Bay Semillon Sauvignon Blanc 2017, which won the Winestate Wine of the Year‘Best under $20’ wine award, and is exclusively available at Coles Liquor20Liquor key metricsStrong EBIT growth of 7.0% vs. pcpTotal sales revenue Comp growth¹Gross marginRetail basket size¹ Retail transactions¹EBITExclusive brandsNumber of stores²EBIT margin$1.7bn+0.6% vs. pcp1.0%NYE adj. vs. pcp18.5% of sales+103bps vs. pcp+1.3%NYE adj. vs. pcp+0.7%NYE adj. vs. pcp908+9 vs. FY184.9%+29bps vs. pcp$85m+7.0% vs. pcp28.3%+9bps vs. pcp1 Excludes Hotels.² Retail Liquor stores only. There are 995 sites including Hotels, an increase of 8 vs. FY18.21Liquor 1H19 resultsEBIT growth driven by increasing exclusive brands penetration and productivityefficienciesHalf-year results Key commentary Comp sales growth of 1.0% for 1H19, adjustedfor NYE
–
Comp sales growth of 0.7% for 2Q19,adjusted for NYE
2Q19 trading impacted by unfavourableweather Liquorland remained the strongest performer,driven by exclusive brand offering and onlinegrowth First Choice Liquor Market conversionscontinued, driving trading improvements withpositive customer response Vintage Cellars trading conditions remainedchallenged EBIT growth driven by exclusive brand growthand productivity efficiencies
Retail basis
$m
1H19
1H18
Change
Key P&L items
Sales revenue
1,731
1,721
0.6%
EBITDA
112
106
5.1%
EBIT
85
80
7.0%
Key metrics
Comparable sales growth (%)
(0.1)
1.6
177bps
NYE adjusted comparablesales growth (%)
1.0
N/A
N/A
Gross margin (%)
28.3
28.2
9bps
CODB (%)
(23.4)
(23.6)
20bps
EBIT margin (%)
4.9
4.6
29bps
22Liquor business updateStore transformation First Choice format continues to evolve, with15 First Choice Liquor Market brandconversions, driving improvement in trading 16 new retail store openings and 7 closures 80% of Liquorland stores now renewed‒ 14 Liquorland renewalsExclusive brand
Strong growth in exclusive brand products,particularly in the wine category
Over 50 new exclusive brand lines launched,including a number of award-winningproductsDigital offering Online growth of ~30% vs. pcp
70% of online orders now fulfilled via Click &Collect
Left: Strong focus on craftbeer range in response toincreasing customerdemandAbove: Successfullycompleted 15 First ChoiceLiquor Market brandconversions in 1H19ExpressNew Express standalone convenience store in Richmond, Victoria24Express key metricsC-store growth despite declining fuel volumesTotal sales revenueFuel volumesC-store comp growth EBITFood-to-go growth Number of sites$2.9bn(1.8)% vs. pcp62 mL/wk(15.8)% vs. pcp1.5%vs. pcp713+2 vs. FY1811.6%vs. pcp$51m(39.3)% vs. pcpNote: The results for the half and the prior corresponding period reflect the elimination of a $20m brand fee previously charged from Supermarkets toExpress (previously called Convenience)25Express 1H19 resultsContinued focus on range and format innovation supporting c-store salesHalf-year results Key commentary C-store comp sales growth of 1.5% driven by:
‒‒
Expansion of food-to-go categoryCompelling every day value proposition
Transactions impacted by 15.8% decline infuel volumes and unfavourable weather Continued focus on range & formatinnovation
‒‒
Full food-to-go offer in 524 sitesTrialling fresh food in 11 sites
Continued fleet optimisation
‒‒‒‒
4 new site openings and 2 closures135 refurbishments76% of network has been renewedOpened non-fuel site in Richmond,Melbourne, with a further 3 expected in2H19 as part of ongoing trial
Note: The results for the half and the prior corresponding period reflect the elimination of a $20m brand fee previously charged from Supermarkets toExpress (previously called Convenience)
Retail basis
$m
1H19
1H18
Change
Key P&L items
Sales revenue
2,941
2,996
(1.8)%
EBITDA
64
97
(34.2)%
EBIT
51
84
(39.3)%
Key metrics
C-store sales growth (%)
2.0
0.9
109bps
Comparable c-store salesgrowth (%)
1.5
0.4
107bps
Fuel volume growth (%)
(15.8)
(18.6)
(281)bps
Comparable fuel volumegrowth (%)
(16.7)
(19.3)
(255)bps
Gross margin (%)
12.2
12.6
(39)bps
CODB (%)
(10.5)
(9.8)
(67)bps
EBIT margin (%)
1.7
2.8
(107)bps
26New Alliance partnershipExpress positioned to be Australia’s leading convenience retailer On 6 February 2019, Coles announced that ithas entered into an agreement to restructurethe terms of the Fuel and ConvenienceAlliance with Viva Energy‒ Express will move to a commission agentmodel and Viva Energy will set the retailprice of fuel The new Alliance is a strategic step inpositioning Express to be Australia’s leadingconvenience retailer Coles and Viva Energy expect fuel volumes togrow over the medium to long term Express customers will continue to enjoyloyalty benefits and will benefit from a morecompelling customer offer Express will continue to operate the Alliancesites and now has the opportunity to expandthe network Viva Energy will pay Coles $137 million attransaction close With the New Alliance commencing in earlyMarch 2019, Express EBIT for FY19 is expectedto be ~$50m From March 2019, fuel sales will no longer bereported in sales revenueNew automatic car wash technology, reducing customer waittimes and decreasing water use, ensuring Express maintains its5 Star Water RatingExpress now offers a tailored range of fresh produce, bakery,dairy and deli goods, as well as an extended grocery rangeand meals for tonight in 11 Melbourne sitesOutlookTony Ceravolo of Ceravolo Orchards in South Australia, which is set to become the first grower from mainland Australia to harvestcherries under a fully automated retractable roof, backed by a $500,000 interest-free loan from the Coles Nurture Fund28Outlook 2H19 Coles is committed to making life easier for customers with an increasingfocus on convenience Overall sales momentum into the third quarter of the 2019 financial yearremains broadly in line with the second quarter The newly announced Supermarket and Express collectables program ‘FreshStikeez’ is designed to encourage Aussie kids and their parents to eat morefresh fruit and veggies and make healthy eating fun for the whole family Cost headwinds from the new store EBA, energy & drought impacts on inputcosts are expected to continue Coles expects to pay its first dividend in September 2019, which will be a finaldividend for the year ending 30 June 2019, reflecting seven months ofearnings post demerger‒ Coles Board reaffirms its target dividend payout ratio of 80-90% of earningsfrom 28 November 2018 to 30 June 2019 payable in September 201929Coles’ investment thesisDemerged from Wesfarmers on 21 November 2018#2#3#4#5#6#1 Operates in resilient and growing marketsMarket leading position in an evolving competitive landscapeEstablished, non-replicable national store networkMaking life easier for customers strategyStrong cash generation, attractive dividend payout ratio and robust balance sheetHighly experienced Board and executive leadership team30Initial CEO observationsColes specific factors Market-wide factorsCompetitive pressures continue:
NSW Supermarkets, higher demographics,convenience foodsVintage Cellars & First Choice LiquorFuel
Customer expectations and behaviourchanging faster than everOnline growth but at lower marginCODB rising faster than salesFurther systems upgrades required & renewalperformance needs to improveMarket growth being chipped away byconvenient & discount food alternativesGreater alignment required between retailersand suppliers on long term domestic investmentand innovation prioritiesSupermarkets ‘High / Low’ promotions impactingtrust and efficiencyMedium term Coles specific & market-wide headwinds31It’s time for a new era at Coles~125% EBITgrowth~19% EBITdeclineInvestment in management, stores and branddriving strong revenue and earnings growthIndustry resetreducing retailprofit poolFY09-FY16 FY16-FY18Coles historical EBIT and F&L growth over time1 EBIT as reported in Wesfarmers’ annual results.0.0 %2.0 %4.0 %6.0 %8.0 %05001,0001,5002,000FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18Comparable sales growth (%)EBIT ($m)EBIT¹ Comparable Food and Liquor sales growth0.0 %2.0 %4.0 %6.0 %8.0 %05001,0001,5002,000FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18Comparable sales growth (%)EBIT ($m)EBIT¹ Comparable Food and Liquor sales growth32Objectives of Strategic RefreshColes is currently undertaking a comprehensive Strategic Refresh to reposition the business inorder to build on the foundations for long term sustainable growthIn particular, the refresh will focus on:
“Fresh Tomorrow” strategyMaking life easier for customers
Pace of executionEfficiency programs to simplify the business & offset inflationInvestment to lead in automation and digital“Winning Together” sustainably with suppliers and communities
An update on the Strategic Refresh will be provided at the Strategy Day,which is scheduled for mid-JuneLaying the foundations for long term sustainable growthThank youflybuys is Australia’s most popular loyalty program, working with some of the largest household names to deliver benefits to customers
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