Metcash Limited (MG9.F) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. My name is Rob Murray, Chair of the Board of Metcash Limited. On behalf of the Board and management of Metcash Limited, I extend to you a warm welcome to the company's 2021 Annual General Meeting. As you are aware, in response to the continued restrictions, uncertainty and health risks arriving from the COVID-19 pandemic, the Board determined to facilitate participation in this year's Annual General Meeting online via the Lumi platform. All attendees can watch a live webcast of the meeting. In addition, shareholders and proxies have the ability to ask questions and submit votes online. We very much appreciate your understanding at this challenging time and for joining us in our meeting virtually today. As we have a quorum present, I declare the general meeting open. First, let me introduce your Board of Directors, most of whom, like you, are attending the meeting virtually. First, with me here today is Jeff Adams, our Group Chief Executive Officer and Executive Director; and our non-executive directors, Peter Birtles, Chair of our Audit, Risk and Compliance Committee; Margie Haseltine, who joined our Board in May of this year and is offering herself for election today; Christine Holman, who joined our Board in September 2020 and is also offering herself for election today; Murray Jordan, who's been on our Board since 2016 and retires by rotation under the constitution today and is offering himself for reelection later in the meeting; and Helen Nash, Chair of our People and Culture Committee. Finally, also joining us virtually is our company Secretary, Julie Hutton. Joining us virtually, we also have our group Chief Financial Officer, Alistair Bell; and the signing partner for our company's FY '21 audit, Christopher George, from our external auditor, Ernst & Young. Mr. George will be available to answer questions shareholders might have concerning the conduct of the audit, the preparation and content of the auditor's report, the company's accounting policies and the auditor's independence at the conclusion of the Group CEO's presentation. We welcome and thank Mr. George for his attendance today. Also in attendance, we have the heads of our various pillars being our Chief Executive Officer, Metcash Food, Scott Marshall; our Chief Executive Officer, Independent Hardware Group, Annette Welsh; and our Chief Executive Officer, ALM, Chris Baddock, as well as the following members of our group leadership team, our Chief Information Officer, David Reeve; our Chief People and Culture Officer, Penny Coates; and our Chief Strategy and Transformation Officer, Matt Havens. Today, we will review the company's activities during the year and receive and consider the accounts and reports for the 12 months ended the 30th of April 2021. We will then consider the 7 resolutions outlined in the notice of meeting, which was lodged with ASX and sent to all shareholders on the 30th of July 2021. [Operator Instructions] Please note that while you can submit questions, I will not address them until the relevant time in the meeting, that is when we are considering the relevant item of business. Please also note that your questions may be moderated or amalgamated, for example, if we receive multiple questions on one topic, to avoid repetition. Our Head of Corporate Affairs and Investor Relations, Steve Ashe, will assist me with this. Finally, due to time constraints, we may run out of time to answer all of your questions. If this happens, we will answer them in due course by e-mail. Finally, we've received a number of questions from shareholders in advance of the meeting, which I will also address during the course of the meeting. We thank our shareholders for those questions in advance. Voting today will be conducted by a way of a poll on all items of business. In order to provide you with enough time to vote, I will shortly open voting for all resolutions, and voting will remain open until the end of the meeting when I declare voting closed. When voting opens, if you are eligible to vote at this meeting, i.e., you're a shareholder or a proxy, a new polling icon will appear. Selecting this icon will bring up a list of resolutions and present you with voting options. To cast your vote, simply select one of the options. There's no need to hit the Submit or Enter button as the vote is automatically recorded. You do, however, have the ability to change your vote up until the time I declare voting closed. Any appointed proxy who has been given discretion on how to vote should vote in the same manner. Any appointed proxy that has been directed to vote in a certain manner and has no discretionary votes to cast does not need to vote as those votes will automatically be counted in accordance with those directions. I now declare voting open on all resolutions. The polling icon will soon appear. Please submit your votes at any time. I will give you a warning before I move to close the voting. I will now give my formal address, which was released to the ASX before the meeting this morning. Ladies and gentlemen, I will now provide you with a high-level overview of how we performed in FY '21 as well as comment on other important matters such as our strategic direction, capital management, Board changes and remuneration outcomes for the year and ESG. I will then invite Jeff to talk in more detail about the company's operating performance as well as progress on key growth initiatives. Firstly, the year in review. FY '21 was an exceptional year for Metcash with record sales, a significant increase in earnings and record operating cash flow. The early success of our MFuture initiatives laid the foundation for a very successful year for both Metcash and, importantly, our independent retailers. The improved competitiveness of our retailers was a key factor in their retention of new and returning customers gained through COVID, which, together with the continuation of an increased preference for local neighborhood shopping and the migration from cities to regional areas, drove strong sales growth. All pillars performed strongly, with the group continuing to successfully navigate significant challenges and uncertainty associated with COVID. I'm particularly proud of the achievements of our Metcash teams and independent retailers in continuing to drive the implementation of our MFuture growth initiatives despite the challenges they faced in managing unprecedented levels of demand, border restrictions and ever-changing health regulations. Our financial performance was very strong. Group revenue, including charge-through sales, increased by around 10% to a record $16.4 billion with strong growth in all pillars. Group EBIT increased around about 20% to $401.4 million, and underlying profit after tax was 27% higher at $252.7 million. This represents a 13% increase in underlying earnings per share to $0.247. The strong earnings, together with effective working capital management, led to record operating cash flows of $475 million, ensuring the company continued to be in a very strong financial position at the end of the financial year with net cash of $125 million. Turning now to capital management. I'm pleased to report that the strong group performance and financial position, together with confidence over future operating cash flows, has resulted in Metcash returning $380 million to shareholders since the payment of last year's final dividend. The Board has a strong focus on shareholder returns and is appreciative of the support received from shareholders, particularly through COVID. The significant amount of capital being returned represents the Board's decision to raise the target dividend payout ratio from 60% to 70% of net underlying profit after tax, together with an off-market buyback of $200 million. We originally announced a buyback of up to $175 million, but the Board decided to increase the amount to $200 million after receiving very strong demand from shareholders. Importantly, all shareholders, whether or not they participated in the buyback, will benefit through earnings per share and return on equity accretive outcomes. Shareholder dividends for the year increased 40% to $0.175 a share through the increase in payout ratio and the strong FY '21 group earnings. Turning now to strategy. We're now 2 years into the MFuture program designed to provide a pathway to sustainable growth for Metcash. This year, significant progress was made with key initiatives such as our store upgrade programs, rolling out new store formats, expanding our private and exclusive label ranges and accelerating our digital plans. We also sharpened our strategic direction to include an increased focus on customers and the community to support our aim of further improving the competitiveness of our retailers. The early success of MFuture has provided a strong foundation for the remaining 3 years of the program, which includes initiatives to retain new and returned customers gained through COVID as well as attracting new shoppers to our retail networks. The program also includes pursuing attractive growth opportunities, including leveraging recent acquisitions such as Total Tools Holdings, TTH, in Hardware; and the Kollaras private label portfolio in Liquor. We were pleased to announce the acquisition of a 70% stake in TTH in September last year. And you may recall, we flagged this acquisition to you at last year's AGM. TTH has the largest professional tools network in Australia with 90 stores, and it is complementary to our Independent Hardware Group of stores. In December, TTH acquired a majority interest in 12 Total Tools stores joint ventures. And in June, we increased our position in TTH to 85%. TTH has a history of strong earnings and is proving to be a fantastic acquisition for Metcash. I would now like to tell you about some changes to the Board. In September last year, we were pleased to welcome Christine Holman as a non-executive director. Christine is an experienced ASX-listed company director and has more than 25 years of commercial experience across a broad range of areas, including mergers and acquisitions, finance, sales, technology, digital transformation and marketing. Christine's extensive and diverse experience is proving to be an asset to Metcash. In May this year, we announced that Tonianne Dwyer would retire from the Board following completion of our FY '21 financial statements. Tonianne has been a significant contributor to Metcash and has played a key role, particularly while Chair of the Audit, Risk and Compliance Committee, in the oversight of Metcash's growth and governance. The Board and I sincerely thank Tonianne for her efforts and dedication to Metcash. Also in May, we welcomed Margie Haseltine to the Board. Margie has over 30 years of experience spanning supply chains and logistics, customer interface in the FMCG sector, change management and governance and has over 12 years' experience in Board directorship. Margie's executive career includes 20 years at Mars Inc., including 5 years as CEO of Mars Food in Australia. Turning now to remuneration. Last year, the Board took certain measures in response to uncertainties associated with COVID. These included deferring scheduled remuneration increases for executive key management personnel, KMP; determining STI and LTI vesting outcomes based broadly on pre-pandemic outcomes to avoid any undue benefit; increasing the deferred component of the FY '20 STI award; and deferring scheduled nonexecutive director fee increases. Once the group's performance stabilized in FY '21, the previously approved increases to KMP remuneration were applied, and KMP STI deferral percentages returned to standard policy. Remuneration for the Group CEO has not changed since his appointment in 2017. And while no increase was applied to his fixed pay, there was an increase to his STI and LTI opportunity to better align his pay mix to market practice and increase the at-risk component of his total remuneration. The remuneration package for the CEO of our Food pillar was increased, positioning him slightly below his peer group benchmark. Board fees increased 5% in FY '21 and remain below medians at between 81% and 99% of peer group benchmarks. The Board is seeking shareholder approval to increase the Board fees pool from $1.6 million to $2 million, which will provide capacity to appoint an additional director in the future. This will be the first time the Board has saw an increase in the fees pool since 2012. We will discuss this later in the meeting. STI outcomes for KMP ranged from 67% to 90% of maximum, reflecting the delivery of exceptional results in FY '21. Our FY '19 LTI vested at 90%, reflecting the underlying earnings per share CAGR hurdle being met and the TSR hurdle being exceeded by 6%. We will have the opportunity to discuss the remuneration report later in the meeting. Now to our workforce. For the third consecutive year, Metcash was awarded an Employer of Choice citation by the Workplace Gender Equality Agency. This is recognition of our deep commitment to gender pay parity and gender equality in the workforce. Metcash was also awarded gold-level recognition under the Mental Health First Aider Skilled Workplace Program and was identified as the Flexready-certified organization, which recognizes leading employers who support flexible work practices. And importantly, our overall employee engagement result continued to improve in FY '21, lifting a further 20% to 57% through the significant efforts of our people despite facing many challenges such as the ever-changing health regulations. I would now like to briefly touch on ESG as we have significantly stepped up our efforts in this important area. FY '21 included the company further improving its ESG credentials, expanding its ESG disclosures and embedding sustainability into the Metcash culture. Our achievements this year as well as the expanded disclosures are detailed in our first sustainability report, which is included in our 2021 annual report and can be found on our website in the Sustainability section. We expect to continue building on this progress over the coming years. Going forward, while it's been an exceptional year for Metcash, shoppers are continuing to enjoy visiting their local independent stores in our food, liquor and hardware network, particularly during the current lockdowns. Sales in the first quarter of FY '22 continue to be elevated, as Jeff Adams will comment on shortly. Making our retailers more competitive has proven to be the right strategy for Metcash. And importantly, we continue to be well positioned with a strong financial position that includes flexibility to invest in our growth plans. Our sharpened Mfuture plans for the next 3 years aim to further improve our retailers' competitiveness and include a balance of good growth and cost-out initiatives. While our Hardware pillar is already positioned with leading digital technology, we are stepping up our investment in digital to accelerate the delivery of solutions for our food and liquor retailers, who now have an increased interest in these solutions. We are also investing in a new project named Horizon, which aims to drive efficiencies through simplification as well as growth through making it easier to do business with Metcash. This will be a staged program with the first phase focused on simplification and building a better future operating platform. In closing, I would like to thank all of our people, the Metcash leadership team, our independent retailers and suppliers for what has been an exceptional year. And to our shareholders, to you, I would like to express my thanks and that of the entire Board for your ongoing support. Finally, I would like to thank my fellow directors for their commitment and contribution to Metcash over the past year and for their ongoing support. I will now hand over to Jeff to give his presentation, which was also released to the ASX this morning.

Thanks, Rob. Good afternoon, everyone. I hope all of you, your families and your friends are safe and healthy as we live through these and work through these uncertain times. As Rob mentioned, I'll talk you through some of the highlights from the group's FY '21 performance. But before I do that, we'll start by looking at our purpose, vision and values. Most of this slide remains unchanged from what you've seen in the past, and it's been another outstanding year from the Metcash team of really delivering on our purpose of championing the success of our independent networks. The one change we have made on this slide is to our vision statement, where you can see there on the last line that we've added creating a sustainable future to reflect our increasing focus on ESG, which I'll talk more about in a minute. Moving on to the next slide, our refocused group strategic direction. So we launched this at our Investor Day last March and is now embedded into each of our businesses. It is the driver for all of our strategic initiatives, with all of our businesses refocused on being customer- and shopper-led, easy to do business with, the business partner of choice for suppliers while being a low-cost operator and improving the competitiveness of our retailers. These are all the keys to delivering better shareholder value. Turning over now to the next slide on ESG. This slide outlines a number of the key initiatives, changes and improvements that we've made in the year, resulting in an overall improvement in our ESG credentials, with our Dow Jones sustainability ranking improving from 46 to 29 in the year. And you can find out more on our ESG work and plans in this year's annual report in the separate sustainability sections. I'll move on now to talk about our financial performance, starting with the group highlights. As Rob said, it was an outstanding year for Metcash with record sales of over $16 billion driven by strong sales growth in all of our pillars, benefiting from the shift in consumer behavior and the success of our MFuture initiatives. And you can see some of this highlighted in the middle of this slide, with revenue growth in the financial year up over 10% and EBIT growth of nearly 20%, resulting in a record operating cash flow of over $475 million. Moving on now to the next group highlights slide. Our results have delivered a significant return of capital to our shareholders while we also continue to invest into future growth initiatives. We've increased our dividend payout ratio from 60% to 70%, resulting in a $0.175 dividend in the year, a 40% increase from the previous financial year. And we recently completed very successful off-market share buyback of $200 million. Between the increased dividend and the share buyback, over $380 million was returned to shareholders in FY '21. We'll just move to the next slide. The next slide shows the breakdown of the results by each of our businesses with the strong revenue growth shown there at the top of the slide for each of the businesses compared to FY '20 and the resulting EBIT growth, as I previously mentioned, with sales up about 10% and EBIT up nearly 20%, showing strong operating leverage for the year. The other call-out on this slide is the change in the group's earning profile, which you can see from the pie chart on the bottom right, with the Hardware business moving from 25% of group EBIT in FY '20 to 33% now in FY '21. Moving on to the Food Mfuture initiatives now on the next slide. The key initiatives are listed there across the top of this slide: network of the future, e-commerce and loyalty and improving our supply chain. I'll just comment on a few of the highlights from each of these areas as we previously covered each of these initiatives in detail at our March Investor Day. Under the network of the future, we've now completed over 600 of our Diamond Store Accelerator store refreshes, and these continue to be a key part of helping our retailers to modernize their stores and to be more competitive. Our retailers have clearly seen the benefits of the DSA program, and we have a strong pipeline of stores to refresh, and we will be targeting to complete over 100 stores a year through FY '26. Our e-commerce platform, IGA Shop Online, has moved from pilot to rollout. We continue to see strong interest from our retailers, and we have a target of about 800 stores using this platform by FY '25. The IGA rewards program, loyalty program continues to roll out after a successful pilot with over 200 stores now on this program. Lastly on this slide, the Food team continued to focus on improving the efficiency of our supply chain with several of the initiatives listed there on the right-hand side of this slide. So moving on to the Liquor MFuture initiatives now on the next slide. Again, the key programs of work in progress are listed there with the first being digital transformation, which is focused on POS integration; e-commerce, where we know the potential size of the prize is big; and setting up a new loyalty scheme. The next column is improving our brand awareness and appeal. This is about getting the right banners in the right locations with the right offer for those local customers. And the next column is owned and exclusive brands, where we have historically underperformed against the rest of the market, but we have a real focus now from the Liquor team to accelerate our growth in this area after our acquisition, as Rob mentioned, of the Kollaras portfolio of brands. And finally, similar to Food, the last column there on the right is the Liquor team's continued focus on improving the efficiency of our supply chain. Next slide is the MFuture initiatives in Hardware with the key focus being on growing both our DIY and our trade business, as outlined by the 2 columns there on the left and the right, being joined together in the middle by our focus on protecting and growing our joint venture and company store network. Starting on the left, grow in DIY. We are expanding the scope of our Sapphire store refresh program, which is now targeting to complete 300 stores by 2025, up significantly from our previous target of 200 stores. And the success of this program means we continue to see strong retailer interest in completing the Sapphire refresh. We continued the trial and rollout of emerging categories which are in significant growth in the market, with a number of those listed there, and we're delivering good growth for both us and for our retailers. And finally, the work the team has been doing around digital and e-commerce with the Hardware team really ahead of the rest of the group in these areas and has been delivering triple-digit growth year after year. Under building trade there on the right, we continue to complete our Trade Center Sapphire refreshes with 50 now targeted by FY '24. Our Whole of House initiative is about expanding our share of a house build that we can supply to a builder. And this is really starting to gain some momentum now. And finally, we're continuing the good work already done on some of our market-leading digital tools that we supply to our customers and builders, with a number of those listed there on the right-hand side of the slide. Just move to the next slide now. The next 2 slides are background information on our recent acquisition of an 85% share of Total Tools business. Starting with this first slide, this is a fantastic business built by a dedicated group of franchisees over the past 30 years. It is the #1 player, as Rob mentioned, in the professional tool market and is now operating in over 90 stores and has very good growth plans in place. Just move to the next slide now. The next slide really outlines the key drivers of those growth plans, which we discussed in detail at our March Investor Day, and we are seeing each of these initiatives already delivering against those growth plans. Total Tools is a very complementary business to our existing Hardware business, and we're really excited about the future growth opportunity this represents for both our Hardware business and for the MetCash Group. So just moving to the next 2 slides now. We've included a trading update in the presentation today. And as you'll be able to see from the update, we've continued our strong start in FY '22 across all 3 of our businesses. And finally, just to wrap up for me, I would like to thank all of the Metcash team, our retailers and our suppliers for all of your support in FY '21 and into the start of FY '22. The past 18 months has truly been unprecedented, and all of you continue to step up and deliver every day. Thank you.

Thank you, Jeff. Thank you for that presentation. Turning now to the formal items of business. The FY '21 financial report is the first item. So with [indiscernible] consider the financial report of the company and the reports of the directors and auditor for the financial year ended 30th of April 2021. You will note that there's no requirement to vote on the reports. The company's 2021 annual report was sent to shareholders who requested a hard copy and made available on the company's website and the ASX market announcements platform. The 2021 annual report contains the statement of comprehensive income, the statement of financial position, the statement of cash flows and the reports of the directors and auditor. I will now respond to the questions we've received on this item in advance of the meeting.

The first is from this [ Ms. Natasha Lee ], and she asked, I note that there has been a substantial increase in corporate costs from $4.8 million to $15.7 million. Could you outline what has driven this increase? Will costs continue to increase? Or are there one-off expenses? How much is due to changes caused by COVID? Yes, you're right, corporate costs did increase. This was, in the vast majority, the result of higher insurance costs. You'll find -- I think this is the experience for many listed companies this year, and the insurance markets are running at near all-time highs in terms of companies getting insurance cover. There was also obviously an increase in the cost of employee incentive schemes this year because of the results that we delivered. That, to a certain extent, is a high-class problem. And in terms of COVID costs, which your question asks, these costs were really not material. They were costs, but they were not material to the same scale of the other costs I mentioned. The second question also came from [ Ms. Lee ], and she asked, the increase in intangibles is largely due to goodwill. How did the auditors assess goodwill? What period of historic cash flow was used, i.e., how many years of data was used? Was sensitivity analysis done? If so, explain how. The audit procedures performed on goodwill are specifically detailed in the audit report on Page 119 of the FY '21 annual report. The key assumptions used in the goodwill assessment are detailed in Note 10 to the financial statements or Page 89 of the annual report. In accordance with the accounting standards, this includes an estimate of future cash flows, not historic cash flows, and includes cash flow projections covering a 5-year period based on approved strategic plans or forecasts and estimates beyond the 5-year period calculated using estimated terminal growth rates that are applicable to the trading environment in which the given CGU operates. And yes, sensitivity analysis has been done, where the key assumptions used in the assessment were changed and the effect on the recoverable amount analyzed. For the forecasted cash flows, discount rates and growth rates are important factors. As disclosed in the financial report, there was no reasonably likely change in key assumptions that was likely to cause any impairment issues. And [ Ms. Lee's ] final question, I appreciate and congratulate the Board on last year's results. I see there's been a large increase in employee numbers. Is this due to the inclusion of Total Tools employees or other factors? Please explain. And your question, indeed, almost answers itself. Yes, the majority of the increase was due to the inclusion of Total Tools employees. We also got a question from Mr. Don Adams of the Australian Shareholders' Association. And he asked -- or he said and then he asked, the Australian Shareholders' Association recognizes Metcash's success in its 3 main pillars. But there is tough competition in each of these markets, which may limit growth opportunities for the company. What is your thinking about expanding into other markets that would use your marketing and logistic skills, for example, pharmacies, foodservice or New Zealand? Did you see opportunities like these? Well, firstly, I'd like to say to Don and the ASA, thank you for recognizing the success of our businesses. You are also clearly right. As you know, from the time we discussed together, our markets are very competitive, but that doesn't mean that we don't have good growth opportunities. I would refer you and, indeed, all of our investors to our Investor Day presentation, which can be found on our website. Here, we outlined our growth opportunities for the remaining 3 years of our MFuture program. This includes some very exciting and new opportunities arising from our acquisition of Total Tools Holdings. Many of our growth initiatives focus on further improving the competitiveness of our independent retailers, which, as you've seen, has been a very successful strategy to date for Metcash. In terms of expanding into other markets, we will continue to consider opportunities as they arise should they align with our strategic direction, but importantly, if and only if they provide potential value for our shareholders. I will now ask our Head of Corporate Affairs and Investor Relations, Steve Ashe, to read out any questions on this item received online.

Thanks, Chairman. Yes, there have been a number of questions received by [ Mr. Stephen Mayne ]. The first question is, could you please advise if there have been any protest votes above 10% on the proxies? And if so, what was the issue of concern? And which of the proxy advisers recommended a vote against?

Thank you, [ Stephen ], for your question. None of the proxy advisers recommend against on any of the [ resolutions ], and we haven't recorded a -- I think your phrase was protest vote of anywhere near 10% on any of the resolutions.

The second question is, does the demerger of Endeavour Group out of Woolworths make Woolworths a weaker competitor in both the supermarket and liquor space because it now has reduced market power? Is the demerger something that Metcash welcomes? Have you noticed any changes in market practice by either Woolworths or Endeavour since the demerger took place effective in July?

I mean I've -- this is a matter that Jeff and I and the Board have been discussing relatively recently. So either I can answer it or Jeff could answer it. We've really -- I think to give you a top line, we've really seen no discernible difference in the competitiveness of the biggest player in the market in both of those markets, which is, indeed, Woolworths. The supplier base is quite discrete, and I think it's fair to say that they are as powerful and remain as powerful in those markets as they did before the demerger. Beyond that, I really wouldn't want to comment. They -- we're really not noticing any day-to-day difference in the competitiveness of that major player.

The next question is, is the 5-kilometer limit for residential -- residents during the current Melbourne lockdowns good for Metcash because it forces more residents to become familiar with shopping at their local IGA rather than being at Coles and Woolworths further afield?

I'll invite Jeff to comment on that.

Yes. Thanks, Rob. Look, I think, obviously, we've got the same restrictions in place for Sydney metro as well. And to be honest, we haven't seen any real change in the performance across our businesses between being in lockdowns or out of lockdowns. So it's been fairly consistent to the numbers that we've put into the trading update. So we haven't seen any kind of a material shift because of these 5-kilometer restrictions that were put in place.

Next question. With the benefit of hindsight, was it a mistake to rush in with a $300 million selective placement at $2.80 in May last year, particularly given that we have now just completed a $200 million buyback? With the stock now at $4, does the Chair agree that this placement needlessly diluted retail shareholders, particularly given that the accompanying SPP only raised $13.6 million from retail investors? What's the current split between retail and institutional holders?

Well, let me answer the first bit of that question first. If you were to read our annual report, I think we disclosed details on the top 20 shareholders. I think they're all institutional, and it's 86%. So I think it's realistic to assume that small individual shareholders are probably less than 10% of our total shareholding base. In response to your first question, I think, in honesty, there's a number of things you would do differently in life if you had perfect knowledge of what was going to happen in the future. There are a lot around this pandemic that I think all the businesses and players might have done. But the reality is that we didn't know those things. And last year's equity raising was taken at a time when the outlook for Metcash and the Australian and New Zealand economy was highly uncertain. And it was responsible and responsive of the Board, I believe, to secure the company's position in light of that. I think Metcash would like to acknowledge the shareholder support it received during the COVID-19 period. And as outlined as part of the equity raising in 2020, if conditions improved or the economy and the recovery accelerated, Metcash at the time said we would assess the optimal method to return capital to shareholders at an appropriate time. The off-market buyback recognizes that improved outlook for Metcash and the broader economy post the initial COVID-19 impact in 2020 and the strong ongoing performance of the Metcash business. The off-market buyback, which we've just executed, is a mechanism that can maximize returns to shareholders that have continued to support Metcash and is EPS accretive. So without the benefit of that perfect hindsight you talked about, I think we as a Board have acted responsively and responsibly for our shareholders.

The last question from [ Stephen ] is, will we provide a full year recording of today's AGM and put on the website? The answer is yes.

Okay. We will do that. I'm glad to.

There are 2 more questions, both from [ Mr. Henrik K ]. First one is, with regards to IGA fuel discounts, it's confusing with customers, one company, BP, then in another -- and a different one. I propose that the linkage with United Petroleum be considered. This would help both a single linkage and also help both companies if Woolworths linked with Ampol and Coles with Coles Express. Why is this not done by Metcash?

We should probably get Scott here. Scott, you are presumably out there in the [indiscernible] somewhere. Would you be able to answer that question or consider that thought?

Yes. Thank you. And thanks for the question. I think, for us, loyalty is something we want to build on. I think the linkage with fuel and our customers is a specific one that we don't manage, and people have done that locally by site. And working with our national retailers, we all acknowledge there's future opportunity for us to collectively get into this space. So I take your question and happy to take any further feedback on that directly.

Thanks, Scott.

The last question is also from [ Henrik K ], and it's a statement. It says, with regards to a loyalty scheme, I would suggest that this cover all brands in the Metcash Group.

Well, we certainly thank you for your [indiscernible] shareholders who are engaged enough to suggest ideas. I can promise you that, that will be one idea amongst many others that we will definitely consider. So I understand your direction and thinking in that. So I appreciate the input.

There are no other questions, Chairman.

Okay. We'll now move to consideration and discussion of each of the resolutions to be put to the meeting. A reminder that those eligible to vote on the resolutions can submit their votes at any time. So Resolution 2a is the election of Ms. Christine Holman as a director. Shareholders are asked to consider the election of Ms. Christine Holman as a director of the company. Christine was appointed to the Board in September 2020. Under the company's constitution, Christine retires at the conclusion of this meeting and, being eligible, offers herself for election. Christine's profile is outlined in the explanatory memorandum contained in the notice of meeting and also the annual report. Christine is a member of the Audit, Risk and Compliance Committee and the Nomination Committee. The Board has concluded that Christine is an independent nonexecutive director and unanimously supports her election. I invite Christine to address the meeting in connection with this resolution.

Thank you, Chairman, fellow directors and shareholders for giving me this opportunity to put myself forward for election to the Metcash Board. Following a 25-year executive career in technology, private equity investment management and building long-term sustainable growth businesses, I bring technology and digital transformation management skills, together with demonstrable capability in finance, capital management, mergers and acquisitions and embedding ESG principles in the overall business and corporate strategy for delivering growth and sustainable value. All of this underpinned by strong ASX governance experience, which are all relevant to Metcash. Our ability to operate in the digital economy is going to be extremely important and pivotal for the success of Metcash moving forward. Using best-of-breed digital platforms will become extremely important to provide a truly localized, customized, personalized experience for our consumers. I was pleasantly surprised by how wide Metcash's footprint extended within the regional areas of Australia that have traditionally been the backbone of our nation but perhaps sometimes forgotten. Metcash has the opportunity to leverage and enhance its amazing regional presence, its logistics and supply chain capability to create a dynamic and valuable network that can play an important role as part of our nation-building objectives through and post COVID. Finally, perhaps one of the most important for you as shareholders is helping build and unlock shareholder value through rigorous and disciplined decisions around capital management as custodians of your capital and in doing so, acting with integrity and transparency at all times. The history and legacy of this company is not lost on me as I take on this opportunity, if allowed to do so today. I've spent a lot of time over the last 11 months visiting Metcash sites and stores and meeting with some of our staff, our retailers and consumers. What has been unmistakably obvious is the commitment and passion that all of these stakeholders have for upholding and defending independents. I believe my skills will be valuable to help Metcash as we continue to advocate for independence and support our retailers, communities and consumers in a meaningful way. This is a great time to join the Board of Metcash. I'm truly grateful for this opportunity, and I ask that you support my nomination today. Thank you so much.

Thank you, Christine. The resolution is now open for discussion. We did not receive any questions on this item in advance of the meeting. I will therefore now ask our Head of Corporate Affairs and Investor Relations, Steve Ashe, to read out any questions on this item received online.

There are no questions, Chairman.

Steve has just confirmed there are no further questions on this item. Resolution 2b is the election of Ms. Margie Haseltine as a director. Shareholders are also asked to consider the election of Ms. Margie Haseltine as a director of the company. Margie was appointed to the Board in May 2021. Under the company's constitution, Margie retires at the conclusion of this meeting and, being eligible, offers herself for election. Margie's profile is outlined in the explanatory memorandum contained in the notice of meeting and also the annual report. Margie is a member of the People and Culture Committee and the Nomination Committee. The Board has concluded that Margie is an independent nonexecutive director and unanimously supports her election. I invite Margie to address the meeting in connection with this resolution.

Good morning. My name is Margie Haseltine, and I joined Metcash Board in May this year, and I have to say I'm both excited and honored to have joined the Metcash team. My executive background was 20 years in FMCG at Mars Inc. 15 of those was in supply chain working across both all of food, snack and pet. My final last 5 years at Mars was as the CEO of Mars Food. And over my shift there, I brought Uncle Ben's shelf stable rice and finishing sources to the supermarket shelves. I'm an experienced nonexecutive Board director with over 12 years of full-time professional experience. I currently chair Bapcor, an ASX 200 automotive aftermarket car parts company, and also have previous experience in sharing both [ RIM ] and of [ Friston ] as Audit Chair and sitting on those committees. I'm also on the Newcastle Permanent Building Society where I sit on both the Audit and Risk Committee and the Remuneration Committee. I also participate in the Central Coast where I live with a lot of not-for-profit and community actions, including things such as the Fairhaven and also on the Newcastle Charitable Foundation Board. So what do I bring to Metcash? What I believe I bring to Metcash is a passion and independence in community and the experienced retailing and franchise background, strong FMCG and supply chain knowledge and also a strong and current experience in both remuneration, ESG and digital systems. But I think most importantly, I bring a change transformation experience and expertise in bringing about cultural, structural, innovative change to unlock and deliver value for our investors and all of our stakeholders. As I joined the Metcash team, I've recognized the quality and experience of my fellow Board directors and the very experienced, dedicated and passionate senior executive team and staff. We have much to do with some far-reaching and positive change programs such as Horizon and MFuture to both strengthen our core and to seize the future with innovation. I'd like to thank everybody for your support, and I look forward to working with you all in the future. Thank you.

Thank you, Margie. The resolution is now open for discussion. Again, we did not receive any questions on this item in advance of the meeting. I'll once again therefore now ask our Head of Corporate Affairs and Investor Relations, Steve Ashe, to read out any questions on this item received on the line.

There are no questions, Chairman.

Steve has just confirmed that there are no questions on this item. So I'll now move to the next resolution. Resolution 2c is the reelection of Mr. Murray Jordan as a director. Shareholders are now asked to consider the reelection of Mr. Murray Jordan as a director of the company. Murray joined the Board in 2016. Under the company's constitution, Murray retires by rotation at the conclusion of this meeting and, being eligible, offers himself for reelection. Murray's profile is outlined in the explanatory memorandum contained in the notice of meeting and also the annual report. Murray is a member of the Audit, Risk and Compliance Committee, the People and Culture Committee and the Nomination Committee. The Board has concluded that Murray is an independent nonexecutive director and unanimously supports his reelection. I invite Murray to address the meeting in connection with this resolution.

Good afternoon, ladies and gentlemen. It is a pleasure to be coming to you from Auckland, New Zealand. I know it's not that satisfactory that I wasn't able to get over to Australia, but that is due to the travel bubble not being available. I would like to offer myself for reelection as an independent nonexecutive director of your company today. I recognize this role is both a privilege and a responsibility. And today, therefore, I wanted to share with you a little about the skills, experience and expertise I bring to the Board, what I'm particularly passionate about and what I look forward to contributing to Metcash and its governance if reelected today. I was first appointed to the Board in February 2016. Prior to that, I was the Managing Director of Foodstuffs New Zealand, a cooperative, which is the largest grocery distributor in New Zealand. Foodstuffs operates a very similar model to Metcash, supplying and supporting independently owned and operated businesses. As such, I have brought out deep knowledge and expertise in grocery, wholesaling and retailing and have unique insights into the challenges and opportunities of conducting and supplying independent businesses in that sector. I understand the vital role that independent food and grocery businesses play in our communities. Through my experience at Foodstuffs and now Metcash, I'm genuinely passionate about Metcash's core purpose of championing successful independents and ensuring that these independent businesses continue to thrive long into the future across all the sectors, food and grocery, liquor and hardware that Metcash supplies. I also have experience in the corporate arena having held senior management positions in property development and investment, which enables me to bring financial discipline and expertise to Metcash projects and initiatives. I'm currently a nonexecutive director of Chorus Limited, telecommunications company; Sky City Limited, which specializes in entertainment; Metlifecare, which is a large New Zealand retirement village operator. And also, I am a trustee of Starship Foundation, a New Zealand children's charity; as well as Southern Cross Medical Care Society and the Southern Cross Health Trust, part of the Southern Cross Group, a health care insurance business. These roles help me understand the issues that arise in other industries as well as more broadly to see how governance and risk are dealt with across a broad range of businesses. I reside in New Zealand, and recently, I reflected on the challenges posed by the COVID-19 pandemic and being a nonexecutive director of your company when based in New Zealand. Whilst this has definitely posed challenges as per today, I have still been able to effectively engage with other Board members and management and meaningfully contribute to discussion, debate and direction on strategic and operational matters throughout this period. Recently, I was also able to physically attend a Board meeting in Sydney with the travel bubble between Australia and New Zealand implemented this year. This provided a great opportunity to reconnect with my colleagues and reignited my enthusiasm and passion for this company and my commitment to playing a meaningful part in steering the company through the COVID-19 pandemic and beyond as it executes its strategic plan and initiatives. I remain fully committed to Metcash, its business and its people. I'm very excited by what Metcash has achieved over the past few years since my last election, on safety, financial results and now the MFuture initiatives, just to mention a few. But I'm more excited by our plans for the future such as our Horizon and Metcash digital accelerated projects and our significantly increased focus on sustainability and how Metcash can better contribute to a sustainable future, again, just to name a few. If reelected today, I look forward to continuing to work with management towards a strong and sustainable business, supporting independent businesses long into the future. Thank you very much.

Thank you, Murray. The resolution is now open for discussion. We didn't receive any questions on this item in advance of the meeting. So once again, I'll ask our Head of Corporate Affairs and Investor Relations, Steve Ashe, to read out any questions on this item received online.

There are no questions, Chairman.

Steve has just confirmed that there are no further questions on this item. Resolution 3 is the resolution to adopt the remuneration report. The remuneration report forms part of the director's report of the company for the financial year. It is set out on Pages 56 to 71 of the 2021 annual report. Please note that the vote on this resolution is advisory only and does not bind the directors or the company. The resolution is now open for discussion. I will once again first respond to the questions we've received on this item in advance of the meeting. [ Mr. Francis ] has asked, why should there be any performance bonuses to the Board when they get paid to do the job just like all the employees? If they don't perform, well, they should be removed. Firstly, directors don't receive any performance bonuses at all. While Jeff Adams is a director, his eligibility for a performance bonus is through his position as the Group CEO, not as a director. From a performance perspective, directors go through a rigorous review process, and I can report that all have performed very well, all received feedback and assessment in the year gone by. I believe our shareholders have a quality Board with the right mix of skills and experience representing them and their interests. Mr. Don Adams from the Australian Shareholders' Association has asked, the ASA is voting for the adoption of the remuneration report, but as we have explained to the company, it is a close call for several reasons. One of these is that the report does not disclose the weights given to the factors that make up the STI score. Would you consider including these weights in future remuneration reports? We'll take your comments on board, Don. We take them seriously. But I'd like to point out that in reality, we have been applauded by the other proxy advisers for the quality and clarity of this year's remuneration report. We also had KPMG review our remuneration report, and they concluded our disclosures were above market practice. In relation to STI outcomes, we provide detail on how the STI pool is derived, including the EBIT targets and various thresholds. We note there is equal weighting between scorecard and behavioral performance. We provide scorecard targets, outcomes and what is required to reach threshold, target and stretch outcomes. We note that financial and value creative objectives account for 60% of the scorecard, and that performance against strategic objectives accounts for 40% of the scorecard performance. We then provide performance outcomes for each KMP against the scorecard criteria. We then disclose the percentage achieved for each KMP against the targeted maximum. Our level of STI detail, therefore, has certainly increased this year, and I believe our remuneration disclosure overall is at a high level. That said, we acknowledge and will consider the comment of the ASA. I will now ask our Head of Corporate Affairs and Investor Relations, Steve Ashe, to read out any questions on this item received online.

There are no further questions, Chairman.

Steve has just confirmed there are no further questions on this item. I now move to Resolution 4a. Shareholder approval is sought to grant performance rights to the Group CEO, Mr. Adams, for his FY '21 long-term incentive award. In light of the uncertainty around the COVID-19 pandemic, the Board decided to defer finalizing the grant of an FY '21 LTI award for Mr. Adams until the business outlook was clearer. Given the stability of Metcash's operations over FY '21, the Board has determined that it is now appropriate to proceed with the FY '21 LTI award to Mr. Adams on the usual terms. And accordingly, shareholders are being asked to approve both the FY '21 and FY '22 LTI grants at this year's Annual General Meeting. If shareholders approve the FY '21 LTI grant to Mr. Adams, he will be granted 532,946 performance rights. This number has been determined by dividing Mr. Adam's FY '21 LTI opportunity of $1.375 million by $2.58 being the volume weighted average price of the company's shares traded on the ASX over the 20 trading days ended the 16th of March 2020, being the last trading day determined by directors to be the closest day to the end of the company's 2021 financial year, that was before the impact of the COVID-19 pandemic. Mr. Adam's FY '21 LTI opportunity is 76.4% of his total employment cost, or TEC, of $1.8 million. The award will be subject to 2 performance conditions that will be tested over a 3-year performance period running from the 1st of May 2020 to the 30th of April 2023. Half of the performance rights will be subject to an absolute total shareholder return hurdle. The remaining half of the performance rights will be subject to a return on funds employed performance hurdle. Further details about the award of these performance rights to Mr. Adams and each of these performance conditions is set out in the explanatory memorandum accompanying the notice of meeting. The resolution is now open for discussion. I will once again first respond to the questions we have received on this item in advance of the meeting. Mr. Don Adams has asked, ASA policy prefers that all grants of performance rights to the CEO be approved by shareholders. We note that Metcash does not seek approval for STI performance rights on the grounds that you purchase the shares on market rather than issue new shares as allowed by the ASX listing rulings. When did you purchase the 232,558 shares granted to Jeff Adams on the 15th of April 2021 under the FY '20 STI plan? For the FY '21 STI plan, Mr. Adams has been granted $794,351 worth in performance rights. How many performance rights are there? So the answer to this question, the 232,558 performance rights for Jeff vested in April 2021, and the shares were purchased on market on the 19th of April this year. In relation to the $794,351 of performance rights under the FY '21 STI plan, we applied the VWAP of $3.74 to determine 212,393 performance rights. These were allocated in August 2021. Subject to vesting conditions, we would look to buy on market and allocate shares between the 15th and the 25th of April 2022. I will now ask our Head of Corporate Affairs and Investor Relations, Steve Ashe, to read out any questions on this item received online.

No further questions, Chairman.

Steve has just confirmed that there are no further questions on this item. I now move to Resolution 4b. As mentioned, shareholder approval is also sought to grant performance rights to the Group CEO, Mr. Adams, for his FY '22 long-term incentive award. If shareholders approve the FY '22 LTI grant to Mr. Adams, he will be granted 367,646 performance rights. This number has been determined by dividing Mr. Adam's FY '22 LTI opportunity of $1.375 million by $3.74, being the volume weighted average price of the company's shares traded on the ASX over the 20 trading days ended 30th of April 2021, the last trading day before the start of the company's 2022 financial year. Mr. Adams' FY '22 LTI opportunity is 76.4% of his total employment cost, or TEC, of $1.8 million. The award will be subject to 2 performance conditions that will be tested over a 3-year performance period running from the 1st of May 2021 to the 30th of April 2024. Again, half of the performance rights will be subject to an absolute total shareholder return performance hurdle, and the remaining will be subject to a return on funds employed performance hurdle. Further details about the award of these performance rights to Mr. Adams and each of these performance conditions is set out in the explanatory memorandum accompanying the notice of meeting. The resolution is now open for discussion. We did not receive any questions on this item in advance of the meeting other than the question from Mr. Don Adams on STI performance rights. That's already noted and answered. I will now ask our Head of Corporate Affairs and Investor Relations, Steve Ashe, to read out any questions on this item received online.

No further questions, Chairman.

Steve has just confirmed that there are no further questions on this item. I now move to Resolution 5. Finally, shareholder approval is sought to increase the maximum amount available for payment of nonexecutive directors' fees by $400,000 to $2 million. The current maximum amount of $1.6 million was approved by shareholders at the 2012 Annual General Meeting. And hence, there has been no increase in the nonexecutive director aggregate fee pool for 9 years. ASX Listing Rule 10.17 provides that a listed entity must not increase the total aggregate amount of directors' fees payable to all of its nonexecutive directors without shareholder approval. Rule 7.3(a) of the Metcash constitution also provides that the total aggregate amount provided to all nonexecutive directors of the company for their services as directors must not exceed in any financial year the amount fixed by the company in general meeting. This aggregate fee pool is a maximum limit only. The additional headroom is seen as prudent to give the Board the necessary flexibility to continue operating effectively and manage succession planning. The result is now open for discussion -- the resolution is now open for discussion, I beg your pardon. We did not receive any questions on this item in advance of the meeting. I will now ask our Head of Corporate Affairs and Investor Relations, Steve Ashe, to read out any questions on this item received on the line.

We've received 2 questions, Chairman, from [ Mr. Stephen Mayne ]. The first question is, when did the directors last receive an actual fee increase? And what is the Board intending to do with Board fees once the fee increase is approved at today's AGM?

So the first question, I think we've disclosed already, there was a 5% increase in fees last year for the nonexecutive directors. We've also disclosed where that leads us with regard to the market median, which is just below -- I think we concluded that our fees are 81% and 99%, from memory of what I just said before, of that median. So what do we intend to do with it? I think really, we've stated that here. So nothing other than review our fees annually or certainly biannually to continue to assess whether we're paying our directors fairly and that will allow for future increases for as far as you can see going forward. Also, as we said, if we have this approved by shareholders, we'll be in a position where we can manage our succession internally if for any period of time, we need to run with a director extra in order to manage succession. We have a view that succession within our Board is best handled internally if we can possibly achieve it. We're trying to put ourselves in a position to do that.

The last question, again, from [ Stephen Mayne ]. When disclosing the outcome of the net fee increase pool and all other resolutions today, could you please advise the ASX how many shareholders voted for and against similar to what happens with the scheme of arrangement? This will provide a better gauge of retail shareholders' sentiment on all resolutions.

And we -- I think that's our normal practice, isn't it, Steve? I don't see why we can't do that at all. And so we will. So there you go. There's your answer. Are there no further questions?

No further questions, Chairman.

Okay. Well, I thank all of our shareholders for those questions, both in advance and online as we've gone through today's meeting. I appreciate it's a fairly clunky interaction, but it is good to have some interaction with our shareholders at least. Ladies and gentlemen, that concludes our discussion on the items of business. In a couple of minutes, I will close the voting system. Please ensure that you've cast your vote on all resolutions. I'll now pause to allow you time to finalize those votes. [Voting]

Thank you. I declare the voting closed. And I can declare that all resolutions have been passed by the necessary majorities based on the preliminary results displayed. Please note that the final results, which may differ slightly from those displayed on the screen, will be lodged today on the ASX market announcements platform when finalized. As this concludes the formal business of the meeting, I thank you all for your attendance and your ongoing support of your company. I would particularly like to thank you once again for joining our meeting virtually today and for your understanding in this challenging time. Thank you. And I declare the meeting closed.