Good day, ladies and gentlemen. Thank you for coming along to the annual general meeting of Metcash. My name is Peter Birtles, and I am the Chair of the Board of Metcash Limited. On behalf of the Board, I would like to thank you for all coming along today and attending this meeting. Before we commence, I would like to acknowledge the traditional custodians of the lands where we are today and where we are all connecting from. I am connecting in, because we are doing an online meeting, I am connecting in from the land of the Gadigal people of the Eora Nation, and I pay my respects to elders across country, past, present, and emerging. I extend that respect to any Aboriginal and Torres Strait Islander people here today. We certainly have a quorum present, so I now declare the annual general meeting open.
First thing that I would like to do is to introduce your Board of Directors who are with me on the stage here today. Firstly, we have Doug Jones, who is our Chief Executive Officer and Executive Director. Next to Doug, we have Marina Go, who is the Chair of our People, Culture, and Nomination Committee. We have Margie Haseltine, who is the Chair of our Safety and Sustainability Committee. Mark Johnson, who is especially busy with us. He is the Chair of the Audit and Risk and Compliance Committee, but also the Technology Advisory Working Group. Then we have Nicky Sparshott, who has recently joined the Board as a new Director, and therefore, under our constitution, will retire today and is offering herself up for election later in the meeting. Then we have David Whittle. Finally, we have Johanna O'Shea, who is our Company Secretary.
It is also Johanna's birthday today. She organized the meeting especially to be on her birthday. As well as the members of the Board, we have members of our leadership team here with us, and we have our Group Chief Financial Officer, Deepa Sita, who is at the front here. Sitting with Deepa, we actually have our Signing Partner from Ernst & Young, who are the company's auditors, Katrina Troughton. Ms. Troughton will be available to answer any questions that shareholders might have concerning the conduct of the audit, the preparation and content of the auditor's report, the company's accounting policies, and also the auditor's independence at the conclusion of the Group CEO's presentation. We welcome and thank Ms. Troughton for her attendance today.
Also, we have with us our Chief Executive Officer from our ALM , that is our liquor business, Kylie Wallbridge, and our CEO from our Total Tools and Hardware Group, Scott Marshall. We also have a number of other members of our Group Leadership Team with us as well. At the meeting today, we will review the company's activities during the year and receive and consider the accounts and reports for the 12 months ended April 30th, 2026. We will then go on to consider the four resolutions that were outlined in the notice of meeting, which was lodged with the ASX and made available to all shareholders on 7th of August , 2026. Moving on to talk about our voting instructions to help us run the meeting today.
All resolutions will be put to a vote, and we have electronic handsets which we will use to decide the votes by an instant poll. Once voting opens, the resolution text will appear, and it will bring up the voting options that are available to you. You do that by pressing the green square. You then press one if you are voting for the item, two to vote against, or three to abstain. To move on to the next item, press the green square again, or return to the full list of items by pressing the red triangle. Your selection and the word received will appear on the screen confirming that your vote has been cast. If you do wish to change your mind, simply select a new option by pressing one, two, or three and your original vote will be canceled and your new selection will be counted.
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. Once the poll is closed, the results will be displayed on the screen, showing the combination of votes that were cast in the room and also all the proxies that were received prior to the meeting. If you do have any issues with your handset, please obtain assistance from one of the attendants. If you are joining the meeting today online and you do wish to ask a written question, select the messaging tab at the top of the Lumi platform.
Type your question in the box towards the top of the page and press the send button. A copy of your submitted questions, along with any written response from our meeting team, can be viewed by selecting My Messages. Should you wish to ask your question verbally, click the Request to speak button in the broadcast window. The audio questions interface will now display, and you will be prompted to confirm your name and enter the topic of your question. Submit your details and select Join queue to be connected. If prompted, select Allow in the pop-up to grant access to your microphone. Please note, while you can submit questions from now on, I will not address them until the relevant time in the meeting. I will now turn to my formal address.
I will provide you with an overview of how the company performed in the 2026 financial year, as well as comment on other important matters, including our strategy, our Board changes, our approach to remuneration, and to ESG. I will then invite Doug Jones to talk in more detail about the company's operating performance as well as progress against our strategy. Let me begin with a look at the year in review and a brief overview of our financial performance. I am pleased to share that the company delivered a resilient performance in the 2026 financial year which reflects the strength of our diversified portfolio, disciplined execution, and the advantages of our independent retail model. This was achieved in a year of mixed trading conditions, ongoing cost of living pressures, and sector-specific challenges.
Against that backdrop, the group continued to demonstrate the quality and resilience of its earnings and cash generation while continuing to advance its long-term strategic priorities. The group delivered solid financial outcomes for the year. Group revenue increased to AUD 19.6 billion, which was up by 0.7%, and up by 3.8% if we exclude tobacco. Group EBIT was AUD 503.7 million, up 1.6%, excluding the AUD 12.4 million of strategy and integration costs.
Operating cash flow remained strong at AUD 558 million, which reflects the quality of earnings generated by our business and the focus on disciplined working capital management across the group and the inherent strength of our business. Underlying profit after tax was AUD 268.8 million, and underlying earnings per share were AUD 0.245. Total dividends for the year were AUD 0.18 per share, fully franked, which was consistent with last year and modestly above the group's target payout ratio.
The balance sheet remains strong with leverage of 1x at the low end of our target range, and this provides flexibility to support ongoing investment and shareholder returns. Food delivered another year of strong performance, supported by improved competitiveness in our supermarkets and ongoing growth in both food service and convenience. The continued expansion of this business is also helping to further diversify the group's earnings base. In hardware and tools, the integration of the Total Tools and the Independent Hardware Group has created a stronger, more scaled platform across both trade and DIY. While market conditions remain challenging, the improved momentum in the second half reflects the benefit of this integration and targeted management initiatives.
The success of the tobacco mitigation strategy has helped the business offset at least AUD 35 million of earnings from the loss of around AUD 1.8 million of tobacco sales since 2021, largely to illicit trade, as well as lower earnings from the market downturn in hardware and tools. The results we delivered are underpinned by a clear strategic direction. Our strategy remains centered on winning with independents. It leverages Metcash's unique combination of scale, differentiated capabilities, and strong competitive networks. This model continues to underpin the group's resilience and positions the business to capture growth opportunities across large and essential markets. The group continues to make meaningful progress in executing this strategy during the year. Importantly, the independent networks across food, liquor, and hardware and tools remain healthy and competitive and continue to attract retailers and suppliers.
It is the unique scale and capabilities of the Metcash model that ensure our customers are best placed to compete. Recognizing the conditions in which we operate, a key priority is to optimize the performance of our existing businesses. At the same time, we continue to invest in digital and data capabilities. This includes scaling the Sorted B2B marketplace and the near completion of our Horizon ERP program. We are also building a modern AI-ready operating environment in partnership with Microsoft and investing to make the business more scalable for the future. One that includes a stronger earnings profile and higher margin businesses. These initiatives are designed to strengthen the core platform, improve operational efficiency, and support future growth opportunities, including extending our offer into services such as retail media, loyalty, and digital, which Doug will expand on a little bit further.
Turning now to our Board changes. We have continued to ensure the composition of the Board reflects the right skills, experience, and diversity to support the company's strategy. As part of our focus on renewal, Helen Nash retired from the Board on the 31st of July, 2026. Helen made a significant contribution over her tenure, providing strong financial expertise and governance across a broad range of matters. On behalf of the Board, I sincerely thank Helen for her dedication and service, and we wish her well for the future. Also in July, we welcomed Nicky Sparshott to the Board as a Non-Executive Director. Nicky brings deep executive experience across retail, consumer goods, and digital transformation in Australian and international markets. Her commercial perspective and customer focus further strengthen the Board's capabilities and are well-aligned with Metcash's strategic priorities.
The Board remains focused on succession planning and maintaining an appropriate balance of experience, independence, and diverse perspectives. This brings me now to remuneration. The Board is committed to a remuneration framework that aligns executive reward with company performance and long-term shareholder value. The outcomes this year reflected performance in a challenging operating environment. Group earnings improved modestly, supported by a strong food result, continued growth in liquor, and improved momentum in hardware and tools in the second half. Against this backdrop, STI outcomes range from between 7.1% to 25.4% of the maximum opportunity, which the Board considers appropriate. Following a review of the remuneration framework, greater weighting was applied to long-term incentives with a corresponding reduction in short-term opportunity. This rebalancing strengthens alignment with shareholder outcomes and reinforces management focus on sustainable value creation.
The FY 2024 long-term incentive award vested at 20.5%, reflecting moderate financial performance over the period and subdued shareholder returns, which were below threshold. Deferral arrangements for senior executives continue to align remuneration outcomes with longer-term performance, with increased deferral applying this year to the group CFO. Non-executive director fees were unchanged in FY 2026. Overall, the Board is satisfied that remuneration outcomes appropriately reflect company performance and remain aligned with the interest of shareholders. I would now like to turn to ESG. Metcash remains committed to responsible and sustainable business practices with ESG embedded in how we operate and create long-term value. The safety and wellbeing of our team members remains our highest priority. We delivered further improvement in safety outcomes in FY 2026 while continuing to strengthen capability, proactive risk management, and mental health support.
We also continued to progress diversity and inclusion, maintaining gender balance at a board level and within the group leadership team, along with pay parity in line with WGEA reporting. In managing our environmental impact, the group achieved key milestones, including sourcing 100% renewable energy for our Australian operations and delivering a meaningful reduction in emissions. Pleasingly, we achieved our interim 2030 target ahead of schedule, alongside continued investment in our on-site renewable energy and efficiency. We remain focused on reducing waste and improving circularity with initiatives supporting recycling and waste reduction across the broader network. Our progress is reflected in strong external ESG recognition, improved modern slavery ratings, and enhanced disclosure through our sustainability report, which is aligned with the new sustainability accounting standards. We recognize that strong governance, a focus on people, environmental stewardship, and community support remain fundamental to delivering sustainable long-term shareholder value.
Looking forward, while trading conditions are expected to remain challenging, Metcash enters the 2027 financial year in a position of strength. The group has a clear strategy, strong market positions, and a resilient business model. The Board remains confident in the company's ability to deliver sustainable returns and long-term value for shareholders. In closing, I would like to thank my fellow directors for their continued commitment and contribution during the year, and on behalf of the Board, I would like to sincerely thank our management team, led by Doug Jones, all team members across the business, all our independent retailers, our franchisees, our suppliers. To our shareholders, thank you for your ongoing support and contribution. Thank you. I will now hand over to Doug to give his presentation, which was also released to the ASX before this meeting.
Thank you, Peter, and good afternoon, everybody in the room and online. I think you can go to the first slide. Thank you. I would like to begin, as I always do, with a reconfirmation of our purpose, which, as Peter noted a few minutes ago, is also our strategy. The keen-eyed among you will notice that we have evolved our strategy and purpose from championing successful independence to winning with and alongside independence. We feel that that is appropriate as we pursue our aspiration of being the number one partner, powering an unstoppable network of independent businesses across Australia. Next slide. On the subject of competitive advantages, we have three core aspects to those, which together give us a unique and specifically advantaged competitive moat around our business.
The first one is unmatched scale, which is manifested in the number of suppliers that we serve and customers that we serve each and every day, the thousands and thousands of bannered retail stores, as well as nearly 100,000 unbannered stores. Our trusted and differentiated retail capabilities sit on top of our logistics capabilities and alongside them and bring that unique scale to life every day. Alongside that and completing the trio are our competitive networks, which are the banners and brands that we operate and which form the ultimate manifestation of our market offer.
Next slide, please. As we note, we have made clear progress against the strategy that we articulated in April 2024 at our Investor Day. These are focused in three key areas. Firstly, on scaling our networks. Secondly, on improving our efficiencies. Third, on strengthening our networks. As you can see on the slide, there has been clear progress throughout. That said, we are not complacent. We know that there remains significant work to be done, and we are up for that. Next slide. As we then turn our attention to the results for the year that ended in April, earlier this year, the headline is that the FY 2026 result was delivered on a base of solid execution with the pressures understood and managed.
The key metrics of revenue of AUD 19.6 billion, up 3.8% excluding tobacco and growth in normalized EBIT and EBITDA, as well as a strong operating cash flow of AUD 558 million tell the story. Our financial strength comes through in our three-year cash realization ratio of 104%, our leverage at the lower end of the range, and dividends maintained at a 70% payout ratio. The key takeaway is that our earnings were resilient through the year.
We did a great job of converting cash, and our balance sheet provides us significant flexibility. Looking then at the portfolio, you can see each element of that portfolio doing its job. Food and liquor provide the stable earnings base. In a competitive and value-conscious environment, the earnings were maintained despite, as the chair noted, a significant decline in tobacco sales over a multi-year period. Hardware and tools maintained their sales momentum and had improved through the year, despite weak trade markets. We are pleased to say that we are seeing the results of our targeted actions delivering fruit. There was strong discipline in costs, in working capital management, and in the tight control of capital expenditure. Our platform extension into products and services both protects and strengthens our core as well as providing us new revenue opportunities and margin growth potential.
This matters because as food and liquor provide the stability and hardware the upside when the cycle turns, our diversified portfolio supports that resilience. On the next slide, you can see what we call the revenue stream view. We introduced this at the half year, and at the end of the year, we now include earnings. Wholesale remains our core earnings engine, and our growth and higher margin streams broaden our resilience and generate new opportunity. For investors, this evidence of the transition to the diversified platform, not a single channel wholesaler, should give you confidence. The proof points are the significant growth in wholesale earnings, up more than a third in the period, while the share of total earnings has reduced from 91% to 76%. This is in the context of that AUD 1.8 billion decline in tobacco sales since FY 2021.
The estimated earnings drag is around AUD 30 million, and at the same time, hardware retail earnings were down around AUD 30 million. So the businesses offset at least AUD 55 million through a stronger and larger and more profitable core. I must acknowledge that this includes acquired businesses, which required capital to be invested, and we are now focused on delivering returns on those investments. As we turn to ESG, to make some of the points that the chair noted already, we are very pleased with our progress against three key focus areas, planet, people, and our impact in the community.
It is noteworthy that we have maintained our 89th percentile ranking in the Dow Jones Sustainability Index for the third year in a row, and we have achieved an A rating in the Monash Modern Slavery rating, as well as Peter noted, met 100% of our baseline energy needs from renewable sources in the year. In the future, we are targeting this for all of our sites. I want to turn to Horizon for a moment. This core, large, and very complex IT project continues to show steady progress. We have already gone live with the customer master modules, and so significant elements of the solution are already live and in use. The full financial system has been used for more than a year now, and now along with the customer master, shows that a significant part of the technology platform is up and running.
We are planning to launch the Release One, which is Western Australia, and our national support office later in this quarter. There are two important things to note here. We have made the prudent decision to settle Release One through the peak trading period and to delay the Release Two into the first quarter of 2027. I flagged that this was an option at the results presentation in June. The second is that we have extended the scope to take advantage of the AI-ready fabric platform within the Microsoft technology stack. This was not available until recently, and certainly not at the inception of the program, and it allows for the retirement of legacy technology platforms and generates attractive returns. On the next slide, we turn to the trading update. As you can see, sales have continued in growth across all pillars.
We flagged that the first half earnings will be impacted by an adverse Superior Foods sales mix, the removal of the accelerated tobacco excise increase, which we told you about in June, and persistent food and liquor cost inflation. These cost inflation from elevated pressures are being offset to some degree by our cost out programs, which are on track. In the second half, we have plans to continue to reduce the impact in food and liquor and to continue to support the hardware momentum. In food, supermarket sales are resilient in a highly competitive trading environment. While in supermarkets tobacco is still negative, it is improving fast, and there is a direct correlation between the performance of tobacco with the strength of enforcement in that particular state.
In food service and convenience, corporate account growth has been offset by the decline in the continued margin pressure in the street business, as well as moderated growth in QSR and our shipping business. In petrol and convenience, we are pleased that we have had a number of contract wins with sales improvement flowing through and a large amount of that through tobacco. First half earnings will be impacted by that accelerated tobacco excise cessation, which is AUD 10 million for the full year, weighted towards the first half, adverse food service and convenience sales mix, ongoing cost inflation above sales growth. In liquor, we have continued to take market share through the ALM-supplied independents. This is within the context of a market that is characterized by subdued demand and elevated competitive intensity. Pillar earnings, like foods, will be impacted by ongoing cost inflation above sales growth rates.
In hardware and tools, we have had pleasing continuation of the sales momentum. Although market uncertainty does continue to impact the outlook for the sector, we have made good progress on the strategy of returning the business to mid-cycle margins. As I conclude then, I would like to iterate the chair's thanks both to my colleagues, to the Board, to the thousands of team members in our business, to the independents who partner with us and trust us with their business every day, and of course, to our shareholders. Thank you.
Thank you, Doug. Let's now turn to the formal items of business. Item one is the financial report. The item is to receive and consider the financial report of the company and the report of the directors and auditor for the financial year ended 30th of April , 2026. You will note that there is no requirement to vote on the reports. The company's 2026 annual report was sent to shareholders who requested a hard copy and was also made available on the company's website and the ASX market announcement platform. The 2026 annual report contains a statement of comprehensive income, the statement of financial position, the statement of cash flows, and the reports of the directors and the auditor, along with our first sustainability report, which was prepared in accordance with the Corporations Act 2001 and the AASB S2 climate-related disclosures. These reports are now open for discussion.
If you are a shareholder or a proxy, attorney, or representative of a shareholder and wish to ask a question about the reports or any questions generally about the business, please raise your hand and an attendant will offer you a microphone. When invited, please introduce yourself to the meeting and ask your questions. All questions should be directed to me as the chair in the first instance.
Our investor relations team will also be monitoring the online facility for questions, so an opportunity will be given to shareholders, both present in person or attending via the online facility, to ask questions specific to each resolution to be put to the meeting before voting on the resolution. If you do have a question in relation to a specific resolution, please hold that question until that resolution is considered. I'll open to the floor for any questions. Natasha. You g ot a microphone?
Thank you, Mr. Chair. Natasha Lee, shareholder. Firstly, I'd like to thank the Board for their solid result, although the share price is a little bit in the doldrums, we can't really do much about that. You will be aware that the dividend payment was a little bit late for some of us. There was a bit of a hiccup there. The first question concerns the price gap for your large store price gap for food. On page 15, you said it's 1.2%, but on page 25, you've got it as 2.1. I think a number's been transposed here. I was just wondering, what is the correct gap? Is this relating to wholesale or retail prices?
It is the measurement of retail prices against the competition. In terms of the number, Doug?
Hi, Natasha. Thank you for the question. I believe, but I will take it on notice and confirm for you, I believe the difference is the different baskets, whether it is the high compete, Extra Special stores, which have a lower price gap than all large stores. But I will confirm that for you. Those numbers are correct.
Right. Okay. It was just a little bit confusing anyway. But anyway, it is-
I think what is important to recognize there is just the progress that we have had in that area. It has been a continued focus over a number of years, and we have seen that price gap really reduce over time. So our retailers are in a much better position now to compete than they were a few years ago.
Yes, I've noticed that, and I think that throughout the supermarket retailers, there is a degree of price matching or near price matching, which you're reflecting there. As far as the Middle East war, you said there's been supply chain disruptions. Are they in particular areas? What has been the impact of that?
There have been limited supply chain interruptions. As a result of that, I think that the impact on our business was muted. We spoke about it in our results announcement and the pre-results announcement. The biggest direct impact, and I think all Australians felt it, was through the increase in fuel prices.
We managed that very carefully with our independent retailers as well as with our suppliers. We're fortunate that there were no major product disruptions, although we did take some considered positions on inventory ahead of what we perceived to be areas of specific risk. In the end, we've sold through all of that inventory, and I'm pleased to say that it's largely normalized.
Okay. That's good. Yeah. I hadn't heard of any sort of major disruptions like toilet paper being sold out and things like that. How are you monitoring the changing socioeconomic preferences in the liquor sector to identify the growth sectors? To what degree is use of AI and monitoring of purchasing through loyalty cards and the like being applied?
Yeah. Well, what we could say is that the focus on consumer behavior across the whole organization is something that has a lot of focus. Within the liquor sector, generally, we are seeing changes in consumption patterns. We are seeing changes in preferences. We are seeing a move towards convenience and lower volume purchasing, which is actually a positive for Metcash's liquor business, being more of a convenience-focused business, suiting the independents within that. I am sure Kylie can talk much more knowledgeably than I can in terms of the category changes. But we are seeing a focus much more on that immediate solution rather than necessarily buying in bulk.
Yeah, because there are generational-
Absolutely
...preferences.
You could see things like ready-to-drink solutions being much more popular amongst the younger generation.
Just the final question in this area about sustainability. You are moving towards hybrid and electric vehicles, and also congratulations on your other achievements. Not that I have looked at, but there was not really any detail about your vehicle fleet. So what percentage of the fleet is hybrid or electric, and what is the timeframe to achieve 100%?
We don't operate directly that many vehicles in our own fleet, Natasha. We work mainly in partnership with large and small transportation contractors, who many of them have different strategies on their EV conversions. I don't know what that figure is. As always, we'll need to balance the cost of ultimately moving the product against the impact and the environment, the sustainability of the assets that we use, and of course, we measure all of that primarily through our Scope 3 emissions.
Right. Thank you very much.
Thank you. Gentleman here.
How's it going? My name is James Sturtz. It's a bit of a political question. Coalition policy, I believe, is to reduce tobacco excise to around 20% of that which it is at the moment. First, would that make lawful retailers of tobacco cost competitive with the unlawful trade that we now have at the moment, firstly? Secondly, what are the lumpinesses that we get as far as law enforcement goes? Because I live in Queensland. In Townsville, for example, the unlawful trade of tobacco is discreet.
All the smokers know where to go. You go to Cairns, and you can walk into a shop in the main street of Cairns and buy brightly colored packets of cigarettes for, the shitty ones are AUD 10, and the good ones are AUD 20. Can we be cost competitive if the coalition do what they say they are going to do and reduce the tobacco excise to 20% of what it is at the moment, and combine that with a bit of law enforcement for the crims? Can we be cost competitive?
That side of it is a very complex area, and there is a number of, I suppose, competing priorities because the health lobby have got a perspective, the treasury have got a perspective. I think there is plenty for the coalition to do if they were going to progress that. I think all we can do is operate as best we can within the environment that we are presented with. The focus of the current government is that enforcement is the way to go, and that is their kind of approach. What we are seeing is differing levels of enforcement. Actually, in Queensland as a whole, we would have to say that Queensland has led the way in terms of enforcement.
What we have seen is that in relation to our tobacco business, there has been a stronger recovery of tobacco as we have seen those enforcement actions being put into place across Queensland. Clearly, as you are demonstrating, it is not uniform at this point. We are now starting to see those enforcement actions in New South Wales. We have seen the change in premier in Victoria showing a greater interest in more action on tobacco. So we are hopeful that we will see that there. As we have shown in the trading update this morning, you have started to see tobacco come back. So enforcement is starting to work and have an impact.
Thank you. I just have to say, it is extraordinarily variable.
David Wilkinson, shareholder. The 52-week high for Metcash shares was AUD 4.06. Today, they are trading at AUD 2.93, which is roughly a 26%-27% drop in the value. I would like to get your thoughts on that, and when we might expect some sort of a turnaround in the share price that it may start to increase in value.
Yeah. I think we share your general disappointment with the share price, and our view is that the share price is not representative of the inherent value of this company. It is our responsibility as a Board and as a management team to build the confidence that shareholders will get to a much more representative value. There are things that we are doing in terms of the performance of the business. As we have outlined, we have got a strong strategy that is going to drive growth. We are looking at how we manage the capital allocations across the organization.
One thing that we would say is the company has consistently actually demonstrated very good management of cash, and that has allowed us to maintain strong dividend levels. Of course, that is the key part as well, is maintaining those dividends. Yeah, we are focused on growth, but we are also focused on cash capital and ensuring that we continue to deliver good dividend growth as well as share price growth.
Well, in relation to that, why do you think that the market does not pick up on that then? Why do you think that they disagree with that stance, as it were?
Yeah, it is an area that I obviously spend time with some of the major investment groups out there and as do other members of the Board and Management. I think there are a number of factors. I think the reality is that the company's earnings have been flat for the last three years, so the market is looking for the company to deliver a growth in earnings. When you look at some of the external issues that we face, such as tobacco issue, I would say our actual underlying earnings have improved. As we work through, we feel there is momentum there, and we just need to translate that through to the bottom line. I think there is some question marks over our competitiveness in the market versus the big giants that we operate against, whether that is Coles and Woolworths in food or Bunnings in hardware.
Being able to demonstrate that our retailers can compete effectively in that market, which with our earlier discussion that we had around pricing, continuing to work on that and allowing our retailers to be competitive to demonstrate that, I think that is important. I think it is about earnings growth, it is about capital discipline, and it is about giving confidence in our market position.
Good afternoon.
Good afternoon.
My name is Patricia Beale, and I am here as a Monitor from the Australian Shareholders' Association, with proxies from 41 members whom they want to express through me today. Firstly, you have done pretty well in a competitive market, I guess. Well done for that, to hold your position and not be any worse off. It is not a year, I guess, in which one would aim to get a huge profit, or else there would be screams from customers, etc, and an inquiry from somebody also, I suspect, or else the customers would just not come back.
Anyway, I noticed one item recently. Woolworths, I think it was, were refusing to buy bananas from Coffs Harbour, and therefore the farmers couldn't sell them locally to Woolworths, and people in Coffs Harbour couldn't buy locally grown bananas. I presume you optimize your logistics a bit better than that and can offer locally grown goods, as I know you do in general, to customers.
Yeah. Well, certainly a key part of our model is buying locally as well as nationally. Doug, anything you wanted to-
Yeah, absolutely. That is the strong point, and it talks a little bit to the earlier question about serving local communities by recognizing the trends, whether it is in alcohol or preference for local bananas. Our network is well set and designed to do exactly that.
Excellent. Yes. Thank you. One question I had was about the skills matrix of the Board, because we are well aware as long-term shareholders that the company is run by the management under the oversight of the Board. When Board members come up for re-election, we want to examine their qualifications and also the qualifications of the current Board to see that you get a good balance of skills, etc. Many companies certainly have the Board skills matrix within the annual report, whereas you've only chosen to put it at this stage in the corporate governance report, which is a separate item released separately to the market and available through the company or the ASX or whatever. We were thinking that it would be more convenient in the annual report.
The description of the skills is very vague, about three levels of competency or otherwise for a number of headings. For primary skill, if you consider yourself knowledgeable, and a lesser level two skills and then level three skills. There's a couple of the items that had very little, if any, primary skills in that area. I know you mentioned continuing education for the Board, and we would like to think that that might be happening, so that the improvement might be there, in future years.
We'll-
Comment on that.
...take on Board your comment in terms of potential inclusion in the annual report. I suppose our view is all of that information is released at the same time, the corporate governance statement is released at the same time as the annual report, so that information is out there and available. Certainly, my observation of our description of the categories, I don't see that as particularly different to other companies. I think there is a reasonable amount of information. But again, we'll take on Board your observation as to how we describe that. You and I had the opportunity to have a conversation a couple of weeks ago, and I think realistically, can a company end up in a position where you have expertise amongst your Board on every single matter?
I think that's a challenge, and there are some areas where a Board will naturally supplement the skills that it has by taking on external advice, by people who are experts. The role of a director is comprehensive, and we need to be able to contribute to discussions about strategy, about governance, about financial issues, IT, marketing, whatever it may be. So there's a lot of things that we need to be considering. In some areas, you might get somebody that's an expert but actually is not able necessarily to contribute more broadly to other discussions. For example, I think areas that you've highlighted would be stakeholder and community engagement, I think is an area that we've said that no one on the Board is an expert in. Our view is we can supplement the Board there.
But when we look at people who perhaps have that background, are they able to contribute more broadly to all of the things that come across the Board table? That's where it starts to be more questionable. I don't think it's effective to have a board that has people that can only contribute in one area or maybe one or two areas. It doesn't make an effective board. So, I think we are very comfortable. What we actually have effectively done in that table is, it's almost in priority order. You can see that in the areas that are most important, we have the highest levels of strength across the Board.
Thank you. Just a minor question perhaps. I noticed during the year that the number of employees went up very significantly from 11,000 odd to nearly 14,000. Was that an increase commensurate with the number of shops that increased or whatever? Could you explain?
Thank you for raising that. It was a very astute observation by you, and it actually relates, it's an internal systems thing in a way, in that we're trying to bring more activities together and do them once across the organization. Effectively, what that figure represents is the number of employees that are paid through the central Metcash payroll team. That number has increased because we brought people in from other parts of the organization into the Metcash payroll system. Interestingly, if you look at the cost of wages across the organization, the increase is nothing like that. So it's just a reflection of more people being paid centrally through the Metcash system. It's actually not a real increase in headcount across the organization. Okay. Any further questions? Questions from online, I think, yes?
Yes. We just have one question online from Mr. Steven Main, on consumer confidence and interest rates. He says, Alan Kohler put up a series of graphs on ABC News last night and then declared everybody's miserable. Firstly, are we sensing a notable deterioration in consumer sentiment? Are house prices falling, contributing the most to this decline? Secondly, what is our view on the perception that interest rates could rise again? Based on what we see with inflationary pressures, would the chair be surprised if interest rates are lifted again in order to tame inflation?
It is a as we've said, I think we've used the word challenging environment. That's the situation that we're in. What we continue to see is that our end consumer, and recognize that Metcash's business predominantly is to sell to independent retailers who then sell to the consumer. What we're seeing through our network is that end consumer is more cautious and conservative, being more careful with their spending. That results in changes in basket sizes, changes in the makeup of a basket, and we're seeing mixed changes in products. The consumer's certainly much more price aware, much more careful with their spending, and you're seeing a more promotional environment, I think, across retail as a consequence of that. We are participating in that. We need to be competitive. We need to respond to that environment.
I'd say, having worked in retail in Australia for a long time now, I don't see that this is the worst that I've seen. I think that you're not seeing the specter of significant job losses that potentially have been there at other times, which perhaps have had more of a dramatic impact. When you look at the actual level of retail spending, it hasn't been as subdued as potentially some would think. So there's still opportunity out there, and it's about competing and winning in your market. As for interest rates, clearly if I put my retailer hat on, I would prefer that there wasn't a further increase in interest rates. You could argue that with what's happening in housing, that would be detrimental. It's our job to control inflation. So yeah, that would be my general comments. Yes. Thank you. Any further questions?
Okay, I will move on. We'll now move on to the next item of business, for which we will commence using electronic handsets. Just a quick recap. If you've not already done so, please insert your card into the slot at the top of the handset with the barcode at the bottom and facing towards you. When voting opens, the voting options will appear on the handset screen. Once again, to vote for, press one. To vote against, press two. Or if you wish to abstain, press three. Your selection and the word received will appear on the screen confirming your vote has been cast. If you wish to change your mind, simply select a new option by pressing one, two, or three. Your original vote will be canceled, and your new selection will be counted.
If you have any issues, then one of the assistants should help you. There will be time for shareholders to ask questions about each resolution. In the interest of time and to give a fair opportunity to all, we would ask you that you keep your questions as succinct as possible. Moving to resolution two, which is the resolution to elect a director. Shareholders are requested to consider the election of Ms. Nicky Sparshott as a Director of the company. Under the company's constitution, Nicky retires by rotation at the conclusion of this meeting, and being eligible, offers herself for election. Nicky's profile is outlined in the explanatory memorandum contained in the notice of meeting.
Nicky joined the Board in July 2026 and is a member of the Audit, Risk, and Compliance Committee and a member of the People, Culture, and Nomination Committee. Since joining the company already in the first two months, Nicky has made a significant contribution. The Board has concluded that Nicky is an independent, non-executive director and unanimously supports her election. I'm going to invite Nicky to address the meeting to say a few words in connection with this resolution.
Thank you, Peter. Hello, everybody. Firstly, I should say it's an absolute privilege to be able to offer myself for election as an independent non-executive director of Metcash. Throughout my career working with brands and retailers and consumers, I've always admired the work that Metcash does, the absolute obsession this company has in enabling independent businesses and the role that those independent businesses play in the communities that they serve, and it's a purpose that I'm incredibly passionate about. As Peter said, I joined the Board in July, and over that time I've had the opportunity to spend some time with my fellow Board members, with the management team, and of course to spend some time out in the field in stores with our independent retailers, and I have to say it's only made me even more convinced and deepened my respect for this organization.
By way of just a little bit of background to myself, over the last 30 years I've spent most of my time in consumer goods and in retail. I've worked with companies like Procter & Gamble, The Coca-Cola Company, and Unilever, in Australia and also across international markets. Most recently have held a number of different CEO roles, so global CEO of T2, which maybe some of you have tried, the CEO of Unilever for Australia and New Zealand, and my most recent executive role was as global chief of transformation for Unilever. Across all of those experiences, I've largely focused on building brands and marketing of those brands, end-to-end supply chain and wholesale distribution, and leading for growth and transformation. They're the kind of experiences that if I am elected today, I would certainly look forward to bringing into Metcash.
Aside from the advisory company that I now lead I also sit on a number of other Boards as a non-executive director, and I chair the Industry Advisory Group for the University of Technology . I'll just end by saying I think that Metcash has such an incredible purpose and a really important one in Australia, and a really clear strategy against which to deliver it, and if I am elected today then I very much look forward to using my experience to help further that ambition, shore up independent retailing in this country, and of course create long-term value creation for all of our shareholders. Thank you for your time today.
Thank you, Nicky. This resolution is now open for discussion. As noticed, all questions should be initially directed to me as chair. Are there any questions from the floor? No. Are there any questions online?
Just one online from Mr. Steven Main. Could new director Nicky Sparshott and the chair comment on the recruitment process that led to her appointment to the Board? Which recruitment firm assisted with the process? Did the full Board interview any other candidates? Did Nicky know any of our directors or key management personnel before engaging with the recruitment process?
Okay. As an organization we go through a process of working with a recruiter. I do not know that we necessarily need to disclose which recruiter that we work with, but it is a highly credentialed and capable recruitment firm that we work with, well-known in the marketplace, and that does a lot of very good work with different Boards on their recruitment. As a Board, we set out the criteria that we were looking for. Referencing back to that discussion that we had earlier around the skills matrix, we considered and recognized that Helen Nash was planning to step away from the Board. We recognized the skills that Helen brought to the Board and experiences, so what we would be losing.
We recognized that given the nature of Metcash's business being a wholesale-retail organization, a brand business, that having somebody that had very strong and extensive experience in those areas was going to be really valuable. Recognizing, as Nicky has just outlined, you can see that her profile is very appropriate for working with Metcash and contributing to Metcash. She was one of a number of potential directors that certainly I interviewed, and along the way, other members of the Board were involved with me in the initial screening.
Then all members of the Board and actually members of the management team met with Nicky prior to appointment. We were very comfortable with Nicky being the clear standout candidate that we met through that process. We are very pleased to have Nicky on Board. I think that covers it. I do not know, Nicky, whether there is anything else that you wanted to just add, but I think that probably covers that. Thank you.
No further questions. Thanks, Chair.
Thank you. Okay. If there are no further questions, I now formally move the motion that Ms. Nicky Sparshott be elected as a director of the company. I now put the motion to a poll and open the poll. Please cast your vote using the electronic handsets now. To vote for the resolution to elect Ms. Sparshott, please press one. To vote against, press two. Or if you wish to abstain, press three. Is it working? You are okay. Yeah. All good. Just got one problem at the back. Okay. All good.
Can you show us the process?
We will see the outcomes, I think. So, declare the voting closed, and I think the results should appear on the screen. So, we can see that strongly carried motion. So, declare the motion carried that Ms. Nicky Sparshott is elected as a director of the company. Congratulations, Nicky.
Thank you.
I now move to our next resolution, Resolution3, which is to adopt the remuneration report. The remuneration report forms part of the directors' report to the company for the financial year. It is set out on pages 35 to 53 of the 2026 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. Do we have any questions on the floor? Natasha.
Thank you, Mr. Chair. Natasha Lee again. I noted that there was a comment that the ROFE gatekeeper had been changed, because it may potentially disincentivize investment in modernizing fully depreciated legacy assets. Can you give a bit of information around that? I note that there is only two elements which are considered as far as the long-term incentives being ROFE and ATSR. I suppose part of my concern is that if you have fully depreciated assets, is that potentially producing sort of false economy or a drag on productivity because you are extending the life of it and potentially the risks, similar to what Tilta recently faced. So, what sort of assets are we talking about in this category of your legacy assets?
Yeah. So, I suppose just to clarify and confirm, what we are saying is that going forward, so from 2026 forward, the LTI scheme changes so that the two hurdles within the, or the two target areas within the scheme are EPS growth and an absolute total shareholder return. Those are our two key targets, and we have a range of outcomes for those two areas. What we had previously, we had something called a ROFE gate opener, and the company needed to achieve a certain level of ROFE for those other two targets to open up. That introduced a level of complexity compared to other schemes that are out there in the marketplace. But also, I think there is a few factors involved, and one of my messages earlier on in this meeting was that capital discipline is going to be a real key focus area.
That means that at this point in time, there is going to be a significant focus on working capital, because when we look at the capital makeup of the organization, working capital is a significant part of the capital basis. The Board is determined that moving the focus on ROFE into the short-term incentive scheme is an appropriate step. So, return on funds employed is going into the short-term incentive scheme and will represent about 14% of the potential earnings available under the short-term investment scheme. We are going to be measuring that return on funds on a monthly basis, and that will really ensure that we have got the appropriate discipline on capital management. So we think that is appropriate. That is probably the primary driver of that decision.
Yes, there is also the potential issue that in terms of the company, probably going back a number of years, had under-invested in some of its technology. What we are seeing with programs like Horizon and some of our other investments in technology is we have got a bit of catch-up activity. We are making that. We are making those important investments decisions to ensure that we have got the right technology platform in place. So, excuse me. We are doing that.
Yeah. Okay. Yeah. It is good that you have got the capital management discipline, and that would be expected. I suppose on the other side of that is the expected returns from that capital investment as far as the risk management that the wheels do not fall off somewhere because you have not either invested enough or in the right technology.
Yeah.
There is a degree of balancing. Being constrained capital-wise-
Yes.
...it needs to be prioritized against the risks involved.
Absolutely. That is why you are seeing that investment in technology.
Okay. Thank you.
Patricia.
Good afternoon again, Peter. It is Patricia Beale again, for the record, from the Shareholders Association. I must say that we were pleased to see the changes that have taken place in the rem, the awarding and the conditions. We think it is much more appropriate that the long-term incentives be a good measure over the long term, and we are thinking of shareholders who usually hold their shares for the long term. So, increasing the proportion of rewards that is done like that, I think, is an excellent measure. We have much pleasure in voting for-
Okay
rem.
Thank you very much. We appreciate that. Thank you for your support. Any further questions? Question online? Yes.
Yes. Just one from Steven Main. Which of the proxy advisors covered us this year? Did any recommend a vote against any of today's resolutions, including this remuneration report item? If so, what reasons did they give? Did this translate into any material protest votes? Also, I would not need to ask this question if you disclosed the proxy votes earlier to the ASX, as I have asked for at previous AGMs. Can you please answer why you do not do this?
Okay. In terms of the first part of the question, we are followed or reported on by the major proxy groups, so ISS, CGI, and Ownership Matters, and also ACSI. All of those groups reported on the company and had in favor recommendations on all resolutions, including the remuneration report. We were certainly pleased in that position. In terms of presenting the proxy positions, I think we will take that on notice and consider that as something that we can do in the future. Okay, no further questions. Right. I now formally move the motion that the remuneration report be adopted. I now put the motion to a poll and open the poll. Using the handsets, please cast your vote now. To vote for, press 1, to vote against, press two, and if you wish to abstain, press three.
We will keep the handsets open for a few more seconds. All good. It is worked? Yep. Now we have got one more behind you. Yeah, okay. Okay. Yep. We are good. Has that worked for you? Just Yep, you are good? Okay. I will declare the voting closed. The result will appear on the screen. Again, strong in favor. So, I declare the motion carried, and that the remuneration report has been adopted. Our fourth resolution is to approve a grant of performance rights to Mr. Doug Jones, our group CEO, as part of his 2027 long-term incentive award. If shareholders approve the grant to Mr. Jones, he will be granted 886,986 performance rights.
This number has been determined by dividing Mr. Jones' long-term incentive opportunity with a value of AUD 2,590,000 by AUD 2.92, which was the volume-weighted average price of the company shares traded on the ASX over the 20 days ended the 30th of April, 2026, which was the last trading day before the start of the company's 2027 financial year. Mr. Jones' long-term incentive opportunity is 140% of his fixed remuneration and will be tested over a three-year performance period from the 1st of May 2026 to the 30th of April 2029. This award is subject to two equally weighted performance measures.
50% of the performance rights are subject to an absolute total shareholder return hurdle, which measures growth in shareholder value through share price appreciation and dividends over the performance period. The remaining 50% are subject to an adjusted earnings per share growth hurdle, which measures the company's ability to deliver sustainable earnings growth over the period. Following a review of the remuneration framework, the return on funds employed gate opener that previously applied has been removed. The Board considers that absolute TSR and adjusted EPS measures continue to provide an appropriate focus on long-term shareholder value and earnings growth. In relation to the question that I had earlier as to driving the share price, we can see that we are aligning the long-term incentive arrangements of the company through looking for share price growth and earnings growth, which we see as key factors there.
Further details about the performance rights to Mr. Jones and each of these conditions is set out in the explanatory notes accompanying the notice of meeting. The resolution is now open for discussion. Any questions on this resolution? Okay, no questions on the floor. Any questions online? Okay, so we will move to the voting. I now formally move that the grant of 886,986 performance rights to the group CEO, Mr. Doug Jones, be approved. Put the motion to a poll and open the poll. Using the handsets, please cast your vote now. Press one to vote for, two against, and three to abstain. Are we good? Yes. Okay. So, I declare the voting closed and the results will now appear on the screen. Again, strongly vote for. Thank you. I declare the motion to grant performance rights to Mr. Jones carried.
Finally, to resolution number five, which is a special resolution to approve the giving of financial assistance under Section 260B2 of the Corporations Act. This resolution is proposed to enable the company and its subsidiaries to comply with the group's existing financing arrangements by causing two companies that have recently become wholly owned members of the Metcash group, which are the Total Tools Launceston Proprietary Limited and Tasmania Hardware Proprietary Limited, to become guarantors under those arrangements alongside other group entities. Briefly, the Metcash Group uses its financing arrangements in connection with the acquisition of the remaining interests in those businesses. As a consequence, if those businesses become guarantors of the group's financing arrangements, the guarantee and related transactions may be regarded under the Corporations Act as providing financial assistance in connection with the acquisition of shares in those companies.
The Corporations Act therefore requires approval from both the shareholders of those companies and the shareholders of Metcash as a listed holding company. Approval of this resolution will allow these companies to accede to the group's existing guarantee and financing framework, helping ensure ongoing compliance with the terms of the group's debt facilities and maintaining continued access to funding and other financial accommodation available to the Metcash group. A more comprehensive explanation of the resolution and the reasons for it is set out in the explanatory notice with the notice of meeting. The Board considers the resolution to be in the best interests of the company and unanimously recommends that shareholders vote in favor of it.
The Board's recommendation reflects the fact that the resolution supports the group's ongoing financing arrangements and compliance with those arrangements. This resolution is a special resolution, which means that at least 75% of votes cast on the resolution must be cast in favor for the resolution to be passed. The resolution is now open for discussion. Patricia Beale.
Thank you. Patricia Beale again from the Australian Shareholders' Association. I don't recall seeing any resolution similar to that in the last few years. I wonder, what has changed? The Corporations Act, or is it some different way of financing that you're now using?
I'm actually surprised that you haven't seen it, because I've seen it and been involved with it in other companies as well, and it is something that I've seen over a number of years. It's an administrative process, in effect. Effectively, it's typical of an organization that has many subsidiary companies, that all of those subsidiaries become part of an overall debt financing arrangement. To be able to be part of that arrangement, each company becomes a guarantor, so effectively guarantors its assets as security for that financing arrangement. What that allows us to do is to have everybody managed efficiently, all as part of one arrangement. That's quite a common thing, not just in Metcash.
It's something Metcash has been doing for a number of years, but I see it in a number of other companies, and I'm sure that my fellow directors who've sat on different companies will have seen it. It isn't unusual. It's something that happens. Okay, any other questions? No questions online, so I now formally move that the motion be approved. I put the motion to a poll and open the poll. Please use the handsets. To vote for, press one, to vote against, press two, or if you wish to abstain, press three. Okay, thank you. I'll now declare the voting closed, and the result will appear on the screen. We can see that we've certainly achieved the 75% of votes cast in favor of the resolution. I declare the motion carried. This concludes the formal business of the meeting.
I thank you again for coming in today and your ongoing interest and support of Metcash. I declare the meeting closed. We invite you to join us for afternoon tea immediately following the meeting. You will also find some bags in the foyer with products from our private label range. We invite you to take a bag with you as you leave. Thank you.