Strategic rationale for the acquisitions
C. Key Risks (cont'd)
Metcash cannot guarantee that its existing insurances (which are provided by third party insurance providers) will be available or offered in the future. An inability of Metcash to maintain such covers in the
future could limit the ability of Metcash to conduct its business, which could have a negative impact on the financial results and prospects of Metcash.
1.14 Work health and safety
Metcash is focused on the safety of its people and customers. While Metcash places a strong emphasis on the implementation of work health and safety standards, the risk of a serious injury, including
psychosocial harm, or fatality remains. The occurrence of such events may have an adverse effect on the safety and wellbeing of our people and the productivity, operations and reputation of Metcash.
1.15 People and culture
The increasing competitive landscape and low levels of unemployment continue to place pressure on the competition for talent and labour capacity and Metcash's ability to efficiently operate our business. The
ability to attract and retain talent with the necessary skills and capabilities to operate in a challenging market whilst being able to effect transformation is critical to Metcash's success. Similarly, the ability to
attract and retain employees to meet Metcash's labour and leadership capacity needs is crucial for our operational capability and efficiency. Metcash competes in skills and labour markets to attract and retain its
employees and management team. The competitive nature of these markets may result in the loss of key employees and/or labour capacity which may make it more difficult and costly to attract or retain
employees. If Metcash is unable to attract and retain employees, this may adversely affect the Group's operations and overall financial performance.
Interruptions at Metcash's workplaces arising from industrial disputes, work stoppages and accidents may result in production losses and delays. Renegotiation of collective agreements may increase Metcash's
operating costs and may involve disputes.
1.16 Ritchies put option - contingent liability
Metcash has a 29.9% ownership interest in Ritchies. The remaining shareholders in Ritchies have the right to put their 70.1% ownership interests to Metcash, subject to a margin related annual financial hurdle
('hurdle') being achieved.
The put option can be exercised annually during a prescribed period immediately following the approval of Ritchies' annual financial statements or in certain limited circumstances by individual shareholders
within a prescribed period. The put option can, however, only be exercised during these periods if Ritchies achieved the hurdle in the previous financial year.
Should the hurdle be achieved and the shareholders elect to exercise the put option, the purchase consideration payable by Metcash is based on a multiple of the prior year reported earnings adjusted for a
number of material factors that are subject to commercial negotiation and agreement between the parties.
Whilst the financial hurdle was achieved in respect of Ritchies' 2023 financial year, the put option was not exercised in relation to that year. Metcash estimates that the put option consideration payable to
Ritchies shareholders in respect of the 2023 financial year would have been between $255 million and $265 million.
The determination of the put option consideration and the maturity date include a number of potentially material judgements and estimates and therefore the actual consideration and timing could vary.
The put option agreement terminates when Metcash ceases to hold shares in Ritchies or if Ritchies lists on the ASX.
The exercise of the put option may divert funds from other intended uses of such funds, which may initially have an adverse impact on Metcash pursuing various capital investments and may require Metcash to
obtain additional funding through debt or equity or a combination.
1.17 Investigations, disputes and litigation
The Group may, from time to time, be subject to regulatory reviews, audits and investigations which divert management's attention away from the Group's operations and may be costly. There is a risk that
enforcement action may follow any regulatory review, audit or investigation and that such activities also adversely affect Metcash's reputation.
Metcash
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