Metcash back in profit but underlying sags

Metcash has swung to a $192.8 million full-year profit after cycling through its South Australian contract impairments, but its share price has taken a tumble after a decline in food earnings and higher finance costs weighed on the IGA supermarket supplier’s underlying result.

Revenue for the 12 months to April 30 rose 1.8 per cent to $12.66 billion but earnings declined 1.4 per cent to $330 million as growth in hardware and liquor failed to fully offset a decline in food.

Underlying profit fell 3.0 per cent to $210.3 million.

Metcash, which slipped to an impairment-driven $150 million loss in the previous financial year, held its final dividend at a fully franked 7.0 cents per share.

Shares in the company fell by more than 7.0 per cent at Monday’s open and were 6.5 per cent down at $2.945 at 1011 AEST.

Despite a 0.3 per cent increase in total food sales to $8.79 billion, food earnings decreased by 3.0 per cent to $182.7 million following a decline in wholesale sales and a $10 million investment in growth initiatives.

Nonetheless, chief executive Jeff Adams said he was encouraged that the decline in non-tobacco sales had slowed for a fourth consecutive half-year amid what he called “challenging market conditions”.

Metcash said the supermarkets division will continue to invest in growth initiatives and expects related operating expenditure in FY20 to be in-line with that incurred in FY19.

Total liquor sales increased 5.6 per cent to $3.67 billion, reflecting continued growth for the IBA bannered group and ALM wholesale customers.

Hardware sales declined 0.9 per cent to $2.10 billion amid a slowdown in construction activity and the closure of unprofitable company-owned stores, as well as the loss of a large Home Timber and Hardware wholesale customer in Queensland during the first half of the year.

Hardware earnings increased by $11.9 million or 17.2 per cent to $81.2 million and the company said there appeared to be an improvement in the level of confidence in the network following the May federal election.


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