Metcash Registers Profit, Dividend Bump




Metcash, the country’s 4th ranking supermarkets group, has boosted annual dividend 23% after reporting a solid rise in 2021-22’s revenue and earnings.

The company told the market Monday that shareholders will see an 11 cent fully franked dividend for the second half compared to 9.5 cents a share a year ago.

That will take full-year dividend to a total of 21.5 cents, a 10-year high.

Metcash oversees the IGA group of supermarkets, as well as liquor distribution, hardware through Mitre 10 and other chains.

CEO Doug Jones said the company’s “local neighbourhood shopping” strategy again helped lift net profits in the 2021-22 financial year with statutory after-tax profits of $245.4 million for the year to the end of May, a rise of 2.7%.

Annual revenue rose 5.9% to $15.9 billion while total group revenue (including charge throughs) up 6.4% to $17.4 billion.

The group said underlying earnings before interest and tax were up 17.7% to $472.3 million and underlying net after tax profit jumped more than 18% to just under $300 million, also a record.

The market welcomed the numbers, with Metcash shares opening 5% higher at $4.34 on Monday. At one stage they were up more than 8% to a day’s high of $4.49.

They ended the session up 4.1% at $4.30.

“Our retail networks in Food, Hardware and Liquor all continued to perform well, further strengthening the health of our independent retail networks, Mr Jones said in the ASX release.

"On a two-year basis, like-for-like (LfL) sales increased ~15% in the IGA retail network, ~28% across Hardware’s IHG and Total Tools retail networks and ~24% in the IBA Liquor network. Importantly, retailers are increasingly reinvesting in their stores, further improving the quality of their network primarily through the various store upgrade programs we support.

“We also further strengthened relationships with our independent retailers and were pleased to recently announce long term agreements to continue supplying Foodworks stores and Drakes Supermarkets in Queensland.

“The number of external challenges increased in the second half and our supply chain and retail operations, both our own and those of our retail partners, exhibited significant resilience and flexibility.

"There were more lockdowns due to the Omicron COVID variant, major supply chain challenges, flooding in South Australia, New South Wales and Queensland which resulted in supply route disruptions, and towards the end of the financial year challenges related to Russia’s invasion of Ukraine and lockdowns in China.

“A strategic investment in inventory, the flexibility of our operations and the outstanding efforts of our people helped our retailers to keep their shelves stocked and continue serving their local communities through these challenges.

“Good progress has been made on a wide range of digital initiatives, including progressing the rollout of new eCommerce platforms in the Food and Liquor networks. In Food, we now have ~190 stores using our IGA Shop Online platform, and sales through our leading platforms in IHG and Total Tools now represent ~6% of total network sales in Hardware.

“Project Horizon, our technology transformation program aimed at resetting our core technology and making it easier to do business with us, has continued to progress with transition to a new core financial system successfully completed in the year.

“Our range of ESG projects has expanded substantially reflecting the inclusion of sustainability as a core component of Metcash’s vision. Pleasingly, this has been reflected in a further improvement in our ESG credentials with our DJSI ranking improving to 21 and the 69th percentile.

Encouragingly, Metcash also told the ASX that the 2022-23 financial year had opened well for the retailer.

It said total group sales were up 8.6% in the first seven weeks of the new year “with growth in all pillars” (that is in supermarkets, liquor and hardware).

"In Food, total sales increased 5.0% (+7.7% ex tobacco) compared with the prior corresponding period reflecting strong demand in both the Supermarkets and Convenience businesses. Supermarkets sales increased 4.5% (+7.4% ex tobacco) with continuation of the increased momentum experienced in Q4 FY22 and higher wholesale price inflation.

"In Hardware, total sales increased 19.8% compared with the prior corresponding period, representing continued strong demand in IHG and Total Tools and the impact of higher inflation. IHG sales increased 10.4%.

"Strong demand and global supply chain challenges are continuing to place pressure on the availability of some product categories, and there continues to be a solid pipeline of residential construction and renovations activity.

"In Liquor, total sales increased 8.6% compared with the prior corresponding period reflecting continuation of strong demand across retail stores and a recovery in on-premise sales. Wholesale sales to the IBA retail banner group increased 2.7%.

The solid gain for the shares yesterday was as much to do with the strength of the start of the new year than anything else in the report, given market gloom about the impact of rising nflation and higher interest rates.

Metcash also revealed plans to spend $70 million on new distribution facilities in Victoria.