Australia’s leading wholesaler and distributor, Metcash Limited (ASX: MTS) made an announcement on 19 November 2018 stating that it has signed a long-term lease agreement with Charter Hall for the construction and leasing of a new ‘best in class’ Distribution Centre (DC) at Gepps Cross in South Australia. Following this news, the shares price of the company decreased 2.105 percent as on 19 November 2018.
As per the announcement, the new 68,000m² DC, which will replace Metcash’s existing DC at Kidman Park, is expected to deliver operational efficiencies for the company’s independent retailer network in South Australia. The new distribution centre will provide an access to a wider range of products than currently available through the DC at Kidman Park. Further, the new Distribution Centre will also benefit local suppliers by providing an efficient route to market for their products through access to Metcash’s extensive distribution network.
In an earlier release, the company had announced regarding long-term supply agreements with several Foodland owners and these agreements were conditional on Metcash entering into a lease agreement for the new Distribution Centre by 21 December 2018.
As per the company’s CEO Mr. Jeff Adams, the Company’s retailer network will benefit from a greater range in grocery and perishables that will further underpin their ability to provide a quality, differentiated offer that is tailored to their local community. The Construction of the new Distribution Centre is scheduled for completion in mid-2020, at which time Metcash will transition to the Gepps Cross facility.
In FY 2018, the underlying profit after tax of the company increased by 10.7% to $215.6 Mn and underlying earnings per share increased by 8.9% to 22.1 cents per share. The company generated sales revenue of $14.46 bn in FY 2018 which is an increase of 4.3% on the last financial year. The EBIT increased by 9.2% to $332.7 million in FY 2018 which was predominantly driven by growth in the Hardware pillar following the acquisition of HTH. The company generated strong cash flows during the year, and at the end of FY 2018, the cash conversion ratio was approximately 100%, and net cash was $42.8 million. The Company’s independent retailers have continued to invest in their stores to improve the shopping experience for their customers. During FY 2018, a further 67 stores were ‘refreshed’ bringing the total number of stores completing the ‘Refresh’ program to approximately 250. During the year, the company continued to invest in upgrading store cool rooms with upgraded 111 cool rooms in the year. Currently, there are almost 500 stores that have invested in upgrading their cool rooms. Recently the company made an announcement stating that eCargo Holdings Limited is going to acquire 85% of Metcash’s China Business.
In the last six months, the share price of the company decreased by 16.67 percent as on 16 November 2018. MTS’s shares traded at $2.790 with a market capitalization of circa $2.59 billion as on 19 November 2018 (AEST 3:40 PM).
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