On 3 December 2018, Metcash Limited (ASX: MTS) released its first-half results of FY 2019 in which the company reported a statutory profit after tax of $95.8 Mn which is 3 percent higher than the corresponding previous period. Despite the increase in profit, the share price of the Metcash witnessed a fall of 5.054% as on 3 December 2018.
The reported results of the company reflect the adoption of the new Accounting Standard AASB15. The group sales of the company in the first half of FY 2019 increased by 2.2 percent to $6,189.2 million and the company achieved sales growth in all pillars. The group EBIT of the company increased by 1.2% to $158.1 million which includes 2.4 percent increment in Food EBIT, the decrement of 1 percent in Liquor EBIT and increment of 34.0% in Hardware EBIT. The Underlying profit after tax of the company was up by 1.2 percent to $100.3 million in H1 2019 as compared to H1 2018. Further, the company reported that the working smarter program is on track to deliver cumulative savings of around $125 million by the end of FY 2019. At the end of the first half of FY 2019, the Net cash from operating activities of the company was $120.3 million.
In the supermarket segment, the total sales of the company in the first half of 2019 were broadly flat at $3.57 billion. The wholesale sales (ex-tobacco) decreased by 1.9 percent in the first half of FY 2019 compared to the corresponding previous period. Further, the teamwork score in the supermarket segment increased 40bps (~72%).
The total sales in the convenience store segment increased by 5.4 percent to $762.9 million in H1 2019 as compared to the corresponding previous period. Further, the total sales (including charge-through) in the liquor segment increased 6.7% to $1.75 billion.
The company’s board declared an FY19 interim dividend of 6.5 cents per share, fully franked which is having an ex-dividend date of 13 December 2018, the record date of 14 December 2018 and payment date of 18 January 2019. The interim dividend of 6.5 cents per share represents a dividend payout ratio of around 60 percent of underlying earnings.
The company is expecting highly competitive market conditions to continue through the balance of FY 2019. However, the company is encouraged by the slowdown in the rate of decline in non-tobacco sales and progress on key initiatives in the first half.
In the food segment, the company is expecting EBIT of the second half of FY 2019 to be impacted by approximately $8 million of operating investment by the Supermarkets business in growth opportunities. This investment is expected to deliver earnings benefits beyond the financial year 2019. In the liquor segment, the company is expecting the volume growth over the balance of FY 2019 to continue to be at modest levels due to the on-going trend of ‘premiumization’.
Meanwhile, the share price has fallen by 4.15% in the last three months as on 30 November 2018. MTS’s shares traded at $2.630 with a market capitalization of circa $2.52 billion as on 3 December 2018 (AEST 4:00 PM).