The Metcash Limited (ASX: MTS) share price could be on the move today after the release of its full year results this morning.
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How did Metcash perform in FY 2020?
For the 12 months ended 30 April 2020, Metcash delivered a 2.9% increase in revenue to $13 billion and a 2% lift in revenue including charge through sales to $14.9 billion.
This was driven by a 3.5% increase in Food sales to $8.8 billion and a 0.3% lift in Liquor sales to $3.68 billion, but partially offset by a 1.3% decline in Hardware sales to $2.08 billion.
Due largely to weaker earnings in its Food segment, group underlying earnings before interest and tax (EBIT) fell 1.8% to $324.2 million. The Food segment was impacted by onerous lease obligations and the ceasing of supply to Drakes Supermarkets in South Australia.
After adjusting for these items, group underlying EBIT increased by ~$12 million.
On the bottom line, Metcash posted a reported loss after tax of $45.9 million. This compares to a profit after tax of $192.8 million in FY 2019 and was the result of material impairments to goodwill and other assets.
A total post tax impairment of $237.4 million was made in the first half following advice from 7-Eleven that it will not be renewing its current supply agreement with Metcash.
On an underlying basis, profit after tax was roughly flat at $209.7 million or 23 cents per share.
The Metcash board has determined to pay a fully franked final dividend of 6.5 cents per share. This brings its total dividends for FY 2020 to 12.5 cents per share.
A year of unprecedented challenges.
The company's CEO, Jeff Adams, was pleased with Metcash's performance over a very eventful and difficult 12 months.
He said: "I am pleased to report very admirable results in a year of unprecedented challenges that included the impact of devasting bushfires and the COVID-19 pandemic."
"Our businesses went to extraordinary lengths to support our employees, our retailer network and local communities in their time of need. This included investing in their safety and wellbeing, in operations to ensure the continuity of supply of essential products, as well as in supporting retailers impacted by COVID-19 restrictions," he added.
Trading update.
Metcash has started FY 2021 in a very positive fashion. For the first seven weeks of the new financial year, Food sales are up 9.3%, Liquor sales are up 5.5%, and Hardware sales are up 9.4%.
However, management warned: "There is uncertainty over the timing of further lifting of COVID-19 restrictions in Australia and the extent that our businesses will continue to benefit from the favourable change in consumer behaviour."
Total Tools acquisition.
Metcash also revealed that its proposed acquisition of 70% of Total Tools Holdings for ~$57 million is in the final stages of negotiations.
Total Tools is the franchisor to the largest tool retail network in Australia, with its 81 stores nationwide generating sales of ~$555 million.
Management notes that this aligns with its strategy of being the leading supplier to independents in each of its three segments. It also expects it to enhance its position in the Australian hardware market and increase its exposure to trade customers.
