The Metcash Limited (ASX: MTS) share price is on the move on Monday morning following the release of its half year results.
At the time of writing, the wholesale distributor's shares are up 7% to $4.22.
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Metcash share price jumps after strong half year profit growth
- Group revenue up 1.3% to $7.2 billion
- Revenue including charge-throughs increased 1.5% to $8.2 billion
- Group underlying EBIT up 13.9% to $231.2 million
- Underlying profit after tax up 13.1% to $146.6 million
- Statutory profit after tax up 3% to $128.8 million
- Underlying earnings per share up 15% to 14.6 cents
- Interim dividend up 31% to 10.5 cents per share
What happened during the half?
For the six months ended 31 October, Metcash reported a 1.3% increase in revenue to $7.2 billion and underlying profit after tax growth of 13.1% to $146.6 million. The latter excludes significant items such as Project Horizon implementation costs and Total Tools put option valuation adjustments.
According to the release, this strong result was driven by its Liquor and Hardware businesses, which offset a weaker performance from its Food pillar.
The Liquor business reported a 6.6% increase in sales to $2.17 billion thanks to strong demand from the IBA retail network and contract customers. This was underpinned by a shift in consumer behaviour and improved competitiveness of its stores. Liquor EBIT increased 10.5% to $44.3 million.
The Hardware business reported a 17.9% increase in sales to $1.48 billion following continued growth in trade sales, strong DIY sales, and contributions from acquisitions. Hardware EBIT increased to 53.3% to $34.4 million.
This offset a 4.9% decline in Food sales (including charge-throughs) and a 7.6% reduction in Food EBIT to $95.2 million. Management advised that this reflects a decline in the contribution from joint venture stores, the adverse impact of the 7-Eleven contract exit, and there being no tobacco excise increase.
Management commentary
Metcash's CEO, Jeff Adams, said: "It has been a very pleasing first half for both Metcash and our independent retailers as we continued to build on the very strong prior corresponding half. All Pillars again benefitted from the shift in consumer behaviour and improved competitiveness of our retail networks supported by the success of our MFuture program."
"This is a significant achievement given the many challenges in the half including staff isolations, labour shortages, supply chain issues, continuously changing health regulations and other lockdown-related impacts."
Positively for the Metcash share price, Mr Adams appears optimistic on the second half.
He commented: "Importantly, the sales momentum seen in recent periods has continued into the second half with sales growth recorded in all Pillars in the first five weeks of the half. We are also expecting our Food and Liquor pillars to benefit from a strong Christmas/New Year trading period and their extensive regional presence."
Food sales are up 2.3%, Liquor sales are up 7.6%, and Hardware sales are up 20.1% so far during the second half.
"We remain well placed to continue investing in our growth plans under MFuture focused on further improving the competitiveness of our independent retailers," Mr Adams concluded.
