Metcash shares jump despite a full year loss from IGA supermarkets

  • Metcash posted full year sales revenue up 4.3% to $14.5 billion.
  • Underlying profit after tax was up 10.7% to $215.6 million but the statutory loss after tax was $149.5 million.
  • The loss includes impairments of goodwill and other net assets of $345.5 million connected with IGA supermarkets.

Metcash today reported a full year statutory loss after tax of $149.5 million, weighed down by IGA supermarkets and increasing competition.

The loss came with the already-announced impairment of goodwill and other net assets of $345.5 million post tax in the company’s food division.

Group sales revenue was up 4.3% to $14.5 billion and underlying profit after tax rose 10.7% to $215.6 million.

The company announced an off-market buy-back of $125 million on top of a fully franked final dividend of 7 cents a share, representing about 60% of underlying earnings, taking the full year payout to 13 cents.

In early trade, Metcash shares were up 5.9% to $2.95.

“Our strong financial position has given us capacity to fund our growth initiatives as well as return capital to shareholders,” says CEO Jeff Adams.

The company has a net cash position of $42.8 million compared to net debt of $80.8 million last year.

Total food sales fell 1.2% to $8.9 billion over the 12 months to the end of April. Retail sales across the IGA retail network fell 0.9% on a like for like basis.

Adams says there’s been some improvement in food sales through the first seven weeks of the 2019 financial year.

“Despite this, we do not expect a material change in FY19 to the highly competitive market conditions experienced in FY18,” he says.

The company last month announced the loss of a major customer in South Australia, Drakes Supermarkets. Total sales to Drakes were $270 million in 2018.

Metcash’s overall increase in group sales was largely due to the earnings of Home Timber & Hardware for a full financial year compared to only seven months last year.

Hardware sales were up by one third to $2.01 billion.

The results by division:

Source: Metcash

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