Metcash (MTS) shares ended the day with a small gain after confirming last week’s surprise earnings downgrade, lower trading profit and the abandonment of dividends for 18 months.
Metcash said it lost a total of $384 million in 2014-15, after taking a total of $604 million in impairment writedowns and losses.
The shares rose 2% to $1.135 – having been battered lower in the wake of last week’s shocking write down news.
The small rise in the share price also came despite the company admitting it expected a further slide in its financial performance this year as it battles to keep itself competitive against its bigger competitors.
The loss compares to a $169 million profit for 2013-14.
Metcash said underlying earnings before interest and tax (EBIT) reached $325 million for the financial which, which is at the upper end of the group’s $315 million and $330 million guidance range.
But it was also down on the $390.3 million in EBIT for 2013-14, underlining the damage done to the company’s core businesses by the intensifying price war in groceries and supermarkets between itself, Coles, Woolworths and Aldi.
Underlying net profit fell 17.4% to $193 million – the lowest result since 2007 – before one-off losses of $577.2 million dragged the group to the bottom line loss of $384.2 million.
MTS 1Y – Metcash fighting for survival
Chief executive Ian Morrice issued no detailed profit guidance but indicated that underlying earnings were expected to decline again this year, for the fourth consecutive year.
Initiatives such as price matching and store refurbishments were helping to boost sales in about 600 participating IGA stores, Mr Morrice said. The gains, however, were unlikely to counter difficult trading conditions in the food and grocery sector this year.
Metcash also announced it would sell its automotive division which includes the Autobarn, Autopro and Midas brands to Burson Group for $275 million, which is less than the $350 plus million it has reportedly been looking for from a trade sale or float. The sale will generate around $210 million in net proceeds for Metcash.
The sale will raise funds to help reduce net debts of about $667 million and provide capital to be invested in the core grocery business to help Metcash compete in the grocery war.
Earnings in the company’s core food and grocery business slumped 26% to $216.8 million, despite a 1.6% rise in sales to $9.2 billion.
Earnings from liquor rose 10.6% to $57.6 million, despite a 1.8% drop in sales to $3.1 billion, and ebit from the Mitre 10 hardware and auto division rose 16% to $57.9 million as sales jumped 12.5% to $1.3 billion (which is a lot better than Woolies Master’s hardware operations are doing).
With no final dividend for 2014-15, all shareholders will have as income is the 6.5 cents a share interim payout.
