Shareholders in grocery wholesaler and hardware operator, Metcash will be happy – they will get a dividend earlier than expected after suffering for 18 months as the company revamped itself, consolidated the Mitre 10 and other acquisitions and fought off the intensifying competition in supermarkets from Aldi, Woolworths and Coles.
Metcash revealed yesterday that it will resume dividend payments after delivering a better-than-expected 9.3% increase in underlying net profit to $194.8 million and announcing the retirement of chief executive Ian Morrice.
Metcash said it would pay a final distribution of 4.5 cents a share, payable July 27. The news saw the shares jump more than 5% to $2.30.
Metcash had withheld dividends since the second half of 2015 to preserve cash and fund investments in price cuts and store upgrades and had planned to resume dividends in fiscal 2018. Revenue rose 5.4% to $14.12 billion, helped by a 53rd trading week and revenue from the Home Timber and Hardware business that was acquired in October 2016 from Woolworths.
The net profit result for the year ended April 30 beat market forecasts of around $188.7 million and was underpinned by about $40 million in cost savings, higher earnings from liquor and hardware and the extra week of trading.
Cashflow surged to more than $300 million for the year from $165 million a year ago, while debt was slashed from $275 million a year to to just $80 million.
Earnings from Metcash’s largest division, its supermarkets food and grocery distribution, which were forecast be down around 5%, ended up flat, thanks to the cost savings.
Reported net profit, after taking into account about $23 million in restructuring and integration costs following the acquisition of Woolworths’ Home Timber and Hardware, fell 20.6% to $171.9 million.
“We continued to see positive earnings momentum in both Liquor and Hardware, while in Food the impact of intense competition and weak economic conditions in Western Australia were largely offset by the benefit of the 53rd trading week, Working smarter (the company’s efficiency program) and other cost savings,” chief executive Ian Morrice, said.
The better-than-expected result was overshadowed by news that Mr Morrice plans to retire this year after five years at as CEO, having been appointed in 2013. The company said it planned to make an announcement on his successor “in the near future".
