Metcash (ASX:MTS), the supermarkets, hardware, and liquor group, has reduced its interim dividend for the six months ending on October 31 due to a noticeable slowdown in earnings growth.
The company announced on Monday that shareholders will receive 11 cents per share as the interim dividend, down from 11.5 cents a year ago and equal to the 11 cents paid in 2021. Directors explained that the payout had been set at the favored ratio of 70% of underlying after-tax earnings, which declined by 10.9% to $142.5 million.
This drop in earnings occurred despite a 1.3% increase in group revenue for the year to $7.8 billion and a 1.6% increase to $9 billion when including charge-through sales by the supplier direct to retail outlets.
Metcash reported a 12.2% rise in statutory net profit for the half, reaching $141 million.
Metcash supplies independent supermarkets in the IGA group, as well as hardware operations such as Mitre 10, Total Tools (now a 100% owned business after a recent acquisition), and independent liquor wholesale distribution.
Group CEO Doug Jones expressed satisfaction with the results, highlighting the diversity and resilience of the company's portfolio of businesses in the first half of FY24. Sales growth, especially in the independent retail networks, remained strong despite challenging conditions.
Jones also noted that the first six weeks of the current fiscal year had seen a modest but positive start for the company and its various divisions. Sales growth had continued in the first four weeks of the current half-year, particularly in the Food and Liquor pillars, which benefited from competitiveness and a differentiated value proposition. Hardware continued to outperform the market and was well-positioned to capitalize on an improvement in consumer confidence and activity levels.
Metcash also announced additional cost-cutting measures, aiming to achieve between $14 and $16 million in annualised savings by the end of next April.
The company reported a 0.8% increase in total group sales, with notable growth in Food ex-tobacco, Hardware, and Liquor compared to the previous comparative period. Total food sales ex-tobacco rose by 4.8%, and wholesale price inflation for November (ex-tobacco and produce) was 4.4%. Total hardware sales increased by 2.4%, driven by growth in the Independent hardware Group and Total Tools. Liquor sales also grew by 1.5%, with increased sales to retail and on-premise customers.
