Grocery wholesaler Metcash Ltd has met and topped its reduced guidance and reported a 6% rise in annual profit for the 2011 financial year, but it has warned that it still faces challenging conditions over the rest of the calendar year.
As well it is awaiting a court decision on its attempt to buy the Franklins chain in NSW from Pick n’ Pay of South Africa for more than $200 million.
The company warned last December and again in March that tough trading conditions had meant the company would not make the earlier guidance for earnings growth of 6% to 8%.
In March the company said it was looking for growth of 3% to 5% for the full year.
That was beaten with the rise of just over 6% for the year to April 30.
It was mainly for that reason that the company declined to give any guidance of earnings for the 2012 year, saying it would wait until the interim results were released in December.
The market didn’t object and the shares ended 2c higher at $3.90, in a market that drifted lower all day and closed in the red by around half a per cent.
Metcash told the ASX yesterday that net profit in the 2010-11 year was $241.4 million, up 6.06% from 2009-10.
Revenue was 7.4% higher at $12.46 billion.
Metcash declared a final dividend of 16c, fully franked, up from 15c, fully franked, in 2009-10.
That made a full year payout of 27c (the 11c interim was steady), which was 86% of net profit (eps were 31.5c).
That was well above the company’s stated payout ratio of at least 60% of net earnings.
The company has previously said that it will, wherever it can, return earnings to shareholders.
But with the possibility it will get approval to buy the Franklins business, a conservative final payment level might have been more appropriate.
But that would have forced the company to cut final dividend and the full year payout, which would have undermined the share price.
Metcash said in yesterday’s statement that the "industry continues to experience product deflation, underlying cost inflation and a value driven consumer".
Metcash chief executive officer Andrew Reitzer said the result was "creditable… particularly given the challenging trading conditions experienced by our industry this past year.
"Metcash’s result was achieved through the steady performance and resilience of its independent retailer customers," Mr Reitzer said.
"This has seen Metcash and its customers continuing to invest in strengthening their operations and as a result maintaining grocery market share."
Metcash said it had, with its retailer network, opened 65 new stores with a total area of 56,925 square metres in the year just past.
Of these new stores, 56 were under the IGA brand, with another 17 converting to IGA from other store brands.
"All divisions within the Group remain focused on improving operational efficiency in the prevailing low inflationary environment and we continue our substantial investment in modernising the independent sectors support structures and supply chain," Mr Reitzer said.
"Construction of our NSW mega-distribution centre is well ahead of schedule and heralds an exciting future for independent retailers in NSW and provides a sound basis for long term sustainable growth," he said.
IGA Distribution (IGD) Metcash’s grocery distribution business, IGAD, achieved sales of $7.56 billion and EBITA grew 4.4% to $361.8 million.
Sales on a comparable store basis rose 4.5% reflecting consumers continued support of the network of independent outlets across Australia, led by IGA.
Australian Liquor Marketers (ALM) ALM’s sales were $2.3 billion and EBITA was $30.1 million. Impressively, the core ‘like for like’ EBITA rose 20.4% on ‘like for like’ sales growth of 2.7%, in a liquor market that contracted by just over 4%. Sales through Independent Brands Australia remained strong with IGA Liquor up 9%.
Campbells Wholesale (CW) Campbells Wholesale achieved sales of $1.71 billion and EBITA rose 10.3% to $31.8 million – a good result following the closure of eight Cash & Carry warehouses at the end of the last financial year.
Mitre 10 In its first full year of operation as part of the Metcash group, posted annual sales revenue of $797.6 million and strong EBITA of $20.7 million.
