The Metcash Limited (ASX: MTS) share price is on watch this morning as it reported its result for the HY22 for the six months to October 2021.
Metcash is responsible for supplying (or owns) a number of different businesses including IGA, Foodland, Mitre 10, Total Tools and various independent alcohol brands.
Metcash HY22 report
The company reported continuing growth despite a very strong result in HY21 a year ago.
Metcash said there were strong sales and earnings in all of its pillars (food, hardware and alcohol), supported by a shift in consumer behaviour and success of its improvement initiatives.
Group revenue increased by 1.3% to $7.2 billion.
Total food sales declined 4.9% compared to HY21. Against HY20 total food sales increased 4.1%, and when excluding the impact of losing Drakes and 7-Eleven total food sales increased 16.8%. Supermarket sales were broadly flat against a very strong HY21, with elevated sales continuing across all states. However, food EBIT (EBIT explained) declined 7.6% to $95.2 million.
Total liquor sales increased 6.6% to $2.17 billion with strong demand from contract customers, on-premise sales and the Independent Brands Australia (IBA) network, which includes Cellarbrations, The Bottle-O, IGA Liquor, Duncans, Thirsty Camel, Big Bargain and Porters. Liquor EBIT increased 10.5% to $44.3 million thanks to increased sales volumes.
Hardware sales jumped 17.9% to $1.48 billion, reflecting continuing growth in trade sales, strong DIY sales and the contribution from the acquired Total Tools. Hardware EBIT soared 53.3% to $98.9 million, with the EBIT margin improved 160 basis points to 6.7%.
Group underlying EBIT went up 13.9% to $231.2 million, whilst underlying profit after tax increased 13.1% to $146.6 million. Statutory profit after tax grew 3% to $128.8 million.
Dividend
The Metcash board decided to increase the interim dividend by 31% to 10.5 cents. This compares to the underlying profit / earnings per share (EPS) of 14.6 cents (which rose 15%).
Outlook for Metcash and the share price
Metcash said that strong sales have continued in the first five weeks of the FY22 second half, helped by the shift of consumer behaviour and improved competitiveness of its retailer networks. The food and liquor divisions are expecting a strong Christmas and New Year period.
The company is expecting ongoing supply chain disruption and increased costs, particularly in distribution centres.
Metcash is going to keep investing in its online shopping platforms to accelerate e-commerce growth.
I think Metcash is one of the most promising ASX blue chip shares with a solid dividend, growing earnings and initiatives to improve the business further. At the pre-open Metcash share price, I’d be comfortable buying shares if Metcash were the type of business I was looking for my own portfolio.
