Liquor sales increase for Metcash

03 December, 2018 by Andy Young

Metcash has today released its results for the first half of the financial year, showing an overall increase in revenue, earnings and profit as well as an increase in liquor sales and earnings.

Comparisons to the previous comparable reporting period have been adjusted to reflect new accounting standard AASB15; the group reported revenue excluding charge-through sales of $6.2bn, up 2.2 per cent.

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Including charge-through sales, group revenue increased 2.3 per cent to $7.2bn (1H18: $7.0bn), with sales growth in all Pillars.

Underlying profit after tax1 increased 1.2 per cent to $100.3m, while statutory profit after tax increased 3.0 per cent to $95.8m. Excluding the impact of AASB15, underlying and statutory net profit after tax increased 2.0 per cent and 3.9 per cent respectively.

Group CEO, Jeff Adams said: “The first half results were pleasing in the face of challenging market conditions, with the Group delivering improved sales and earnings.

“Our Supermarkets Pillar continued to face challenging market conditions, however it was encouraging to see a slowdown in the rate of deflation which helped deliver an improvement in the sales trajectory for both ourselves and our retailer network.

“We were excited to recently announce that we have entered into a long-term lease for a new purpose built distribution centre in South Australia. The new DC is expected to improve the competitiveness of our South Australian retailers through the delivery of efficiency benefits and access to a greater range of products. Importantly, it reflects our on-going commitment to championing independent retailers and further strengthens the foundation for continued investment in the network.

“As previously announced, we now have long term supply agreements in place with the majority of our Foodland retailers in South Australia.

“We are in the final period of our very successful Working Smarter program and will commence implementing the next phase of our strategy focused on ensuring we have a sustainable cost base and revenue growth.

“We continue to have a strong financial position and are well placed with flexibility to pursue future growth opportunities.”

Metcash’s total liquor sales increased 6.7 per cent to $1.8bn, which the company said reflected “continued growth in sales to the IBA bannered group and ALM wholesale customers”, adding: “Wholesale sales through the IBA network increased 7.2 per cent, partly due to the conversion of a number of contract customers to the IBA banner, including Thirsty Camel in South Australia and the Northern Territory.”

Earnings for the liquor division were impacted by AASB15, with earnings under the new standard down 1.0 per cent to $29.1m, however excluding the impact of the new standard, earnings increased 5.4 per cent to $29.1m. The group said this result reflects the strong sales performance, which was partly offset by higher costs “including fuel and costs associated with the introduction of Container Deposit Schemes in the ACT and Queensland”.

Looking at the year ahead for the liquor division, Metcash said: “The Liquor pillar remains focused on building and improving the quality of its IBA network. We expect volume growth over the balance of FY19 to continue to be at modest levels due to the on-going trend of lower consumption, but higher quality.

“There continues to be uncertainty associated with the roll-out of state container deposit schemes.”