Metcash liquor sales up 5.7 per cent
Metcash Limited has released its 2018 full year results, with the group generating sales revenue of $14.46bn, an increase of 4.3 per cent of the previous financial year, after adjusting for a 53rd trading week in FY17.
The company recorded a statutory loss after tax of $149.5m, following a $171.9m profit last year, which is due to “the impairment of goodwill and other net assets of $345.5m” in relation to the loss of Drake’s Supermarkets and weakness in the Western Australian economy.
The group’s liquor business saw sales increase by 5.7 per cent to $$3.28bn, which it said reflected “increased sales from both existing and new contract customers, and from the annualisation of Porters Liquor which was acquired in 2H17”.
The group added: “Wholesale sales through the IBA network increased 8.8 per cent as a number of wholesale customers converted to the IBA banner. Retail sales in the IBA network increased 1.5 per cent on a LfL basis.”
Group CEO, Jeff Adams said: “It was pleasing to see the Group deliver underlying earnings growth despite the continuation of highly competitive and challenging markets, particularly in the Food pillar.
“Underlying earnings reflect the success of key programs such as Working Smarter and the integration of [Home Timber and Hardware] during the year.
“The business continued to generate strong cash flows, and with a cash conversion ratio of around 100 per cent we ended the year in a net cash positive position.
“We have seen the benefits of our Working Smarter program in helping mitigate the impact of difficult market conditions. We are now in the final year of this program and expect additional savings to be delivered in FY19.
“Going forward, the next phase of our strategy aspires to deliver both growth and efficiencies over the next five years. I believe we have a good portfolio of businesses and I intend to build on the success to date in transforming Metcash. Where appropriate, we will be accelerating current pillar initiatives, as well as investing in new growth and efficiency opportunities.
“Our focus on operational efficiencies will include looking to address the impact on operating leverage in South Australia related to the loss of supply to Drakes Supermarkets post FY19.
“Our focus remains supporting the on-going success of our independent retailers across our Food, Liquor and Hardware pillars.
“Our strong financial position has given us capacity to fund our growth initiatives as well as return capital to shareholders. I am pleased to announce today that we will be undertaking an Off-Market Buy-Back with the aim of purchasing back $125m of equity, as well as paying a final dividend for the year of 7.0 cents per share, fully franked,” Adams said.
In its outlook for the liquor business, Metcash said: “In Liquor, there is uncertainty associated with the further rollout of the Container Deposit Scheme, particularly in Queensland, Western Australia and the ACT, which are the next states to implement their schemes. Despite this, the Liquor market is expected to continue to grow at modest levels. The Liquor pillar remains focused on building and improving the quality of its IBA network.”
The group also said that its strategic focus for the liquor business will see an increased focus on the premium market and that the company will be trailing a retail offer.