Metcash Limited (ASX: MTS) has reported its full year result to 31 March 2019.
Metcash is a leading wholesale distributor of supermarket products and the owner of popular retail brands like IGA, Mitre 10 and Foodland. In liquor it owns The Bottle-O, Cellarbrations and Duncans.
What Did Metcash Report In FY19
The company reported that group revenue increased by 1.8% to $12.7 billion excluding charge through sales.
Food EBIT was down 3% to $182.7 million (click here to learn what EBIT means), Liquor EBIT grew by 1.3% to $71.2 million and Hardware EBIT rose by 17.2% to $81.2 million. Overall, Group EBIT dropped by 1.4% to $330 million due to the size of its Food EBIT compared to the other two segments.
The Food segment continues to be tough with price deflation for the year of 1.1%, although FY18 was worse at 2.4%. There is intense competition from Woolworths Group Ltd (ASX: WOW), Coles Group Limited (ASX: COL) and Aldi.
Underlying profit after tax, which excludes restructuring costs, dropped 3% to $210.3 million. However, underlying profit per share (EPS) rose 1.8% thanks to the $150 million share buy back.
Statutory/reported profit generated was $192.8 million, compared to a loss of $148.2 million last year.
Metcash Worker Smarter Plan
In FY19 the company recognised $17.5 million of after-tax ‘Working Smarter’ restructure costs and South Australia distribution centre transition costs.
The Working Smarter program has been completed with total yearly gross savings of approximately $125 million over three years.
Metcash Dividend And Balance Sheet
The Metcash Board has declared a final dividend of 7 cents per share, fully franked.
However, the company’s balance sheet went to a $42.9 million net debt position at June 2019 from net cash of $42.8 million last year.
Metcash Management Comments
Metcash CEO Jeff Adams said: “Solid earnings and cashflows were again delivered by our Pillars despite challenging market conditions and we continue to be well positioned with a strong balance sheet.
“MFuture, the next phase of our strategy, is now underway and includes continuing our strong focus on costs and investing to drive revenue growth.”
Is Metcash A Buy?
Using Metcash’s underlying profit, it’s valued at 14 times financial year 2019’s earnings.
It would have to be a bargain price for me to want to buy Metcash, which I don’t think it’s at yet, despite the cost savings. I think there are more reliable ASX shares to consider for your portfolio such as the ones in the free report below.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.