The Coles Group Ltd (ASX: COL) share price could be a mover today after announcing its FY21 half-year result and growing the dividend by 10%.
Coles FY21 half-year result
The large supermarket business announced that its total sales rose by 8.1% to $20.4 billion year on year.
There was growth across each of its divisions. Comparable sales growth was 7.2% for supermarkets, 15.1% in liquor and 9.9% in Coles Express.
Coles was pleased to report that its EBIT (EBIT explained) grew by 12.1% to $1.02 billion and net profit after tax (NPAT) went up by 14.5% to $560 million.
Within that result, Coles reported that its supermarket online sales to consumers rose by 61%, with total online sales rising 48% (including business customers). Coles said that e-commerce contributed $1 billion of sales for the half.
In terms of which supermarkets are performing – neighbourhood stores continue to perform strongly whilst CBD stores remain subdued. There was marginal improvement in shopping centre store performance during the second quarter and some resort stores also benefited from customers travelling domestically.
Coles dividend and balance sheet
The supermarket business’ board decided to declare a dividend of 33 cents per share, which represented a 10% increase compared to last year. It has an annual dividend payout ratio target of 80% to 90%.
It finished with net assets of $2.79 billion, an increase of $177 million compared to the full year result. Working capital of -$1.34 billion was an improvement of $496 million. Net debt reduced by $400 million compared to the full year.
Management comments
Coles CEO Steven Cain said: “We have now delivered the first 18 months of our refreshed strategy…In the half we have made significant progress in our Own Brand product development, online operations and supply chain automation.
“Whilst COVID-19 will continue to present challenges it will also continue to present opportunities for change. With a strong balance sheet and team, Coles is well placed to continue delivering on our vision of becoming the most trued retailer in Australia and grew long-term shareholder value.”
Summary thoughts
Coles produced a solid result this period, in my opinion. It’s never going to be a high-growth business, but for people just focused on steady growth of the dividend then I think it’s a reliable option to consider. Online sales growth will be key for the long-term.
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