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Metcash (ASX:MTS) share price rises on mixed HY24 result, big dividend

The Metcash Ltd (ASX: MTS) share price is up 2% after the company announced its FY24 half-year result.

Metcash supplies lots of different independent retailers around Australia, including IGA, Cellarbrations, The Bottle-O, IGA Liquor, and Porters Liquor. It also owns the brands Mitre 10, Home Timber & Hardware, and Total Tools.

FY24 first half results

Here are some of the main highlights from the six months to 31 October 2023:

Total food sales (including charge-through and excluding tobacco) increased 5.7%, with growth in both supermarkets and convenience, though the increase was 0.6% including tobacco sales.

Specifically in supermarkets, wholesale sales excluding tobacco rose 6% thanks to “further improvement in network competitiveness and inflation.” IGA stores saw increased foot traffic, but fewer items per basket. Sales volume returned to growth in the second quarter.

The food division EBIT increased 3.6% to $101.7 million. Profitable food earnings growth is normally good news for the Metcash share price.

Hardware sales (including charge-through) increased 2.9% to $1.8 billion, with growth in Total Tools offsetting a “slight decline” in the other part of the division.

In Total Tools, sales increased 18.2% to $350.9 million, largely reflecting the “impact of additional majority-owned joint venture stores”.

However, total hardware EBIT fell 5.1% to $110.6 million, with higher regulatory costs, higher labour costs, higher occupancy costs and other cost inflation.

Liquor sales (including charge-through) increased 2.4% to $2.5 billion, while liquor EBIT improved 3% to $50.8 million, helped by improved leverage and “good cost management”.

Outlook for the Metcash share price

The company said sales growth has continued in the first four weeks of the second half of FY24, with the food and liquor pillars “performing well”. Total food sales were up 4.9% excluding tobacco and flat including tobacco. Liquor sales were 1.5% higher.

Its hardware division is performing “better than the market and remains ideally positioned in the detached home and professional tools segments”. Total hardware sales were up 2.4%, with Total Tools sales up 6.2% thanks to store footprint expansion and expansions. Total Tools seems like a really compelling business.

Metcash seems one of the most appealing ASX dividend shares because of its high yield and growing sales. The last two declared dividends amount to a dividend yield of 6%, or 8.6% including the franking credits. I’d be happy to own it in a dividend-focused portfolio.

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At the time of publishing, Jaz does not have a financial or commercial interest in any of the companies mentioned.
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