The Metcash Limited (ASX: MTS) share price will be on watch this morning following the release of its half year results.
How did Metcash perform in the first half?
In the first half of FY 2020 Metcash delivered sales (including charge-through sales) of $7.2 billion and an underlying profit after tax of $95.7 million. This was a 0.5% increase and 4.6% decline, respectively, on the prior corresponding period.
Metcash's profit decline was driven by an increase in lease obligations and the loss of its supply contract to Drakes South Australia.
On a reported basis, Metcash posted a $151.6 million loss after tax. This includes a post-tax impairment of $237.4 million following the recently announced loss of the 7-Eleven contract.
This didn't stop Metcash from declaring a fully franked interim dividend of 6 cents per share.
How did its segments perform?
The Food segment reported a 1.2% increase in sales during the first half. A key driver of this growth was a positive sales result by its Supermarkets wholesale business for the first time since FY 2012. Despite this, Food EBIT fell 8.4% to $85.2 million during the half.
The Liquor segment was a positive performer during the half. A lift in sales helped drive Liquor EBIT 1.7% higher to $29.6 million.
Finally, the Hardware segment performed reasonably well given the tough trading conditions. It reported a 1.3% decline in EBIT to $37.3 million during the half.
Metcash CEO, Jeff Adams said: "The first half included some significant achievements for the Group, particularly in our Food pillar. I am pleased to report that our Supermarkets business delivered wholesale sales growth, including on an ex tobacco basis after adjusting for the impact of ceasing to supply Drakes. This is the first reported increase in wholesale sales ex tobacco since FY12."
Outlook.
Management advised that its Supermarkets wholesale sales have continued to grow during the first five weeks of the second half. Though, the loss of the Drakes contract will negatively impact its overall second half sales.
Elsewhere, it expects the Liquor segment to benefit from the premiumisation trend again in the second half, but the Hardware segment is expected to be impacted by the slowdown in construction activity.
