Metcash Limited (MTS) - on 1 December reported a 12.3% increase in normalised profit after tax for the six months to 31 October 2010. The result was struck on a 6.6% rise in wholesale sales to $5.6 billion, despite intense competition in the grocery sector, lower levels of inflation and price deflation in the produce sector. Directors have declared a 10% rise in the interim dividend to 11¢ per share, fully franked. Management reaffirmed guidance of 7-10% growth in normalised earnings per share (EPS) for the 2010 financial year.
IGA>D (the company’s grocery wholesale distribution business) continues to be the powerhouse of Metcash and is performing well against competition from other major retailers, such as Coles and Woolworths. Wholesale sales of IGA>D rose 9.3% to $3.48 billion, with earnings before interest, tax and amortisation (EBITA) growing 11.5% to $163.3 million or 85.3% of the total group EBITA. Comparable store sales grew by 6.4%. IGA-D has made a significant investment in its fresh produce offering, the full benefits of which has yet to be realised.
The Campbells Wholesale division which services convenience stores had a poor result with EBITA falling 14.8% to $13.5 million. Campbells Wholesale represented only 7.1% of total group EBIT for the half years period and was adversely impacted by a bad debt of $1.5 million and convenience sales in general being affected by a trend by consumers to switch to value shopping.
Read more in Metcash’s release
Disclosure: Staff of Chancellor Hattersley Lloyd own shares in Metcash.