Metcash shares on watch amid $142m first half profit and flat dividend

Metcash Ltd (ASX: MTS) shares remain suspended in early afternoon trade after an ASX outage.

But when they do return to action, the wholesale distributor’s shares will be watched carefully.

That’s because the ASX 200 stock released its half year results this morning.

ASX 200 stock on watch on results day

For the six months ended 31 October, Metcash reported a 0.1% increase in group revenue to $8.5 billion and a 0.4% lift to $9.6 billion including charge-through. This reflects growth in the Food (excluding tobacco), Liquor, and Hardware pillars.

Thanks to margin improvements, the ASX 200 stock’s EBITDA lifted 2% to $367.2 million for the half. This was driven largely by strong growth in the Food pillar.

Management notes that Food EBITDA increased 9.8%, reflecting a strong trading performance in both Supermarkets and Foodservice & Convenience.

Liquor EBITDA was 4.8% lower due to the impact of one-off strategy costs, lower wholesale price inflation on strategic buying, and higher labour costs.

Hardware & Tools EBITDA was flat for the half, reflecting an improved sales performance, partly offset by one-off integration and strategy costs and retail margin pressure.

This ultimately led to the ASX 200 stock reporting a 0.3% increase in profit after tax to $142.2 million, which allowed it to declare a flat, fully franked interim dividend of 8.5 cents per share. Management notes that this is slightly above the company’s target payout ratio of ~70% of underlying profit after tax, reflecting its strong cash performance.

Management commentary

Metcash’s group CEO, Doug Jones, was pleased with the half. He said:

The business has delivered solid results in tough trading conditions, supported by disciplined operational performance and the successful execution of our strategy. Importantly, we’ve maintained good momentum in our core business, and our independent networks remain healthy and confident despite the challenging conditions.

On the back of decisive action taken over the last 5 years to both improve the core of our business and to position the Group for future growth, Metcash remains wellset for ongoing success with a stronger, more diversified and more resilient business, and with significant opportunities for accelerating growth.

Outlook

The company revealed that sales growth momentum has continued into the second half with the rate of growth lifting in Supermarkets and Total Tools, and “broadly sustained” in Foodservice & Convenience, Hardware, and Liquor.

It also advised that it is “planning for positive sales momentum over the remainder of the half.”

The post Metcash shares on watch amid $142m first half profit and flat dividend appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.