Metcash Limited

ABN 32 112 073 480

1 Thomas Holt Drive

Macquarie Park

NSW 2113 Australia

5 December 2019

Market Announcements Office

Australian Securities Exchange Limited

20 Bridge Street

Sydney NSW 2000

Dear Sir/Madam

METCASH LIMITED - 2020 HALF YEAR RESULTS AND FINANCIAL REPORT

In accordance with ASX Listing Rule 4.2A, please find attached the following documents for release to the market:

  1. ASX Announcement - Metcash Limited 2020 Half Year Results
  2. Appendix 4D and Financial Report (including the Directors' Report and Independent Auditor's Review Report) of Metcash Limited and its controlled entities for the half year ended 31 October 2019.

Yours faithfully

Julie Hutton

Company Secretary

Metcash Limited

ABN 32 112 073 480

1 Thomas Holt Drive

Macquarie Park

NSW 2113 Australia

5 December 2019

ASX Announcement

Metcash Limited 2020 Half Year Results

  • Group highlights:
  1. Total Food pillar sales (including charge-through sales) increased 1.2%, with Supermarkets wholesale sales ex tobacco being positive1 for the first time since FY12
  1. Liquor delivered its sixth consecutive year of earnings growth
    1. Our Trade-focused Hardware pillar continued to perform well despite difficult trading conditions
    1. MFuture programs progressing across all pillars
  • Statutory results for 1H20 reflect adoption of the new Accounting Standard AASB16 Leases. Prior period comparatives have not been restated for the impact of AASB16. To enable comparison, the results for 1H20 have been adjusted, where appropriate, to exclude the impact of AASB16
  • Group sales (including charge-through sales) increased 0.5% to $7.2bn
  • Reported loss after tax of $151.6m includes an impairment of $237.4m (post tax) following the loss of the 7-Eleven contract (1H19 Pre AASB16: Reported profit after tax of $95.8m)
  • Underlying profit after tax (pre AASB16) was $95.7m (1H19: $100.3m)2 negatively impacted by:
    1. Contribution from resolution of onerous lease obligations being ~$10m higher in 1H19
    1. Ceasing to supply Drakes in South Australia from 30 September 2019
  • Group underlying EBIT (pre AASB16) declined $8.4m to $149.7m
    1. Food EBIT down $7.8m to $85.2m - higher contribution from resolution of onerous leases in 1H19
    1. Liquor EBIT up $0.5m to $29.6m - flow through from higher sales
    1. Hardware EBIT down $0.5m to $37.3m - resilience in cycle downturn which negatively impacted Trade sales
  • Strong balance sheet
  • Interim dividend of 6.0 cents per share, fully franked

1

Group Overview

Metcash Limited (ASX:MTS) today released its financial results for the six months ended 31 October 2019. These results incorporate the introduction of the new Accounting Standard AASB16 Leases. As the prior corresponding period has not been restated for AASB16, adjustments to 1H20 results have been made, where appropriate, to enable effective comparisons.

Reported Group revenue, which excludes charge-through sales, increased 1.6% to $6.3bn (1H19: $6.2bn).

Including charge-through sales, Group revenue increased 0.5% to $7.21bn (1H19: $7.17bn), with sales growth in the Food and Liquor pillars, partly offset by a decline in Hardware sales.

Group underlying EBIT (pre AASB16) declined 5.3% to $149.7m (1H19: $158.1m), largely reflecting a lower contribution in the Food pillar from the resolution of onerous lease obligations and ceasing to supply Drakes Supermarkets in South Australia with effect from 30 September 2019.

The Hardware Pillar performed relatively well with growth and cost initiatives mostly offsetting the adverse impact of the slowdown in construction activity. The Liquor business also continued to perform well delivering another period of earnings growth.

Underlying profit after tax (pre AASB16) declined 4.6% to $95.7m (1H19: $100.3m)2 largely reflecting the decline in EBIT noted above. Underlying earnings per share (pre AASB16) declined by 0.9% to 10.5 cents, reflecting the benefit of the company's share buy-back in FY19. Reported loss after tax was $151.6m (1H19 Pre AASB16: Reported profit after tax of $95.8m).

Group operating cashflow (post AASB16) for the half was $88.8m. Net debt as at 31 October 2019 was $95.3m (FY19: $35.5m).

Group 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 Drakes1. This is the first reported increase in wholesale sales ex tobacco since FY12.

"The improvement in Supermarkets was broad-based with all states reporting an increase in the sales trajectory. Western Australia, our most challenging state, improved significantly with sales broadly in-line with the prior corresponding half after many years of decline.

"It was also pleasing to see 'like for like' sales in our IGA retail network return to growth. We are continuing to work closely with our retailers and have made progress with implementing and accelerating initiatives under the MFuture program.

"Retailer confidence is improving and this is driving further investment to improve the quality and competitiveness of the IGA store network.

"Our Liquor business continued to perform well, delivering earnings growth for the sixth consecutive year. Our initiatives focused on the 'on-premise' channel and the private and exclusive labels category are delivering good results. These initiatives, together with expanding our digital capability are key priorities under the MFuture program.

"We have a strong and diversified Hardware business which continued to perform well despite Trade sales being affected by the slowdown in construction activity. The business has good initiatives, including continuing to invest in the network alongside its retailers, and remains well positioned to manage through the downturn in the business cycle.

2

"It was disappointing to receive advice from 7-Eleven last month that they will not be renewing our current supply agreement which concludes in August next year. The cost of more onerous supply requirements going forward unfortunately made the contract uneconomic for us.

"Our financial position remains strong and this provides us with flexibility to fund our current initiatives, as well as consider future growth opportunities that create value for our shareholders," Mr Adams said.

Review of Trading Results

Food

Total Food sales (including charge-through sales) increased 1.2% to $4.4bn (1H19: $4.3bn).

In Supermarkets, total sales (including charge-through sales) increased 0.8% to $3.6bn. Excluding the impact of ceasing to supply Drakes in South Australia from 30 September 2019, total sales increased 1.2%1.

There was continued improvement in the sales trajectory of wholesale sales (ex tobacco) which declined 0.3% (1H19: -1.9%). Excluding the impact of ceasing to supply Drakes, non-tobacco sales increased 0.3%1, which represents the first reported half year period increase in non-tobacco sales since FY12.

The sales trajectory improved in all states, with Queensland the strongest performer. In Western Australia, there was a significant improvement with sales being broadly in line with the prior corresponding half. In South Australia, sales returned to positive growth (ex Drakes impact)1 with the Foodland stores performing well in the period post Metcash ceasing to supply Drakes.

The improvement in sales was supported by the successful execution of growth initiatives and a further reduction in price deflation3 to -0.1% (1H19: -1.3%). The business continued to work closely with suppliers to further improve the price competitiveness of our retailers.

There was an improvement in the sales performance of the IGA retail network with 'like for like' (LfL)4 sales up 0.4% (1H19: -0.2%).

Supermarkets' teamwork score continued to improve, increasing two percentage points to ~74% (1H19: ~72%).

Convenience sales increased 2.8% to $784.6m (1H19: $762.9m) reflecting mainly increased tobacco sales from major customers.

Food EBIT (pre AASB16) decreased $7.8m to $85.2m, negatively impacted by a ~$10m reduction in the contribution from the resolution of onerous lease obligations and the adverse impact of ceasing to supply Drakes Supermarkets from 30 September 2019, partly offset by improved wholesale sales (ex tobacco); cost savings through simplification and other initiatives; improved earnings from joint ventures and corporate stores; and a positive contribution from the Convenience business.

The EBIT margin5 for the Food pillar declined 20 basis points to 1.9%, which reflects the lower EBIT. Reported EBIT was $88.4m and includes a positive AASB16 adjustment of $3.2m.

Liquor

Total Liquor sales (including charge-through sales) increased 1.7% to $1.78bn (1H19: $1.75bn), reflecting continuation of the 'premiumisation trend' to higher value, but lower consumption.

Wholesale sales to contract customers and non-bannered stores increased due to the addition of new customers and growth in 'on-premise' sales.

Warehouse sales to the IBA bannered network increased 1.7% on a LfL basis (1H19: 2.0%).

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Metcash Limited published this content on 05 December 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 December 2020 00:08:03 UTC