Metcash dividend returns but profit down 20.6%

SYDNEY: Food and grocery wholesaler Metcash has resumed dividends after lowering debt but expects competitive pressures to continue to weigh on its performance in the current financial year.

The IGA and Foodland supplier also made a surprise announcement that chief executive Ian Morrice will retire in 2018, after five years in the role.

Metcash’s net profit of $A171.9 million ($NZ178.2 million) for the year to April 30 was down 20.6% on the previous year.

‘‘It was a fairly challenging year with unprecedented com petitive pressures,’’ Mr Morrice said yesterday.

However, sales rose 5.4% to $A14.12 billion, helped by a 53rd trading week in the year and revenue from the Home Timber and Hardware business, which it acquired from Woolworths in October, 2016.

The profit figure included $A23 million in costs related to the Home Timber and Hardware acquisition as well as restructuring costs associated with Metcash’s ‘‘working smarter’’ savings programme, while the previous year’s profit had included gains from the sale of its automotive business.

Excluding the oneoff costs, underlying profit rose 9.3% to $A194.8 million.

Metcash, along with larger rivals Woolworths and Coles, has faced intense price competition in food and groceries from discount chain Aldi.

It has also suffered tough economic conditions in Western Australia, which has been hit by the resource sector downturn.

Sales in Metcash’s main foods division rose 0.6% to $A9.18 billion, while earnings remained flat at $A180 million.

Excluding the 53rd week, food sales were down 1.3% and Metcash said likeforlike retail sales across the IGA network increased just 0.1%.

Liquor sales were up 3.5% at $A3.33 billion, while hardware sales jumped 52% to $A1.61 billion, helped by the Home Trading and Hardware acquisition.

Mr Morrice played down the likely impact of online retail giant Amazon’s imminent arrival in Australia.

‘‘I think they will bring to Australia their tried and tested marketplace model, rather than food,’’ he said.

He ruled out the likelihood of Metcash being a takeover target for Amazon, saying Metcash’s business model of supplying independent retailers was vastly different from Amazon’s.

Metcash, which has not paid dividends since mid2015, said it was restarting payouts at A4.5c a share after reducing net debt by nearly $A195 million during the year.

Metcash shares were up A11c, or 4.8%, at $A2.30. — AAP