Metcash Limited announces 2021 trading update

Metcash Group Chairman Rob Murray recently announced the Group’s FY21 performance at its 2021 Annual General Meeting and trading update, which he described was an exceptional year for Metcash with record sales, a significant increase in earnings and record operating cashflow.

“The early success of our MFuture initiatives laid the foundation for a very successful year for both Metcash and our independent retailers,” says Mr Murray.

“The improved competitiveness of our retailers was a key factor in their retention of new and returning customers gained through Covid which, together with the continuation of an increased preference for local neighbourhood shopping and the migration from cities to regional areas, drove strong sales growth.”

All Pillars performed strongly, with the Group continuing to successfully navigate significant challenges and uncertainty associated with Covid.

“Our financial performance was very strong. Group revenue, including charge-through sales, increased ~10% to a record $16.4bn, with strong growth in all Pillars. Group EBIT increased ~20% to $401.4m and underlying profit after tax was ~27% higher at $252.7m. This represents a ~13% increase in underlying earnings per share to 24.7 cents,” says Mr Murray.

“The strong earnings, together with effective working capital management, led to record operating cashflows of ~$475m, ensuring the Company continued to be in a very strong financial position at the end of the financial year with net cash of ~$125m.”

Discussing the business strategy, Mr Murray says: “We are now two years into the MFuture program designed to provide a pathway to sustainable growth for Metcash, balanced with cost efficiencies.

“This year significant progress was made with key initiatives such as our store upgrade programs, rolling out new store formats, expanding our private and exclusive label ranges and accelerating our digital plans.

“We also sharpened our strategic direction to include an increased focus on customers and the community to support our aim of further improving the competitiveness of our retailers.

“The early success of MFuture has provided a strong foundation for the remaining three years of the program, which includes initiatives to retain new and returned customers gained through Covid, as well as attracting new shoppers to our retail networks.”

Group CEO Jeff Adams announced Metcash Group’s revenue for the FY21 increased 9.9% to $14.3b (10.1% to $164b including charge-through sales). Food sales increased 3.1% to $9.3b while liquor sales increased 19.2% to $4.3b.

He announced MFuture initiatives for the Metcash Food business.

Across its ‘Network of the Future,’ Mr Adams announced further DSA store upgrades with ~45% of the network completed (622 upgrades) targeting an additional 100-130 stores annually with 90% of the network expected to be completed by FY26.

A new e-commerce program rollout will be accelerated for IGA retailers into ~800 stores by FY25. And network loyalty programs are being enhanced via its IGA Rewards which is live in 200 stores with further rollouts underway.

Across its supply chain, Metcash is building capability to expand ranges via direct and cross dock solutions, leveraging SA DC expanded range and scalability, transport management system improvement and warehouse management system upgrade.

In the first 16 weeks ended 15 August 2021, Metcash Group trading has been driven by a shift in consumer behaviour:

  • More local neighbourhood shopping
  • Move from city to regional areas
  • More eating at home
  • Home consumption of liquor substituting on-premise consumption
  • Less overseas travel and duty free shopping
  • A high level of home renovation and DIY activity.

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