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Metcash (ASX:MTS) share price jumps 8% after strong first half growth

The Metcash Limited (ASX:MTS) share price is on the move on Monday after the release of its first half results…
The post Metcash (ASX:MTS) share price jumps 8% after strong first half growth appeared first on The Motley Fool Australia. –

The Metcash Limited (ASX: MTS) share price is jumping higher following the release of its half year results.

At the time of writing, the wholesale distributor’s shares are up 8% to $3.49.

How did Metcash perform in the first half?

Much like rivals Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW), Metcash has been performing very positively over the last six months.

For the six months ended 31 October, the company reported a 12.2% increase in group revenue to $7.1 billion. Including charge-through sales, the company’s revenue increased 12.3% to $8.1 billion.

This led to Metcash reporting a 30.4% increase in underlying group earnings before interest and tax (EBIT) to $203 million and a 43% lift in underlying profit after tax to $129.6 million.

On a statutory basis, profit after tax came in at $125.1 million, compared to a loss of $151.6 million a year earlier.

This allowed the Metcash board to declare a fully franked interim dividend of 8 cents per share.

What were the drivers of its growth?

This solid growth was driven by the strong performance of all its segments.

Total Food sales increased 9.5% to $4.8 billion or 16.3% when excluding the impact of Drakes and 7-Eleven contract losses. Management advised that this was driven by a change in consumer behaviour to more home cooking, an increase in the preference for local neighbourhood shopping, and the success of its MFuture initiatives.

Total Liquor sales were even stronger and increased 14.3% to $2 billion. This reflects strong demand in the retail network, which more than offset COVID-19 trading restrictions on on-premise customers.

Finally, Hardware sales increased 20.6% to $1.3 billion for the half. This was boosted by higher margin DIY sales and acquisitions. Excluding acquisitions, sales increased 16.2% over the prior corresponding period.

Management notes that the strong DIY demand was underpinned by a change in consumer behaviour to more home improvement projects, gardening, and maintenance activity. The success of MFuture initiatives also helped to further improve the competitiveness of the IHG retail network.

Outlook.

Metcash has started the second half strongly and revealed that its sales momentum has continued in all segments during the first five weeks of the half.

Metcash’s CEO, Jeff Adams, commented: “I am pleased to report that the Group has had a good start to the second half, with strong sales momentum continuing in all pillars in the first five weeks of trading. We are also expecting strong trading over the Christmas and New Year period.”

For the first five weeks, Food sales are up 2.4% over the prior corresponding period or 12.1% excluding the 7-Eleven impact, Liquor sales are up 16.9%, and Hardware sales are up 25.3%.

However, due to the high level of uncertainty caused by COVID-19, management hasn’t provided any guidance for the remainder of the half.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Metcash (ASX:MTS) share price jumps 8% after strong first half growth appeared first on The Motley Fool Australia.

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