Metcash shares have rallied after the supermarkets wholesaler announced a $125 million share buyback alongside an impairment-driven full-year loss of $149.5 million.
The IGA and Foodland supermarket supplier’s shares were 6 cents, or 2.15 per cent higher, at $2.85 at 1200 AEST on Monday after Metcash announced the loss for the year to April 30 – down from a $172 million profit a year ago.
Metcash announced in May it would take a $352 million impairment for 2017/18 – as a result of the loss of a major South Australian contract and tougher competition.
On Monday Metcash chief executive officer Jeff Adams said the company’s strong cash position would allow a share buyback of at least $125 million – with a cutoff date for participation of June 27.
Despite the headline full-year loss, the company also announced an underlying profit after tax – removing the effects of the impairment – of $215.6 million, up 10.7 per cent.
Sales in the biggest division, food, fell 1.2 per cent to $8.9 billion, and IGA retail sales were down 0.9 per cent on a like for like basis.
But Mr Adams said cost-cutting plans meant food earnings had remained flat at around $188 million.
The wholesaler posted strong earnings in its hardware sector – up by $20.5 million to $69 million, while liquor earnings improved $1.5 million to $68 million.
The increase in hardware earnings were driven by the 2016 acquisition of Home Timber & Hardware from Woolworths.
Mr Adams said the results were positive given the expected loss of the Drakes supermarket business as a customer in South Australian, and no signs of an improvement in general market conditions.
“It was pleasing to see the group deliver underlying earnings growth despite the continuation of highly competitive and challenging markets, particularly in the food pillar,” he said.
METCASH’S RESULTS FOR YEAR TO APRIL 30, 2018
* Net loss of $149.5 million, down from $171.9m profit a year earlier
* Revenue of $14.46 billion, up 2.4 per cent
* Final dividend of 7 cents a share, fully franked, up from 4.5 cents