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Metcash (ASX:MTS) has continued its growth trajectory with its latest results, booking an 8.9% lift in annual sales, to $17.3 billion, alongside a 10% increase in net profit to $283 million for the year ending April 30.
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“Increased diversification and resilience of the group was a key driver of sales and earnings growth in the face of challenging conditions, particularly in hardware, where trade activity remained subdued,” Metcash’s CEO, Doug Jones, said.
Mr Jones continued: “The food business grew strongly with revenue up 11% and earnings up 18%, including the acquisition of Superior Foods in June last year.” The company has put a flagged $10 million capital expenditure earmarked for the acquisition on ice after it was no longer needed, too, he added.
And, the $4.2B retailer has renewed its call for strong enforcement action to be taken by government agencies to rein in illegal tobacco trade.
The company, which owns well-known brands like IGA, Total Tools, and Mitre 10, booked its results despite an under-performing hardware business and a decrease in tobacco sales as the illegal market erodes market share.
Pointing to those decreasing sales, Mr Jones called for the proliferation of organised crime in tobacco sales to be strongly tackled by law enforcement authorities.
“The foothold and the increasing strength of organised crime in this country is something I’m very alarmed about,” he said. “It shouldn’t be viewed as a tobacco problem but as an organised crime and societal problem.”
“Action is needed without delay, at the very highest level,” Metcash’s CEO added.
According to FTI Consulting, illicit sales of tobacco now account for 39% of the Australian tobacco market. In March, Coles (ASX:COL) highlighted Victoria as the supermarket theft capital of the nation. The supermarket giant alleged the rise may be attributable to higher levels of organised crime.
After today’s solid results, broker Macquarie also continued its “outperform” rating of the Metcash stock in a research note shared at lunch.
The broker laid a $4 target, indicating a 3.6% upside on the most recent $3.86 price.
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Metcash delivers a dividend yield of 4.47%, and Macquarie noted the results came in at the upper end of guidance provided in early June.
MTS rose through the day and at 3pm was up around 3% at $3.91.
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