MTS -1.89%: Released their FY26 result this morning that was broadly in line with expectations & show earnings have stabilised, even if growth remains hard to come by. The group delivered underlying profit of $268.8m, inline with consensus, while sales were broadly flat at $17.35bn. The result reinforces our current investment case – Metcash remains a resilient, cash-generative business with attractive income characteristics, but the operating backdrop is still mixed, particularly in Food, where sales remain soft and tobacco-related headwinds continue to weigh.
FY26 Highlights:
- Underlying profit: $268.8m, down 2.4% on the prior year, broadly in line with consensus of $269m
- Net income: $279.1m, down 1.5%, ahead of consensus of $274.1m
- Group sales: $17.35bn, up 0.2%, slightly below consensus of $17.38bn
- Food revenue: $9.23bn, down 1.2%, broadly in line with consensus of $9.24bn
- Hardware revenue: $2.77bn, up 3.5%, slightly below consensus of $2.8bn
- Liquor revenue: $5.36bn, up 1.0%, broadly in line with consensus of $5.37bn
- Underlying EBITDA: $761.7m, up 1.9%
- Underlying EBIT: $503.7m, down 0.8%
- Final dividend: 9.5cps
The trading update was the more important part of the release. Group sales are up 1.9% in the first seven weeks of FY27, or 2.4% excluding tobacco, with softer trading in May followed by a clear improvement through June. Food and Liquor both started the year slowly as consumer sentiment was hit by geopolitical uncertainty and cost-of-living pressure, but trading has improved over the past three weeks. Hardware & Tools remains the better performer, extending its improved second-half FY26 momentum into the new year, led by high-single-digit growth from Total Tools.
Overall, this was a solid rather than spectacular result. Metcash is not shooting the lights out, but it is holding its ground in a difficult consumer environment, and the $25m annualised cost-out program should provide some support in FY27. The key issue is that Food sales remain underwhelming, and hardware, while better, is still facing margin pressure. At $XXXX, with the stock broadly flat on the day, the market’s reaction looks about right: the result was in line, the outlook is stable, but there was not enough in the update to materially change the investment case.
MM remains long & bullish MTS for income
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