Metcash share price: what's the outlook following FY20 results?

We examine the highlights from Metcash's recently released full-year results.

Metcash share price rises on FY20 results

Australian food, liquor and hardware conglomerate Metcash (MTS) handed down its full-year FY20 results to the market on Monday, 22 June.

The response from investors was an optimistic one, with the Metcash share price being bid 1.06% higher, to finish the session at $2.86 per share. Metcash opened higher on Tuesday, last trading at $2.90 per share.

Overall, Metcash saw group revenue come in at $14.9 billion (+2%), while earnings (Group Underlying EBIT) came in at $324.2 million – on a pre AASB 16 basis.

On the bottom-line, the conglomerate delivered an underlying profit after tax of $209.7 million, on a pre AASB 16 basis. This result was broadly in line with the conglomerate's FY19 NPAT, and was ‘was driven by a weaker-than-expected Food EBIT margin,’ according to Citi analysts.

For income-minded investors, Metcash announced it would be paying a final dividend of 6.5 cents per share – bringing the company's full-year dividends to 12.5 cents per share. The FY20 final dividend is set to be paid on 5 August.

Finally, In a separate announcement, Metcash also announced that it has entered into the final stage of negotiations to acquire a 70% stake in Total Tools for $57 million.

The FY21 outlook

Looking at the early parts of the new fiscal year, Metcash’s management said that food sales have continued to exhibit robust growth – as a result of changing consumer behaviours – up 9.3% in the first seven weeks of FY21.

'The business is continuing to progress its growth initiatives focused on further improving the competitiveness of its retailer network and has a strong focus on costs to help offset the impact of inflation and other cost pressures,’ the company said.

Overall, Metcash's other two key business pillars: liquor and hardware have also benefitted from a change in consumer behaviour, with sales up 5.5% and 9.5% in the first seven weeks of FY21, respectively.

In saying that, the conglomerate noted that due to uncertainties regarding the easing (or potentially further strengthening) of Covid-related restrictions, it remains difficult for Metcash to quantify how much longer it will 'continue to benefit from the favourable change in consumer behaviour' in FY21.

Moreover, the Group’s Chief Executive noted:

'Going forward, we are well positioned with a strong balance sheet to help manage through the current uncertain environment while continuing to invest in Growth opportunities.’

The analyst view

Looking at some of the key analyst takes in response to yesterday’s FY20 results, we see that:

  • Citi argued that 'Metcash remains the clear market share winner in grocery', but noted that operating leverage has diminished, as costs rise in step with sales growth. Citi has a Neutral rating and a $3.10 price target on MTS.
  • J.P. Morgan remains Overweight the stock, with a price target of $3.15 on Metcash. While the FY20 results came in below the investment bank's forecasts, J.P. analysts argued that there is valuation support, upside potential for MTS's food segment and that the Total Tools acquisition ‘provides an incremental growth option.'
  • Elsewhere, UBS analysts retained their Buy rating and increased their price target on Metcash to $3.05 per share. While the investment bank’s analysts said the results were ‘softer than expected’, the conglomerate remains attractive from a valuation perspective.

Want to trade Metcash: long or short?

Create an IG trading account or log in to your existing account to get started now.


The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

Act on share opportunities today

Go long or short on thousands of international stocks with CFDs.

  • Get full exposure for a comparatively small deposit
  • Trade on spreads from just 0.1%
  • Get greater order book visibility with direct market access

See opportunity on a stock?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Take your position
  • See whether your hunch pays off

See opportunity on a stock?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Trade a huge range of popular stocks
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See opportunity on a stock?

Don’t miss your chance. Log in to take your position.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.