Share Buy-back Program Boosts Metcash Limited

The stock price of Metcash Limited (ASX: MTS) climbed up 1.4 per cent on June 25, 2018 after the release of its full-year result for FY18. According to the release, the Group generated sales revenue of $14.46 Bn, an increase of 4.3% on the prior financial year after adjusting for a 53rd trading week in FY17, largely reflecting the inclusion of Home Timber & Hardware (HTH) for a full financial. Underlying profit after tax surged up 10.7% to $215.6 Mn (FY17: $194.8 Mn), and includes strong earnings growth in the Hardware pillar. However, the group posted a statutory loss after tax of $149.5 million.

Based on strong performance, the Board of Directors declared a fully franked final dividend of 13.0 cents per share, which represents a full year dividend payout ratio of 59% of Underlying Earnings Per Share. The record date for the final dividend is 11 July 2018, and payment will be made on 8 August 2018.

The management of the company expects planned investments in growth initiatives in the Supermarkets business to adversely impact its earnings by around $10 Mn in the current financial year but expecting to deliver earning benefit beyond FY19. The next phase of the company’s strategy is a 5-year program that aspires to deliver both growth and efficiencies. This includes accelerating current pillar initiatives and investing in new growth and efficiency initiatives.

A review of Metcash’s capital management strategy concluded that the company’s strong financial position and cash flows provide it with the capacity to return capital to shareholders while retaining sufficient capacity to fund the company’s future growth plans. The Group has the intention to conduct an approximately $125 Mn Off-Market Buy-Back event, which, if appropriate, can be scaled up. This was a news that excited many shareholders and led MTS zoom up during early trade.

The last date on which shares can be acquired to be eligible to participate in the Buy-Back is 27 June 2018. Full details of the Buy-Back will be set out in a booklet that will be sent to Metcash shareholders by 4 July 2018. The Buy-Back is expected to be completed by 20 August 2018.


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