Grocery wholesaler Metcash has won a $655 million liquor distribution deal with 1700 bottleshops and other retailers, and flagged earnings-per-share growth of 1 to 3 per cent for the current year amid tough conditions.
In an update to the market Metcash, which will hold its annual meeting tomorrow in Sydney, said the challenging trading conditions were marked by continued deflation caused by the high Australian dollar, low consumer confidence, higher investment in marketing and rising utility costs especially electricity.
Metcash said despite the challenging trading environment it had still forged ahead with a number of growth initiatives including the purchase of Automotive Brands Group, the purchase of the remaining 49 per cent stake in Mitre 10 and the completion of a tender process for a new automated distribution centre.
In its release, Metcash said it had signed a 15-year supply agreement with Liquor Marketing Group and Hotel & Tourism Management, covering supply distribution to 1700 stores trading under an array of banners such as Bottlemart, Harry Brown and Sip N Save.
The financial details of the contract were not revealed but Metcash said the contract represented roughly $655 million of new volume to Metcash’s liquor wholesale division ALM.
The ALM business had sales of $2.33 billion last financial year.
Also updating the market on its financial performance, said it was expecting full-year earnings-per-share growth of 1-3 per cent for 2012-13. At its last trading update the company said Metcash would deliver low to mid single digit EPS growth in fiscal 2013.
The company said all its recent growth initiatives were expected to be EPS accretive in their first full year of operation.
The company also said it remained confident it could maintain a payout ratio of roughly 80 per cent, in line with the past few years, despite an enlarged capital base following a recent capital raising of $325 million.
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