Metcash has posted a $384 million full-year loss and announced the sale of its automotive division as it tries to shore up its grocery division against intense competition.
The loss for the 12 months to April was weighed down by $640 million in write-downs and impairments and follows a profit of $169 million for 2013/14.
Excluding the one-offs, the group recorded underlying earnings before interest and tax of $325 million, which is at the higher end of its $315 million and $330 million guidance range.
Metcash also announced it would sell its automotive division, which includes the Autobarn, Autopro and Midas brands, to Burson Group for $275 million.
The group had been looking to publicly float the division but chief executive Ian Morrice said Burson’s offer fairly valued the business.
“Through discussions with Burson, it became clear that the parties could reach an agreement which represented both attractive value for shareholders and certainty of transaction completion,” he said.
Burson Group, which owns the Burson Auto Parts brand, will partly fund the purchase through a $218 million capital raising and its shares have been placed in a trading halt while it carries out the entitlement offer.
Metcash expects to receive net proceeds of $210 million from the sale, which is 9.9 times the division’s 2014/15 earnings, and will use the money to strengthen its balance sheet as it overhauls its grocery wholesale business, which includes the IGA brand.
Earnings from the grocery business slumped 26 per cent to $216.8 million for the year, though like-for like sales from IGA increased 0.7 per cent.
Its convenience store business lifted sales revenue 11 per cent to $1.6 billion.
Metcash is spending $480 million on improving the division, including improving its private label offering, lowering prices and refurbishing stores as it fends off competition from Woolworths, Coles and Aldi.
But it signalled that the division would continue to struggle during the 2015/16 year.
“The improved sales from the strategic initiatives in the Food & Grocery Pillar, together with the growth opportunities in the other Pillars, will not offset the headwinds in Food & Grocery in FY2016,” the group said.
“Metcash remains confident that the strategy it is deploying will ultimately prove to be effective and beneficial to shareholders.”
