It has three major divisions:
- Metcash Food & Grocery, comprising IGA supermarket and Campbells Wholesale
- Australian Liquor Marketers (ALM)
- Metcash Hardware and Automotive, comprising Mitre 10 and the Automotive Brands Group (83.1%-owned)
MTS’ 1H14 results revealed modest growth, with a 5% increase in revenue contributing to a 20.6% lift in net profit to $98.9 million.
However the result also revealed issues surrounding its profit margins. EBITA margin contracted from 3.3% in 1H13, to 2.9% in 1H14 amid continued price deflation and increased marketing spend.
The Food & Grocery business is the main headache for the group, where significant fruit & vegetable price deflation and excessive fuel discounting resulted in a 14% slide in divisional EBITA.
In response to the weak earnings result, management announced plans to split its Food & Grocery into two separate divisions, each led by a different CEO.
The two divisions operating within Food & Grocery are to be known as Supermarkets and Convenience.
It was only in January 2012 that the company merged grocery and convenience under the Food & Grocery division in order to streamline the business.
December’s announcement to effectively reverse that decision raises the likelihood of process duplication (more costlier and less efficient).
Also, the reduced size of the two businesses threatens to reduce their clout in negotiating better deals with suppliers and compete on price with Woolworths and Coles.