Metcash has completed a $330 million revenue raising to fund two liquor acquisitions, provide working capital and expand its MFuture growth program.
The move follows the company announcing its strongest food sales growth in eight years.
“In food there was a two- to three-week period in March where there was panic buying – we were running our distribution centres 24/7 and still couldn’t keep up with the volume,” said chief executive Jeff Adams. “We’ve seen it come back down some but it’s still at an elevated level.”
Total food sales for the five months ended March rose 4.3%, or up 7.6% excluding the loss of a contract to supply South Australia-based retailer Drakes. This followed food sales growth of 1.2% in the September half.
Liquor sales were also strong, rising 3.2% in the five months ending March after rising 1.7% in the first half. Higher sales at bottle shops in Australia offset weaker sales in New Zealand, where shops have been forced to close, and on-premise customers in Australia, which closed in the last week of March.
Metcash is looking at three bolt-on acquisitions worth about $45 million, two in liquor and one in hardware. The liquor acquisitions are expected to close in the first half of the 2021 financial year.
The capital raising comprises $300 million through a fully underwritten share placement at $2.80 a share and $30 million through a non-underwritten offer to retail investors.
“It will enable us to continue to support our independent retailers through this challenging period and progress our Future growth program,” Adams said. “We will also be able to consider potential new growth opportunities should they arise and align with our strategic direction.”
Adams noted that the COVID-19 pandemic had presented a unique set of challenges for the business.
“We have responded by changing our key priorities during this period to protecting the health and wellbeing of our people; keeping our supply chains open to ensure delivery of essential goods; and protecting our balance sheet,” he said.
“All our pillars [divisions] are currently trading, although trading restrictions are impacting the Liquor Pillar and there is a minor disruption in the Hardware Pillar.
“We have invested in additional working capital to further support our retailers through this period, particularly in Liquor where our Australian ‘on-premise’ customers and New Zealand retail customers are currently subject to restrictions.
Adams told The Sydney Morning Herald the company had been forced to put parts of its store refreshes on hold during the pandemic.
“Some of the store refreshes we’ve had to pause because, with social distancing in stores, we couldn’t be sticking people in there doing work at this time,” he said.
“But there are other initiatives we’ve accelerated, so it’s a bit of a mixture. Some are paused, but others we’re carrying on.”
