Metcash has announced it is upping its stake in Total Tools, from 70% to 85%, at a cost of $59.4 million.
The decision comes as the tools business saw impressive growth since Metcash took its initial stake last September, with Total Tools’ earnings before tax and interest (EBIT) for the eight months to 30 April 2021 hitting $24 million.
And, in order to speed up and facilitate the business’ growth plans — which include an expansion of its store network — Metcash has increased its debt facility to Total Tools from $40 million to $65 million.
Metcash still looks to have complete ownership of Total Tools towards the end of FY24.
MFuture strategy proves itself in 2020
The investment comes as Metcash enjoyed a bumper year to April 30, 2021, with statutory profit hitting $239 million compared to a loss of $56.8 million a year prior.
Group revenue jumped 9.9% to $14.3 billion, while group EBIT rose 19.9% to $401.4 million.
“It has been a standout year for Metcash, with record sales underpinning significant earnings growth and record operating cashflow,” said chief executive Jeff Adams.
“The early success of our MFuture initiatives laid the foundations for a very successful year for Metcash and our independent retailers, with their improved competitiveness being a key factor in the retention of new and returning customers gained through COVID-19.
“This, together with the continuation of an increased preference for local neighbourhood shopping and the migration from cities to regional areas, has driven strong sales growth across our independent retail networks, significantly improving their overall health.”
Metcash’s food division, driven by supermarket chain IGA, benefited from the shift in consumer behaviour. IGA saw like-for-like sales up 10.5%, with total food sales increasing 3.1% to $9.4 billion.
This result was slightly hampered, however, by the impact of Metcash’s loss of the Drakes supermarkets and 7-Eleven supply contracts. Excluding this impact, total sales would have hit 11% growth.
The businesses other categories also performed strongly, with total Liquor sales up 19.2% to $4.4 billion, and total Hardware sales up $24.7 billion due to growth in DIY and a return to growth in Trade sales.
This article was first published by Inside Retail.