An ok result in a tough business environment, I thought. Revenue...

An ok result in a tough business environment, I thought.

Revenue growth only 4%, which means volumes are very sluggish, given grocery inflation is running closer to double digits.

What saved them was the gross margin being up a significant 600bp, from 11.1% to 11.7% (it tends to happen with FMCG retailers during periods of high inflation as they book inventory profits).

But this was essentially fully negated by 13% higher Cost of Doing Business (CoDB-to-Sales rose to 7.4%, from 6.8% in pcp), notably 10% increase in Employee Expenses and 27% increase in
"Other Expenses" - these are the two single biggest cost line items for MTS.

So EBITDA growth of 4% was in line with Revenue growth.  Could have been a lot worse.

Watch for many companies reporting CoDB rising faster than Revenue over the next two or three reporting seasons.  I think the upcoming reporting season is going to be a nasty!

The other notable aspect of the result is the lower D&A charge, despite both PP&E and Lease Liabilities rising, so the quality of the result isn't quite there.  Normalising for that would leave Underlying Pre-Tax Profit barely unchanged on pcp, instead of the 3% increase reported.

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