Metcash to cut dividends

Grocery wholesaler Metcash plans to cut its dividend payout and lift capital expenditure, after saying its earnings have been hit by a weaker than expected performance and costs from making changes to its business.

Investors were unimpressed, sending Metcash shares 10.79% lower to $2.81 at 10.56am (AEDT), against a benchmark index lift of 0.29%.

Metcash chief executive officer Ian Morrice announced a transformation plan, as the wholesaler said it plans significant investment over the next three years to transform the business.

The group plans to transform the food and grocery division, drive consolidation and sustainable network growth, enhance its supply chain and enable successful independents, Mr Morrice said.

The group will reduce its dividend payout ratio to 60 per cent, starting with the fiscal 2014 dividend.

Total capital expenditure is set to peak at between $150m and $180m in 2015, falling to $130m to $150m in 2016 and 2017, Metcash said.

"The consolidation and sustainable network growth initiative will see Metcash focus on converting more independent retailers to our liquor, hardware and automotive banners; extend our retail footprint; reinvigorate our retail execution and enhance the category growth opportunities," he said.

The group plans to expand its digital platform, introducing tailored omni-channel solutions and enhanced analytics capabilities, Mr Morrice said.

The company has been reviewing its food and grocery operations to address structural challenges, and as aspects of its plans are implemented they have impacted on earnings, it said earlier.

The company has been reducing inventory, restructuring its private label products, and reducing many of its prices.

The value of some of its assets are also being reduced, by an expected total value of between $30 million and $35 million.