Grocery wholesaler, Metcash, has lifted its first half profit more than 20 per cent thanks to its exit from the Franklins line of supermarkets, which removed a drag on its balance sheet.

Metcash made a net profit of $98.9 million for the six months to October 31, up from $82 million for the same time last year.

But underlying profit, which excludes one offs like the exit from the Franklins business, was down two per cent to $119 million.

Revenue rose five per cent to $6.65 billion but pre-tax earnings were down more than six per cent to $193 million.

Metcash CEO, Ian Morrice, said the company, which provides to IGA and Foodworks supermarkets, was continuing to suffer with tough market conditions and food price deflation.

He said it was difficult for the company to compete against supermarket giants Woolworths and Coles, who he said distorted the market through cross-subsidisation between their grocery and fuel businesses.

“The use of market distortive devices such as fuel shopper dockets, particularly at excessively high predatory levels, makes it very difficult for independent retailers to compete on a level playing field,” he said.

Morrice said Metcash had invested more heavily in advertising and marketing in order to remain competitive.

But the company expects conditions to remain challenging for the remainder of its financial year and is forecasting earnings per share growth in the high single digits.

Metcash announced an interim dividend of 9.5 cents a share, equal to last year’s half year dividend.

AAP