Morrisons signals confidence with special dividend

● Annual profits up 17% at £380m ● Ninth quarter of rising sales

British supermarket major Morrisons, the third biggest food retailer in Scotland, is to pay a special dividend to reflect its confidence for the future after beating forecasts with an 11 per cent rise in fullyear profit yesterday.

The group announced a special divi of 4p, which with ordinary dividend payments took its total shareholder payout for the year to 10.09p – up 85.8 per cent.

It is the first “extra” payment to shareholders since a share buyback in 2011.

Morrisons’ chief executive David Potts said of the sharply hiked payout: “It’s an expression by the board of its confidence in the future.”

Despite the continued robust trading performance, Morrisons’ shares closed down 4.9 per cent. That partly reflected profit-taking after a 5 per cent rise in the share price over the last three months, and some disappointment at a fall in free cash flow to £350 million from £670m.

“This will temper somewhat the excitement of the special dividend,” said Bernstein analyst Bruno Monteyne.

The company, which has 60 stores in Scotland, reported a near-17 per cent rise in pretax profits to £380m in the 12 months to 4 February, from £325m last time. Underlying profits rose 11 per cent to £374m.

Group sales lifted 5.8 per cent to £17.3 billion, while same-floorspace sales were up 2.8 per cent. Potts said the figures – the ninth consecutive quarter of improved like-forlike sales – showed the group’s recovery was well on track.

He revealed that Morrisons’ burgeoning wholesaling arm – selling bulk food to other retailers – was on track to hit its target of £700m of annualised sales by the end of this year.

Potts has steered wholesale deals with Ocado, Amazon, Rontec petrol forecourts, the Mccoll’s convenience store chain and Channel Islands retailer Sandpiper.

He said: “As our core [supermarket] business does better, wholesale has the potential to be the second [growth] engine.” Another advantage, Potts added, was that “all this wholesale growth requires little new capital from us”.

The chief executive said the improvement in sales was “broad-based” in origin, including competitive pricing, good service, and having now refurbished about 50 per cent of the store estate.

He said customers were keen on Morrisons’ conscious emphasis on its “British-ness” and “local” sourcing. Twothirds of its product is sourced in the UK, and earlier this week the group announced that it is to boost the local food and drink it sells by recruiting 200 new local producers.

Potts yesterday also cited a new potato grading and packaging facility in Carnoustie that directly sources from 200 Scottish potato growers. “We use them and cut out the agents and middlemen,” he said.

Earlier this year Morrisons axed 1,500 shop floor workers as part of a restructure that will see fewer managers.