Morrisons makes progress despite drop in H1 profits
● Retailer returning to £91m to investors as sales reach nine-year quarterly high
Morrisons announced it will return £91 million to shareholders after seeing sales growth reach a nine-year high in the second quarter.
The supermarket reported a year-on-year jump in like-forlike sales of almost 5 per cent for the half-year to 5 August, and jumping 6.3 per cent in the second quarter. Total revenues grew 4.5 per cent to £8.8 billion for the half year.
The group announced plans to pay an extra £91m to investors after raising its total interim dividend by 2p, or 132 per cent, to 3.85p.
Morrisons noted the expansion of its online grocery services as a highlight in the first half of the year, as it entered Scotland for the first time and expanded in the south of England, giving more than 75 per cent of British households access to the service.
However, the group’s pre-tax profit dropped 29 per cent to £142m, after being dragged down by net adjustments of £51m, due to a bond tender offer and a change in how the company estimates stock provision.
Chief executive David Potts said: “Strong growth, including our best quarterly like-forlike sales for nearly a decade, together with another special dividend for our shareholders, shows how new Morrisons can keep improving for all stakeholders. Morrisons continues to become broader, stronger and a more popular and accessible brand.”
The group said its wholesale supply partnership with Mccoll’s progressed more quickly than first expected.
Morrisons said: “We now expect to achieve our target of £700m of total annualised wholesale supply sales ahead of our initial end-2018 guidance. Our plan for £1bn of annualised wholesale supply sales in due course remains unchanged.”
Looking to the future, the group expects to lower costs of its Morrisons.com expansion and the ramping up of its wholesale supply operations.
Its net debt now sits at £929m, reduced by £44m since the end of 2017-18.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “Morrisons continues to make progress with its turnaround. With a high proportion of freehold stores and debt falling, the group’s balance sheet looks robust, and that means cash is available to return to shareholders despite ongoing investment.
“Longer term, the group needs to strengthen its online offering, and convenience has also been a weak spot. However, management are taking steps to improve both areas and initial signs are good.”
Russ Mould, investment director at AJ Bell, said that despite showing good progress, the supermarket cannot rest on its laurels if it is to stay ahead of competitors. He said: “The group is still at risk of finding itself in the squeezed middle of the grocery business, with the discounters Aldi and Lidl attacking it from one side, and Sainsbury, Tesco and Waitrose from the other.”
Shares closed down 2.1 per cent at 260.3p.