Record year as Morrisons prepares to go multi-channel

YORKSHIRE supermarket group Morrisons has taken further steps into online trading as it recorded a 13% pre-tax profit hike to £869m.

For the year to January 30, like-for-like sales, excluding fuel and VAT, were also up 9% from 6% the previous year.

As well as its acquisition of kiddicare.com for £70m, which last month signified the group’s move into online retailing, it announced this morning a £32m investment in FreshDirect, a fast growing internet grocer serving the New York market.

The group will take around a 10% stake in the company and has also committed to launching Morrisons.com, for both groceries and non-food products, within two years.

Morrisons said: “These two investments will help us to learn from the very best, and get us going. We believe as a result we will get to the right answers faster in both grocery and non-food internet retailing.

“We are determined that in both these new channels of on-line and convenience we will offer customers something which is distinctively Morrisons.”

Morrisons reported statutory basic earnings per share of 23.9p, an increase of 5% over the previous year, whilst underlying basic earnings per share increased by 12% to 23.0p.

Morrisons said the board is recommending a final dividend of 8.37p per share, bringing the total dividend for the year to 9.6p, an increase of 17%.

The group reported strong cash generation, with cash from operations of £1.1bn, up £127m -13% – over the previous year.

Capital expenditure of £592m was “well within earlier guidance”, it said and lower than the prior year’s £916m, which had included the opening of a new regional distribution centre and a package of stores from the Co-op.

The group said it expects the rate of investment to pick up again in 2011/12, as it invests in further distribution capacity and a higher rate of new store openings.

Net debt was £817m, a decrease of £107m over the year, to leave gearing at 15%.

At the year end the group had undrawn, committed bank facilities of £625m.

The year saw Morrisons open 15 new stores. It has also agreed to acquire 16 Netto stores from Asda, as part of Asda’s acquisition of 194 Netto stores throughout the UK.

Chief executive Dalton Philips said: “2010 was a year of solid performance in the business, whilst we reshaped the top team and began a series of initiatives and investments to drive the business forward.

“Our plan to make Morrisons “Different and Better than Ever” has great momentum, with store trials under way that are yielding exciting results, our first convenience store sites secured and important e-commerce investments in FreshDirect and kiddicare.com announced.”

Morrisons also announced that Brian Flanagan, a non-executive director, is to step down in June.

With immediate effect, Nigel Robertson is appointed as senior independent director, Johanna Waterous as chairwoman of the board’s remuneration committee, and Penny Hughes will assume the role of chairman of the board’s corporate compliance and responsibility committee.

Philip Cox, who joined the board as a non-executive director in 2009, will remain as chairman of the board’s audit committee.