Morrisons sees profits tumble as challenging market continues
SUPERMARKET group Morrisons announced a big drop in half year profits as like-for-like sales fell by 1.6%.
The Bradford-based chain saw flat turnover of £8.9bn in the six months to August 4 as pre-tax profits fell to £344m from £440m last time and the company admitted that the “challenging” economic outlook is likely to remain for the forseeable future.
Looking forward, Morrisons said it is making progress with its roll out of M local convenience stores – it now has 33 open with 100 by the end of the year and is looking to launch online sales and home deliveries in January following its deal with Ocado.
The group said total store sales were up 0.8% compared to 1.3% for the same period last year.
It is raising its interim dividend by 10% to 3.84p while net debt is £2.529bn compared to £1.68bn last year.
In its results statement Morrisons said: “Whilst early indications of a recovery in the UK economy are encouraging, we are yet to see this impact on consumers’ pockets. We have therefore developed our financial and operational plans on the basis that there will be no significant change to the challenging economic environment in the near future. We anticipate an improvement in our sales performance during the second half and accordingly the board believes the group’s performance for the full year will be broadly in line with its previous expectations. Our strategic initiatives are laying the foundations for good progress in the year to January 2015, and beyond.”
Morrisons, which has a property portfolio with an estimated market value of around £9bn, said it is reviewing whether to sell off some of its estate, 90% of which estate is freehold, a much bigger proportion than its major competitors, Tesco, Sainsbury’s and Asda.
Morrisons, which describes itself as “the still maturing, fourth competitor in the UK grocery retail sector”, said it sees significant growth opportunities with 6.4m households in the UK not having “ready access” to a Morrisons store.
Chairman Sir Ian Gibson said: “Consumer confidence and market conditions have remained challenging in the first half. We have continued to invest in and develop our customer offer and this has been reflected by an improved sales performance compared to the second half of last year. Our financial position is strong and we remain focused on maximising returns from our assets and delivering superior shareholder returns. Once again our interim dividend is increased by 10%, in line with our previous commitment.”
Dalton Philips, chief executive, said: “Our strategy for growth in convenience and online is now set. Today we are outlining our financial strategy, which will support our key financial objectives of growing underlying earnings, generating cash and delivering superior total shareholder returns.
“We have also made significant progress in building our presence in the key growth channels of convenience and online. By the end of the year we will have 100 M local convenience stores, around half of which will be in London and the South East, and we’ve secured a new distribution centre in Bury to support our convenience stores in the North. In parallel we’ve been working at pace on our online offer; the final pillar of our strategy. Morrisons.com will be making home deliveries of our great fresh food by the end of January 2014, supported through our long term service agreement with Ocado.”
