Profits slump and sales dive at struggling Morrisons
THE struggles continue at Morrisons as sales continue to slide and underlying profits took a tumble in the first half of the year.
In its interim results for the half year to August 3, the Bradford supermarket saw like-for-like sales (excluding fuel and VAT) fall down 7.4% compared to a 1.6% drop this time last year. It announced a huge 51% drop in underlying pre-tax profit (includes new business development costs of £38m) to £181m. Total turnover for the period was down 4.9% to £8.5bn.
However, despite market speculation that the supermarket may follow Tesco into a dividend cut, Morrisons has increased its interim dividend by 5% to 4.03p and chief executive Dalton Philips says the supermarket is getting back on the front foot.
Dalton Philips said: “We are six months into the three-year plan that we set out in March and, although it is early days, I am encouraged by the progress we have made.
“There is an enormous amount of change and modernisation flowing through our core business, much of it enabled by new systems. Price investment, in-store improvements, and better products were all key components of the work undertaken in the first half, and the Morrisons card launches soon. Our new growth channels – online and convenience – are progressing well, and our cost-savings and cash flow plans are both on track to achieve our ambitious three-year targets.
“Although it is too early to see the benefits of the three-year plan in the sales line, Morrisons is getting back on the front foot, and implementing change and innovation at real pace throughout the business. We are meeting the challenges of structural change with decisive action and are on track to become a more distinctive value retailer for the next generation of grocery retail.”
Sir Ian Gibson, non-executive chairman, admitted that conditions are tough, and the industry is going through unprecedented change.
“Our first-half results reflect the reset of the business we announced in March. Morrisons is now well underway with building the foundations for a better future. The board is confident of the new strategy and Morrisons financial position remains strong. In line with the policy we set out in March, we are increasing the interim dividend by 5% to 4.03p, and confirm our commitment to pay a total dividend for 2014/15 of not less than 13.65p,” he said.
Morrisons said that while LFL sales performance is yet to improve, there are some encouraging initial trends. It said its initiatives are on track and it anticipates these will start to benefit sales performance towards the end of the second half.
For the full-year, Morrisons expects underlying profit before tax to be in the range £325m-£375m, after £65m of new business development costs and £70m of one-off costs relating to Kiddicare.
