Morrisons hikes dividend on confident outlook despite £86m blow to profits
Morrisons has welcomed last year's jump in like-for-like sales with a special dividend, it revealed today, though profits were hit by £86m in costs as the supermarket closed a pension scheme and paid off loans.
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The figures
Profit before tax fell 15.8 per cent year on year to £320m in the 12 months to the end of February, compared to £380m the year before.
Morrisons blamed a variety of costs for the drop, including £33m in loan repayments, and £40m of higher stock provisioning and distribution improvements. The supermarket also had to pay £36m in pensions costs as it closed salary-linked schemes.
However, underlying annual profits increased 8.6 per cent to £406m.
Revenue rose 2.7 per cent year on year to £17.7bn, while non-fuel growth hit 5.1 per cent.
Meanwhile like-for-like sales excluding fuel climbed 4.8 per cent, with retail up 1.5 per cent and wholesale up 3.3 per cent.
Net debt climbed slightly higher to £997m, up from £973m the year before, though cashflow fell from £350m in 2017-18 to £265m.
But basic earnings per share shrank to 10.34p, from 13.3p last year, as they reflected the profit hit.
Morrisons plans to pay a final dividend of 4.75p per share, as well as a special dividend of 4p per share, taking the full-year total up 25 per cent to 12.6p per share, compared to the previous year’s 10.09p.
Why it’s interesting
The UK’s fourth biggest supermarket’s dividend reward was taken as a sign of its confidence amid an ongoing turnaround plan, despite underlying profits marginally missing analyst expectations.
Morrisons posted a positive outlook for 2019, saying it has “many sales and profit growth opportunities ahead” as it chases £1bn in wholesale supply sales.
That arm of the supermarket’s business is set to get a boost from Morrisons’ supply deal with convenience retailer McColl’s, and it expects to start supplying around 300 stores towards the end of 2019 as well as turning 10 McColl’s into Morrisons Daily stores.
Ed Monk, associate director from Fidelity Personal Investing’s share dealing service, said: “That diversification into convenience retailing will be important as supermarkets in general struggle to tempt shoppers to their main stores.
“Morrisons said today that uncertainty around Brexit ‘became more personal’ at the end of last year and shoppers cut back.”
With other analysts praising Morrisons’ “strong, disciplined and balanced growth”, retail marketing firm TCC Global said Morrisons’ new stores could give it a further boost.
Insights director Bryan Roberts said: “Our recent store visits suggest that Morrisons’ own fresh proposition continues to further build on its already strong credentials.”
What Morrisons said
David Potts, chief executive, said:
“A third consecutive year of strong sales and profit growth, and a total annual dividend up over 150 percent during those three years, show the Morrisons turnaround is well on track.
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“This turnaround is based on improving the shopping trip for customers, making Morrisons more popular and accessible.
“And our customers are noticing. Most pleasing of all was another big increase in customer satisfaction, now up a full 20 percentage points in the last four years, which is all down to the friendliness and expertise of our team of unique food makers and shopkeepers.”