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Morrisons saw first annual profits growth in five years

Staff Writer |
Helped by a strong fourth quarter, Morrisons grew annual like-for-like sales and underlying profits before tax for the first time in five years and declared a 3.85p final dividend to celebrate.

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LFL sales jumped 2.5% in the three months to 29 January, lifting the year's total to 1.7% and turnover up 1.2% to £16.3bn.

Having achieved more than £1bn cost savings, and identifying even more for the current year, underlying PBT rose 12% to £337m, at the upper end of the £330m-£340m range guided by management and beating the £326m consensus forecast from the start of the year.

Underlying earnings per share were 40% higher at 10.86p.

"Our turnaround has just started, and we have more plans and important work ahead," said CEO David Potts.

"If we keep improving the customer shopping trip, I am confident that Morrisons will continue to grow."

Looking forward he conceded that there were uncertainties ahead, "especially around the impact on imported food prices if sterling stays at lower levels", rising depreciation and pension costs, and further invest in staff pay - though this is all incorporated into the plan.

Having achieved £18m of incremental profit from improvements to wholesale, services, interest and online, Potts said he remained confident of the £50m-£100m medium-term target.

"We have identified further cost saving opportunities beyond the £1bn already achieved, in: ordering, distribution between manufacturing and retail, in-store administration, and procurement of goods not for resale," he added, with the medium-term targets of £1bn improvement in working capital and at least £1.1bn of disposal proceeds remaining unchanged.

After free cash flow for the period of £670m net debt was reduced by £552m to £1.19bn at the year end and is expected to continue to fall to less than £1bn by the end of 2017/18.

The triennial pension valuation complete, with funding surplus of £111m

In the first year of the new dividend policy, where the annual payout will be covered around two times by underlying earnings per share, the total for the year was 5.43p, giving full year dividend growth of 8.6%.


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