Shares in UK supermarket group Morrison’s (MRW) were largely unchanged at 177p despite the firm publishing strong results for the year to January and raising the total dividend by more than a quarter.
Group like for like sales excluding fuel and VAT rose 8.6% compared with a 0.8% fall the previous year, with fourth quarter organic growth hitting 9% compared with a 2.1% fall the previous year.
COVID COSTS HIT PROFIT
Profits before tax and exceptional items were up 5.6% to £431 million on an underlying basis, but were 50.7% lower at £201 million on a reported basis after £290 million of what the firm called ‘direct Covid-19 costs to help feed the nation through the crisis’.
Despite the drop in profits and a substantial increase in net debt, the firm paid a special dividend of 4p per share deferred from the second half of the previous year and a final dividend for last year of 5.11p, taking the full-year pay-out to 11.15p, an increase of 27.1%.
Looking ahead, the firm said it expected profits before tax and exceptional items to be in the £420 million to £440 million range, in other words close to last year’s underlying figure, assuming ‘a gradual return to more normal trading conditions, no significant increases in expected direct Covid-19 costs such as elevated colleague absence, and no further restrictions such as another period of prolonged cafe closures’.
ANALYSTS UPBEAT
Clive Black, head of research at Shore Capital, house broker to the firm, flagged its plan to deleverage following the spike in net debt, ‘which we warmly welcome’, and said the group was ‘better set than this time last year to press on with medium-term growth plans’.
Ross Hindle, analyst at Third Bridge, noted the firm had benefitted from an extensive store refurbishment programme which had enabled it to ‘gobble up market share’, and suggested that the firm’s move to improve its home-ware and clothing lines ‘could offer some margin protection to the group’.
