Supermarket giant Morrisons has reported post-tax profits of £135m for the first six months of its fiscal year ending 30 July 2017. This represents an increase of £17m on the corresponding period a year earlier. In an industry renowned for the tightness of margins, it also represents a net profit of around 1.6% on total revenues of £8,421m.
Key metrics summary
• Turnover up 4.8% to £8.42bn ( compared with 2016/17's £8.03bn)
• Group like-for-like (LFL) sales excluding fuel and VAT were up 3.0% (2016/17: 1.4%)
• Underlying profit before tax (UPBT) climbed 12.7% to £177m (2016/17: £157m)
• Underlying earnings per share (EPS) were up 14.9% to 5.79p (2016/17: 5.04p)
• Reported profit before tax (PBT) jumped 39.9% to £200m (2016/17: £143m)
• Free cash flow of £352m (2016/17: £558m)
• Net debt fell by £262m to £932m since the end of 2016/17; debt is now below the company's £1bn year-end target
• Interim dividend up 5.1% to 1.66p (2016/17: 1.58p)
Seventh consecutive positive
Chairman Andrew (Andy) Higginson described this as another good performance, a seventh consecutive quarter of positive like for like comparisons. He said that with good trading momentum and a strategy to build a broader, stronger Morrisons, the business is well set to continue to deliver consistent and sustainable growth for stakeholders.”
Chief executive David Potts goes as far as to say that a new Morrisons is beginning to take shape. The capability of the team continues to improve and it is making strong headway with its strategic plans to fix, rebuild and grow the company.
“Our supermarkets continue their focus on improving the customer shopping trip and, in wholesale supply, we are beginning to realise some of the opportunities that our unique team of food makers and shopkeepers bring us,” he says.
Overstocked and confusing
In this specific context, this occasional Morrisons shopper cannot help wondering if he has ever actually visited one of his overstocked, confusing stores and stood at one of his checkouts incognito and endured the painful wait to pay some of the slowest cashiers in the UK for the shopping.
Potts described the refit programme as the most successful such programme in which he has been involved. “It was a challenging first half,” he said in the question and answer session following the formal presentation of the results.
“We learned to work with the supply chain. We are making good progress. By the end of the calendar year we should start to see inbound inflation start to fall. We see lower inflation in 2018. He says the price crunch initiative to hold down prices has been popular with customers.
Pension fund in surplus
The pension fund, incidentally, is in surplus. There is free cash on the balance of nearly £600m. A link-up with UK neighbourhood retailer McColl's has kick started the renaissance of the Safeway brand, a brand which most shoppers who gave it a moment's passing thought believed was well and truly dead and gone.
The link with McColl's forms part of a strategy which CEO Potts says will help deliver annualised wholesale supply sales in excess of £700m by the end of 2018, and more than £1bn in due course.
Independent UK stockbroker The Share Centre says the results continue to demonstrate the positive impact of the restructuring activities the group has been implementing for some time. It recommends Morrisons as a ‘hold’ as competition from discounters will continue to impact the sector.
The chairman closed the presentation conference by wishing the assembled analysts 'Merry Christmas' with his tongue clearly firmly in his cheek. The share price fell by 12.20 pence to 232.80.