WM Morrison Supermarkets (LON: MRW) has today provided interim results for the half year to 4th August 2019.
Financial summary
· Group like-for-like (LFL) sales(1) ex-fuel/ex-VAT up 0.2% (2018/19: 4.9%)
· Q2 Group LFL ex-fuel/ex-VAT down 1.9% (Q2 2018/19: up 6.3%)
· Total revenue up 0.4% to £8.83bn (2018/19: £8.80bn)
· Profit before tax and exceptionals(2) up 5.3% to £198m (2018/19: £188m)
· EPS before exceptionals(2) up 4.1% to 6.38p (2018/19: 6.13p)
· Statutory profit before tax up 48.5% to £202m (2018/19: £136m)
· Free cash flow(3) up £15m to £244m (2018/19: £229m)
· Free cash flow adjusted for disposal proceeds, operating working capital, onerous payments, and non-cash movements up £30m to £211m (2018/19: £181m)
· Net debt £2,358m (2018/19 year end: £2,394m). Pre-IFRS 16 net debt £975m, down £22m since the end of 2018/19
· Interim ordinary dividend up 4.3% to 1.93p (2018/19: 1.85p)
· Special interim dividend of 2.00p, taking total interim dividend up 2.1% to 3.93p
Strategic and operating highlights
· Maintaining meaningful, sustained cash generation, profit and dividend growth
· Significant investment and improvement in competitiveness
· Expansion of the Morrisons store on Amazon Prime Now to many more cities across the UK, starting in Q3
· Trial conversion of ten McColl’s stores to Morrisons Daily started well
· Today announcing four new or extended wholesale supply initiatives:
- Multi-year partnership signed with Amazon extending relationship in time and scope
- New forecourt partner Harvest Energy
- New export partner LuLu in the Middle East
- Further convenience store trial formats with Rontec
Financial targets update
· On track for £1bn annualised wholesale supply sales target
· Further £7m incremental profit from wholesale, services, interest and online, taking the total so far to £61m. On track for our £75m-£125m target
Note: 2018/19 has been restated for the new lease accounting standard, IFRS 16
Andrew Higginson, Chairman, said:
“I’m confident that Morrisons is on the right path for continued and sustainable growth. The team are listening and responding to customers, and making the right choices to benefit all stakeholders, including strong dividends for shareholders.”
David Potts, WM Morrison Supermarkets Chief Executive, said:
“We stayed focussed on our Fix, Rebuild and Grow strategy, and were pleased to maintain the momentum of the turnaround against strong comparatives last year. Sales and profit progress was robust, and we again invested in improving our competitiveness for customers.
“News today of new wholesale initiatives, including a further extension of our partnership with Amazon, and of another special dividend, again show how new Morrisons continues to become broader and stronger for all stakeholders, and how progress can be meaningful and sustainable even in more testing trading conditions. Such progress is only made possible by Morrisons exceptional team of food makers and shopkeepers.”
Outlook
Sales comparatives were strong, with 2018/19 assisted by very favourable summer weather and events such as the World Cup and royal wedding. In contrast, this year’s summer weather was largely unfavourable and there were no similar events to boost sales. Consumer confidence also continued to be weak, again affecting customer behaviour. In this more testing period, our profit performance was robust, free cash flow generation remained strong, and we were satisfied with our relative LFL performance.
During the second half, we are planning both for retail LFL to improve, and for various additional cost saving opportunities. In addition, we expect the contribution from our incremental £75m-£125m profit opportunity to continue to grow, including previously guided online cost savings after our recent temporary exit from the Erith customer fulfilment centre (CFC) and lower wholesale start-up costs. We remain on track for our medium-term target of £75m-£125m incremental profit from wholesale, services, interest and online.
We are confident that Morrisons will continue to become broader and stronger. We have many meaningful and sustainable growth opportunities ahead, and are pleased today to be announcing extensions of our wholesale supply partnerships with Amazon and Rontec, and two new partnerships, with Harvest Energy in the UK, and LuLu in the Middle East.
Reflecting our growth opportunities, sustained profit and cash flow progress, and future expectations, we are today announcing a further special dividend of 2.00p per share. We will continue to retain a strong and flexible balance sheet, and we will be guided each year by the principles of our capital allocation framework in assessing the uses of free cash flow.
