13th Sep 2018 13:33
LONDON (Alliance News) - Wm Morrison Supermarkets PLC on Thursday proposed a special dividend, more than doubling its interim payout, despite recording a drop in half-year profit.
Morrisons shares were down 2.4% at 259.55 pence early Thursday, the worst performer in the FTSE 100.
The UK supermarket chain declared a 2p special dividend and upped its ordinary interim dividend by 11% to 1.85p, taking the total first half payout to 3.85p versus 1.66p paid a year ago.
At the end of its last financial year to February 4, the grocer also proposed a special dividend of 4.0p on top of its final dividend of 4.43p.
For the six months to August 5, the UK's fourth biggest supermarket chain by market share posted pretax profit of GBP142 million, down 29% year-on-year from GBP200 million. This was after net adjustments of GBP51 million, including GBP33 million in one-off costs due to a bond tender offer and GBP28 million in relation to increased stock provisioning, Morrisons explained.
David Madden, market analyst at CMC Markets UK, said: "The debt restructuring charges will benefit the company in the long-run as it will reduce interest payments, and therefore give the group more breathing space."
On an adjusted basis, first half pretax profit was up 9% to GBP193 million from GBP177 million.
Revenue for the half year increased 4.5% to GBP8.80 billion from GBP8.4 billion a year prior. New store contribution "was slightly higher than guided" as two stores opened in Cambridgeshire, England, "got off to a better-than-expected start", Morrisons said.
In the half-year period, the retailer reported an increase in like-for-like sales, excluding fuel and VAT, of 4.9% compared to 3% the year prior. Comparable sales in the second quarter of the year hit a "nine-year high" as they grew 6.3%, Morrisons added.
Including fuel and VAT, like-for-like interim sales were up 4.2%, with second quarter up 6.4%.
Chief Executive Officer David Potts said: "Strong growth, including our best quarterly like-for-like sales for nearly a decade, together with another special dividend for our shareholders, shows how new Morrisons can keep improving for all stakeholders."
"Morrisons continues to become broader, stronger and a more popular and accessible brand, and I am confident that our exceptional team of food makers and shopkeepers can keep driving the turnaround at pace."
According to the latest figures by Kantar Worldpanel - for the 12 weeks to August 12 - Morrisons sales rose 2.7%, the fastest growing among UK supermarkets. Its market share was flat at 10.4%.
Madden added: "When you take into account that Morrisons declared a special dividend in March, it is fair to say that their turnaround is impressive."
First half retail like-for-like sales were up 2.1%, while wholesale sales increased 2.8% due to quicker than expected progression in the company's supply partnership with McColl's Retail Group PLC.
In August, McColl's completed a rollout of 1,300 stores to its new supply chain partner Morrisons, following disruptions due to the collapse of wholesaler Palmer & Harvey.
Looking ahead, the FTSE 100-listed firm said it now forecasts achieving its GBP700 million target in total annualised wholesale supply sales ahead of its initial target date of the end of 2018.
"Our plan for GBP1 billion of annualised wholesale supply sales in due course remains unchanged," the company added.
In a conference call with news reporters, the company said it was "open for business" with regards to wholesale.
As part of its business strategy, Morrisons has rolled out lockers of Amazon.com Inc across almost all of its store estate. In addition, the company has increased the supply of branded and Morrisons own-brand items to Amazon's customers, as part of its partnership with the US based online retailer.
Since the end of the half-year, Morrisons also agreed new deals with two new wholesale supply partners, MPK Garages in the UK and Big C in Thailand.
Madden said: "The diversification is essential given the major changes going on in the UK supermarket sector."
"Morrisons have an agreement with Amazon to deliver groceries as a part of the Amazon Prime service and this could be very useful to the UK supermarket as Amazon have a track record of disrupting whatever industries they enter."
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