10th Sep 2020 08:46
(Alliance News) - Wm Morrison Supermarkets PLC on Thursday reported a much lower interim profit due to costs associated with Covid-19, though lifted its dividend with a "confident outlook".
Shares in FTSE 100-listed Morrison were down 4.2% at 186.75 pence in London in morning trading.
The Bradford-based supermarket chain posted a GBP145 million pretax profit for the 26 weeks ended August 2, a 28% drop from its GBP202 million profit the year before
Morrison explained that its profit has been temporarily hurt by considerable Covid-19 costs, particularly extra payroll, bonus, colleague and customer safety measures. Seasonal waste and markdown, as well as food bank initiatives and charities, also contributed to its reduced profit. These extra costs amounted to around GBP155 million in the first half.
These extra costs were partially mitigated by business rates relief totalling GBP93 million, giving a net half-year Covid-19 cost impact of GBP62 million. Without this extra cost, Morrison said its operating profit before exceptional items would have increased by GBP11 million year-on-year.
It expects to record a total net benefit of around GBP60 million in the second half from Covid-19, with lower business rates offsetting higher direct costs, swinging from the net cost of GBPP62 million in its first.
Revenue in the first half fell 1.1% to GBP8.73 billion from GBP8.83 billion due to very low fuel demand during and after the UK lockdown, though the company said this is now rebuilding.
The firm said it has almost met its GBP1 billion annualised wholesale supply sales target and is on track to begin supplying the remaining McColl's stores, around 240, in its second half.
As a result of the exceptional circumstances surrounding the Covid-29 pandemic, it is not reporting against its GBP75 million to GBP125 million incremental profit target.
"We are confident of continued strong momentum into the second half, improved free cash flow and net debt, and another year of growth in profit before tax and exceptionals," the company said.
The company increased its interim dividend to 2.04p per share from 1.93p per share which it said reflects its "strong first-half trading performance and our confident outlook." Pre-pandemic, it had planned to announced another final special dividend relating to the second half of financial 2020 but decided to defer this.
The special dividend decision remains deferred, reflecting "some sustained uncertainty around the potential future impact of Covid-19 on both our customers' behaviour and the broader British economy."
Chief Executive David Potts said: "We are now looking forward to holding on to what we created in the first half, building on our colleagues' inspiration and innovation, and sustaining the momentum of a broader, stronger Morrisons. I'd like to again thank every Morrisons colleague for their incredible efforts: you've earned your key worker status several times over."
By Anna Farley; [email protected]
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