10th Mar 2016 11:30
LONDON (Alliance News) - Wm Morrison Supermarkets PLC on Thursday trimmed its dividend payout and warned its turnaround will take time, but said its that sales performance improved towards the end of its financial year and that it was confident on its outlook.
The grocer experienced a difficult 2015, with sales coming under pressure from the challenge of German discounters Aldi and Lidl in the UK market, which drove significant price deflation and caused the big four supermarkets, of which Morrisons is the smallest, to invest heavily in price cuts to keep customers.
This resulted in Morrisons falling out of the FTSE 100 in December, but the situation has improved since. Shares in the group surged in January after it posted its first growth in sales for four years over the key Christmas period. The stock gained further support in late February, when Morrisons revealed a deal with Amazon Inc, the US online retail giant, to supply its fresh food to the Amazon Prime and Amazon Pantry services in the UK.
That final share price push came just before the close of the FTSE Quarterly Review and meant Morrisons will return to the FTSE 100 after only a quarter's absence. It will start trading as a blue-chip stock once more on March 21.
Morrisons shares were down 2.6% at 196.70 pence Thursday.
For all of 2015, total revenue slipped to GBP16.1 billion from GBP16.8 billion, while like-for-like sales for the year, excluding fuel and VAT, dropped 2.0%.
But signs of light emerged at the end of the year, as like-for-like sales rose 0.1% in the fourth quarter. In its Christmas trading update, Morrisons reported higher transaction volumes in store and a doubling in online sales.
A somewhat less positive picture were shown by the Kantar Worldpanel figures published on Tuesday, which showed Morrisons taking a hit to sales in the 12 weeks to February 28. Morrisons sales fell 3.2% year-on-year, while its market share was shaved to 10.6% from 11.0%.
Morrisons said its pretax profit for the year to the end of January was GBP217.0 million, swung from a GBP792.0 million loss a year earlier, when it booked significant costs on the restructuring of its business and store estate.
Stripping out those restructuring and store closure costs, underlying pretax profit hit GBP302.0 million, down from GBP413.0 million the year earlier but in line with the company's guidance of GBP295.0 million to GBP310.0 million.
Morrisons declared a final dividend of 3.50 pence per share, taking its total dividend to 5.00p, down from the 13.65p it paid out a year earlier.
The grocer said it has achieved its initial aims of stabilising like-for-like sales, cutting costs and recruiting new talent in the business. It added a strategy of listening to customer feedback and attempting to improve the shopping experience based on this was working, with customer satisfaction improving.
The group also continued to cut costs and remains confident on its target of taking GBP1.0 billion in costs out of the business by the end of the 2017 financial year, compared to the 2015 year. The cost cutting in the just-finished financial year involved job cuts at its head office, the closure of underperforming stores and the sale of its M Local stores.
Morrisons said its turnaround will take time and will still involve significant investments being made in the business, in addition to the cost cutting.
Morrisons said it expects underlying pretax profit to grow by between GBP50.0 million and GBP100.0 million in the medium term, driven by online, manufacturing and wholesale opportunities the group has identified, and it expects its free cash flow will be better than previously guided, driven by operating working capital improvements and property disposal proceeds.
"By improving the shopping trip for customers, we have started the journey to turnaround the business and make our supermarkets strong. Our listening programme is informing and shaping the six priorities that are now driving the improvements that customers are noticing," said David Potts, chief executive of Morrisons.
By Sam Unsted; [email protected]; @SamUAtAlliance
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