Morrison W.Sprmkts best quarterly like-for-like sales for nearly a decade

WM Morrison Supermarkets

Morrison W.Sprmkts (LON:MRW), today announced the interim results for the first half year to 5 August 2018.

Financial summary

●Group like-for-like (LFL) sales(1) ex-fuel/ex-VAT up 4.9% (2017/18: 3.0%)

●Q2 Group LFL ex-fuel/ex-VAT up 6.3%, a nine-year high

●Revenue up 4.5% to £8.80bn (2017/18: £8.42bn)

●Underlying profit before tax (UPBT(2)) up 9.0% to £193m (2017/18: £177m)

●Underlying earnings per share (EPS(2)) up 8.5% to 6.28p (2017/18: 5.79p)

●Reported PBT down 29% to £142m (2017/18: £200m) after net adjustments of £51m, including £33m previously announced for successful bond tender offers and £28m following a change in methodology for estimating stock provisions

●Free cash flow(3) of £242m, including bond tender costs and lower disposal proceeds year on year in the first half (2017/18: £352m)

●Net debt reduced by a further £44m to £929m since the end of 2017/18

●Interim ordinary dividend up 11.4% to 1.85p (2017/18: 1.66p)

●Special interim dividend of 2.00p, taking total interim dividend up 132% to 3.85p

Strategic and operating highlights

●Acceleration in LFL, sustained strong underlying profit growth and cash flow

●Returning a further £91m to shareholders, in accordance with our capital allocation framework principles guiding the uses of free cash flow each year

● extended to more parts of the South and into Scotland for the first time, and now available to over 75% of British households

●Initial programme to supply first 1,300 McColl’s stores completed ahead of plan

●Since half-year end, agreed new wholesale deals to supply MPK Garages forecourt stores and Big C in Thailand

Financial targets update

●£700m of annualised wholesale supply sales expected to be achieved ahead of initial end-2018 guidance. £1bn of annualised sales still expected in due course

●Further £4m incremental profit from wholesale, services, interest and online, taking the total so far to £46m. On track for the £75m-£125m target

●In the second half, we expect lower costs of both expansion and accelerated wholesale supply, and will annualise the Home & Leisure relaunch

●Net debt expected to remain at a low level, consistent with our capital discipline and the principles of our capital allocation framework

Andrew Higginson, Chairman, said:

“With each passing quarter, the Morrisons team is building a better and better business. New customers try Morrisons and tell us they really enjoy shopping with us: our friendly colleagues, the quality of our fresh food and our low prices. We look forward to more and more customers trying Morrisons.”

David Potts, Chief Executive, 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.”


We are confident that Morrisons has many meaningful and sustainable sales and profit growth opportunities ahead. We also expect free cash flow generation to remain strong and sustainable. Reflecting this progress and our expectations, we are today announcing a further special dividend of 2.00p per share. As we stated at the 2017/18 preliminary results, we will 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.

During Q2, we progressed our wholesale supply partnership with McColl’s more quickly than initially expected. As a result, we now expect to achieve our target of £700m of total annualised wholesale supply sales ahead of our initial end-2018 guidance. Our plan for £1bn of annualised wholesale supply sales in due course remains unchanged.

This speeding up of wholesale supply to McColl’s, plus investments in store-pick and the new Erith customer fulfilment centre (CFC) for, means we incurred some extra start-up costs in the first half. We expect these costs to reduce during the second half and beyond. In addition, during the second half we will annualise last year’s relaunch of our Home & Leisure range, and expect improved performance year on year.

Net incremental profit from wholesale, services, interest and online was £4m during the period, bringing the cumulative total so far to £46m. We remain on track for our £75m-£125m medium-term target.

Net debt ended the first half lower than end-2017/18. We expect it to remain at a low level, consistent with our capital discipline and the principles of our capital allocation framework.

After a successful £233m bond tender offer during the first half, we now expect 2018/19 underlying net finance costs to be £60m-£65m.

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