Times are tough for supermarkets as they compete to attract cash-strapped consumers. However, while WM Morrison's first-half like-for-like sales, excluding petrol, fell 0.9 per cent, there was evidence of an improving trend during the second quarter and the shares remain attractively rated.
Underlying half-year profit actually rose 1 per cent to £445m, thanks to a 10 basis point increase in the operating margin to 5.3 per cent and the group remains on track to deliver £100m of cost savings by 2013-14. The £1bn share buy-back programme – £628m has been returned to shareholders so far – has also boosted earnings by 4 per cent, which, helped by a lower tax charge, pushed underlying EPS up 10 per cent to 13.1p.
Shoppers are increasingly demanding better value – a Morrison strong point – and own-brand sales grew 40 per cent. Self-help initiatives are also making progress, including the rollout of sales-boosting Fresh formats, the move into new non-food products and the development of a convenience-store business. However, challenging conditions have meant a scaling back in expansion ambitions, with plans for new store openings cut by 200,000 sq ft to 500,000 sq ft by 2013-14.
Broker Panmure Gordon expects full-year EPS of 28.8p (from 25.9p in 2011).
| WM Morrison Supermarkets (MRW) | ||||
|---|---|---|---|---|
| ORD PRICE: | 289p | MARKET VALUE: | £7.0bn | |
| TOUCH: | 289-289.1p | 12-MONTH HIGH: | 340p | LOW: 261p |
| DIVIDEND YIELD: | 3.8% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 217p | NET DEBT: | 32% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 8.74 | 449 | 12.4 | 3.17 |
| 2012 | 8.94 | 440 | 13.3 | 3.49 |
| % change | +2 | -2 | +7 | +10 |
Ex-div: 26 Sep Payment: 5 Nov | ||||
