Morrisons' (MRW) trading figures for the first half would seem to confound the high level of shorting currently levelled on its shares. During the six months to the end of July the supermarket chain strengthened its balance sheet, boosted sales growth and developed its external partnerships. The grocer is delivering against its recovery plan, growing like-for-like sales for seven consecutive quarters. Excluding fuel, comparable sales were up 3 per cent during the period, driven by increased volumes. Like-for-like transactions were up 3.9 per cent, helping push underlying pre-tax profits up 13 per cent to £177m. However, underlying margins were down fractionally at 2.5 per cent.
Retail accounted for the lion’s share of sales growth, up 2.5 per cent on 2016's figures. However, at the wholesale business – which includes partnerships with Ocado (OCDO) and Amazon (us:AMZN) – sales increased 0.5 per cent. Post year-end the group made greater inroads into convenience shopping, signing up McColl’s as a partner. Management hopes this will push annualised wholesale supply sales past £700m by the end of 2018.
A store-pick (meaning the items can be picked from a Morrison's store) online home delivery service was launched in the north-east of England, broadening its online catchment area. There are plans to expand the service to other areas "in due course". Incremental profits from wholesale, services, interest and online was £14m, taking the total to £32m during the past 18 months. Management has revised up its incremental profit target range to £75m-£125m, from £50m-£100m.
Free cash flow was £352m, down on the £558m generated during the same period in 2016. This included £102m in working capital and £93m in proceeds from the disposal of its Dordon customer fulfilment centre. That allowed the group to pay down a further £262m of debt, taking net debt below the £1bn year-end target, to £932m.
Analysts at house broker Shore Capital expect adjusted pre-tax profits of £365m for the 12 months ending January 2018, giving EPS of 11.7p (2017: £337m/10.8p).
| WM MORRISON (MRW) | ||||
| ORD PRICE: | 232.5p | MARKET VALUE: | £ 5.47bn | |
| TOUCH: | 232.5-232.6p | 12-MONTH HIGH: | 254p | LOW: 192p |
| DIVIDEND YIELD: | 2.4% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 181p | NET DEBT: | 22% | |
| Half-year to 30 Jul | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 8.03 | 143 | 4.7 | 1.58 |
| 2017 | 8.42 | 200 | 6.9 | 1.66 |
| % change | +5 | +40 | +47 | +5 |
| Ex-div: | 28 Sep | |||
| Payment: | 06 Nov |
