WM Morrisons Supermarkets PLC Meaningful and sustainable growth for year-ended 3rd February 2019

Andrew Higginson, Chairman, said “In a challenging period for customers and an ever-changing British retail scene, the turnaround at Morrisons has continued to progress well. The team has now completed four years of important work, building Morrisons as a broader, stronger business.

“I am delighted that sales and profit again grew strongly, and that we are able to share that growth with our shareholders through increased dividends.”

 

WM Morrisons Supermarkets PLC (LON:MRW) has today announced its preliminary results for the 52 weeks ended 3 February 2019.

 

Financial summary

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Group LFL sales(1)  ex-fuel/ex-VAT up 4.8% (2017/18: 2.8%)

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Total revenue up 2.7% to £17.7bn (2017/18: £17.3bn), up 4.7% on a 52-week basis

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Profit before tax and exceptionals(2) up 8.6% to £406m (2017/18: £374m), and up 10.0% on a 52-week basis

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EPS before exceptionals(2) up 8.0% to 13.17p (2017/18: 12.19p)

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Statutory PBT after £86m exceptional items, down 15.8% to £320m (2017/18: £380m)

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Free cash flow(3) of £265m (2017/18: £350m, including £108m disposal proceeds)

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Free cash flow adjusted for disposal proceeds, operating working capital, and onerous payments up £44m (up 17.5%) to £296m (2017/18: £252m)

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Net debt £997m (2017/18: £973m)

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Net pension surplus of £688m (2017/18: £594m)

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ROCE increased to 7.9% (2017/18: 7.7%)

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Final ordinary dividend of 4.75p, taking the full-year ordinary dividend to 6.60p

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Further special dividend of 4.00p, taking the full-year special dividend to 6.00p

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Full-year total dividend up 24.9% to 12.60p (2017/18: 10.09p)

Strategic and operating highlights

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Customer satisfaction scores now up 20 percentage points in four years

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Ex-fuel revenue growth of 5.1% (52-week basis), the best since 2009/10

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Total dividend of £289m paid to shareholders in 2018/19

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Morrisons Daily convenience stores now in 115 locations

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New St Ives store shortlisted as one of top 5 globally, from 750 stores in 50 countries

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Since year end, started trial to offer Morrisons.com online shopping to Center Parcs’ guests, and Safeway fascia re-introduced to the British high street for first time since 2005, with two MPK Garages stores converting to Safeway Daily

Targets update

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£700m annualised wholesale supply sales achieved ahead of end-2018 target

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Expect to begin to supply McColl’s remaining c.300 convenience stores towards the end of 2019, and still expect £1bn of annualised wholesale supply sales in due course

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Further £12m incremental profit from wholesale, services, interest and online, taking the total so far to £54m. On track for our £75m-£125m target

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Plan to trial converting ten McColl’s stores to Morrisons Daily convenience stores

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

David Potts, Chief Executive, said:

“A third consecutive year of strong sales and profit growth, and a total annual dividend up over 150 percent during those three years, show the Morrisons turnaround is well on track.

This turnaround is based on improving the shopping trip for customers, making Morrisons more popular and accessible.

And our customers are noticing. Most pleasing of all was another big increase in customer satisfaction, now up a full 20 percentage points in the last four years, which is all down to the friendliness and expertise of our team of unique food makers and shopkeepers.”

Outlook

We remain confident that Morrisons still has many sales and profit growth opportunities ahead, and expect that growth to be meaningful and sustainable.

We also continue to expect free cash flow generation to remain strong. Reflecting progress so far and our expectations, we are today announcing a further special dividend of 4.00p per share, taking the total dividend for the year to 12.60p. We will retain a strong and flexible balance sheet, and will be guided each year by the principles of our capital allocation framework in assessing the uses of free cash flow.

We expect net debt to remain at a low level, consistent with our capital discipline and the principles of our capital allocation framework.

After progressing our wholesale partnership with McColl’s more quickly than initially expected, we achieved our target of £700m of annualised wholesale supply sales ahead of our initial end-2018 guidance. We expect to begin to supply McColl’s remaining c.300 convenience stores towards the end of 2019, with some sales benefit likely from the second half. Our plan for £1bn of wholesale supply sales in due course remains unchanged.

Net incremental profit from wholesale, services, interest and online was £12m during the period, bringing the cumulative total so far to £54m. We remain on track for our £75m-£125m medium-term target.