Shares digital

Morrison (Wm) (MRW) – Finals PTP: £563m (£323m) Divi: 4.8p (4p)

Ken’s final figures, Morrisons’ founder earned a rare accolade indeed; a standing ovation from analysts. They confirmed that the botched integration of Safeway is mere history and the group is now well positioned for above average growth.

Over the past two years Morrisons has been transformed. Its twin emphasis upon fresh food and good value has won it an additional 500,000 customers. Over the past nine months it has enjoyed much stronger sales growth than any of its competitors.

There has been a conscious effort to segregate the offering so that it appeals to the local market. There has also been a growing emphasis on organics, fair trade and new lines.

The group has a less ambitious opening programme than some of its competitors. However, it believes that it could – as the number four – eventually benefit from the increased emphasis upon competition.

Morrisons currently does not have an internet presence. This is likely to change over the next two years.

The group announced a £1 billion share buyback. However, it will not seek to crystallise the value of its 26 investment properties until the market has improved and remains committed to trading from freehold stores.

The dividend, up 20%, remains comfortably covered three-times by earnings, while plans to cut cover to 2.5-times imply continued payout growth. The company will reduce cover ‘over time’ to 2.5-times. The joint broker Citigate believes that the dividend could grow by 80% over the next three years.

Citigate is forecasting earnings of 16.6p rising to 20.2p next year, placing the shares on a PE of 17.4, falling to 14.3.

Shares says: In a defensive sector, the rating is justified by the increasing sales momentum.

by: John Marshall