Shares in UK supermarket group WM Morrison (MRW) were among the biggest gainers on the FTSE 100 on another down day for markets, gaining 6.2% to 191p after its results for the year to 2 February met market expectations.
Total group revenues were down 1.1% to £17.5bn with like-for-like sales excluding fuel and VAT down 0.8%, while pre-tax profits before exceptional items rose 3% to £408m.
While the firm agreed to pay a final dividend, it decided to defer payment of a special dividend to ‘maximise flexibility around how we prioritise uses of our strong cash flow’, which clearly resonated with shareholders.
SOLID UNDERLYING PERFORMANCE
A 0.8% dip in annual like-for-like sales may not seem much to celebrate but the comparison with the ‘barbecue summer’ of 2018 which lifted full-year like-for-likes by 4.8% was always going to be tough.
The second-half bump which the supermarkets were hoping for failed to materialise, due to the continuing drag on consumer sentiment from political and economic uncertainty, but post the election sales have clearly perked up.
Retail sales for the first six weeks of the new financial year are up 5% like-for-like as shoppers flock to its stores to stock up on food and hygiene products, leading analysts to keep their revenue forecasts for the time being.
PRAGMATIC APPROACH
With current trading strong and some 240 McColl’s stores to transition to Morrisons wholesale supply this year, putting the firm on track to hit its £1bn annual wholesale revenue target, cash flow should remain healthy this year.
At the same time Morrisons is well-capitalised with low debt and ‘a strong maturity profile’ meaning it doesn’t have to refinance that debt any time soon.
It also has cash and cash-equivalents of £305m, a pension surplus of £944m and an undrawn credit facility of £1.45bn should it ever need it.
As part of its measures to make sure that the supply chain operates as smoothly as possible, it is making immediate payments to suppliers to make sure that it is able to ‘keep stock on the shelves’ as chief executive David Potts put it.
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