WM Morrison Supermarkets plc (LON:MRW) has lifted its full year dividend 8.6% after reporting its first profit and like-for-like sales growth since 2012 on the back of a restructuring under new boss David Potts.
The supermarket chain recommended a total dividend of 5.43p for the year to 29 January 2017, compared to 5.0p the previous year, in line with its new policy to pay a sustainable dividend covered around two times by underlying earnings per share (EPS).
Underlying profit before tax climbed to £337mln from £242mln with EPS rising to 10.89p from 7.77p. Morrison had guided towards underlying pre-tax profits between £330mln and £340mln.
Like-for-like sales, excluding fuel, gained 1.7% with growth across all four quarters. Turnover edged up 1.2% to £16.3bn from £16.1bn despite the closure of underperforming stores.
Morrisons closed eight stores and opened one new store during the year as part of the group’s overhaul.
The restructuring comes amid fierce competition between the so-called Big Four supermarkets, including Morrisons, Tesco plc (LON:TSC), J Sainsbury plc (LON:SBRY) and Asda, as they lose market share to smaller discounters Aldi and Lidl.
Morrisons now also faces rising import costs due to a weaker pound following the UK’s vote to leave the European Union last June, making competitive pricing more difficult for the sector.
“There are some uncertainties ahead, especially around the impact on imported food prices if sterling stays at lower levels,” the group said in a statement.
“We also expect depreciation and pension costs to increase, and we will continue to invest in colleague pay rates. However, all of this is incorporated into our plan.”
As part of its shake-up, the company has identified further cost saving opportunities on top of the £1bn already achieved in ordering, distribution between Manufacturing and Retail, in-store administration, and procurement of goods not for resale.
Morrison expects net debt to fall to less than £1bn by the end of fiscal year 2017/18 after dropping by £552m to £1.1bn in the previous year.
The supermarket said it is also on track to meet its target of £50mln-£100mln medium-term incremental profit in wholesale, services, interest and online after realising £18mln during the year.
Potts said: “Our turnaround has just started, and we have more plans and important work ahead. If we keep improving the customer shopping trip, I am confident that Morrisons will continue to grow."
Shares fell 4.45% to 235.85p in early trading.