viewWM Morrison Supermarkets PLC

Morrisons pays special divi and extends relationship with Amazon

The market remained competitive and challenging. Customer behaviour continued to be impacted by the uncertainties around the prolonged Brexit process.

WM Morrison Supermarkets trolley
Consumer confidence continued to be low.

Wm Morrison Supermarkets PLC (LON:MRW) has announced a special dividend of 2p, as expected in some quarters, and extended its relationship with Amazon.

In its interim results statement for the half-year to 4 August, the supermarket chain said like-for-like (LFL) sales, excluding fuel and value-added tax, was up 0.2% year-on-year.

The second quarter saw LFL sales fall 1.9% from the same period of last year. – a period that included the FIFA World Cup and a noticeably hotter summer than Britain has had this year.

Total revenue in the half-year period was up 0.4% to £8.83bn from £8.80bn the year before.

Headline profit before tax and exceptional items was up 5.3% to £198mln from £188mln the previous year, while statutory profit before tax leapt 48.5% to £202mln from £136mln in 2018.

Free cash flow improved to £244mln from £229mln in the corresponding period of 2018.

Net debt eased to £2.36bn from £2.39bn at the beginning of the reporting period.

The grocer declared an interim ordinary dividend of 1.93p, up 4.3% from last year’s 1.85p divi; on top of that, it has declared a special dividend of 2p.

Morrisons extends relationship with Amazon

Morrisons, which in June announces an expansion of its presence on Amazon Prime, has announced a further extension of its relationship with the online retailer; the two have signed an agreement to form a partnership for a set period rather than on a rolling basis.

Morrisons and Amazon “will be exploring new opportunities to innovate and improve the shopping experience for both Morrisons and Amazon customers”, the UK company said.

The retailer is also extending its wholesale partnership with Rontec, the petrol station forecourt operator, through further store format trials.

In recent weeks Morrisons and Rontec have started trials of different formats in four of its smaller convenience stores. Two are branded Morrisons Select, offering predominantly a food-to-go Morrisons range, and two remain branded Shop'N Drive with small Morrisons food-to-go inserts.

It has also announced a new overseas export wholesale partnership with Y-International, part of LuLu Group International, to supply Morrisons branded products, including Morrisons' 'Best' and 'Free From' ranges.

LuLu is the second-largest grocer in the Middle East and has more than 150 stores, with more expansion planned in coming years.

Morrisons will initially supply LuLu in Qatar from later this year, with plans to roll out to further countries thereafter.

"News today of new wholesale initiatives, including a further extension of our partnership with Amazon, and of another special dividend, again show how new Morrisons continues to become broader and stronger for all stakeholders, and how progress can be meaningful and sustainable even in more testing trading conditions,” said David Potts, the chief executive of Morrisons.

The company said that after going up against tough year-ago comparatives in the first half of the current financial year, LFL sales growth should improve in the second half.

“We remain on track for our medium-term target of £75mln-£125mln incremental profit from wholesale, services, interest and online,” the company said.

Shares gained 4.3% to 202.5p in late morning trading.

Special divis could be cut if market conditions worsen, says analyst 

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said news that Morrisons has tightened its relationship with Amazon will be welcome as there are few partners that carry as much weight and potential as the online giant.

On the company's retail business, she added: "The fact Morrison owns a lot of its stores means it has more flexibility than other businesses.

"The good news there for investors is it’s been able to offer special dividends in the past – and this half has been no exception.

"Of course, this kind of shareholder return is highly discretionary. Performance from the group has been stable enough of late, but if conditions in the sector were to become materially more difficult, those specials could be taken off the menu.”


Quick facts: WM Morrison Supermarkets PLC

Price: 192.9 GBX

Market: LSE
Market Cap: £4.65 billion

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