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Morrisons unveils lower sales but moves into the black

Published: 20:50 10 Mar 2016 AEDT

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Morrisons has unveiled a new wholesale food supply deal with online retailer Amazon

WM Morrison Supermarkets PLC (LON:MRW) reported lower annual sales but highlighted a move into the black.

Morrisons, which has taken a hit from the challenge from discounters, said like-for-like sales excluding fuel and VAT in the year to January 31 fell 2%.

Total turnover dropped 4.1% to £16.1bn and underlying pre-tax profits declined to £302mln from £413mln a year ago, in the middle of guidance of between £295mln and £310mln.

It also proposed a final dividend of 3.5p and an annual Total dividend of 5p, down from 13.65p a year ago as expected.

But the group made a pre-tax profit of £217mln against a loss of £792mln a year ago and said it had reduced net debt by £594mln to £1.75bn. It expects net debt at the end of 2016/17 to be between £1.4bn and £1.5bn.

It also said it had generated £1.6bn of free cash flow in two years, ahead of initial expectations.

Morrisons has unveiled a new wholesale supply deal with online retailer Amazon.com, Inc. (NASDAQ:AMZN) and rejigged its distribution deal with online grocer Ocado Group PLC (LON:OCDO).

Under new chief executive David Potts, the company has also been selling non-core convenience stores, cutting costs and improving its ranges in line with customer feedback.

The group said it expected to achieve the rest of its £1bn three-year cost saving target in 2016/17, although its recovery drive would take time and will still need sustained investment.

It also expect to exceed three-year targets for improving operating working capital by £600mln and £1bn from selling property.

Potts said: "Our strong balance sheet and cash flow provide the platform for turnaround and growth."

Shares fell 2p to 200p. Steve Clayton, head of equity research at Hargreaves Lansdown, said: "Morrison is still a work in progress, but the company appears to be heading in the right direction."

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