Supermarket chain Morrisons saw its annual profits cut in half as it was impacted by the additional costs of Covid-19, but also declared a special dividend alongside a final payment.
Profit before tax and exceptional items fell 50.7% to £ 201m, including £ 290m of direct costs from Covid-19 to cover thousands of additional staff, employee sickness benefits and in-store security measures to deal with the pandemic.
In a season where supermarkets have weathered the Covid storm better than most in their role as essential supplier without posting huge profits as costs rise, CEO David Potts has carried the profit halving as a ” badge of honor “.
“The British people got access to food because supermarket workers, not just Morrisons, were asked by the government to be key workers and required to stay open, unlike pretty much the rest of society. Frankly, we couldn’t have made any profit and that would have been a result, ”he said.
Of the £ 290million in extra costs, salaries for new hires amounted to £ 99million, with employee bonuses adding £ 68million. Morrisons has also donated £ 12million to food banks and other charitable causes. Its free cash position deteriorated significantly, with outflows of £ 450million, compared to inflows of £ 218million a year earlier.
The group’s like-for-like sales excluding fuel and value-added tax rose 8.6%, with like-for-like sales up 9% in the last quarter, the company said Thursday. Gasoline sales were hit as fewer people drove during times of lockdowns and other restrictions, with like-for-like sales falling 43% in January.
An exceptional dividend of 4p per deferred share for the second half of the 2019/20 financial year was declared as well as a final dividend of 5.11p.
“We expect the 2021/22 pre-tax and windfall profit, including rates paid, to be higher than the £ 431million profit realized in 2020/21, excluding the rate relief ( business) of £ 230million, ”the company said, adding that it expected strong free cash flow. and a significant reduction in net debt.
“This target assumes a gradual return to more normal trading conditions, no significant increase in the expected direct costs of Covid-19, such as a high absence of colleagues, and no other restrictions such as another extended period of cafe closures. . “
Morrisons, which was relegated last week from the FTSE Top 100 Index, said it was expanding its “Morrisons on Amazon” service, which is now available in around 50 cities and has accounted for over 10% of sales. in the majority of stores where the service is offered.
Hargreaves Landsown analyst Susannah Streeter said there were signs Morrisons was paving the way to take advantage of the opportunities ahead, as he considered easing restrictions.
“Although online sales still lag significantly behind their rivals, there is significant scope for rapid growth. It has taken a small step forward in terms of market share to take a 10.3 share. % of the sector in the 12 weeks leading up to February 21, ”she said. adding that the merger with Amazon “also has enormous potential”.
“If he can become the Minor King of the Amazon Empire, there could be some significant rewards ahead. Converting 300 more McColls convenience stores to the Morrison Daily format could help boost future revenues, as this sector has held up particularly well in the past year. “
“But competition is fierce in the grocery business and if Morrisons focuses on a ‘stack it high, sell it cheap’ approach as it tries to retain buyers after the foreclosure, the strategy could nibble away. margins. “