Morrisons profits surge as like-for-likes climb

Morrisons' like-for-like sales climbed 7.9 per cent in the year to February 1, excluding fuel.
Pre-tax profits at the grocer rose to £655m, from £612m the year before. This included £2m of property gains, versus £32m the year before.

Turnover grew 12 per cent to £14.5bn, with around 3 per cent of that growth attributable to the increased price of fuel during the period.

Customer numbers grew 4.2 per cent and average basket spend rose 3.6 per cent. The Morrisons board is recommending a final dividend of 5p per share, to bring the total for the year to 5.8p - an increase of 21 per cent.

Morrisons has benefited as budget-conscious consumers look for value during the downturn. The grocer launched over 21,000 price cuts in the year, when its market share grew from 12.1 per cent to 12.3 per cent, according to TNS market research data. It said it has successfully completed plans to revamp its stores, product offer and brand.

Net debt increased to £642m, up from £543m the year before, after a £678m investment in nine store openings, the freehold to its new distribution centre in Sittingbourne in Kent and payments in to its pension fund.

The retailer, which has 382 stores, will extend its target of having 1 million sq ft of new store space by January 2010 by a further 500,000 sq ft following its acquisition of Co-op/Somerfield stores. It will open around 350,000 sq ft of new retail space in the coming year.

The board will retain capital originally set aside for share buy-backs in the 2009/10 year for further investment opportunities.

Morrisons chief executive Marc Bolland said: "Our focus on fresh food and value appeals to shoppers everywhere and provides a strong platform to take Morrisons from national to nationwide."

Panmure Gordon retail analyst Philip Dorgan said: "The hike in capital expenditure and the promise to look for further acquisitions increases the risk profile, which is already being affected by the outlook for the industry. Margins fell in 2008/09 and we expect further falls in the current year, which drives our well below-consensus earnings estimates."