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Morrisons (MRW) has posted a first half revenue rise of 4.5% to £8.8bn after a like for like sales surge in the second quarter driven by its growing wholesale business.
The 4.5% revenue jump in the six months to 5 August included a contribution of 0.3% from new space as it opened two stores in Abergavenny and St Ives, Cambridgeshire.
Total revenue excluding fuel was £6.9bn, up 5.3%.
Group like for like sales excluding fuel were up 4.9%, with retail like for likes up 2.1% (1.9% via supermarkets and 0.2% online) and organic wholesale growth of 2.8%.
Group like for like sales (ex-fuel and VAT) were up 6.3% in the second quarter – a nine-year high for the supermarket – with retail contributing 2.5% and wholesale 3.8%. Retail sales were strong in the period and in part assisted by favourable weather and the football World Cup.
Morrisons said inflation was broadly flat in the period, with growth driven by a “strong” uplift in volimes.
Wholesale sales in particular strengthened during the period, largely due to an acceleration in the roll-out programme to supply McColl’s. Second quarter wholesale like for like growth was 3.8%, up from 1.8% in the first quarter as the McColl’s roll-0out was accelerated, now supplying around 1,300 McColl’s stores and on target to achieve £700m of annualised wholesale supply sales ahead of initial end-2018 guidance.
Since half-year end, agreed new wholesale deals to supply MPK Garages forecourt stores and Big C in Thailand
Underlying operating profit in the period was up 4.2% to £223m, with margin flat at 2.5%.
Underlying EBITDA margin was 5.1%, up 13 bps.
Reported profit before tax fell 29% to £142m due to £55m of one-off charges, including £33m previously announced for successful bond tender offers and £28m following a change in methodology for estimating stock provisions
Underlying profit before tax was up 9.0% to £193m (2017/18: £177m).
Group net debt fell to £929m, down £44m since the end of 2017/18 and down from a peak of £2.8bn.
In its outlook Morrisons said it has “many meaningful and sustainable sales and profit growth opportunities ahead” and expects free cash flow generation to remain “strong and sustainable”.
As a result, it announced a further special dividend of 2p per share.
Chairman Andrew Higginson said: “With each passing quarter, the Morrisons team is building a better and better business. New customers try Morrisons and tell us they really enjoy shopping with us: our friendly colleagues, the quality of our fresh food and our low prices. We look forward to more and more customers trying Morrisons.”
CEO David Potts added: “Strong growth, including our best quarterly like-for-like sales for nearly a decade, together with another special dividend for our shareholders, shows how new Morrisons can keep improving for all stakeholders.
“Morrisons continues to become broader, stronger and a more popular and accessible brand, and I am confident that our exceptional team of food makers and shopkeepers can keep driving the turnaround at pace.”
Morrisons shares are up 0.4% to 266.9p so far today, having tumbled as low as 256.7p in early trading.
Morning update
The John Lewis Partnership has announced its first half results from the six months to 28 July, showing that Waitrose suffered a double-digit operating profit fall in the period.
The supermarket’s operating profit before exceptional items fell 12.2% back to £96.4m in the period, despite a 2.1% rise in sales to £3.39bn representing like for like sales growth of 2.6%.
John Lewis chairman Sir Charlie Mayfield pointed to a “marked improvement” in like for like sales as well as “good progress” in rebuilding gross margin putting Waitrose “on track for profit growth for the full year”.
“Profits before exceptionals are always lower and more volatile in the first half than the second half. It is especially so this half year, driven mainly by John Lewis & Partners where gross margin has been squeezed in what has been the most promotional market we’ve seen in almost a decade,” he said.
Overall group pre tax profits before exceptional items slumped 98.8% to £1.2m, with statutory pre-tax profits down 80.5% to £6m.
Total group revenues were up 1.5% to £4.86bn.
Mayfield added: ““These are challenging times in retail. Our profits before exceptionals are in line with what we said they would be at our Strategy Update in June.
“We’re continuing to improve our offer for customers while ensuring we have the financial strength to continue developing our business going forward. This is reflected in both brands continuing to grow sales and customer numbers, and our total net debts reducing.”
“Our Partnership structure and our Partners are key differentiators for us in a highly competitive and changing retail market. The launch last week of John Lewis & Partners and Waitrose & Partners reflects our ambition for the future and the critical difference of our Partners.”
Group level profits are expected to be “substantially lower” over the full year, though forecasting is “particularly difficult… with the level of uncertainty facing consumers and the economy, in part due to ongoing Brexit negotiations”.
Full year profit growth at Waitrose will be offset by the continuing margin pressure in John Lewis & Partners and by incremental costs of investment.
On the markets this morning, the FTSE 100 has edged down 0.1% to 7,306.5pts so far today.
Greencore is continuing its share price surge from yesterday, rising a further 3.6% back to 98.6p this morning.
Other risers include Majestic Wine (WINE), up 1.1% to 406.5p and Kerry Group (KYGA), up 0.9% to €95.90.
Fallers so far include Marks & Spencer (MKS), down 1.8% to 287.9p after this morning’s weak John Lewis profit numbers, Science in Sport (SIS), down 1.7% to 68.6p and McBride (MCB), easing back 1.3% to 138.2p after yesterday’s strong rise.
Yesterday in the City
The FTSE rebounded 0.6% to 7,313.4pts yesterday as tobacco stocks rallied after recent losses.
British America Tobacco (BATS) recovered from a near three-year share price low to climb 5.9% back to 3,763p yesterday, while Imperial Brands (IMB) rose 3.2% to 2,691.5p. Tobacco shares were boosted by talk in the US of new restrictions on e-cigarettes due to their use by young people.
Other risers included Greencore (GNC), which leapt 6.9% to 191.8p while McBride (MCB) was up 8.9% to 140p after Berenberg reiterated its 140p target on the stock.
Also on the up were B&M European Value Retail (BME), up 1.9% to 418.2p, SSP Group (SSPG), up 1.9% to 704.6p, Greggs (GRG), up 1.7% to 1,066p and Marks & Spencer (MKS), up 1.5% to 293.3p.
Ocado (OCDO) was one of the day’s significant fallers as the woes of its French grocery partnership Casino continue to weigh on the shares, which fell a further 2.4% to 933p.
Other fallers included Majestic Wine (WINE), down 2% to 402p, FeverTree Drinks (FEVR), down 1.6% to 3,832p and C&C Group (CCR), down 1.4% to €3.36.
Morrisons (MRW) was down 0.5% to 265.8p ahead of this morning’s half year results.
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