(Alliance News) - Wm Morrison Supermarkets PLC on Thursday posted consensus-topping sales growth and profit, but noted it incurred GBP290 million in Covid-19-related costs during a busy year for the Bradford-based grocer.
In the financial year ended January 31, like-for-like sales growth, excluding both VAT and fuel, was up 8.6% annually. According to consensus compiled by Vuma, Morrisons was tipped to notch smaller like-for-like growth of 7.9%. In financial 2020, it posted a like-for-like sales fall of 0.8%, highlighting just how much the grocer's sales benefited from boosted demand amid Covid-19.
In its fourth quarter alone - so including the crucial Christmas period - like-for-like sales surged 9.0%, compared to a 2.1% drop a year earlier.
Annual revenue rose 0.4% to GBP17.60 billion from GBP17.54 billion. Pretax profit dropped 62% to GBP165 million from GBP435 million.
However, stripping out exceptional items, pretax profit beat forecasts. It came in at GBP201 million, down 51%, but marginally higher than the GBP200 million it was tipped to post, according to consensus.
Morrisons noted pretax profit before exceptional items would have been 5.6% higher year-on-year at GBP431 million, were it not for the GBP230 million of waived business relief rates it returned.
"This has been a year where Morrisons resilience has been severely tested and I could not be more proud of the way the whole business has met that test," Chair Andrew Higginson said.
UK grocers around this time last year began to get a boost from heavy consumer stockpiling amid fears of shortages due to the virus pandemic. This eventually subsided, though supermarket demand was still high as lockdown measures restricted dining in restaurants and pubs.
The supermarket chain's profits were hit by Covid-19-related costs, which came in at GBP290 million, so GBP10 million higher than guided in its Christmas trading update. The expenses include GBP99 million in extra payroll costs, GBP68 million in bonuses for staff, and GBP65 million in costs related to distribution, waste and mark-downs.
Morrisons added: "In addition, our cafes were again required to close and fuel LFL fell 43% (compared to the 23% fall for the first 22 weeks of H2), both of which also had a negative effect on profit."
The company upped its total payout by 27% to 11.15 pence per share, from 8.77p. The dividend for financial 2021 includes a 4.00p special payout deferred from the year prior.
Exceptional costs this year included GBP66 million in online and home delivery transformation costs.
"Both online and wholesale are profitable and we expect profits to keep improving," the company said.
Its partnership with Amazon.com Inc is now available in roughly 50 towns and cities. It is also supplying goods at the US e-commerce firm's new physical store in Ealing, London.
"Our business has reacted and responded very well throughout the pandemic, and both our absolute and relative trading performance has been consistently strong. We are confident we can continue our momentum into the new year, and expect both profit growth and a significant reduction in net debt," Morrisons said.
Its net debt pile rose to GBP3.17 million from GBP2.46 billion a year earlier.
For the new year, it expects pretax profit before exceptional items to top the GBP431 million it made financial 2021, the figure which excluded the GBP230 million in waived relief repayments.
Morrisons forecasts "strong free cash flow and a significant reduction in net debt".
Over the next year three, 300 McColl's Retail Group PLC stores will be converted into Morrisons Daily convenience stores.
"Since Q4 2020/21, we started to supply the remaining McColl's stores not previously covered by our initial wholesale supply agreement. By year end we had started to supply 130 stores, with the remaining 106 stores since," Morrisons added.
Morrisons shares were 0.3% lower at 176.55 pence each in London on Thursday morning.
By Eric Cunha; ericcunha@alliancenews.com
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