Morrisons' H1 profits sink but management confident about turnaround

11th Sep 2014 07:14

As promised, UK supermarket chain Wm Morrison lifted its interim dividend by 5% but reported a 51% drop in underlying profits in its first half and said that like-for-like (LFL) sales momentum is "yet to improve".The grocer, which in March announced a wave of aggressive price cuts to battle the so-called 'discounters', said that turnover fell 4.9% to £8.5bn in the six months to 3 August, with LFL sales excluding fuel and VAT down 7.4%."Conditions are tough, and the industry is going through unprecedented change, said chairman Ian Gibson.He said that interim results reflect the "reset" of the business announced in March and the company is "now well underway with building the foundations for a better future".Underlying pre-tax profit totalled just £181m, less than half the £371m made the year earlier, though analysts were expecting a figure closer to £174m.Price cuts were blamed for the 88 basis-point reduction in the operating margin to 3.38%.In line with the policy set out in March, Morrisons has lifted its interim dividend to 4.03p, and confirmed its commitment to pay a total dividend of "not less than 13.65p", compared with 13p previously.Chief executive Dalton Philips said it was "too early to see the benefits" of the company's £1bn self-help three-year plan, but the company had made good early progress."Price investment, in-store improvements, and better products were all key components of the work undertaken in the first half, and the Morrisons card launches soon," he said.The company noted that the LFL decline in the number of items per basket eased to 3.2% in the second quarter, an improvement on the 5.9% fall in the first quarter and the 6.9% decrease in the fourth quarter of last year.