- Major investment programme announced
- Underlying profits fall 13 per cent, turnover down two per cent
- Dividend up 10 per cent
- Exit from non-core activities announced and property disposals
Supermarket group WM Morrison said it will undergo a major turnaround and cut prices after it swung to a statutory loss in the 12 months ended February 2nd following a 'disappointing year'.
The company, which is the fourth-largest grocer in the UK, reported a loss before tax of £176m, compared with a profit of £879m previously, due to exceptional non-recurring costs of £903m.
These one-offs comprise £163m of impairments at online baby merchandising retailer Kiddicare, £319m of costs relating to elements of the store pipeline and £379m in respect of trading stores.
On an underlying basis, it recorded a profit before tax of £785m, down 13% year-on-year but broadly in line with analysts' estimates.
Group turnover was down 2% at £17.7bn, with like-for-like sales excluding fuel and VAT falling 2.8%.
Morrison Chairman Sir Ian Gibson admitted that the company has been slow to adapt to the changing UK grocery market and has not been able to participate fully in loyalty programmes and personalised couponing due to "outdated" IT infrastructure and systems.
"Whilst these factors, combined with the fact that we do not yet have a meaningful presence in online and convenience - the two fastest growing channels in the grocery market - have clearly held us back, and the overall performance of our core business has been disappointing," he said.
As such, the company said it is undertaking a significant and sustained investment "to offer the best value, price and quality for our customers". It will have to "reset the profit base of the business to deliver this".
Morrison will invest £300m this year with £1bn of self-help measures identified over the next three years through price cuts and investment in stores. This is expected to push underlying profits down to £325-375m this year, well below the current consensus forecast.
The company said that it now intends to sell Kiddicare this year, which it acquired in 2011, after the division failed to meet its financial targets. It will also dispose of its stake in US online food business Fresh Direct.
The company also said that it expects to generate £2bn of free cash flow in the three years to 2016/2017 after it identified £1bn of property disposals. Nevertheless, it assured that its freehold ownership of its properties will not fall below 80%.
Morrison, considered one of the 'Big Four' supermarket chains along with J Sainsbury, Tesco and Wal-mart-owned Asda, launched its first online shopping service in January 2014 through a joint venture with Ocado.
The move is part of its "acceleration of new channel development" and is said to be performing "ahead of plan".
The firm raised its full-year dividend by 10% to 13p. It committed to at least a 5% increase in the payout this year and promised investors a "progressive and sustainable dividend thereafter".