British supermarket Morrisons has reported a rise in first-half profit for the first time in four years, and a third straight quarter of underlying sales growth, indicating its recovery under a new management team is gaining momentum.
The Bradford, northern England, based group, also raised its targets for cost savings and working capital improvement and lowered its debt target, sending its shares 5 per cent higher on Thursday.
Morrisons, which trails market leader Tesco, Sainsbury's and Walmart's Asda in annual sales, said its underlying pretax profit rose 11 per cent to £157 million ($208 million) in the 26 weeks to July 31st.
That was ahead of analysts’ average forecast of £150 million.
The firm said sales at stores open over a year, excluding fuel, were up 2 per cent over the second quarter, accelerating from a 0.7 per cent rise in the first quarter.
"We remain on track to deliver improved profits and returns for shareholders," Chairman Andrew Higginson said.
David Potts, a former Tesco executive who joined Morrisons as chief executive in March 2015, has been reversing the loss of customers to German discounters Aldi and Lidl by cutting prices, improving product quality and availability and bolstering customer service.
“We have made improvements to the shopping trip for customers and we plan to do more,” he said.
Potts has also overhauled Morrisons’ online strategy through a renegotiated distribution agreement with Ocado and a wholesale supply deal with Amazon.
Morrisons’ net debt was reduced by £477 million to £1.27 billion in the first half - below the firm’s year-end target of £1.4-1.5 billion.
That target has now been reduced to around £1.2 billion and debt is now expected to fall to less than £1 billion by the end of the 2017-18 year.
Morrisons also said it would exceed its cost savings target of £1 billion by the end of 2016-17, would hit its target of £2 billion of free cash flow six months ahead of plan and raised its working capital improvement target by £200 million to £1 billion.
The firm also hiked its interim dividend by 5.3 per cent to 1.58 pence.
(Reuters)
