Financial summary
Total turnover £8.9bn in line with last year (2012/13: £8.9bn)
Total store sales up 0.8% (2012/13: up 1.3%). Like-for-like store sales down 1.6% (2012/13: down 0.9%)
Underlying profit down 10% to £401m (2012/13: £445m)
Underlying earnings per share down 2% to 12.86p (2012/13: 13.09p)
Profit before tax £344m (2012/13: £440m)
Interim dividend up 10% to 3.84p (2012/13: 3.49p)
Net debt of £2,529m (2012/13: £1,680m)
Gearing of 48% (2012/13: 32%)
Financial strategy
Financial strategy updated
Reduced capital expenditure targets announced
New dividend policy confirmed
Property estate being reviewed
Strategic highlights
Convenience - 33 M local convenience stores now trading and performing well: on track to have 100 stores operating this year. New convenience distribution centre secured for the North
Multi-channel - on schedule with online food proposition to launch in January 2014
IT systems upgrade programme progressing well - providing the foundation for further cost savings in 2014/15
Fresh Formats - tailored fresh food proposition now in 169 stores: on track for over 200 stores this year
Significant productivity improvements in store. Electronic ordering introduced
Good progress on expanding manufacturing capability
Operating highlights
Seven new supermarkets opened, including one replacement
2,800 own brand products successfully launched
Strengthened management team in place
Employer of the Year
Shareholder returns
In March 2011 the Group committed to a minimum annual dividend increase of 10% for three years. The current year is the final year of that commitment. From 2014/15 onwards the Board will maintain a progressive dividend policy targeting cover, over the medium term, of around two times underlying earnings.
We also anticipate that a combination of reduced capital expenditure, improvements in working capital and more active property estate management is likely to result in the release of capital that is surplus to the ongoing needs of the business. In such circumstances, and subject to maintaining a strong, investment grade credit rating, we would anticipate returning surplus capital to shareholders in an appropriate form.
Sir Ian Gibson, Non-Executive Chairman, said:
"Consumer confidence and market conditions have remained challenging in the first half. We have continued to invest in and develop our customer offer and this has been reflected by an improved sales performance compared to the second half of last year. Our financial position is strong and we remain focused on maximising returns from our assets and delivering superior shareholder returns. Once again our interim dividend is increased by 10%, in line with our previous commitment."
Dalton Philips, Chief Executive, said:
"Our strategy for growth in convenience and online is now set. Today we are outlining our financial strategy, which will support our key financial objectives of growing underlying earnings, generating cash and delivering superior total shareholder returns.
This is against an economic backdrop which remains difficult for the consumer, but where our relentless focus on providing great value and quality to our customers, and improving the way we communicate Morrisons unique points of difference, have been reflected in a steady improvement in our like-for-like sales performance.
We have also made significant progress in building our presence in the key growth channels of convenience and online. By the end of the year we will have 100 M local convenience stores, around half of which will be in London and the South East, and we've secured a new distribution centre in Bury to support our convenience stores in the North. In parallel we've been working at pace on our online offer; the final pillar of our strategy. Morrisons.com will be making home deliveries of our great fresh food by the end of January 2014, supported through our long term service agreement with Ocado."
