(Alliance News) - Wm Morrison Supermarkets PLC on Wednesday said it is planning to waive its business rates for financial 2021, following rival Tesco PLC's announcement, and has also declared a special dividend.
The blue chip supermarket said it will repay GBP274 million of business rate relief.
"For some time Morrisons has been considering the implications of the government's decision not to collect business rates this year, and we had planned to make our decision once the full cost and duration of Covid-19 had become more clear. However, we have now brought forward this decision and are committing to pay business rates for the coronavirus period in full," it added.
In March, the UK Chancellor of the Exchequer Rishi Sunak said the UK government would give all retail, hospitality and leisure businesses a 100% business rates holiday for the next 12 months, with the holiday intended to help companies weather the pandemic.
Earlier Wednesday, Tesco said it will repay GBP585 million of business rates relief received from the UK government as a result of the Covid-19 pandemic.
Tesco added that the funds from rates relief were spent on its response to the pandemic as food retailers had to deal with panic buying, pressure on supply lines, safety concerns and the risk of mass absences from work. However, it noted its latest estimate showed Covid-19 would cost the company GBP725 million this year, above the business rates relief received.
Morrisons Chief Executive David Potts said we was "grateful" for the UK government's "swift action" at the start of the pandemic.
Potts continued: "Throughout this difficult period Morrisons has done its best work to look after our colleagues, our customers and key workers, to feed the nation, to protect both the vulnerable and our smaller suppliers and to play a full and leading role in meeting the enormous challenges that the Covid-19 pandemic brought. I'm exceptionally proud of the way that the whole business has responded."
Due to the second national lockdown in the UK, Morrisons expects its total Covid costs to hit GBP270 million, which is GBP40 million more than previous estimates, and significantly higher than the GBP230 million in-year business rates relief.
Morrisons also noted the lockdowns have hurt its profit, as its cafes and market street counters were closed.
The supermarket continued: "However, we have continued to manage our business well and achieved strong operating leverage. As a result, before the GBP230 million business rates payment and recognising the busy Christmas and New Year trading period is still ahead of us, we are expecting 2020/21 underlying profit before tax and exceptionals to be in line with our expectations."
It also noted it has a "very strong" balance sheet, allowing it to declare a special dividend of 4.0 pence. The firm noted this will take place of its deferred second half dividend for financial 2020.
Morrisons said it has weathered the pandemic "very well", but noted its choice to pay out a special dividend and waive its business rates will "clearly impact" its net debt position.
It expects its year-end net debt to be around GBP1.7 billion.
Shares in Wm Morrison Supermarkets closed 2.3% lower in London on Wednesday at 178.65 pence each. Tesco ended 1.9% lower at 224.50p each.
By Paul McGowan; paulmcgowan@alliancenews.com
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