LONDON (Alliance News) - Wm Morrison Supermarkets PLC Thursday reported a drop in first half profits, and flat revenues, as it focused its investment on developing its online presence, rather than adding new shop space.
The supermarket chain said that it will reduce its capital expenditure going forward, and reduce its plan for new supermarket space from next year, as it looks to drive growth through its online channel and smaller convenience stores, and expanding its manufacturing capability.
Morrison increased its interim dividend by 10% to 3.84 pence per share, and said that it expects a pick-up in sales performance during the second half of the year, with full year results broadly in line with expectations.
It said that revenue was in line with last year at GBP8.9 billion, and like-for-like store sales were down further at 1.6%, compared with 0.9% a year earlier.
Morrison's half-year pretax profit decreased to GBP344 million, from GBP440 million a year earlier.
It reported a net profit of GBP267 million, compared with GBP329 million in the prior year, due to further investment in the development of its online business, although it said that tight cost control helped to offset a bigger fall. Morrison said it expects online to grow faster than any other channel.
During the period, Morrison entered a long-term agreement with independent online retail grocer Ocado group to enable its online platform to start grocery deliveries in January 2014. It said that it is on schedule with its multi-channel plans.
However, as a result of the deal with Ocado, Morrison said it decided to write down GBP27 million in investments it had made in its own online statement.
It said net debt increased to GBP2.5 billion,from GBP1.68 billion a year earlier, as expected due to heavy investment and lease financing.
Morrison said it opened seven new supermarket stores in the first half, and launched a further 2,800 own brand products. It also said it opened 33 local convenience stores in the period, which are performing well, and it is on track to have 100 of these stores operating by the end of the year.
Morrison shares were amongst the biggest gainers Thursday morning, trading at 308.80 per share, up 3.9%.
By Rowena Harris-Doughty; rowenaharrisdoughty@alliancenews.com; @rharrisdoughty
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