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Morrisons expects profits to rise as trading returns to normal

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WM Morrison Supermarkets PLC (LON:MRW) said profits in the new year should rise as trading returns to normal, with fewer direct COVID-19 costs and restrictions such as café closures.

The grocer said it entered the new year with “strong trading and operational gearing momentum, and further productivity and cost efficiency opportunities supported by our very robust underlying cash flow and balance sheet”.

READ: McColl’s to convert 300 stores to Morrisons format as pair extends partnership

Free cash flow and net debt will also improve “significantly” with working capital impacts to start to reverse in the first quarter.

The group has vowed to go carbon-neutral in its agricultural supply chain by 2030, covering products from the UK farmers directly sourced for own-brand products in beef, pork, lamb, potatoes and eggs.

In the year to January 31, like-for-like sales excluding fuel were up 9%, with total revenue flat at £17.6bn.

Fuel sales tumbled 32% to £2.4bn because of the COVID-19 restrictions, especially during the periods of lockdown.

Online sales tripled during the year, with capacity up fivefold, and Morrisons expects profits in the segment to keep improving.

Profit before tax and exceptionals plunged 51% to £201mln, including £290mln of direct COVID-19 costs for safety measures, staff absences and extra distribution costs.

Otherwise, profits would have risen 6% to £431mln before the payment of £230mln of waived government business rates relief.

Net debt at period-end was £3.1bn, a special dividend of 4p per share was paid in January bringing the full-year total dividend up 27% to 11.15p.

“Morrisons may never again face such a year of change, challenge and cost and to have finished the year ahead is some achievement,” said Richard Hunter, Head of Markets at interactive investor.

“Despite its best efforts, Morrisons is in a fiercely competitive sector where investors see better value elsewhere. The market consensus of the shares as a stronghold does, however, offer some recognition of future prospects.”

Shares dipped 1% to 175.7p early on Thursday.

–Adds analyst comment, shares–

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