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UK’s Morrisons sees halving of profit as ‘badge of honour’ in COVID year

Stock Markets7 minutes ago (Mar 11, 2021 05:05AM ET)

(C) Reuters. FILE PHOTO: A Morrisons store is pictured in St Albans

By James Davey

LONDON (Reuters) – British supermarket group Morrisons said a halving of annual profit due largely to costs incurred during the COVID-19 pandemic was a “badge of honour” as the priority in 2020-21 had been feeding the nation.

The group said on Thursday it made profit before tax and exceptional items of 201 million pounds ($280 million) in the year to Jan. 31, prior to a business rates payment of 230 million pounds, down from 408 million pounds in 2019-20.

“I personally wear a halving of profits as a badge of honour,” Chief Executive David Potts told reporters.

“The British people have had access to food because the supermarket workers, not just Morrisons, were asked by government to be key workers and required to stay open, unlike pretty much the rest of society. Frankly we could have made no profit and it would have been a result,” he said.

Morrisons, Britain’s fourth biggest grocer after market leader Tesco (OTC:TSCDD), Sainsbury’s and Asda, said that while its like-for-like sales rose 8.6% over the year, it incurred direct pandemic costs of 290 million pounds.

That reflected the cost of hiring tens of thousands of additional workers, staff sick pay and in-store measures to deal with the pandemic.

Morrisons also lost revenue from in-store cafes, which were forced to close, while demand for fuel has been subdued.

In the group’s new financial year costs and cash flow comparatives ease, but those for sales get much harder.

It forecast 2021/22 profit before tax and exceptionals including business rates paid to be higher than the 431 million pounds profit achieved in 2020/21, excluding the waived rates relief.

Morrisons also expects strong free cash flow and a significant reduction in net debt.

Shares in Morrisons, which was last week relegated from the FTSE 100 index of top UK firms, were down 0.8% at 0918 GMT, valuing the business at 4.2 billion pounds.

The group is expanding its relationship with Amazon (NASDAQ:AMZN). Its ‘Morrisons on Amazon’ service is now available in about 50 towns and cities, and accounts for over 10% of sales in the majority of stores where the service is offered.

There has been persistent speculation that Amazon could emerge as a possible bidder.

“We don’t ever comment on matters related to mergers and acquisition,” said Potts.

($1 = 0.7175 pounds)

UK’s Morrisons sees halving of profit as ‘badge of honour’ in COVID year

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