MORRISONS announced another fall in profits yesterday but cheered shareholders with the news that it plans to sell off part of its £9bn property portfolio and return proceeds to investors.
The news lifted the gloom caused by a 22 per cent fall in pre-tax profits to £344m in the six months to August 4, below analysts’ forecasts.
The Bradford-based company said over 90 per cent of its estate is freehold, a considerably greater proportion than its main rivals.
Chief executive Dalton Philips said the group has begun a review to decide how much of the property to offload to realise value for shareholders,
Asked what he plans to do with the proceeds, Mr Philips said: “We will invest in the core estate to ensure the estate is in a very strong position. We know how important the dividend is to shareholders. Yes, we could return money to shareholders. It’s a significant opportunity to generate significant amounts of cash flow.”
The group also announced plans to reduce its plans for large store openings, which will slash capital expenditure and free up cash for its fast growing convenience store business and the launch of its online offering next January.
“The future is no longer in building more supermarkets. The space race is well and truly over,” said Mr Philips.
Capital expenditure will rise to £1.2bn in 2013/14, but will fall to £850m in 2014/15 and to £650m in 2015/16.
Analysts welcomed the news and Morrisons’ shares closed up 5.3p to 302.5p, a rise of 1.8 per cent.
The group’s profits have been hit by its late entry into the fast growing areas of convenience stores, which are showing growth of 20 per cent a year, and online shopping, which is showing 16 per cent growth a year.
It is hoping to overcome this by opening 300 “M local” convenience stores within the next three years and earlier this year it signed a 25 year deal with online grocer Ocado to start delivering groceries next January.
Mr Philips said that TV presenters Ant and Dec, who are the brand’s advertising spokespeople, are currently filming Morrisons’ Christmas TV advertising campaign.
Morrisons is to take over sponsorship of ITV’s festive fundraiser Text Santa from last year’s sponsor Asda. The show will be presented by Ant and Dec.