Thursday 05 November 2015 7:23 am

Morrisons share price falls as interims show profits plummet 35 per cent; chief executive David Potts admits turnaround will be “a long journey”

Morrisons' share price fell this morning after the supermarket revealed yet another set of bad results, with underlying profits down more than a third.

The figures

The troubled supermarket, which yesterday sold off its convenience stores arm, said underlying pre-tax profits had tumbled 35 per cent to £117m, while turnover had dropped 5.1 per cent to £8.1bn for the first half to 2 August. Profit before tax has almost halved from £239m to £126m.

Like-for-likes excluding fuel were down 2.7 per cent. Underlying earnings per share were also down 35 per cent to 3.73p, compared with 5.74p in 2014. It made a profit of £96m from the disposal of property totalling £181m, the supermarket said.

It is recommending an interim dividend of 1.50p, down from 4.03p last year. The full year dividend will be "not less than 5p".

Morrisons' share price was down 3.3 per cent at the open.

Why it's interesting

Morrisons is at something of a crossroads.

Having unceremoniously ditched its former chief executive Dalton Philips, it parachuted in Tesco lifer David Potts to steer the supermarket back into calmer waters. Since his arrival, Potts has announced a number of initiatives including cutting back the head office head count in favour of putting more feet on the store floor, as well as overseeing the deal to sell off M Local to Mike Greene, which was confirmed last year.

But, as other supermarkets before it have found, turning around one of the big four retailers will be a long journey – a fact that Potts himself acknowledged today.

Potts has outlined six priorities "to build on our strengths and improve the customer shopping trip". They include being more competitive; to serve customers better; find local solutions; to develop popular and useful services; to simplify and speed up the organisation and to make the core supermarkets strong again.

Progress was being made on all of these aims, adding that the £1bn cost saving programme was "on-track", the supermarket said. A further 11 stores are to be closed, Morrisons confirmed today.

What they said

Chairman Andrew Higginson said: "David has very quickly formed a new team that combines the best of Morrisons home grown and external talent. I am also delighted that two new non-executive directors – Belinda Richards and Irwin Lee – have recently joined and strengthened the board. They bring a wealth of experience, which will prove invaluable to Morrisons.

“During the first half, the team has made good progress in starting the turnaround journey. Whilst the management team need time to settle in, make the changes they see as important, and build trading momentum, I believe the team will deliver much improved profits and returns for shareholders.”

Potts added: "Since joining Morrisons, I have been struck by the passion and commitment of all our colleagues, and I want to thank them for their continued good work. Our colleagues have the key role in delivering an improved shopping trip for customers both in stores and online.

"Morrisons will be an organisation that listens. During the first half, the new executive and leadership teams have been listening hard to colleagues, customers, suppliers and shareholders. They tell us there is a lot for us to do. The immediate priority is to deliver a better shopping trip to stabilise trading performance. Our six strategic priorities will then deliver improvement in the core

supermarkets, where we have the greatest opportunity.

“It will be a long journey. We approach the challenge with energy, confidence and many strengths, particularly our strong balance sheet and cash flow, which enables investment in improving the customer shopping trip.”

In short

Morrisons claims that customers and colleagues are "beginning to notice improvements", but even management admits the turnaround "will take time and require sustained investment in the proposition".