The share price of Morrisons (LSE: MRW) (NASDAQOTH: MRWSY.US) fell by 8% to 215p during early trade this morning, after the UK’s fourth largest supermarket posted a loss of £176m this year, after posting profits of £870m the year before.
This is due to a £903m write down of assets including Kiddicare, the baby products retailer, which the grocer will attempt to sell this year due to poor performance. The shares have fallen by 18% so far in 2014.
In response, Morrisons announced it would sell £1bn of its freehold property over the next three years, in a move widely predicted by analysts. The firm has a property portfolio worth around £9bn — which has been a point of issue for activist investors, who believe it represents untapped value for shareholders.
Morrisons warned that underlying profits will fall by more than half to around £325-£375m next year.
The chief executive, Dalton Philips, commented:
“In trading terms this has been a disappointing year for Morrisons, with consumer confidence and market conditions continuing to be challenging. It has however been a period of significant strategic progress as we lay the foundations for a stronger future. Our financial position remains strong.”
“The review of our business undertaken by the Board, underpins our confidence in Morrisons strategic direction and the long-term prospects of the business. This is reflected in an increased dividend for the year ended 2 February 2014, in line with our previous commitment and consistent with our progressive dividend policy.”
Morrisons hiked the dividend by 10% to 13p, which is supported by earnings of 25p per share, giving a coverage ratio of 1.9.
The grocer committed to minimum dividend increase of 5% next year, meaning that after this morning’s price movement, the shares offers a projected income of 6.5%, while trading on a P/E of 9.
Of course, the decision to ‘buy’ — based on those ratings, today’s results and the wider prospects for the grocery sector — remains solely your decision.
