Morrisons profit falls ahead of takeover auction

Good morning.

Morrisons revealed profit fell by 43pc in the six months to August as it prepares to kick off an auction to decide between two US private equity suitors.

The supermarket chain fell from a pandemic half-year profit before tax of £145m this time last year to £82m as it counted the cost of cafe closures and Covid expenses.

Direct Covid-19 costs amounted to £41m and Morrisons also lost £80m in profit from closed cafes, fuel and food-to-go sales.

However, the retailer said it expected full-year profit before tax to beat last year’s £431m.

Shares edged higher yesterday after it confirmed it will kick off an auction to decide between rival offers from CD&R and Fortress, two American private equity outfits, that could exceed £9bn.

Total revenue including fuel rose 3.7pc to £9.05bn, but excluding fuel like-for-like sales were broadly flat year on year. Online sales surged 48pc higher year on year, and are up over 200pc compared to 2019.

Morrisons also warned of higher prices in the second half, driven by higher commodity costs and a shortage of lorry drivers.

“We will seek to mitigate these and other potential cost increases, such as any incurred to maintain good on-shelf availability,” it said.

5 things to start your day

1) Andrew Bailey: UK economic recovery ‘flattening out’ The Bank of England Governor has begged 2m sidelined workers to return to the jobs market as he warned that severe staff shortages are holding back Britain’s economic revival. Britain needs millions of people to come back to the workforce to fill huge vacancies created since society reopened, he said.

2) Facebook accused of discrimination after mechanic and pilot jobs targeted at men The social network has been accused of breaching equality laws after its technology was found to favour men when targeting job adverts for male-dominated roles such as mechanics and pilots. The campaign group Global Witness has filed complaints with the Equality and Human Rights Commission (EHRC) and Information Commissioner, claiming a Facebook algorithm designed to show jobs to the most interested candidates is discriminatory.

3) Morrisons takeover battle set to end in £7bn head-to-head auction The takeover battle for Morrisons is due to be settled in a highly unusual head-to-head auction which the supermarket’s bosses hope will lift bidding beyond £7bn. The ongoing bidding war for the grocer between US private equity firm Clayton, Dubilier & Rice (CD&R) and a consortium led by SoftBank-owned Fortress is set to go to an auction next month after Morrisons said that neither side had “declared their offers final [so] a competitive situation continues to exist”.

4) Marks & Spencer revives St Michael brand after 21-year absence The retailer is reviving the St Michael brand after a 21-year absence, as vintage clothes find a new audience in younger generations. M&S said that it intends this year to start selling menswear using the vintage label first launched in 1928.

5) Britain forced to ask France to cut electricity exports over threat of power surge Officials issued a request for “emergency assistance” from France on the morning of Sunday August 29 to cap flows to Britain through giant cables under the sea. It came after traders buying and selling power across borders around Europe were temporarily unable to book trades due to problems with the Joint Allocation Office, meaning too much energy would have been coming into Britain via the cable.

What happened overnight

Asian shares dropped on Thursday, while the dollar held firm, in line with a cautious global mood as investors worried about the combination of slowing global growth and the potential tapering of central bank stimulus.

The European Central Bank is particularly in focus, with analysts expecting it to announce a token step towards reducing its emergency economic support later on Thursday.

MSCI’s broadest index of Asia-Pacific shares outside Japan lost 1.04pc while Japan’s Nikkei dropped 0.38pc.

There were losses in Australia down 1.01pc, Korea off 0.74pc, and in Hong Kong which shed 1.17pc, with tech names leading the declines there.

The Hang Seng Tech Index fell 2.44pc in early trading, weighed by declines in Tencent Holdings down 3.7pc and Netease down over 7pc after China’s government on Wednesday summoned gaming firms to ensure they implement new rules for the sector.

Chinese blue chips were down 0.41pc just after the bell, and US stock futures, the S&P 500 e-minis, were down 0.16pc.

Coming up today

  • Corporate: Genus (Full year); Burford Capital, Capital & Regional, Cairn Homes, Computacenter, Funding Circle, STV, Morrisons, EMIS Group, Spire Healthcare, International Public Partnership Economics (Interim)
  • Economics: Trade (Germany), jobless claims (US)


Donovan Larsen

Donovan is a columnist and associate editor at the Dark News. He has written on everything from the politics to diversity issues in the workplace.

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