Morrisons has topped a revenue of £9bn in the past six months, as the bidding battle over the supermarket giant escalates.
The retailer enjoyed a revenue lift of 3.7 per cent, including its fuel earnings, in its interim results for the six months to 1 August, painting a picture of health for potential buyers.
The high street staple been at the centre of a bidding war over the past two months, which has seen private equity firms Fortress and Clayton, Dubilier & Rice, race to one up each other’s offers.
With both bids not yet declared final, the bidding battle has gone to auction.
Shares lifted 0.21 per cent to 293p per share in its early afternoon trading.
However, Morrisons’ interim profit before tax leaves a little to be desired, as it dropped 43.4 per cent from £145m to £82m.
Despite this, the retail heavyweight has performed well digitally, as the UK’s consumer focus remains locked on online offerings.
‘Relatively robust shape’
Senior investment manager at Brewin Dolphin, John Moore, said: “The new potential owners will be pleased to see that Morrisons is in relatively robust shape, as it continues to recover from the effects of Covid-19. Revenues have increased, as has free cash flow, helping to edge down debt.
“While profits are markedly lower, this can largely be put down to exceptional items and Covid-19 costs. There are other concerns in the shape of supply chain challenges, but the more integrated approach of Morrisons should see it better placed than many facing these uncertainties.”
It’s online like-for-like growth jumped 48 per cent in the period, but surged a massive 237.1 per cent on pre-pandemic levels.
Morrisons on Amazon’ has now expanded to more than 60 towns and cities, which it said covers some 60 per cent of the UK’s population.
It added that it will begin supplying the UK’s Amazon Fresh stores, alongside its bolstering its Deliveroo grocery offering.
Morrisons’ brick and mortar deal with McColl’s is also well underway, as the McColl’s store conversion roll-out has been ramped up to 350 by November next year – up from a target of 300 by the end of 2023.
A new model?
Retail analyst at Third Bridge, Ross Hindle, explained that although Morrison’s online performance is strong, it is not a high-earning avenue for grocery retailers.
“While online growth remains an attractive top-line growth driver, nobody has yet managed to deliver groceries at a high level of profitability. Could a new model be in the offing?”
“Morrisons has broadened its partnership with Deliveroo which does solve the “last mile” challenge, however, experts warn against the loss in customer data, that if kept in-house, could help Morrisons drive efficiency through its range and offering in the longer term.”
But despite continued Covid-19 challenges, as well as sustained supply chain cost increases and labour pressure, Hindle said that the recent bidding saga will draw more attention to fellow supermarket heavyweights.
“Overall, our experts believe the recent interest in Morrisons and Sainsburys will benefit other stable incumbents in the short term, such as Tesco and the discounters. As seen with past acquisitions, the process can distract management teams from executing on their core priorities, leaving the door open for others to capitalise.”