Divi joy as Morrison hits record

SUPERMARKETS group Wm Morrison has lifted the interim dividend by a whopping 25% as it signalled it was on track for a 36th successive year of profits growth.

Reporting a 16% rise in firsthalf profits to a record £114.5m, executive chairman Sir Ken Morrison said the increase in the dividend to 0.45p was to reflect the company's success.

'We have been a bit parsimonious in the past,' he said, adding that 'long-suffering' shareholders had had to make do with a dividend yield of just 1%. He also said 'a very positive start to the second half' with underlying sales - stripping out the benefit of new stores - running at 4.9% in the first five weeks, excluding petrol, significantly ahead of most rivals.

'All in all, I believe we are well-placed to withstand the fiercely competitive conditions that prevail in our sector and move forward with confidence,' said Morrison, who is 71 next month but has no immediate plans to retire.

Analysts applauded the profits figures, which beat most forecasts, and some were preparing to lift full-year forecasts. The shares rose 2p to 205p in early trade.

The only setback was a reversal in the fortunes of the pension fund, which slipped from a surplus of £6.8m at the start of the period to a deficit of £13.3m because of sliding share values. However, Morrisons closed the £130m scheme to new recruits six years ago, limiting its liabilities.

Underlying sales growth continues to slow. It was 5.7% in the first half to 11 August against 7.7% in 2001 and 9.4% in 2000, partly because of price deflation in many product areas. 'We're in the throes of a very cheap period for fresh foods,' Morrison said.

The northern-based group, which opens a third London branch next week, in Enfield, attributed part of its success to in-house processing and distribution and its popular 'buy one, get one free' promotions.

The 113-store chain will open new shops in Newcastle, Cambourne near Cambridge St Helens, Merseyside, and Redcar, Cleveland in the next two months. But it is struggling to expand as fast as it would like in the South due to strict planning rules and high store prices.

The company also said it would be prepared to account for share options as costs in its accounts, although it plans to wait for clearer guidance on this.

Tesco this week reported a slowdown in its underlying sales to 3.9% in the 24 weeks to 10 August, compared with 7% growth in the previous 12 months. Sainsbury's reported underlying sales growth was running at just 3.1% in its first quarter but blamed the ending of the Air Miles promotion for some of the slowdown.

Asda, part of the Wal-Mart group, claims to be the fastest-growing, with food sales growth in high single digits and clothing sales rocketing by as much as 30%, thanks to the George range.