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Morrisons 'more competitive' but shares tumble

By James Sillars, Business Reporter
Morrisons investors have taken flight despite annual results showing healthy sales and profit growth.
The UK's fourth-largest supermarket chain reported a 17% leap in pre-tax profits for the year to 4 February
Underlying pre-tax profits, which better reflect day-to-day trading, were up 9.5% with like-for-like sales excluding fuel growing by 2.8%.That compared with the 1.9% sales growth achieved in its previous financial year.However shares, which initially rose by 2%, fell sharply in the wake of the figures which also showed reduced shopper basket sizes and squeezed margins.Competition in the sector remains fierce given the scramble among the major chains to grow their customer bases at a time when discounters continue to expand.
Morrisons 'more competitive' but shares tumble

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David Potts took over at Morrisons in 2015 and arrested years of declining sales
The likes of Tesco, Sainsbury's, Asda and Morrisons have been keeping a tighter lid on costs in a bid to compete better on price - absorbing some Brexit-linked price increases over the past year.:: Morrisons cuts 1,500 managers to focus on customer serviceThat focus has paid off for the sector, as shoppers' budgets are squeezed by wage growth failing to keep pace with inflation.The fact supermarkets stock wide ranges of essentials has helped shield them from the crisis facing much of the high street.The company's chief executive, David Potts, said: "We had a strong year, becoming more competitive and increasingly differentiating Morrisons for all stakeholders.
"We are pleased to be paying shareholders a special dividend of 4p a share, which reflects our good performance so far and confidence for the future."All parts of our progress so far have one common link: our colleagues. Listening to customers, responding, and improving the shopping trip are as important now as when we started this turnaround three years ago."Shares in Morrisons were trading 5% down at closing.Neil Wilson, senior market analyst at ETX Capital, said: As we noted following the upbeat Christmas trading update, the market has not been buying into the group's recent run of form, with the stock still down c10% from its peaks last year despite a decent bump in the last month or so."Even this morning there is little cheer... There is a sense that this kind of growth will be difficult to maintain, but this has been the argument for some time and has continually been wrong."Ken Odeluga, market analyst at City Index, agreed investors were showing less confidence in the future than Morrisons had expressed as market share growth continues to lag that of discounters."Shareholders are now schooled in supermarket tactics against Aldi and Lidl and they know cash flow is key,' he said."Selective use of free cash flow for 'investment in price' combined with revamped efficiency and slashed costs helped put the brakes on the decline of Tesco et al during their 2014-15 crisis.
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"Morrisons' "confidence" may therefore have rung a little hollow on Wednesday given that free cash flow generation almost halved to €350m from 2016/17's €670m, despite 60% less net debt and a modest dividend rise (9%)."The quality of that cash flow was also questionable. Only €132m was from retail sales whilst disposal proceeds and improved working capital accounted for most of the rest."
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