Morrison results disappoint but brokers advise investors to sit tight and ‘hold’

Otmane El Rhazi from Mindful Money » Shares.

Morrison’s full year results have left many unimpressed but Ian Forrest, investment research analyst at The Share Centre, explains what the update really means for shareholders…

Investors in Morrison’s were not overly impressed with the supermarket chain’s full year results. Fourth quarter like-for-like sales were down 2.6% and there was a 52% drop in underlying pre-tax profit to £345m.

The group’s trading performance did improve steadily during the year, but recent data shows us that the supermarket is losing market share.

With cash generation remaining strong and enabling a 5% rise in the dividend, income seekers will be consoled, although the group is only promising a modest dividend for the current year.

Revenue fell 1.3% over the Christmas period and Morrison’s chief executive stepped down. His successor, who will be starting on Monday, has the market waiting to see what improvements he can make to the group’s strategy.

We continue to recommend Morrison’s as a ‘hold’ for medium risk long term contrarian investors due to the value of the group’s substantial property portfolio, cash generation and prospects for new sales channels, such as online and convenience stores. We prefer Sainsbury’s in the sector due to its better trading, cheaper valuation and higher dividend yield.