Morrisons is not the basket case it once was

By Proactive Investors / March 13, 2018 / www.proactiveinvestors.co.uk / Article Link

Things have been looking up a bit of late for Morrisons, which presents its full-year results on Wednesday.

The supermarket chain had a strong finish to 2017 and it came out on top alongside market leader Tesco PLC (LON:TSCO) in the latest industry sales figures.

Analysts at Jefferies predict sales in 2017 rose by 4% to ?16.3bn and pre-tax profit climbed by 8% to ?366mln.

Jefferies recently upgraded the stock to 'buy' from 'hold' and lifted its target price to 265p from 225.50p, saying Morrisons is best placed to benefit from an expected easing of inflation and a more supportive consumer outlook.

Like the rest of the big four supermarkets, Morrisons has suffered through higher cost inflation and weaker consumer confidence after Brexit, as well as tough competition from discounters Aldi and Lidl.

In a January trading update, Morrisons reported 2.8% like-for-like sales growth for the 10 weeks to January 7 on the back of efforts to improve its customer service and offer competitive prices.

The company also started supplying McColl's stores earlier than initially planned under an agreement announced in August, which has supported wholesale sales.

Kantar Worldpanel's latest figures revealed Tesco and Morrisons were the best performers of the UK's big four supermarkets with sales rising 2.7% year-on-year in the 12 weeks to February 25. That compared to 1.1% growth for J Sainsbury plc (LON:SBRY) and a 2.3% increase for Asda.

The focus of insurance giant the Pru increasingly seems to be on Asia, where it is busy selling its products to the new middle class.

The first half of 2017, according to Mike Wells, group chief executive, saw growth across all of the main performance measures "led by double-digit growth in our Asian business".

"We have achieved our objective of generating over ?10 billion of group cumulative free surplus between 1 January 2014 and 31 December 2017 six months early and we remain on track to achieve the remaining Asia-focused objectives by the end of this year," Wells said.

In the UK the group has merged its M&G and Prudential UK & Europe asset management businesses to form M&G Prudential, and management will be expected to give an update on how this marriage is faring.

Recent reports suggest the company is close to offloading its UK annuities, which would free up millions of pounds in capital that the Pru has set aside, as per the European Union's Solvency II regulations.

Morgan Stanley is predicting full-year core pre-tax profits of ?6.74bn, up from ?5.81bn in 2016.

It has pencilled in a figure of 11.32p for core earnings per share, up from 9.72p the year before, while the full-year dividend pay-out is seen rising to 3p from 2.85p.

With the collapse of joint venture partner Carillion PLC (LON:CLLN) and the disposal of its stake in Connect Plus, it's fair to say Balfour Beatty has had an eventful few months.

Balfour, which reports its full year results on Wednesday, had been working with Carillion on three UK road projects.

The demise of Carillion is expected to cost Balfour between ?35mln and ?45mln.

On the subject of roads, Balfour announced in February that it had sold a further 5% stake in Connect Plus, the operator of the M25 orbital motorway in London, bringing its holding down to 15%. It followed the disposal of a 20% stake in the business in December.

Balfour is also set to benefit from Donald Trump's tax cuts in the US, which comes at a good time for the group with its with 30%-owned LAX Integrated Express Solutions joint venture being awarded a US$1.95bn contract to develop an 'automated people mover' at Los Angeles International Airport.

UBS predicts full-year sales, including joint ventures, of ?8.35bn and profit from operations of ?198mln, including a ?85mln gain from the sale of investments. It expects a final dividend of 2.4p each.

"While the group remains in recovery mode, we expect confidence about improved earnings to strengthen and therefore we anticipate a positive outlook for 2018 and 2019," UBS said.

Significant announcements expected

Finals: Wm Morrison Supermarkets PLC (LON:MRW), Prudential PLC (LON:PRU), Advanced Medical Solutions Group (LON:AMS), Balfour Beatty plc (LON:BBY), Burford Capital PLC (LON:BUR), Charles Taylor PLC (LON:CTR), Dignity PLC (LON:DTY), EKF Diagnostics Holdings PLC (LON:EKF), EMIS Group PLC (LON:EMIS), Empressaria Group PLC (LON:EMT), Forterra PLC (LON:FORT), Futura Medical PLC (LON:FUM), Hikma Pharmaceuticals PLC (LON:HIK), Marshall Motor Holdings PLC (LON:MMH), SafeCharge International Group Limited (LON:SCH), StatPro Group PLC (LON:SOG), Somero Enterprises Inc (LON:SOM)  

Interims: Brooks Macdonald Group plc (LON:BRK), Northamber PLC (LON:NAR)

Economic data: UK trade in goods; US retail sales; US forward PPI

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