Morrisons profits leap

Britain's fourth-biggest supermarket group said its pre-tax profits leapt 22 per cent in the first six months of the year. Its sparkling performance came as new customers flocked through its doors in search of lower prices. Profits hit £359m in the period as the chain's market share rose to 11.6 per cent, according to the most recent TNS Worldpanel survey.

Chief executive Marc Bolland said: "This has been an excellent first-half performance from Morrisons, continuing our run of market-beating sales growth."

Morrisons has gained a million new customers over the past two years, and now attracts more than 10 million a week, and this improvement helped lead to an increase in like-for-like sales of 7.8 per cent in the half. Total revenues rose five per cent to £7.5bn. The group has been increasing its sales more quickly than rivals, focusing on price discounting on basic items. Morrisons is one of several supermarket chains to have taken market share from sector-leader Tesco recently.

The group's buoyant performance meant it was able to raise its dividend by 35 per cent to 1.08 per share. It also said it was confident it would reach its earnings forecasts for the year. However it did sound one note of caution, saying that its performance might slow in the second half as food price inflation begins to ease.

WHAT THEY ARE SAYING:

Sam Hart, analyst at Charles Stanley & Co., on Bloomberg.com: "We expect Morrison to continue to deliver industry leading sales growth and significant potential exists to further expand operating profit margins. As such, earnings growth is forecast to be the strongest in the sector over the next three years."