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Morrison stakes Safeway claim
LONDON, (Reuters) -- Britain's William Morrison Supermarkets Plc, locked in a contest to take control of rival Safeway Plc, posted a near 14 percent rise in annual profits on Monday along with an industry beating sales increase. The UK's fifth biggest food retailer, whose 2.3 billion pounds ($3.7 billion) all-share bid for Safeway faces stiff competition from four rivals, said pre-tax profit rose to 276.6 million pounds in the year to February 2, beating most forecasts. Like-for-like sales in the five weeks to March 9 outpaced bigger rivals, growing 7.6 percent including petrol. The group said it would pay a total dividend of 2.7 pence per share, up 22.7 percent. "These results demonstrate that we have a strong management team and we can do two things at once. Hopefully it will help the City (the UK financial community) come to terms with what we are seeking to achieve.'' said Bob Stott, joint managing director of the supermarket group, in an interview. "There is seemingly a general consumer slowdown where people have the discretion to spend, but maybe food is winning out.'' Morrison shares opened 1-1/4p lower at 165-1/2p, valuing the firm at about 2.6 billion pounds. The value of its offer for Safeway has fallen from an initial 2.9 billion pounds along with the company's share price. Stott refused to comment on speculation that the company will sweeten its bid with up to one billion pounds in cash. He added that supermarkets might benefit from a deterioration in consumer sentiment, as more people choose to eat in. However, he did not expect the current very strong levels of sales growth to be maintained. "If we achieve 4-5 percent like-for-like growth in sales excluding fuel this year, we'll have done a good job,'' he said. BID DECISION LOOMSMorrison had brought forward its results because the government is preparing to announce in the next few days which of the five bidders it will refer to the Competition Commission for greater scrutiny. Analysts expect most or all of the bidders to be investigated in a probe lasting at least three months. The future ownership of Safeway, the UK's fourth-largest grocer with a 10 percent market share, will have a major impact on consumers and suppliers alike. "We are confident that a combination of Morrison and Safeway would be good for both customers and suppliers, leading to healthy competition between four major national superstore operators,'' Chairman Ken Morrison said in a statement. "Any other combination would reduce competition to three majors with one smaller, albeit strong regional player.'' Morrison, with 119 stores based mainly in the north of England, is seen as the underdog, but is the only one of five suitors to have tabled a firm bid for Safeway. The other approaches have been made by Britain's three biggest food retailers -- Tesco, Sainsbury and Wal-Mart-owned ASDA -- along with retail entrepreneur Philip Green, the owner of the Top Shop and Bhs clothing chains. Stott said morale at Morrison was strong despite the uncertainty. "Its had a positive impact, we have led the field and still have the only bid on the table...our people our proud to be part of a company going forward,'' he said. "We want to get Safeway because it gives us an opportunity to expand quickly over the next three years to become a truly national player, but you can see from the new store opening programme that we have plenty of normal organic growth with or without Safeway.'' Morrison has plans for up to 10 new stores in 2004. Safeway owns 484 stores. Analysts believe Philip Green and Morrison have the best chance of avoiding being entangled in a regulatory probe. "We have said all along we believe our bid should be cleared by the OFT subject to small divestments where there is local overlap,'' Stott said. Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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