Morrisons suffered a £1bn (£1bn) loss in the last financial year due to an increase in interest payments on debts incurred as a result of its private equity acquisition.
As finance costs increased, the supermarket chain, acquired by Clayton, Dubilier & Rice for £10bn (USD10bn) in 2021, went further into the red during the year ending Oct. 2023.
Market Topco’s accounts show that Morrison, the parent company of Market Topco, made a loss before tax last year of £1.1bn after incurring interest costs worth £735m.
The debt financing bill was 23pc more than the £593m in 2022.
Losses reveal the enormity of the task facing Rami Baitieh who has set a bold vision for the Bradford-based retailer.
The Frenchman has been working to improve Morrisons fortunes since he was hired by Carrefour in November to replace David Potts. had lost its position as Britain’s 4th largest grocer in 2022 to German discounter Aldi.
After admitting that the group was “below par”, he has promised to “reinvigorate the business”.
Aldi, Lidl and other discounters have been gaining popularity as a result of the cost-of-living crisis. Mr Baitieh is trying to fight back by matching his prices with German discounters.
The holding company of Morrisons reported that revenues fell to £18.4bn, from £18.7bn, in 2023. However, underlying profits (excluding debt interest costs) rose to £970m, from £911m.
Fuel sales dropped more than £560m last year to £3.4bn. This was before Motor Fuel Group bought its 337 petrol stations for £2.5bn two months earlier.
Morrisons will use a significant portion of this cash to reduce its £5.4bn in debt.
CD&R bought the retail giant three years ago. This was the first time in 1967 that the FTSE 250 company had been taken off the London Stock Exchange.
The interest rates were very low when the supermarket signed the agreement, but a steep rise in borrowing costs left it vulnerable to financial pressures.
M. Baitieh, despite this, has pledged to transform the company.
He said earlier this year: “I have to be very direct. Morrisons’ performance has been mediocre since the pandemic.
Our market share has been declining steadily, but our like-forlikes have improved and are encouraging. However, they’ve been below average for some time and the switching statistics were not encouraging.
David Lepley, the Morrisons store chief who had worked for almost eight years, left abruptly last month after his shake-up.
Sir Terry Leahy – the former Tesco boss who now chairs Morrisons, and is a senior advisor to CD&R – continues to support Mr Baitieh.
A US private equity fund hired Dave Lewis as a senior advisor. He is another former Tesco manager. However, he will not be involved with operations at Morrisons.
Morrisons spokesperson said: “Morrisons financial performance highlights the progress made by the company, as it has delivered six consecutive quarters like-for-like revenue growth.”
The company said that “a number non-cash items had impacted the statutory profit” but emphasized that “the business’s underlying performance is strong.”
According to the latest Kantar figures, Morrisons holds 8.8pc in the grocery market. This is down from 9.1pc the previous year, and compares to Aldi’s 9.4pc.
Morrisons, first reported to have hired advisers for the sale of Rathbones Bakery.
Deloitte was enlisted to gauge interest from prospective suitors. However, discussions about Rathbones future are still at an early stage.
Rathbones produces over 50,000 tonnes of baked goods each year. These include crumpets and bread rolls, as well as hot cross buns.
Since many years, speculation has persisted about the sale of the company’s manufacturing sites. However, the bosses recently tried to downplay the possibility of such a transaction.
Since he took over, Mr Baitieh highlighted the importance Morrisons manufacturing sites.