The supermarket chain Morrisons slumped to a £1.5bn loss during its first full year in private-equity ownership, according to its latest results.
The grocery retailer was bought by the US private equity firm Clayton, Dubilier & Rice (CD&R) for £7bn in October 2021 after an intense bidding war.
The results for the period from late July 2021 to the end of October last year reveal the grocer’s struggles during the first year after it was taken private and delisted from the London Stock Exchange.
Morrisons, which employs more than 110,000 staff, including 95,000-plus working in its 500 supermarkets, made an operating loss of £58m before exceptionals for the 65 weeks to 30 October, according to a trading update from the chain’s parent company filed at Companies House.
A substantial portion of its £1.5bn pre-tax loss for the period was related to finance costs of £593m, which included interest payments on external debt, as well as interest on its lease liabilities and interest payable on loans to group companies.
About £400m of those finance costs is understood to represent the annual interest charge on the company’s debt, as previously outlined by its chief financial officer, Joanna Goff. Morrisons has described this cost as being roughly equal to the amount paid out in annual dividends and interest when the chain was a listed company.
It is understood the group does not need to refinance its debt until 2027.
Morrisons’ £1.5bn loss contrasts with the £201m pretax profit before one-offs it made on sales of £17.5bn during its final year as a public company.
The group’s latest results underline concerns about private equity takeovers, which often load businesses with debt. Its net debt obligations stood at £3.2bn before the CD&R takeover, and increased to almost £6bn after the acquisition, or £7.5bn if other obligations are included.
Morrisons lost its spot among the big four supermarkets last September when it was overtaken by Aldi, which became the UK’s fourth-largest supermarket chain after Tesco, Sainsbury’s and Asda.
Since the CD&R takeover, Morrisons has bought the struggling convenience store chain McColl’s out of administration, announcing last May it had outbid the owners of Asda in the race to acquire the group.
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The company recently said it had closed 132 unprofitable McColl’s stores out of the 1,164 it acquired, putting 1,300 staff at risk of redundancy.
David Potts, the chief executive of Morrisons, recently said the business, which can trace its history back 124 years, was “combining well with CD&R to be more effective” and was on track to increase profits in 2023 after “a year of transition”.
In a trading update, released in late January, Morrisons said like-for-like sales, excluding fuel, had risen by 2.5% during the three weeks up to Christmas, and added that sales momentum had continued into the new year.
