Morrison's profit, dividend surge

Britain's fourth-biggest grocer, whose new chief executive Dalton Philips starts on March 29, said on Thursday it made profit before tax and one-off items of 767 million pounds in the year ended January 31.

That compared with an average forecast of 757 million pounds in a Thomson Reuters I/B/E/S poll of 24 analysts.

The dividend was hiked 41 percent to 8.2 pence a share as the group reaped the benefits of a three-year drive to improve its operating systems and distribution.

"We expect the economic environment to remain challenging, disposable incomes to be under pressure and value to be a high priority for consumers," Morrison said, echoing the caution of other retailers, who fear steps to reduce government debt, like raising taxes and cutting public spending, could hit consumers.

Morrison, which runs over 420 stores, has outperformed bigger rivals Tesco, Asda and Sainsbury on sales for most of the past two years, helped by its focus on low prices, promotions and fresh-food counters.

Sales at stores open at least a year rose 6 percent, excluding fuel and VAT sales tax, over the year.

Despite its strong performance, Morrison shares have underperformed Europe's STOXX 600 retail index by 14 percent over the past 12 months, as some analysts have questioned its long-term growth prospects.

So far the group has focussed on expanding across Britain, and new boss Philips, who joins from Canadian grocer Loblaw, will have to decide whether to follow bigger rivals into markets like general merchandise, services and online.

Morrison shares closed at 304.2 pence on Wednesday, valuing the business at about 8.1 billion pounds.