The half year results for Wm Morrison Supermarkets showed pre-tax profits up 11.6 per cent on turnover up 17.9 per cent, with a 20 per cent increase in the interim dividend.

Discounting the effects of new stores, the important "like-for-like" sales figure was up over five per cent, with an even larger figure in recent weeks. This performance is better than any other major supermarket company, and shows the strength of Morrison's business.

Chairman Ken Morrison repeated his determination to keep the company independent - with the family holding a substantial slice of the shares he is in a good position to keep predators at bay. A rumour that the company was in merger talks with J Sainsbury was denied.

Morrisons differs from its major competitors in various ways. Firstly, it is hardly represented in the prosperous South-East, which makes the sales growth even more impressive. Secondly, it has rejected the "expensive in-store loyalty cards" in favour of lower prices and two-for-one multisave offers. Thirdly, the company has stuck to a formula of superstores of around 40,000 sq ft. sited out-of-town or edge-of-town. Following a tightening of planning guidelines, Ken Morrison has reminded the government that these restrictions are preventing him from expanding faster and providing further competition in the South for the major chains.

However Wal-Mart's acquisition of Asda may bring prices down, and Tesco have announced plans to pre-empt this move, so inflation may be kept in check without any Government action - just good old fashioned private sector competition.

Meanwhile, Sainsburys, Safeway and Somerfield appear to be the companies with most to lose from any sharpening of prices. Somerfield, who purchased Kwik Save last year, are having a particularly difficult time in converting Kwik Save stores to the Somerfield format and losing sales in the change.

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