Wm Morrison Supermarkets — FY2012/13 Earnings Presentation
55 slides from Wm Morrison Supermarkets's earnings presentation, Mar 14, 2013
Slide 1: Preliminary Results
Preliminary Results 53 weeks to 3 February 2013 14 March 2013 0
Slide 2: Sir Ian Gibson, Chairman
MORRISONS Sir lan Gibson Chairman
Slide 3: Overview
Overview • Sales growth up 3% • Underlying profits down 4% • Underlying earnings per share up 7% • Dividend up 10% • Equity retirement programme completed • Good progress on all strategic initiatives 2012/13: 53 weeks to 3 February 2013 2011/12: 52 weeks to 29 January 2012 2
Slide 4: Richard Pennycook, Group Finance Director
Richard Pennycook Group Finance Director 3
Slide 5: Financial summary
Financial summary £m 2012/13 2011/12 Turnover 18,116 17,663 3% Operating profit 949 973 2% Net finance costs -70 -26 Profit before tax 879 947 7% Underlying earnings per share 27.3p 25.6p 7% Net debt 2,181 1,471 Dividend 11.8p 10.7p 10% 2012/13: 53 weeks to 3 February 2013 2011/12: 52 weeks to 29 Ja
Slide 6: Turnover bridge
Turnover bridge £m 232 28 9 67 59 -270 18,116 17,991 2011/12* New Like-for- Fuel Fuel Conv- Other 2012/13 stores like volumes price enience * Pro forma – 53 weeks to 5th February 2012 5
Slide 7: Sales performance
Sales performance Group like-for-like (ex-VAT) 2012/13* 2011/12** Sales ex-fuel -2.1% 1.8% Sales inc-fuel -1.3% 5.1% Customers -2.6% 1.3% Other metrics: Sales per customer £22.85 £22.82 Sales per sq. ft. £20.24 £21.05 *2012/13: 53 weeks to 3 February 2013 (2011/12: 53 weeks to 5 February 2012) **201
Slide 8: Underlying earnings
Underlying earnings £m 2012/13 2011/12 Reported profit before tax 879 947 Underlying adjustments: – property related transactions 1 1 – net pension interest cost/(income) (IAS 19) 4 -13 – multi-channel and convenience development 17 - Underlying profit before tax 901 935 4% Normalised tax at 26.5% (
Slide 9: Operating profit
Operating profit 2012/13 2011/12 £m % £m % Turnover 18,116 17,663 Gross profit 1,206 6.7 1,217 6.9 Other operating income 80 0.4 86 0.5 Administrative expenses -336 -1.9 -329 -1.9 Operating profit* 950 5.2 974 5.5 * Pre property disposal losses 2012/13: 53 weeks to 3 February 2013 2011/12: 52 weeks
Slide 10: Cash flow
Cash flow £m 2012/13 2011/12 Cash flow from operations 1,435 1,264 Proceeds from disposals 5 4 Capital expenditure -980 -796 Acquisitions and investments -36 -1,016 -105 -907 Equity retirement -514 -368 Net purchase of treasury shares -65 - Sale of own shares 42 - Dividends -270 -807 -304 -669 Tax,
Slide 11: Funding profile
Funding profile £m 2012/13 2011/12 2010/11 Revolving credit facilities 1,350 1,200 1,100 Safeway sterling bonds 550 550 550 USPP 157 157 - Sterling bond 800 400 - Bank loan 200 - - £m 3,057 2,307 1,650 1,350 Undrawn RCF -675 -725 -625 Net cash / other -201 -111 -208 Net debt 2,181 1,471 817 557 350
Slide 12: Enhancing shareholder returns
Enhancing shareholder returns • Equity retirement completed • Average coupon on associated debt instruments 3.5%. Average longevity 10 years • Equity retirement – further uplift for next year’s EPS 100% Sept 2011 Mar 2012 Sept 2012 Jan 2013 Mar 2013 11
Slide 13: Impact of equity retirement on reported EPS
Impact of equity retirement on reported EPS * • 7% increase in EPS 0.96p 27.26p 0.15p 26.30p 1.13p 25.55p -0.53p EPS Growth in Taxation Other Pre-equity Equity EPS 2011/12 earnings movements retirement retirement 2012/13 before tax in shares impact * underlying 12
Slide 14: Return on capital employed (ROCE)
Return on capital employed (ROCE) 15% 10% 5% 0% 08/09 09/10 10/11 11/12 12/13 13
Slide 15: Dalton Philips, Chief Executive
Dalton Philips Chief Executive 14
Slide 16: Agenda
Agenda • Market context • Addressing difficult trading performance • Progress on strategic initiatives 15
Slide 17: Market backdrop
Market backdrop Economic pressures continue to hit consumer confidence Food commodity prices remain high GDP is stagnant 1.8% 0.9% 0% 2009 2010 2011 2012f (4.0)% Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Source: IMF, food commodity index includes cereals, vegetable oils, meat, seafood, sugar, bananas and o
Slide 18: Market growth headwinds
Market growth headwinds Convenience and online growth increasing 100% 23% Proportion of market growth 39% 50% 0% 09-10 10-11 11-12 12-13 Main stores Convenience Online Source: Kantar Worldpanel, market growth shows difference between Total Till Roll 52w/e Jan – Jan 17
Slide 19: Greater clarity and focus needed
Greater clarity and focus needed Unsatisfactory performance this year Promotional effectiveness Communication of our differences Undifferentiated promotions Insufficient communication of our craft skills Value perception dipped Freshness perception dipped April '12 Nov '12 April '12 Nov '12 Sources:
Slide 20: Getting back on track
Getting back on track Actions taken to improve trading performance Promotional effectiveness Communication of our differences Promotions that resonate with customers Greater focus on craft skills New innovative promotions Focus on provenance and consumer trust 19
Slide 21: Encouraging results so far
Encouraging results so far Positive momentum returning Consumer sentiment rising Recommendations growing 20 31 YouGov index YouGov index 10 28 0 Mar Jan Mar Jan -10 25 Morrisons Major food retailers Morrisons Major food retailers Value perception improving Freshness perception improving Nov '12 Feb
Slide 22: Our convictions
Our convictions Food focused not generalist Experiential over purely functional Skills not just drills Value is forever General merchandise - clicks not bricks Multi-format and Multi-channel 21
Slide 23: Three areas of focus
Three areas of focus Driving topline Increasing efficiency Capturing growth 22
Slide 24: Driving topline
Driving topline All initiatives are on track Strengthening our Fresh Formats Enhancing our Own Brand service culture All 3 initiatives on track 23
Slide 25: Strengthening our Own Brand
Strengthening our Own Brand New ranges launched and performing well Own Brand participation growing* 48.3% 47.4% • Relaunched 5,000 products • Expanded the role of Own Brand Feb 2012 Feb 2013 Children’s clothing • Relaunch 5,000 more products in 2013/14 • Launch Nutmeg clothing range *Source: Kantar
Slide 26: Fresh Formats
Fresh Formats Making good progress Butchers preparing meat in store • Trading over 100 stores across the country • Capex on target at £1.5m per store Fishmonger slicing salmon in store • Liberated 200k sq. ft. 25
Slide 27: Fresh Formats
Fresh Formats Store investment to continue Baker kneading dough in store • Roll out 100 stores in 2013/14 • Further tailor stores to local customers Stores with Fresh Formats investment • Target c.£0.5m capex per store 205 105 1 12 FY 10/11 FY 11/12 FY 12/13 FY 13/14 % of 0% 3% 30% ~55% total sales
Slide 28: Increasing efficiency
Increasing efficiency All initiatives are on track Driving store Tackling indirect Revamping our productivity procurement systems All 3 initiatives on track 27
Slide 29: Driving store productivity
Driving store productivity Self help continuing to deliver benefits Electronic order pad • Delivered £40m of savings in 2012/13 • Continued to deliver award winning service and availability to our customers Store productivity savings £100m £65m • Trial and roll out further initiatives £25m • Deliver
Slide 30: Tackling indirect procurement
Tackling indirect procurement Multiple initiatives delivering savings Down-gauged shrink film by 3µ • Focused on both large and small spend areas Indirect procurement savings £100m £85m • Continue to establish a centralised procurement process £40m • Deliver £100m in savings by 2013/14 2011/12 2012/
Slide 31: Revamping our systems
Revamping our systems Implementation in full swing New meat manufacturing system • Started roll out of supply chain management system • Began upgrade of Woodheads meat manufacturing system Systems improvement savings £100m • Continue system roll out £63m £32m • Improve promotional and ranging tools
Slide 32: Capturing growth
Capturing growth All initiatives are on track Vertical Advancing Moving to integration convenience multi-channel All 3 initiatives on track 31
Slide 33: Vertical integration
Vertical integration Strengthening one of our key points of difference Colne pig abattoir • Completed improvements at Winsford meat site • Commenced Colne abattoir expansion • Brought Grimsby seafood plant fully online Grimsby seafood production plant • Expand Grimsby seafood, Farmers Boy pastry and
Slide 34: Advancing convenience
Advancing convenience Stores opened, sites acquired New Elm Park store, East London • Opened 12 stores, tailored to local customer needs • Acquired over 60 further sites • Opened West London convenience distribution centre Fresh offer in Formby store, Lancashire 33
Slide 35: Advancing convenience
Advancing convenience Accelerating roll out West London convenience distribution centre • Accelerate rollout by opening 100 stores by end 2013/14 • Open a north of England CDC South East locations Convenience stores trading 100 12 3 2011/12 2012/13 2013/14 CDC Current M local Pipeline M local 34
Slide 36: Moving to multi-channel: general merchandise
Moving to multi-channel: general merchandise On track with our online offer Morrisons Cellar website • Launched Morrisons Cellar • Announced Lakeland partnership • Opened 4 new Kiddicare stores so far Single platform* • Further integrate Morrisons and Kiddicare • Launch Lakeland offer • Consolidate
Slide 37: Moving to multi-channel: food
Moving to multi-channel: food Launch by the end of the year Online grocery concept • Taken learnings from Fresh Direct • Developed strategy and proposition Online grocery channel growth* £11.1bn • Launch online grocery by end 2013/14 £5.6bn 2012 2017 *Source IGD 36
Slide 38: In summary
In summary • A difficult year • Short term issues being fixed • Committed to our long term strategy • Strong progress on new channel development • Trading for today, building for tomorrow 37
Slide 39: Appendices
MORRISONS Appendices
Slide 40: Enhancing our service culture
Enhancing our service culture Investing in our points of difference Butchery apprentice in store • Improved HOT service scores • Trained over 11,000 apprentices • Held craft masterclasses for over 500 counter colleagues Produce colleague advising a customer • Established a dedicated retail improveme
Slide 41: Sales performance 2012/13
Sales performance 2012/13 Group like-for-like (ex-VAT) Q1 Q2 H1 Q3 Q4 H2 FY Sales ex-fuel -1.0% -0.9% -0.9% -2.1% -4.1% -3.2% -2.1% Sales inc-fuel 0.9% -0.6% 0.2% -1.3% -3.7% -2.6% -1.3% Customers -2.2% -1.4% -1.8% -2.2% -4.6% -3.2% -2.6% Other metrics: Sales per customer £22.48 £22.33 £22.41 £22.01
Slide 42: 53 vs 52 week P&L analysis
53 vs 52 week P&L analysis 2012/13 2012/13 £m (53 weeks) (52 weeks) Turnover 18,116 17,798 Gross profit 1,206 1,185 Other operating income 80 80 Administrative expenses -336 -329 Profits on property related transactions -1 -1 Operating profit 949 935 Net interest expense -70 -67 Profit before tax 87
Slide 43: Finance costs
Finance costs £m 2012/13 2011/12 Interest payable -80 -51 Less: capitalised 15 12 -65 -39 Interest receivable 3 5 Other finance income - 1 Other finance cost -6 -7 -68 -40 Net pensions (expense) / income -4 13 Amortisation of bonds 2 2 Fair value movements on derivatives - -1 Net finance cost -70 -2
Slide 44: Depreciation
Depreciation* £m 368 340 319 304 290 179 189 160 164 169 171 151 153 155 130 H1 H2 FY H1 H2 FY H1 H2 FY H1 H2 FY H1 H2 FY 08/09 09/10 10/11 11/12 12/13 *Including amortisation 43
Slide 45: Balance sheet
Balance sheet £m 2012/13 2011/12 Fixed assets and investments 9,185 8,536 Working capital -1,754 -1,657 Net pensions liability -20 -11 Net debt -2,181 -1,471 Net assets 5,230 5,397 Gearing 42% 27% 44
Slide 46: Capital expenditure – 2012/13
Capital expenditure – 2012/13 8% 5% New space Maintenance 11% IT infrastructure (Evolve) 49% Manufacturing 10% Fresh Formats Multi-channel 10% Other 7% Total expenditure - £1.0bn 45
Slide 47: Supplementary financials
Supplementary financials 3 February 2013 29 January 2012 Number of shareholders 48,082 46,410 Number of shares in issue (m) 2,347 2,532 Dividend 2012/13 2011/12 2010/11 Interim 3.49p 3.17p* 1.23p Final 8.31p 7.53p* 8.37p Total 11.8p 10.7p 9.6p Dividend dates: FY 2012/13 Interim 2013/14 Ex dividend 1
Slide 48: Sales area and store numbers
Sales area and store numbers Stores Sales area (000’s sq.ft.) Number Estate at 29 January 2012 - core 12,894 472 - convenience 10 3 12,904 475 New openings - core 449 14 - convenience 28 9 477 23 Extensions 40 5 Estate at 3 February 2013 - core 13,383 486 - convenience 38 12 13,421 498 Store sizes (
Slide 49: Financial calendar
Financial calendar 2013/14 Date Q1 IMS 9 May 2013 AGM 13 June 2013 Half year end 4 August 2013 Interim results announcement 12 September 2013 Q3 IMS 7 November 2013 Christmas Trading Statement 20 January 2014 Full year end 2 February 2014 48
Slide 50: FY 2013/14 guidance summary
Appendix FY 2013/14 guidance summary Sales Net new space expected to contribute around 2.9% to total sales growth (ex-fuel) Finance costs (ex-IAS 19) Expected to be c.£85m Tax rate Effective tax rate expected to be around 25% Space Full year net space growth of around 500,000 sq. ft. (3.7%) Capital
Slide 51: Awards
Awards Multiple Spirits Retailer 50
Slide 52: Meet the team: Board of Directors
Meet the team Board of Directors Sir Ian Gibson CBE Chairman Sir Ian joined the Group as Non-Executive Deputy Chairman in September 2007. He was appointed Chairman in March 2008. Sir Ian is Chair of the Board’s Nomination Committee and a member of its Remuneration Committee and Corporate Compliance
Slide 53: Meet the team: Board of Directors
Meet the team Board of Directors Nigel Robertson Senior Independent Director Nigel joined the Group as a Non-Executive Director in July 2005 and has been Senior Independent Director since March 2011. He is a member of the Nomination, Remuneration, Audit and Corporate Compliance and Responsibility Co
Slide 54: Meet the team: Management Board
Meet the team Management Board Dalton Philips Chief Executive See Board of Directors Richard Pennycook Group Finance Director See Board of Directors Mark Harrison Group Retail Director Mark joined the Management Board in October 2010 and was appointed Group Retail Director in June 2011. His responsi
Slide 55: Meet the team: Management Board
Meet the team Management Board Terry Hartwell Group Property Director Terry was appointed to the Management Board in October 2010 after joining the Group in May 2009 as Group Property Director. Prior to joining Morrisons, Terry was Group Property Director for the worldwide operations at Kingfisher P
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