Wm Morrison Supermarkets — H1 2005/06 Earnings Presentation
31 slides from Wm Morrison Supermarkets's earnings presentation, Nov 17, 2005
Slide 1: IFRS Interim Results
IFRS Interim Results 25 weeks to 24 July 2005 17 November 2005
Slide 2: Overview
Overview 2 • UK GAAP trading update of 20 October remains unchanged • Operating profit before “exceptionals” unchanged at £50.7m • Conversion to IFRS gives no operational impact • £8.4m increase in pre-tax loss half year 2005-06 • £104.1m decrease in pre-tax profit full year 2004-05 • Net debt decre
Slide 3: Context
Context 3 • Numbers presented on 20 October re-stated to IFRS • Reported numbers since 1 February 2004 re-stated to IFRS • KPMG have reviewed all the IFRS adjustments • Option to show comparative data for financial instruments under UK GAAP taken (IAS 39) • All other IFRSs and IASs applied • Quoted
Slide 4: Applicable IFRS standards
Applicable IFRS standards 4 Operational Non-operational • Leased building and land • Share-based payments (IFRS 2) classification (IAS 17) • Pensions (IAS 19) • Impairment of assets (IAS 36) • Goodwill and business • Presentation (IAS 1) acquisitions (IFRS 3) • Financial Instruments (IAS32/39) • Tax
Slide 5: Key IFRS 1 First-time adoption options
Key IFRS 1 First-time adoption options 5 IFRS 3 Business • Not applicable as no material business combinations combinations before date of adoption (2 February 2004) IAS 19 Pensions • All cumulative actuarial gains and losses recognised at date of adoption IAS 39 Financial • Implementation deferred
Slide 6: Highlights UK GAAP to IFRS
Highlights UK GAAP to IFRS 6 Half year Half year Full year 2005/06 2004/05 2004/05 £m £m £m Operating profit, pre-exceptionals IFRS 50.7 172.9 395.4 UK GAAP 50.7 168.9 380.3 Exceptional costs IFRS 118.8 61.8 139.2 UK GAAP 118.8 21.8 99.2 (Loss)/profit before taxation IFRS (82.1) 80.1 193.0 UK GAAP (
Slide 7: Pre-tax profit bridge
Pre-tax profit bridge 7 Half year Half year Full year 2005-06 2004-05 2004-05 £m £m £m (Loss)/profit before tax UK GAAP (73.7) 121.6 297.1 Share-based payments (2.6) (0.2) (2.6)
Slide 8: Share-based payments (IFRS 2) - Policy
Share-based payments (IFRS 2) - Policy 8 UK GAAP • Nil charge for Executive Share Option Schemes (ESOP) based on options granted at market • Save As You Earn (SAYE) excluded from UK accounting • Long Term Incentive Plans (LTIP’s) charged on payment IFRS • Annual charge based on fair value of options
Slide 9: Pre-tax profit bridge
Pre-tax profit bridge 9 Half year Half year Full year 2005-06 2004-05 2004-05 £m £m £m (Loss)/profit before tax UK GAAP (73.7) 121.6 297.1 Share-based payments (2.6) (0.2) (2.6) Pensions (1.2) (1.2) (2.8)
Slide 10: Pension (IAS 19) - Policy
Pension (IAS 19) - Policy 10 UK GAAP • Accounting based on actuarial valuations using FRS 17 • Deficit on the balance sheet • Actuarial gains and losses are recognised immediately in the statement of recognised gains and losses IFRS • Materially similar to FRS 17 • Small exceptions with the accruing
Slide 11: Pre-tax profit bridge
Pre-tax profit bridge 11 Half year Half year Full year 2005-06 2004-05 2004-05 £m £m £m (Loss)/profit before tax UK GAAP (73.7) 121.6 297.1 Share-based payments (2.6) (0.2) (2.6) Pensions (1.2) (1.2) (2.8) Long leasehold land 0.5 0.4 0.9
Slide 12: Building leases (IAS 17) - Policy
Building leases (IAS 17) - Policy 12 UK GAAP • Land and building leases classified as operating leases • Long leasehold land premiums recognised in tangible assets • Long leasehold land written off over life of the building IFRS • Buildings can be classified as finance leases (no impact on WMS) • Lo
Slide 13: Pre-tax profit bridge
Pre-tax profit bridge 13 Half year Half year Full year 2005-06 2004-05 2004-05 £m £m £m (Loss)/profit before tax UK GAAP (73.7) 121.6 297.1 Share-based payments (2.6) (0.2) (2.6) Pensions (1.2) (1.2) (2.8) Long leasehold land 0.5 0.4 0.9 Impairment provision 0.0 0.0 0.0
Slide 14: Impairment provision (IAS 36) - Policy
Impairment provision (IAS 36) - Policy 14 UK GAAP • Trading history did not give risk of impairment • UK GAAP not so prescriptive to the level of impairment provision IFRS • Impairment test has to be performed if there are indications • Standard defines retail outlet as level to perform impairment t
Slide 15: Pre-tax profit bridge
Pre-tax profit bridge 15 Half year Half year Full year 2005-06 2004-05 2004-05 £m £m £m (Loss)/profit before tax UK GAAP (73.7) 121.6 297.1 Share-based payments (2.6) (0.2) (2.6) Pensions (1.2) (1.2) (2.8) Long leasehold land 0.5 0.4 0.9 Impairment provision 0.0 0.0 0.0 Intangible retirement - (40.0
Slide 16: Business combinations (IFRS 3) - Policy
Business combinations (IFRS 3) - Policy 16 UK GAAP • No intangibles recognised on acquisition • Goodwill (including negative goodwill) amortised over useful life • Hindsight period to adjust fair values is 2 years IFRS • Intangibles separately identifiable included in fair value • Intangibles writte
Slide 17: Pre-tax profit bridge
Pre-tax profit bridge 17 Half year Half year Full year 2005-06 2004-05 2004-05 £m £m £m (Loss)/profit before tax UK GAAP (73.7) 121.6 297.1 Share-based payments (2.6) (0.2) (2.6) Pensions (1.2) (1.2) (2.8) Long leasehold land 0.5 0.4 0.9 Impairment provision 0.0 0.0 0.0 Intangible retirement - (40.0
Slide 18: Financial instruments (IAS32/39) - Policy
Financial instruments (IAS32/39) - Policy 18 UK GAAP • Hedging derivatives are off-balance sheet and accounted for on settlement • Loans and bonds are recorded at amortised cost • Preference shares are equity IFRS • All hedging derivatives are on balance sheet at fair value • Current derivatives hav
Slide 19: Pre-tax profit bridge
Pre-tax profit bridge 19 Half year Half year Full year 2005-06 2004-05 2004-05 £m £m £m (Loss)/profit before tax UK GAAP (73.7) 121.6 297.1 Share-based payments (2.6) (0.2) (2.6) Pensions (1.2) (1.2) (2.8) Long leasehold land 0.5 0.4 0.9 Impairment provision 0.0 0.0 0.0 Intangible retirement - (40.0
Slide 20: Other impacts
Other impacts 20 Long service awards • Legacy Safeway long service awards that have already materially unwound Investment properties • Certain properties are deemed to be investment properties. Reclassified from tangible assets to investment properties. Impact £82.8m at 25 July 2004. No impact to pr
Slide 21: Operating profit bridge
Operating profit bridge 21 Half year Half year Full year 2005-06 2004-05 2004-05 £m £m £m Operating profit before exceptionals UK GAAP 50.7 168.9 380.3 Profit on sale of fixed assets under UK GAAP 2.5 4.3 17.9 Share-based payments (2.6) (0.2) (2.6) Pensions (0.4) (0.5) (1.1) Long leasehold land 0.5
Slide 22: Impact on profit guidance
Impact on profit guidance 22 • Minimal impact as profit guidance was before goodwill amortisation
Slide 23: Goodwill bridge
Goodwill bridge 23 £m Negative goodwill under UK GAAP 30th January 2005 (262.9) Pensions 21.4 Deferred taxation 413.9 Reverse amortisation to 30th January 2005 (58.2) Hindsight adjustments (43.8) Property fair value uplifts re sales and closures (32.2) Property fair value write downs re sales and cl
Slide 24: Taxation (IAS 12) - Policy
Taxation (IAS 12) - Policy 24 UK GAAP • Full provision for timing differences – excludes deferred tax on revaluations and rolled-over capital gains IFRS • Full provision made for temporary differences between taxation and accounting treatment • Property fair value uplift deferred tax is as if the pr
Slide 25: Net asset bridge
Net asset bridge 25 Half year Half year Full year 2005-06 2004-05 2004-05 £m £m £m Net assets under UK GAAP 3,989.7 4,054.1 4,017.5 Share-based payments (0.2) 2.3 2.1 Pensions (20.4) (20.4) (22.4) Leases 7.9 7.0 7.4 Business combinations (88.6) (22.3) (80.3) Financial instruments 6.2 - - Dividend 16
Slide 26: Dividends (IAS 10) - Policy
Dividends (IAS 10) - Policy 26 UK GAAP • Dividends recognised when proposed IFRS • Proposed dividends are not a liability under IFRS • Dividends are recognised when authorised which is: – At an Annual General Meeting – On payment
Slide 27: Income statement (unaudited)
Income statement (unaudited) 27 Year ended 25 weeks ended 25 weeks ended 30 January 24 July 2005 25 July 2004 2005 Note £m £m £m Sales including VAT 1 6,339.0 6,025.1 13,029.1 Total turnover 1 5,913.9 5,663.2 12,283.7 Less share of BP Joint Venture (66.4) (78.9) (180.0) Group turnover 5,847.5 5,584.
Slide 28: Full balance sheet (unaudited)
Full balance sheet (unaudited) 28 24 July 2005 25 July 2004 30 January 2005 Note £m £m £m Non-current assets Intangible assets 7 103.2 103.2 103.2 Property, plant and equipment 6,139.1 6,796.3 5,699.6 Investment properties 82.8 84.9 83.8 Other non-current assets: Investment in BP Joint Venture - 76.
Slide 29: Cash flow (unaudited)
Cash flow (unaudited) 29 Year ended 25 weeks ended 25 weeks ended 30 January 24 July 2005 25 July 2004 2005 Note £m £m £m Cash generated from operations 10 326.6 332.4 442.9 Taxation paid (4.3) (90.2) (171.5) Net cash inflow from operating activities 322.3 242.2 271.4 Cash flows from investing activ
Slide 30: SORIE & Net debt
SORIE & Net debt 30 Statement of recognised income and expense (unaudited) 25 weeks ended 25 weeks ended Year ended 24 July 2005 25 July 2004 30 January 2005 £m £m £m Actuarial gain on defined benefit pension schemes 70.4 62.7 (80.5) Tax on items recognised directly in equity (21.1) (19.0) 24.0 Net
Slide 31: MORRISONS
MORRISONS
Wm Morrison Supermarkets — H1 2005/06 Earnings Presentation on 6ix