Wm Morrison Supermarkets — FY2009/10 Earnings Presentation
43 slides from Wm Morrison Supermarkets's earnings presentation, Mar 11, 2010
Slide 1: Preliminary Results 52 weeks ended 31 January 2010
Preliminary Results 52 weeks ended 31 January 2010 11 March 2010
Slide 2: Sir Ian Gibson, Chairman
2 Sir Ian Gibson Chairman Willenhall
Slide 3: Overview 2009/10
Overview 2009/10 3 • Continuing growth in sales and profits • Underlying profit* up 19% to £767m • Total dividend of 8.2p – up 41% • New Board members – Penny Hughes – appointed 1 January 2010 – Johanna Waterous – appointed 1 February 2010 – Dalton Philips – starts 29 March 2010 * Excluding IAS 19 p
Slide 4: Richard Pennycook, Group Finance Director
4 Richard Pennycook Group Finance Director Streatham
Slide 5: Review
Review 5 • Results • Optimisation Plan • Food Specialist for Everyone • National to Nationwide • Forward plans and outlook
Slide 6: Results
Results M MORRISONS
Slide 7: Financial summary
Financial summary 7 £m 2009/10 2008/09 Turnover 15,410 14,528 6% Operating profit * 812 669 21% Net finance costs - 49 - 16 Profit on property related transactions 4 2 Pensions credit 91 - Profit before tax 858 655 31% Net debt 924 642 * Excluding property transactions and pensions credit
Slide 8: Sales performance
Sales performance * 8 Group like for like 52 weeks ended 31 January 2010 1 February 2009 Sales – exc. fuel 6.0% 8.2% Sales – inc. fuel 3.4% 11.1% Customers 2.3% 4.2% Other metrics Sales per customer (£) £23.08 £22.48 Sales (£ per sq. ft.) £21.03 £20.35 * Exc. VAT
Slide 9: Turnover bridge
Turnover bridge £m — 17 143 Fy 08/09 New Like for Fuel price Fuel Other 09/10 stores like volume growth MORRISONS
Slide 10: Underlying profit
Underlying profit 10 £m 2009/10 2008/09 PBT reported 858 655 Underlying adjustments – profit on property related transactions -4 -2 – pensions credit - 91 - – net pension expense (income) (IAS 19) 4 -17 Underlying profit 767 636 21% Tax (normalised 2007/08 30%) - 230 - 195 Underlying profit after ta
Slide 11: Operating profit
Operating profit 11 2009/10 2008/09 £m % £m % Gross profit 1,062 6.9 913 6.3 Other operating income 65 0.4 37 0.2 Administrative expenses - 315 - 2.1 - 281 - 1.9 Operating profit * 812 5.3 669 4.6 * Excluding property transactions and pensions credit
Slide 12: Cash flow
Cash flow 12 £m 2009/10 2008/09 Cash flow from operations 1,004 964 4% Proceeds from disposals 7 22 Capital expenditure - 906 - 678 Sale and issue of shares 34 3 Shares repurchased - - 146 Tax, interest, servicing of finance - 262 - 133 Dividends - 159 - 131 Cash flow - 282 - 99 Opening net debt 642
Slide 13: Optimisation Plan
Optimisation Plan M MORRISONS
Slide 14: Optimisation Plan update – space
Optimisation Plan update – space 14 • 2009/10: – 11 organic store openings including 2 replacements – 34 former Co-op/Somerfield stores opened Dover – 13 extensions completed • Original 3 year target: – 1m sq. ft. by January 2010 – exceeded by over 0.4m sq. ft. Westbury Completed
Slide 15: Optimisation Plan update – latest in store
Optimisation Plan update – latest in store 15 • Till queue management system now in over 300 stores • Self-scan checkouts installed in over 260 stores • Intelligent labour planning tool kit successfully piloted
Slide 16: Optimisation Plan update – Distribution
Optimisation Plan update – Distribution 16 • New South East RDC in Sittingbourne – £108m investment – now services 65 stores – 22m km saved per annum • New South West RDC at Bridgwater – operational in 2011/12 Distribution network back in balance
Slide 17: Optimisation Plan update – systems
Optimisation Plan update – systems 17 • New payroll and HR systems now pay over 80,000 colleagues • First stage of new financial and distribution systems completed • New EPOS solution successfully piloted • Voice picking technology operating in all warehouses On track
Slide 18: Optimisation Plan update – CSR
Optimisation Plan update – CSR 18 • 1st grocery retailer to be awarded the Carbon Trust Standard Kidderminster • ‘Let’s Grow’ • ‘Great Taste, Less Waste’ • Morrisons Academy • Farming programme Corporate reputation transformed
Slide 19: Optimisation Plan conclusion
Optimisation Plan conclusion 19 Delivery Original Target 250bps ahead of Top line growth ahead of market market Space growth 1.4m sq. ft. 1.0m sq. ft. EBITDA growth £526m p.a. £460m p.a. Capital investment in programme £435m £450m Carbon footprint reduction 56% 36% dividend in line achieved 2.5x Div
Slide 20: Optimisation Plan – shareholder returns
Optimisation Plan – shareholder returns 20 £m 05/06 06/07 07/08 08/09 09/10 Annual total shareholder return 16% - Turnover 12,115 12,462 12,969 14,528 15,410 v sector 9% Operating profit 104 385 580 669 812 Operating profit 0.9% 3.1% 4.5% 4.6% 5.3% Share Price Performance Annual dividend growth 30%
Slide 21: Food Specialist for Everyone
21 Food Specialist for Everyone
Slide 22: Food specialist …
Food specialist … 22 In customer perception terms, Morrisons leads the market on: Best quality meat and fish Best quality bread Fresh food prepared in store British sourced fresh food Working with farmers and growers Source: Hall and partners
Slide 23: Food specialist … but we don't lead on
Food specialist … 23 But we don’t lead on: Best quality fruit and vegetables Premium own label Ready meals Healthy eating Source: Hall and partners
Slide 24: ….. for Everyone
MORRISONS ~ Price if items bought separately £12 Christmas shop Pick up a Collector Card today. A fresh Christmas for evetYone MORRISONS
Slide 25: National to Nationwide
25 National to Nationwide
Slide 26: Potential to become Nationwide
Potential to become Nationwide 26 • Morrisons is under represented in key areas of the Country • 425 stores, 11.9m sq. ft. • 1.4m more households have access to a Morrisons this year • 7m households still don’t have access to a Morrisons • Our focus is to continue to move from a ‘National’ to a ‘Nat
Slide 27: National to Nationwide
National to Nationwide 27 Speke Rothwell Illingworth (Halifax) Shefford • We’ve shown we can open over 40 stores in a year • We operate the widest range of store sizes under a single fascia at one price (10,000 - 40,000+ sq. ft.) • Potential to reach many more customers Our new space target is 1.5m
Slide 28: Forward plans and outlook
Forward plans and outlook M MORRISONS
Slide 29: Current market background
Current market background 29 • Low food inflation good for our customers • Consumer confidence remains fragile • Disposable income under more pressure in 2010 than 2009 • Great value remains a top priority • Health, provenance and treats still important
Slide 30: Continuing to invest
Continuing to invest 30 • ‘National to Nationwide’ – the next 1.5m sq. ft. – 20,000 new jobs • Manufacturing capacity and capabilities • The distribution network – new RDC in the South West • The systems programme Three year capital investment £2.2bn
Slide 31: Start of the Logistics Optimisation Plan
Start of the Logistics Optimisation Plan 31 2006 – Logistics Network • Post Safeway a number of depot disposals had taken place • Overly complex network • Imbalance of capacity • Transport inefficiencies • Reliance on multiple legacy systems with a high degree of manual input • High level of store s
Slide 32: Completion of the Plan by 2011
Completion of the Plan by 2011 32 2011 – Logistics Network • Simplified network – new South West RDC, £100m • Cost efficient operation • Capacity for growth in support of ‘National to Nationwide’ • Industry leading systems • Better store service
Slide 33: IT programme
IT programme 33 • 2010: – EPOS roll out – produce factories roll out – warehouses roll out – product management begins – next stage financials, HR and payroll • 2011 onwards: – product management continues – supply chain begins – roll outs continue – trading tools deployed • £200m investment to 2013
Slide 34: Summary
Summary 34 • Strong LFL sales exc. fuel up 6.0% • Underlying profit up 21% • Strong balance sheet • Dividend growth of 41% • Morrisons now embraced by a wider audience – stronger customer perceptions – record customer numbers – 10,000 new jobs
Slide 35: Supplementary Slides
MORRISONS Supplementary Slides
Slide 36: Top team
Top team 36 Richard Pennycook Martyn Fletcher Group Finance Director Manufacturing Director Mark Gunter Terry Hartwell Group Stores Director Group Property Director Angus Maciver Martyn Jones Group Marketing & Group Trading Director Communications Director Neal Austin Norman Pickavance Logistics Dir
Slide 37: Balance sheet
Balance sheet 37 £m 2009/10 2008/09 Fixed assets and investments 7,666 7,079 Working capital - 1,776 - 1,868 Pensions deficit - 17 - 49 Net debt - 924 - 642 Net assets 4,949 4,520 Gearing 19% 14% Interest cover 18.5 41.9 Interest cover adjusted * 18.0 20.3 Dividend cover - underlying 2.5 2.9 * Exclu
Slide 38: Depreciation
Depreciation 38 £m 289 290 304 282 153 163 160 151 153 129 126 130 H1 H2 FY H1 H2 FY H1 H2 FY H1 H2 FY 06/07 07/08 08/09 09/10 • H2 06/07 & H1 07/08 – accelerated depreciation of branded assets • H2 07/08 – Safeway structural assets fully depreciated • H1 08/09 – business as usual • H2 08/09 – Optim
Slide 39: Optimisation Plan 1
Optimisation Plan 1 39 Area of focus Original status Goal set Performance Equal original Large converted Sales densities 23% below Morrisons in 5 stores original Morrisons years Sales Loss making and requiring densities Smaller significant increase in sales higher than converted stores density to of
Slide 40: Optimisation Plan 2
Optimisation Plan 2 40 Goal set 06/07 Area of focus Original status Performance £m No store segmentation Gross margin 100 No micro ranging Opportunities in back office In store and through self-scan 50 efficiency checkouts Opportunities to increase Manufacturing capacity to serve the bigger 15 busin
Slide 41: Optimisation Plan conclusion
Optimisation Plan conclusion 41 Impact on EBITDA v 05/06 4 years to 09/10 £m Delivered Target Gross margin 241 210 In store efficiency benefits 149 140 Manufacturing 15 15 Distribution 81 55 Centre 40 40 Total incremental benefit 526 460 Total capital investment 435 450 Outperformance v Optimisation
Slide 42: Stores analysis
Stores analysis 42 Group Estate at 1 February 2009 382 New openings 45 Replacements -2 Estate at 31 January 2010 425 Total sales area (‘000 sq. ft.) 11,867 Freeholds and long leaseholds 89% Petrol filling stations 291
Slide 43: MORRISONS
MORRISONS
Wm Morrison Supermarkets — FY2009/10 Earnings Presentation on 6ix