Wm Morrison Supermarkets — H1 2006/07 Earnings Presentation
31 slides from Wm Morrison Supermarkets's earnings presentation, Sep 21, 2006
Slide 1: Interim Results
Interim Results 25 weeks to 23 July 2006 21 September 2006
Slide 2: Sir Ken Morrison CBE, Chairman
Sir Ken Morrison CBE Chairman Leyland
Slide 3: Agenda
Agenda 2 • Overview – Sir Ken Morrison • Introduction – Marc Bolland • Financial and Operational Review – Richard Pennycook • Questions 5
Slide 4: Interim Results 2006/07
Interim Results 2006/07 3 • Solid first half performance - signs that the recovery is under way: – Increasing customer numbers – Improving sales densities – Like for like turnover up 6.6% (4.6% ex. fuel) • Optimisation Plan delivering benefits and on track • PBET £134.2m (2005/06: £36.7m) • Interim
Slide 5: Other matters
Other matters 4 • Board – Marc Bolland appointed CEO – 1 September 2006 – Recruitment for new Deputy Chairman progressing well – Bob Stott retires – 30 September 2006 • Competition Commission enquiry – Dedicated team in place 5
Slide 6: Marc Bolland
Stockport , Mare Bolland MORRISONS
Slide 7: Richard Pennycook
Richard Pennycook Group Finance Director Bristol
Slide 8: Financial summary
Financial summary 7 £m H1 06/07 H1 05/06 Turnover 5,850.7 5,847.5 Operating profit 163.8 50.7 Exceptional items - (118.8) Operating cash inflow 418.8 326.6 Net debt 881.2 1,101.0 Net assets 3,659.9 3,910.8 8
Slide 9: Operating profit pre exceptionals
Operating profit pre exceptionals 8 H1 06/07 H1 05/06 £m % £m % Gross profit/margin 1,499.9 25.6 1,430.8 24.5 Staff costs (746.1) (12.8) (784.2) (13.4) Depreciation (126.6) (2.1) (139.3) (2.4) Other costs (463.4) (7.9) (456.6) (7.8) Operating profit 163.8 2.8 50.7 0.9 pre exceptionals
Slide 10: Turnover bridge – half on half
Turnover bridge – half on half 9 £m 5,848 59 5,851 92 75 207 (430) H1 2005 / 06 Disposals Core & New Stores Fuel Price Fuel Volume H1 2006 / 07 2005 / 06 Converted
Slide 11: Profit bridge – half on half
Profit bridge – half on half 10 £m 19 163.8 16 20 61 31 50.7 3 (16) 48 (5) (16) Optimisation Initiatives H1 Disposals New Like for Like Energy Pensions Profit Margin Distrib’n Central Store H1 2005 / 06 Stores Stores Costs Pre Costs Costs Wages 2006 / 07 Optimis- ation
Slide 12: Cash flow
Cash flow 11 £m 06/07 05/06 Cash flow from operations 418.8 326.6 Proceeds from disposals 50.9 158.9 Capital expenditure (103.8) (338.2) Sale and issue of shares 1.8 0.5 Tax, interest, servicing of finance (12.4) (15.6) Dividends (81.7) (81.2) Cash flow 273.6 51.0 Opening net debt (1,147.6) (1,160.9
Slide 13: Operational review
Operational review 12 Calendar 2004 – 2005 2006 – 2007 Conversion of Safeway Optimise the new business Objective Apply, and adapt where necessary, the 125 store Morrisons model to the new c370 store world…. In order to optimise business performance over a 3 year programme Tactical profit recovery, n
Slide 14: Like for like sales
Like for like sales 13 7 weeks 16 weeks 9 weeks to 19 H1 FY 05/06 to 25 May to 23 July March 2006/07 (AGM) (Interims) (Prelims) Like for like sales Inc fuel 5.1% 5.7% 6.0% 7.5% 6.6% Ex fuel 2.4% 3.2% 3.7% 6.1% 4.6% Other metrics Customers 5.3% 4.6% 5.1% 5.5% 5.3% Sales per customer (£) 22.21 21.81 2
Slide 15: Scotland – an update
Scotland – an update 14 Like for like sales in 43 stores* 9.1% 6.5% Q3 05/ 06 Q4 05/ 06 *Excluding fuel
Slide 16: South - real progress in new territory
South - real progress in new territory 15 Like for like sales in 149 stores* 5.1% 3.5% Q3 05/ 06 Q4 05/ 06 *Excluding fuel
Slide 17: Store sales – how they build
Store sales – how they build 16 Sales increase from point of opening or conversion Converted Stores 46% • New stores take time to New Morrisons Stores 39% establish their trade • Converted stores have a 27% similar profile 17% • Morrisons growth has 18% always been driven by new 14% customers findin
Slide 18: Smaller stores project
Smaller stores project 17 • Smaller stores began the July 2006 growth on February 2006 year with a large productivity gap 9.9% • Numerous trials and operational initiatives 6.5% • Sales densities already 5.2% exceed large stores, but 3.2% 3.5% profitability still well short – a 2 year programme 0.7%
Slide 19: Market performance
Market performance 18 Like for like market share Morrisons has outperformed the strengthening market over recent months 13.0% 13.2% 13.2% 13.2% 13.1% 13.0% 12.9% 12.8% 13.1% 13.0% 4.5% 12.7% 12.8% 3.5% 3.3% 3.2% 3.1% 2.6% 2.6% 2.6% 2.4% 2.4% 2.3% 2.2% Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May
Slide 20: Range – work to do
Range – work to do 19 5
Slide 21: Customer service – consistent delivery
Customer service – consistent delivery 20
Slide 22: Optimisation – A clear plan to fix the basics
Optimisation – A clear plan to fix the basics 21 • 6m store staff hours – target saving – on target. Staff costs 12.8% (FY05/06 13.5%) • 90 bps margin target over three years – ahead of schedule – but guidance maintained • £30m distribution saving target this year – 3 depots closed – further rationa
Slide 23: Performance update
Performance update 22 8 wks to 18 8 wks to 17 33 wks to 17 September H1 2006/07 September September 2005 2006 2006 Like for like sales Inc fuel 6.6% 6.6% 6.5% 6.6% Ex fuel 2.6% 4.6% 5.9% 4.9% Other metrics Customers 4.1% 5.3% 5.2% 5.3% Sales per customer (£) 21.84 22.00 22.00 22.00 Sales per sq.ft.
Slide 24: Summary
Summary 23 • The company is making good progress – KPIs are positive – all parts of the estate are improving – post interim results continue the encouraging trend • Real confidence in the future • However – much more to do
Slide 25: MORRISONS
MORRISONS ‘=| (5) g
Slide 26: Supplementary slides
Supplementary slides MORRISONS
Slide 27: Profit and loss account
Profit and loss account 26 £m 06/07 05/06 Turnover 5,850.7 5,847.5 Operating profit pre exceptionals 163.8 50.7 Net interest expense (29.6) (16.2) Share of joint venture income after tax - 2.2 Profit before tax and exceptionals 134.2 36.7
Slide 28: Exceptional costs
Exceptional costs 27 £m 06/07 05/06 Redundancy - 9.9 Store conversions (inc payroll) - 90.7 Divestment costs - 0.5 Fixtures written off on conversion - 17.7 Total Safeway integration and conversion - 118.8
Slide 29: Balance sheet
Balance sheet 28 £m H1 06/07 H1 05/06 Fixed assets and investments 6,589.1 6,556.5 Stock 336.8 440.0 Debtors and prepayments, 264.4 221.9 Assets held for resale 81.2 387.2 Creditors, exc.bank debt and bonds (2,730.4) (2,593.8) 4,541.1 5,011.8 Net cash / (debt) – within 1 year 111.0 (133.4) Net debt
Slide 30: Stores analysis
Stores analysis 29 Systems Morrisons Group Conversions Estate at 30 January 2006 23 355 378 New openings - 1 1 Conversions (6) 6 - Disposals (6) - (6) (12) 7 (5) Estate at 23 July 2006 11 362 373 Total sales area (sq.ft.m) 10.6 Freeholds and long leaseholds 91% Petrol filling stations 275
Slide 31: The stores estate
The stores estate 30 Group Continuing Group stores 354 Systems conversion stores 11 Total like for like stores (Slide 13) 365 New stores 8 Total estate 373
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