Wm Morrison Supermarkets — H1 2012/13 Earnings Presentation
53 slides from Wm Morrison Supermarkets's earnings presentation, Sep 6, 2012
Slide 1: Interim Results
Interim Results 26 weeks to 29 July 2012 6 September 2012
Slide 2: Sir Ian Gibson, Chairman
MORRISONS Sir lan Gibson Chairman
Slide 3: Overview
Overview • Sales growth up 2% • Underlying profits up 1% • Underlying earnings per share up 10% • Interim dividend up 10% • Strong progress on our strategic initiatives
Slide 4: Richard Pennycook, Group Finance Director
Richard Pennycook Group Finance Director
Slide 5: Financial summary
Financial summary £m 2012/13 2011/12 Turnover 8,939 8,737 2% Operating profit 475 458 4% Net finance costs -35 -9 Profit before tax 440 449 -2% Underlying earnings per share 13.09p 11.91p 10% Net debt 1,680 1,055 Dividend 3.49p 3.17p 10%
Slide 6: Turnover bridge
Turnover bridge £m £85m +1.3% 13 8,939 47 5 145 58 -60 8,737 2011/12 New Like-for- Fuel Fuel Conv- Other 2012/13 stores like volumes price enience
Slide 7: Space growth imbalance – short term headwind
Space growth imbalance – short term headwind Grocery market growth vs space growth • Imbalance driven by 0.7% – below trend market growth – above trend space growth Market 0.2% growing faster Space growing faster -0.7% -1.2% -1.4% 2010 2011 2012 2013 2014 Source: Internal data
Slide 8: Changing competitive environment
Changing competitive environment
Slide 9: Underlying earnings
Underlying earnings £m 2012/13 2011/12 Reported profit before tax 440 449 Underlying adjustments: – net pension interest cost/(income) (IAS 19) 2 -7 – multi-channel and convenience development 3 - Underlying profit before tax 445 442 1% Normalised tax at 27.2% (2011/12: 29.3%) -121 -130 Underlying p
Slide 10: Operating profit
Operating profit 2012/13 2011/12 £m % £m % Turnover 8,939 - 8,737 - Gross profit 620 6.9 597 6.8 Other operating income 39 0.4 41 0.5 Administrative expenses -184 -2.0 -180 -2.1 Operating profit 475 5.3 458 5.2
Slide 11: Cash flow
Cash flow £m 2012/13 2011/12 Cash flow from operations 833 677 Proceeds from disposals 2 - Capital expenditure -380 -284 Acquisitions and investments -36 -105 -414 -389 Equity retirement -260 -157 Net purchase of treasury shares -32 - Dividends -186 -219 -478 -376 Tax, interest & servicing of financ
Slide 12: Debt maturity profile
Debt maturity profile • Strong balance sheet funding • Maturity profile of debt extended £m 1,350 557 400 157 150 200 200 400 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 RCF Sterling bond USPP
Slide 13: Impact of equity retirement on reported EPS
Impact of equity retirement on reported EPS * • Further improvement in H2 0.43p 13.09p 0.20p 0.02p 12.66p 0.53p 11.91p EPS Growth in Taxation Other Pre-equity Equity EPS H1 2011/12 earnings movements retirement retirement H1 2012/13 before tax in shares impact * underlying
Slide 14: Return on capital employed (ROCE)
Return on capital employed (ROCE) 12% • Revised space guidance – 2012/13 – 0.5m sq ft – 2013/14 – 0.9m sq ft 6% • Revised capex guidance – 2012/13 – £1.1bn – 2013/14 – £0.9bn 0% 08/09 09/10 10/11 11/12 H1 12/13
Slide 15: Dalton Philips, Chief Executive
Dalton Philips Chief Executive
Slide 16: Market backdrop
Market backdrop Market suffering from global, European and UK factors Global food commodities continue to rise Eurozone fears loom over the UK Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Food commodity index includes cereals, vegetable oils, meat, seafood, sugar, bananas and oranges, source IMF
Slide 17: Consumer behaviour
Consumer behaviour Low confidence has led to enduring shifts Trading from brand to Own Brand • More consumers making tough compromises: – Balancing the budget – Selective purchasing – Orchestrated eating Shopping to a tighter budget Eating together as a family
Slide 18: Sales performance
Sales performance Group like-for-like (ex-VAT) H1 2012/13 H1 2011/12 FY 2011/12 Sales ex-fuel -0.9% 2.2% 1.8% Sales inc-fuel 0.2% 5.5% 5.1% Customers -1.8% 1.0% 1.3% Other metrics: Sales per customer £22.41 £22.33 £22.82 Sales per sq. ft. £20.30 £20.90 £21.05
Slide 19: Responding to customers
Responding to customers Boosting our value offer Innovative ways to Fantastic prices to support Great deals designed for balance the budget selective purchasing orchestrated eating habits
Slide 20: Our convictions
Our convictions Food focused not generalist Experiential over purely functional Value is for ever Skills not just drills General merchandise - clicks not bricks Multi-format and Multi-channel
Slide 21: Three areas of focus
Three areas of focus Driving topline Increasing efficiency Capturing growth
Slide 22: Driving topline
Driving topline All initiatives are on track Strengthening Fresh Enhancing our Completing National our Own Brand Formats service culture to Nationwide Moving further Moving further Optimising our ahead on Fresh ahead on Fresh space All 4 initiatives on track
Slide 23: Strengthening our Own Brand
Strengthening our Own Brand New ranges launched and performing well Great value M savers products • Expanded M savers range • Dialled up the value with over two thirds of products under £1 M savers share of value Own Brand market • Revitalised our core Morrisons range, 13% relaunching over 2,500 pro
Slide 24: Strengthening our Own Brand
Strengthening our Own Brand Additional launches to bolster our brand New and improved core range • Relaunch 5,000 products by 2012/13 • Relaunch 10,000 products by 2013/14 • Launch new Nutmeg clothing range Total Own Brand products relaunched 10,000 5,000 1,000 2011/12 2012/13 2013/14
Slide 25: Fresh Formats
Fresh Formats Making good progress Flower shop module • Trading 45 Fresh Format stores • Liberated over 100k sq. ft. • Tailored modular concept Great value fresh food offer • Grown sales within 4-6% range
Slide 26: Fresh Formats
Fresh Formats Pushing ahead with roll out Butchers preparing cuts in store • Continue to refine concept • Roll out over 100 stores by end of H2 • Liberate 750k sq. ft. Fresh Format stores trading >100 45 12 FY 11/12 H1 12/13 FY12/13 % of 3% 13% ~30% total sales
Slide 27: Increasing efficiency
Increasing efficiency All initiatives are on track Driving store Tackling indirect Revamping our productivity procurement systems All 3 initiatives on track
Slide 28: Driving store productivity
Driving store productivity Self help continuing to deliver benefits Revised till screens • Rolled out a range of initiatives • Continued to deliver award winning service and availability to our customers Store productivity savings £100m • Trial and roll out further initiatives £65m • Deliver £40m th
Slide 29: Tackling indirect procurement
Tackling indirect procurement Multiple initiatives delivering savings New LED lighting in stores • Identified and implemented over 100 Fewer napkin types cost saving ideas Indirect procurement savings £100m • Establish centralised procurement process £40m • Deliver £100m in savings by 2013/14 2011/1
Slide 30: Revamping our systems
Revamping our systems Implementation in full swing New supply chain system • Completed EPOS rollout across full estate Systems improvement savings £100m • Roll out supply chain management system • Upgrade Woodheads meat manufacturing system £32m £4m • Unlock £100m by 2013/14 2010/11 2011/12 2013/14
Slide 31: Capturing growth
Capturing growth All initiatives are on track Vertical Moving to Advancing integration multi-channel convenience All 3 initiatives on track
Slide 32: Vertical integration
Vertical integration Strengthening one of our key points of difference Manufacturing sites • Started integration of Winsford meat site • Invested in expansion of Colne pig abattoir • Opened Grimsby seafood plant Grimsby seafood Colne abattoir • Complete improvements at Winsford and Colne Winsford me
Slide 33: Moving to multi-channel
Moving to multi-channel On track with our online offer New Kiddicare Nottingham store • Developed Kiddicare store rollout plans • Developed proposition for online general merchandise categories • Consolidated learnings from Fresh Direct New wine website • Open first new Kiddicare store in Q3 • Open
Slide 34: Advancing convenience
Advancing convenience Building scalable infrastructure Fresh to go in Birmingham New Street • Opened 5 stores, tailored to local customer needs • Secured west London convenience distribution centre New convenience distribution centre • Up to 20 stores by end of H2 • Deliver infrastructure to enable
Slide 35: In summary
In summary • Steady progress • Continuing to deliver for customers • Good progress against strategic initiatives • Trading for today, building for tomorrow
Slide 36: Appendices
MORRISONS Appendices
Slide 37: Sales performance
Sales performance Group like-for-like (ex-VAT) 2012/13 2011/12 Q1 Q2 H1 H1 Sales ex-fuel -1.0% -0.9% -0.9% 2.2% Sales inc-fuel 0.9% -0.6% 0.2% 5.5% Customers -2.2% -1.4% -1.8% 1.0% Other metrics: Sales per customer £22.48 £22.33 £22.41 £22.33 Sales per sq. ft. £20.26 £20.34 £20.30 £20.90
Slide 38: Finance costs
Finance costs £m 2012/13 2011/12 Interest payable -36 -22 Less: capitalised 5 6 -31 -16 Interest receivable 1 2 Other finance income - 1 Other finance cost -4 -4 -34 -17 Net pensions (expense) / income -2 7 Amortisation of bonds 1 1 Net finance income -35 -9
Slide 39: Depreciation
Depreciation* £m 370 340 319 290 304 282 289 169 171 179 191 153 163 160 151 153 155 164 129 126 130 H1 H2 FY H1 H2 FY H1 H2 FY H1 H2 FY H1 H2 FY H1 H2 FY H1 H2** FY** 06/07 07/08 08/09 09/10 10/11 11/12 12/13 • H2 06/07 & H1 07/08 – accelerated depreciation of branded assets • H2 07/08 – Safeway st
Slide 40: Balance sheet
Balance sheet £m H1 2012/13 H1 2011/12 Fixed assets and investments 8,724 8,232 Working capital -1,785 -1,842 Net pensions (liability)/asset -11 51 Net debt -1,680 -1,055 Net assets 5,248 5,386 Gearing 32% 20%
Slide 41: Balance sheet – principles and objectives
Balance sheet – principles and objectives Principles: • Strong investment grade balance sheet A3 • Control of our real estate c.90% freehold • Pension scheme fully funded on prudent assumptions • Cautious accounting policies Objectives: • Finance the investment programme • Retain flexibility and hea
Slide 42: Debt maturity profile
Debt maturity profile £m 2010/11 2011/12 H1 2012 Revolving credit facilities 1,100 1,200 1,350 Safeway sterling bonds 550 550 550 USPP - 157 157 Sterling bond - 400 800 1,650 2,307 2,857 £m Undrawn RCF -625 -725 -900 1,350 Net cash / other -208 -111 -277 Net debt 817 1,471 1,680 557 400 157 150 200
Slide 43: Enhancing shareholder returns
Enhancing shareholder returns • Equity retirement on track 100% 0% Sept 2011 Mar 2012 Sept 2012 Target Mar 2013
Slide 44: Return on capital employed
Return on capital employed Underlying net profit before interest + rent payable, less tax ROCE = Net assets – pension assets/(liabilities) + net debt + 20x rent payable
Slide 45: Supplementary financials
Supplementary financials 29 July 2012 29 January 2012 Number of shareholders 48,793 46,410 Number of shares in issue (m) 2,443 2,532 Dividend 2012/13 2011/12 2010/11 Interim 3.49p 3.17p* 1.23p Final - 7.53p* 8.37p Total - 10.7p 9.6p Dividend dates: Ex dividend 28 September 2012 Record 3 October 2012
Slide 46: Financial calendar
Financial calendar 2012/13 Date Interim results announcement 6 September 2012 Q3 IMS 8 November 2012 Christmas trading update 7 January 2013 Financial year end 3 February 2013 Preliminary results announcement* 14 March 2013 2013/14 Date Q1 IMS 9 May 2013 AGM 13 June 2013 Half year end 4 August 2013
Slide 47: Sales area and store numbers
Sales area and store numbers Stores Sales area (000’s sq.ft.) Number Estate at 29 January 2012 12,904 475 New openings - standard 27 1 - convenience 7 2 Extensions 2 1 Estate at 29 July 2012 12,940 478 Petrol filling stations 303 Store sizes (000’s sq. ft.) > 40 25 – 40 15 – 25 < 15 (excluding conve
Slide 48: FY 2012/13 guidance summary
Appendix FY 2012/13 guidance summary Sales Net new space expected to contribute around 2.1% to total sales growth (ex-fuel) Finance costs (ex-IAS 19) Expected to be c.£40m in H2 2012/13 Tax rate Effective tax rate expected to be around 25%, with a normalised rate of around 27% Space Full year net sp
Slide 49: Awards
Awards Multiple Spirits Retailer
Slide 50: Meet the team – Board of Directors
Meet the team Board of Directors Sir Ian Gibson 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 and
Slide 51: 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. In March 2011, the Company announced that Nigel had been appointed as Senior Independent Director. He is a member of the Nomination, Remuneration, Audit and C
Slide 52: 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 53: 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 world wide operation at Kingfisher P
Wm Morrison Supermarkets — H1 2012/13 Earnings Presentation on 6ix