Wm Morrison Supermarkets — H1 2008/09 Earnings Presentation
36 slides from Wm Morrison Supermarkets's earnings presentation, Sep 11, 2008
Slide 1: Interim Results 2008/09
Interim Results 2008/09 26 weeks to 3 August 2008 11 September 2008
Slide 2: Sir Ian Gibson, Chairman
Sir lan Gibson Chairman M MORRISONS
Slide 3: Richard Pennycook, Group Finance Director
Richard Pennycook Group Finance Director
Slide 4: Financial summary
Financial summary •4 H1 £m 08/09 07/08** Turnover 7,105 6,259 13% Operating profit* 303 255 19% Net finance costs - 2 Profit on property related transactions 6 17 PBT 309 274 13% Net debt 458 482 5% Dividend 0.800p 0.675p 19% * excluding property transactions ** pro forma 26 weeks ended 05/08/07
Slide 5: Turnover bridge – half on half
Turnover bridge – half on half •5 H1 £m 76 308 389 73 245 7,105 6,259 6,014 2007/08 Extra 2007/08 New Like for Fuel Fuel 2008/09 25 weeks week 26 weeks stores like price volume
Slide 6: Underlying earnings
Underlying earnings •6 H1 £m 08/09 07/08* Reported PBT 309 274 13% Underlying adjustments: • Profit on property related transactions (6) (17) • Net pension income (IAS 19) (8) (8) Underlying PBT 295 249 18% Normalised tax at 30% (2007/08: 32%) (88) (80) Underlying PAT 207 169 Number of shares (m) 2,
Slide 7: Operating profit
Operating profit •7 H1 08/09 07/08** £m % £m % Turnover 7,105 - 6,259 - Gross profit 436 6.1 382 6.1 Other operating income 19 0.3 17 0.3 Administrative expenses (152) (2.1) (144) (2.3) Operating profit* 303 4.3 255 4.1 * excluding property transactions ** pro forma 26 weeks ended 05/08/07
Slide 8: Gross profit - notes
Gross profit - notes •8 • Margin dilution effect of fuel price inflation c.40 bps • Depreciation charge down – accelerated depreciation last year c.15 bps • Energy costs up £19m – headwind for the full year H1 08/09 07/08** £m % £m % Turnover 7,105 - 6,259 - Gross profit 436 6.1 382 6.1 Other operat
Slide 9: Balance sheet
Balance sheet •9 £m H1 08/09 H1 07/08* Fixed assets and investments 6,777 6,571 Working capital (1,902) (1,832) Pensions deficit - (167) Net debt (458) (482) Net assets 4,417 4,090 Gearing 10% 12% * pro forma as at 05/08/07
Slide 10: Shareholder returns
Shareholder returns •10 • Dividends – up 18.5% – policy to grow by underlying EPS and move cover to sector average over time • Capital – surplus capital of £1bn to be returned to shareholders in 08 and 09 – programme commenced and we will take stock of progress in March 09
Slide 11: Cash flow
Cash flow •11 £m 08/09 07/08* Cash flow from operations 521 492 Proceeds from disposals 17 40 Capital expenditure (238) (141) Sale and issue of shares 3 12 Purchase of own shares (50) - Tax, interest, servicing of finance (64) (29) Dividends (110) (90) Cash flow 79 284 Opening net debt 543 772 Closi
Slide 12: Marc Bolland, Chief Executive
Marc Bolland Chief Executive
Slide 13: Market background
Market background •13 • H1 saw rising commodity prices getting into the food chain Price rises year to July 2008 Rice Soya Oil Beef Wheat 23% 27% 66% 70% 119% Source FT/FAO Recent developments • Oil price reducing • Sterling down
Slide 14: Market background
Market background •14 • Commodity prices easing down due to – growing capacity – improved harvests • TNS grocery inflation 24 wks ended 10 August 6.0% • Rate of inflation likely to ease around the end of 2008 due to – reduced impact from commodities – annualisation effect
Slide 15: Background – consumer confidence
Background – consumer confidence •15 • Consumer confidence has shown significant decline 0 -5 -10 -15 -20 Consumer confidence -25 -30 -35 -40 -45 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Source GfK NOP Consumers’ changing behaviours
Slide 16: Consumer shopping trends
Consumer shopping trends •16 30 Food retail overview 25 12we growth vs LY % 20 15 10 5 Source: TNS 0 30 Dec 27 Jan 24 Feb 23 Mar 20 Apr 18 May 15 Jun 13 Jul 10 Aug 07 08 08 08 08 08 08 08 08 Value OL Premium OL Standard OL Total Branded • Downtrading in-store is now evident • Customers switching ret
Slide 17: Morrisons brand values
Morrisons brand values •17 • Fresh • Value • Service Adjusting the mix for current trends
Slide 18: Value – what we are doing
Value – what we are doing •18 • Price cuts – reinvesting part of inflation into price/promotional offer – 4,000 price cuts in September • Promotions – strengthening our promotional offers with focus on food • Value – ‘Bettabuy’ now Morrisons ‘Value’ as part of the wider corporate re-branding – ‘Valu
Slide 19: Fresh – what we are doing
Fresh – what we are doing •19 • Continuing consumer interest in fresh and healthy food • Our fresh participation growing – fish – salad bar – sandwiches • Capturing ‘dining out at home’ trade through targeted fresh offers and product development • Morrisons fairtrade and organic sales up Morrisons i
Slide 20: Recent sales performance
Recent sales performance •20 Group like for like H1 Q1 Q2 H1 08/09 07/08* 08/09 08/09 Sales – exc. fuel 2.7% 7.0% 8.2% 7.6% Sales – inc. fuel 2.4% 10.8% 14.1% 12.5% Other metrics Sales per customer (£) 22.59 23.21 23.28 23.24 Sales (£ per sq. ft.) 19.81 20.94 21.19 21.06 • Good performance across th
Slide 21: Customer footfall
Customer footfall •21 Like for like 4.7% 4.6% 0.7% H1 07/08* H2 07/08 H1 08/09 • Gaining customers across the whole country • Gaining customers from all major competitors • Gaining younger families • Morrisons net switching gains exceed the gains for the total discount segment * pro forma 26 weeks e
Slide 22: Optimisation plan update
Optimisation plan update •22 • Store refresh programme – completed on target - July 2008 – 370 stores • New space – 1 replacement store opened in H1 – 40,000 sq. ft. of extension space launched in H1 – 8 new stores to open in H2 – on track to deliver 1m sq. ft. over 3 years • Manufacturing – new Spa
Slide 23: Optimisation plan update
Optimisation plan update •23 • Distribution – South East site to come on stream in H1 2010 • CSR – delivering against our promises – carbon reduction 25% – Carbon Trust standard – carrier bags – December - 10m reusable bag giveaway – schools programme • IT system replacement – development team now i
Slide 24: Summary
Summary •24 • Strong LFL sales up 7.6% • Underlying profit up 18.5% • Healthy cash flow • All key 2010 initiatives on track • H2 to be highly competitive • First half profit performance gives us confidence that we will deliver our profit expectations for the year
Slide 25: Supplementary Slides
MORRISONS Supplementary Slides
Slide 26: Financial summary (07/08 – 26 and 25 weeks)
Financial summary (07/08 – 26 and 25 weeks) •26 26 weeks to 25 weeks to H1 £m 08/09 05/08/07 29/07/07 Turnover 7,105 6,259 6,014 Operating profit* 303 255 247 Net finance income - 2 2 Profit on property related transactions 6 17 17 PBT 309 274 266 Net debt 458 482 566 Dividend 0.800p 0.675p 0.675p 8
Slide 27: Operating profit (07/08 – 26 and 25 weeks)
Operating profit (07/08 – 26 and 25 weeks) •27 26 weeks to 25 weeks to H1 08/09 05/08/07 29/07/07 £m % £m % £m % Turnover 7,105 - 6,259 - 6,014 - Gross profit 436 6.1 382 6.1 370 6.1 Other operating income 19 0.3 17 0.3 16 0.3 Administrative expenses (152) (2.1) (144) (2.3) (139) 2.3 Operating profi
Slide 28: Underlying earnings (07/08 – 26 and 25 weeks)
Underlying earnings (07/08 – 26 and 25 weeks) •28 26 weeks 25 weeks £m 2008/09 to 05/08/07 to 29/07/07 PBT reported 309 274 266 Underlying adjustments; • Profit on property related transactions (6) (17) (17) • Net pension income (IAS 19) (8) (8) (8) Underlying PBT 295 249 241 Normalised tax at 30% (
Slide 29: Cash flow (07/08 – 26 and 25 weeks)
Cash flow (07/08 – 26 and 25 weeks) •29 26 weeks 25 weeks £m 08/09 to 05/08/07 to 29/07/07 Operating cash flow (ex depreciation) 391 329 248 Depreciation 130 163 158 Proceeds from disposals 17 40 40 Capital expenditure (238) (141) (139) Sale and issue of shares 3 12 12 Purchase of own shares (50) -
Slide 30: Finance costs
Finance costs •30 £m H1 08/09 H1 07/08 Interest payable (23) (29) Less: capitalised 2 4 (21) (25) Interest receivable 13 19 Other finance costs (4) (4) (12) (10) Net pension income 8 8 Fair value movements on derivatives (4) (4) Net finance income - 2
Slide 31: Balance sheet (07/08 – 26 and 25 weeks)
Balance sheet (07/08 – 26 and 25 weeks) •31 26 weeks to 25 weeks to £m H1 08/09 05/08/07 29/07/07 Fixed assets and investments 6,777 6,571 6,575 Working capital (1,902) (1,832) (1,757) Pensions deficit - (167) (167) Net debt (458) (482) (566) Net assets 4,417 4,090 4,085 Gearing 10% 12% 14%
Slide 32: Our balance sheet principles
Our balance sheet principles •32 • Operational control of our retail stores is fundamental to us • We are a prudent organisation and we structure our finances accordingly • We wish to maintain a strong investment grade balance sheet • Our defined benefit pension schemes' assets and liabilities are e
Slide 33: Stores analysis
Stores analysis •33 Stores Estate at 3 February 2008 375 New openings (net) - Estate at 3 August 2008 375 Total sales area (sq. ft. ‘000) 10,894 Freeholds and long leaseholds 92% Petrol filling stations 286
Slide 34: Schools programme
Schools programme •34 • ‘LET'S GROW’ is our new nationwide campaign to get children excited about growing food, with schools benefiting from free gardening equipment • Enables children to get involved in growing their own fruit and vegetables at school to help understand where food comes from • Supp
Slide 35: Recognition
Recognition •35 • Industry recognition
Slide 36: Morrisons
MORRISONS
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