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Based on Annual report 2009: Wm Morrison Supermarkets PLC

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• UK’s fourth largest food retailer by sales with an annual turnover in excess of £14bn.

• 382 stores, visited by 10 million customers each week and served by 124,000 employees.

• Main Competitors: Supermarkets.

Tesco. Sainsbury’s. Asda.

INTRODUCTION

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PRINCIPAL SUBSIDIARIES

Wholly-owned subsidiaries of Wm Morrison Supermarkets PLC

Bos Brothers Fruit and Vegetables BV

Produce wholesaler

Wm Morrison Produce Limited

Produce packer

Farmers Boy LimitedManufacturer and distributor

Neerock LimitedFresh meat processor

Rathbone Kear LimitedBaker

Farock Insurance Company LimitedCaptive insurer

Safeway Overseas Limited

Holding company

Safeway Overseas Limited

Grocery retailer

Safeway Stores Limited

Grocery retailer

Wholly-owned subsidiaries of Safeway Limited

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• Strengths:• Produce , pack and supply direct to stores.• Own supply chain, own manufacturing sites and Market

Street. • “We have three distinct brand values: Fresh, Value and

Service. Having these three brand values gives us the flexibility to react to market changes and consumer trends”

• Weaknesses:• Does not have an online grocery offer .• Small non-food offers.

STRENGHTS AND WEAKNESS

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• Group turnover grew 12%

• Profit before tax increased by 9.64%.

• Total dividend for the year has increased 21%, making dividend cover 2.9 times.

• Cash generation was strong .

• Capital expenditure has increased, as additional focus on growing the estate and supporting the Optimisation Plan.

FINANCIAL HIGHLIGHTS

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• Group turnover grew 12%, due to industry leading like-for-like store sales growth and strong fuel sales.

• Like-for-like sales, the measure of growth in existing stores, increased by 7.9% with customer numbers up 4.2% and average basket spend up 3.6%.

• Group Sales performing well.

ANALYSIS: SALES

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• Operating Profit increased by 9.64%, driven by the strong like-for like sales performance and ongoing delivery of the Optimisation Plan.

Profit Profit before before tax tax

2009 2009

£671m£671m 20082008

£612m£612m

ANALYSIS: PROFIT

•Profit after tax decreased by 17%, due to offset net finance cost.

Profit Profit after tax after tax

2009 2009

£460m£460m 20082008

£554m£554m

•Though the operating profit has increased the Net Profit has reduced, which requires taking care of finance income and finance cost.

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ANALYSIS: LIQUIDITY

LiquidityLiquidity 20092009 20082008

Current RatioCurrent Ratio 0.530.53 0.490.49

Acid TestAcid Test 0.280.28 0.250.25•Current ratio has improved compared to previous year. But the company still needs to work on in the long run.

•Cash generation was strong – with cash from operations of £964m, a year-on-year increase of £208m, or 28%.

•Cash from financing activities are mainly affected by new borrowings £250m and Shares repurchased for cancellation (£146m)

•Capital expenditure has increased, reflecting additional focus on growing the estate and supporting the Optimisation Plan.

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ANALYSIS: PROFITABILITY

ProfitabilityProfitability 20092009 20082008

Gross Profit Margin Gross Profit Margin 6.28%6.28% 6.30% 6.30%

Net Profit Margin Net Profit Margin 4.62%4.62% 4.72%4.72%

ROCEROCE 14.84%14.84% 13.9%13.9%

•The gross profit margin of 6.3% was bit lower than previous year, due to the high fuel sales, which have a very low margin.•The net profit has also fallen down, mainly because of taxation and net finance income/costs.•The effective rate of tax for the year was 30% which is 2% above the prevailing corporate tax rate of 28%. •The higher rate is mainly a result of non-qualifying depreciation and expenses where the Group is unable to obtain tax deductions.•Return on capital employed has increased which is good for shareholders.

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ANALYSIS: EFFICIENCY

EfficiencyEfficiency 20092009 20082008

Stock Turnover Stock Turnover 27.627.6 27.527.5

Debtor collectionDebtor collection 6.1 days6.1 days 5.6 days5.6 days

Creditor paymentCreditor payment 51.3 days51.3 days 50.4 days50.4 days

•Stock Turnover has been on the same level almost.

•Debtor collection is very effective.

•The group is managing creditors payment well.

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ANALYSIS: INVESTMENT

Investment Investment 20092009 20082008

Capital Gearing Capital Gearing 27.12%27.12% 24.3% 24.3%

Earnings per share Earnings per share 17.39p17.39p 20.79p20.79p

Dividend paidDividend paid £131m£131m £108m£108m

•Total Dividend paid is higher than prior year.Total Dividend paid is higher than prior year.

•Retained earnings are less compared to last year as more dividend is paid.Retained earnings are less compared to last year as more dividend is paid.

•Earnings per share has fallen down compared to last year.Earnings per share has fallen down compared to last year.

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FEW COMPARISONS- FOR THE YEAR 2009

MorrisonsMorrisons TescoTesco Sainsbury’sSainsbury’s

Turnover Turnover ££ 14bn 14bn ££ 54 bn 54 bn £18bn£18bn

Gross Profit Gross Profit MarginMargin

6.28%6.28% 8%8%

Net Profit Net Profit marginmargin

4.62%4.62% 6%6% 3.56%3.56%

Debtor Debtor collectioncollection

6.1 days6.1 days 12 days12 days

Creditor Creditor paymentpayment

51.3 days51.3 days 62 days62 days

GearingGearing 27.12%27.12% 46%46%

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FEW COMPARISONS- FOR THE YEAR 2009

Morrisons PLC

Tesco PLC Sainsbury (J)

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• They should start online shopping and delivery at the earliest.

• They should offer more non food items to match up with their competitors.

• They should look into managing finance cost /income and the tax efficiently.

RECOMMENDATIONS

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• Healthy cash flow and strong balance sheet.

• Company is managing trade debtors and creditors efficiently.

• Former Co-op/Somerfield stores successfully integrated. Current year profit margin impacted by Co-operative/Somerfield store, a one off costs.

• The merger reserve represents the reserve in the Company’s balance sheet arising on the acquisition in 2004 of Safeway Limited. In the opinion of the Directors, this reserve is not distributable and accordingly it will be carried forward as a capital reserve.

• Charitable donations made during the year amounted £1.18m.£1.18m.

CONCLUSION

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QUESTIONS???QUESTIONS???

THANK YOU

ACCOUNTING THEORY AND PRACTICE-BUSN 5600