Based on Annual report 2009: Wm Morrison

Supermarkets PLC

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 INTRODUCTION

• 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.

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 PRINCIPAL SUBSIDIARIES

Wholly-owned subsidiaries of Wm Morrison

Supermarkets PLC
Bos Brothers Fruit Farock Insurance
Neerock Limited
and Vegetables BV Company Limited
Fresh meat processor
Produce wholesaler Captive insurer

Farmers Boy Limited Wm Morrison Produce

Manufacturer Rathbone Kear Limited
Limited
and distributor Baker
Produce packer

Safeway Overseas Safeway Overseas Safeway Stores

Limited Limited Limited
Grocery retailer Holding company Grocery retailer
Wholly-owned subsidiaries of Safeway Limited
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 STRENGHTS AND WEAKNESS

• 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.
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 FINANCIAL HIGHLIGHTS
• 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.

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 ANALYSIS: SALES

• 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.

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 ANALYSIS: PROFIT

• Operating Profit increased

by 9.64%, driven by the Profit 2009 2008
strong like-for like sales before £671m £612m
performance and ongoing tax
delivery of the
Optimisation Plan.
•Profit after tax decreased by Profit 2009 2008
17%, due to offset net finance after tax £460m £554m
cost.

•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

Liquidity 2009 2008

Current Ratio 0.53 0.49
Acid Test 0.28 0.25
•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

01/18/10 the estate and supporting the Optimisation Plan.
growing 8
 ANALYSIS: PROFITABILITY
Profitability 2009 2008
Gross Profit 6.28% 6.30%
Margin
Net Profit Margin 4.62% 4.72%
ROCE 14.84% 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
01/18/10 to obtain tax deductions. 9
 ANALYSIS: EFFICIENCY

Efficiency 2009 2008

Stock Turnover 27.6 27.5
Debtor collection 6.1 days 5.6 days
Creditor payment 51.3 days 50.4 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 2009 2008

Capital Gearing 27.12% 24.3%
Earnings per share 17.39p 20.79p

Dividend paid £131m £108m

•Total Dividend paid is higher than prior year.

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

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

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 FEW COMPARISONS- FOR THE YEAR
2009

Morrisons Tesco Sainsbury’s

Turnover £ 14bn £ 54 bn £18bn

Gross Profit 6.28% 8%

Margin

Net Profit 4.62% 6% 3.56%

margin
Debtor 6.1 days 12 days
collection
Creditor 51.3 days 62 days
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payment
 FEW COMPARISONS- FOR THE YEAR
2009
Morrisons PLC

01/18/10 Tesco PLC Sainsbury (J) 13

 RECOMMENDATIONS

• 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.

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 CONCLUSION

• 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.

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 THANK YOU

QUESTIONS???

ACCOUNTING THEORY AND PRACTICE-BUSN 5600

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