Sir Ian Gibson - Chairman. Introduction

Transcription

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2 Sir Ian Gibson - Chairman Introduction

3 Overview Sales growth ahead of the market Underlying profits up 13% Underlying earnings per share up 12% Total dividend up 17% to 9.6p Balance sheet strategy implemented equity return announced Board changes 2

4 Richard Pennycook Results, balance sheet and the market

5 Financial summary m 2010/ /10 Turnover 16,479 15,410 Operating profit* Net finance costs Property related transactions Profit fitbefore tax and exceptionals % Pensions credit - 91 Profit fitbefore tax % Net debt Dividend 9.6p 8.2p 17% * Excluding property transactions and pensions credit 4

6 Turnover bridge m ,479 15, /10 New Like for Fuel Fuel price Other 2010/11 stores like volumes 5

7 Sales performance Group like-for-like, exc VAT 52 weeks 2010/ /10 Sales exc. Fuel 0.9% 6.0% Sales inc. fuel 4.3% 3.4% Customers 0.2% 2.3% Other metrics Sales per customer ( ) Sales ( per sq. ft.)

8 Underlying earnings m 2010/ /10 Reported profit before tax Underlying adjustments: Property related transactions 1-4 Pensions credit Net pension interest (income)/cost (IAS 19) Underlying profit before tax Normalised tax at 30% % Underlying profit after tax Number of shares (m) 2,641 2,623 Underlying EPS (pence) % Dividend 9.6p 8.2p 17% 7

9 Operating profit 2010/ /10 m % m % Turnover 16,479 15,410 Gross profit 1, , Other operating income Administrative expenses* Operating profit * bps * Excluding property transactions and pensions credit 8

10 Operating profit - notes 10/11 09/10 m % m % Turnover 16,479 15,410 Gross profit 1, , Other operating income Administrative expenses Operating profit* Margin calculation effects: Fuel mix (30bps decline in margin) One-off costs of Co-op/Somerfield store acquisition (20bps increase in margin) True margin improvement of 30bps in year * Excluding property transactions and pensions credit 9

11 Cash flow m 10/11 09/10 Cash flow from operations 1,141 1,014 Proceeds from disposals 8 7 Capital expenditure Sale and issue of shares Acquisition of subsidiary Tax, interest, servicing of finance Dividends Cash flow Opening net debt Closing net debt

12 Balance sheet

13 Balance sheet strategy Principles and objectives Financing Dividends and equity return Capacity and credit rating 12

14 Balance sheet review past performance 5 year view Morrisons UK sector average Annual dividend growth 22% 13% Cash generation as % profit 35% 16% Sales growth to capex ratio 147% 118% We will continue to focus closely on capital efficiency and returns 13

15 Balance sheet review principles and objectives Principles: Strong investment grade balance sheet A3 Control of our real estate 87% freehold Pension scheme fully funded on prudent assumptions 38m surplus Cautious accounting policies Objectives: Finance the investment programme Enhance returns for shareholders Retain flexibility and headroom 14

16 Balance sheet review - financing New revolving credit facility 1.2bn amongst 8 banks 5 years to March m drawn Debt maturities m 1400 RCF Sterling Bond 150 Sterling Bond Sterling Bond

17 Balance sheet review shareholder returns Dividend dividend growth in the year 17% interim : final ratio increased to 30% progressive policy to grow in line with underlying eps continues 3 year commitment to a minimum 10% annual growth Equity return 1bn programme over two years starts today 16

18 Balance sheet review capacity and credit rating bn bn Current debt capacity with investment grade Opening net debt position (0.8) Two year capex guidance (2.0) c. 80% funded from organic cash generation 1.6 Equity retirement proposal (1.0) Remaining balance sheet headroom Objective to retain capacity for profitable growth at attractive returns 17

19 The market

20 Consumers under pressure Inflation hitting real incomes Rising unemployment Taxes increasingi Pressure on consumers Real disposable income growth 1.0% -0.7% -2.0% (f) Source: Capital Economics Nov 2010; Capital Economics, Feb

21 Inflation across the value chain Oil Prices World commodity prices +9% continue to rise CAGR Food prices lagged, and lower, but nonetheless increasing Agricultural Prices CAGR +18% Sector has shielded the +5% consumer from input price effects 4.5% Food CPI 2.5% 9.1% 5.5% 34% 3.4% CAGR Source: Capital Economics, Feb

22 Consumer responses favour the supermarket sector Value-conscious Consumers say they re cash strapped 68% Consolidating trips Saving on household expenses Supermarket shoppers buying 14.6% Electricals 16.3% 27% No spare cash Homewares 24.5% 25.9% Families eating in +3% Family evening meals, servings CAGR Source: Nielsen, 2010; Verdict, 2010; KWP,

23 New space Strong space growth % 5.3% 3.6% 24% 2.4% 1.6% Continuing to % 30% 93% 56% Tesco Sainsbury Morrisons Asda 5.8% 6.6% 4.7% 3.5% 39% 41% 73% Supermarket food contribution to total space growth 93% Tesco Sainsbury Morrisons Asda Source: company data 22

24 Underlying trends continue Top up shopping driving growth of convenience Average 9 visits to grocers Consumers buying online Source: KWP per week 20% online grocery growth Source: IGD Source: IGD 23

25 Morrisons well placed We expect the economic backdrop to remain challenging in 2011, with higher taxes, government spending cuts, inflation and rising unemployment all continuing to weigh on consumer confidence and disposable incomes. With our unique position of high quality food at great value prices, supported by the range of exciting initiatives we are implementing to drive our business, Morrisons s is well positioned o to face these challenges and deliver e further profitable growth 24

26 Dalton Philips Business review

27 Recap: Our vision for the business Different, Reinforce our differences Seize the opportunities 26

28 Attracting great talent Richard Hodgson Group Commercial Director Belinda Youngs Private Brand Director Nick Collard Commercial Director, Ambient and Frozen Neil Nugent Morrisons Chef Scott Weavers-Wright CEO Kiddicare Gordon Mowat Strategy Director 27

29 A strong management team Dalton Philips Chief Executive Richard Pennycook Finance Director Mark Gunter Group Retail Director Martyn Jones Group Corporate Services Director Richard Hodgson Commercial Director Mark Harrison Stores Director Norman Pickavance HR Director Martyn Fletcher Manufacturing Director Neal Austin Logistics and Supply Chain Director Terry Hartwell Property Director 28

30 Three areas of focus Driving topline Increasing efficiency Capturing growth 29

31 Driving topline Moving further ahead on Fresh Optimising our space Completing National to Nationwide Strengthening our Brand Enhancing our service culture 30

32 Moving further ahead on Fresh Preparing fresh food in-store Morrisons 69 Extend our lead Launch Fresh Lab Test new concepts Asda Sainsbury Tesco Morrisons Committed to providing fresh food 58 Asda 41 Sainsbury 51 Tesco 41 Source: Hall & Partners Brand Tracker 31

33 Video playing

34 Moving further ahead on Fresh Heard great feedback Encouraged by the results Refine further Unbeaten on fresh Produce +8% Dli Deli +31% Butchery +9% Fresh Flowers +43% Source: Morrisons internal data 4 weeks ending 27/02/11 32

35 Optimising our space Liberate space Free up 5 15% Identify category opportunities Trial in progress 11% liberated 1,600 net SKU reduction 33

36 Video playing

37 Optimising our space Liberate space Free up 5 15% Identify category opportunities Trial in progress 11% liberated 1,600 net SKU reduction 33

38 Optimising our space 5% - 15% Liberated freeing 750k sq.ft. Number of stores 10k 20k 30k 40k 50k Store size (sq.ft.) 34

39 Completing National to Nationwide Source: Kantar Worldpanel 7m households without easy access Target 1.5m sq.ft. over 3 years Total share 12.8% London 64% 6.4% Met our target of 400k sq.ft. 2010/11 South & South East Postcodes within a 10 minute drive time, source: Experian % 35

40 Completing National to Nationwide Space growth targets New Current 600k sq.ft. planned 2011/12 1.1m Exceed 1.5m sq.ft. target Seize opportunity to grow without cannibalisation Deliver a revised target of 2.5m over the next 3 years +0.2m +0.1m 0.6m 05m 0.5m 0.4m 2010/ / / /14 36

41 Strengthening our Own Brand Transform own label to Morrisons Brand Create distinctive products Close the gap Build on 6bn sales per year 50% Own label participation 0 Morrisons Sainsburys 37

42 Strengthening our Own Brand Grown own brand by 5.1% 3,000 new / re-launched products Won 14 awards Formed a new team Conduct thorough review Rollout from Q4 Complete 3 year journey 38

43 Enhancing our service culture Over 130,000 colleagues Huge service opportunity HOT service lab initiated Engage our colleagues 48,000 trained to NVQ Largest apprentice provider 39

44 Enhancing our service culture 95% mystery shopper compliance Drive down labour turnover 2%pts Reduce absence 0.5%pts Labour Turnover Absence 40

45 Three areas of focus Driving topline Increasing efficiency Capturing growth 41

46 Increasing efficiency Driving store productivity Revamping our systems Tackling indirect procurement Increasing network efficiency 42

47 Driving store productivity 1 hour per day equals c 1m Launch productivity lab Idea Incubate Roll out 28 initiatives tested so far 5 initiatives rolling out 43

48 Driving store productivity Reduce facing across Automate stock taking Increase shelf ready packaging Banana hammocks Reduce facing up 44

49 Driving store productivity Complete trials Roll out across estate Deliver 20m in 2011/12 Target 100m by 2013/14 20m 100m 2011/ /14 45

50 Revamping our systems Biggest project of its kind EPOS & cash office Intelligent labour planning Voice picking 4m EBIT in 2010/11 46

51 Revamping our systems Complete EPOS & cash office roll out Integrate new product file Roll out Oracle ERP in Produce Unlocking over 100m by 2013/14 100m+ 4m 2010/ /14 47

52 Tackling indirect procurement Move from 30% in scope to 100% Taskforce in place Capex in scope Saved 28m in 2010/11 48

53 Tackling indirect procurement 100m Targeting 100m EBIT 2013/14 28m 60m Streamline new store build reduce cost by 2-3m per store 30% less time 2010/110/ 2011/ /14 Build cost Build time 49

54 Increasing network efficiency Build capacity Reduce costs Improve efficiency Great progress on Bridgwater 50

55 Increasing network efficiency Open Bridgwater Q4 Serve 70 stores from 800k sq.ft. Complete our network 20m EBIT from 2014/15 51

56 Three areas of focus Driving topline Increasing efficiency Capturing growth 52

57 Capturing growth Food Production Exploring Convenience Moving online 53

58 Food production 2 nd largest fresh food producer Key point of difference 2 acquisitions in 2010/11 Farmers Boy Deeside Simply Fresh 50m EBITDA 2013/14 Offshore: Bos Brothers Holland 54

59 Food production Made great progress on integration Simply Fresh 100% 12% Adding volume Reducing cost Volume Conversion cost Farmers Boy Deeside 100% 20% Invest in new categories Volume Conversion cost 55

60 Exploring convenience Significant opportunity Trial 3 stores Average 9 visits to grocers per week Source: KWP Identified 3 sites Store fascia agreed Fresh focussed proposition p Convenience market 30bn 41bn Source: IGD 56

61 Exploring convenience 57

62 Moving online Growing demand from shoppers Understand the economics Made great progress 2 exciting ii investments 58

63 kiddicare.com Acquired a leader in babycare Award winning multi- channel proposition, and Strong growth trajectory t Unique visitors +42% 2008/ /10 Sales +41% 2008/ /10 59

64 kiddicare.com the benefits Technology Speed Scalability Multi-channel Best in class 60

65 Food online 61

66 Food online 62

67 FreshDirect Great fresh proposition Strong sales growth Online sales +22% Profitable Morrisons team to be embedded d 2008/ /10 63

68 FreshDirect the benefits Fresh credentials Online food expertise Systems & technology Operational processes 64

69 Moving online Drive growth in our investments Learn from our partners Leverage their expertise and technology Launch non-food ood 2012/13 Launch food 2013/14 65

70 Three areas of focus Driving topline 750k Unbeaten 2.5m space HOT Own ambient on fresh target service brand space Increasing efficiency i rollout 2012/13 onwards 2012/13 onwards over next 3 years by 2011/12 a 2-3 year journey Indirect 100m store Evolve Bridgwater spend productivity 100m 20m 100m Capturing growth by 2013/14 by 2013/14 by 2013/14 from 2014/15 Food production 50m 3 M local stores Kiddicare & FreshDirect by 2012/13 this year 66

71 In summary 1.Another good year 2.Clear vision and plan, and a great team 3.Well positioned to face challenges 4.Strong core 5.Opportunity to grow 67

72 Q&A