14 March Preliminary Results. 53 weeks to 4 February 2018

Transcription

1 14 March 2018 Preliminary Results 53 weeks to 4 February 2018

2 Andrew Higginson Chairman 2

3 David Potts CEO 3

4 Fix, Rebuild and Grow PHASE 3: GROW A broader business creating value PHASE 2: REBUILD Six priorities to improve the shopping trip Gain consistency and confidence PHASE 1: FIX Stabilise LFL Improve capability Operate at lower cost 4

5 The last 12 months Group like-for-like sales, ex-fuel, ex-vat Supermarkets like-for-like transactions 2.1% 1.8% 2.9% 3.4% 2.6% 2.5% 2.8% 3.1% 4.3% 4.1% 4.6% 4.6% 3.2% 0.1% 0.7% 1.6% 2.1% 2.0% Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015/ / / / / /18 Committed to buying British? +10% Customer satisfaction +12% +7% +3% +2% Jan-18 'Big 3' Competitors Morrisons Jan-15 Jan-16 Jan-17 Jan-18 5

6 The last 12 months - Safeway 6

7 The last 12 months Morrisons Daily Hendon Rontec Morrisons Daily Hendon Rontec Sandpiper, Channel Islands Amazon channels 7

8 The six priorities To be more competitive To serve customers better Find local solutions Develop popular and useful services To simplify and speed up the organisation To make the core supermarkets strong again 8

9 Be more competitive Price Crunch and Way Down Morrisons Makes It Wonky Savers Events and special offers Manufacturing cost, yield, volume & quality Saving customers every penny we can The Morrisons Price List 9

10 Be more competitive Conditioning and storage Loading on to line Washing, grading and sorting Quality control Automated weighing and bagging Robotic picking 10

11 Be more competitive Potato processing plant - Rushden 11

12 Be more competitive New Home & Leisure Nutmeg womenswear The Best 12

13 Serve customers better Customer satisfaction improving More front-line colleagues Store-pick online home delivery Christmas Food to Order sales up 50% Investing in colleague pay and bonus Store-pick online home delivery 13

14 Find local solutions Over 200 new local suppliers and 750 new local products Local sales up 50% in two years More Card data helping target local offer Local solutions driving national benefit Local beer Edinburgh Gin Local produce 14

15 Develop popular and useful services Modernised cafés, 50 new barista bars 30 new Morrisons Daily stores on our forecourts Over 400 Amazon lockers 160 new Doddle pick-up points Around 180 Timpson at Morrisons Barista bar Southend Morrisons Daily St. Ives, Cambridgeshire Opened 8 th March 2018 Doddle kiosk Northampton Timpson at Morrisons Giffnock 15

16 Simplify and speed up Automated ordering In-store administration Distribution Goods not for resale Manufacturing, distribution & Market Street efficiency and yield Digital trials Kiosk express tills Thornbury 16

17 Make core supermarkets strong again 80 more Fresh Looks Completed half the estate Modernising stores Applied Fresh Look learnings Fruit & Veg Florists National benefit Fresh Look Fruit & Veg Market Drayton Fresh Look Flowers Halifax 17

18 Meaningful and sustainable growth Building meaningful and sustainable sales growth Like-for-like New stores Online Wholesale Modest Sustainable St. Ives, Cambridgeshire Abergavenny Birmingham Store-pick New Erith CFC New geographies Amazon McColl s Rontec Sandpiper Safeway 18

19 Meaningful and sustainable growth New store St. Ives, Cambridgeshire Opened 8 th March 2018 Morrisons Daily Utilising car parks McColl s Timpson at Morrisons Parcel pick-up 19

20 Trevor Strain CFO 20

21 Overview 2017/ /17 Ex-fuel sales growth 2.5% * (0.2)% Underlying profit m year-on-year 11.0% 11.6% Return on capital employed 7.7% 7.3% Free cash flow m Lease adjusted net debt: EBITDAR 2.1x 2.5x Ordinary dividend pence Special dividend pence Total dividend pence year-on-year 85.8% 8.6% * On a comparable weeks basis 21

22 Sales 2016/ /18 Like-for-like (ex-vat) H1 H2 FY H1 H2 FY Group: Sales ex-fuel % Sales inc-fuel % Supermarkets * Sales ex-fuel % Number of transactions % Items per basket % (3.9) (5.4) (4.6) (6.2) (3.7) (4.9) Sales m , , /17 Net new space Like-for-like Fuel 53rd week 2017/18 * Excludes Morrisons.com sales through Dordon CFC 22

23 Financial summary m 2017/ /17 Revenue 17,262 16,317 Operating profit Net finance costs (80) (145) Share of profit from joint ventures 2 2 Profit before tax % Underlying profit before tax * % Underlying earnings per share * 12.19p 10.86p Net debt 973 1, m Total dividend 10.09p 5.43p 85.8% * Underlying profit before tax and underlying earnings per share exclude impairment and provisions for onerous contracts, profit/loss on disposal and exit of properties and sale of businesses and investments, the impact of pension volatility, and other items that do not relate to the Group s principal activities on an ongoing basis 23

24 Profit m 2017/ /17 Reported operating profit Reported profit before tax Underlying adjustments: (Profit) / loss on disposals (19) (32) Impairment and provision for onerous contracts (6) (6) Pension scheme set-up credit (13) - Costs associated with the repayment of borrowings Net pension income (9) (8) Other 25 2 Underlying operating profit Underlying profit before tax * % * Underlying profit before tax excludes impairment and provisions for onerous contracts, profit/loss on disposal and exit of properties and sale of businesses and investments, the impact of pension volatility, and other items that do not relate to the Group s principal activities on an ongoing basis 24

25 Incremental 75m - 125m profit A further 24m delivered in the year Two-year total 42m: Lower interest Income from popular and useful services Online losses reducing Wholesale 25

26 Cash flow m 2017/ /17 Cash flow from operations ex-onerous payments 926 1,207 Capital expenditure (500) (419) Tax and interest (136) (129) Onerous payments (42) (94) Purchase of own shares (4) (5) Joint venture dividends 8 8 Proceeds and payments to settle share-based incentive schemes 26 - Dividends (129) (118) Costs incurred on repayment of borrowings (17) (42) Cash flow pre-disposals Proceeds from disposals Cash flow post-disposals Other non-cash movements (19) 21 Opening net debt (1,194) (1,746) Closing net debt (973) (1,194) Free cash flow pre-dividend

27 Cash flow summary m (636) Change in net debt / / / / /18 Net debt: 2,817m 2,340m 1,746m 1,194m 973m 221 m Free cash flow (before capital returns) * m Free cash flow (before capital returns, disposal proceeds, working capital and onerous payments) / / / /18 Cumulative: 785m 1,639m 2,309m 2,659m * Movement in net debt adjusted for dividends paid 2014/ / / /18 27

28 Balance sheet Sustained working capital benefits Lower net debt, reduced to 973m Net debt : EBITDA 1.1x Lease adjusted net debt : EBITDAR 2.1x Strong debt maturity profile ROCE increased to 7.7% from 7.3% Net pension surplus of 594m 28

29 2018/19 guidance Annualised wholesale supply sales by end-2018 > 700m Net new space sales +0.2% Depreciation 440m to 450m Net finance costs Capital expenditure Net debt Underlying tax rate Onerous capital payments c. 65m c. 500m Lower c.24% c. 60m 29

30 Capital allocation framework Invest in maintaining estate and reducing cost Maintain debt ratios to support investment grade rating Invest for profitable growth Pay dividends in line with stated policy Return surplus capital to shareholders 30

31 The Plan Operational levers to enhance returns Capital structure levers to enhance returns Volume growth Margin Asset intensity Optimise assets Capital return Profit growth Dividend yield Optimise total shareholder return on basis of robust balance sheet 31

32 Appendices 32

33 Sales bridge by channel * m ,536 12, /17** Core Online Other 2017/18 * Excluding fuel ** Including Other sales 33

34 Operating profit 2017/ /17 m % m % Revenue 17,262-16,317 - Gross profit Operating profit Impairment and provisions for onerous contracts (6) (0.0) (6) (0.0) Profit on disposals (19) (0.1) (32) (0.2) Pension scheme set-up credit (13) (0.1) - - Other Underlying operating profit * * Underlying operating profit excludes impairment and provisions for onerous contracts, profit/loss on disposal and exit of properties and sale of businesses and investments and other items that do not relate to the Group s principal activities on an ongoing basis 34

35 Underlying earnings per share (EPS) m 2017/ /17 Underlying profit before tax * Underlying tax charge at 23.8% (2016/17: 25.0%) (89) (84) Underlying profit after tax * Weighted average number of shares (m) 2,339 2,327 Underlying EPS * 12.19p 10.86p Total dividend 10.09p 5.43p * Underlying profit and underlying earnings per share exclude impairment and provisions for onerous contracts, profit/loss on disposal and exit of properties and sale of businesses and investments, the impact of pension volatility and other items that do not relate to the Group s principal activities on an ongoing basis 35

36 Finance costs m 2017/ /17 Interest payable (65) (89) Interest capitalised 1 1 Provisions: unwinding of discount (13) (13) Other finance costs (1) (3) Underlying finance costs (78) (104) Other finance income 5 7 Underlying net finance costs (73) (97) Costs associated with repayment of borrowings (16) (56) Net pension income 9 8 Net finance costs (80) (145) 36

37 Balance sheet m 2017/ /17 Fixed assets and investments 1 7,761 7,761 Working capital 2 (2,045) (2,009) Provisions and tax (792) (767) Net pensions asset Net debt (973) (1,194) Net assets 4,545 4,063 Key metrics: Interest cover 3 6.1x 4.6x Net debt : EBITDA 3 1.1x 1.4x Lease adjusted net debt : EBITDAR 3,4 2.1x 2.5x Gearing 21% 29% ROCE 4 7.7% 7.3% 1 Including goodwill and intangibles, property, plant and equipment, investment property, assets held-for-sale, available-for-sale financial assets and investments in joint venture 2 Stock, debtors and creditors < 1 year 3 Excludes profit/loss on disposals, net pension income, impairment and provision for onerous contracts and other items that do not relate to the Group s principal activities on an ongoing basis 4 Lease costs capitalised on a multiplier of 10x 37

38 Return on capital employed (ROCE) * 10.3% 10.4% 10.4% 9.8% 8.2% 7.3% 7.7% 5.6% 5.3% 2009/ / / / / / / / /18 * 2009/10 to 2015/16 are based on a 14x lease multiplier, 2016/17 onwards based on a 10x multiplier 38

39 Funding maturity profile m 1, RCF Sterling bond Euro bond * * Notional value of facilities 39

40 Supplementary financials 4 February January 2017 Number of shareholders 41,444 42,308 Number of shares in issue (m) 2,356 2,336 Dividend 2017/ / /16 Interim ordinary 1.66p 1.58p 1.50p Final ordinary 4.43p 3.85p 3.50p Special 4.00p - - Total 10.09p 5.43p 5.00p Dividend dates Ex dividend 24 May 2018 Record 25 May 2018 Payment 28 June

41 Financial calendar 2018/19 Date Q1 trading statement 10 May 2018 AGM 14 June 2018 Half year end 5 August 2018 Interim results announcement 13 September 2018 Q3 trading statement 6 November 2018 Christmas trading statement 8 January 2019 Financial year end 3 February

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