Half-yearly financial report 2007/08

Transcription

1 Half-yearly financial report 2007/08

2 Index 1 Financial summary 2 Interim management report 6 Responsibility statement 7 Accounting policies 8 Condensed consolidated income statement 9 Condensed consolidated balance sheet 10 Condensed consolidated cashflow statement 11 Notes to the condensed financial statements 16 Auditors review report 17 Investor relations and financial calendar We are the UK s fourth largest food retailer with 369 stores and 10.6m square feet of selling space. Our business is mainly food and grocery the weekly shop. Uniquely, we source and process most of the fresh food that we sell through our own manufacturing facilities, giving us close control over provenance and quality. Some 9m customers a week pass through our doors, and 112,000 colleagues across the business work hard each day to deliver great service to them. Our service promise is recognised, by our industry, as the best in the business.

3 Morrisons half-yearly financial report 2007/08 1 Financial summary Group turnover 6.0bn up 2.8% 2006: 5.9bn Like for like sales (ex. fuel) up 2.7% 2006: up 4.6% Operating profit before property transactions and tax 247m up 57% 2006: 158m Adjusted earnings per share* 8.02p up 4.67p 2006: 3.35p *diluted and adjusted to exclude property transactions Net debt 566m down: 315m 2006: 881m Interim dividend 0.675p up 8% 2006: 0.625p Operational summary Continued growth in customer numbers and spend Margins strengthened and costs reduced Further strong cash generation Optimisation plan progress Top team completed New brand and marketing campaigns successfully launched 3,000 new or improved products introduced New distribution facility in the South opened

4 2 Morrisons half-yearly financial report 2007/08 Interim management report Sir Ken Morrison, Chairman, said Our first half results build on the improvement we made last year and I am pleased with the progress we have made in the early stages of the three year Optimisation Plan. I am delighted to welcome Sir Ian Gibson to the Board, and look forward to working closely with him in the coming months to ensure a smooth handover of the Chairmanship of the Group.

5 Morrisons half-yearly financial report 2007/08 3 Marc Bolland, Chief Executive, said Morrisons Optimisation Plan is on track and delivering significantly improved profits through margin gains and management of our cost base. We have made a strong start to our objective of being the food specialist for everyone, with positive customer response to our rebranding and the many developments in store. We will continue to focus on strongly improving operating margins whilst at the same time shaping Morrisons for future growth. Overview This report covers trading for the 25 weeks ended 29 July Turnover was 6.0bn, up 2.8% on the prior period. Our like for like sales performance of 2.7% (2.3% including fuel) reflected continued good growth in the estate of stores converted from Safeway. The programme to deliver continuing growth in these stores and reinvigorate the original Morrisons estate, which is outlined further below, will begin to take effect towards the end of the current financial year. Profit before tax was 266.3m, a significant increase on the 134.2m reported in the comparable period last year. Gains from property transactions, included in this result, were 16.5m compared with 6.0m in the prior period. Operating profit before property transactions was 247.4m compared with 157.8m in the prior period. Operating margins before property gains were particularly strong at 4.1%, reflecting a lower level of marketing costs and price investment than is anticipated over the second half. The net finance credit of 2.4m (2006: charge of 29.6m) reflected the impact of a reducing pensions deficit, a one-off interest benefit on repaid corporation tax and low levels of net debt ahead of the full roll out of the Group s investment programme. The remainder of the year is expected to see a more normal net finance cost. Cash flow remained strong, with 405.6m generated from operations compared with 418.8m in the prior period. Capital expenditure increased to 140.1m, from 103.8m, but has not yet reached the levels expected once the full programme, previously announced, is under way. Net debt of 566.1m was significantly down on the previous year s 881.2m but is expected to rise by the year end as the Group s investment programme starts to accelerate. Full year capital expenditure is expected to be 500m. The period saw little change in the stores estate, with no disposals and one new opening, at Speke (Merseyside) in July. Since the half year, new stores have opened at Johnstone and Erskine and a further five will open in the remainder of the year. Two nontrading properties were sold in the period, with a gain of 16.5m, and a small pipeline of similar disposals will continue in the coming two years. Our discussions around a possible property joint venture covering our sites containing investment properties continue, but in the light of current market conditions we have chosen not to proceed to the marketing stage at this time. We will keep this under review and progress this work further when the time is right. With Group profitability continuing to improve, the Board is pleased to confirm its intention to increase the interim dividend by 8% to pence per share. This will be paid on 12 November 2007 to shareholders on the register on 12 October At our preliminary results announcement in March 2008, we will update the market with regard to our overall balance sheet and financing strategy. The UK grocery retail market The period under review moved from good industry growth early on to a marked slowdown towards the end. This was partly the inevitable consequence of the exceptionally strong comparative period in 2006, but the environment itself became significantly tougher in absolute terms as well. The effect of rising interest rates on consumer spending was exacerbated by very poor summer weather and two bouts of exceptional flooding. Since the period end the industry has also had to contend with the impact of two outbreaks of foot and mouth disease. With this backdrop, the industry displayed aggressive price competition, squeezing out the mild inflation that had been seen in the early part of Whilst the trend of greater emphasis on the health, provenance,

6 4 Morrisons half-yearly financial report 2007/08 Interim management report FOOD SPECIALIST FOR EVERYONE Fresh choice for you We make and prepare a wider range of food in-store than any other supermarket. The Market rediscovered The heart of Morrisons is Market Street, our fresh food market, where experts prepare freshly sourced produce to your requirements. Closer to source than any other retailer We work closely with British farmers and growers, to bring our customers the freshest food. Great Value Competitive prices and hundreds of offers that always save our customers money. quality and freshness of food seen in 2006 continues, in a tighter economy this has inevitably been balanced somewhat by hard hitting price led campaigns. We expect these to continue. Market prices for a number of basic food commodities have reached previously unknown highs. This situation is already affecting many agricultural products and posing major problems for UK meat and poultry producers. Products with a flour or milk content are also affected, and retail prices will inevitably rise. Our efforts to continue to supply our customers with good quality and excellent value will stand us in good stead in a demanding market place. Our close contact with growers and producers through our vertical integration will enable us to support UK agriculture and ensure that we maintain a competitive advantage. Many customers are feeling pressure on their disposable income, but through rigorous control of our cost base, we are committed to remaining competitive. In our planning, we had anticipated that the grocery sector would remain fiercely competitive. We have not, therefore, revised our plans or expectations in the light of the most recent market conditions. The Competition Commission continues its inquiry into the grocery sector, and we have, of course, provided every co-operation to it. We anticipate provisional findings shortly, with the final report expected in February 2008, and local competition still appears to be a main issue. As the industry s number four player, were the Commission to recommend steps to reduce the dominance of certain competitors in some local markets we would be fully supportive of such proposals. Optimisation Plan progress Much of the period was spent working hard on the building blocks of our future success, and preparing to launch new products, store environments and marketing programmes that will support our goal of being the food specialist for everyone. Success, in this period, was measured by further solid profit recovery. New initiatives to continue delivering industry leading service levels at lower cost were successful in the period, with sales productivity in stores increasing by 7% and distribution costs per case decreasing by 11%. Further initiatives are underway; for example trials are taking place of self-scan checkouts in certain stores and a new grocery warehouse was opened late in the period at Swindon, replacing capacity in the Midlands, which will significantly reduce journey times and costs to the South West. Much of the preparatory work for the elements of the programme that will be visible to our customers was successfully undertaken in the period. Customers are now beginning to see the many own brand products that are being re-formulated to provide improved quality, healthier ingredients, whilst our price cutting campaign ensures that they pay no more for these improvements. We have also rolled out new packaging for the 1,700 Market Street lines produced in-store that emphasises their freshness and quality.

7 Morrisons half-yearly financial report 2007/08 5 The new brand logo and colours, and the contemporisation of Market Street launched initially in our new Speke and Johnstone stores have been well received. Early signs are that both existing loyal customers and those considering Morrisons afresh like our advertising campaign. This highlights the amount of fresh food preparation undertaken in store and the care that we take in sourcing our food. Over the coming months, more and more of our 1,800 vehicle fleet, 103,000 store colleagues and 370 store portfolio will be seen in the new brand livery, and we intend to complete this huge undertaking by July Our new store in Erskine, the smallest store opened as a new Morrisons for many years, has successfully shown that we can now target new sites in locations that would not support a large, traditional Morrisons store. This store contains the full Market Street concept, with high levels of counter-service for fresh food. It opens up more opportunities across the country and gives us confidence that our three year space growth target of 1m square feet will be attained. Our first corporate social responsibility report was produced in April this year, and we are pleased to confirm good progress against our goals at this early stage. Energy usage is down in our stores and our transport fleet, by 2%, reflecting the benefit of numerous initiatives. Overall, our carbon footprint, as measured in accordance with the principles agreed by the Carbon Trust, has improved by 7.9% against the base year of We are well on our way to achieving our target of a cumulative 36% reduction by People Key to delivering our goals will be exceptional performances from our people, and good progress was made on a number of fronts in the period. The top team was completed, with the appointment of Norman Pickavance as Group HR Director and Angus MacIver as Group Marketing and Communications Director. New short and long term incentive programmes have been put in place for approximately 600 senior managers across the business, and plans to provide colleagues with staff discount for the first time are on schedule for delivery in November We were delighted, in the period, to retain the Grocer Award for Customer Service and to regain the Grocer Award for Availability. These prestigious industry awards reflect huge credit on colleagues in the business, and the Board is most grateful for their unstinting efforts towards making Morrisons a great success once again. Trading update and outlook In the 7 weeks since the half year, like for like sales growth was 3.0% (2.2% including fuel), an improvement on the first half performance. Concerns that an outbreak of e-coli in the Paisley area of Scotland may have been linked to one of our stores had a short term effect, but close co-operation and prompt action by the authorities and ourselves has ensured that customer confidence was quickly restored. In the second half we continue to target a strengthening of our sales momentum as the benefit of our various initiatives starts to come through. We will increase our marketing activities and price investment, and anticipate that we will also see further commodity cost rises following a difficult growing season for farmers. Despite this, the strong progress made so far this year in delivering margin benefits and further improvements in costs gives us confidence that we will achieve our profit expectations for the year. THE GROCER 33 AWARDS 2006/2007 the best customer service Morrisons crowned CUSTOMER SERVICE CHAMPION for the third year running the best availability Morrisons customers enjoy the BEST STOCKED SHELVES

8 6 Morrisons half-yearly financial report 2007/08 Responsibility statement We confirm that to the best of our knowledge: the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union; the Interim management report includes a fair review of the information required by: (a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first 25 weeks of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining 27 weeks of the year; and The Board The Board of Directors that served during the 25 weeks to 29 July 2007 and their respective responsibilities can be found on page 17 of the Annual report and financial statements David Hutchinson retired from the Board on 30 June Sir Ian Gibson joined the Group on 1 September 2007 as Non-Executive Deputy Chairman. (b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first 25 weeks of the current financial year and that have materially affected the financial position or performance of the entity during that period and any changes in the related party transactions described in the last annual report that could do so. By order of the Board 19 September 2007

9 Morrisons half-yearly financial report 2007/08 7 Accounting policies Basis of preparation This Half-yearly financial report 2007/08 is the condensed consolidated financial information of the Group for the 25 weeks ended 29 July It has been prepared in accordance with the Disclosure and Transparency Rules of the UK s Financial Services Authority and the requirements of IAS 34 Interim Financial Reporting as adopted by the European Union. The Half-yearly financial report 2007/08 was approved by the Board of Directors on 19 September The Half-yearly financial report 2007/08 does not constitute financial statements as defined in section 240 of the Companies Act 1985 and does not include all of the information and disclosures required for full annual financial statements. It should be read in conjunction with the Annual report and financial statements 2007 which are available on request from the company s registered office or to download from The financial information contained in this Half-yearly report in respect of the 53 weeks ended 4 February 2007 has been extracted from the Annual report and financial statements 2007 which have been filed with the Registrar of Companies. The auditors report on these financial statements was unqualified and did not contain a statement under Section 237(2) or (3) of the Companies Act The half-yearly results for the current and comparative periods are unaudited. The auditors have carried out a review of the Half-yearly financial report 2007/08 and their report is set out on page 16. Restatement of the Condensed consolidated income statement The format of the Consolidated income statement in the Annual report and financial statements for the 53 weeks ended 4 February 2007 was changed to that of a functional style that is consistent with the key competitors in the Food and Drug Retail sector. Accordingly, the same format has been applied for the Condensed consolidated income statement for the 25 weeks ended 29 July 2007 and the income statement for its comparative period is restated. The impact of this change is that: Operating profit remains unchanged. raw materials are subsumed into Cost of sales. staff costs, impairment and depreciation are split between Cost of sales and Administrative expenses as appropriate. Restatement of Debtors and Current creditors Following a review of creditors categorisation, Trade creditors of 100.1m have been recategorised as Prepayments within Debtors at the balance sheet date 23 July New IFRS and amendments to IAS The financial statements for the year ended 3 February 2008 are impacted by the following new standards and interpretations. IFRS 7 Financial instruments: Disclosure and IAS 1 Presentation of Financial Statements Capital disclosures will increase the amount of disclosure in the full financial statements. The accounting, income and net assets will remain unchanged. Significant accounting policies The condensed consolidated financial statements in this Half-yearly financial report for the 25 weeks ended 29 July 2007 have been prepared using accounting policies and methods of computation consistent with those set out in Wm Morrison Supermarkets PLC s Annual report and financial statements In preparing the condensed consolidated financial statements, management are required to make accounting assumptions and estimates. These assumptions and estimation methods were consistent with those applied to the consolidated financial statements for the 53 weeks ended 4 February 2007.

10 8 Morrisons half-yearly financial report 2007/08 Condensed consolidated income statement 25 weeks ended 29 July weeks 25 weeks 53 weeks ended ended ended Note m m m Turnover 1 6, , ,461.5 Cost of sales (5,644.2) (5,586.2) (11,825.5) Gross profit Other operating income Administrative expenses (139.1) (115.4) (271.8) Profits arising on property transactions Operating profit Finance costs 2 (24.1) (37.4) (74.9) Finance income Profit before taxation Taxation 3 (41.1) (40.8) (121.4) Profit for the financial period Earnings per share (pence) 4 basic diluted Ordinary dividend per share (pence) 5 Interim proposed paid Final paid Condensed consolidated statement of recognised income and expense 25 weeks ended 29 July weeks 25 weeks 53 weeks ended ended ended m m m Profit for the financial period Actuarial gain arising in the pension scheme (net of taxation) Cash flow hedging movement 2.9 (3.3) (0.6) Deferred tax on share options (0.9) 2.8 Effect of the tax rate change on the deferred tax movements on the pension scheme deficit 3.3 Total recognised income and expense for the financial period

11 Morrisons half-yearly financial report 2007/08 9 Condensed consolidated balance sheet 29 July 2007 Note m m m Assets Non-current assets Property, plant and equipment 6 6, , ,117.4 Lease prepayments Investment property Financial assets , , ,604.9 Current assets Stocks Debtors Cash and cash equivalents , Non-current assets classified as held for sale , Liabilities Current liabilities Creditors (1,569.5) (1,639.4) (1,501.1) Other financial liabilities (478.9) (2.5) (253.8) Current tax liabilities 3 (132.4) (77.2) (100.0) (2,180.8) (1,719.1) (1,854.9) Non-current liabilities Other financial liabilities (763.9) (1,016.9) (768.6) Deferred tax liabilities 3 (450.2) (423.3) (477.6) Pension liabilities 7 (166.8) (401.4) (197.9) Provisions (151.1) (89.0) (144.9) (1,532.0) (1,930.6) (1,589.0) Net assets 4, , ,927.0 Shareholders equity Called up share capital Share premium Merger reserve 2, , ,578.3 Retained earnings and other reserves 1, ,039.5 Total equity 8 4, , ,927.0

12 10 Morrisons half-yearly financial report 2007/08 Condensed consolidated cash flow statement 25 weeks ended 29 July weeks 25 weeks 53 weeks ended ended ended Note m m m Cash flows from operating activities Cash generated from operations Interest paid (14.2) (14.6) (68.0) Taxation paid (33.5) (1.9) (53.6) Net cash inflow from operating activities Cash flows from investing activities Interest received Proceeds from the sale of property, plant and equipment Purchase of property, plant and equipment (140.1) (103.8) (257.2) Net cash outflow from investing activities (81.3) (48.8) (86.4) Cash flows from financing activities Net proceeds from the issue of ordinary shares Finance lease principal repayments (1.1) (1.2) (2.5) Repayment of borrowings (0.6) (250.0) (260.5) Dividends paid to equity shareholders 5 (89.8) (81.7) (98.3) Net cash outflow from financing activities (79.1) (331.1) (356.3) Net increase in cash and cash equivalents Cash and cash equivalents at start of period Cash and cash equivalents at end of period Reconciliation of net cash flow to movement in net debt in the period 25 weeks 25 weeks 53 weeks ended ended ended Note m m m Net increase in cash and cash equivalents Cash outflow from decrease in debt and lease financing Other non cash movements 6.9 (7.2) (27.6) Opening net debt (772.2) (1,147.6) (1,147.6) Closing net debt 10 (566.1) (881.2) (772.2)

13 Morrisons half-yearly financial report 2007/08 11 Notes to the condensed financial statements 25 weeks ended 29 July weeks 25 weeks 53 weeks ended ended ended 1 Turnover m m m Sale of goods in stores 4, , ,086.8 Fuel 1, , ,300.7 Total store based sales 5, , ,387.5 Direct manufacturing sales Income from concessions and commission Total turnover 6, , , weeks 25 weeks 53 weeks ended ended ended 2 Finance costs and income m m m Interest payable on short term loans and bank overdrafts (0.4) (5.6) (5.1) Interest payable on bonds (28.9) (27.6) (60.3) Interest capitalised Total interest payable (25.2) (30.4) (59.3) Fair value movement of derivative instruments (3.2) (7.8) (11.7) Pension liability interest cost (47.4) (44.6) (94.8) Expected return on pension assets Net pension interest income Other finance costs (4.0) (2.7) (11.1) Finance costs (24.1) (37.4) (74.9) Bank interest received Other interest received Amortisation of bonds Finance income Net finance income/(cost) 2.4 (29.6) (54.2) 3 Taxation The current corporation tax charge on taxable profits for the current interim period is made at an underlying rate of 31%, which is the effective current tax rate that is expected to arise on total annual profits before tax at 3 February The effective tax rate for the current interim period is 15%. This low rate reflects the closure of prior-year enquiries that were raised by HM Revenue & Customs, which has resulted in a significant amount of corporation tax now being recoverable, and a large release of deferred tax following the change in rate of UK corporation tax from 30% to 28%.

14 12 Morrisons half-yearly financial report 2007/08 Notes to the condensed financial statements continued 25 weeks ended 29 July Earnings per share Basic earnings per share are calculated by dividing earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period, excluding those held by the Group as treasury shares, which are treated as cancelled. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares. Adjusted earnings per share Earnings per share has been adjusted for profits or losses arising on property transactions after removing the effects of tax. It is the Directors view that adjusted earnings per share is a fairer reflection of the results of the underlying business. 25 weeks ended 25 weeks ended 53 weeks ended 29 July July February 2007 m m m Basic Diluted Basic Diluted Basic Diluted Earnings Earnings attributable to ordinary shareholders Profits arising on property transactions* (11.5) (11.5) (4.2) (4.2) (26.9) (26.9) Adjusted earnings attributable to ordinary shareholders Millions Millions Millions Basic Diluted Basic Diluted Basic Diluted Weighted average number of shares Ordinary shares in issue/diluted ordinary shares** 2, , , , , ,658.7 Pence Pence Pence Basic Diluted Basic Diluted Basic Diluted Adjusted earnings per ordinary share * Profits arising on property transactions as shown in the income statement after adjusting for the effects of tax. ** The weighted average ordinary shares in issue is adjusted for potentially dilutive preference shares and share options.

15 Morrisons half-yearly financial report 2007/ weeks 25 weeks 53 weeks ended ended ended 5 Dividends m m m Equity dividends paid in the period The dividend paid in the period represents the cash payment of the final dividend from the 53 weeks ended 4 February The Directors are proposing an interim dividend of 0.675p per share which will be paid on 12 November 2007 to shareholders who are on the register of members on 12 October The interim dividend will absorb an estimated 18.1m of shareholders funds. This amount will be charged to retained earnings when paid. 6 Property, plant and equipment m m m Net book value At beginning of the period 6, , ,143.9 Additions at cost Interest capitalised Transfer from/(to) assets held for sale and investment property 3.5 (25.8) Disposals (10.7) (0.2) (2.9) Depreciation charge for the period and other asset write offs (155.8) (124.4) (272.3) At end of the period 6, , ,117.4 In addition to the depreciation charge above of 155.8m, 2.5m (23 July 2006: 2.2m; 4 February 2007: 4.6m) is charged on Investment properties. 17m additional depreciation was charged in the current interim period to write down certain branded assets that are due to be replaced. Contracts placed for future capital expenditure not provided in the financial statements amount to 99.6m (23 July 2006: 61.3m; 4 February 2007: 101.5m). 7 Pension liabilities Pensions cost has been calculated on a year-to-date basis by using the actuarially determined pension cost rate from the end of the prior financial year. There were no significant events or fluctuations in this interim period. The April 2007 actuarial valuations for both of the Group s defined benefit pension schemes are currently in progress. Early conclusions show that there are likely to be improvements in actual and forecast longevity indicating that the January 2008 position will include longer longevity assumptions.

16 14 Morrisons half-yearly financial report 2007/08 Notes to the condensed financial statements continued 25 weeks ended 29 July 2007 Cash flow 8 Statement of changes in Share Share Merger hedging Retained capital premium reserve reserve earnings Total shareholders equity m m m m m m Current interim period At 4 February ,578.3 (0.6) 1, ,927.0 Total recognised income and expense Share issues Share option charge Dividends (89.8) (89.8) At 29 July , , ,084.6 Prior interim period At 29 January , ,648.6 Total recognised income and expense (3.3) Share issues Share option charge Dividends (81.7) (81.7) At 23 July ,578.3 (3.3) ,659.9 Prior year At 29 January , ,648.6 Total recognised income and expense (0.6) Share issues Share option charge Dividends (98.3) (98.3) Sale of treasury shares At 4 February ,578.3 (0.6) 1, ,927.0

17 Morrisons half-yearly financial report 2007/ weeks 25 weeks 53 weeks ended ended ended 9 Cash flows from operating activities m m m Profit for the period Adjustments for: Taxation Depreciation and amortisation Profits arising on property transactions (16.5) (6.0) (38.5) Net finance (income)/cost (2.4) Other non-cash changes Excess of contributions over pension service cost (23.1) (11.3) (41.6) (Increase)/decrease in stocks (12.8) Increase in debtors (9.8) (10.2) (3.3) Increase in creditors Increase/(decrease) in provisions 3.2 (38.8) 11.6 Cash generated from operations Analysis of net debt m m m Cash and cash equivalents Bank overdrafts (226.7) Cash and cash equivalents per cash flow Interest and cross-currency swaps Financial assets Bonds (250.0) (250.7) Swaps (0.1) (0.7) Finance lease obligations (2.1) (2.5) (2.4) Current financial liabilities (excluding bank overdrafts) (252.2) (2.5) (253.8) Bonds (744.8) (1,008.5) (748.1) Other unsecured loans (16.7) (4.0) (17.3) Finance lease obligations (2.4) (4.4) (3.2) Non-current financial liabilities (763.9) (1,016.9) (768.6) Net debt (566.1) (881.2) (772.2)

18 16 Morrisons half-yearly financial report 2007/08 Independent review report to Wm Morrison Supermarkets PLC Introduction We have been engaged by the Company to review the condensed set of financial statements in the Halfyearly financial report for the 25 weeks ended 29 July 2007 which comprises the Condensed consolidated income statement, the Condensed consolidated balance sheet, the Condensed consolidated cash flow statement, the Condensed consolidated statement of recognised income and expense and the related explanatory notes. We have read the other information contained in the Half-yearly financial report 2007/08 and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules ( the DTR ) of the UK s Financial Services Authority ( the UK FSA ). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached. Directors responsibilities The Half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Half-yearly financial report in accordance with the DTR of the UK FSA. The annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this Half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. Our responsibility Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the Half-yearly financial report 2007/08 based on our review. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the Half-yearly financial report for the 25 weeks ended 29 July 2007 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA. KPMG Audit Plc Chartered Accountants Leeds 19 September 2007

19 Morrisons half-yearly financial report 2007/08 17 Investor relations and financial calendar Financial events Quarterly management statement 22/11/07 Financial year end 03/02/08 Preliminary results announcement 13/03/08 Annual general meeting and Quarterly management statement 05/06/08 Half year end 27/07/08 Half-yearly announcement and Interim management report 11/09/08 Dividends Interim dividend record date 12/10/07 Interim dividend payment date 12/11/07 Final dividend record date 02/05/08 Final dividend payment date 06/06/08 Morrisons website Shareholders are encouraged to visit our website, to obtain information on company history, stores and services, latest offers, press information and a local store finder. Share price information The Investor Information section of our website provides our current and historical share price data and other share price tools. Share price information can also be found in the financial press and the Cityline service operated by the Financial Times (telephone ). Online reports and accounts Our Annual and Half-yearly Group accounts are available to download from the website along with Corporate Social Responsibility reports and other financial announcements. The information in the Annual report and financial statements, Annual review and summary financial statement and the Half-yearly financial reports are exactly the same as in the printed version. Dividend Reinvestment Plan The Company has a Dividend Reinvestment Plan which allows shareholders to reinvest their cash dividends in the Company s shares bought in the market through a specifically arranged share dealing service. Full details of the plan and its charges, together with mandate forms, are available from the Registrars. Registrars and Shareholding enquiries Administrative enquiries about the holding of Morrisons shares and enquiries in relation to the Dividend Reinvestment Plan should be directed to: Capita Registrars Northern House, Woodsome Park, Fenay Bridge, Huddersfield, HD8 0LA Telephone: Registered office Wm Morrison Supermarkets PLC Hilmore House Gain Lane Bradford BD3 7DL Telephone: Investor Relations Telephone: accinvr@morrisonsplc.co.uk Recycled paper This document has been printed on recycled paper that is manufactured in mills with ISO accreditation from 100% recycled fibre. It is totally chlorine free and is a NAPM certified recycled product. Further information about other ways in which the Group is helping to reduce environmental damage can be found in the Corporate Social Responsibility Report 2007 which can be viewed on our website.

20 Wm Morrison Supermarkets PLC