Preliminary Results. and Strategic Business Review. 53 weeks to 4 February March 2007

Transcription

1 Preliminary Results 53 weeks to 4 February 2007 and Strategic Business Review 15 March 2007

2 Sir Ken Morrison CBE Chairman Reading

3 Agenda 2 Introduction Sir Ken Morrison Key features 2006/7 Marc Bolland Financial and Operational Review Richard Pennycook Strategic Business Review Marc Bolland Q&A 5

4 Overview 2006/07 3 Continuing steady progress confirmation that the recovery is under way Recommended final dividend of 3.375p. Total dividend of 4.00p (8.1% increase) Recruitment of Deputy Chairman progressing well Competition Commission enquiry continues 5

5 Marc Bolland Chief Executive Enfield

6 Key features 2006/7 5 Market developments 2006/7 results Optimisation Plan 5

7 Richard Pennycook Group Finance Director Hawick

8 Financial summary 7 m Turnover Operating profit* Profits on property transactions Exceptional items and goodwill impaired Net debt Dividend Earnings* 06/07 12, p 8.3p 05/06 12, (374.4) 1, p 1.5p *excluding property transactions and exceptional items

9 Operating profit 8 06/07 05/06 m % m % Gross profit Other operating income Administrative expenses (271.8) (2.2) (236.3) (2.0) Operating profit* *excluding property transactions and exceptional items

10 Turnover bridge 9 m 12, , /06 Disposals 05/06 Disposals 06/07 Like for like New Stores Fuel price Fuel volume 53rd week 2006/07

11 Sales performance 10 Group like for like Sales Ex fuel Customers Other metrics Sales per customer ( ) Sales ( per sq.ft.) 53 weeks to 4 February % 5.2% 4.3% weeks to 29 January % 2.4% 5.3%

12 Profit bridge* 11 m /06 Disposals New stores LFL stores Pay inflation Energy 53rd week Fuel margin Manuf'g Profit pre optimisation *excluding property profits and exceptional items

13 Profit bridge* 12 6m hours target 90bps improvement 30 target m target Optimisation Initiatives Profit pre optimisation Margin Distribution costs Central costs Store wages Other 2006/07 *excluding property profits and exceptional items

14 Cash flow 13 m Cash flow from operations Acquisition costs Proceeds from disposals Capital expenditure Sale and issue of shares Tax, interest, servicing of finance Dividends Cash flow 06/ (257.3) 5.0 (109.1) (98.3) / (15.6) (635.4) 18.3 (18.4) (97.8) 22.3

15 Balance sheet 14 m Fixed assets and investments Working capital Pensions deficit Net debt Net assets Gearing Interest cover Dividend cover 06/07 6,585.8 (1,688.7) (197.9) (772.2) 3, % /06 6,587.0 (1,374.6) (416.2) (1,147.6) 3, % - -

16 Performance update 15 5 weeks to 11 March 07 Group like for like 53 weeks to 4 February weeks to 29 January 06 Sales 2.0% 6.0% 5.1% Ex fuel 3.4% 5.2% 2.4% Customers 1.3% 4.3% 5.3% Other metrics Sales per customer ( ) Sales ( per sq.ft.)

17 Marc Bolland Chief Executive Chippenham

18 Customer perceptions of food retailing 17 Supermarkets Good prices and product development Large, cold and impersonal Stressful shopping experience Limited service More non food focus than food Front of mind Health Quality Fresh food Price Provenance

19 Our strengths 18 Market Street Great value and offers Great availability Great service National store base Large freehold ownership Committed can do organisation A sound business

20 Development areas 19 Inconsistent perception of the brand Underdeveloped range Stores too cluttered Distributions network incomplete Systems outdated Organisation has competency gaps Evolution, not revolution

21 Competitor positioning matrix Food 20 High Price Low Price.we need to sharpen our positioning Non Food

22 Positioning Morrisons will be Food Specialist food specialist for everyone We really understand food We know where it comes from We are close to farmers We pack it and make it in our factories We make it in our stores We employ craft skills in our stores 21 For everyone Great food which is also great value

23 Revitalising the brand 22 Brand proposition Fresh for you everyday Brand values Fresh, service and value Brand identity development Evolution of logo New communication strategy National and local

24 In store 23 Market Street Contemporary look and feel Improved visibility of in-store prepared products and craft skills Packaging for all in-store prepared products Other packaging development The Best Morrisons brand Bettabuy

25 In store 24 Range development Food range Non food Health and Beauty, Home and Leisure Segmentation Store size Demographic Region Competition Ethnicity Store efficiency initiatives Investments 180m over 3 years Margin / efficiency benefits of 150m annually by 2010

26 Store space 25 New sales space - 1m square feet over 3 years New stores Extensions

27 Manufacturing 26 Benchmarking confirms value shorter lead times Ensures close control of freshness, quality and provenance Further investments to add capacity Investment 70m over 3 years Savings 15m annually by 2010

28 Distribution 27 Best grocery lead times in the industry partly complete New network planning 2007 New facility in South 2009 New South East depot New South West depot Investment 90m over 3 years Savings 25m annually by 2010

29 Illustrative distribution network Current depot locations Depot locations

30 Distribution 29 Best grocery lead times in the industry partly complete New network planning 2007 New facility in South 2009 New South East depot New South West depot Investment 90m over 3 years Savings 25m annually by 2010

31 Environment 30 KPI Carbon footprint Group energy use Energy from renewable sources Water use Waste to landfill Own brand packaging All timber (inc. 100% of wood derived marketing materials) 2010 Target Reduce by 36% Reduce by 8% per sq metre 10% Reduce by 15% Reduce by 50% Reduce by 15% Recycled or certified as coming from sustainable sources

32 Other work to do 31 Organisation New senior appointments: HR Director, Marketing and Communications Director, Home and Leisure Trading Director Climate survey improvement steps Incentive plans Staff discount Systems Core systems adequate for now, but not for the future Moving from bespoke to packaged software In-house operation Investment 110m over 3 years

33 Investment requirements 32 A three year additional programme m In store Manufacturing Distribution IT Total investment 2007/ In addition to normal annual capex, including new space, of 400m

34 Financial goals optimisation plan 33 Impact on Operating Profit vs. 05/06 In store efficiency benefits Manufacturing Distribution Centre Gross margin Optimisation 1 06/07 07/08 m m Optimisation 2 07/10 m Total incremental benefit total = 460

35 Capital structure 34 Continue to favour the flexibility of freehold ownership Exploring a property partnership for the investment properties Committed to an investment grade balance sheet Short term requirements for enhanced capex, bond amortisation and pension funds

36 Summary 35 Strongly improve operating margins.whilst shaping for growth

37 36

38 Supplementary slides

39 Profit and loss account 38 m Turnover Gross profit Other operating income Administrative expenses Profits on property related transactions Operating profit Net interest expense Share of joint venture income after tax Profit before tax and exceptionals Exceptional items Profit/(loss) before tax 06/07 12, (271.8) (54.2) /06 12, (236.3) (52.2) (374.4) (312.9)

40 Exceptional costs 39 m Redundancy Store conversions (inc payroll) Divestments Loss on disposal of fixed assets Impairment of depots to be closed Safeway integration and conversion Goodwill impairment and brand write off Total 06/ /

41 Movement in net debt 40 m Cash flow Non-cash movements Total movement Opening net (debt)/cash Closing net debt 06/ (27.5) (1,147.6) (772.2) 05/ (9.0) 13.3 (1,160.9) (1,147.6)

42 Stores analysis 41 Systems Conversions Morrisons Group Estate at 30 January New openings Conversions (6) 6 - Disposals (11) (3) (14) (17) 7 (10) Estate at 4 February Total sales area (sq.ft.m) 10.5 Freeholds and long leaseholds 92% Petrol filling stations 278

43 Profit and loss 42 m Turnover Gross profit Other operating income Administrative expenses Profits on property related transactions Operating profit Net interest expense Share of joint venture income after tax Profit before tax and exceptionals Exceptional items Profit/(loss) before tax 06/07 (53 weeks) 12, (271.8) (54.2) /07 (52 weeks) 12, (266.3) (53.2)