Interim Results 2008/09 26 weeks to 3 August September 2008

Transcription

1 Interim Results 2008/09 26 weeks to 3 August September 2008

2 Sir Ian Gibson Chairman

3 Richard Pennycook Group Finance Director

4 Financial summary 4 H1 m 08/09 07/08 ** Turnover 7,105 6,259 Operating profit * % 19% Net finance costs - 2 Profit on property related transactions 6 17 PBT Net debt Dividend 0.800p 0.675p 13% 5% 19% * excluding property transactions ** pro forma 26 weeks ended 05/08/07

5 Turnover bridge half on half 5 H1 m ,105 6,014 6, /08 25 weeks Extra week 2007/08 26 weeks New stores Like for like Fuel price Fuel volume 2008/09

6 Underlying earnings 6 H1 m 08/09 07/08 * Reported PBT Underlying adjustments: Profit on property related transactions (6) (17) Net pension income (IAS 19) (8) (8) Underlying PBT Normalised tax at 30% (2007/08: 32%) (88) (80) Underlying PAT Number of shares (m) 2,664 2,661 Underlying EPS (pence) % 18% 22% * pro forma 26 weeks ended 05/08/07

7 Operating profit 7 H1 08/09 07/08 ** m % m % Turnover 7,105-6,259 - Gross profit Other operating income Administrative expenses (152) (2.1) (144) (2.3) Operating profit * * excluding property transactions ** pro forma 26 weeks ended 05/08/07

8 Gross profit - notes 8 Margin dilution effect of fuel price inflation c.40 bps Depreciation charge down accelerated depreciation last year c.15 bps Energy costs up 19m headwind for the full year H1 08/09 07/08 ** m % m % Turnover 7,105-6,259 - Gross profit Other operating income Administrative expenses (152) (2.1) (144) (2.3) Operating profit * * excluding property transactions ** pro forma 26 weeks ended 05/08/07

9 Balance sheet 9 m H1 08/09 H1 07/08 * Fixed assets and investments 6,777 6,571 Working capital (1,902) (1,832) Pensions deficit - (167) Net debt (458) (482) Net assets 4,417 4,090 Gearing 10% 12% * pro forma as at 05/08/07

10 Shareholder returns 10 Dividends up 18.5% policy to grow by underlying EPS and move cover to sector average over time Capital surplus capital of 1bn to be returned to shareholders in 08 and 09 programme commenced and we will take stock of progress in March 09

11 Cash flow 11 m 08/09 07/08 * Cash flow from operations Proceeds from disposals Capital expenditure (238) (141) Sale and issue of shares 3 12 Purchase of own shares (50) - Tax, interest, servicing of finance (64) (29) Dividends (110) (90) Cash flow Opening net debt Closing net debt * pro forma 26 weeks ended 05/08/07

12 Marc Bolland Chief Executive

13 Market background 13 H1 saw rising commodity prices getting into the food chain Price rises year to July 2008 Rice Soya Oil Beef Wheat 23% 27% 66% 70% 119% Source FT/FAO Recent developments Oil price reducing Sterling down

14 Market background 14 Commodity prices easing down due to growing capacity improved harvests TNS grocery inflation 24 wks ended 10 August 6.0% Rate of inflation likely to ease around the end of 2008 due to reduced impact from commodities annualisation effect

15 Background consumer confidence 15 Consumer confidence has shown significant decline Consumer confidence Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Source GfK NOP Consumers changing behaviours

16 Consumer shopping trends Food retail overview 12we growth vs LY % Dec Jan Feb Mar Apr May Jun Jul Aug 08 Source: TNS Value OL Premium OL Standard OL Total Branded Downtrading in-store is now evident Customers switching retailers in search of value Consumers managing their own inflation

17 Morrisons brand values 17 Fresh Value Service Adjusting the mix for current trends

18 Value what we are doing 18 Price cuts reinvesting part of inflation into price/promotional offer 4,000 price cuts in September Promotions strengthening our promotional offers with focus on food Value Bettabuy now Morrisons Value as part of the wider corporate re-branding Value range to be expanded by over 50% in H2 Tertiary brands extending our offer of tertiary brands Morrisons is well positioned for the future

19 Fresh what we are doing 19 Continuing consumer interest in fresh and healthy food Our fresh participation growing fish salad bar sandwiches Capturing dining out at home trade through targeted fresh offers and product development Morrisons fairtrade and organic sales up Morrisons is well positioned for the future

20 Recent sales performance 20 Group like for like H1 Q1 07/08 * 08/09 Q2 08/09 H1 08/09 Sales exc. fuel 2.7% 7.0% 8.2% 7.6% Sales inc. fuel 2.4% 10.8% 14.1% 12.5% Other metrics Sales per customer ( ) Sales ( per sq. ft.) Good performance across the whole country Particularly strong in Scotland and the South * pro forma 26 weeks ended 05/08/07

21 Customer footfall 21 Like for like 4.6% 4.7% 0.7% H1 07/08* H2 07/08 H1 08/09 Gaining customers across the whole country Gaining customers from all major competitors Gaining younger families Morrisons net switching gains exceed the gains for the total discount segment * pro forma 26 weeks ended 05/08/07

22 Optimisation plan update 22 Store refresh programme completed on target - July stores New space 1 replacement store opened in H1 40,000 sq. ft. of extension space launched in H1 8 new stores to open in H2 on track to deliver 1m sq. ft. over 3 years Manufacturing new Spalding abattoir opened in Q2

23 Optimisation plan update 23 Distribution South East site to come on stream in H CSR delivering against our promises carbon reduction 25% Carbon Trust standard carrier bags December - 10m reusable bag giveaway schools programme IT system replacement development team now in place payroll & HR system to be launched in Q4

24 Summary 24 Strong LFL sales up 7.6% Underlying profit up 18.5% Healthy cash flow All key 2010 initiatives on track H2 to be highly competitive First half profit performance gives us confidence that we will deliver our profit expectations for the year

25 Supplementary Slides

26 Financial summary (07/08 26 and 25 weeks) 26 H1 m 08/09 26 weeks to 05/08/07 25 weeks to 29/07/07 Turnover 7,105 6,259 6,014 Operating profit * Net finance income Profit on property related transactions PBT Net debt Dividend 0.800p 0.675p 0.675p 8 * excluding property transactions

27 Operating profit (07/08 26 and 25 weeks) 27 H1 08/09 26 weeks to 05/08/07 25 weeks to 29/07/07 m % m % m % Turnover 7,105-6,259-6,014 - Gross profit Other operating income Administrative expenses (152) (2.1) (144) (2.3) (139) 2.3 Operating profit * * excluding property transactions

28 Underlying earnings (07/08 26 and 25 weeks) 28 m 2008/09 26 weeks to 05/08/07 25 weeks to 29/07/07 PBT reported Underlying adjustments; Profit on property related transactions (6) (17) (17) Net pension income (IAS 19) (8) (8) (8) Underlying PBT Normalised tax at 30% (2007/08: 32%) (88) (80) (77) Underlying PAT Number of shares (m) 2,664 2,661 2,661 Underlying EPS

29 Cash flow (07/08 26 and 25 weeks) 29 m 08/09 26 weeks to 05/08/07 25 weeks to 29/07/07 Operating cash flow (ex depreciation) Depreciation Proceeds from disposals Capital expenditure (238) (141) (139) Sale and issue of shares Purchase of own shares (50) - - Tax, interest, servicing of finance (64) (29) (29) Dividends (110) (90) (90) Cash flow Opening net debt Closing net debt

30 Finance costs 30 m H1 08/09 H1 07/08 Interest payable (23) (29) Less: capitalised 2 4 (21) (25) Interest receivable Other finance costs (4) (4) (12) (10) Net pension income 8 8 Fair value movements on derivatives (4) (4) Net finance income - 2

31 Balance sheet (07/08 26 and 25 weeks) 31 m H1 08/09 26 weeks to 05/08/07 25 weeks to 29/07/07 Fixed assets and investments 6,777 6,571 6,575 Working capital (1,902) (1,832) (1,757) Pensions deficit - (167) (167) Net debt (458) (482) (566) Net assets 4,417 4,090 4,085 Gearing 10% 12% 14%

32 Our balance sheet principles 32 Operational control of our retail stores is fundamental to us We are a prudent organisation and we structure our finances accordingly We wish to maintain a strong investment grade balance sheet Our defined benefit pension schemes' assets and liabilities are effectively part of our balance sheet, and should be managed as such

33 Stores analysis 33 Stores Estate at 3 February New openings (net) - Estate at 3 August Total sales area (sq. ft. 000) 10,894 Freeholds and long leaseholds 92% Petrol filling stations 286

34 Schools programme 34 LET'S GROW is our new nationwide campaign to get children excited about growing food, with schools benefiting from free gardening equipment Enables children to get involved in growing their own fruit and vegetables at school to help understand where food comes from Supports the Growing Schools initiative Customers collect vouchers in-store Schools exchange vouchers for seeds, plants and gardening equipment

35 Recognition 35 Industry recognition

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