Interim Results 12 September 2019 26 weeks to 4 August 2019 1 - - PowerPoint PPT Presentation

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Interim Results 12 September 2019 26 weeks to 4 August 2019 1 - - PowerPoint PPT Presentation

Nov 25, 2023 358 likes •775 views

Interim Results 12 September 2019 26 weeks to 4 August 2019 1 Andrew Higginson Chairman David Potts CEO Fix, Rebuild and Grow PHASE 3: GROW A broader business creating value PHASE 2: REBUILD Six priorities to improve the shopping trip

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Interim Results

12 September 2019

26 weeks to 4 August 2019

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Andrew Higginson Chairman

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David Potts CEO

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Fix, Rebuild and Grow

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

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Six, Five, Four

To be more competitive To serve customers better Find local solutions Develop popular and useful services To simplify and speed up the

  • rganisation

To make the core supermarkets strong again

6 priorities 5 ways of working

Customers first Teamwork Freedom in our framework Listening and responding Selling, controlling costs, growing profits and removing wasted effort

4 stakeholders

Customers Colleagues Suppliers Shareholders

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  • Improving the shopping trip

– Invested in the customer offer – Improved price competitiveness

  • Maintained turnaround momentum

– Meaningful/sustainable growth – Grew LFL, profit, ROCE, cash flow and another special dividend – Modest, sustainable two to three year like-for-like

  • Building a broader, stronger Morrisons

The first half

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Wholesale

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Wholesale

McColl’s Conversion - Manchester MPK Garages - Wetley Rocks, Stoke-on-Trent Rontec - Bilston Sandpiper - Five Oaks, Jersey

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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

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Be more competitive

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Be more competitive

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Be more competitive

SUPREME CHAMPION

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Serve customers better

Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Aug-19

Customer satisfaction

Online coverage

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Find local solutions

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Lake, Isle of Wight

After Before

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Develop popular and useful services

Rapid Charger Doddle Kiosk Hand Car Wash

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Many more years of productivity and cost saving opportunities...

  • Investing in the shopping trip, improving competitiveness
  • Stocking more of what customers want to buy
  • Improving in-store stock holding, waste, markdown, availability
  • Improving the supply chain

...And still a lot to go for

Simplify and speed up

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Make core supermarkets strong again

Oswestry Folkestone Bolsover Canning Town

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  • Listening and responding to customers
  • Building a broader, stronger Morrisons
  • Capital light growth
  • Modest, sustainable two to three year like-for-like
  • Our differences make us distinct...great products, British, local, manufacturing,

'Morrisons makes it', the Morrisons price list, market street, highly skilled colleagues

Sustainable growth

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Trevor Strain CFO

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H1 2019/20 H1 2018/191 Ex-fuel sales growth 0.3% 5.3% Profit before tax and exceptionals2

  • £m

198 188 Return on capital employed3 7.1% 7.0% Adjusted free cash flow4

  • £m

211 181 Net debt : EBITDA3 2.3x 2.3x Ordinary interim dividend

  • pence

1.93p 1.85p Special interim dividend

  • pence

2.00p 2.00p Total interim dividend

  • pence

3.93p 3.85p

  • year-on-year

2.1% 132%

Overview

1 Restated for IFRS 16 - lease accounting 2 Profit before tax, exceptional items and net pension interest 3 Based on a rolling 12 month basis 4 Free cash flow before capital returns, disposal proceeds, operating working capital, onerous payments and non-cash movements

5.3%

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2018/19 2019/20 Like-for-like (ex-VAT) H1 FY Q1 Q2 H1 Group: Sales ex-fuel % 4.9 4.8 2.3 (1.9) 0.2 Sales inc-fuel % 4.2 4.3 2.7 (2.2) 0.2

8,800 8,831 5 14 12

H1 2018/19 Net new space Like-for-like Fuel H1 2019/20

Sales £m

+0.4%

Sales

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£m H1 2019/20 H1 2018/191 Profit/(loss) on disposals and exit of properties

  • (1)

Costs associated with the repayment of borrowings

  • (33)

Net pension interest 10 8 Other exceptional items (6) (26) Total exceptional credit/(charge) 4 (52)

Exceptional items

1 Restated for IFRS 16 – lease accounting
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£m H1 2019/20 H1 2018/191 Reported operating profit 246 219 Reported profit before tax 202 136 £m H1 2019/20 H1 2018/191 Operating profit before exceptionals 252 246 EBITDA margin before exceptionals 5.8% 5.6% Profit before tax and exceptionals2 198 188

Profit

1 Restated for IFRS 16 – lease accounting 2 Profit before tax, exceptional items and net pension interest

5.3% 20bps

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A broader, stronger business

£75m - £125m incremental profit target:

–

Wholesale

–

Popular and useful services

–

Lower interest

–

Morrisons.com Cumulative £61m

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Balance sheet

  • 11
  • 39

186 272 594 688 751

2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 H1 2019/20

Pension Surplus £m

1,020 520 365 419 500 461 c.550

2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20

Cash Capex £m

1

2,817 2,340 1,746 1,194 973 997 975

2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 H1 2019/20

Net Debt (pre-IFRS 16) £m

8.2% 5.6% 5.3% 6.3% 6.7% 6.9% 7.1%

2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 H1 2019/20

ROCE

Post-IFRS 16 Basis Lease adjusted on a 14x multiplier

2 1 2019/20 full year guidance 2 Half year calculated on rolling 12 month basis
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Cash flow

218 198 271 271 H1 181 211 FY 323

2014/15 2015/16 2016/17 2017/18 2018/19 H1 2019/20

Adjusted Free Cash Flow1 £m

1 Before capital returns, disposal proceeds, operating working capital, onerous payments and non-cash movements 2 Restated for IFRS 16 – lease accounting

2 2

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Net new space sales1 0.0% Depreciation2 £530m - £540m Net finance costs before exceptionals2 £105m - £110m Capital expenditure c.£550m Normalised tax rate 23% - 24% Onerous capital payments c.£60m Wholesale supply sales £1bn in due course Net debt To remain low

2019/20 guidance

1 Includes four proposed store closures 2 Adjusted for IFRS 16 – lease accounting
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The plan

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

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Appendices

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£m H1 2019/20 H1 2018/191 Revenue 8,831 8,800 Statutory operating profit 246 219 Net finance costs (44) (84) Share of profit from joint venture

  • 1

Statutory profit before tax 202 136 Profit before tax and exceptionals2 198 188 Earnings per share before exceptionals3 6.38p 6.13p Net debt 2,358 2,355 Total interim dividend4 3.93p 3.85p

Financial summary

1 Restated for IFRS 16 – lease accounting 2 Profit before tax, exceptional items and net pension interest 3 Profit before exceptional items and net pension interest, adjusted for a normalised tax charge divided by weighted average number of shares 4 Includes special interim dividends of 2.00p in 2019/20 and 2.00p in 2018/19

2.1% 5.3% 0.4%

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Earnings per share (EPS) before exceptionals

£m H1 2019/20 H1 2018/191 Profit before tax and exceptionals2 198 188 Normalised tax charge at 23.5% (2018/19: 23.5%) (46) (44) Profit before exceptionals and after tax3 152 144 Weighted average number of shares (m) 2,375 2,350 EPS before exceptionals4 6.38p 6.13p Total interim dividend5 3.93p 3.85p

1 Restated for IFRS 16 – lease accounting 2 Profit before tax, exceptional items and net pension interest 3 Profit before exceptional items and net pension interest, adjusted for a normalised tax charge 4 Profit before exceptional items and net pension interest, adjusted for a normalised tax charge divided by weighted average number of shares 5 Includes special interim dividends of 2.00p in 2019/20 and 2.00p in 2018/19
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Finance costs

£m H1 2019/20 H1 2018/191 Interest payable (22) (27) Interest payable on lease obligations (32) (33) Interest capitalised 1 1 Provisions: unwinding of discount (1) (1) Other finance costs (1) (1) Finance costs before exceptionals (55) (61) Other finance income 1 2 Net finance costs before exceptionals (54) (59) Costs associated with repayment of borrowings

  • (33)

Net pension interest 10 8 Net finance costs (44) (84)

1 Restated for IFRS 16 – lease accounting
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Balance sheet

£m H1 2019/20 H1 2018/191 Fixed assets and investments2 8,543 8,578 Working capital3 (2,067) (2,081) Provision and tax (526) (570) Net pension asset 751 834 Net debt (2,358) (2,355) Net assets 4,343 4,406 Key metrics: Interest cover4 4.7x 4.4x Net debt : EBITDA4 2.3x 2.3x Gearing 54% 53% ROCE4 7.1% 7.0%

1 Restated for IFRS 16 – lease accounting 2 Including goodwill and intangibles, property, plant and equipment, right-of-use assets, investment property, assets held-for-sale, investments in joint venture, and

finance lease receivables

3 Stock, debtors and creditors < 1 year 4 Half year calculated on rolling 12 month basis
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£m H1 2019/20 H1 2018/191 Cash flow from operations 567 541 Capital expenditure (212) (185) Tax and interest (107) (103) Purchase of own shares (3) (2) Proceeds and payments to settle share-based incentive schemes 10 14 Debt acquired on acquisition of business

  • (5)

Costs incurred on repayment of borrowings

  • (30)

Proceeds from disposals 3 4 Dividends (208) (198) Other non-cash movements (14) (5) Movement in net debt 36 31 Opening net debt (2,394) (2,386) Closing net debt (2,358) (2,355) Free cash flow before capital returns, disposal proceeds, operating working capital, onerous payments and non-cash movements 211 181

Cash flow

1 Restated for IFRS 16 – lease accounting
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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

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4 August 2019 3 February 2019 Number of shareholders 37,663 39,090 Number of shares in issue (m) 2,400 2,368 Dividend 2019/20 2018/19 2017/18 Interim ordinary 1.93p 1.85p 1.66p Interim special 2.00p 2.00p

  • Final ordinary

4.75p 4.43p Final special 4.00p 4.00p Total 12.60p 10.09p Dividend dates Ex dividend 26 September 2019 Record 27 September 2019 Payment 1 November 2019

Shareholder information

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Financial calendar

2019/20 Date Christmas and Q3 trading statement 7 January 2020 Financial year end 2 February 2020 Preliminary results announcement 18 March 2020

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