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Preliminary Results 18 March 2020 52 weeks to 2 February 2020 1 - PowerPoint PPT Presentation

Preliminary Results 18 March 2020 52 weeks to 2 February 2020 1 David Potts CEO Fix, Rebuild, Grow, Sustain , S Sust ustain GROW A broader business creating value REBUILD Six priorities to improve the shopping trip Gain consistency


  1. Preliminary Results 18 March 2020 52 weeks to 2 February 2020 1

  2. David Potts CEO

  3. Fix, Rebuild, Grow, Sustain , S Sust ustain GROW A broader business creating value REBUILD Six priorities to improve the shopping trip Gain consistency and confidence FIX Stable LFL Improve capability Operate at lower cost SUSTAIN Shopping trip improvements Carbon and plastic Local integration 3

  4. Own Brand 4

  5. Colleagues • Executive Committee appointments • New generation coming through • Bench strength 5

  6. Consumer confidence weaker -6 -7 -8 -9 -10 -11 -12 -13 -14 -15 Source: GfK Consumer Confidence monthly year-on-year change 6

  7. Be more competitive – own brand customer favourites 7

  8. Be more competitive 8

  9. Serve customers better 9

  10. Find local solutions 37 local Over 1,000 Over 200 local Local sales up foodmaker local items suppliers over 30% events 10

  11. Make core supermarkets strong again 11

  12. Naturally digital Small team to identify opportunities Work at pace to create value Organise people and processes Evolution not revolution 12

  13. Wholesale 13

  14. Wholesale & online Rontec, Gateway Leeds Online Home Delivery Interior - Rontec, Gateway Leeds Morrisons Daily Conversion 14

  15. 15

  16. Michael Gleeson CFO

  17. Overview 2019/20 2018/19 1 Ex-fuel like-for-like sales growth (0.8)% 4.8% Profit before tax and exceptionals 2 - £m 408 396 3.0% Return on capital employed 7.0% 6.9% Net debt : EBITDA 3 2.4x 2.4x Ordinary dividend - pence 6.77p 6.60p Special dividend - pence 2.00p 6.00p Total dividend - pence 8.77p 12.60p 1 Restated for IFRS 16 - lease accounting 2 Profit before tax, exceptional items and net retirement benefit interest 3 EBITDA before exceptional items 17

  18. Sales 2018/19 2019/20 Like-for-like (ex-VAT) H1 H2 FY H1 H2 FY Group Sales ex-fuel % 4.9 4.6 4.8 0.2 (1.7) (0.8) Sales inc-fuel % 4.2 4.5 4.3 0.2 (2.5) (1.1) Sales £m 0 (105) 17,735 (94) 17,536 2018/19 Net new space Like-for-like Fuel 2019/20 18

  19. Exceptional items 2018/19 1 £m 2019/20 Impairment and provision for onerous contracts 2 (10) Profit/(loss) on disposal and exit of properties 66 - Store restructuring and closure costs (51) - Costs associated with the repayment of borrowings - (33) Retirement benefit exceptional items - (26) Other exceptional items (9) (42) Net retirement benefit interest 19 18 Total exceptional credit/(charge) 27 (93) 1 Restated for IFRS 16 – lease accounting 19

  20. Profit £m 2019/20 2018/19 1 Reported operating profit 521 432 Reported profit before tax 435 303 2018/19 1 £m 2019/20 Operating profit before exceptionals 513 510 EBITDA margin before exceptionals 5.9% 5.7% 22 bps Profit before tax and exceptionals 2 408 396 3.0% 1 Restated for IFRS 16 – lease accounting 2 Profit before tax, exceptional items and net retirement benefit interest 20

  21. Cost saving opportunities – Productivity – Shrink / availability – COGS – Naturally digital 21

  22. A broader, stronger business £75m - £125m incremental profit target: – Lower interest – Morrisons.com Cumulative £68m – Wholesale – Popular and useful services 22

  23. Statement of cash flow 2018/19 1 £m 2019/20 Cash flow from operations 1,017 977 Capital expenditure (511) (461) Tax and interest (190) (195) Proceeds from disposals 34 22 Other 11 (19) Non cash movements on lease liabilities (66) (53) 295 271 Other non cash movements (57) 10 238 281 Dividends paid (302) (289) Movement in net debt (64) (8) Opening net debt (2,394) (2,386) Closing net debt (2,458) (2,394) 1 Restated for IFRS 16 – lease accounting 23

  24. Balance sheet £m Net Pension Surplus £m Cash Capex 944 1,020 688 594 520 511 500 461 419 272 186 365 -11 -39 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 ROCE £m Net Debt (pre-IFRS 16) Lease adjusted on Post-IFRS 16 Basis a 14x multiplier 8.2% 2,817 7.0% 6.9% 6.7% 2,340 6.3% 5.6% 5.3% 1,746 1,194 1,082 997 973 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 24

  25. 2020/21 Financial calendar 2020/21 Date Q1 trading statement 12 May 2020 AGM 11 June 2020 Half year end 2 August 2020 Interim results announcement 10 September 2020 Financial year end 31 January 2021 25

  26. 2020/21 guidance Net new space sales 0.3% Depreciation c.£550m Net finance costs before exceptionals c.£105m Capital expenditure c.£525m Normalised tax rate 23% - 23.5% Cash tax paid To include c.£50m cash impact Onerous capital payments Less than £10m Wholesale supply sales £1bn in due course 26

  27. 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 27

  28. Appendices 28

  29. Financial summary 2018/19 1 £m 2019/20 Revenue 17,536 17,735 Statutory operating profit 521 432 20.6 % Net finance costs (87) (130) Share of profit from joint venture 1 1 Statutory profit before tax 435 303 Profit before tax and exceptionals 2 408 396 3.0% Basic earnings per share before exceptionals 3 13.18p 12.85p Net debt 2,458 2,394 Total dividend 4 8.77p 12.60p 1 Restated for IFRS 16 – lease accounting 2 Profit before tax, exceptional items and net retirement benefit interest 3 Profit before exceptional items and net retirement benefit interest, adjusted for a normalised tax charge divided by weighted average number of shares 4 Includes special dividends of 2.00p in 2019/20 and 6.00p in 2018/19 29

  30. Earnings per share (EPS) before exceptionals 2018/19 1 £m 2019/20 Profit before tax and exceptionals 2 408 396 Normalised tax charge at 23.1% (2018/19: 23.5%) (94) (93) Profit before exceptionals and after tax 3 314 303 Weighted average number of shares (m) 2,383 2,357 Basic EPS before exceptionals 4 13.18p 12.85p Total dividend 5 8.77p 12.60p 1 Restated for IFRS 16 – lease accounting 2 Profit before tax, exceptional items and net retirement benefit interest 3 Profit before exceptional items and net retirement benefit interest, adjusted for a normalised tax charge 4 Profit before exceptional items and net retirement benefit interest, adjusted for a normalised tax charge divided by weighted average number of shares 5 Includes special dividends of 2.00p in 2019/20 and 6.00p in 2018/19 30

  31. Finance costs £m 2019/20 2018/19 1 Interest payable (47) (51) Interest capitalised 2 1 Provisions: unwinding of discount (2) (3) Interest on lease liabilities (63) (66) Other finance costs (1) (1) Finance costs before exceptionals (111) (120) Other finance income 4 4 Finance lease income 1 1 Net finance costs before exceptionals (106) (115) Costs associated with repayment of borrowings - (33) Net retirement benefit interest 19 18 Net finance costs (87) (130) 1 Restated for IFRS 16 – lease accounting 31

  32. Statement of financial position 2018/19 1 £m 2019/20 Property, plant and equipment and investments 2 8,641 8,581 Working capital 3 (2,038) (2,013) Provisions and tax (548) (537) Net retirement benefit surplus 944 688 Net debt (2,458) (2,394) Net assets 4,541 4,325 Key metrics: Interest cover 4.8x 4.4x Net debt : EBITDA 2.4x 2.4x Gearing 54% 55% ROCE 7.0% 6.9% 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 non-current trade and other receivables 3 Inventories, receivables and payables < 1 year 32

  33. Our 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 Naturally digital 33

  34. The plan Operational levers to enhance returns Capital structure levers to enhance returns Volume Asset Margin Optimise assets Capital return growth intensity Dividend Profit growth yield Optimise total shareholder return on basis of robust balance sheet 34

  35. Shareholder information 2 February 2020 3 February 2019 Number of shareholders 36,349 39,090 Number of shares in issue (m) 2,405 2,368 Dividend (p) 2019/20 2018/19 2017/18 Interim ordinary 1.93 1.85 1.66 Interim special 2.00 2.00 - Final ordinary 4.84 4.75 4.43 Final special - 4.00 4.00 Total 8.77 12.60 10.09 Dividend dates Ex dividend 21 May 2020 Record 22 May 2020 Payment 29 June 2020 35

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