Morrisons have just declared their preliminary results which appear relatively strong. These strong results of Morrisons are underpinned by the fact that it had the right balance of focus on consumers, shoppers, on ensuring the sustenance of category values and focus on employee welfare. Provision of more premium ranges and a higher focus on quality further strengthened consumer trust and sentiment. Better availability, fewer out of stocks and shorter check-out times supported by better ordering systems and more tills ensured higher shopper satisfaction and increased shopping trips. Key component also supporting better financial results was sustenance of category values as a result of better range and stronger collaboration with suppliers. Focus on better employee welfare including proposals for a higher entry pay point of £8.50 per hour have also supported stronger employee engagement. This also proves that the right consumer and shopper proposition needs to be the whole package as demonstrated by Morrisons in these results and doesn’t only need to focus on price.”
Financial Results and Strategic Summary as declared by Morrisons are as below:
Financial summary
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LFL sales ex-fuel/ex-VAT up 1.7%, positive in all four quarters and 2.5% in Q4
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Turnover up 1.2% to £16.3bn (2015/16: £16.1bn) despite store closures
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UPBT up 11.6% to £337m, at the upper end of the £330m-£340m guided range (2015/16 UPBT before restructuring costs: £302m)
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UPBT up 39.3% (2015/16 UPBT including restructuring costs: £242m)
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Underlying EPS up 39.8% to 10.86p (2015/16: 7.77p)
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Reported PBT up 49.8% to £325m (2015/16: £217m)
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Free cash flow of £670m (2015/16: £854m)
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Operating working capital improvement of £360m
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Gross debt reduced by £717m, net debt reduced by £552m to £1,194m
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Triennial pension valuation complete, with funding surplus of £111m
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Final dividend of 3.85p, full year total dividend up 8.6% to 5.43p (2015/16: 5.00p)
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Strategic and operating highlights
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First year of positive LFL sales and UPBT growth since 2011/12
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Strong cash flow, gross and net debt down substantially
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First year of new dividend policy. Dividend sustainable and covered around two times by underlying EPS
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Fix, Rebuild and Grow strategy starting to build a broader, stronger Morrisons
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New partnerships with Amazon, Ocado, Timpson, Rontec, and the revival of the Safeway brand are all capital light growth opportunities
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Further forty ‘Morrisons Daily’ forecourt convenience stores planned with Rontec
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Financial targets update
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£18m of the £50m-£100m incremental PBT target delivered in the first year
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£1bn cost savings achieved. Further productivity and cost savings to come
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Good progress with medium-term cash flow targets: achieved over £900m of £1bn working capital, and almost £900m of £1.1bn disposals
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Net debt expected to fall to less than £1bn by the end of 2017/18
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This information above is from Morrisons update on 9th March 2017. Asbicon has only provided its analysis in the first paragraph
(Asbicon is a Consumer Goods & Services specialist firm focused on “Growth Solutions for Aspiring Brands”. Asbicon enables this through its 5 verticals of Research, Assisted Advisory®, Capability Development, Data services & Design services providing Retail & Distribution effectiveness to its clients)
