Coronavirus Update

Morrison Supermarkets - Final Results

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Morrison Supermarket

PRELIMINARY RESULTS FOR THE 52 WEEKS ENDED 2 FEBRUARY 2020

Working for customers, colleagues, suppliers and shareholders

COVID-19 update - Immediate actions include:

Pay guarantee for colleagues

Expanding online delivery capability to pick from more than 100 stores

Immediate payments for small suppliers, funded by Morrisons strong cash flow

2019/20 financial summary

Group like-for-like (LFL) sales(1)  ex-fuel/ex-VAT down 0.8% (2018/19: up 4.8%)

Total revenue down 1.1% to £17.5bn (2018/19: £17.7bn)

Profit before tax and exceptionals(2) up 3.0% to £408m (2018/19: £396m)

EPS before exceptionals(2) up 2.6% to 13.18p (2018/19: 12.85p)

Statutory profit before tax up 43.6% to £435m (2018/19: £303m)

Free cash flow(3) £238m (2018/19: £281m)

Free cash flow excluding £57m other non-cash movements, £295m (2018/19: £271m)

Net debt £2,458m (2018/19: £2,394m)

Net pension accounting surplus £944m (2018/19: £688m). Triennial pension valuation complete, with funding surplus of £682m (2016/17: £111m)

ROCE increased to 7.0% (2018/19: 6.9%)

Final ordinary dividend of 4.84p, taking the full-year ordinary dividend to 6.77p, and full-year total dividend to 8.77p (2018/19: 12.60p). Decision on further special dividend deferred, maximising flexibility around how we prioritise uses of our strong cash flow

Strategic and operating highlights

EBITDA margin before exceptionals up 22 basis points to 5.9%, as cost control and productivity initiatives offset some of the impact of the tougher sales environment

Significant investments in price, service, and Market Street improving the shopping trip

Sales in the first ten McColl's to Morrisons Daily conversions have been strong and customer feedback has been positive. Further 20 converted since year end

£1.1bn disposal proceeds target exceeded, after c.£120m consideration for Camden

Morrisons store on Amazon Prime Now extended to eight cities across the UK

A further 44 Fresh Look store improvements complete, bringing the total to almost 350

New overseas export wholesale supply partner, CP Lotus in China

Current trading and targets update

Retail contribution to LFL improved to flat for the first four weeks of 2020/21, and 5.0% for the first six weeks, after considerable stocking up and sales pull-forward recently

Over 240 McColl's stores to transition to Morrisons wholesale supply during 2020, and we remain on track for our £1bn annualised wholesale supply sales target

Further £14m incremental profit from wholesale, services, interest and online, taking the total so far to £68m. On track for our £75m-£125m target

Five new stores to open during 2020/21

Note: 2018/19 has been restated for the new lease accounting standard, IFRS 16 Leases

COVID-19 update

COVID-19 is a severe threat to Britain and worldwide. Morrisons primary focus is the health and safety of our colleagues and customers, and we are doing all we can to mitigate that threat. We are liaising and co-operating with all the relevant authorities to plan for different scenarios. Our colleagues in stores, offices, manufacturing and distribution are working to ensure the supply chain operates as smoothly as possible and we keep stock on the shelves. We are putting in place some immediate initiatives to help our key stakeholders, including:

Colleagues. A pay guarantee for sick and affected colleagues, and more flexibility around shifts and annual leave

Customers . Expanding our online Morrisons.com and Morrisons store on Amazon Prime Now store-pick capacity to more than 100 stores over coming weeks

Suppliers. Immediate payments for small suppliers, funded by our strong cash flow

Outlook

Sales have been on an improving trend since the start of 2020, and improved again recently with retail contribution to LFL flat for the first four weeks of 2020/21. This is despite the significant deflationary impact of our continued investment in becoming more competitive for customers. During the last two weeks, there has been considerable stocking up and sales pull-forward as customers plan for the impact of COVID-19 . Overall, for the first six weeks of 2020/21, retail contribution to LFL was 5.0%.

With sales on an improving trend, profit growing for a fourth consecutive year, and free cash flow continuing to be strong, we had anticipated announcing another special dividend today. Instead, during the usual process of reviewing capital allocation, we determined it would be prudent to defer the decision given current unprecedented events around COVID-19. This gives us maximum future flexibility around how we prioritise uses of our strong cash flow, and we will keep our capital allocation options under review.

Morrisons is operating from a very robust financial position. We have a strong balance sheet, with low debt and a strong maturity profile. Cash flows and liquidity are also very strong. As at the end of 2019/20, we had cash and cash-equivalents of £305m and access to undrawn revolving credit facilities (RCFs) of £1.45bn. Our store portfolio is overwhelmingly freehold (87%), and our pensions are in surplus.

For wholesale, over 240 additional McColl's stores will convert to Morrisons wholesale supply during 2020, which we expect will more than offset the impact of any further store closures already announced by McColl's. Our plan for £1bn of wholesale supply sales in due course remains unchanged.

Net incremental profit from wholesale, services, interest and online was £14m during the period, bringing the cumulative total so far to £68m. We remain on track for our £75m - £125m medium-term target. 

Andrew Higginson, Chair, and David Potts, Chief Executive, said:

"We are currently facing unprecedented challenges and uncertainty dealing with COVID-19. Looking after our colleagues and customers is our priority, ensuring that we have a clean, safe place to shop and work.

"At Morrisons, we have a strong, experienced, and above all, determined team of the best food makers and shopkeepers in Britain. We promise to work as hard as we can for customers, suppliers, and all stakeholders to keep our shops operating as smoothly as possible. Thank you to all our colleagues for your incredible efforts so far."