Morrisons supermarket - financial report - page 5
Keywords: Morrisons,Finanial report,supermarket,performance of morrisons
By maya on 02/05/2008
Level: Master's degree (MA, MBA, MSc, MEng, MRes, MPhil etc)
Page Number: 5 of 14 pages: 1 2 3 4 5 6 7 8 9 10 11 12 13 14
an attractive position in the market environment, with the necessary strategic capabilities required to attain competitive advantage and deliver the results expected by the shareholders, ultimately strengthening its financial position in the coming periods.
3. FINANCIAL PERFORMANCE
3.1. Financial Overview
Historically, Morrison’s financial performance is running at an upwards trend, which shows a good, steady progress, with record sales and profits – the 37th successive improvement in FY2003 since the company went public in 1967. The historical growth came from Morrison’s strategy of combination of new stores, increasing in the average number of customers in each store, and rising in the average spend by each customer. The win of the Safeway bid in FY2004 increases over 85,000 employees of the Group.
3.1.1. Turnover
Thanks to Safeway acquisition in 2004, Morrison’s turnover increases by 145.06% after its 4 years sequential growth. Having adjusted for VAT and other income, group turnover was £12,116m for the year ended 30th January 2005, compared with £4,944m in 2004. Other income includes almost £40m of rent received, up from £22.2m in the previous year.
3.1.2. Profit
From a historical perspective, the continuous uptrend in terms of Morrison’s operation income i.e. 13.55% annual increases, suggests that the organization locate in a satisfied financial position. In FY2004, operating profit before exceptional cost contributes 3.1% of turnover. Exceptional costs are £99.2m, mainly comprising redundancy payments to former Safeway staff of £23.8m and costs of £72.4m associated with the store conversion programme. Operating profit pre-exceptional less net interest payable is £321.1m.
The gross margin fell from 25.5% to 24.4% due to a number of factors. On the plus side are the initial synergies derived from combining the two businesses, but these are more than offset by the Safeway price cuts which Morrison’s introduces immediately following the takeover and the re-alignment of Safeway’s buying terms.
3.1.3. Capital
From FY2000 to FY2003, Morrison’s capital terms i.e. fixed asset, current asset, current liabilities, long-term liabilities and shareholders funds follow a phenomenally stable increase. However, with Safeway takeover in 2004, which enlarges Morrison’s stores national widely, all kinds of capitals significantly increase as shown in Table 1. Meanwhile, the depreciation is computed as amount of £265m, which nearly doubles the depreciation value of £120m in FY 2003.
Table 1
Source: FAME
Considering about Morrison’s capital structure, Figure 3 examines the organization’s capital allocation and the corresponding changes within the last five years. It indicates that the proportion of long-term liabilities apparently increase, because
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