Morrisons supermarket - financial report - page 9
Keywords: Morrisons,Finanial report,supermarket,performance of morrisons
By maya on 02/05/2008
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by 10.1% down from £17,141m in FY2003 to £15,409m. Pre-tax profit suffers a red light which reduces from £610m in FY2003 to £15m in FY2004, in which Sainsbury supermarket reports an increased sale by 5.1% reflecting a significant contribution from petrol and new space.
3.3.2 Key ratios comparison
Morrison’s reports turnover as £12,116m after Tesco and Sainsbury in FY2004. Taking Safeway acquisition into account, Morrison’s strengthens its position with its sales which ranks 5th in the supermarket sector with a market share of 13.6%. Morrison’s holds lower asset £7,369m, which is under the industry median level i.e. £14,344. Tesco and Sainsbury account for over 67% of the total asset in the market, because they operate a boarder business sector while Morrison’s is mostly superstore focus. The increase of shareholder funds, £4,017m in FY2004 has enforced Morrison’s to be more capitalized and more competitive against its peers group.
Figure 6 compares Morrison’s current ratio against the market key players and the industry median. Morrison’s is underperformance against the market median level, as well as its competitors. This implies that Morrison’s is weak at its ability to use its current asset to cover its current liabilities.
The supermarket industry normally operates low profit margins in order to stimulate sales and thereby increases the total amount of profit generated. Morrison’s presents an acceptable profit margin, while Sainsbury shows a disappointing profit margin, statue with 0.1, which is affected by the acceleration in the investment in the customer offer.
In terms of ROSF and ROCE, Tesco has an outstanding performance, while Morrison’s sticks the industry median at 7.39 and 5.43. In contrast, Sainsbury’s performance is under the average level. Pursuing a sales-led recovery through investment in the customer offer, in particular through lower prices, 3,000 new employee recruitment and investment in supply chain and store practices to improve availability, have resulted in Sainsbury’s significantly lower profitability in an increasingly competitive food retailing market.
Morrison’s gearing ratio stands at a phenomenal low level, which is prior to its peers group including Tesco and Sainsbury’s. The industry’s high risk is predominantly financed by debt. Such a low gearing ratio eases investors to be more confident to invest on Morrison’s.
4. VALUE DRIVERS
4.1. Customer Focus
Morrison’s key strength is its customer focus through all functions, including positive public relations, value across the weekly shop and so on. Morriosn’s competitive prices and strong promotional offers are attractive to citizens in national wide.
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