Preliminary results for the year ended 2 February 2014

Preliminary results for the year ended 2 February 2014 and strategic update.


Financial summary

· Turnover down 2% to £17.7bn (2012/13: £18.1bn)
· Like-for-like sales (ex-fuel, ex-VAT) down 2.8% (2012/13: down 2.1%)(1)
· Underlying profit before tax down 13% to £785m (2012/13: £901m)(2)
· Non-recurring exceptional costs of £903m
· Loss before tax £176m (2012/13: profit of £879m)
· Earnings per share (10.2)p (2012/13: 26.7p)
· Underlying earnings per share down 8% to 25.2p (2012/13: 27.3p)
· Final dividend of 9.2p. Total dividend for the year up 10% to 13.0p (2012/13: 11.8p) in line with guidance
· Net debt £2,817m (2012/13: £2,181m) after capital investment of £1,086m (2012/13: £1,016m)

Operating highlights

· Morrisons.com launched in January 2014 – performing ahead of plan
· Over 100 M local convenience stores now trading; second convenience distribution centre now operational
· IT systems programme development progressing well – providing platform for significant future cost savings
· 18 new supermarkets opened(3)
· Fresh Formats – tailored fresh food proposition now in over 200 stores
· 6,500 Own Brand products successfully launched in year; own label conversion programme complete
· Vertical integration – good progress in expanding manufacturing capability
· £300m, three year cost saving targets delivered

Strategic update

Comprehensive strategic review completed
* Enhanced focus on core supermarket business
- major investment in proposition; £300m in 2014/15
- £1bn of self help over three years identified – implementation underway
* Acceleration of new channel development – online and convenience
* Planned exit from non-core activities, including Kiddicare and Fresh Direct
* Property review completed
* New space pipeline reassessed
* Total non-recurring costs of £0.9bn

Resulting in:

* Stronger value leadership and a customer winning proposition
* Rebased profit outlook
* Strong balance sheet
- strong investment grade credit rating
- predominantly freehold property estate maintained
*Substantial cash flow generation
- £1bn over three years from operating improvements, working capital and reduced capex
- £1bn of property disposals over three years
*Generation of meaningful shareholder value over the medium term
- commitment to 5% minimum increase in dividend for 2014/15 and a progressive and sustainable dividend thereafter
- return of surplus capital as appropriate

Commenting on the results, Sir Ian Gibson, Chairman, said:

“In trading terms this has been a disappointing year for Morrisons, with consumer confidence and market conditions continuing to be challenging. It has however been a period of significant strategic progress as we lay the foundations for a stronger future. Our financial position remains strong.

The review of our business undertaken by the Board, underpins our confidence in Morrisons strategic direction and the long-term prospects of the business. This is reflected in an increased dividend for the year ended 2 February 2014, in line with our previous commitment and consistent with our progressive dividend policy.

In respect of the year ending 1 February 2015 the Board anticipates that the total annual dividend will be not less than 13.65p. Thereafter we expect dividends to grow more slowly than earnings, as dividend cover rebuilds towards our target level of around two times.”

Dalton Philips, Chief Executive, said:

“The strategy we are announcing today is a bold and comprehensive response to the fundamental structural changes that are taking place in grocery retail.

We are significantly reducing our cost base and will invest £1bn into our proposition over the next three years, to improve our value even further and to defend and strengthen our competitive position. Customers will see this in our stores as well as in our fast growing online and convenience offers. At the same time we will exit non-core activities, significantly reduce our capital expenditure and deliver improved operating cashflow and return on capital employed.

Together with the strategic value of our vertically integrated supply chain, these measures will provide a firm foundation from which to provide outstanding value to our customers and to generate meaningful shareholder returns over the medium term.

I’m confident that Morrisons will emerge from this period of necessary change as a more focused, more distinctive value leader and well positioned to compete sustainably in the new grocery landscape.”

Outlook

We will continue to implement a wide range of measures to address the sales performance of the business and progress our strategic initiatives. Our expectations are that the challenging consumer and market environment we saw in 2013 will persist through the coming year. Our profit expectations reflect this, and our determination to be a stronger value leader for our customers. At this early stage in the year, we anticipate that underlying profits(4) in 2014/15 will be in the range of £325m - £375m, after charging £65m of new business development costs and £70m of one-off, non-recurring costs.



Enquiries

Wm Morrison Supermarkets PLC

Trevor Strain 0845 611 5000

Investor Relations

Niall Addison 07764 624701

Media

Wm Morrison Supermarkets PLC:

Richard Taylor 0845 611 6912

Julian Bailey 07969 061092

Citigate Dewe Rogerson:

Simon Rigby 020 7638 9571

Lindsay Noton 020 7638 9571


Unless otherwise stated all results for 2013/14 relate to the 52 weeks ended 2 February 2014 and 2012/13 results are for the 53 weeks ended 3 February 2013.

Notes

1 52 weeks to 2 February 2013 compared to 52 weeks to 3 February 2013

2 Underlying profit before taxation, property transactions, multi-channel development costs, non-recurring exceptional write downs and IAS19 pension interest

3 Including one replacement store: excluding convenience stores

4 Based on revised definition of underlying earnings, which excludes property transactions and IAS19 pension interest only

Today's share price

152.50p
25 Oct 2014 9:54am 15 min delay
(London Exchange)

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