A financial guide to Morrisons Supermarket

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1. Introduction

1.1 Background :

Morrison's is one of the largest food retail shop in UK. In 1899 a stall open in Bradford Market by William Morrison who began work to bring something into existence the company today we know. In 1961 the company open first supermarket in Bradford. Ongoing process of enlargement and plans for further growth Morrison's becomes a public company in 1967. More than 80,000 investors try to purchase shares on over-subscribed 174 times. In centaury year they celebrate by opened the 100th Morrison's store at Nelson. In 2000 and 2004 Morrison's open their store at welsh and Scotland. In 2004 Morrison's completes the takeover of Safeway and cerate UK's fourth largest supermarket group. In March 2006 Morrison's open first Bio Ethanol E85 filling pump and tying in with the first deliveries of the Saab 9-5 Bio Power flex-fuel car. Morrison's have 403 stores around UK. Their business is mainly on food and grocery - the weekly shop. They use their own manufacturing facilities to process most of the fresh food.

1.2 Aim and Objective :

Morrison's is the fourth largest supermarket hierarchy of authority who offering a range of goods including both branded and their own products. Their aim is to provide all their customers, the best value of money wherever they live and uniquely and Morrison's always charged the same prices in every one of their large stores. They offer more freshly prepared food than any other retailer because they got more staff to preparing food than any other supermarket. Morrison's have their own distribution network who can ensure the right products are always available for their customer. Their staffs are skilled and know their trade who give their customers what they want like fresh food service by helpful, friendly, well-trained people. The commitment they have to great selling and service their aim to get the right for their customer every time.

1.3 industry and activity :

Morrison's build their historic strength of value and fresh food quality, able to be put to practical use to a natural, bigger business following the Safeway new possession in 2004. As an expert on food they make them become different clearly from their larger competitors like Tesco, Sainsbury or Asda, whom are seeking extend their non-food authentication. Morrison's also emphasise about their serious understanding on food ; though they closer with their source from other retails or manufacturing or packing system or the employment of more experienced and bakers than their competitors. From their fourth position in the UK, their have some opportunity to move on 2nd or 3rd position. As a food specialist it is their firmly held believe that it is mostly attracted for brand range customer in different type of offer in grocery retailing.

2. Information gathering :

2.1. Website :

Morrison's plc is a big company and they have their own website. As a financial experts I am working in an institutional investment firm. My firm asked me to prepare a report on the financial performance of Morrison's plc. www.morrisons.co.uk is their own website to fined all information about Morrison's. In their website it is easy to fined last 10 years financial statement. Also easy to fined their company history and all necessary document they have. In their financial statement I fined some part like performance review, strategic review, governance, group financial statement, company financial statement, which was easy for me to calculate last two year financial performance and asked to follow specific guideline and framework to my investment firm.

2.2. Library :

The British Library was the only source for collect book and study about profitability, liquidity, financial risk, and investor ratio. I tried to fined detail about all of the ratio and apply on Morrison's 2008 and 2009 financial statement. Corporate finance and investment by Richard Pike & Bill Neale fifth edition was mostly help me to fined easily about the ratio.

Analysis : In 2008 income statement Morrison's turnover was 12969 (m), which was added sale of goods in-stock 10439 (m), fuel 2443 (m), manufacturing sales 27(m) and income from concession and commission 60(m). 2009 in income statement Morrison's turnover was 14528 (m) which was added sale of goods in-stock 11378 (m) , fuel 3069(m), manufacturing sales 83(m)and income from concession and commission 48(m).From total turnover (Sale revenue) in 2009 was 1559(m) more than 2008. Cost of sale (m) was minus from turnover in income statement and got gross profit 818 (m) in 2008 and 913 (m) in 2009, which was 95 (m) more then 2008. It was a good position for Morrison's from previous year. Gross profit margin in % was found from gross profit and sale revenue which was 6.31% in 2008 and 6.28% in 2009. The change in 2008 and 2009 is - 0.36%.

Analysis : Operating profit in 2009 was 671 (m) and 2008 was 612 (m). 2009 gross profit 913 (m) added with other operating income 37(m) and profit arising on property transaction 2 (m). From these administrative expenses 281(m) need to minus for fined 2009 operating profit 671(m). In 2008 gross profit was 818(m) which was added with other operating income 30(m) and profit arising on property transaction 32 (m) and from total need to be minus Administrative Expenses 268(m) for fined operating profit 612(m) in 2008. Operating profit in 2009 was 59(m) more then 2008 which was good for Morrison's end of that year. Operating profit margin in % found from operating profit and sale revenue which was 4.62%in 2009 and 4.72% in 2008. The change from 2008 to 2009 is - 2.13%.

Analysis : In balance sheet 2009 equity was 4520(m) which was added share capital 263(m), premium share 60(m), capital redemption reserve 6(m), merger reserve 2578(m) which was act for another officially in 2004 of safeway limited, retain earning and hedging reserve 1613. Non-current liability 1682 added with other financial liability 1049(m), deferred tax liability 472(m), net pension liability 49(m) and provision 112(m). In Balance sheet 2008 equity was 4378(m) which was added Share capital 269(m), Premium Share 57(m), merger reserve 2578(m), retain earning and hedging reserve 1474(m). Non-current liability was 1405(m) which was added other financial liability 774(m), deferred tax liability 424(m), net pension liability 68(m) and provision 139(m). In 2009 capital employed (equity + Non-current liability) 6202(m) and 2008 was 5783(m). Retrained on capital employed on % for 2009 was 10.82% and 2008 was 10.58%. These 2 year Retrained On Capital Employed 2.23 more then 2008 which was a good sign for Morrison's.

Profitability ratio for 2009 and 2008 is shown by bar chart. In this chart gross profit margin for 2009 was 6.28% 2008 was 6.31%. There have less then last year. On operating profit margin 2009 was 4.62% and 2008 4.72%. In this 2 year 2008 was higher then 2009. Retrained On Capital Employed for 2009 was 10.82% and 2008 10.58%. 2009 was more then last year. In an average of profitability ratio Morrison's was in better position at 2009.

Analysis : Balance sheet 2009 for Morrison's shown current asset 1066(m) which added Stocks 494(m). current assets also add debtors 245(m) which was included Trade debtors 105(m), less ; provision for implement of tread debtors 3(m), add ; lease prepayment - long lease land premiums 1(m), other debtors 78(m), prepayment and accrued income 64(m). cash and cash equivalents 327(m) which also added in current assets. Current liability was 2024(m) in 2009. It was added creditors which have tread creditors 1443(m), other tax and social security payable 28(m), other creditors 160(m), accruals and deferred income 273(m) and interest accrual 11(m). Others financial liabilities 1(m) and current tax liability 108(m) added with current liability. Current assets divided by current liability equal current ratio which was 0.53 for 2009. In 2008 balance sheet current assets was 906(m) which was added stock 442(m), debtors 199(m), financial assets 74(m) and cash and cash equivalent 191(m). current liability was 1853(m) in 2008 which was added creditors 1679(m), other financial liability 77(m) and current tax liability 97(m). For 2008 current ratio was 0.49 which was less then 2009.

Analysis : balance sheet for 2009 stock/inventory was 494(m) which was added material and work-in-progress 13(m) and finished goods 481(m). For fined quick ratio in 2009 current assets 1066(m) - Stock 4994(m) divided by current liability 2024(m) which was equal 0.28(m). In 2008 quick ratio was 0.25(m) which was less then 2009.

On this bar chart for liquidity ratio 2009 is red colour and 2008 is green colour. Current ratio for 2009 was 0.53 and for 2008 was 0.49. In this ratio 2009 was more then 2008 which was good for Morrison's. In quick ratio Morrison's got 0.28 in 2009 and 0.25 in 2008 which was also more then 2008.

Analysis : Inventory or stock was 494(m) for 2009 which was divided from cost of sale 13615(m) and multiply with 365 days that will be fined inventory day 13.24 for 2009. In 2008 inventory was 442(m) divided by cost of sale 12151(m) and multiply with 365 day to fined inventory day 13.28 for 2008. 2008 inventory day was more then 2009.

On top of the bar chart inventory day for 2009 was 13.24 and 2008 was13.28. In working capital ratio inventory day was less then last year which is good for Morrison's.


Analysis : Income statement for 2009 Profit before interest and tax was 671(m) which was found from gross profit913(m), added with other operating income 37(m) and profits arising on property transaction 2(m), Less ; Administrative expenses 281(m). profit before interest and tax divided by interest 60(m) and interest cover for 2009 was 11.18(m). In 2008 income statement profit before interest and tax was 612(m) which divided by interest 60(m) and interest cover was 10.20(m). 2009 interest cover was good then last year.

Analysis : Long term liability was 1682 for 2009 which was added other financial liability 1049(m), deferred tax liability 472(m), net pension liability 49(m), provision 112(m). performance share was 0 which was added with long term liability and divided with capital employed 6202(m) for 2009 and total gearing for 2009 was 0.27(m). In 2008 long term liability was 1405(m) which was added other financial liability 774(m), deferred tax liability 424(m), net pension liability 68(m), provision 139(m). Long term liability and 0 performance share divided with capital employed 5783(m) equal total gearing 0.24(m) for 2008. From 2008 total gearing was more in 2009.

Above bar chart is cover Morison's financial ratio for 2009 and 2008. In financial ratio interest cover for 2009 was 11.18(m) and 2008 was 10.20(m). On the other hand total gearing for 2009 was 0.27(m) and 2008 was 0.24(m). financial ratio for 2009 was more then 2008.

Stock Market Ratio ( Investors Ratio) :

Total number of ordinary share 263 and dividend per share found 0.0221 for 2009. Dividend to ordinary shareholder for 2008 was 4.8 which was added ordinary dividend per share interim paid 0.675 and final - paid 4.125. Dividend to ordinary shareholders divided to total number of ordinary share 269 and dividend per share found 0.0178. Dividend per share increase in 2009.

Above bar chart shown stock market ratio on earning per share and dividend per share. In earning per share for 2009 was 1.52 and 2008 was 1.98. 2008 earning per share was higher then 2009. In Dividend per share 2009 was 0.0221 and 2008 was 0.0178. 2009 dividend per share is higher then 2008.

4. Conclusion:

Like all other business Morrison's faces risks and unpredictable thing that could make an impact on the group's achievement of its based on facts. The unstable and potentially dangerous in the financial markets impacted the economy as a whole and Morrison's satisfied that their result continue in specific condition strong during this time. The profitability ratio have not much change from 2008. Though the credit crunch was mainly effect business at that year. Liquidity ratio is increase in 2009, which is a very good sign for new investor to invest. Working capital ratio was higher then 2008. Morrison's management team is much strong on it. Financial ratio is also higher then last year which will be a good hope for new investor to join in Morrison's. Stock market ratio is lower then 2008. It is a good chance for new investor to buy more share in cheap price. As a financial expert I recommended Morrison's plc for investment and less risk due to credit crunch.