TIDMMRW
RNS Number : 5448G
Morrison(Wm.)Supermarkets PLC
18 March 2020
News Release
Release date: 18 March 2020
PRELIMINARY RESULTS FOR THE 52 WEEKSED 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 GBP17.5bn (2018/19: GBP17.7bn)
-- Profit before tax and exceptionals(2) up 3.0% to GBP408m (2018/19:
GBP396m)
-- EPS before exceptionals(2) up 2.6% to 13.18p (2018/19: 12.85p)
-- Statutory profit before tax up 43.6% to GBP435m (2018/19: GBP303m)
-- Free cash flow(3) GBP238m (2018/19: GBP281m)
-- Free cash flow excluding GBP57m other non-cash movements, GBP295m
(2018/19: GBP271m)
-- Net debt GBP2,458m (2018/19: GBP2,394m)
-- Net pension accounting surplus GBP944m (2018/19: GBP688m). Triennial
pension valuation complete, with funding surplus of GBP682m (2016/17:
GBP111m)
-- 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
-- GBP1.1bn disposal proceeds target exceeded, after c.GBP120m 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 GBP1bn annualised
wholesale supply sales target
-- Further GBP14m incremental profit from wholesale, services, interest
and online, taking the total so far to GBP68m. On track for our
GBP75m-GBP125m 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 GBP305m and
access to undrawn revolving credit facilities (RCFs) of GBP1.45bn.
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 GBP1bn of wholesale supply
sales in due course remains unchanged.
Net incremental profit from wholesale, services, interest and
online was GBP14m during the period, bringing the cumulative total
so far to GBP68m. We remain on track for our GBP75m - GBP125m
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."
Figure 1 - 2019/20 profit reconciliation
FY H1 19/20 H2 19/20 FY 19/20 Y-on-Y
GBPm 18/19
-------
Statutory operating profit 432 246 275 521 20.6%
Statutory profit before tax 303 202 233 435 43.6%
------- --------- --------- --------- -------
Exceptional items:
* Net impairment and provision for onerous contracts 10 - (2) (2)
* (Profit)/loss on disposal and exit of properties - - (66) (66)
33 - - -
* Costs associated with repayment of borrowings(*)
26 - - -
* Retirement benefit exceptional items
* Store restructuring and closure costs - - 51 51
* Net retirement benefit interest income(*) (18) (10) (9) (19)
* Other exceptional items 42 6 3 9
Operating profit before exceptionals 510 252 261 513 0.6%
Profit before tax and exceptionals 396 198 210 408 3.0%
------- --------- --------- --------- -------
* Adjusted in profit before tax and exceptionals, but not
operating profit before exceptionals
Figure 2 - LFL sales performance (ex-VAT)
2018/19 2019/20
FY Q1 Q2 H1 Q3 Q4 H2 FY
-------- ----- ------- ------- ------- ------- ------- -------
Retail contribution
to LFL 1.5% 0.2% (2.4)% (1.1)% (1.1)% (2.2)% (1.7)% (1.4)%
-------- ----- ------- ------- ------- ------- ------- -------
Wholesale contribution
to LFL 3.3% 2.1% 0.5% 1.3% (0.1)% 0.1% 0.0% 0.6%
-------- ----- ------- ------- ------- ------- ------- -------
Group LFL ex-fuel 4.8% 2.3% (1.9)% 0.2% (1.2)% (2.1)% (1.7)% (0.8)%
-------- ----- ------- ------- ------- ------- ------- -------
Group LFL inc-fuel 4.3% 2.7% (2.2)% 0.2% (2.5)% (2.4)% (2.5)% (1.1)%
-------- ----- ------- ------- ------- ------- ------- -------
Reported in accordance with IFRS 15
This announcement includes inside information.
Alternative Performance Measures
Guidelines on Alternative Performance Measures issued by the
European Securities and Markets Authority came into effect for all
communications released on or after 3 July 2016 for issuers of
securities on a regulated market. The key alternative performance
measures identified by the Group and contained in this announcement
are detailed below.
The Directors measure the performance of the Group based on the
following financial measures which are not recognised under
EU-adopted IFRS, and consider these to be important measures in
evaluating the Group's results and financial position.
Definitions and additional requirements:
A full glossary of terms and alternative measures is provided in
this announcement. The Directors believe the key metrics are the
ones outlined below because they are used for internal reporting of
the performance of the Group, they provide key information on the
underlying trends and performance, and they are key measures for
director and management remuneration.
(1) Like-for-like (LFL) sales: percentage change in year-on-year
sales (excluding VAT), removing the impact of new store openings
and closures in the current or previous financial year. A reconciliation
between LFL sales and total revenue is provided in the glossary
at the end of this announcement
(2) Profit before tax and exceptionals: defined as profit before
tax, exceptional items and net retirement benefit interest. Earnings
per share (EPS) before exceptionals: defined as profit before
exceptional items and net retirement benefit interest, adjusted
for a normalised tax charge.
A reconciliation between statutory profit before tax, statutory
operating profit, profit before tax and exceptionals, and operating
profit before exceptionals is shown in Figure 1. See Note 8 for
a reconciliation between basic EPS and EPS before exceptionals.
(3) Free cash flow: defined as movement in net debt before the payment
of dividends. Free cash flow for the period is GBP238m (2018/19:
GBP281m), being the movement in net debt of GBP(64)m (2018/19:
GBP(8)m) adjusted for dividends paid of GBP302m (2018/19: GBP289m).
Enquiries:
Wm Morrison Supermarkets PLC
Michael Gleeson - Group Financial Officer 0845 611 5000
Andrew Kasoulis - Investor Relations Director 0778 534 3515
Media Relations
Wm Morrison Supermarkets
PLC: Julian Bailey 0796 906 1092
Citigate Dewe Rogerson: Simon Rigby 020 3926 8522
Nick Hayns 020 3926 8503
Management will host a conference call this morning at
09:00.
Dial-in details:
Participant dial in: +44 (0) 20 3003 2666
Participant pin: Morrisons
A replay of the call will be available for 7 days:
7 day replay dial in: +44 (0) 20 8196 1998
7 day replay pin: 0213901#
An audio webcast is available at
https://www.morrisons-corporate.com/investor-centre/
-S -
Certain statements in this financial report are forward looking.
Where the financial report includes forward-looking statements,
these are made by the Directors in good faith based on the
information available to them at the time of their approval of this
report. Such statements are based on current expectations and are
subject to a number of risks and uncertainties, including both
economic and business risk factors that could cause actual events
or results to differ materially from any expected future events or
results referred to in these forward-looking statements. Unless
otherwise required by applicable law, regulation or accounting
standards, the Group undertakes no obligation to update any
forward-looking statements whether as a result of new information,
future events or otherwise.
Financial overview
2019/20 was another year of growth in profit, free cash flow
(before other non-cash movements), and the ordinary dividend,
despite a tougher sales environment.
Total revenue for 2019/20 was GBP17.5bn, down 1.1% year on year,
with net new space contribution flat. Total revenue excluding fuel
was down 0.8%.
Fuel sales were down 2.5% to GBP3.7bn, impacted by a highly
promotional market.
Group LFL ex-fuel was down 0.8%, comprising retail down 1.4% and
wholesale up 0.6%. In Q4, Group LFL ex-fuel was down 2.1%, with
retail down 2.2% and wholesale up 0.1%.
For retail, as expected, the very favourable summer weather and
events such as the football World Cup in 2018 meant tougher
year-on-year sales comparatives in 2019. There were also added
challenges, such as prolonged and unprecedented political debate
over Brexit, and a mid-December general election during our peak
trading period. This led to heightened levels of customer
uncertainty throughout the year which weighed on shoppers'
confidence. In addition the food retail market, always very
competitive, became collectively more so during the year, with much
higher levels of promotional activity.
Sales have improved so far during 2020. For the first six weeks
of 2020/21, the retail contribution to LFL was 5.0%.
For wholesale, we were pleased to grow sales with all of our
customers during the year, although LFL was impacted during the
second half by the lower sales at McColl's as reported by McColl's
for the period.
We managed our costs well, which offset some of the operating
leverage impact of the lower sales. Operating profit before
exceptionals was up 0.6% to GBP513m (2018/19: GBP510m), with margin
up 5 basis points year on year to 2.9%. EBITDA margin before
exceptionals was up 22 basis points, to 5.9%.
The net incremental profit before tax from wholesale, services,
interest and online was GBP14m, bringing the cumulative profit so
far to GBP68m. We remain confident of achieving our medium-term
target of GBP75 - GBP125m incremental profit from these four
areas.
Net finance costs before exceptionals were GBP106m (2018/19:
GBP115m).
Profit before tax and exceptionals was up 3.0%, to GBP408m
(2018/19: GBP396m).
Exceptional items recognised outside profit before tax and
exceptionals were a net credit of GBP27m as listed in Figure 1
(2018/19: net debit of GBP93m).
Of these, property disposal profits were GBP66m, the majority of
which relates to our Camden store. Following a tender process, we
sold Camden and our eight-acre surrounding site to Berkeley Group
for a total consideration of c.GBP120m. Berkeley will pay GBP85m in
stages over the years of the project, and will build a new
Morrisons supermarket and convenience store on the site with a
value of GBP34m. The consideration will be received over a number
of years, and the property disposal proceeds have been discounted
resulting in a profit of GBP64m.
Restructuring costs were GBP51m, of which GBP46m relates to the
announcement in January that we are investing in creating more
frontline jobs and reducing some team manager roles within stores.
Other exceptional items were GBP9m, of which GBP3m were in the
second half. Net retirement benefit interest income was GBP19m
(2018/19: GBP18m).
Statutory profit before tax after exceptionals was up 43.6% to
GBP435m (2018/19: GBP303m, after GBP93m of net exceptional
costs).
Basic EPS before exceptionals was up 2.6% to 13.18p (2018/19:
12.85p).
Cash capital expenditure was GBP511m (2018/19: GBP461m).
Free cash flow was GBP238m (2018/19: GBP281m). Free cash flow
excluding GBP57m other non-cash movements (ex-leases) was up
GBP24m, to GBP295m (2018/19: GBP271m).
Group net debt was GBP2,458m, compared to GBP2,394m at the end
of 2018/19. Of the GBP64m increase, GBP57m was other non-cash
movements. On a pre-IFRS 16 basis, net debt was GBP1,082m (2018/19:
GBP997m).
The proposed final ordinary dividend is 4.84p per share, taking
the full-year ordinary dividend up 2.6% to 6.77p (2018/19: 6.60p).
This is in line with our policy to pay a sustainable ordinary
dividend covered around two times by EPS before exceptionals. In
addition, with the interim special dividend of 2.00p announced with
the 2019/20 interim results, the full-year total dividend is 8.77p
(2018/19: 12.60p).
Four new stores were opened (including two replacements), and
four stores were closed during the period, with an overall net
reduction, including extensions, of c.4,000 square feet.
Return on capital employed (ROCE) was 7.0%, up from 6.9% for
2018/19.
Strategy update
Morrisons is primarily currently focused on combating the impact
of COVID-19 for all our stakeholders. Our broader strategy
continues in parallel with these efforts.
Alongside Fix, Rebuild, and Grow, we have recently introduced a
fourth concurrent phase of our strategy - 'Sustain' - encompassing
both the critical importance of our broader societal and
environmental responsibilities, and our initiatives to sustain the
strong momentum of the turnaround so far. In addition, as we
progress across many fronts, digitalising all aspects of our
business is becoming increasingly important, and 'Naturally
Digital' has now become our seventh priority.
These priorities remain the drivers of our growth and all other
aspects of our strategy are unchanged. Our five ways of working
(customers first, teamwork, freedom in our framework, listening and
responding, and improving our operations) inform all our actions
and behaviour, while our ambitions for our four stakeholders (for
customers, colleagues, suppliers and shareholders) ensure that
progress is balanced and broad, and allow us to measure success.
This process is underpinned by our long-held convictions: that we
still have a relative catch-up opportunity, that we can always keep
improving for customers, and that execution is key.
2019/20 was another year of growth: in profit, free cash flow
(before non-cash movements) , and the ordinary dividend. Momentum
in building a broader, stronger business was also positive, with
wholesale again expanding, further development of different
Morrisons brands, store format innovations and, most importantly, a
stronger Morrisons team coming through. While LFL sales were
negative, this was largely due to the difficult trading conditions
and consumer uncertainty of last year.
We are taking some learnings and opportunities into 2020/21 and
beyond around price, service, Market Street, availability, shrink,
marketing, costs and own brand. These are complemented by our new
store pipeline, further opportunities towards achieving our
GBP75m-GBP125m incremental profit target, and our continued focus
on controlling costs, improving productivity, and cost of goods
(COGS). If executed well, we expect to drive operating leverage and
continue to generate significant levels of free cash flow.
Priorities update
1. To be more competitive
We continue to invest in the shopping trip and improve our
relative competitiveness for customers. During the year, we cut
prices and improved product specification, packaging, and
merchandising across hundreds of our customers' favourite
items.
Alongside these investments, we still have substantial cost
saving, productivity, and COGS opportunities which we continue to
access in partnership with our suppliers. These include supply
chain and distribution costs, mix, volume-related discounts,
replenishment, packaging, and digitalisation.
We also continue to make good progress in becoming a product
business and developing our brands. 'Morrisons Makes It',
'Naturally Wonky, Naturally Wonderful', and 'Best', are all going
from strength to strength. 'Free From' and our vegan range, 'V
Taste', grew by 56% and 117% respectively. We are also adding many
new items from our own unique fresh food businesses, with brands
such as International Seafoods Ltd (based in the port town of
Grimsby) and Woodhead Bros (our fresh meat business). In non-food
'Nutmeg' is growing rapidly across clothing and baby, as is our
Home and Leisure range.
We again achieved recognition for our own-brand quality. As well
as the many awards we noted in our interim results, we were widely
recognised during the second half too. At Christmas we won Best
Fizz for our Best Prosecco in the Good Housekeeping Christmas Taste
Test; and our Best All Butter Mince Pies, Best Classic Panettone
and vegan Best Layered Tart all won their categories at the BBC
Good Food Christmas Taste Test. We also won 97 awards at the
International Wine Challenge 2020 and Supermarket of the Year at
the Drinks Retailing Industry Awards.
2. To serve customers better
We recently announced that we would be investing to create 4,000
net new frontline jobs in our stores. We are removing over 3,000
managerial roles and creating 7,000 new customer-facing roles. This
new colleague structure is aligned with our food maker and
shopkeeper credentials. It will put more colleagues and more
colleague hours on the shop floor, to serve customers better.
In addition, we are investing in continuing to improve
availability and shrink, with more dedicated colleague hours on the
shop floor, plus some IT and security initiatives, which means our
teams can focus more on selling as well as controlling stock.
Morrisons.com continues to grow for customers. In addition to
the Dordon CFC, we now store pick our customers' online orders from
almost 40 Morrisons supermarkets, and have extended our coverage
area to over 90% of British households. We have also begun a click
& collect trial for customers in six stores.
Since year end we have launched our 'Nutmeg' clothing offer
online. It is available nationwide for home delivery, or click
& collect from any Morrisons store.
3. Find local solutions
We have made further good progress in finding local solutions.
Since the start of the local food maker programme three years ago,
we have sourced over 1,000 new items from more than 200 suppliers
at 37 local food maker events across Britain. Sales of these items
were up more than 30% last year.
For example, we started selling Rora Dairy yogurts in our
Peterhead store after they attended our local food maker event.
Rora Dairy has been a family-run business for over 300 years, and
is located five miles from our Peterhead store. It produces
yoghurts which are gluten free, free from artificial colours,
flavours, sweeteners and preservatives, suitable for vegetarians,
and only uses non-homogenised milk direct from the dairy on the day
of production, as well as local fruits for the different flavours.
Rora has very quickly moved from delivering to one local store to
16 across Scotland.
'Local' has wider societal importance for Morrisons. We are
working at becoming truly integrated locally and more and more part
of local communities, helping them thrive in a sustainable way.
This includes supporting the most local food makers in delivering
direct to our stores, thereby reducing food miles, supporting the
local economy, and ensuring the freshest food for our customers. We
are also providing support for the local communities we serve in
many different ways: through a dedicated in-store Community
Champion; community rooms where local groups can meet; and a range
of education and support programmes to both help customers enjoy
eating well, and to address local issues.
4. Develop popular and useful services
Plans to install electric vehicle chargers progressed well
during the year. We now have 50 - 100 kW rapid chargers at over 100
Morrisons stores, which is Britain's biggest supermarket network.
These are the highest specification available and allow customers
to fully recharge their electric vehicle in just 20 to 60
minutes.
We also made good progress with our plans for gift cards,
successfully launching both Morrisons and 'Nutmeg' cards,
introducing new third-party gift card fixtures and digital screens,
and expanding the range of gift card services available for
customers.
We added over 40 Travel Money currency exchange kiosks during
the year, taking the total to 50. Timpsons continues to grow,
adding more than 30 sites in the year and now in 245 stores. We
made good progress with rolling out various car care, tyre change
and car connect services with partners such as Car Care Valeting,
Black Circles and We Buy Any Car. We also continue to introduce the
cash-for-clothes service, Smart Recycling, and are progressing our
plans for popular services such as barbers and beauty bars.
In addition, we now have 55 Morrisons Daily convenience stores
on our forecourts.
During the period, Doddle announced it would no longer operate a
collection service from Morrisons stores. We are currently
reviewing our options to restore a parcel pick-up service.
5. To simplify and speed up the organisation
Many components of our Fix, Rebuild, Grow, and Sustain strategy
aim at simplifying and speeding up Morrisons, demonstrating how our
priorities are all interconnected. For example, our plans to serve
customers better by creating 4,000 net new roles, and our
initiatives to improve availability and reduce shrink, are
resulting in productivity and cost saving benefits. Our work around
COGS and suppliers has the dual benefit of making Morrisons more
competitive for customers and encouraging simpler, more
collaborative relationships. In addition, our new priority,
Naturally Digital, will further improve the shopping trip by making
processes simpler, quicker, and easier to execute.
6. To make core supermarkets strong again
During the year we completed 44 further Fresh Look store
improvements, bringing the total to almost 350 since the start of
the programme.
These refits continue to drive our modular roll-out of new
learnings and innovation across the estate. During the year, we
introduced almost 70 new Garden Centres and improved 50 Home &
Leisure departments in our stores. 'Nutmeg' womenswear is now in
around 300 stores, and we have plans to launch menswear too.
Innovation is also coming from our new stores. Four new stores
opened during the year, including Canning Town, which is our first
store with a 'Market Kitchen' food-to-go offer, and Bolsover, which
is our first smaller, community store (at 15,000 square feet).
7. Naturally Digital
We have set up a team to identify opportunities and act at pace
to create value for all stakeholders by building digital solutions
which will help us organise our colleagues and processes to:
simplify all aspects of Morrisons, eliminate wasted effort, improve
the shopping trip, and become more popular and accessible for
customers. It will involve working with existing teams and
infrastructure to improve or accelerate what we have, rather than
invest significant new capital.
Wholesale supply
Sales grew with all our major wholesale partners during the
year, and we remain on track for our target of GBP1bn of wholesale
supply sales in due course.
During the first half, ten trial stores were converted from
McColl's to Morrisons Daily. The stores offer a full Morrisons
convenience range and are branded Morrisons Daily, but continue to
be owned and operated by McColl's. Sales in these first ten
conversions have been strong and customer feedback has been
positive. Since year end, we have converted another 20 stores
together and are further tailoring and testing the proposition.
McColl's has over 240 remaining ex-Co-op stores, which will
transition to Morrisons wholesale supply during 2020. McColl's has
also announced a medium-term plan for an estate of around 1,100
larger, more convenience-focused stores. This represents an
accelerated optimisation plan that will reduce McColl's store
numbers from the current level of over 1,400. During 2020/21, we
expect our sales to the McColl's stores that transition to
Morrisons wholesale supply to more than offset the impact of any
stores closed by McColl's.
We signed a new overseas export partnership in the second half,
with CP Lotus in China. From later this year, we will start
supplying around 100 CP Lotus stores in eleven Chinese provinces
with a small range of Morrisons own-brand items.
In our interim results, we announced a further extension of our
relationship with Amazon: a multi-year partnership to explore new
opportunities together to improve the shopping experience for both
Morrisons and Amazon customers.
In addition, the Morrisons store on Amazon Prime Now, the
ultra-fast, same-day online grocery home delivery service, is now
available for customers in eight cities, with Liverpool, Glasgow,
Newcastle and Sheffield all added since the end of the first half.
As announced at our interim results, Morrisons has recently become
a retailer on Amazon's Prime Now website and app, selling directly
to customers. The Morrisons store on Prime Now sales are now
reported within retail LFL; all other Morrisons wholesale sales to
Amazon continue to be reported within wholesale LFL.
Financial strategy and update
Capital allocation framework
Our strong balance sheet is the foundation of Morrisons
continued turnaround. Debt is low, the property estate is
predominantly freehold, and the pension is in a net surplus
position. Capital expenditure has halved since its peak and is at a
sustainably lower level. We generate significant and sustainable
levels of free cash flow, and manage the business with consistent
capital discipline and capital allocation principles.
Shareholder returns
Our capital allocation framework has guided us in building a
track record of capital discipline over recent years. Our first
priority is to invest in the stores and infrastructure and reduce
costs. Second, we will seek to maintain debt ratios that support
our target of an investment-grade credit rating. Third, we will
invest in profitable growth opportunities. Fourth, we will pay
dividends in line with our stated policy, and then any surplus
capital will be returned to shareholders.
Consistent with the principles of our capital allocation
framework, we announced both ordinary and special dividends during
the year.
Our policy is for the ordinary dividend to be sustainable and
covered around two times by EPS before exceptionals. The final
ordinary dividend will be 4.84p per share, bringing the total
ordinary dividend for the full year to 6.77p (up 2.6%). In
addition, we announced a special dividend of 2.00p per share at the
interim results.
In total, the full-year ordinary plus special dividend for
2019/20 are 8.77p per share (2018/19: 12.60p).
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.
Subject to shareholder approval at our 2020 AGM, the final
ordinary dividend of 4.84p per share will be payable on 29 June
2020 to shareholders on the share register at the close of business
on 22 May 2020.
Cost savings
We have programmes to improve productivity spanning many work
streams end to end across the business, many with the dual aims of
improving the shopping trip for customers and saving costs. In
addition, there are several ongoing opportunities within COGS and
digitalising Morrisons further that will both improve our business
and take more cost out. We expect these cost saving programmes to
remain significant and sustainable for many years to come.
Cash flow and working capital
Free cash flow was GBP238m (2018/19: GBP281m). Free cash flow
excluding GBP57m other non-cash movements (ex-leases) was up
GBP24m, to GBP295m (2018/19: GBP271m).
Operating working capital was an GBP18m inflow (2018/19: GBP10m
outflow), with the usual second-half outflow and some of the
first-half operational improvements sustained.
Property disposal proceeds were GBP34m (2018/19: GBP22m), the
majority of which relates to the sale of our Camden store to
Berkeley Group. Total consideration for Camden was c.GBP120m,
comprising GBP85m in cash for our store and eight-acre site which
Berkeley will pay in stages over the years of the project, and a
new Morrisons supermarket and convenience store which Berkeley will
build with a value of GBP34m. Overall, the c.GBP120m total
consideration will mean we have exceeded our GBP1.1bn disposal
proceeds target.
Cash capital expenditure, depreciation and amortisation
Cash capital expenditure was GBP511m (2018/19: GBP461m), below
our guidance of c.GBP550m due to fewer capital projects in the
second half. We expect 2020/21 cash capital expenditure to be
around GBP525m. In addition, we incurred GBP58m of onerous cash
payments, including a payment relating to an onerous lease. This
was in line with our guidance of c.GBP60m for 2019/20, and we
expect less than GBP10m in 2020/21.
For accounting periods starting on or after April 2019, there is
a change in the rules for UK corporation tax quarterly instalments,
meaning companies now pay tax in the year to which it relates. For
Morrisons during 2020/21, this will mean two instalments for
2019/20 and four instalments for 2020/21, resulting in additional
cash tax payments of around GBP50m. From 2021/22, tax paid will
revert to four annual instalments as before.
Depreciation and amortisation was up GBP24m to GBP525m (2018/19:
GBP501m), lower than guided as cash capital expenditure was also
lower. During 2020/21, we expect another increase in depreciation
and amortisation, to around GBP550m.
Debt and interest
Group net debt was GBP2,458m (2018/19: GBP2,394m). Of the GBP64m
increase, GBP57m related to other non-cash movements (ex-leases).
On a pre-IFRS 16 basis, net debt was GBP1,082m (2018/19:
GBP997m).
The maturity profile of our remaining debt facilities is strong.
In September 2019, ahead of the upcoming maturity of our euro bond,
the Group issued a GBP350m sterling bond at a low fixed interest
rate of 2.5% which expires in October 2031. In addition, during the
year we extended our RCF by a further year, resetting its five-year
term and resulting in a maturity date of June 2024, and also put in
place an additional GBP100m RCF maturing in July 2020.
Net finance costs before exceptionals were GBP106m, down GBP9m
from last year (2018/19: GBP115m). This is in line with our
guidance of GBP105m - GBP110m, and is equivalent to our previous
guidance of c.GBP55m on a non-IFRS 16 basis. We expect 2020/21 net
finance costs before exceptionals to be c.GBP105m.
Impairment review
We perform an annual store-by-store review of impairment and
onerous property contracts. The net credit was GBP2m, recognised
outside profit before tax and exceptionals.
Pension
We recently completed the triennial pension valuation, with a
funding surplus of GBP682m across the three schemes, up from
GBP111m at the last triennial review. At year end, the net pension
accounting surplus on the balance sheet was GBP944m, up from
GBP688m at the end of 2018/19. Net retirement benefit interest
income was GBP19m for the year, reported outside profit before tax
and exceptionals.
Net new space
During the year, we opened four new stores of which two were
replacements. As previously announced, we also closed four stores.
As guided, these offset so net new space sales contribution was
zero. During 2020/21, we plan to open five new stores and expect
net new space sales contribution to be around 0.3%.
Future reporting
As the first May bank holiday in 2020/21 has moved from the
Monday to the Friday of our fourteenth week, we will extend Q1 by
an extra week. The first 14 weeks of 2020/21 will be compared to
the corresponding 14 weeks in 2019/20, with both years including
the trading period in the run-up to the first May bank holiday. Q1
trading will be reported on 12 May.
As a result of this change, Q2 will be 12 weeks, and will be
reported within the first-half results as usual in September. To
ensure no year-on-year calendar effect, we will again report a
14-week Q1 and 12-week Q2 in 2021/22, before reverting back to 13
weeks for the years thereafter.
People update
Our dedicated team of food makers and shopkeepers are our most
important asset. We are increasing colleague pay, to GBP9.20 per
hour from April 2020, and continue to invest in colleague bonus
which is directly linked to customer service. We will also create
more frontline customer-facing roles to serve customers better.
Over half of our store managers and people managers have now
completed our behavioural skills programme 'Leading With Purpose'.
We are planning a 'Working With Purpose' programme for our
colleagues, designed to support business improvements.
We won the 'All About School Leavers Top Retail Employer' award
for the second year
running and were ranked in the top 30 UK companies in the
'Social Mobility Employer Index' award.
We continue to see internal talent coming up through the
organisation, with significantly more promotions being made from
within the business.
Complementing the best colleagues in our shops and sites is a
talented senior team. We strengthened the Board further with the
appointment of a third Executive Director, Michael Gleeson, as
Chief Financial Officer, and promoted Trevor Strain to the new role
of Chief Operating Officer, with responsibilities including
commercial, manufacturing, supply chain, logistics, operations
development, online and wholesale. We have also made some changes
to the Executive Committee, with Andy Atkinson now Group Commercial
Director and David Lepley promoted to the role of Group Retail
Director.
Corporate responsibility and community
Our corporate responsibility programme ensures we operate in a
way that is right for our customers, colleagues, suppliers and
shareholders, while making a positive contribution to society and
taking good care of the environment.
Reducing our emissions
Working with the Carbon Trust, we have ambitious science-based
carbon reduction targets to reduce scope 1 and 2 (direct) emissions
by 33% by 2025, 53% by 2030, and to be at zero net emissions by
2040 against a 2017 baseline. In our first year we achieved a 28%
reduction in emissions against our target. We have also set a
stretching target of net zero emissions in our UK agriculture chain
by 2030. This will be achieved through working with farmers and
supporting the increase of on-farm productivity, farmland carbon
storage and renewable energy utilisation.
Plastic packaging
Reducing the impact plastic is having on the environment is
important to our customers and society more generally. We are
committed to reducing the plastic we use in our packaging and have
introduced a wide-range of initiatives such as increasing our
offering of loose fruit and veg, a reusable paper carrier bag, and
an unbleached and untreated recycled cotton string produce bag. To
date we have removed over 6,000 tonnes of plastic packaging and
over 1.5 billion plastic items, such as straws, cotton buds and
stirrers. We were awarded the Business in the Community
Environmental Sustainability Award for our plastic reduction
programme.
Improving recyclability
By 2025, all of our plastic packaging will be recyclable,
reusable or compostable. We have made progress against our
commitment through a number of initiatives including removing both
hard-to-recycle black plastic, and expanded polystyrene from all
Morrisons packaging, and featuring front-of-pack 'recycle me' and
'recycle in store' logos on popular Morrisons products. By focusing
on these hard-to-recycle items, 5,500 tonnes of non-recyclable
plastic packaging has been replaced by recyclable alternatives.
Deforestation
Every year, millions of acres of natural forest are destroyed
due to illegal logging, poor forest management practices and an
increasing growing global demand for forest and agricultural
products. We have a new commitment in place to ensure zero
deforestation by the end of 2025. This strengthens our position on
the sourcing of key commodities including soy, palm, timber and
beef.
'Nutmeg' environmental plan
We have set a number of stretching environmental targets for our
'Nutmeg' clothing range, to be delivered by 2025. These include
100% of the polyester used in 'Nutmeg' clothing to be from recycled
sources, and 100% of viscose to be sourced from responsibly managed
forests and produced using closed-loop manufacturing.
Food waste
We have a target to reduce our operational food waste by 50% by
2030. Working with third party data analysts, we have developed a
methodology to accurately record food waste in our stores by
weight. Our Too Good to Go initiative is available in all our
stores, allowing customers to purchase discounted goods at risk of
being wasted. Customers log on to the app and pay for a 'magic box'
of Market Street products that are just past their best before date
but perfectly good to eat. We also work with charities in our
stores, manufacturing and distribution centres to redistribute
edible surplus food.
Eggs
We have moved away from caged eggs after doubling the number of
free-range farmers that supply our egg packing business. This means
that all our fresh shell eggs will come from hens that have outdoor
access for at least eight hours each day, as well as nest boxes
with wide perches and spaces for scratching and dust bathing. We
are also working to ensure that 100% of eggs used as ingredients in
our own-brand products are cage free by 2025.
We were also awarded the 'Sustainable Food and Farming Award'
from Compassion in World Farming for our bee-friendly eggs range.
This award recognises businesses that are taking steps to produce
meat, dairy and eggs in ways that protect, improve and restore
wildlife and the environment. Following a partnership with the
Bumblebee Conservation Trust, farmers supplying our egg
manufacturing site Chippindale Foods with eggs need to plant an
acre of wildflower meadow for every laying hen range.
CLIC Sargent
Our charity partnership with CLIC Sargent continues to go from
strength to strength, with a total of GBP11m raised since the
partnership was launched in February 2017. Our aim this year is to
raise vital funds to enable CLIC Sargent to open a new Home from
Home in Manchester.
Morrisons Foundation
The Morrisons Foundation provides funding for local charities
and has donated GBP3.6m through grants and colleague match-funding
providing support to both national and local communities in
2019/20.
Consolidated income statement
52 weeks ended 2 February 2020
2020 2019 restated(1)
------------------- ------------------------------------------------- --------------------------------------------
Exceptionals Exceptionals
Before (note Before (note
exceptionals 3) Total exceptionals 3) Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
------------------- ------- -------------- ------------- --------- ---------------- --------------- ---------
Revenue 4 17,536 - 17,536 17,735 - 17,735
Cost of sales (16,855) (52) (16,907) (17,039) (44) (17,083)
------------------- ------- -------------- ------------- --------- ---------------- --------------- ---------
Gross profit 681 (52) 629 696 (44) 652
Other operating
income 94 - 94 88 - 88
Profit/loss
on disposal
and exit of
properties - 66 66 - - -
Administrative
expenses (262) (6) (268) (274) (34) (308)
------------------- ------- -------------- ------------- --------- ---------------- --------------- ---------
Operating
profit 513 8 521 510 (78) 432
Finance costs 5 (111) - (111) (120) (33) (153)
Finance income 5 5 19 24 5 18 23
Share of profit
of joint venture
(net of taxation) 1 - 1 1 - 1
------------------- ------- -------------- ------------- --------- ---------------- --------------- ---------
Profit before
taxation 408 27 435 396 (93) 303
Taxation 6 (94) 7 (87) (93) 23 (70)
------------------- ------- -------------- ------------- --------- ---------------- --------------- ---------
Profit for the
period attributable
to the owners
of the Company 314 34 348 303 (70) 233
---------------------------- -------------- ------------- --------- ---------------- --------------- ---------
Earnings per
share (pence)
- Basic 8 14.60 9.89
- Diluted 8 14.44 9.67
------------------- ------- -------------- ------------- --------- ---------------- ----------------------
(1) For further details on the restatement of the reported
results for the 52 weeks ended 3 February 2019 from adopting
IFRS 16 'Leases', see note 25.
Consolidated statement of comprehensive income
52 weeks ended 2 February 2020
2020 2019 restated(1)
Other comprehensive income/(expense) Note GBPm GBPm
----------------------------------------------------------- --------- ---------------- --------------------------
Items that will not be reclassified
to profit or loss:
Remeasurement of defined benefit
schemes 17 231 100
Tax on defined benefit schemes (38) (17)
----------------------------------------------------------- --------- ---------------- --------------------------
193 83
----------------------------------------------------------- --------- ---------------- --------------------------
Items that may be reclassified
subsequently to profit or loss:
Cash flow hedging movement (57) 9
Exchange differences on translation
of foreign operations (2) -
Tax on items that may be reclassified
subsequently to profit or loss 10 (1)
(49) 8
Other comprehensive income for
the period, net of tax 144 91
----------------------------------------------------------- --------- ---------------- --------------------------
Profit for the period attributable
to the owners of the Company 348 233
----------------------------------------------------------- --------- ---------------- --------------------------
Total comprehensive income for
the period attributable to the
owners of the Company 492 324
----------------------------------------------------------- --------- ---------------- --------------------------
(1) For further details on the restatement of the reported
results for the 52 weeks ended 3 February 2019 from adopting IFRS
16 'Leases', see note 25.
Consolidated statement of financial position
As at 2 February 2020
2020 2019 restated(1) 2018 restated(1)
Note GBPm GBPm GBPm
----------------------------- ------- -------- ----------------- -----------------
Assets
Non-current assets
Goodwill and intangible
assets 9 381 404 428
Property, plant and
equipment 10 7,147 7,094 7,027
Right-of-use assets 11 942 929 970
Investment property 12 58 60 69
Retirement benefit
surplus 17 960 730 612
Investment in joint
venture 39 47 53
Trade and other receivables 15 71 8 8
Derivative financial
assets 20 - 15 16
9,598 9,287 9,183
----------------------------- ------- -------- ----------------- -----------------
Current assets
Inventories 14 660 713 686
Trade and other receivables 15 353 344 247
Derivative financial
assets 20 1 19 15
Cash and cash equivalents 19 305 264 327
----------------------------- ------- -------- ----------------- -----------------
1,319 1,340 1,275
Assets classified as
held-for-sale 13 3 39 4
----------------------------- ------- -------- ----------------- -----------------
1,322 1,379 1,279
----------------------------- ------- -------- ----------------- -----------------
Total assets 10,920 10,666 10,462
----------------------------- ------- -------- ----------------- -----------------
Liabilities
Current liabilities
Trade and other payables 16 (3,051) (3,070) (2,921)
Borrowings 20 (237) (178) (72)
Lease liabilities 19 (72) (69) (59)
Derivative financial
liabilities 20 (36) (5) (13)
Current tax liabilities - (27) (15)
----------------------------- ------- -------- ----------------- -----------------
(3,396) (3,349) (3,080)
----------------------------- ------- -------- ----------------- -----------------
Non-current liabilities
Borrowings 20 (1,108) (1,110) (1.245)
Lease liabilities 19 (1,304) (1,328) (1,354)
Derivative financial
liabilities 20 (7) (2) (1)
Retirement benefit
deficit 17 (16) (42) (18)
Deferred tax liabilities (472) (414) (415)
Provisions (76) (96) (99)
----------------------------- ------- -------- ----------------- -----------------
(2,983) (2,992) (3,132)
----------------------------- ------- -------- ----------------- -----------------
Total liabilities (6,379) (6,341) (6,212)
----------------------------- ------- -------- ----------------- -----------------
Net assets 4,541 4,325 4,250
----------------------------- ------- -------- ----------------- -----------------
Shareholders' equity
Share capital 21 240 237 236
Share premium 21 192 178 159
Capital redemption
reserve 39 39 39
Merger reserve 2,578 2,578 2,578
Retained earnings and
other reserves 1,492 1,293 1,238
----------------------------- ------- -------- ----------------- -----------------
Total equity attributable to the
owners of the Company 4,541 4,325 4,250
-------------------------------------- -------- ----------------- -----------------
(1) For further details on the restatement of the reported
results for the 52 weeks ended 3 February 2019 and 53
weeks ended 4 February 2018 from adopting IFRS 16 'Leases', see note 25.
Consolidated statement of cash flows
52 weeks ended 2 February 2020
2020 2019 restated(1)
Note GBPm GBPm
-------------------------------------------- ----- ------ -----------------
Cash flows from operating activities
Cash generated from operations 18 1,017 977
Interest paid (104) (120)
Taxation paid (87) (76)
-------------------------------------------- ----- ------ -----------------
Net cash inflow from operating activities 826 781
-------------------------------------------- ----- ------ -----------------
Cash flows from investing activities
Interest received 1 1
Dividends received from joint venture 23 9 7
Proceeds from the disposal of property,
plant and equipment, investment property,
right-of-use assets and assets held
for sale 34 22
Purchase of property, plant and equipment,
investment property and right-of-use
assets (429) (381)
Purchase of intangible assets (81) (77)
Acquisition of business (net of cash
received) (1) (3)
Net cash outflow from investing activities (467) (431)
-------------------------------------------- ----- ------ -----------------
Cash flows from financing activities
Purchase of trust shares 21 (10) (9)
Settlement of share awards 21 (2) (5)
Proceeds from exercise of employee
share options 21 14 20
New borrowings 347 275
Repayment of borrowings (278) (306)
Costs incurred on repayment of borrowings - (30)
Repayment of lease obligations (87) (69)
Dividends paid 7 (302) (289)
-------------------------------------------- ----- ------ -----------------
Net cash outflow from financing activities (318) (413)
-------------------------------------------- ----- ------ -----------------
Net increase/(decrease) in cash and
cash equivalents 41 (63)
Cash and cash equivalents at start
of period 264 327
-------------------------------------------- ----- ------ -----------------
Cash and cash equivalents at end of
period 19 305 264
-------------------------------------------- ----- ------ -----------------
(1) For further details on the restatement of the reported
results for the 52 weeks ended 3 February 2019 from adopting IFRS
16 'Leases', see note 25.
Reconciliation of net cash flow to movement in net debt(2) in
the period
2020 2019 restated(1)
Note GBPm GBPm
----------------------------------------------------- ---- ------- ----------------
Net increase/(decrease) in cash and cash equivalents 41 (63)
Cash inflow from increase in borrowings (347) (275)
Debt acquired on acquisition of business - (2)
Cash outflow from repayment of borrowings 278 306
Cash outflow from repayment of lease liabilities 87 69
Non-cash movements on lease liabilities (66) (53)
Other non-cash movements (57) 10
Opening net debt(2) (2,394) (2,386)
----------------------------------------------------- ---- ------- ----------------
Closing net debt (2) 19 (2,458) (2,394)
----------------------------------------------------- ---- ------- ----------------
(1) For further details on the restatement of the reported
results for the 52 weeks ended 3 February 2019 from adopting IFRS
16 'Leases', see note 25.
(2) Net debt is defined in the Glossary.
Consolidated statement of changes in equity
Attributable to the owners of the Company
------------------------------------------------------------------------------
52 weeks ended 2 February Share Share Capital Merger Hedging Retained Total
2020 capital premium redemption reserve reserve earnings equity
reserve
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ----- --------- --------- ------------ --------- --------- ---------- --------
At 4 February 2019
(reported) 237 178 39 2,578 10 1,589 4,631
----------------------------- ----- --------- --------- ------------ --------- --------- ---------- --------
Adjustment on the adoption
of IFRS 16 25 - - - - - (306) (306)
----------------------------- ----- --------- --------- ------------ --------- --------- ---------- --------
At 4 February 2019
(restated(1) ) 237 178 39 2,578 10 1,283 4,325
Profit for the period - - - - - 348 348
Other comprehensive
(expense)/income:
Cash flow hedging movement - - - - (57) - (57)
Exchange differences
on translation of foreign
operations - - - - - (2) (2)
Remeasurement of defined
benefit schemes 17 - - - - - 231 231
Tax in relation to
components of other
comprehensive income - - - - 10 (38) (28)
----------------------------- ----- --------- --------- ------------ --------- --------- ---------- --------
Total comprehensive
(expense)/income for
the period - - - - (47) 539 492
----------------------------- ----- --------- --------- ------------ --------- --------- ---------- --------
Purchase of trust shares 21 - - - - - (10) (10)
Employee share option
schemes:
Share-based payments
charge - - - - - 26 26
Settlement of share
awards 21 - - - - - (2) (2)
Share options exercised 21 3 14 - - - (3) 14
Tax in relation to
components of equity - - - - - (2) (2)
Dividends 7 - - - - - (302) (302)
----------------------------- ----- --------- --------- ------------ --------- --------- ---------- --------
Total transactions
with owners 3 14 - - - (293) (276)
----------------------------- ----- --------- --------- ------------ --------- --------- ---------- --------
At 2 February 2020 240 192 39 2,578 (37) 1,529 4,541
----------------------------- ----- --------- --------- ------------ --------- --------- ---------- --------
Attributable to the owners of the Company
------------------------------------------------------------------------------
52 weeks ended 3 February Share Share Capital Merger Hedging Retained Total
2019 capital premium redemption reserve reserve earnings equity
reserve
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ----- --------- --------- ------------ --------- --------- ---------- --------
At 5 February 2018 (reported) 236 159 39 2,578 2 1,531 4,545
------------------------------- ----- --------- --------- ------------ --------- --------- ---------- --------
Adjustment on the adoption
of IFRS 16 25 - - - - - (295) (295)
------------------------------- ----- --------- --------- ------------ --------- --------- ---------- --------
At 5 February 2018
(restated(1)
) 236 159 39 2,578 2 1,236 4,250
Profit for the period
(restated(1) ) - - - - - 233 233
Other comprehensive
income/(expense):
Cash flow hedging movement - - - - 9 - 9
Remeasurement of defined
benefit pension schemes 17 - - - - - 100 100
Tax in relation to components
of other comprehensive
income - - - - (1) (17) (18)
------------------------------- ----- --------- --------- ------------ --------- --------- ---------- --------
Total comprehensive
income for the period - - - - 8 316 324
------------------------------- ----- --------- --------- ------------ --------- --------- ---------- --------
Purchase of trust shares 21 - - - - - (9) (9)
Employee share option
schemes:
Share-based payments
charge - - - - - 34 34
Settlement of share
awards 21 - - - - - (5) (5)
Share options exercised 21 1 19 - - - - 20
Dividends 7 - - - - - (289) (289)
------------------------------- ----- --------- --------- ------------ --------- --------- ---------- --------
Total transactions with
owners 1 19 - - - (269) (249)
------------------------------- ----- --------- --------- ------------ --------- --------- ---------- --------
At 3 February 2019
(restated (1) ) 237 178 39 2,578 10 1,283 4,325
------------------------------- ----- --------- --------- ------------ --------- --------- ---------- --------
(1) For further details on the restatement of the reported
results for the 52 weeks ended 3 February 2019 from adopting IFRS
16 'Leases', see note 25.
1. General information and basis of preparation
The financial information, which comprises the consolidated
statement of comprehensive income, consolidated statement of
financial position, consolidated statement of cash flows,
consolidated statement of changes in equity, and related notes, is
derived from the full Group financial statements for the 52 week
period ended 2 February 2020, which have been prepared under
International Financial Reporting Standards (IFRS) and
International Financial Reporting Standards Interpretation
Committee (IFRS IC) interpretations as adopted by the European
Union and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS.
It does not constitute statutory financial statements within the
meaning of section 434 of the Companies Act 2006. This financial
information has been agreed with the auditor for release. The
Group's financial statements (comprising the consolidated statement
of comprehensive income, consolidated statement of financial
position, consolidated statement of cash flows, consolidated
statement of changes in equity, and related notes) are available
for download on the Group's website at
https://www.morrisons-corporate.com/investor-centre/financial-reports/
The Annual Report and Financial Statements for the 52 week
period ended 2 February 2020 on which the auditor has given an
unqualified report and which does not contain a statement under
section 498 of the Companies Act 2006, will be delivered to the
Registrar of Companies in due course.
The accounting policies used in completing this financial
information have, unless otherwise stated, been consistently
applied in all periods shown. These accounting policies are
detailed in the Group's financial statements for the 52 week period
ended 2 February 2020 which can be found on the Group's website
https://www.morrisons-corporate.com/investor-centre/financial-reports/
New accounting standards, amendments and interpretations adopted
by the Group
The following new standards, interpretations and amendments to
standards are mandatory for the Group for the first time for the 52
weeks ended 2 February 2020:
-- IFRS 16 'Leases';
-- IFRIC 23 'Uncertainty over income tax treatments';
-- Amendments to the following standards:
- IAS 19 'Employee Benefits';
- IAS 28 'Investments in Associates';
- IAS 9 'Financial Instruments'; and
- Improvements to IFRSs (2015-2017)
The Group has considered the above new standards, and amendments
to published standards, and has concluded that only IFRS 16, IFRIC
23, and the amendment to IAS 19 are relevant to the Group. Only
IFRS 16 has a material impact on the Group's consolidated financial
statements.
IFRS 16 'Leases'
IFRS 16 'Leases' was published in January 2016 and has become
effective for the Group for the period beginning 4 February 2019.
The standard replaces IAS 17 'Leases', IFRIC 14 'Determining
whether and Arrangement contains a lease', SIC-15 'Operating
Leases-Incentives' and SIC-27 'Evaluating the Substance of
Transactions Involving the Legal Form of a Lease'. The standard
applies a single recognition and measurement approach for all
applicable leases under which the Group is the lessee.
The Group has lease contracts for property and equipment. Before
the adoption of IFRS 16, leases in which substantially all the
risks and rewards of ownership were retained by the lessor were
classified as operating leases; all other leases were classified as
finance leases. Under the previous standard, lease payments on
operating leases were recognised as rental costs in the
consolidated income statement. There was no recognition of the
associated assets or liability in the consolidated statement of
financial position, except to the extent that there were any
prepaid or accrued rents.
Upon adoption of IFRS 16, for all leases where the Group is a
lessee, the Group recognises a right-of-use asset and a lease
liability in its consolidated statement of financial position. The
consolidated income statement includes depreciation in relation to
the right-of-use assets and a finance charge in relation to the
lease liabilities.
Lessor accounting is substantially unchanged under IFRS 16,
except for sub-leases previously classified as operating leases.
These leases have been re-assessed as to whether they are operating
or financing in nature, using the requirements of IFRS 16.
The transition to IFRS 16 for the Group took place on 4 February
2019 and the Group has adopted the fully retrospective transition
approach. In accordance with this transition method, the Group has
applied IFRS 16 at the date of initial application as if it had
been effective at the commencement date of the existing lease
contracts. Accordingly, the comparative information in these
financial statements has been restated, unless otherwise stated.
The nature and effect of these changes are disclosed in note
25.
On transition the Group elected to use the practical expedient
allowing the standard to be applied only to contracts that were
previously identified as leases when applying IAS 17 and IFRIC 4
'Determining whether an Arrangement contains a Lease' at the date
of initial application.
1. General information and basis of preparation (continued)
New accounting standards, amendments and interpretations adopted
by the Group (continued)
IFRIC 23 'Uncertainty over income tax treatments'
IFRIC 23 'Uncertainty over income tax treatments' was issued in
June 2017 and has become effective for the Group from the period
beginning 4 February 2019. The interpretation covers how the Group
accounts for taxation, where there is some uncertainty over whether
treatments in the tax return will be accepted by HM Revenue and
Customs or the relevant overseas jurisdictions.
Each uncertain treatment (or combination of treatments) is
considered for whether it will be accepted, and if probable taxable
profits/losses, tax bases, unused tax losses, unused tax credits
and tax rates are accounted for consistently with the tax return.
The Group accounts for each treatment using whichever of the two
allowed measurement methods is expected to best predict the final
outcome - the single most likely outcome or a probability
weighted-average value of a range of possible outcomes.
The Group adopted the modified retrospective approach to
transition on 4 February 2019. Under this approach, no restatement
of comparative financial statements was required.
The Group has referred to the IFRIC guidance, including Draft
Interpretation DI/2015/1 in previous periods, resulting in the
accounting policy prior to the adoption of IFRIC 23 applying
similar principles for selecting measurement methods as in the new
interpretation. Accordingly, the impact of IFRIC 23 has had an
immaterial impact on the consolidated financial statements and
there has been no adjustment necessary to the opening statement of
financial position as at 4 February 2019.
Amendment to IAS 19 'Employee Benefits'
An amendment to IAS 19 'Employee Benefits' was published in
February 2018 and has become effective for the Group from the
period beginning 4 February 2019. The amendment applies
prospectively in connection with accounting for plan amendments,
curtailments and settlements.
The amendment requires entities to use updated assumptions to
determine current service cost and net interest for the remainder
of the period after a plan amendment, curtailment or settlement.
The impact of this amendment has had an immaterial impact on the
consolidated financial statements.
New accounting standards, amendments and interpretations in
issue but not yet effective
There are a number of standards and interpretations issued by
the IASB that are effective for financial statements after this
reporting period.
Of these new standards, amendments and interpretations, there
are none that are expected to have a material impact on the Group's
consolidated financial statements.
1. General information and basis of preparation (continued)
Principal risks
The Directors have carried out a robust assessment of the
principal risks facing the Group, including those that would
threaten its business model, the achievement of our seven
priorities, solvency or liquidity.
The Directors consider these to be the most significant risks
facing the business, however, they do not comprise all the risks
that the business is facing. These principal risks are set out
below.
RISKS DESCRIPTION MITIGATION
UK - EU Trade Brexit and continued
trade negotiations * A business-wide Stability Group is monitoring
with the EU and developments through the transition period and
other countries, coordinating operational responses. We have focussed
presents ongoing action plans in place, ready to implement as the
uncertainty to the political and economic environment evolves;
UK economy and continues
to impact consumer
confidence. * We continue to actively engage with key suppliers to
assess specific impacts to our business and maintain
Failure to adequately a strong focus on UK sourcing;
prepare for a range
of outcomes could
have significant * We have achieved Authorised Economic Operator status
implications on to enable more straight forward border checks;
business performance,
including; supply
chain disruption; * We have also been working with our suppliers and
availability of freight providers to identify alternative supply
product; changes routes avoiding the busiest ports;
to taxes and tariffs;
impact of pronounced
currency fluctuations; * The Group has a treasury policy in place for hedging
and the ability to mitigate risks on currency fluctuations. We have
to secure labour. assessed, and continue to plan for, potential changes
to taxes and tariffs; and
* We continue to monitor any changes which may impact
the availability of labour across the Group. Our
manufacturing and logistics sites have specific
people plans in place.
-------------------------- ------------------------------------------------------------------
Business Interruption There is a risk
that a major incident, * We have recovery plans in place covering our stores,
such as a significant depots, sites and offices;
failure of technology
or a strategic third
party, a natural * These plans include, where appropriate, secondary
disaster, a global locations which would be used as backup in case of an
pandemic such as incident;
COVID-19, disruption
in the supply chain
or strike action, * Business continuity resilience and disaster recovery
could cause significant exercises are undertaken to test processes and
disruption to business management's ability to respond effectively;
operations. The
Group's response
must be appropriate * A Crisis Management Group is in place to oversee
to minimise disruption these plans and to manage and respond to any major
and reputational incidents;
damage.
* We conduct supplier risk assessments and have
contingency plans in place, where possible, to manage
the risk of loss of supply;
* There has been continued investment in cloud
technologies to provide further resilience to the
Technology systems; and
* We work alongside our strategic third party partners
ensuring both parties' continuity plans are robust
and aligned.
-------------------------- ------------------------------------------------------------------
Competitiveness The grocery sector
continues to be * Our pricing, trade plan and promotional and marketing
highly competitive campaigns are actively managed;
with considerable
promotional activity.
If we do not engage * Our strong balance sheet and strong cash flow allow
with our suppliers us to continue to invest in our proposition;
or effectively manage
our trade plan to
remain competitive * Long-term agreements are established with suppliers,
there is a risk ensuring a competitive customer offer to help
this will adversely maintain security of supply;
impact like-for-like
sales and financial
performance. * We continue to work closely with British growers and
farmers; and
* We continually review our range, category plan and
quality and respond to customer feedback.
-------------------------- ------------------------------------------------------------------
1. General information and basis of preparation (continued)
Principal risks (continued)
RISKS DESCRIPTION MITIGATION
Customer There is a risk
that we do not meet * One of our seven priorities is 'to serve customers
the needs of our better' and we have a range of activities to support
customers in respect that;
of price, range,
quality, service,
responding to changes * The ongoing programme of customer listening helps us
in eating habits to gain a deep understanding of what our customers
and sustainability want and has informed key activities such as our
concerns. store Fresh Look programme as well as changes to
range and the introduction of more locally sourced
If we do not provide products;
the shopping trip
that customers want,
both in store and * We closely monitor research on customer perceptions
online, we could and respond quickly wherever possible, such as,
lose sales and market plastics, palm oil, red meat and changes to eating
share particularly habits;
in an environment
of weaker customer
sentiment. * We have reduced plastic in the products we supply and
launched our 2025 own-brand plastic commitment; and
* We have worked to make Morrisons products accessible
to more customers by working with new wholesale
partners and continuing to expand the geography
covered by our online offering.
--------------------------- ------------------------------------------------------------------
Data A security breach
leading to a loss * The Data Steering Group has the responsibility for
of customer, colleague overseeing data management practices, policies,
or Group confidential regulatory awareness and training;
data is a key aspect
of this principal
risk. A major data * Information security policies and procedures are in
security breach place, including encryption, network security,
could lead to significant systems access and data protection;
reputational damage
and fines.
* This is supported by ongoing monitoring, reporting
The risk environment and rectification of vulnerabilities; and
is challenging,
with increased levels
of cyber-crime and * Focussed working groups are in place - looking at the
regulatory requirements. management of data across the business including
colleague data, customer data, commercial data and
financial data. This considers data transfer to third
parties.
--------------------------- ------------------------------------------------------------------
Financial The main areas of
and treasury this principal risk * The Group's Treasury function is responsible for the
are the availability forward-planning and management of funding, interest
of funding and management rate, foreign currency exchange rates and certain
of cash flow, including commodity price risks. They report to the Treasury
liquidity requirements Committee and operate within clear policies and
and debt maturity procedures which are approved by the Board. The
profiles, to meet appropriateness of policies are reviewed on a regular
business needs. basis;
There is a risk
of a working capital
outflow if there * The Group's treasury policy is to maintain an
was a significant appropriate borrowing maturity profile and a
reduction in payment sufficient level of headroom in committed facilities.
terms to suppliers. This includes an assumption that supply chain finance
Some suppliers benefit facilities are not available for the benefit of
from access to supply suppliers;
chain finance facilities.
The withdrawal of
these facilities * There are governance processes in place to control
could lead to some purchases in foreign currency and management of
terms being reviewed. commodity prices;
In addition, exposure
to movement in foreign * For livestock and produce, we track prices and
exchange rates continues forecasts and enter into long-term contracts where
to require management. appropriate to ensure stability of price and supply;
and
The growth of wholesale
supply contracts
introduces credit * We have policies to control and monitor the credit
risk which requires risk across our increasing number of Wholesale
policies and monitoring customers.
to manage.
--------------------------- ------------------------------------------------------------------
1. General information and basis of preparation (continued)
Principal risks (continued)
RISKS DESCRIPTION MITIGATION
Food safety There is a risk
and product that the products * Monitoring processes are in place to manage food
integrity we sell are unsafe safety and product integrity throughout the Group and
or not of the integrity supply chain;
that our customers
expect. It is of
utmost importance * Regular assessments of our suppliers and own
to us, and to the manufacturing and store production facilities are
confidence that undertaken to ensure adherence to standards;
customers have in
our business, that
we meet the required * Our vertical integration model gives us control over
standards. If we the integrity of a significant proportion of our
do not do this it fresh food;
could impact business
reputation and financial
performance. * Management regularly monitors food safety and product
integrity performance and compliance as well as
conducting horizon scanning to anticipate emerging
issues, such as the new allergen regulation which
comes into force in 2021;
* The process is supported by external accreditation
and internal training programmes; and
* We work closely with our supply chain to understand
food provenance, sustainable and ethical practices.
---------------------------- ------------------------------------------------------------------
Health and The main aspect
safety of this principal * We have clear policies and procedures detailing the
risk is of injury controls required to manage health and safety risks
or harm to customers across the business;
or colleagues. Failure
to prevent incidents
could impact business * An ongoing training programme is in place for
reputation and customer front-line operators and management;
confidence and lead
to financial penalties.
* A programme of health and safety audits is in place
across the Group with resource dedicated to manage
this risk effectively; and
* Management regularly monitors health and safety
performance and compliance.
---------------------------- ------------------------------------------------------------------
People Our colleagues are
key to the achievement * We have fair employment policies, and competitive
of our plan, particularly remuneration and benefits packages;
as we improve the
business. There
is a risk that if * A Group-wide reward framework is in place and roles
we fail to attract, are evaluated against an external framework, driving
retain or motivate stronger consistency of rewards;
talented colleagues,
we will not provide
the quality of service * Our training and development programmes are designed
that our customers to give colleagues the skills they need to do their
expect. job and support their career aspirations;
* Line managers conduct regular talent reviews and
processes are in place to identify and actively
manage talent;
* We have worked to give colleagues increased
visibility and flexibility of their hours and rotas
with the introduction of a new People System and
modernised working patterns; and
* Colleague engagement surveys, listening sessions and
networking forums are used to understand and respond
to our colleagues.
---------------------------- ------------------------------------------------------------------
Regulation The Group operates
in an environment * We have a GSCOP compliance framework in place
governed by numerous including training for relevant colleagues and
regulations including processes to monitor compliance;
GSCOP (Groceries
Supply Code of Practice),
competition, employment, * We have a senior level working group in place to
health and safety review and improve GSCOP compliance activity;
and regulations
over the Group's
products. The Board * We have an independent whistleblowing line for
takes its responsibilities suppliers to provide feedback to the Group and a Code
very seriously and Compliance Officer so that action can be taken as
recognises that necessary;
breach of regulation
can lead to reputational
damage and financial * The Group monitors for potential regulatory change
damages to the Group. and the impact on contractual arrangements;
Consideration is
also given to any
potential changes * We have training, policies and legal guidance in
to regulations. place to support compliance with Competition Law and
other regulations; and
* We actively engage with government and regulatory
bodies on policy changes which could impact our
colleagues and our customers.
---------------------------- ------------------------------------------------------------------
1. General information and basis of preparation (continued)
Principal risks (continued)
UK - EU Trade
Throughout the year, uncertainty around the UK's future
relationship with the EU has impacted customer confidence. At the
half year, in light of this continued uncertainty and potential
impact on the operational environment for Morrisons, and the United
Kingdom generally, the decision was taken to create a separate
Brexit Group Risk. This was approved by the Audit Committee in
September and included in the risk disclosure in the Interim
Statement. This risk has now been renamed as UK - EU Trade.
Whilst the UK left the EU on 31 January 2020, uncertainty still
remains over the UK's future trading relationship with the EU and
the implications for the movement of goods across borders when the
transition period ends on 31 December 2020.
In February 2020, the UK government confirmed plans to introduce
import controls on EU goods at the border after the transition
period ends on 31 December 2020. There is also the potential for
substantial extra costs if the objective of a zero tariff trade
agreement is not achieved.
In our planning for the two previous Brexit deadlines in March
2019 and October 2019, we had evaluated a number of scenarios and
will continue to respond as further details emerge. Actions
previously taken include securing Authorised Economic Operator
status, maintaining a robust Treasury Policy for foreign exchange
transactions, actively engaging with our freight partners and
suppliers to ensure their preparedness and considering alternative
routes of supply. Potential impacts on the availability of labour
are being mitigated by further investment in automation,
particularly in our Manufacturing division and are being closely
monitored on a site by site basis.
The business remains focussed on executing its plans to mitigate
the identified risks arising from the UK's changing relationship
with the EU. This will include the impact of a proposed new points
based immigration system which is due to come into force on 1
January 2021 which may reduce access to EU labour. The Group is
monitoring ongoing developments through the transition period and
co-ordinating operational responses.
COVID-19
At the time of reporting, in March 2020, the Group continues to
closely monitor the constantly changing risk of the global COVID-19
pandemic. Our response is being coordinated through a COVID-19
Business Continuity team with full time representatives from all
business areas. The potential impact will depend on the severity
and length of the UK outbreak.
The key risks to our operations include:
-- The impact on our colleagues, especially those who are
at high risk and need to self isolate;
-- Disruption to our global supply chain through restrictions
on movement;
-- The impact on our suppliers, who we are continuing to
work closely with, especially those with smaller operations;
-- Short-term spikes in customer demand and the impact on
ongoing availability of key staple lines; and
-- A prolonged significant outbreak in the UK resulting in
geographical movement restrictions.
Responsibility statement
This statement is given pursuant to Rule 4 of the Disclosure and
Transparency Rules. It is given by each of the Directors.
To the best of each Director's knowledge:
(a) The consolidated financial statements, prepared in accordance
with the applicable set of accounting standards, give
a true and fair view of the assets, liabilities, financial
position and profit or loss of the Group and its subsidiaries
included in the consolidation as a whole; and
(b) the strategic report includes a fair review of the development
of the business and the position of the Group and its
subsidiaries included in the consolidation taken as a
whole, together with a description of the principal risks
and uncertainties that they face.
2. Segmental Reporting
The Group's principal activity is that of retailing, derived
from the UK.
The Group is required to determine and present its operating
segments based on the way in which financial information is
organised and reported to the chief operating decision-maker
(CODM). The CODM has been identified as the Executive Committee, as
this makes the key operating decisions of the Group and is
responsible for allocating resources and assessing performance.
Key internal reports received by the CODM, primarily the
management accounts, focus on the performance of the Group as a
whole. The operations of all elements of the business are driven by
the retail sales environment and hence have fundamentally the same
economic characteristics. All operational decisions made are
focussed on the performance and growth of the retail outlets and
the ability of the business to meet the supply demands of the
stores.
The Group has considered the overriding core principles of IFRS
8 'Operating segments' as well as its internal reporting framework,
management and operating structure. In particular, the Group
considered its retail outlets, the fuel sale operation, the
manufacturing entities, online operations and wholesale supply. The
Directors' conclusion is that the Group has one operating segment,
that of retailing.
3. Profit before exceptionals
'Profit before exceptionals' is defined as profit before
exceptional items and net retirement benefit interest. Further
detail on the definition of profit before tax and exceptionals,
profit before exceptionals after tax and earnings per share before
exceptionals is provided in the Glossary.
The Directors consider that these adjusted profit and adjusted
earnings per share measures referred to in the results provide
useful information on ongoing trends and performance. The
adjustments made to reported profit are to: exclude exceptional
items, which are significant in size and/or nature; exclude net
retirement benefit interest; and to apply a normalised tax rate of
23.1% (2019: 23.5%).
Profit before exceptionals and earnings per share before
exceptionals measures are not recognised measures under EU-adopted
IFRS and may not be directly comparable with adjusted measures used
by other companies. The classification of items excluded from
profit before exceptional requires judgement including considering
the nature, circumstances, scale and impact of a transaction.
Reversals of previous exceptional items are assessed based on the
same criteria.
Given the significance of the Group's property portfolio and the
quantum of impairment and property-related provisions recognised in
the consolidated statement of financial position, movements in
impairment and other property-related provisions would typically be
included as exceptional items, as would significant impairments or
impairment reversals of other non-current assets.
Despite being a recurring item, the Group has chosen to also
exclude net retirement benefit interest from profit before
exceptionals as it is not part of the operating activities of the
Group, and its exclusion is consistent with the way it has
historically been treated and with how the Directors assess the
performance of the business.
2020 2019 restated(1)
GBPm GBPm
-------------------------------------------------- ------ -----------------
Profit after tax 348 233
-------------------------------------------------- ------ -----------------
Add back: tax charge for the period(2) 87 70
Profit before tax 435 303
Adjustments for:
Impairment and provision for onerous
contracts(2) (2) 10
Profit/loss arising on disposal and
exit of properties(2) (66) -
Store restructuring and closure costs(2) 51 -
Other exceptional items(2) 9 42
Costs associated with the repayment
of borrowings(2) - 33
Retirement benefit exceptional items(2) - 26
Net retirement benefit interest (2) (19) (18)
------------------------------------------------- ------ -----------------
Profit before tax and exceptionals 408 396
Normalised tax charge at 23.1% (2019:
23.5%)(2,3) (94) (93)
-------------------------------------------------- ------ -----------------
Profit before exceptionals after tax 314 303
-------------------------------------------------- ------ -----------------
Earnings per share before exceptionals
(pence)
- Basic (note 8) 13.18 12.85
- Diluted (note 8) 13.03 12.57
------ ------------------------------------------ ------ -----------------
(1) For further details on the restatement of the reported
results for the 52 weeks ended 3 February 2019 from adopting IFRS
16 'Leases', see note 25.
(2) Adjustments marked 2 decrease post-tax adjusted earnings by
GBP34m (2019: increase of GBP70m) as shown in the reconciliation of
earnings disclosed in note 8.
(3) Normalised tax is defined in the Glossary.
3. Profit before exceptionals (continued)
Impairment and provision for onerous contracts
Following the Group's annual impairment and onerous contract
review a net credit of GBP2m has been recognised. This includes a
net impairment reversal of GBP15m (GBP123m impairment reversal
offset by GBP108m impairment charge). The GBP108m impairment charge
includes GBP59m in relation to property, plant and equipment,
GBP23m in relation to right-of-use assets, GBP11m in relation to
investment property and GBP15m in relation to intangible assets
(see notes 9, 10, 11 and 12). The GBP123m impairment reversal
includes GBP93m in relation to property, plant and equipment,
GBP24m in relation to right-of-use assets and GBP6m in relation to
investment property (see note 10, 11 and 12). A net GBP2m charge
has been recognised in relation to provisions for onerous
contracts. A GBP10m credit has been recognised following changes to
estimates in respect of lease terms. In addition, there has been a
charge in respect of amounts provided for onerous commitments and
receivables in respect of contract payments of GBP21m.
Impairment and provision for onerous contracts in the 52 weeks
ended 3 February 2019 totalled a net charge of GBP10m. This
comprised of a net impairment reversal of GBP2m (GBP175m impairment
reversal offset by GBP173m impairment charge), a net GBP11m charge
relating to provisions for onerous contracts, a release of accruals
for onerous commitments of GBP6m, and an increase in other property
provisions of GBP7m.
Profits/loss arising on disposal and exit of properties
Profits/loss arising on disposal and exit of properties, net of
fees incurred, amounted to GBP66m (2019: GBPnil). Of this amount,
GBP64m was realised following the sale of land and buildings in
respect of the Camden store (see note 13).
Store restructuring and closure costs
Store restructuring and closure costs recognised in the 52 weeks
ended 2 February 2020 totalled GBP51m (2019: nil). This includes
GBP46m in respect of restructuring of store management teams (2019:
nil) and GBP5m of restructuring costs relating to the closure of
four stores during the period (2019: nil).
Other exceptional items
Other exceptional items include:
-- a GBP6m charge, relating to one-off costs associated with
improvements to the Group's distribution network. These
costs were incurred as part of a programme to increase network
capacity and support the accelerated roll out of wholesale
supply (2019: GBP12m).
-- a net charge of GBP3m relating to costs incurred in relation
to legal cases in respect of historic events and costs associated
with other restructuring activity (2019: GBP2m).
In the 52 weeks ended 3 February 2019, other exceptional items
included a GBP28m charge in relation to increased inventory
provisioning as the Group continued to automate its ordering
systems; leading to operational changes, additional information
regarding stock levels, and a change in methodology for estimating
inventory provisions.
Costs associated with the repayment of borrowings
The costs incurred in the 52 weeks ended 3 February 2019
comprised GBP30m relating to financing charges on redemption of
financial instruments (primarily premiums) and GBP3m of fees and
premiums written off on the repayment of bonds. There were no
amounts relating to gains or losses reclassified to the income
statement on termination of hedging arrangements, which had
previously been recognised in reserves.
Retirement benefit exceptional items
In the 52 weeks ended 3 February 2019, the retirement benefit
exceptional items included costs of GBP19m in relation to an
exceptional curtailment charge following the closure of the Group's
Retirement Saver Plan to future accrual in September 2018. In
addition, there was a charge of GBP7m in relation to the estimated
cost of the equalisation of guaranteed minimum retirement benefits
for men and women, following a ruling by the High Court in October
2018.
4. Revenue
2020 2019
GBPm GBPm
---------------------------------- ------ ------
Sale of goods in-store and online 13,065 13,265
Other sales 800 705
---------------------------------- ------ ------
Total sales excluding fuel 13,865 13,970
Fuel 3,671 3,765
---------------------------------- ------ ------
Total revenue 17,536 17,735
---------------------------------- ------ ------
All revenue is derived from contracts with customers.
5. Finance costs and income
2020 2019 restated(1)
GBPm GBPm
----------------------------------------------------------- ----- ----------------
Interest payable on short-term loans and bank overdrafts (4) (3)
Interest payable on bonds (43) (48)
Interest on lease liabilities (63) (66)
Interest capitalised 2 1
----------------------------------------------------------- ----- ----------------
Total interest payable (108) (116)
Provisions: unwinding of discount (2) (3)
Other finance costs (1) (1)
----------------------------------------------------------- ----- ----------------
Finance costs before exceptionals (2) (111) (120)
Costs associated with the repayment of borrowings (note 3) - (33)
Finance costs (111) (153)
Bank interest and other finance income 4 4
Finance lease income 1 1
Finance income before exceptionals(2) 5 5
Net retirement benefit interest (notes 3 and 17) 19 18
Finance income 24 23
----------------------------------------------------------- ----- ----------------
Net finance costs (87) (130)
----------------------------------------------------------- ----- ----------------
(1) For further details on the restatement of the reported
results for the 52 weeks ended 3 February 2019 from adopting IFRS
16 'Leases', see note 25.
(2) Net finance costs before exceptionals marked 2 amount to
GBP106m (2019: GBP115m).
6. Taxation
2020 2019 restated(1)
GBPm GBPm
---------------------------------------------------- ----- ----------------
Current tax
---------------------------------------------------- ----- ----------------
- UK corporation tax 60 79
- Foreign tax 3 4
- Adjustments in respect of prior periods (4) 7
----------------------------------------------- ----- ----------------
59 90
---------------------------------------------------- ----- ----------------
Deferred tax
- Origination and reversal of timing differences 22 (25)
- Adjustments in respect of prior periods 6 5
----------------------------------------------- ----- ----------------
28 (20)
---------------------------------------------------- ----- ----------------
Tax charge for the period 87 70
--------------------------------------------------- ----- ----------------
(1) For further details on the restatement of the reported
results for the 52 weeks ended 3 February 2019 from adopting IFRS
16 'Leases', see note 25.
The effective tax rate for the year was 20.0% (2019: 23.1%). The
normalised tax rate for the year (excluding the impact of property
transactions, store restructuring and other adjustments) was 23.1%
(2019: 23.5%).
The normalised tax rate was 4.1% above the UK statutory tax rate
of 19%. The main factor increasing the normalised tax rate is
disallowed depreciation on UK properties which reflects the Group's
strategy to maintain a predominantly freehold estate.
Legislation to reduce the standard rate of corporation tax to
17% from 1 April 2020 was included in Finance Act 2016 and was
enacted in a previous period. Accordingly, deferred tax has been
provided at 19% or 17% depending upon when the temporary difference
is expected to reverse (2019: 19% or 17%).
The March 2020 Budget cancelled the planned reduction to 17% so
the UK statutory rate will remain at 19% from 1 April 2020. The
legislation was not enacted during the year so deferred tax has
been provided using the 17% rate. If deferred tax was calculated
using the 19% rate, the net deferred tax liability recognised at
the reporting date would be increased from GBP472m to GBP527m.
7. Dividends
Amounts recognised as distributed to equity holders in the
period:
2020 2019
GBPm GBPm
------------------------------------------------------------------------------------- ----- -----
Final dividend for the period ended 3 February 2019 of 4.75p (2018: 4.43p) 113 104
Special final dividend for the period ended 3 February 2019 of 4.00p (2018: 4.00p) 95 94
Interim dividend for the period ended 2 February 2020 of 1.93p (2019: 1.85p) 46 44
Special interim dividend for the period ended 2 February 2020 of 2.00p (2019: 2.00p) 48 47
------------------------------------------------------------------------------------- ----- -----
302 289
------------------------------------------------------------------------------------- ----- -----
The Directors propose a final ordinary dividend in respect of
the financial period ended 2 February 2020 of 4.84p per share which
will absorb an estimated GBP116m of shareholders' funds. Subject to
approval at the AGM, the final dividend will be paid on 29 June
2020 to shareholders who are on the register of members on 22 May
2020.
The dividends paid and proposed during the year are from
cumulative realised distributable reserves of the Company.
8. Earnings per share (EPS)
Basic EPS is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary
shares in issue during the period excluding shares held in trust.
For diluted EPS, the weighted average number of ordinary shares in
issue is adjusted to assume conversion of potentially dilutive
ordinary shares.
The Company has two (2019: two) classes of instrument that are
potentially dilutive: those share options granted to employees
where the exercise price together with the future IFRS 2 charge of
the option is less than the average market price of the Company's
ordinary shares during the period and contingently issuable shares
under the Group's Long Term Incentive Plans (LTIPs).
a) Basic and diluted EPS (unadjusted)
Reconciliations of the earnings and weighted average number of
shares used in the calculations are set out below:
2020 2019 restated(1)
------------ -------- ------ ---------- ---------
Weighted Weighted
Average Average
number of number of
Earnings shares EPS Earnings shares EPS
GBPm millions pence GBPm millions pence
------------------------------------- -------- ------------ ------ ---------- -------------- -------------
Unadjusted EPS
Basic EPS
Profit attributable to ordinary
shareholders 347.9 2,382.5 14.60 233.1 2,356.8 9.89
------------------------------------- -------- ------------ ------ ---------- -------------- -------------
Effect of dilutive instruments
Share options and LTIPs - 26.3 (0.16) - 53.2 (0.22)
------------------------------------- -------- ------------ ------ ---------- -------------- -------------
Diluted EPS 347.9 2,408.8 14.44 233.1 2,410.0 9.67
------------------------------------- -------- ------------ ------ ---------- -------------- -------------
(1) For further details on the restatement of the reported
results for the 52 weeks ended 3 February 2019 from adopting IFRS
16 'Leases', see note 25.
8. Earnings per share (continued)
b) EPS before exceptionals
EPS before exceptionals is defined as earnings per share before
exceptional items and net retirement benefit interest. Basic EPS is
adjusted to more appropriately reflect ongoing business
performance.
The reconciliation of the earnings used in the calculations of
EPS before exceptionals is set out below:
2020 2019 restated(1)
-------- ---------- ------ -------- ---------- ----------------
Weighted Weighted
average average
number of number of
Earnings shares EPS Earnings shares EPS
GBPm millions pence GBPm millions pence
---------------------------------------------- -------- ---------- ------ -------- ---------- ----------------
EPS before exceptional
Basic EPS before exceptionals
Profit attributable to ordinary shareholders 347.9 2,382.5 14.60 233.1 2,356.8 9.89
Adjustments to determine profit before
exceptionals (note 3) (34.0) - (1.42) 69.8 - 2.96
---------------------------------------------- -------- ---------- ------ -------- ---------- ----------------
313.9 2,382.5 13.18 302.9 2,356.8 12.85
Effect of dilutive instruments
Share options and LTIPs - 26.3 (0.15) - 53.2 (0.28)
---------------------------------------------- -------- ---------- ------ -------- ---------- ----------------
Diluted EPS before exceptionals 313.9 2,408.8 13.03 302.9 2,410.0 12.57
---------------------------------------------- -------- ---------- ------ -------- ---------- ----------------
(1) For further details on the restatement of the reported
results for the 52 weeks ended 3 February 2019 from adopting IFRS
16 'Leases', see note 25.
9. Goodwill and intangible assets
2020 2019
GBPm GBPm
----------------------------------- ----- -----
Net book value
At start of period 404 428
Additions 82 79
Interest capitalised 2 1
Disposals (1) -
Impairment (15) (11)
Amortisation charge for the period (91) (93)
------------------------------------ ----- -----
At end of period 381 404
------------------------------------ ----- -----
The Group has performed its annual assessment of its
amortisation policies and asset lives and deemed them to be
appropriate. Following the annual impairment review conducted by
the Group, an impairment charge of GBP15m (2019: GBP11m) has been
recognised in relation to intangible assets.
10. Property, plant and equipment
2020 2019 restated(1)
GBPm GBPm
------------------------------------------------ ----- ----------------
Net book value
At start of period 7,094 7,027
Additions 398 397
Acquisition of business - 5
Disposals (5) (15)
Transfers from investment property - 6
Transfers to assets classified as held-for-sale (3) (41)
Depreciation charge (371) (348)
Net impairment reversal 34 63
------------------------------------------------- ----- ----------------
At end of period 7,147 7,094
------------------------------------------------- ----- ----------------
(1) For further details on the restatement of the reported
results for the 52 weeks ended 3 February 2019 from adopting IFRS
16 'Leases', see note 25.
10. Property, plant and equipment (continued)
The Group has performed its annual assessment of its
depreciation policies and asset lives and deemed them to be
appropriate. There have been no changes made to asset category
lives during the year.
The cost of financing property developments prior to their
opening date has been included in the cost of the asset. The
cumulative amount of interest capitalised in the total cost above
amounts to GBP199m (2019: GBP199m).
Impairment
The Group considers that each store is a separate cash
generating unit (CGU) and therefore considers every store for an
indication of impairment annually. The Group calculates each
store's recoverable amount and compares this amount to its book
value. The recoverable amount is determined as the higher of 'value
in use' and 'fair value less costs of disposal'. If the recoverable
amount is less than the book value, an impairment charge is
recognised based on the following methodology:
'Value in use' is calculated by projecting individual store
pre-tax cash flows over the life of the store, based on forecasting
assumptions. The methodology used for calculating future cash flows
is to:
-- use the actual cash flows for each store in the current
year;
-- allocate a proportion of the Group's central costs to each
store on an appropriate basis;
-- project store cash flows over the next three years by applying
forecast sales and cost growth assumptions;
-- project cash flows beyond year three, for the life of each
store by applying a long-term growth rate;
-- discount the cash flows using a pre-tax rate of 9.0% (2019:
9.0%). The Group takes into account a number of factors
when assessing the discount rate, including the Group's
WACC and other wider market factors. The Group has evaluated
its discount rate following application of IFRS 16 and has
concluded that the discount rate applied is appropriate.
The Group will continue to assess this as market practice
as this area develops; and
-- consideration is given to any significant one-off factors
impacting the stores during the current year and any strategic
or market factors which may impact future store performance.
'Fair value less costs of disposal' is estimated by the
Directors based on their knowledge of individual stores, the
markets they serve and likely demand from grocers or other
retailers. This assessment takes into account the continued low
demand from major grocery retailers for supermarket space, when
assessing rent and yield assumptions on a store by store basis. In
certain years, the Directors also obtain store level valuations
prepared by independent valuers to aid this assessment. When
assessing the assumptions at individual store level the Directors
take into account the following factors:
-- whether a major grocery operator might buy the store, taking
into consideration whether they are already located near
the store, and whether the store size is appropriate for
their business model, and then if not;
-- assessing whether a smaller store operator might buy the
store, in which case the value has been updated to reflect
the Directors' assessment of the yield which would be achievable
if such an operator acquired the store, and then if not;
and
-- assessing whether a non-food operator might buy the store,
in which case the value has been updated to reflect the
Directors' assessment of the yield which would be achievable
if such an operator acquired the store.;
Having applied the above methodology and assumptions, the Group
has recognised a net impairment reversal of GBP34m (GBP93m
impairment reversal offset by GBP59m impairment charge) during the
year in respect of property, plant and equipment (2019: net GBP63m
impairment reversal; GBP155m impairment reversal offset by GBP92m
impairment charge). This movement reflects fluctuations from store
level trading performance and local market conditions.
At 2 February 2020, the assumptions to which the value in use
calculation is most sensitive are the discount and growth rates.
The Group has estimated a change of +/- 1% in either would result
in a change in impairment of c.GBP60m.
11. Right-of-use assets
2020 2019 restated(1)
GBPm GBPm
--------------------------------- ----- ----------------
Net book value
At start of period 929 970
Additions 75 66
Disposals (3) -
Depreciation charge (60) (58)
Net impairment reversal/(charge) 1 (49)
---------------------------------- ----- ----------------
At end of period 942 929
---------------------------------- ----- ----------------
(1) For further details on the restatement of the reported
results for the 52 weeks ended 3 February 2019 from adopting IFRS
16 'Leases', see note 25.
The Group has performed its annual assessment of its
depreciation policies and asset lives and deemed them to be
appropriate. There have been no changes made to asset category
lives during the year.
11. Right-of-use assets (continued)
Impairment
Having applied the same methodology and key assumptions as for
property, plant and equipment as set out in note 10, the Group has
recognised a net impairment reversal of GBP1m (GBP24m impairment
reversal offset by GBP23m impairment charge) during the year in
respect of right-of-use assets (2019: net GBP49m impairment; GBP69m
impairment charge offset by GBP20m reversal of impairment). This
movement reflects fluctuations from store level trading performance
and local market conditions.
At 2 February 2020, the assumptions to which the value in use
calculation is most sensitive are the discount and growth rates.
The Group has estimated a reasonably possible change of +/- 1% in
either would result in a change in impairment of c.GBP15m.
12. Investment property
2020 2019 restated(1)
GBPm GBPm
------------------------------------------ ----- ----------------
Net book value
At start of period 60 69
Additions 7 1
Transfer to property, plant and equipment - (6)
Disposals (1) (1)
Depreciation charge (3) (2)
Net impairment (5) (1)
------------------------------------------ ----- ----------------
At end of period 58 60
------------------------------------------ ----- ----------------
(1) For further details on the restatement of the reported
results for the 52 weeks ended 3 February 2019 from adopting IFRS
16 'Leases', see note 25.
13. Assets classified as held-for-sale
2020 2019
GBPm GBPm
-------------------------------------------- ----- -----
Net book value
At start of period 39 4
Transfer from property, plant and equipment 3 41
Disposals (39) (6)
-------------------------------------------- ----- -----
At end of period 3 39
-------------------------------------------- ----- -----
On 13 December 2019, the Group disposed of GBP38m of assets
previously classified as held-for-sale in relation to its Camden
site. The consideration includes GBP85m in cash (GBP25m received in
the period, with a further GBP20m due in 2020 and the remaining
GBP40m due in 2025) together with GBP34m in non-cash consideration
due by 2024 (representing the undiscounted value of the future
lease of a new store on part of the same site). The total
consideration has been discounted, resulting in a profit on
disposal of GBP64m after disposal costs in the 52 week period ended
2 February 2020. Consideration receivable as at the period end is
included within both current and non-current trade and other
receivables, on a discounted basis.
14. Inventories
2020 2019
GBPm GBPm
--------------- ----- -----
Finished goods 660 713
--------------- ----- -----
Unearned elements of commercial income are deducted from
finished goods as the inventory has not been sold.
15. Trade and other receivables
2020 2019 restated(1)
GBPm GBPm
---------------------------------------------------- ----- ----------------
Finance leases - Group is lessor 8 8
Other receivables 63 -
---------------------------------------------------- ----- ----------------
Total non-current 71 8
---------------------------------------------------- ----- ----------------
Commercial income trade receivables 7 4
Accrued commercial income 28 28
Other trade receivables 175 167
Less: provision for impairment of trade receivables (4) (4)
---------------------------------------------------- ----- ----------------
Trade receivables 206 195
Prepayments and accrued income 116 132
Other receivables 31 17
---------------------------------------------------- ----- ----------------
Total current 353 344
---------------------------------------------------- ----- ----------------
(1) For further details on the restatement of the reported
results for the 52 weeks ended 3 February 2019 from adopting IFRS
16 'Leases', see note 25.
Non-current other receivables comprise deferred consideration in
relation to the disposal of the Camden site (note 13) due after
more than one year. The amount includes GBP33m of deferred cash
consideration on a discounted basis and GBP30m representing the
fair value of a future lease of a newly constructed supermarket and
convenience store on part of the site.
As at 2 February 2020 and 3 February 2019, trade receivables
that were neither past due nor impaired, related to a number of
debtors for whom there is no recent history of default. The other
classes of receivables do not contain impaired assets.
As at 15 March 2020, GBP6m of the GBP7m commercial income trade
receivables balance had been settled and GBP20m of the GBP28m
accrued commercial income balance had been invoiced and
settled.
16. Trade and other payables
2020 2019 restated(1)
GBPm GBPm
-------------------------------------------- ----- ----------------
Trade payables 2,467 2,449
Less: commercial income due, offset against
amounts owed (21) (27)
-------------------------------------------- ----- ----------------
2,446 2,422
Other taxes and social security payable 131 113
Other payables 58 109
Accruals and deferred income 416 426
-------------------------------------------- ----- ----------------
3,051 3,070
-------------------------------------------- ----- ----------------
(1) For further details on the restatement of the reported
results for the 52 weeks ended 3 February 2019 from adopting IFRS
16 'Leases', see note 25.
Included within accruals and deferred income is GBP1m (2019:
GBP1m) in respect of deferred commercial income. Amounts accrued in
relation to store restructuring activity are included within
accruals and deferred income at 2 February 2020.
As at 15 March 2020, GBP17m of the GBP21m commercial income due
above had been offset against payments made.
17. Retirement benefits
Defined benefit schemes
The Group operates a number of defined benefit retirement
schemes (together 'the Schemes') providing benefits based on a
benefit formula that depends on factors including the employee's
age and number of years of service. The Morrison and Safeway
Schemes provide retirement benefits based on either the employee's
compensation package and/or career average revalued earnings (CARE)
(the 'CARE Schemes'). The CARE Schemes are not open to new members
and were closed to future accrual in July 2015. The Retirement
Saver Plan ('RSP') is a cash balance scheme, which provides a lump
sum benefit based upon a defined proportion of an employee's annual
earnings in each year, which is revalued each year in line with
inflation subject to a cap. The RSP was closed to future accrual in
September 2018.
The position of each scheme at 2 February 2020 is a follows:
2020 2020 2019 2019
CARE RSP CARE RSP
Statement of financial position GBPm GBPm GBPm GBPm
------------------------------------------ -------- ------ -------- ------
Fair value of scheme assets 5,013 389 4,471 349
Present value of obligations (4,053) (405) (3,741) (391)
------------------------------------------- -------- ------ -------- ------
Net retirement benefit surplus/(deficit) 960 (16) 730 (42)
------------------------------------------- -------- ------ -------- ------
The movement in the fair value of the Schemes' assets over the
period was as follows:
2020 2019
GBPm GBPm
-------------------------------------- ----- -----
Net retirement benefit surplus
at start of the period 688 594
Net interest income 19 18
Settlement and curtailment gain - 2
Curtailment loss from closure
of the retirement benefit scheme - (19)
Remeasurement in other comprehensive
income 231 100
Employer contributions 9 56
Current service cost - (53)
Past service cost - (7)
Administrative expenses (3) (3)
--------------------------------------- ----- -----
Net retirement benefit surplus
at end of the period 944 688
--------------------------------------- ----- -----
At 2 February 2020, schemes in surplus have been disclosed
within the assets in the Consolidated statement of financial
position. The Group obtained legal advice with regard to the
recognition of a retirement benefit surplus and also recognition of
a minimum funding requirement under IFRIC 14 'IAS 19 - The limit on
a defined benefit asset, minimum funding requirement and their
interaction'. This advice concluded that recognition of a surplus
is appropriate on the basis that the Group has an unconditional
right to a refund of a surplus. In respect of the RSP this is on
the basis that paragraph 11(a) of IFRIC 14 applies, enabling a
refund of surplus during the life of the RSP. In respect of the
Morrison Scheme, it is on the basis that paragraph 11(b) or 11(c)
of IFRIC 14 applies enabling a refund of surplus assuming the
gradual settlement of the scheme liabilities over time until all
members have left the scheme or the full settlement of the Scheme's
liabilities in a single event (i.e. as a scheme wind up). In
respect of the Safeway Scheme, a refund is available on the basis
that paragraph 11(b) of IFRIC 14 applies. Amendments to the current
version of IFRIC 14 are currently being considered. The legal
advice received by the Group has concluded that the above
accounting treatment should not be materially affected by the 2015
exposure draft of the revised wording to IFRIC 14.
Settlement and curtailment losses in the 52 weeks ended 3
February 2019 include a GBP19m exceptional charge as a result of
the closure of the RSP to future accrual in September 2018.
The Group recognised a past service cost of GBP7m in the 52
weeks ended 3 February 2019 in relation to the estimated cost of
the equalisation of guaranteed minimum retirement benefits for men
and women, following a ruling by the High Court in October
2018.
Assumptions
The main financial assumptions used by the Group to calculate
the net retirement benefit surplus/deficit were as follows:
2020 2020 2019 2019
CARE RSP CARE RSP
Discount rate applied to scheme liability (% p.a.) 1.8% 1.8% 2.8% 2.7%
Inflation assumption (RPI) (%p.a.) 2.9% 2.9% 3.2% 3.2%
---------------------------------------------------- ------ ----- ------ -----
17. Retirement benefits (continued)
Assumptions (continued)
Assumptions regarding future mortality experience are set based
on actuarial advice and in accordance with published statistics.
The mortality tables used for the 52 weeks ended 2 February 2020
are the S2PMA/S2PFA-Heavy mortality tables (males/females) based on
year of birth with a scaling factor of 110% applied to the
mortality rates in both the Morrison and Safeway Schemes, with CMI
2018 core projections and a long-term rate of improvement of 1.5%
p.a. For the 52 weeks ended 3 February 2019, the Group used the
S2PMA/S2PFA-Heavy mortality tables (males/females) based on year of
birth with a scaling factor of 110%/100% applied to the mortality
rates in the Morrison/Safeway Scheme respectively, with CMI 2017
projections and a long-term rate of improvement of 1.5% p.a.
The latest full actuarial valuations were carried out as at 1
April 2019 for the Safeway Scheme and 5 April 2019 for the Morrison
Scheme and the RSP. The valuations indicated that, on the agreed
funding basis, the Safeway, Morrison and RSP Schemes had surpluses
of GBP518m, GBP157m and GBP7m respectively. As a result of these
funding positions there are currently no deficit contributions
payable. As such there is no 'minimum funding requirement' in
force.
Defined contribution scheme
The Group opened a defined contribution retirement benefit
scheme called the Morrisons Personal Retirement Scheme ('MPRS') for
colleagues during the 53 weeks ended 4 February 2018. The MPRS
became the auto enrolment scheme for the Group. As the MPRS is a
defined contribution scheme, the Group is not subject to the same
investment, interest rate, inflation or longevity risks as it is
for the defined benefit schemes. The benefits that employees
receive are dependent on the contributions paid, investment returns
and the form of benefit chosen at retirement. During the 52 weeks
ended 2 February 2020, the Group paid contributions of GBP78m to
the MPRS (2019: GBP28m), and expects to contribute GBP80m for the
following period (2019: GBP79m).
18. Cash generated from operations
2020 2019 restated(1)
GBPm GBPm
-------------------------------------------------------------------- ------ ------------------
Profit for the period 348 233
Net finance costs 87 130
Taxation charge 87 70
Share of profit of joint venture (net of tax) (1) (1)
-------------------------------------------------------------------- ------ ------------------
Operating profit 521 432
Adjustments for:
Depreciation and amortisation 525 501
Impairment 108 173
Impairment reversal (123) (175)
Profit/loss arising on disposal and exit of properties (66) -
Gain arising on reduction of lease terms (10) -
Defined benefit scheme contributions paid less operating expenses (5) 21
Share-based payments charge 26 34
Decrease/(Increase) in inventories(2) 53 (27)
Increase in Trade and other receivables(2) (14) (89)
Increase in Trade and other payables(2) 29 114
Decrease in provisions(2) (27) (7)
-------------------------------------------------------------------- ------ ----------------
Cash generated from operations 1,017 977
-------------------------------------------------------------------- ------ ------------------
(1) For further details on the restatement of the reported
results for the 52 weeks ended 3 February 2019 from adopting IFRS
16 'Leases', see note 25.
Total working capital inflow (the sum of items marked (2) in the
table) is GBP41m in the 52 weeks ended 2 February 2020 (2019: GBP9m
outflow). This includes GBP2m (2019: GBP12m) as a result of the
current year charges in respect of onerous contracts and accruals
of onerous commitments and GBP63m of non-cash exceptional charges
(2019: GBPnil), net of GBP41m (2019: GBP6m) of onerous payments and
other non-operating payments of GBP1m (2019: GBP5m). When adjusted
to exclude these items, the working capital inflow is GBP18m (2019:
GBP10m outflow).
19. Analysis of net debt(1)
2020 2019 restated(2)
GBPm GBPm
--------------------------------------- -------- -----------------
Cross-currency interest rate swaps(3) - 9
Fuel and energy price contracts - 6
--------------------------------------- -------- -----------------
Non-current financial assets - 15
--------------------------------------- -------- -----------------
Foreign exchange forward contracts - 3
Fuel and energy price contracts 1 16
Current financial assets 1 19
--------------------------------------- -------- -----------------
Bonds(3) (237) -
Other short-term borrowings(3) - (178)
Cross-currency interest rate swaps(3) (4) -
Lease liabilities(3) (72) (69)
Foreign exchange forward contracts (17) (4)
Fuel and energy price contracts (15) (1)
Current financial liabilities (345) (252)
--------------------------------------- -------- -----------------
Bonds(3) (1,110) (1,013)
Revolving credit facility(3) 2 (97)
Lease liabilities(3) (1,304) (1,328)
Fuel and energy price contracts (7) (2)
Non-current financial liabilities (2,419) (2,440)
--------------------------------------- -------- -----------------
Cash and cash equivalents 305 264
--------------------------------------- -------- -----------------
Net debt(1) (2,458) (2,394)
--------------------------------------- -------- -----------------
(1) Net debt is defined in the Glossary.
(2) For further details on the restatement of the reported
results for the 52 weeks ended 3 February 2019 from adopting IFRS
16 'Leases', see note 25.
Total net liabilities from financing activities (the sum of
items marked (3) in the table) is GBP2,725m in the 52 weeks ended 2
February 2020 (2019: GBP2,676m). Of the GBP49m increase (2019:
GBP42m decrease) in net liabilities from financing activities,
GBP67m (2019: GBP56m) relates to non-cash movements offset by
GBP18m (2019: GBP98m) related to cash movements.
Cash and cash equivalents include restricted balances of GBPnil
(2019: GBP3m) which is held by Farock Insurance Company Limited, a
subsidiary of Wm Morrison Supermarkets PLC.
20. Financial instruments
2019
2020 2020 Carrying 2019
Carrying amount Fair Value amount Fair Value
GBPm GBPm GBPm GBPm
----------------------------------------- ----------------- ------------ ---------- ------------
Derivative financial assets - - 15 15
----------------------------------------- ----------------- ------------ ---------- ------------
Total non-current financial assets - - 15 15
----------------------------------------- ----------------- ------------ ---------- ------------
Derivative financial assets 1 1 19 19
----------------------------------------- ----------------- ------------ ---------- ------------
Total current financial assets 1 1 19 19
Borrowings (237) (237) (178) (178)
Derivative financial liabilities (36) (36) (5) (5)
----------------------------------------- ----------------- ------------ ---------- ------------
Total current financial liabilities (273) (273) (183) (183)
Borrowings (1,108) (1,238) (1,110) (1,182)
Derivative financial liabilities (7) (7) (2) (2)
----------------------------------------- ----------------- ------------ ---------- ------------
Total non-current financial liabilities (1,115) (1,245) (1,112) (1,184)
----------------------------------------- ----------------- ------------ ---------- ------------
The fair value of the sterling and euro denominated bonds are
measured using closing market prices (level 1) (3 February 2019:
Level 1). The fair value of all derivative financial instruments
are calculated by using benchmark observable market interest rates
and discounted future cash flows (level 2) (3 February 2019: Level
2).
21. Share capital and share premium
Number of
shares Share capital Share premium Total
millions GBPm GBPm GBPm
-------------------------- ---------- -------------- -------------- ------
At 4 February 2019 2,368.3 237 178 415
Share options exercised
and shares issued under
LTIP schemes(1) 36.7 3 14 17
--------------------------- ---------- -------------- -------------- ------
At 2 February 2020 2,405.0 240 192 432
--------------------------- ---------- -------------- -------------- ------
(1) The GBP3m movement in share capital has been rounded down to
ensure that the total movement and total share capital positions,
are correctly stated.
All issued shares are fully paid and have a par value of 10p per
share (2019: 10p per share). The Group did not acquire any of its
own shares for cancellation in the 52 weeks ended 2 February 2020
or the 52 weeks ended 3 February 2019. The holders of ordinary
shares are entitled to receive dividends as declared and are
entitled to one vote per share at the meetings of the Company.
Trust shares
Included in retained earnings is a deduction of GBP30m (2019:
GBP21m) in respect of own shares held at the reporting date. This
represents the cost of 14,215,041 (2019: 9,885,248) of the Group's
ordinary shares (nominal value of GBP1.4m (2019: GBP1.0m)). These
shares are held in a trust and were acquired by the business to
meet obligations under the Group's employee share plans using funds
provided by the Group. The market value of the shares at 2 February
2020 was GBP26m (2019: GBP23m). The trust has waived its right to
dividends. These shares are not treasury shares as defined by the
London Stock Exchange.
During the period, the Group acquired 4,881,284 (2019:
3,945,258) of its own shares to hold in trust for consideration of
GBP10m (2019: GBP9m), and utilised 551,491 (2019: 1,721,480) trust
shares to satisfy awards under the Group's employee share
plans.
Proceeds from exercise of share awards
The Group issued 8,532,407 (2019: 12,440,132) new shares to
satisfy options exercised by employees during the period in respect
of the Group's Share save schemes. Proceeds received on exercise of
these shares amounted to GBP14m (2019: GBP20m) and these have been
recognised as an addition to share capital and share premium in the
period. In addition, the Group issued 28,166,736 (2019: nil) shares
under the Group's Long Term Incentive Plan ('LTIP') scheme for
nominal value.
Settlement of share awards
During the 52 weeks ended 2 February 2020, the Group has settled
551,491 of share options out of trust shares which have vested
during the period net of tax. The Group paid the GBP2m (2019:
GBP5m) in cash on behalf of the employees, rather than selling
shares on the employees' behalf to settle the employee's tax
liability on vesting of share options.
22. Commercial income
Types of commercial income recognised by the Group and the
recognition policies are:
Type Description Recognition
of commercial
income
Marketing Examples include Income is recognised dependent on
and income in respect the terms of the specific supplier
advertising of in-store and agreement in line with when performance
funding online marketing obligations in the agreement are
and point of sale, met. Income is invoiced once the
as well as funding performance conditions in the supplier
for advertising. agreement have been achieved.
------------------------- --------------------------------------------
Volume-based Income earned by Income is recognised through the
rebates achieving volume year based on forecasts for expected
or spend targets sales or purchase volumes, informed
set by the supplier by current performance, trends and
for specific products the terms of the supplier agreement.
over specific periods. Income is invoiced throughout the
year in accordance with the specific
supplier terms. In order to minimise
any risk arising from estimation,
supplier confirmations are also obtained
to agree the final value to be recognised
at year end.
------------------------- --------------------------------------------
The amounts recognised as a deduction from cost of sales
relating to the two types of commercial income are detailed as
follows:
2020 2019
GBPm GBPm
----------------------------------- ------ ------
Commercial income:
Marketing and advertising funding 78 51
Volume-based rebates 113 135
----------------------------------- ------ ------
Total commercial income 191 186
----------------------------------- ------ ------
23. Related party transactions
The Group's related party transactions in the period include the
remuneration of the senior managers, and the Directors' emoluments
and retirement benefit entitlements, share awards and share options
as disclosed in the audited section of the Directors' remuneration
report, which forms part of the Group's Annual Report and Financial
Statements.
During the 52 weeks ended 2 February 2020, the Group received a
dividend of GBP9m (2019: GBP7m) from MHE JVCo Limited. The Group
has a 51.1% interest in MHE JVCo Limited.
24. Guarantees and contingent liabilities
Following the disposal of the land and building of its customer
fulfilment centre at Dordon to a third party, the Group continues
to guarantee the lease in respect of this site through until 2038.
If the lessee were to default during the period of guarantee, their
lease obligations could revert back to the Group under the terms of
the guarantee and become a liability of the Group. Should the
lessee default, the additional future commitment is estimated at up
to GBP30m (2019: GBP31m).
The Group has an ongoing legal case brought by a number of
current and former colleagues relating to employee data theft in
the 52 weeks ended 1 February 2015. In December 2017, the High
Court concluded that the Group was liable for the actions of the
former employee who conducted the data theft. The Group launched an
appeal to this judgement and the High Court has confirmed that
there will be no hearings on the level of compensation until the
appeal has been concluded. During the 52 weeks ended 3 February
2019 the High Court rejected this appeal and the Group is now
appealing to the Supreme Court. The Supreme Court hearing took
place in November 2019 and the Group is waiting for the decision.
It is the Directors' view that at this stage of the process the
Group cannot reliably assess the outcome of the case nor reasonably
estimate the quantum of any loss and as such no provision has been
recognised in these consolidated financial statements.
25. Changes in accounting policies
The Group has adopted the fully retrospective approach to
transition for IFRS 16 'Leases' and under this approach, the
opening consolidated statement of financial position as at 5
February 2018 and the comparative consolidated statement of
financial position as at 3 February 2019 have been restated.
Impact on the consolidated income statement
The adoption of IFRS 16 resulted in changes to the consolidated
income statement, as previously recognised straight-line rental
costs were removed and replaced with a depreciation charge on the
right-of-use assets and a finance cost on the lease liabilities.
The impact of IFRS 16 in the 52 weeks ended 3 February 2019 was to
change each line as follows:
2019
------------------------------------------------------------ -------------------------------------------------------
Before exceptionals Exceptionals Total
GBPm GBPm GBPm
------------------------------------------------------------ ------ ---------------------- --------------- ------
Cost of sales 45 45
-------------------------------------------------------------------- ---------------------- --------------- ------
Gross profit 45 45
Profit/loss on disposal and exit of properties - (2) (2)
Administrative expenses - (5) (5)
-------------------------------------------------------------------- ---------------------- --------------- ------
Operating profit 45 (7) 38
Finance costs (56) - (56)
Finance income 1 - 1
Profit before taxation (10) (7) (17)
Taxation 2 4 6
-------------------------------------------------------------------- ---------------------- --------------- ------
Profit for the period attributable to the owners of the Company (8) (3) (11)
-------------------------------------------------------------------- ---------------------- --------------- ------
Earnings per share (pence)
- Basic (0.45)
- Diluted (0.44)
-------------------------------------------------------------------- ---------------- ---------------- -----------
During the 52 weeks ended 3 February 2019, the following lines
in the consolidated income statement were principally impacted by
IFRS 16:
Impact on profit before exceptionals after tax:
-- Cost of sales - a net credit of GBP45m was recognised, being
the reversal of previously recognised rent payments (GBP103m)
offset by the depreciation charge on the right-of-use assets
and leased assets in investment property (GBP58m).
-- Net finance costs - additional finance costs of GBP55m were
recognised on IFRS 16 lease liabilities.
-- The net impact of all of the adjustments in the table above
reduced reported profit before tax and exceptionals by GBP10m
and profit before exceptionals after tax by GBP8m.
25. Changes in accounting policies (continued)
Impact on exceptional items:
-- Profit/loss on disposal and exit of properties - an additional
GBP2m of lease disposal costs were recognised.
-- Administrative expenses - an additional GBP5m net charge
was recognised being the net impact of additional impairment
from applying IFRS 16 of GBP53m (being GBP49m charge for
right-of-use assets, GBP3m charge for property, plant and
-- The net impact of all of the adjustments in the table above
reduced exceptionals after tax by GBP3m.
-- All of the above items were classified as exceptional items
in line with the Group's policy.
Impact on the consolidated statement of financial position
Upon adoption of IFRS 16, the Group recognised right-of-use
assets (representing the right to use the underlying assets) and
lease liabilities for lease payments on the discounted future
obligations.
The impact of IFRS 16 as at 5 February 2018 and at 3 February
2019 was to change each line as follows:
2019 2018
GBPm GBPm
------------------------------- -------- --------
Assets
Property, plant and equipment (218) (216)
Right-of-use assets 929 970
Investment property 34 36
Trade and other receivables 8 8
Non-current assets 753 798
------------------------------- -------- --------
Trade and other receivables (3) (3)
Current assets (3) (3)
------------------------------- -------- --------
Liabilities
Trade and other payables 15 60
Lease liabilities (69) (59)
Current liabilities (54) 1
------------------------------- -------- --------
Lease liabilities (1,328) (1,354)
Deferred tax liabilities 69 63
Provisions 257 200
------------------------------- -------- --------
Non-current liabilities (1,002) (1,091)
------------------------------- -------- --------
Net assets (306) (295)
------------------------------- -------- --------
Shareholders' equity
Retained earnings and other
reserves (306) (295)
------------------------------- -------- --------
Total equity attributable to
the owners of the Company (306) (295)
------------------------------- -------- --------
As at 3 February 2019, IFRS 16 principally impacted the
following lines in the consolidated statement of financial
position:
Right-of-use assets of GBP929m (2018: GBP970m) were recognised
and presented separately in the consolidated statement of financial
position. Included within this balance were assets reclassified
from property, plant and equipment of GBP218m (2018: GBP216m) and
additional accumulated impairment of GBP386m (2018: GBP352m).
Investment property right-of-use assets of GBP34m (2018:
GBP36m), have been recognised in respect of leasehold investment
property. Included within this balance was additional accumulated
impairment of GBP75m (2018: GBP96m).
Lease liabilities of GBP1,397m (2018: GBP1,413m) were recognised
and split between current and non-current on the face of the
consolidated statement of financial position.
Deferred tax liabilities decreased by GBP69m (2018: GBP63m) in
relation to the tax relief available for the transition adjustment
that will be realised over the remaining life of the leases.
Provisions reduced by GBP257m (2018: GBP200m) as onerous lease
provisions are derecognised on application of IFRS 16.
The net impact of all of the adjustments in the table above has
decreased retained earnings and other reserves by GBP306m (2018:
GBP295m).
25. Changes in accounting policies (continued)
Impact on the consolidated statement of cash flows
The net cash movement has not changed following the adoption of
IFRS 16. However, the presentation in the consolidated cash flow
statement has changed, with lease payments, which were previously
recognised within cash flows from operating activities, being split
between the interest element (which remains within cash flows from
operating activities) and the capital element (now disclosed within
cash flows from financing activities). This is detailed below:
2019
GBPm
-------------------------------------------- ------
Cash flows from operating activities
Cash generated from operations 135
Interest paid (66)
Net cash inflow from operating activities 69
-------------------------------------------- ------
Cash flows from financing activities
Repayment of lease obligations (69)
-------------------------------------------- ------
Net cash outflow from financing activities (69)
-------------------------------------------- ------
Net movement in cash and cash equivalents -
-------------------------------------------- ------
During the 52 weeks ended 3 February 2019, the following lines
in the consolidated cash flow statement were principally impacted
by IFRS 16:
-- Cash generated from operations - increased by GBP135m as straight-line
rent payments are no longer recognised.
-- Interest paid - GBP66m of interest payments were recognised
relating to the finance element of lease payments.
-- Repayment of lease obligations - GBP69m of payments were recognised
relating to the capital element of lease payments.
-- There was no net impact of these adjustments on cash flow
in the period.
Glossary
Alternative Performance Measures
In response to the Guidelines on Alternative Performance
Measures (APMs) issued by the European Securities and Markets
Authority (ESMA), we have provided additional information on the
APMs used by the Group. The Directors use the APMs listed below as
they are critical to understanding the financial performance and
financial health of the Group. As they are not defined by IFRS,
they may not be directly comparable with other companies who use
similar measures.
On transition to IFRS 16, the definitions of net debt and return
on capital employed (ROCE) changed. Net debt now includes current
and non-current lease liabilities. Previously, ROCE took into
account the operating lease rentals charge (on land and buildings)
as part of the return and a lease adjustment (10 times rent
charged) for the capital employed element. Following adoption of
IFRS 16 and the recognition of lease liabilities and assets, these
adjustments are no longer necessary in the ROCE calculation.
Amounts relating to these measures included within this statement
have been restated unless detailed otherwise.
Measures Closest Definition and Reconciliation
equivalent purpose for 2019/20
IFRS Group measures
Measure (1)
Profit Measures
Like-for-like Revenue Percentage 52 weeks ended 2 February 2020 %
(LFL) change in Group LFL (exc. fuel) (0.8)%
sales growth year-on-year ---------------------------------
sales Group LFL (inc. fuel) (1.1)%
(excluding VAT), ---------------------------------
removing Net new space (inc. fuel) (0.0)%
the impact of ---------------------------------
new store Total revenue year-on-year (1.1)%
openings and ---------------------------------
closures
in the current
or previous
financial year.
The measure is
used
widely in the
retail
industry as an
indicator
of ongoing sales
performance.
It is also a key
measure
for Director and
management
remuneration.
-------------- ----------------- ------------------------------------------------------------------
Total sales Revenue Including fuel: A reconciliation
growth Percentage of total sales
change in including and
year-on-year excluding fuel
total is provided in
reported note 4.
revenue.
Excluding fuel:
Percentage
change in
year-on-year
total
sales excluding
fuel.
This measure
illustrates
the total
year-on-year
sales growth.
This measure is
a key
measure for
Director
and management
remuneration.
-------------- ----------------- ------------------------------------------------------------------
Profit Profit before Profit before A reconciliation
before tax tax tax and of this measure
and exceptionals is is provided in
exceptionals defined note 3.
as profit before
tax,
exceptional
items and
net retirement
benefit
interest. This
excludes
exceptional
items which
are significant
in
size and/or
nature
and net
retirement
benefit
interest.
This measure is
a key
measure used by
the
Directors. It
provides
key information
on
ongoing trends
and
performance of
the
Group and is
used for
Director and
management
remuneration.
-------------- ----------------- ------------------------------------------------------------------
Profit before Profit after Profit before GBP314m being
exceptionals tax tax and profit before
after tax exceptionals tax and exceptionals
after (GBP408m) less
a normalised tax a normalised
charge. tax charge (GBP94m)
(see note 3).
This measure is
used
by the Directors
as
it provides key
information
on ongoing
trends and
performance of
the
Group, including
a
normalised tax
charge.
-------------- ----------------- ------------------------------------------------------------------
(1) Certain ratios referred to in the financial statements are
calculated using more precise numbers rather than rounded numbers.
These stated ratios may therefore differ slightly to those
calculated by the numbers in this report due to rounding (as
numbers in the financial statements are presented in round
millions).
Glossary (continued)
Measures Closest equivalent Definition and purpose Reconciliation
IFRS for 2019/20 Group
measure measures (1)
Profit Measures (continued)
Operating Operating profit(2) Reported operating GBP513m being
profit before profit before exceptional reported operating
exceptionals items, which are significant profit (GBP521m)
in size and/or nature. less profit/loss
on disposal and
This measure is used exit of properties
by the Directors as (GBP66m), and
it provides key information impairment and
on on-going trends provisions for
and performance of onerous contracts
the Group. (GBP2m) plus
store restructuring
and closure costs
(GBP51m) and
other exceptional
items (GBP9m).
--------------------- -------------------------------- ---------------------
Net finance Finance costs Reported net finance A reconciliation
costs before costs excluding the of this measure
exceptionals impact of net retirement is provided in
benefit interest and note 5.
other exceptional items,
which are significant
in size and/or nature.
This measure is used
by the Directors as
it provides key information
on ongoing cost of
financing excluding
the impact of exceptional
items.
--------------------- -------------------------------- ---------------------
Earnings Operating profit(2) Operating profit before GBP1,039m being
before exceptional items including operating profit
interest, share of profit from before exceptionals
tax, joint venture, before (GBP513m), plus
depreciation depreciation and amortisation. share of profit
and from joint venture
amortisation This measure is used (GBP1m), plus
(EBITDA) by the Directors as depreciation
before exceptionals it provides key information (GBP434m) and
on ongoing trends and amortisation
the performance of (GBP91m).
the Group before capital
investment and financing
costs.
--------------------- -------------------------------- ---------------------
EBITDA margin No direct equivalent EBITDA before exceptional 5.9% being EBITDA
before exceptionals items, as a percentage before exceptional
of revenue. items (GBP1,039m)
divided by revenue
This measure is used (GBP17,536m).
by the Directors as
it provides key information
on ongoing trends and
the performance of
the Group before capital
investment and financing
costs.
--------------------- -------------------------------- ---------------------
Interest No direct equivalent Operating profit before 4.8x being operating
cover exceptionals divided profit before
by net finance costs exceptionals
before exceptionals. (GBP513m) divided
by net finance
This measure is used costs before
by the Directors as exceptionals
a measure of the Group's (GBP106m).
ability to meet its
financing costs.
--------------------- -------------------------------- ---------------------
Basic Basic earnings Basic earnings per A reconciliation
earnings per share share based on profit of this measure
per share before exceptionals is included in
before exceptionals after tax rather than note 8.
reported profit after
tax as described above.
This measure is a key
measure used by the
Directors. It provides
key information on
ongoing trends and
performance of the
Group and is used for
Director and management
remuneration, and in
setting the dividend
policy.
--------------------- -------------------------------- ---------------------
Diluted Diluted earnings Diluted earnings per A reconciliation
earnings per share share based on profit of this measure
per share before exceptionals is included in
before exceptionals after tax rather than note 8.
reported profit after
tax as described above.
--------------------- -------------------------------- ---------------------
(1) Certain ratios referred to in the financial statements are
calculated using more precise numbers rather than rounded numbers.
These stated ratios may therefore differ slightly to those
calculated by the numbers in this report due to rounding (as
numbers in the financial statements are presented in round
millions).
(2) Operating profit is not defined under IFRS. However, it is a
generally accepted profit measure.
Glossary (continued)
Measures Closest equivalent Definition and purpose Reconciliation
IFRS for 2019/20 Group
measure measures (1)
Tax measures
Normalised Effective tax Normalised tax is the A reconciliation
tax tax rate applied to of the tax charge
the Group's principal is found in note
activities on an ongoing 2.2.3 of the
basis. This is calculated Group financial
by adjusting the effective statements.
tax rate for the period
to exclude the impact
of exceptional items
and net retirement
benefit interest.
This measure is used
by the Directors as
it provides a better
reflection of the normalised
tax charge for the
Group.
--------------------- ------------------------------ ------------------------
Cash flows and net debt measures
Free cash No direct equivalent Movement in net debt GBP238m being
flow before dividends. the movement
in net debt (GBP64m)
This measure is used before payment
by the Directors as of dividend (GBP302m).
it provides key information
on the level of cash
generated by the Group
before the payment
of dividends.
--------------------- ------------------------------ ------------------------
Adjusted No direct equivalent This measure is a key See page 58 in
free cash measure used by the the Directors'
flow Directors. It provides remuneration
key information on report within
the level of cash generated the Group's annual
by the Group and is report.
used for Director and
management remuneration.
--------------------- ------------------------------ ------------------------
Net debt No direct Net debt is current A reconciliation
equivalent and non-current: borrowings, of this measure
lease liabilities and is provided in
derivative financial note 19.
assets & liabilities;
net of cash and cash
equivalents.
--------------------- ------------------------------ ------------------------
Gearing No direct equivalent Net debt as a percentage 54% being net
of net assets. debt (GBP2,458m)
as a percentage
This measure is used of net assets
by the Directors as (GBP4,541m).
a measure of the capital
structure of the Group
and its ability to
maintain its credit
ratings and covenants.
--------------------- ------------------------------ ------------------------
Working No direct equivalent Movement in inventories, A reconciliation
capital trade and other receivables, of this measure
movement trade and other payables is provided in
and provisions. note 18.
--------------------- ------------------------------ ------------------------
Operating No direct equivalent Working capital movement A reconciliation
working adjusted for onerous of this measure
capital contract charges, onerous is provided in
movement payments and other note 18.
non-operating payments.
This measure is used
by the Directors as
it provides a more
appropriate reflection
of the working capital
movement by excluding
certain non-recurring
movements relating
to property balances.
--------------------- ------------------------------ ------------------------
(1) Certain ratios referred to in the financial statements are
calculated using more precise numbers rather than rounded numbers.
These stated ratios may therefore differ slightly to those
calculated by the numbers in this report due to rounding (as
numbers in the financial statements are presented in round
millions).
Glossary (continued)
Measures Closest equivalent Definition and purpose Reconciliation
IFRS for 2019/20 Group
measure measures (1)
Other measures
Return on No direct equivalent ROCE is calculated ROCE (7%) equals
capital as return divided by return divided
Employed average capital employed. by average capital
(ROCE) Return is defined as employed:
annualised profit before
exceptionals after Return (GBP420m)
tax adjusted for net = profit before
finance costs before exceptionals
exceptionals and operating after tax annualised
lease rentals (on land (GBP314m) adjusted
and buildings). Capital for annualised
employed is defined net finance costs
as average net assets before exceptionals
excluding net retirement (GBP106m).
benefit surplus and
deficit, less average Average capital
net debt. employed (GBP6,043m)
= Average net
This measure is used assets excluding
by the Directors as the net retirement
it is a key ratio in benefit surplus
understanding the performance (GBP3,617m) and
of the Group. average net debt
(GBP2,426m).
--------------------- ------------------------------- ----------------------
Onerous No direct equivalent Payments made to settle Onerous capital
payments onerous contractual payments (GBP41m)
commitments, includes plus GBP17m payment
amounts paid to exit to exit leases
'pipeline' sites or (GBP17m), included
sums paid to exit onerous within repayment
contracts early (e.g. of lease obligations
leases). in the consolidated
cash flow statement.
--------------------- ------------------------------- ----------------------
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London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
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of this information may apply. For further information, please
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END
FR UWVRRRBUOARR
(END) Dow Jones Newswires
March 18, 2020 03:00 ET (07:00 GMT)
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