23rd Mar 2005 07:02
Morrison(Wm.)Supermarkets PLC23 March 2005 Wm. MORRISON SUPERMARKETS PLC PRELIMINARY RESULTS ANNOUNCEMENT RELEASED WEDNESDAY 23rd MARCH 2005 23 March 2005 Wm. Morrison Supermarkets PLC announces its preliminary results for the 52 weeksto 30th January 2005. Financial highlights • Sales - like for like core Morrisons up 7.1% (4.6% excl. fuel) - converted Safeway like for like up 10.9% (9.0% excl. fuel) - unconverted Safeway like for like down 6.8% (8.9% excl. fuel) • Operating profit before exceptional costs of £380m • Operating profit pre exceptional costs less net interest payable was £321.1m Current trading for 6 weeks ending March 13th 2005 • Improving performance from unconverted Safeway stores up 1.2% (0.5% down excl. fuel) • Like for like sales in converted stores up 13.0% (11.3% excl. fuel), - customer numbers up 21.8% • Like for like sales in core Morrisons up 2.7% (down 1.2% excl. fuel) Operating highlights • Conversion programme proceeding well: - 57 stores converted during 2004; now running at 4 per week - post conversion, customer spend averaging at £21.00, up c. £2.00 per basket - sales per sq. ft up from £14.00 to £18.00 (3 year target of £19.72) - store conversion programme substantially complete by year end - c.170 to be converted in 2005 • Disposal programme proceeding well: - 112 stores divested during financial year raising £903m, £360m above original book value - a further 52 small leasehold stores sold since the year end for approximately £80m • By end of 2005 estate expected to be around 360 Morrisons stores with an average size of 28,500 sq. ft. Sir Kenneth Morrison said: "The task of converting Safeway has been challengingbut I believe we have made good progress towards our objective of becoming oneof the four major national food retailers and are on track to complete theprogramme well ahead of the original plan. By the end of the current year wewill have in place the stores and most of the infrastructure to deliverMorrisons quality, value and service nationwide. Based on the encouragingresults which we have seen in the converted stores to date, we remain confidentof achieving a significant improvement in performance in 2006/7." -ENDS- There will be a dial-in conference call for the wire services at 7.30am on 02083223295. There will be an analyst and investor meeting at 9.30am at ABN Amro, 250Bishopsgate, London. A live dial-in facility is available on 020 7365 1856.There will be a replay facility available on 020 7784 1024, passcode 1365064. For further enquiries, please contact: Wm Morrisons Supermarkets PLC 020 7638 9571Sir Kenneth Morrison CBEBob StottGillian Hall Citigate Dewe Rogerson 020 7638 9571Jonathan ClareSimon RigbySarah GestetnerAnthony Kennaway Chairman's statement Review of the 52 weeks ended 30th January 2005 The directors announce the results for the 52 weeks ended 30th January 2005.The major change during the year has been the inclusion of Safeway for someeleven months within the group figures. The task of converting Safeway has beenchallenging but I believe we have made good progress towards our objective ofbecoming one of the four major national food retailers and are on track tocomplete the programme well ahead of the original plan. Results Sales Total takings through our stores were slightly in excess of £13bn. £5.9bn wasfrom the core Morrison estate which represents an increase of 11.5% over lastyear, and is a like-for-like increase of 7.1%, or 4.6% if fuel sales areexcluded. In addition, 57 stores were converted on a progressive basis duringthe year which added a further £0.7bn to the Morrison total sales. Sales in the Safeway branded stores were £6.4bn which represents a decrease of6.8%, or 8.9% excluding fuel. Sales through Safeway included a contribution of£0.8bn from stores which were disposed of during the second half of the year. Turnover Having adjusted for VAT and other income, group turnover was £12.1bn for theyear ended 30th January 2005, compared to £4.9bn in 2004. Other income includesalmost £40m of rent received, up from £22.2m in the previous year. Gross Profit Gross profit was £2,954m, with gross margin falling from 25.5% to 24.4%. Thiswas due to a number of factors. On the plus side were the initial synergiesderived from combining the two businesses, but these were more than offset bythe Safeway price cuts which we introduced immediately following the takeoverand the re-alignment of Safeway's buying terms. Costs Costs as a percentage of sales were higher than in previous years due to theconversion programme. This is due to the temporary dual running ofdistribution, administration and IT functions which is a fundamental necessityof integration. Labour costs have risen from 11.5% to 13.1% of turnover, whilstother operating costs have increased from 5.2% to 6.0%. Depreciation Depreciation in the year was £265m representing 2.2% of turnover. Thedepreciation charge would have been approximately £300m under Morrisons previousaccounting practice, the change from which was announced in July 2004. Profit The resultant operating profit before exceptional costs was £380.3m,representing 3.1% of turnover. Exceptionals were £99.2m, mainly comprisingredundancy payments of £23.8m and costs of £72.4m associated with the storeconversion programme. Net interest payable, after capitalising £6.4m, was£59.2m. Accordingly, operating profit pre exceptionals less net interest payable was£321.1m. On a reported basis, profit before tax was £297.1m compared to £319.9m theprevious year. Supplier income and accounting practices In our statement of 2nd July 2004 we informed the market that we had chosen tobring Safeway's supplier contracts into line with the traditional Morrisonspolicy of back-end loaded supplier rebates rather than asking suppliers forupfront income. Our rationale for this change was to ensure we received betterbuying terms on a day to day basis. Accordingly, approximately £180m of upfront payments anticipated by Safeway were forgone. This is offset by a £47mbenefit as a consequence of the change in Morrisons accounting practice as wemoved to the industry norm of recognising supplier income whilst it is beingearned, rather than when payment is actually received. We also announced in July that we had inherited, with the acquisition ofSafeway, a new accounting system which had been poorly implemented. Westabilised the system in August 2004 and for the first time received creditorreports that reconciled with the balance sheet. There were, at the date ofacquisition, outstanding issues with supplier balances and a general provisionto cover such items was made in the acquisition accounts as reported at theinterim stage in October 2004. In preparing the year end accounts, it was not possible to prove, in respect ofcertain amounts, whether these balances arose pre or post acquisition. Due tothis uncertainty, the Audit Committee, which met on 16th March, felt that aspecific provision of £40m should be made to the accounts for the year to 30thJanuary 2005. This was announced on 17th March 2005. Following the acquisition of Safeway, the board initiated an exercise toestablish the most suitable accounting practices in the circumstances of the newgroup. The board concluded that certain revisions to previous practices wereappropriate. As a consequence of these revisions, profits for the year havebenefited by £42m. Trading Group sales for the year ended 30th January 2005 were £13bn. Core Morrisons Sales from the core Morrison estate of 130 stores were £5.9bn which representsan increase of 11.5% over the previous year, and a like-for-like increase of7.1%, or 4.6% if fuel sales are excluded. This is a strong performance giventhe increasingly competitive market conditions, some early cannibalisationresulting from Safeway conversions and the impact of divestment stores under newownership. Converted stores We converted 57 stores to the Morrison fascia during the year. We are findingthat the Morrisons format is drawing customers back to a location that many haddeserted and accordingly customer numbers are over 20% ahead of unconvertedstores. Following conversion each customer is spending on average £21.00, an increase ofapproximately £2.00 per basket. Therefore, in terms of sales per sq. ft we aremaking good progress. Just one year into the three year target of £19.72 salesare already up from £14.00 to £18.00 per sq. ft across the converted estate. We announced at the time of our interim results in October 2004 that we wouldincrease the pace of the conversion process from three to four stores per week.Much of the necessary planning work has already been completed to convert around170 Safeway stores during the course of this year. This includes the completionof major extensions to stores at Thamesmead, Nottingham, Coventry and Hinckley,prior to conversion. Many store conversions are in areas where Morrisons has not previously tradedand we are pleased with the positive response from customers. Our success isachieved by having the goods and services required by customers and the range ofproduct available in our newly converted stores is being well-received. Unconverted Safeway Stores Substantial price reductions were made in the continuing Safeway stores reducingthe cost of shopping by some 12-14% as we rapidly moved to replace the Safewayflyer with the strong Morrisons promotional offer. This is partly reflected bythe large increase in customer savings from multisave offers which in 2005amounted to £846m. Whilst sales volumes responded positively, these wereinsufficient to offset fully the price reductions. Customer numbers are showing an encouraging increase, particularly postChristmas, rewarding the fact that we served customers well during this crucialshopping period. Update on disposals In total 112 stores were divested during the financial year raising £903m whichwas £360m more than the original book value. The fair value adjustment was£342m, leaving £17.9m in the Profit and Loss account. A further 52, predominantly small leasehold stores have been sold since the yearend for approximately £80m. Only four of the stores that we were required to divest under the undertakingsgiven to the OFT remain unsold and we expect to conclude the process soon. Of the remaining 94 stores, some are already subject to offers from competitorsand the others are being held for future conversion, development or sale. By the end of this year we expect to be operating at least 359 Morrisons storeswith an average size of 28,500 sq. ft., representing a significant presence inthe retail food market and backed by the vertical integration which has alwaysserved us well. Infrastructure In order to ensure the future prosperity of the company it is necessary toinvest significantly in improving and expanding the company infrastructure.There are four principal areas which are receiving attention. Administration will be integrated and based in Bradford when the new head officeis ready for occupation in January. This will enable us to vacate and disposeof the office accommodation in Hayes by the end of 2005 and to dispose of anumber of office buildings in Yorkshire. Distribution is being brought in line with our reshaped business and thecompletion of our new Regional Distribution Depot at Kettering is on programmefor late autumn. Plans are well advanced to adapt the distribution centres at Bellshill andBristol to the Morrisons footprint through the acquisition of additional space.A 100 acre site has been bought in Corby and part of this land has planningpermission for a frozen food distribution centre, which should come on stream in2006. Produce packing has already been augmented by the purchase and extension offacilities at Thrapston and production is now in full swing. Work has commencedon the adaptation of an existing building in Rushden in order to give additionalcapacity to our vegetable processing facilities. We still need other similarfacilities before this work is completed. Our new packing and distributioncentre at the Hook of Holland is fully operational and is proving beneficial,particularly in the area of European produce and flowers. Meat production has been augmented by the purchase of an existing abattoir andpacking facility at Turriff, Aberdeenshire. Agreement has been reached topurchase a further abattoir in the near future. We are currently receiving very good support from suppliers who believe that astrong fourth retail food company is needed to ensure that the shopping publiccontinues to enjoy an acceptable amount of choice. Our support for Britishfarmers and producers has been maintained although we work hard to ensure thatour competitive position is not compromised. Our larger share of the UK foodmarket means that we will be subject to the Buying Code of Practice on which theOFT reported on March 22nd. We do not expect any difficulties in complying withthis. Good supplier relationships are just as vital to our business as loyalcustomers. Store development programme During the period under review new Morrisons stores were opened at Kilmarnock,Wetherby, Hartlepool, Falkirk, Knottingley, Swansea and Denton (Manchester).Initial customer reaction has been favourable and good early sales levels havebeen achieved. Our planned improvement of existing stores was maintained and in addition to thehigh standards of routine maintenance, major extensions and refurbishments werecarried out at Harrogate and Boroughbridge stores. Our plans for new store openings in 2005 are proceeding well and compriseHamilton (which opens in May), Auchinlea, Glasgow (June), Cardonald, Glasgow(August), Paisley (September), Livingston (October), Strood (October), andGloucester (November). Five of these stores replace former Safeway stores. Our new store development programme for 2006 is taking shape with contractsexchanged and planning consent granted for new stores at Bristol, Leyland,Liverpool, Swadlincote, Wednesbury, Whitefield and York. The existing store atCrowborough will be demolished and redeveloped, as will our store in Rothwell.This represents a good basis going forward and I have no doubt it will beaugmented in due course. Balance sheet Net borrowings at the year end were £1.171bn compared to net cash of £207m 12months ago, or £1.077bn when opening Safeway debt is taken into account. Netborrowings represent 29.1% of shareholders funds of £4.0bn. Pensions On an FRS 17 basis the pensions' liability has increased to £263.5m from acombined Morrison/Safeway deficit last year of £208.2m. £81.8m less deferredtax of £24.5m of this increase was due to a change in actuarial assumptions. In 2005 the net company contribution was £46.5m. Capital expenditure Capital expenditure during the year was £423m. In the current financial year,this is expected to rise to approximately £650m reflecting our decision toaccelerate the store conversion programme which will be largely complete by theend of the current financial year. Capital expenditure will fall substantiallyin the financial year 2006/7. By the end of this year the majority of the conversion programme and supportinginfrastructure will be in place. Over the three year period to January 2007,total capital expenditure will be comfortably within the £1.575bn that weannounced at the time of the acquisition. Dividend The Directors are proposing a final ordinary dividend of 3.075p per ordinaryshare making a total of 3.7p per ordinary share (2004: 3.25p), an increase of13.8%. This will be paid on 31st May 2005 to those members registered in thebooks of the company on 29th April 2005. IFRS We are required to adopt International Financial Reporting Standards for thefinancial year ending 29 January 2006 onwards and are making progress in thisregard. Staff The year has been a very exacting one for all our staff. Extra work has beennecessary in the planning and the execution of both the store conversion anddisposal programmes. These tasks have been completed with enthusiasm and skill. We have in place a competent team of people. I must compliment them on whathas already been achieved and express my personal thanks and confidence in themgoing forward. I am pleased to note that in the 27th year of our profit sharingscheme a sum of £19.7m will be distributed amongst all eligible employees. There is no doubt that there is another year of hard work ahead taking us welldown the road towards achieving our medium-term objectives. Corporate Governance In previous years the board was comfortable that its approach to corporategovernance was appropriate and satisfactory. The group is led by a long servingboard which has extensive knowledge of the business. Since the acquisition of Safeway we have made progress in developing a moreformal approach to governance. We will take this programme further in the forthcoming year with considerationbeing given to the appointment of additional non-executive directors and moreformal responsibility being devolved to an Audit Committee and a RemunerationCommittee. Controls Prior to the Safeway acquisition, the directors' knowledge of their business,the robustness of the accounting controls and embedded principles of prudencegave the directors confidence over the control environment. The considerable increase in the size of the group following the acquisition ofSafeway, the added complexities associated with the acquisition, the need tostandardise procedures and the problems with the inherited Safeway accountingsystem has put considerable strain on the existing financial resource whenrelated to an increasingly complex and competitive retailing environment. This has had some impact on our ability to reliably forecast likely trends inprofitability and to obtain a full understanding of the underlying tradingbalances with certain of our suppliers. Progress is being made. We are recruiting further senior financial staff and wehave a clear programme for completing the conversion of Safeway inheritedsystems. We are confident that during the first half of the current year wewill return to the stable and reliable control environment which characterisedMorrisons prior to the Safeway acquisition. Current trading In the 6 weeks ending March 13th, like for like sales increase in the coreMorrisons estate was 2.7% in total but down 1.2% excluding fuel. This figurewas impacted by divested stores and cannibalisation. By comparison, the 63stores that were unaffected by adjacent conversion or divestment achieved atotal like for like sales growth of 5.9% and 1.9% excluding fuel. During the same period, it is pleasing to report that unconverted Safeway storesare, for the first time under our ownership, now showing an overall growth of1.2%, although excluding fuel this is still a decline of 0.5%. Moving on to the 76 converted Safeway stores open for at least one full week'strading, sales in these stores excluding fuel are 11.3% above last year with a21.8% increase in customer numbers. Average sales per sq. ft. have increasedfrom £14.82 to £17.80. Total sales including fuel are 13% higher than lastyear. Taken together, total group sales in the first six weeks of the currentfinancial year are up 4.1% or 1.2% excluding fuel. Outlook For the current financial year we are budgeting to maintain our turnover ataround £12.3bn as the conversion programme moves forward, despite the full yearimpact of stores already divested. Our first priority remains the protection of volume by ensuring a competitivebasket for our customers. In the near term improvement in gross margins will beconstrained by industry conditions. However, improved buying terms along withthe investments in vertical integration are starting to come through to thebenefit of gross margin. In terms of operating costs, we will continue to incur dual running costs fordistribution, administration and IT functions for much of the year. Labourcosts are also expected to remain high as a percentage of sales until theconversion stores reach maturity and are likely to increase near term.Likewise, depreciation will also increase reflecting capital expenditure. Overall we expect operating margins to show some improvement in the currentyear, albeit modest and this will not be apparent until the second half of theyear. Exceptional costs will reflect the increased rate of conversions and areexpected to be significantly higher than the previous year. 2005/6 is the second and busiest year of the conversion programme. By the endof the current year we will have in place the stores and most of theinfrastructure to deliver Morrisons quality, value and service nationwide.Based on the encouraging results which we have seen in the converted stores todate we remain confident of achieving a significant improvement in performancein 2006/7. Sir Kenneth Morrison CBE Chairman March 2005 Wm. MORRISON SUPERMARKETS PLC ANNOUNCEMENT RELEASED WEDNESDAY 23 MARCH 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE PERIOD 52 WEEKS ENDED 30 JANUARY 2005 52 weeks ended 30 January 2005 52 weeks Continuing Acquisitions Group Ended Operations Total 1 February Note 2004 £m £m £m £mTurnover including BP joint venture 2 5,500.8 6,795.3 12,296.1 4,944.1Less share of BP joint venture turnover - (180.0) (180.0) - ------------ ------------ ------------ ------------Group turnover 5,500.8 6,615.3 12,116.1 4,944.1 ------------ ------------ ------------ ------------Group operating profit/(loss) pre exceptional costs 3 429.8 (49.5) 380.3 316.0Exceptional operating costs 3 & 4 (0.3) (98.9) (99.2) (10.9) ------------ ------------ ------------ ------------Group operating profit/ (loss) 3 429.5 (148.4) 281.1 305.1 ------------ ------------BP - share of joint venture operating profit 3.6 - ------------ ------------Total operating profit 284.7 305.1Profit on divestment of assets 5 17.9 0.8Amortisation of negative goodwill 58.2 -Net interest (payable)/ receivable 6 (59.2) 14.1Other finance costs 7 (4.5) (0.1) ------------ ------------Profit before taxation 297.1 319.9Taxation 8 (91.4) (122.3) ------------ ------------Profit for the financial 205.7 197.6periodDividends (98.1) (80.3) ------------ ------------Profit retained 107.6 117.3 ------------ ------------Dividend per ordinary share 9 3.70p 3.25p ------------ ------------Basic earnings per share 10 8.10p 12.59p ------------ ------------Diluted earnings per share 11 8.07p 12.48p ------------ ------------ During the period a number of acquired Safeway stores have been rebranded as Morrisons stores. Inline with the requirements of accounting standards, for the purposes of the analysis above thesestores are included in the acquisitions column. CONSOLIDATED BALANCE SHEET At At 30 January 1 February Note 2005 2004 £m £mTangible fixed assets - at cost 7,524.2 2,437.1 - accumulated depreciation (700.2) (698.4) ------------- ------------- - at written down value 13 6,824.0 1,738.7Negative goodwill 12 (262.9) -Share of net assets in BP joint venture 14 67.4 -Current assets 15 740.7 491.9Current liabilities 16 (1,811.8) (814.2) ------------- -------------Total assets less current liabilities 5,557.4 1,416.4Creditors - amounts falling due after more than one year 17 (989.9) -Provisions for liabilities and charges 18 (286.5) (51.5) ------------- -------------Net assets - excluding pension liability 4,281.0 1,364.9Pension liability 19 (263.5) (47.5) ------------- -------------Net assets - including pension liability 4,017.5 1,317.4 ------------- -------------Called up share capitalEquity & non equity 20 266.3 158.8Share premium account 20 20.1 15.9Merger reserve 20 2,578.3 -Investment in own shares 20 (40.7) -Profit and loss account 21 1,193.5 1,142.7 ------------- -------------Shareholders funds 22 4,017.5 1,317.4 ------------- -------------NBNet current liabilities (current assets less current liabilities) (1,071.1) (322.3) ------------ ------------ CONSOLIDATED CASH FLOW STATEMENT 52 weeks 52 weeks Ended Ended 30 January 1 February Note 2005 2004 £m £mCash inflow from operating activities 23 442.9 436.2Net cash (outflow)/inflow for returns on investments and servicing of finance 24 (75.8) 8.9Taxation paid 25 (171.5) (109.3)Capital expenditure 26 (428.3) (251.9)Divestment proceeds 903.0 -Safeway acquisition 12 (831.4) -Dividends paid 27 (87.7) (44.0) ------------- -------------Cash (outflow)/inflow before use of liquid resources and financing (248.8) 39.9Management of liquid resources 28 220.7 (47.2)Financing - issue of shares 29 8.9 1.0Disposal of own shares 20 12.0 -Decrease in debt 30 (157.3) - ------------ -------------Decrease in cash in the period 31 (164.5) (6.3) ------------- ------------- Reconciliation of net cash flow to movement in net debt in the period Decrease in cash (164.5) (6.3)Decrease in debt 157.3 -(Decrease)/increase in liquid resources (220.7) 47.2 ------------- -------------Change in net (debt)/cash resulting from cash flows (227.9) 40.9On acquisition (1,149.8) -Opening net cash 206.6 165.7 ------------- -------------Closing net (debt)/cash (1,171.1) 206.6 ------------- ------------- ANALYSIS OF NET DEBT / CASH 52 weeks ended 52 weeks ended 30 January 2005 1 February 2004 £m £m £m £m Bonds (978.2) -Lease finance (10.7) -Loan notes (3.6) - ------------- -------------Debt due in more that one year (992.5) -Bank overdrafts & uncleared bank items (272.1) (108.8) ------------- -------------Debt due in less than one year (272.1) (108.8) ------------- -------------Gross debt (1,264.6) (108.8)Cash in hand 20.4 8.8Overnight deposits 73.1 85.9Longer term deposits - 220.7 ------------- ------------- (1,171.1) 206.6 ------------- -------------Gross debt as a % of shareholders funds 31.5 8.3Net debt as a % of shareholders funds 29.1 - CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 52 weeks 52 weeks Ended Ended 30 January 1 February 2005 2004 £m £m Profit for the financial period 205.7 197.6Actuarial loss recognised in the pension scheme (81.8) (49.0)Current tax thereon 1.0 2.9Deferred tax thereon 23.5 11.8 ---------- ----------Total recognised gains and losses relating to the financial period 148.4 163.3Prior year adjustment - (20.1) ---------- ----------Total recognised gains and losses since last annual report 148.4 143.2 ---------- ---------- The prior period adjustment in 2004 relates to the first time adoption of FRS17'Retirement Benefits'. Notes 1. Results The financial information set out herein does not constitute the company'sstatutory accounts for the 52 week periods ended 30 January 2005 and 1 February2004. Statutory accounts for 2004 have been delivered to the registrar ofcompanies, and those for 2005 will be delivered following the company's annualgeneral meeting. The auditors have reported on those accounts; their reportswere unqualified and did not contain a statement under section 237(2) or (3) ofthe Companies Act 1985. 2. Turnover including BP joint venture The analysis of group turnover is as follows:- 52 weeks ended 30 January 2005 52 weeks Morrisons Acquisitions Total Ended 1 February 2004 £m £m £m £m Till transaction values 6,330.5 7,544.2 13,874.7 5,665.9Multisave deductions (423.2) (422.4) (845.6) (366.2) ------------ ------------ ------------ ------------Supermarket takings 5,907.3 7,121.8 13,029.1 5,299.7VAT (455.4) (548.2) (1,003.6) (397.9)Share of BP joint venture turnover - 180.0 180.0 -Other turnover and adjustments 48.9 41.7 90.6 42.3 ------------ ------------ ------------ ------------Turnover 5,500.8 6,795.3 12,296.1 4,944.1 ------------ ------------ ------------ ------------ Other turnover and adjustments:Income from tenants 22.7 17.3 40.0 22.2Dry cleaning 1.6 12.4 14.0 -Photo processing 0.5 5.7 6.2 -Coin operation receipts 16.0 9.6 25.6 13.5Commission income 6.7 8.6 15.3 5.5Third party sales by subsidiaries - UK 47.0 - 47.0 37.7 - export 0.8 - 0.8 0.7Sundry 2.5 9.9 12.4 1.3Goods for own use (33.0) - (33.0) (28.3)Self financed coupons (15.7) (12.6) (28.3) (10.2)Staff discount (0.2) (9.2) (9.4) (0.1) ------------ ------------ ------------ ------------ 48.9 41.7 90.6 42.3 ------------ ------------ ------------ ------------ The departmental analysis of the like for like increase/(decrease) insupermarket takings is as follows:- Morrisons Conversions Safeway % increase % increase/(decrease) % increase/(decrease) 52 weeks Since conversion 52 weeks 52 weeks Food 4.6 (9.1)Off Licence 4.5 (1.3)Home and leisure 4.4 (22.5) ------------ ------------Total excluding petrol 4.6 9.0 (2.3) (8.9)Petrol 22.6 18.4 9.6 6.4 ------------ ------------ ------------ ------------Supermarket takings 7.1 10.9 0.2 (6.8) ------------ ------------ ------------ ------------ Safeway comparisons are with the equivalent 52 weeks of last year.Departmental analysis is not available for the converted units. 3. Group operating profit / (loss) pre and post exceptional costs 52 weeks ended 30 January 2005 Morrisons Acquisitions Total Total including 52 weeks excluding exceptional ended 1 exceptional costs February 2004 costs £m £m £m £m £m Turnover including BP joint venture 5,500.8 6,795.3 12,296.1 12,296.1 4,944.1Less share of BP joint venture turnover - (180.0) (180.0) (180.0) - ------------- ------------- ------------- ------------- -------------Group turnover 5,500.8 6,615.3 12,116.1 12,116.1 4,944.1Change in stocks 79.3 (67.6) 11.7 11.7 13.9Other operating income 0.5 5.4 5.9 5.9 0.8 ------------- ------------- ------------- ------------- ------------- 5,580.6 6,553.1 12,133.7 12,133.7 4,958.8Raw materials and consumables (4,144.4) (5,035.3) (9,179.7) (9,179.7) (3,695.6) ------------- ------------- ------------- ------------- -------------Gross operating profit 1,436.2 1,517.8 2,954.0 2,954.0 1,263.2Staff costs (652.7) (930.5) (1,583.2) (1,607.0) (570.7)Depreciation (83.1) (181.8) (264.9) (279.8) (120.4)Other operating charges (270.6) (455.0) (725.6) (786.1) (256.1) ------------- ------------- ------------- ------------- -------------Group operating profit/(loss)pre exceptional costs 429.8 (49.5) 380.3 281.1 316.0Exceptional operating costs (0.3) (98.9) (99.2) - (10.9) ------------- ------------- ------------- ------------- -------------Group operating profit/(loss) 429.5 (148.4) 281.1 281.1 305.1 ------------- ------------- ------------- ------------- ------------- Other operating income comprises of Profit on sale of tangible fixed assets - - - - 0.1Sundry income 0.5 5.4 5.9 5.9 0.7 ------------- ------------- ------------- ------------- ------------- 0.5 5.4 5.9 5.9 0.8 ------------- ------------- ------------- ------------- ------------- Staff costs comprise of Wages and National Insurance 606.5 894.8 1,501.3 1,525.1 535.0Profit related pay 19.7 - 19.7 19.7 16.0Pension costs 21.1 25.3 46.4 46.4 18.3Share option costs 4.6 - 4.6 4.6 0.5Other staff costs 0.8 10.4 11.2 11.2 0.9 ------------- ------------- ------------- ------------- ------------- 652.7 930.5 1,583.2 1,607.0 570.7 ------------- ------------- ------------- ------------- ------------- 52 weeks ended 30 January 2005 Morrisons Acquisitions Total excluding Total 52 weeks exceptional including ended 1 costs exceptional February costs 2004 Margins % % % % % Gross operating profit 26.1 22.9 24.4 24.4 25.5Staff costs (11.9) (14.1) (13.1) (13.3) (11.5)Depreciation (1.5) (2.7) (2.2) (2.3) (2.4)Other operating charges (4.9) (6.9) (6.0) (6.5) (5.2) ------------ ------------ ------------ ------------ ------------Operating profit/(loss) pre exceptional costs 7.8 (0.7) 3.1 2.3 6.4 4. Exceptional costs 52 weeks ended 30 January 2005 52 weeks Morrisons Acquisitions Total Ended 1 February 2004 £m £m £m £m Acquisition costs 0.3 - 0.3 10.9Redundancy costs - 23.8 23.8 -Divestment costs - 2.7 2.7 -Store conversion costs - 57.5 57.5 -Fixtures written off on - 14.9 14.9 -conversion ------------ ------------ ------------ ------------ 0.3 98.9 99.2 10.9 ------------ ------------ ------------ ------------ 5. Profit on divestment of assets 52 weeks 52 weeks Ended Ended 30 January 1 February 2005 2004 £m £m Proceeds from asset sales 903.0 1.6Written down value of assets sold (543.4) (0.8) ---------- ----------Profit on original book value 359.6 0.8Adjusted against fair value (341.7) - ---------- ----------Profit on divestment assets in period 17.9 0.8 ---------- ---------- 6. Net interest (payable)/receivable 52 weeks 52 weeks Ended Ended 30 January 1 February 2005 2004 £m £m Interest payable on short term loans and bank overdrafts (33.9) (5.9)Bonds (52.8) -Interest capitalised 6.4 5.4 ---------- ---------- (80.3) (0.5)Interest receivable on short term deposits 21.1 14.6 ---------- ---------- (59.2) 14.1 ---------- ---------- Interest capitalised reflects the cost of financing property developments priorto their opening date. 7. Other finance costs 52 weeks 52 weeks Ended Ended 30 January 1 February 2005 2004 £m £m Expected return on pension scheme assets 64.1 8.8Interest on pension scheme liabilities (68.6) (8.9) ---------- ---------- (4.5) (0.1) ---------- ---------- 8. Taxation 52 weeks ended 52 weeks ended 30 January 2005 1 February 2004 Effective Effective £m Rate % £m Rate %Current yearCorporation tax at 30% 112.0 37.7 118.9 37.2Deferred tax at 30% (26.1) (8.7) 1.5 0.4Overseas tax 4.0 1.3 0.8 0.2Prior years - corporation tax 4.8 1.6 0.5 0.2 - deferred tax (3.3) (1.1) 0.6 0.2 ------------ ------------ ------------ ------------ 91.4 30.8 122.3 38.2 ------------ ------------ ------------ ------------ % %UK standard rate of corporation tax 30.0 30.0Expenses disallowed 4.9 1.6Non qualifying depreciation 8.8 6.8Capitalised interest deducted for tax purposes (0.6) (0.5)Divestment profits covered by tax reliefs (7.9) -Amortisation of negative goodwill (5.9) -Timing difference 9.1 -Overseas tax/dividends 0.7 -Deferred tax (8.8) - ------------ ------------Current year 30.3 37.9Prior year adjustments 0.5 0.3 ------------ ------------ 30.8 38.2 ------------ ------------ 9. Dividends The directors propose to recommend a final dividend of 3.075p per ordinaryshare. The total dividend in the period, including the interim payment of 0.625pper share, will be 3.70p per ordinary share compared to 3.25p per ordinary sharein 2004. Subject to approval at the Annual General Meeting the dividend will bepaid on 31 May 2005 to those members registered in the books of the company on29 April 2005. Participants in the dividend reinvestment plan will receive their statementsand, if applicable, share certificates by 15 June 2005. 10. Basic earnings per share The earnings per share are based on the profit for the financial period. In the case of basic earnings per share this is reduced by the preferencedividend. The average number of ordinary shares in issue during the period was2,538,111,000 (2004 1,569,246,000) after adjusting for own shares held. 11. Diluted earnings per share The earnings per share are based on the profit for the financial period. In the case of diluted earnings per share a presumption is made that shareoptions have been exercised at their fair value. The average number of ordinary shares in issue (as adjusted) during the periodwas 2,550,409,000 (2004 1,583,604,000). 12. Safeway acquisition On 8 March 2004, the group acquired the entire issued share capital of SafewayLtd (formerly Safeway Plc) for a total consideration of £3,346.3m, comprising£665.2m cash and the issue of 1,078.8m ordinary shares at a fair value of£2,681.1m. This acquisition has been accounted for using the acquisition method ofaccounting. After the alignment of accounting policies and other adjustments tothe valuation of assets and liabilities to reflect their fair value, theprovisional fair value of assets acquired is £3,667.4m. Total negative goodwill(after amortisation) of £262.9m has arisen, and in accordance with FinancialReporting Standard 10 has been shown adjacent to fixed assets within the balancesheet. This negative goodwill is being recognised in the profit and loss account in theperiods in which the non-monetary assets to which it related are beingrecovered. These are primarily the tangible fixed assets acquired. Fair value adjustments and net assets acquired On Fair value Acquisition Adjustment Total £m £m £m Fixed assets - at cost 5,565.6 1,837.0 7,402.6 - depreciation (1,596.6) - (1,596.6) ------------ ------------ -----------Written down value 3,969.0 1,837.0 5,806.0Investments 74.8 (11.0) 63.8Investment in own shares 52.7 - 52.7Related Shares:
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