20th Sep 2007 07:02
Morrison(Wm.)Supermarkets PLC20 September 2007 Interim results for the 25 weeks ended 29 July 2007 Profit recovery on track Financial summary • Turnover up 2.8% to £6.0bn (2006: £5.9bn) • Like for like sales (ex fuel) increased by 2.7% (2006: 4.6%) • Operating profit before property gains and tax up 57% to £247m (2006: £158m) • Net debt reduced to £566m (2006: £881m) • Interim dividend of 0.675 pence per share, an increase of 8% (2006: 0.625p) Optimisation Plan • All initiatives progressing well • Good progress on improving margin and management of cost base • New branding, products and store changes well received by customers • Senior management team recruitment complete • New distribution depot serving South West opened in July New Smaller Concept Store • 25,000 sq. ft Morrisons opened in Erskine, with the full, fresh food Market Street offer Commenting on the results, Sir Ken Morrison, Chairman, said: "Our first halfresults build on the improvement we made last year and I am pleased with theprogress we have made in the early stages of the three year Optimisation Plan. "I am delighted to welcome Sir Ian Gibson to the Board, and look forward toworking closely with him in the coming months to ensure a smooth handover of theChairmanship of the Group." Marc Bolland, Chief Executive, said "Morrisons Optimisation Plan is on track anddelivering significantly improved profits through margin gains and management ofour cost base. We have made a strong start to our objective of becoming thefood specialist for everyone with a positive customer response to our rebrandingand the many developments in store. We will continue to focus on stronglyimproving operating margins whilst at the same time shaping Morrisons for futuregrowth." Enquiries Wm Morrison SupermarketsRichard Pennycook - Finance Director 0845 611 5000 Investor RelationsNiall Addison - Investor Relations Director 07764 624701 Media RelationsWm Morrison Supermarkets: Gillian Hall 0845 611 5359Citigate Dewe Rogerson: Jonathan Clare 020 7638 9571 Simon Rigby Sarah Gestetner An analyst presentation will take place at 0900 on Thursday 20 September 2007 atABN AMRO, 250 Bishopsgate, London, EC2. Interim management report 20 September 2007 Overview This report covers trading for the 25 weeks ended 29 July 2007. Turnover was £6.0bn, up 2.8% on the prior period. Our like for like salesperformance of 2.7% (2.3% including fuel) reflected continued good growth in theestate of stores converted from Safeway. The programme to deliver continuinggrowth in these stores and reinvigorate the original Morrisons estate, which isoutlined further below, will begin to take effect towards the end of the currentfinancial year. Profit before tax was £266.3m, a significant increase on the £134.2m reported inthe comparable period last year. Gains from property transactions, included inthis result, were £16.5m compared with £6.0m in the prior period. Operatingprofit before property transactions was £247.4m compared with £157.8m in theprior period. Operating margins before property gains were particularly strongat 4.1%, reflecting a lower level of marketing costs and price investment thanis anticipated over the second half. The net finance credit of £2.4m (2006:charge of £29.6m) reflected the impact of a reducing pensions deficit, a one-offinterest benefit on repaid corporation tax and low levels of net debt ahead ofthe full roll out of the Group's investment programme. The remainder of the yearis expected to see a more normal net finance cost. Cash flow remained strong, with £405.6m generated from operations compared with£418.8m in the prior period. Capital expenditure increased to £140.1m, from£103.8m, but has not yet reached the levels expected once the full programme,previously announced, is under way. Net debt of £566.1m was significantly downon the previous year's £881.2m but is expected to rise by the year end as theGroup's investment programme starts to accelerate. Full year capital expenditureis expected to be £500m. The period saw little change in the stores estate, with no disposals and one newopening, at Speke (Merseyside) in July. Since the half year, new stores haveopened at Johnstone and Erskine and a further five will open in the remainder ofthe year. Two non-trading properties were sold in the period, with a gain of£16.5m, and a small pipeline of similar disposals will continue in the comingtwo years. Our discussions around a possible property joint venture covering our sitescontaining investment properties continue, but in the light of current marketconditions we have chosen not to proceed to the marketing stage at this time. Wewill keep this under review and progress this work further when the time isright. With Group profitability continuing to improve, the Board is pleased to confirmits intention to increase the interim dividend by 8% to 0.675 pence per share.This will be paid on 12 November 2007 to shareholders on the register on 12October 2007. At our preliminary results announcement in March 2008, we willupdate the market with regard to our overall balance sheet and financingstrategy. The UK grocery retail market The period under review moved from good industry growth early on to a markedslowdown towards the end. This was partly the inevitable consequence of theexceptionally strong comparative period in 2006, but the environment itselfbecame significantly tougher in absolute terms as well. The effect of risinginterest rates on consumer spending was exacerbated by very poor summer weatherand two bouts of exceptional flooding. Since the period end the industry hasalso had to contend with the impact of two outbreaks of foot and mouth disease. With this backdrop, the industry displayed aggressive price competition,squeezing out the mild inflation that had been seen in the early part of 2007.Whilst the trend of greater emphasis on the health, provenance, quality andfreshness of food seen in 2006 continues, in a tighter economy this hasinevitably been balanced somewhat by hard hitting price led campaigns. We expectthese to continue. Market prices for a number of basic food commodities have reached previouslyunknown highs. This situation is already affecting many agricultural productsand posing major problems for UK meat and poultry producers. Products with aflour or milk content are also affected, and retail prices will inevitably rise.Our efforts to continue to supply our customers with good quality and excellentvalue will stand us in good stead in a demanding market place. Our closecontact with growers and producers through our vertical integration will enableus to support UK agriculture and ensure that we maintain a competitiveadvantage. Many customers are feeling pressure on their disposable income, but throughrigorous control of our cost base, we are committed to remaining competitive. In our planning, we had anticipated that the grocery sector would remainfiercely competitive. We have not, therefore, revised our plans or expectationsin the light of the most recent market conditions. The Competition Commission continues its inquiry into the grocery sector, and wehave, of course, provided every co-operation to it. We anticipate provisionalfindings shortly, with the final report expected in February 2008, and localcompetition still appears to be a main issue. As the industry's number fourplayer, were the Commission to recommend steps to reduce the dominance ofcertain competitors in some local markets we would be fully supportive of suchproposals. Optimisation Plan Much of the period was spent working hard on the building blocks of our futuresuccess, and preparing to launch new products, store environments and marketingprogrammes that will support our goal of being the food specialist for everyone.Success, in this period, was measured by further solid profit recovery. New initiatives to continue delivering industry leading service levels at lowercost were successful in the period, with sales productivity in stores increasingby 7% and distribution costs per case decreasing by 11%. Further initiatives areunderway; for example trials are taking place of self-scan checkouts in certainstores and a new grocery warehouse was opened late in the period at Swindon,replacing capacity in the Midlands, which will significantly reduce journeytimes and costs to the South West. Much of the preparatory work for the elements of the programme that will bevisible to our customers was successfully undertaken in the period. Customersare now beginning to see the many own brand products that are beingre-formulated to provide improved quality, healthier ingredients, whilst ourprice cutting campaign ensures that they pay no more for these improvements. Wehave also rolled out new packaging for the 1,700 Market Street lines produced instore that emphasises their freshness and quality. The new brand logo and colours, and the contemporisation of Market Street -launched initially in our new Speke and Johnstone stores - have been wellreceived. Early signs are that both existing loyal customers and thoseconsidering Morrisons afresh like our advertising campaign. This highlights theamount of fresh food preparation undertaken in store and the care that we takein sourcing our food. Over the coming months, more and more of our 1,800 vehiclefleet, 103,000 store colleagues and 370 store portfolio will be seen in the newbrand livery, and we intend to complete this huge undertaking by July 2008. Our new store in Erskine, the smallest store opened as a new Morrisons for manyyears, has successfully shown that we can now target new sites in locations thatwould not support a large, traditional Morrisons store. This store contains thefull Market Street concept, with high levels of counter-service for fresh food.It opens up more opportunities across the country and gives us confidence thatour three year space growth target of 1m square feet will be attained. Our first corporate social responsibility report was produced in April thisyear, and we are pleased to confirm good progress against our goals at thisearly stage. Energy usage is down in our stores and our transport fleet, by 2%,reflecting the benefit of numerous initiatives. Overall, our carbon footprint, as measured in accordancewith the principles agreed by the Carbon Trust, has improved by 7.9% against thebase year of 2005. We are well on our way to achieving our target of acumulative 36% reduction by 2010. People Key to delivering our goals will be exceptional performances from our people,and good progress was made on a number of fronts in the period. The top team wascompleted, with the appointment of Norman Pickavance as Group HR Director andAngus MacIver as Group Marketing and Communications Director. New short and longterm incentive programmes have been put in place for approximately 600 seniormanagers across the business, and plans to provide all colleagues with staffdiscount for the first time are on schedule for delivery in November 2007. We were delighted, in the period, to retain the Grocer Award for CustomerService and to regain the Grocer Award for Availability. These prestigiousindustry awards reflect huge credit on colleagues in the business, and the Boardis most grateful for their unstinting efforts towards making Morrisons a greatsuccess once again. Trading update and outlook In the 7 weeks since the half year, like for like sales growth was 3.0% (2.2%including fuel), an improvement on the first half performance. Concerns that anoutbreak of e-coli in the Paisley area of Scotland may have been linked to oneof our stores had a short term effect, but close cooperation and prompt actionby the authorities and ourselves has ensured that customer confidence wasquickly restored. In the second half we continue to target a strengthening of our sales momentumas the benefit of our various initiatives starts to come through. We willincrease our marketing activities and price investment, and anticipate that wewill also see further commodity cost rises following a difficult growing seasonfor farmers. Despite this, the strong progress made so far this year indelivering margin benefits and further improvements in costs gives us confidencethat we will achieve our profit expectations for the year. HALF-YEARLY FINANCIAL REPORT 2007/08 Condensed consolidated income statement25 weeks ended 29 July 2007 25 weeks ended 25 weeks ended 53 weeks ended 29 July 2007 23 July 2006 4 February 2007 Note £m £m £mTurnover 1 6,014.3 5,850.7 12,461.5Cost of sales (5,644.2) (5,586.2) (11,825.5)Gross profit 370.1 264.5 636.0 Other operating income 16.4 8.7 20.5Administrative expenses (139.1) (115.4) (271.8)Profits arising on property 16.5 6.0 38.5transactionsOperating profit 263.9 163.8 423.2 Finance costs 2 (24.1) (37.4) (74.9)Finance income 2 26.5 7.8 20.7Profit before taxation 266.3 134.2 369.0Taxation 3 (41.1) (40.8) (121.4)Profit for the financial period 225.2 93.4 247.6 Earnings per share (pence) 4 - basic 8.46 3.52 9.32 - diluted 8.45 3.50 9.31 Ordinary dividend per share (pence) 5Interim - proposed 0.675 0.625 - paid 0.625Final - paid 3.375 Condensed consolidated statement of recognised income and expense25 weeks ended 29 July 2007 25 weeks ended 25 weeks ended 53 weeks ended 29 July 2007 23 July 2006 4 February 2007 £m £m £mProfit for the financial period 225.2 93.4 247.6Actuarial gain arising in the - - 118.7pension scheme (net of taxation)Cash flow hedging movement 2.9 (3.3) (0.6)Deferred tax on share options (0.9) - 2.8Effect of the tax rate change on the 3.3 - -deferred tax movements on thepension scheme deficit 3Total recognised income and expense 8 230.5 90.1 368.5for the financial period Condensed consolidated balance sheet29 July 2007 29 July 2007 23 July 2006 4 February 2007 Note £m £m £mAssetsNon-current assetsProperty, plant and equipment 6 6,108.0 6,140.9 6,117.4Lease prepayments 227.1 221.0 227.9Investment property 239.7 227.2 240.5Financial assets 21.4 24.7 19.1 6,596.2 6,613.8 6,604.9Current assetsStocks 380.7 336.8 367.9Debtors 161.2 164.3 150.6Cash and cash equivalents 655.3 113.5 231.1 1,197.2 614.6 749.6Non-current assets classified as held 4.0 81.2 16.4for sale 1,201.2 695.8 766.0LiabilitiesCurrent liabilitiesCreditors (1,569.5) (1,639.4) (1,501.1)Other financial liabilities (478.9) (2.5) (253.8)Current tax liabilities (132.4) (77.2) (100.0) (2,180.8) (1,719.1) (1,854.9)Non-current liabilitiesOther financial liabilities (763.9) (1,016.9) (768.6)Deferred tax liabilities 3 (450.2) (423.3) (477.6)Pension liabilities 7 (166.8) (401.4) (197.9)Provisions (151.1) (89.0) (144.9) (1,532.0) (1,930.6) (1,589.0)Net assets 4,084.6 3,659.9 3,927.0 Shareholders' equityCalled up share capital 268.4 267.5 267.7Share premium 53.2 38.5 41.5Merger reserve 2,578.3 2,578.3 2,578.3Retained earnings and other reserves 1,184.7 775.6 1,039.5Total equity 8 4,084.6 3,659.9 3,927.0 Condensed consolidated cash flow statement25 weeks ended 29 July 2007 29 July 2007 23 July 2006 4 February 2007 Note £m £m £mCash flows from operating activitiesCash generated from operations 9 405.6 418.8 704.3Interest paid (14.2) (14.6) (68.0)Taxation paid (33.5) (1.9) (53.6)Net cash inflow from operating activities 357.9 402.3 582.7Cash flows from investing activitiesInterest received 19.2 4.1 12.5Proceeds from the sale of property, plant and 39.6 50.9 158.3equipmentPurchase of property, plant and equipment (140.1) (103.8) (257.2)Net cash outflow from investing activities (81.3) (48.8) (86.4)Cash flows from financing activitiesNet proceeds from the issue of ordinary shares 12.4 1.8 5.0Finance lease principal repayments (1.1) (1.2) (2.5)Repayment of borrowings (0.6) (250.0) (260.5)Dividends paid to equity shareholders 5 (89.8) (81.7) (98.3)Net cash outflow from financing activities (79.1) (331.1) (356.3) Net increase in cash and cash equivalents 197.5 22.4 140.0Cash and cash equivalents at start of period 231.1 91.1 91.1Cash and cash equivalents at end of period 428.6 113.5 231.1 Reconciliation of net cash flow to movement in net debt in the period 25 weeks 25 weeks ended 53 weeks ended ended 29 July 2007 23 July 2006 4 February 2007 Note £m £m £mNet increase in cash and cash equivalents 197.5 22.4 140.0Cash outflow from decrease in debt and lease 1.7 251.2 263.0financingOther non cash movements 6.9 (7.2) (27.6)Opening net debt (772.2) (1,147.6) (1,147.6)Closing net debt 10 (566.1) (881.2) (772.2) Notes to the condensed financial statements25 weeks ended 29 July 2007 25 weeks ended 25 weeks ended 53 weeks ended 29 July 2007 23 July 2006 4 February 2007 1 Turnover £m £m £m Sale of goods in stores 4,863.6 4,725.2 10,086.8 Fuel 1,114.6 1,091.3 2,300.7 Total store based sales 5,978.2 5,816.5 12,387.5 Direct manufacturing sales 13.0 12.4 27.7 Income from concessions and 23.1 21.8 46.3 commission Total turnover 6,014.3 5,850.7 12,461.5 25 weeks ended 25 weeks ended 53 weeks ended 29 July 2007 23 July 2006 4 February 2007 2 Finance costs and income £m £m £m Interest payable on short term loans and bank (0.4) (5.6) (5.1) overdrafts Interest payable on bonds (28.9) (27.6) (60.3) Interest capitalised 4.1 2.8 6.1 Total interest payable (25.2) (30.4) (59.3) Fair value movement of derivative instruments (3.2) (7.8) (11.7) Pension liability interest cost (47.4) (44.6) (94.8) Expected return on pension assets 55.7 48.1 102.0 Net pension interest income 8.3 3.5 7.2 Other finance costs (4.0) (2.7) (11.1) Finance costs (24.1) (37.4) (74.9) Bank interest received 14.5 3.7 11.2 Other interest received 4.7 0.4 1.3 Amortisation of bonds 7.3 3.7 8.2 Finance income 26.5 7.8 20.7 Net finance income/(cost) 2.4 (29.6) (54.2) 3 Taxation The current corporation tax charge on taxable profits for the current interim period is made at an underlying rate of 31%, which is the effective current tax rate that is expected to arise on total annual profits before tax at 3 February 2008. The effective tax rate for the current interim period is 15%. This low rate reflects the closure of prior-year enquiries that were raised by HM Revenue & Customs, which has resulted in a significant amount of corporation tax now being recoverable, and a large release of deferred tax following the change in rate of UK corporation tax from 30% to 28%. 4 Earnings per share Basic earnings per share are calculated by dividing earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period, excluding those held by the Group as treasury shares, which are treated as cancelled. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares. Adjusted earnings per share Earnings per share has been adjusted for profits or losses arising on property transactions after removing the effects of tax. It is the Directors view that adjusted earnings per share is a fairer reflection of the results of the underlying business. 25 weeks ended 25 weeks ended 53 weeks ended 29 July 2007 23 July 2006 4 February 2007 £m £m £m Basic Diluted Basic Diluted Basic Diluted Earnings Earnings attributable to ordinary 225.2 225.2 93.4 93.4 247.6 247.6 shareholders Profits arising on property transactions* (11.5) (11.5) (4.2) (4.2) (26.9) (26.9) Adjusted earnings attributable to ordinary 213.7 213.7 89.2 89.2 220.7 220.7 shareholders Millions Millions Millions Basic Diluted Basic Diluted Basic Diluted Weighted average number of shares Ordinary shares in issue/diluted ordinary 2,660.8 2,664.2 2,656.9 2,665.9 2,657.5 2,658.7 shares** Pence Pence Pence Basic Diluted Basic Diluted Basic Diluted Adjusted earnings per ordinary share 8.03 8.02 3.36 3.35 8.30 8.30 * Profits arising on property transactions as shown in the income statement after adjusting for the effects of tax. ** The weighted average ordinary shares in issue is adjusted for potentially dilutive preference shares and share options. 25 weeks 25 weeks ended 53 weeks ended ended 29 July 2007 23 July 2006 4 February 20075 Dividends £m £m £m Equity dividends paid in the period 89.8 81.7 98.3 The dividend paid in the period represents the cash payment of the final dividend from the 53 weeks ended 4 February 2007. The Directors are proposing an interim dividend of 0.675p per share which will be paid on 12 November 2007 to shareholders who are on the register of members on 12 October 2007. The interim dividend will absorb an estimated £18.1m of shareholders' funds. This amount will be charged to retained earnings when paid. 29 July 2007 23 July 2006 4 February 2007 6 Property, plant and equipment £m £m £m Net book value At beginning of the period 6,117.4 6,143.9 6,143.9 Additions at cost 153.0 115.3 268.4 Interest capitalised 4.1 2.8 6.1 Transfers from/(to) assets held for sale and - 3.5 (25.8) investment property Disposals (10.7) (0.2) (2.9) Depreciation charge for the period and other (155.8) (124.4) (272.3) asset write offs At end of the period 6,108.0 6,140.9 6,117.4 In addition to the depreciation charge above of £155.8m, £2.5m (23 July 2006 : £2.2m ; 4 February 2007 : £4.6m) is charged on Investment properties. £17m additional depreciation was charged in the current interim period to write down certain branded assets that are due to be replaced. Contracts placed for future capital expenditure not provided in the financial statements amount to £99.6m (23 July 2006 : £61.3m ; 4 February 2007 : £101.5m). 7 Pension liabilities Pensions cost has been calculated on a year-to-date basis by using the actuarially determined pension cost rate from the end of the prior financial year. There were no significant events or fluctuations in this interim period. The April 2007 actuarial valuations for both of the Group's defined benefit pension schemes are currently in progress. Early conclusions show that there are likely to be improvements in actual and forecast longevity indicating that the January 2008 position will include longer longevity assumptions. Share Share Merger Cash flow Retained Total capital premium reserve hedging earnings reserve 8 Statement of changes in shareholders' equity £m £m £m £m £m £m Current interim period At 4 February 2007 267.7 41.5 2,578.3 (0.6) 1,040.1 3,927.0 Total recognised income and expense - - - 2.9 227.6 230.5 Share issues 0.7 11.7 - - - 12.4 Share option charge - - - 4.5 4.5 Dividends - - - - (89.8) (89.8) At 29 July 2007 268.4 53.2 2,578.3 2.3 1,182.4 4,084.6 Prior interim period At 29 January 2006 267.3 36.9 2,578.3 - 766.1 3,648.6 Total recognised income and expense - - - (3.3) 93.4 90.1 Share issues 0.2 1.6 - - - 1.8 Share option charge - - - - 1.1 1.1 Dividends - - - - (81.7) (81.7) At 23 July 2006 267.5 38.5 2,578.3 (3.3) 778.9 3,659.9 Prior year At 29 January 2006 267.3 36.9 2,578.3 - 766.1 3,648.6 Total recognised income and expense - - - (0.6) 369.1 368.5 Share issues 0.4 4.6 - - - 5.0 Share option charge - - - - 3.0 3.0 Dividends - - - - (98.3) (98.3) Sale of treasury - - - - 0.2 0.2 shares At 4 February 2007 267.7 41.5 2,578.3 (0.6) 1,040.1 3,927.0 25 weeks ended 25 weeks ended 53 weeks ended 29 July 2007 23 July 2006 4 February 2007 9 Cash flows from operating activities £m £m £m Profit for the period 225.2 93.4 247.6 Adjustments for: Taxation 41.1 40.8 121.4 Depreciation and amortisation 158.3 126.6 281.9 Profits arising on property transactions (16.5) (6.0) (38.5) Net finance (income)/cost (2.4) 29.6 54.2 Other non-cash 4.5 1.1 3.0 changes Excess of contributions over pension service (23.1) (11.3) (41.6) cost (Increase)/decrease in stocks (12.8) 62.6 31.5 Increase in debtors (9.8) (10.2) (3.3) Increase in 37.9 131.0 36.5 creditors Increase/(decrease) in provisions 3.2 (38.8) 11.6 Cash generated from operations 405.6 418.8 704.3 29 July 2007 23 July 2006 4 February 2007 10 Analysis of net debt £m £m £m Cash and cash equivalents 655.3 113.5 231.1 Bank overdrafts (226.7) - - Cash and cash equivalents per cash flow 428.6 113.5 231.1 Interest and cross-currency swaps 21.4 24.7 19.1 Financial assets 21.4 24.7 19.1 Bonds (250.0) - (250.7) Swaps (0.1) - (0.7) Finance lease obligations (2.1) (2.5) (2.4) Current financial liabilities (excluding bank (252.2) (2.5) (253.8) overdrafts) Bonds (744.8) (1,008.5) (748.1) Other unsecured (16.7) (4.0) (17.3) loans Finance lease obligations (2.4) (4.4) (3.2) Non-current financial liabilities (763.9) (1,016.9) (768.6) Net debt (566.1) (881.2) (772.2) Responsibility statement We confirm that to the best of our knowledge: • the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union; • the Interim management report includes a fair review of the information required by: (a) DTR 4.2.7R of the Disclosure and Transparency Rules , being an indicationof important events that have occurred during the first 25 weeks of thefinancial year and their impact on the condensed set of financial statements;and a description of the principal risks and uncertainties for the remaining 27weeks of the year; and (b) DTR 4.2.8R of the Disclosure and Transparency Rules , being related partytransactions that have taken place in the first 25 weeks of the currentfinancial year and that have materially affected the financial position orperformance of the entity during that period and any changes in the relatedparty transactions described in the last annual report that could do so. By order of the Board 18 September 2007 The Board The Board of Directors that served during the 25 weeks to 29 July 2007 and theirrespective responsibilities can be found on page 17 of the Annual report andfinancial statements 2007. David Hutchinson retired from the Board on 30 June 2007. Sir Ian Gibson joined the Group on 1 September 2007 as Non-Executive DeputyChairman. Accounting policies Basis of preparation This Half-yearly financial report is the condensed consolidated financialinformation of the Group for the 25 weeks ended 29 July 2007. It has beenprepared in accordance with the Disclosure and Transparency Rules of the UKFinancial Services Authority and the requirements of IAS 34 Interim FinancialReporting as adopted by the European Union. The Half-yearly financial report 2007/08 was approved by the Board of Directorson 18 September 2007. The Half-yearly financial report 2007/08 does not constitute financialstatements as defined in section 240 of the Companies Act 1985 and does notinclude all of the information and disclosures required for full annualfinancial statements. It should be read in conjunction with the Annual reportand financial statements for the 53 weeks ended 4 February 2007 which isavailable on request from the company's registered office or to download fromwww.morrisons.co.uk. The financial information contained in this half-yearly report in respect of the53 weeks ended 4 February 2007 has been extracted from the Annual report andfinancial statements 2007 which have been filed with the Registrar of Companies.The auditors report on these financial statements was unqualified and did notcontain a statement under Section 237(2) or (3) of the Companies Act 1985. The half-yearly results for the current and comparative periods are unaudited. The auditors have carried out a review of the Half-yearly financial report 2007/08 and their report is set out below. Restatement of the Condensed consolidated income statement The format of the Consolidated income statement in the Annual report andfinancial statements for the 53 weeks ended 4 February 2007 was changed to thatof a functional style that is consistent with the key competitors in the Foodand Drug Retail sector. Accordingly, the same format has been applied for theCondensed consolidated income statement for the 25 weeks ended 29 July 2007 andthe income statement for its comparative period is restated. The impact of thischange is that: • Operating profit remains unchanged. • raw materials are subsumed into Cost of sales. • staff costs, impairment and depreciation are split between Cost of sales and Administrative expenses as appropriate. Restatement of Debtors and Current creditors Following a review of creditors' categorisation, Trade creditors of £100.1m havebeen recategorised as Prepayments within Debtors at the balance sheet date 23July 2006. New IFRS and amendments to IAS The financial statements for the year ended 3 February 2008 are impacted by thefollowing new standards and interpretations. IFRS 7 Financial instruments : Disclosure and IAS 1 Presentation of FinancialStatements - Capital disclosures will increase the amount of disclosure in thefull financial statements. The accounting, income and net assets will remainunchanged. Significant accounting policies The condensed consolidated financial statements in this Half-yearly financialreport for the 25 weeks ended 29 July 2007 have been prepared using accountingpolicies and methods of computation consistent with those set out in Wm MorrisonSupermarkets PLC's Annual report and financial statements for the 53 weeks ended4 February 2007. In preparing the condensed consolidated financial statements, management arerequired to make accounting assumptions and estimates. The assumptions andestimation methods were consistent with those applied to the Annual report andfinancial statements for the 53 weeks ended 4 February 2007. Independent review report to Wm Morrison Supermarkets PLC Introduction We have been engaged by the Company to review the condensed set of financialstatements in the Half-yearly financial report for the 25 weeks ended 29 July2007 which comprises the Condensed consolidated income statement, the Condensedconsolidated balance sheet, the Condensed consolidated cash flow statement, theCondensed consolidated statement of recognised income and expense and therelated explanatory notes. We have read the other information contained in theHalf-yearly financial report 2007/08 and considered whether it contains anyapparent misstatements or material inconsistencies with the information in thecondensed set of financial statements. This report is made solely to the Company in accordance with the terms of ourengagement to assist the Company in meeting the requirements of the Disclosureand Transparency Rules ("the DTR") of the UK's Financial Services Authority ("the UK FSA"). Our review has been undertaken so that we might state to theCompany those matters we are required to state to it in this report and for noother purpose. To the fullest extent permitted by law, we do not accept orassume responsibility to anyone other than the Company for our review work, forthis report, or for the conclusions we have reached. Directors' responsibilities The Half-yearly financial report is the responsibility of, and has been approvedby, the Directors. The Directors are responsible for preparing the Half-yearlyfinancial report in accordance with the DTR of the UK FSA. The annual financial statements of the Group are prepared in accordance withIFRSs as adopted by the EU. The condensed set of financial statements includedin this Half-yearly financial report has been prepared in accordance with IAS 34Interim Financial Reporting as adopted by the EU. Our responsibility Our responsibility is to express to the Company a conclusion on the condensedset of financial statements in the Half-yearly financial report 2007/08 based onour review. Scope of review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410 Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity issued by the AuditingPractices Board for use in the UK. A review of interim financial informationconsists of making enquiries, primarily of persons responsible for financial andaccounting matters, and applying analytical and other review procedures. Areview is substantially less in scope than an audit conducted in accordance withInternational Standards on Auditing (UK and Ireland) and consequently does notenable us to obtain assurance that we would become aware of all significantmatters that might be identified in an audit. Accordingly, we do not express anaudit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the Half-yearly financialreport for the 25 weeks ended 29 July 2007 is not prepared, in all materialrespects, in accordance with IAS 34 as adopted by the EU and the DTR of the UKFSA. KPMG Audit PlcChartered AccountantsLeeds18 September 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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