FINANCIAL ANALYSIS

Financial Analysis

FINANCIAL ANALYSIS

Morrison Supermarkets Plc

Introduction

Wm Morrison Supermarkets plc is the fourth largest chain of supermarkets in the United Kingdom. The company is usually referred to and is branded as Morrisons, and it is part of the FTSE 100 Index of companies. Morrisons' market share as of December 2008 is at 11.8%, making it the smallest of the "Big Four" supermarkets, behind Tesco (30.9%), Asda (16.8%) and Sainsbury's (16%), but far ahead of the fifth place Co-operative Group, which has a share of 4.4%. Originally founded by William Morrison in 1899, it started out as an egg and butter stall in Rawson Market, Bradford, England. Until 2004, Morrisons store locations were primarily focused in the north of England, but with the takeover of Safeway in that year, the company now has over 420 superstores across the UK.



Table of Absolutes & Ratio Analysis

Financial Highlights (In GBP as of 02/28/2009)

Total Revenue

54,327,000,000

EBITDA

3,506,000,000

Operating Income

2,970,000,000

Net Income

2,161,000,000

Total Assets

46,053,000,000

Current Assets

14,045,000,000

Total Liabilities

33,058,000,000

Current Liabilities

18,040,000,000

Long Term Debt

12,391,000,000

Stockholders' Equity

12,995,000,000

 

2009

2008

Revenue

54,327

47,298

Cost of sales

50,109

43,668

Operating profit

4,218

3,630

Profit after tax

2,954

2,803

Fixed assets

32,008

23,864

Ratio Analysis

FINANCIAL RATIOS

ROCE %

16.67

17.9

operating profit margin %

3.99

4.5

sales to capital employed

418.06

397.4

total asset turnover

1.03

1.04

stock turnover in days

19.44

20.31

debtors turnover in days

52.62

19.38

creditors turnover in days

190.77

142.77

opearating cash cycle

-118.71

-103.08

 

 

 

LIQUIDITY RATIOS

liquidity ratio

0.78

0.61

quick ratio

0.63

0.38

 

 

 

SOLVENCY RATIOS

gearing

0.54

0.4

debt to equity %

1.16

0.67

 

 

 

SHAREHOLDER RATIOS

return on equity %

0.17

0.18

earnings per share %

0.27

0.27

dividend yield

9

7

dividend cover

0.0026

0.0013

price earning ratio

0.37

1.85

earnings yield

2.702703

0.540541

The gross profit has reduced slightly because the company offered majority of its products at cheaper rate to promote its sales. With sales revenue increasing because of this marketing strategy, the ratio is bound to be lower. However the gross profit has also shown an increase due to the increased sales which is understandable as they have a direct relationship. But the increase in revenue is more than the increase in gross profit thus shifting the balance towards the denominator.

When analyzed also with net profit, net profit has also shown a decline.

Net profit has marginally decreased over the year. This marginal difference could be attributed to an increase in administrative expenses, increased taxes due to new taxation policy guidelines and finance costs (Interest paid). Similar to gross profit, the increase in revenue surpasses the increase in net profits and hence the ratio has shown a decline. However it can be presumed that the new sales strategy would help in not only increase the sales in the future but also improve profits by a good margin.

The company has improved its efficiency in utilizing the shareholder funds when compared to 2009. This increase is warranted and expected because of the increase in profits arising due to increased sales, thanks to the new pricing strategy. Increased profit implies increased dividends payout and excellent returns for shareholders. This also makes it an excellent buy option in the capital markets.

The return on capital has shown an increase when compared to the previous year. This implies the company's earnings before interest and tax has increased over the previous year. Since capital employed has increased in 2009, sales have increased over the year due to high level of investment and this has resulted ...