TIDMMRW
RNS Number : 8135Y
Morrison(Wm.)Supermarkets PLC
10 September 2009
?
INTERIM RESULTS FOR THE HALF YEAR TO 2 AUGUST 2009
Strategy bearing fruit for Morrisons
Financial summary
* Turnover up 5.0% to GBP7.5bn (2008/9: GBP7.1bn)
* Like for like sales (ex VAT and fuel) up 7.8% (2008/9: 7.7%)
* Profit before tax GBP449m (2008/9: GBP309m)
* Underlying profit before tax up 22% to GBP359m (2008/9: GBP295m)
* Net debt GBP885m (2008/9: GBP458m) after capital investment of GBP572m
* Gearing of 19% (2008/9: 10%) and interest cover of 18 times
* Interim dividend up 35% to 1.08p
Operating highlights
* 22 new stores opened in the period
* New Sittingbourne regional distribution centre open ahead of schedule
* Optimisation Plan outperformance confirmed
* 5,000 new jobs created
Sir Ian Gibson, Non Executive Chairman, said:
"We are pleased with these interim results which reflect our broad appeal as the
food specialist for everyone. Morrisons has gained over one million new
customers in the past two years, and the management team's priority is to build
on this success by continuing to offer outstanding day to day value to all our
customers as the pressure on consumer spending continues through 2009."
Marc Bolland, Chief Executive, said:
"This has been an excellent first half performance from Morrisons, continuing
our run of market beating sales growth. We offer great value to our customers,
particularly our offers on fresh food delivered through our own preparation
facilities, which have been hugely popular with a growing number of customers.
The business is performing well in all parts of the country and we are making
good progress on our plans to move from National to Nationwide."
Outlook
We expect market growth to slow in the second half as inflationary pressures
ease. The business' performance to date, the successful implementation of the
Optimisation Plan and our continuing customer gains give the Board confidence
that we will deliver our profit expectations for the year.
Enquiries
+-------------------------------+-------------------+------------------------+
| Wm Morrison Supermarkets PLC | | |
+-------------------------------+-------------------+------------------------+
| Marc Bolland | | 0845 611 5000 |
+-------------------------------+-------------------+------------------------+
| Richard Pennycook | | |
+-------------------------------+-------------------+------------------------+
| | | |
+-------------------------------+-------------------+------------------------+
| Investor Relations | | |
+-------------------------------+-------------------+------------------------+
| Niall Addison | | 07764 624701 |
+-------------------------------+-------------------+------------------------+
| | | |
+-------------------------------+-------------------+------------------------+
| | | |
+-------------------------------+-------------------+------------------------+
| Media Relations | | |
+-------------------------------+-------------------+------------------------+
| Wm Morrison Supermarkets: | Gillian Hall | 0845 611 5359 |
+-------------------------------+-------------------+------------------------+
| Citigate Dewe Rogerson: | Simon Rigby | 020 7638 9571 |
| | Sarah Gestetner | |
| | Kevin Smith | |
+-------------------------------+-------------------+------------------------+
| | | |
+-------------------------------+-------------------+------------------------+
| | | |
| | | |
+-------------------------------+-------------------+------------------------+
| | | |
+-------------------------------+-------------------+------------------------+
There will be an analyst presentation at 9:30am on Thursday 10 September 2009 at
the offices of the Royal Bank of Scotland, 250 Bishopsgate, London, EC2M
4AA.
The presentation will also be available live via audio webcast at:
www.morrisons.co.uk/Corporate/Investors/ and via conference call: international
access number: +44 20 3003 2666 and participant pin: 4032845. There will be a
replay available for 7 days: replay dial in: +44 (0)20 8196 1998 and replay pin:
4032845#.
Overview
This report covers trading for the 26 weeks ended 2 August 2009.
Total turnover was GBP7.5bn, up 5.0% on the prior period. Excluding fuel,
turnover was up 9.2%, comprising a like for like increase of 7.8% and a further
1.4% contribution from new stores.
Profit before tax was GBP449m, including GBP3m of gains from property disposals
(2008/9: GBP6m) and an exceptional pensions credit of GBP91m. Underlying profit
before tax was GBP359m, compared to GBP295m in the prior period, an increase of
22%. The underlying operating margin of 5.1% was strongly ahead of the prior
period, reflecting the benefit of the Group's growth on supply chain efficiency
and pleasing outperformance against our Optimisation Plan targets. Reduced pump
prices at our forecourts also had the effect of reducing fuel turnover, thereby
increasing overall margins.
Following successful consultation with our pension scheme members, we concluded
the process of putting our defined benefit pension schemes onto a sound
financial footing for the long term. Previously, we have injected GBP200m into
the schemes; reduced - in consultation with the Trustees - the funds' exposure
to equity investments and put the actuarial valuation on a very prudent basis of
assumptions, particularly mortality rates. During the second half of the year,
all future benefit accrual will move onto a career average basis, such that it
will grow in line with inflation rather than being linked to final salary. At
the same time, members' entitlements to commutation payments on retirement will
increase, by an average of 10%. The resultant actuarial recalculation of future
liabilities of the Schemes has reduced total liabilities by GBP91m. As a result,
an exceptional pensions credit (which is non cash) has been recognised in the
income statement as required under IAS19 and annual service costs will reduce by
GBP8m with effect from October 2009.
Cash flow was again strong in the period, with GBP533m generated from operations
compared with GBP521m in the prior period. Capital expenditure increased, as
anticipated, to GBP572m (2008/9: GBP238m), with the completion of the
acquisition of a batch of stores from the Co-operative Group and the development
of our new distribution centre at Sittingbourne. As a result of these
investments in future growth, net debt increased to GBP885m (2008: GBP458m), to
leave gearing at 19%, significantly below that of most companies of a comparable
nature and scale. Revolving credit facilities of GBP650m, available until 2012,
remained undrawn at the half year. The Group's bonds were upgraded in March
2009, by Moody's, to A3 - a solid investment grade in line with our conservative
balance sheet principles.
The Group has made good progress in its plans to move from being a national
presence to a truly nationwide retailer. In the period, 22 new stores were
opened, one of which was a replacement, and 19 of which were acquisitions from
the Cooperative Group. Net selling space increased by 0.3 million square feet,
to bring the total to 11.4 million.
Last year we announced an enhanced dividend policy, which was to target
progressive dividend growth, over and above earnings growth, in order to bring
dividend cover to a level in line with the rest of our sector this year. The
Board is pleased to confirm its intention to increase the interim dividend by
35% to1.08 pence per share. This will be paid on 9th November 2009 to
shareholders on the register on 2nd October 2009.
The UK grocery retail market
The consumer environment in the first half of 2009 remained difficult, with
disposable incomes continuing to be under pressure and unemployment and the fear
of unemployment affecting consumer behaviour. In the grocery market, consumers
continued to experience food price inflation, driven mainly by the effects of
the weak pound, which pushed up the costs of imported products and those
domestically produced products that have a ready export market. These pressures
began to moderate towards the end of the period.
A number of measures of grocery market performance are published, all of which
are broadly consistent. One such, from Taylor Nelson Sofres, showed grocery
market growth in the first half of 2009 at 5.9%, which is similar to the growth
in the equivalent prior year period. This reflects the impact of food commodity
and oil price inflation in recent times - the average growth rate in the
previous five years was 3.8%.
The grocery sector continues to be under a close focus from the Office of Fair
Trading (OFT), despite the findings of the Competition Commission that the
sector is highly competitive. We always cooperate fully with such inquiries. In
the case of the OFT investigation into milk, which began in 2004, we continue to
believe strongly that Morrisons has no case to answer and have made
representations in detail to this effect. Our view is unchanged by the
Supplementary Statement of Objections issued by the OFT in July 2009. In the
case of the tobacco inquiry which started in early 2003, there is a complex
legal question as to whether well established industry practices represented a
breach of competition law. It is likely that this can only be settled clearly
through a formal judicial process, although the OFT have indicated an intention
to reach their own conclusion in the first quarter of 2010.
Trading
Our like for like store sales growth of 7.8% continued the strong momentum we
have been reporting since 2007, and reflected increased customer numbers and
strong basket spend, as well as the effects of food price inflation. Over a 24
month period, we have added 1.1 million weekly customers drawn from all our
major competitors, and we seek to continue growing the number of customers
experiencing Morrisons every week in the coming year.
Like for like fuel sales were down 10.0%, reflecting the welcome effect of much
reduced prices at the pumps. Average unleaded prices per litre were 94.9p in the
period, compared with 109.7p in the previous year. Our reputation for strong
value on fuel resulted in total volume growth, measured in litres, of 2.9% in
the period.
The economic downturn continued to weigh heavily on consumers in the period, and
our strong focus on value was maintained. Market Street performed particularly
well, both because of our very sharp everyday pricing and because we are able to
offer deeper, more attractive promotions on fresh products, supported by our own
preparation facilities, than competitors who do not have this capability. We
continue to lead the market, not just on fresh value, but also on quality and
provenance, and we remain the only major British retailer to offer 100% British
pork, beef, lamb and poultry. Our customers strongly endorse this policy, which
supports British farming, reduces food miles and means that we sell only fresh
meat raised to British standards of animal welfare.
The Group's like for like volume momentum, which has led our sector over a
sustained period, has allowed us to invest strongly in value for our customers,
ensuring that we maintain a very competitive position in the market. We continue
to target annual sales growth ahead of market growth. Over and above our
investment in customer value, our volume growth delivered supply chain benefits
which allowed us to continue the process of recovering our margins which began
with the first Optimisation Plan in 2006. Overall, the Group's Underlying
Operating Margin increased from 4.3% to 5.1%, a total of 80 basis points,
although half of this was accounted for by the effect of forecourt prices coming
down year on year. Approximately two thirds of the remaining uplift related to
the supply chain benefits, and a further third from over-performance on other
elements of the Optimisation Plan, which are highlighted below.
Optimisation Plan progress
Our first Optimisation Plan, launched in 2006, achieved higher benefits than
originally projected, and we are pleased that Optimisation Plan II, launched in
2007, is similarly expected to outperform by the time of its completion in
January 2010.
During the period, our continuing work on store ranging and segmentation
delivered good benefits, with all our major categories showing solid growth.
Additionally, our in-store efficiency started to benefit from the queue
management and self-checkout systems which we began rolling out in 2008.
The Plan included significant investment in infrastructure, and a milestone was
the opening, after the period end, of our new Regional Distribution Centre (RDC)
for the South East, at Sittingbourne in Kent. Having acquired the freehold of
the site in 2008, the total site investment will be GBP108m and the opening
period will incur first year costs of cGBP6m, which were included in the
Optimisation Plan. Going forward, the operation of this site will ease capacity
issues created by our growth and will substantially reduce the miles travelled
in serving our South Eastern stores. We have now submitted a planning
application for a further RDC in the South West, at Bridgwater, which will
provide further capacity when needed in 2011/12 to support our National to
Nationwide expansion.
The Optimisation Plan included a major programme of systems renewal, which will
run for a number of years. During the period, we successfully delivered the
first phase of the new financial systems, continued the roll-out of the new HR
and payroll systems (now covering two thirds of our staff) and implemented a new
stock picking system in two of our distribution centres. The roll-out of this
will continue in the second half, which will also see the commencement of a
pilot for the new Epos system in stores.
Co-Operative / Somerfield store acquisition and conversion
As originally announced in November 2008, we acquired 38 stores from the
Co-Operative Group during the period, and also obtained clearance from the OFT
for conversion to Morrisons. At the half year stage, 19 of these stores had been
converted and opened, and a further 15 will open in the second half.
Included in the original package were 4 further stores which do not, naturally,
fit the Morrisons operating model. As planned, they will remain closed until we
are in a position to evaluate the results of other stores.
Excluding these "non-conforming" stores, this acquisition will add 480,000
square feet of net new store space and we anticipate the final acquisition and
development costs will total GBP320m. As well as these capitalised costs, full
year one-off costs of cGBP30m (H1 GBP21m) relating to pre-opening activities
will be charged to Operating Profit. This is below our initial projection of
GBP40m due to tight cost control and the timely manner in which the OFT
approvals were granted.
Although early days, we are pleased with the customer response to the new
stores, many of which were community stores operating with a limited range and
high prices under the Somerfield fascia. As Morrisons, these stores offer a full
weekly shop, with a strong fresh offer, all at the normal nationwide prices
charged by Morrisons.
The combination of our organic store opening programme and the
Co-Operative/Somerfield acquisition has given us a great next step in our move
from National to Nationwide.
Corporate Social Responsibility
We continue to work hard on our CSR agenda. During the period, we again issued
free "bags for life" to our customers, and as a result of this and other
initiatives we reduced carrier bag consumption by 71m bags. We substantially
completed the conversion of our filling station pumps to highly efficient
"vapour recovery" pumps which emit much reduced levels of fuel vapour into the
atmosphere, a GBP16m investment in improved environmental performance.
As the Food Specialist for Everyone, Morrisons understands where food comes
from. To build further on our food specialist credentials, we announced a
ground-breaking joint venture to farm 700 acres on the Dumfries House Estate in
East Ayrshire. The Morrisons Farm will aim to become a leading centre of
excellence for farming research, working in a new partnership with the
Scottish Agricultural College to drive research into sustainable and commercial
farming models and share best practice throughout the industry.
During the period, we launched a major initiative to help educate our customers
and the general public in better food management. Called "Great Taste, Less
Waste" the programme provides easy, practical tips to improve the storage of
food and dispels some myths. For example, it highlights that tomatoes are best
kept at room temperature and apples in the fridge - the reverse of how most
consumers store these items.
Colleagues
Our continued growth resulted in job creation, with colleague numbers increasing
from 124,000 to 131,000 over the period. We welcomed over 2,300 colleagues
formerly employed by the Co-Operative Group or Somerfield, and wish them great
success in their careers with Morrisons. The busy process of converting these
stores has only been achieved so effectively through the great efforts of many
colleagues.
We were delighted that our staff have again been recognised for their
achievements of the past few years with success in further prestigious industry
awards including Retail Week's "Retailer of the Year" for the second consecutive
year and The Grocer's Service and Availability awards.
Wm Morrison Supermarkets PLC
Condensed consolidated financial statements
Consolidated statement of comprehensive income
26 weeks ended 2 August 2009
+--------+---------+--------+---------+---------+----------+
| | Note | 26 | 26 | 52 |
| | | weeks | weeks | weeks |
| | | ended | ended | ended |
| | | 2 | 3 | 1 |
| | | August | August | February |
| | | 2009 | 2008 | 2009 |
| | | GBPm | GBPm | GBPm |
+------------------+--------+---------+---------+----------+
| Turnover | 2 | 7,458 | 7,105 | 14,528 |
+------------------+--------+---------+---------+----------+
| Cost of sales | | (6,940) | (6,669) | (13,615) |
+------------------+--------+---------+---------+----------+
| Gross profit | | 518 | 436 | 913 |
+------------------+--------+---------+---------+----------+
| | | | | |
+------------------+--------+---------+---------+----------+
| Other operating | | 31 | 19 | 37 |
| income | | | | |
+------------------+--------+---------+---------+----------+
| Administrative | | (167) | (152) | (281) |
| expenses | | | | |
+------------------+--------+---------+---------+----------+
| Pensions credit | 6 | 91 | - | - |
+------------------+--------+---------+---------+----------+
| Profits arising | | 3 | 6 | 2 |
| on property | | | | |
| transactions | | | | |
+------------------+--------+---------+---------+----------+
| Operating | | 476 | 309 | 671 |
| profit | | | | |
+------------------+--------+---------+---------+----------+
| | | | | |
+------------------+--------+---------+---------+----------+
| Analysed as: | | | | |
+------------------+--------+---------+---------+----------+
| Operating | | 385 | 309 | 671 |
| profit before | | | | |
| pensions credit | | | | |
+------------------+--------+---------+---------+----------+
| Pensions credit | 6 | 91 | - | - |
+------------------+--------+---------+---------+----------+
| Operating | | 476 | 309 | 671 |
| profit | | | | |
+------------------+--------+---------+---------+----------+
| | | | | |
+------------------+--------+---------+---------+----------+
| Finance costs | 3 | (34) | (28) | (60) |
+------------------+--------+---------+---------+----------+
| Finance income | 3 | 7 | 28 | 44 |
+------------------+--------+---------+---------+----------+
| Profit before | | 449 | 309 | 655 |
| taxation | | | | |
+------------------+--------+---------+---------+----------+
| Taxation | | (140) | (91) | (195) |
+------------------+--------+---------+---------+----------+
| Profit for the | | 309 | 218 | 460 |
| period | | | | |
| attributable to | | | | |
| the owners of | | | | |
| the Company | | | | |
+------------------+--------+---------+---------+----------+
| | | | | |
+------------------+--------+---------+---------+----------+
| Other | | | | |
| comprehensive | | | | |
| income: | | | | |
+------------------+--------+---------+---------+----------+
| Actuarial gain | | 6 | - | (101) |
| /(loss) arising | | | | |
| in the pension | | | | |
| scheme | | | | |
+------------------+--------+---------+---------+----------+
| Write-off | | - | (42) | - |
| pension asset | | | | |
+------------------+--------+---------+---------+----------+
| Foreign | | (1) | - | 6 |
| exchange | | | | |
| movements | | | | |
+------------------+--------+---------+---------+----------+
| Cash flow | | (7) | 2 | 6 |
| hedging | | | | |
| movement | | | | |
+------------------+--------+---------+---------+----------+
| Tax in relation | | - | 12 | 31 |
| to components | | | | |
| of other | | | | |
| comprehensive | | | | |
| income | | | | |
+------------------+--------+---------+---------+----------+
| Other | | (2) | (28) | (58) |
| comprehensive | | | | |
| expense for the | | | | |
| period, net of | | | | |
| tax | | | | |
+------------------+--------+---------+---------+----------+
| Total | | 307 | 190 | 402 |
| comprehensive | | | | |
| profit for the | | | | |
| period | | | | |
| attributable to | | | | |
| the owners of | | | | |
| the Company | | | | |
+------------------+--------+---------+---------+----------+
| | | | | |
+------------------+--------+---------+---------+----------+
| Earnings per | 4 | | | |
| share (pence) | | | | |
+------------------+--------+---------+---------+----------+
| | - | | 11.83 | 8.21 | 17.39 |
| | basic | | | | |
+--------+---------+--------+---------+---------+----------+
| | - | | 11.76 | 8.09 | 17.16 |
| | diluted | | | | |
+--------+---------+--------+---------+---------+----------+
+--------------+------------------+------+------------+------------+------------+
| Consolidated balance sheet | | | |
| | | | |
+----------------------------------------+------------+------------+------------+
| 2 August 2009 | | | | |
+---------------------------------+------+------------+------------+------------+
| | | | | |
+---------------------------------+------+------------+------------+------------+
| | | | 2 August | 3 August | 1 |
| | | | 2009 | 2008 | February |
| | | | | | 2009 |
+--------------+------------------+------+------------+------------+------------+
| | |Note | GBPm | GBPm | GBPm |
+--------------+------------------+------+------------+------------+------------+
| Assets | | | | |
+---------------------------------+------+------------+------------+------------+
| Non-current assets | | | | |
+---------------------------------+------+------------+------------+------------+
| Property, plant and equipment | 5 | 6,985 | 6,302 | 6,587 |
+---------------------------------+------+------------+------------+------------+
| Lease prepayments | | 260 | 239 | 250 |
+---------------------------------+------+------------+------------+------------+
| Investment property | | 241 | 236 | 242 |
+---------------------------------+------+------------+------------+------------+
| Financial assets | | 67 | 49 | 81 |
+---------------------------------+------+------------+------------+------------+
| Pension surplus | 6 | 51 | - | - |
+---------------------------------+------+------------+------------+------------+
| | | | 7,604 | 6,826 | 7,160 |
+--------------+------------------+------+------------+------------+------------+
| Current assets | | | | |
+---------------------------------+------+------------+------------+------------+
| Stocks | | 493 | 451 | 494 |
+---------------------------------+------+------------+------------+------------+
| Debtors | | 221 | 191 | 245 |
+---------------------------------+------+------------+------------+------------+
| Financial assets | | - | 25 | - |
+---------------------------------+------+------------+------------+------------+
| Cash and cash equivalents | | 308 | 339 | 327 |
+---------------------------------+------+------------+------------+------------+
| | | | 1,022 | 1,006 | 1,066 |
+--------------+------------------+------+------------+------------+------------+
| Non-current assets classified | | - | 4 | - |
| as held for sale | | | | |
+---------------------------------+------+------------+------------+------------+
| | | | 1,022 | 1,010 | 1,066 |
+--------------+------------------+------+------------+------------+------------+
| | | | | |
+---------------------------------+------+------------+------------+------------+
| Liabilities | | | | |
+---------------------------------+------+------------+------------+------------+
| Current liabilities | | | | |
+---------------------------------+------+------------+------------+------------+
| Creditors | | (1,895) | (1,903) | (1,915) |
+---------------------------------+------+------------+------------+------------+
| Other financial liabilities | | (236) | (96) | (1) |
+---------------------------------+------+------------+------------+------------+
| Current tax liabilities | | (148) | (64) | (108) |
+---------------------------------+------+------------+------------+------------+
| | | | (2,279) | (2,063) | (2,024) |
+--------------+------------------+------+------------+------------+------------+
| Non-current liabilities | | | | |
+---------------------------------+------+------------+------------+------------+
| Other financial liabilities | | (1,024) | (775) | (1,049) |
+---------------------------------+------+------------+------------+------------+
| Deferred tax liabilities | | (481) | (463) | (472) |
+---------------------------------+------+------------+------------+------------+
| Pension liabilities | 6 | - | - | (49) |
+---------------------------------+------+------------+------------+------------+
| Provisions | | (108) | (118) | (112) |
+---------------------------------+------+------------+------------+------------+
| | | | (1,613) | (1,356) | (1,682) |
+--------------+------------------+------+------------+------------+------------+
| Net assets | | 4,734 | 4,417 | 4,520 |
+---------------------------------+------+------------+------------+------------+
| | | | | | |
+--------------+------------------+------+------------+------------+------------+
| Shareholders' equity | | | | |
+---------------------------------+------+------------+------------+------------+
| Called up share capital | | 265 | 267 | 263 |
+---------------------------------+------+------------+------------+------------+
| Share premium | | 87 | 60 | 60 |
+---------------------------------+------+------------+------------+------------+
| Capital redemption reserve | | 6 | 2 | 6 |
+---------------------------------+------+------------+------------+------------+
| Merger reserve | | 2,578 | 2,578 | 2,578 |
+---------------------------------+------+------------+------------+------------+
| Retained earnings and hedging | | 1,798 | 1,510 | 1,613 |
| reserve | | | | |
+---------------------------------+------+------------+------------+------------+
| Total equity attributable to | | 4,734 | 4,417 | 4,520 |
| owners of the Company | | | | |
+--------------+------------------+------+------------+------------+------------+
+------------------------------------+------+------------+------------+-----------+
| Consolidated cash flow statement | | | |
+-------------------------------------------+------------+------------+-----------+
| 26 weeks ended 2 August 2009 | | | | |
+------------------------------------+------+------------+------------+-----------+
| | | | | |
+------------------------------------+------+------------+------------+-----------+
| | | | | |
+------------------------------------+------+------------+------------+-----------+
| | | | | |
+------------------------------------+------+------------+------------+-----------+
| | | 2 August | 3 August | 1 |
| | | 2009 | 2008 | February |
| | | | | 2009 |
+------------------------------------+------+------------+------------+-----------+
| | Note | GBPm | GBPm | GBPm |
+------------------------------------+------+------------+------------+-----------+
| Cash flows from operating | | | | |
| activities | | | | |
+------------------------------------+------+------------+------------+-----------+
| Cash generated from operations | 7 | 533 | 521 | 964 |
+------------------------------------+------+------------+------------+-----------+
| Interest paid | | (12) | (16) | (70) |
+------------------------------------+------+------------+------------+-----------+
| Taxation paid | | (92) | (67) | (104) |
+------------------------------------+------+------------+------------+-----------+
| Net cash inflow from operating | | 429 | 438 | 790 |
| activities | | | | |
+------------------------------------+------+------------+------------+-----------+
| | | | | |
+------------------------------------+------+------------+------------+-----------+
| Cash flows from investing | | | | |
| activities | | | | |
+------------------------------------+------+------------+------------+-----------+
| Interest received | | 4 | 19 | 29 |
+------------------------------------+------+------------+------------+-----------+
| Proceeds from the sale of | | 4 | 17 | 22 |
| property, plant and equipment | | | | |
+------------------------------------+------+------------+------------+-----------+
| Purchase of property, plant and | | (572) | (238) | (678) |
| equipment | | | | |
+------------------------------------+------+------------+------------+-----------+
| Net cash outflow from investing | | (564) | (202) | (627) |
| activities | | | | |
+------------------------------------+------+------------+------------+-----------+
| | | | | |
+------------------------------------+------+------------+------------+-----------+
| Cash flows from financing | | | | |
| activities | | | | |
+------------------------------------+------+------------+------------+-----------+
| Proceeds from the issue of | | 28 | 3 | 3 |
| ordinary shares | | | | |
+------------------------------------+------+------------+------------+-----------+
| Shares repurchased for | | - | (50) | (146) |
| cancellation | | | | |
+------------------------------------+------+------------+------------+-----------+
| Finance lease principal repayments | | - | (1) | (2) |
+------------------------------------+------+------------+------------+-----------+
| New borrowings | | 200 | - | 250 |
+------------------------------------+------+------------+------------+-----------+
| Repayment of borrowings | | (2) | (1) | (2) |
+------------------------------------+------+------------+------------+-----------+
| Decrease in long term cash on | | - | 49 | 74 |
| deposit | | | | |
+------------------------------------+------+------------+------------+-----------+
| Dividends paid to equity | 8 | (131) | (110) | (131) |
| shareholders | | | | |
+------------------------------------+------+------------+------------+-----------+
| Net cash inflow/(outflow) from | | 95 | (110) | 46 |
| financing activities | | | | |
+------------------------------------+------+------------+------------+-----------+
| | | | | |
+------------------------------------+------+------------+------------+-----------+
| Net (decrease)/increase in cash | | (40) | 126 | 209 |
| and cash equivalents | | | | |
+------------------------------------+------+------------+------------+-----------+
| Cash and cash equivalents at start | | 327 | 118 | 118 |
| of period | | | | |
+------------------------------------+------+------------+------------+-----------+
| Cash and cash equivalents at end | | 287 | 244 | 327 |
| of period | | | | |
+------------------------------------+------+------------+------------+-----------+
+------------------------------------+------+-----------+------------+------------+
| Reconciliation of net cash flow to movement in net debt in the | |
| period | |
+--------------------------------------------------------------------+------------+
| | | 26 weeks | 26 weeks | 52 weeks |
| | | ended | ended | ended |
+------------------------------------+------+-----------+------------+------------+
| | | 2 August | 3 August | 1 February |
| | | 2009 | 2008 | 2009 |
+------------------------------------+------+-----------+------------+------------+
| | Note | GBPm | GBPm | GBPm |
+------------------------------------+------+-----------+------------+------------+
| Net (decrease)/increase in cash | | (40) | 126 | 209 |
| and cash equivalents | | | | |
+------------------------------------+------+-----------+------------+------------+
| Cash outflow from decrease in debt | | 2 | 2 | 4 |
| and lease financing | | | | |
+------------------------------------+------+-----------+------------+------------+
| Cash inflow from increase in loans | | (200) | - | (250) |
+------------------------------------+------+-----------+------------+------------+
| Decrease in long term cash on | | - | (49) | (74) |
| deposit | | | | |
+------------------------------------+------+-----------+------------+------------+
| Other non cash movements | | (5) | 6 | 12 |
+------------------------------------+------+-----------+------------+------------+
| Opening net debt | | (642) | (543) | (543) |
+------------------------------------+------+-----------+------------+------------+
| Closing net debt | 9 | (885) | (458) | (642) |
+------------------------------------+------+-----------+------------+------------+
Consolidated statement of changes in equity
+---------------+---------+---------+------------+---------+---------+----------+--------+
| | Attributable to the owners of the Company |
+---------------+------------------------------------------------------------------------+
| | Share | Share | Capital | Merger | Hedging | Retained | Total |
| | capital | premium | redemption | reserve | reserve | earnings | equity |
| | GBPm | GBPm | reserve | GBPm | GBPm | GBPm | GBPm |
| | | | GBPm | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Current | | | | | | | |
| half | | | | | | | |
| year | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| At 1 | 263 | 60 | 6 | 2,578 | 12 | 1,601 | 4,520 |
| February | | | | | | | |
| 2009 | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Profit | - | - | - | - | - | 309 | 309 |
| for | | | | | | | |
| the | | | | | | | |
| period | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Other | | | | | | | |
| comprehensive | | | | | | | |
| income: | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Actuarial | - | - | - | - | - | 6 | 6 |
| gain | | | | | | | |
| arising | | | | | | | |
| in | | | | | | | |
| the pension | | | | | | | |
| scheme | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Cash | - | - | - | - | (7) | - | (7) |
| flow | | | | | | | |
| hedging | | | | | | | |
| movement | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Foreign | - | - | - | - | | (1) | (1) |
| exchange | | | | | | | |
| movements | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Tax in | - | - | - | - | - | - | - |
| relation | | | | | | | |
| to | | | | | | | |
| components | | | | | | | |
| of other | | | | | | | |
| comprehensive | | | | | | | |
| income | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Total | - | - | - | - | (7) | 314 | 307 |
| comprehensive | | | | | | | |
| income for | | | | | | | |
| the period | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Employees | | | | | | | |
| share | | | | | | | |
| options | | | | | | | |
| schemes: | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Share | - | - | - | - | - | 9 | 9 |
| options | | | | | | | |
| charge | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Share | 2 | 27 | - | - | - | - | 29 |
| options | | | | | | | |
| exercised | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Dividends | - | - | - | - | - | (131) | (131) |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Total | 2 | 27 | - | - | - | (122) | (93) |
| transactions | | | | | | | |
| with owners | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| At 2 | 265 | 87 | 6 | 2,578 | 5 | 1,793 | 4,734 |
| August | | | | | | | |
| 2009 | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Prior | | | | | | | |
| half | | | | | | | |
| year | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| At 3 | 269 | 57 | - | 2,578 | 6 | 1,468 | 4,378 |
| February | | | | | | | |
| 2008 | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Profit | - | - | - | - | - | 218 | 218 |
| for | | | | | | | |
| the | | | | | | | |
| period | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Other | | | | | | | |
| comprehensive | | | | | | | |
| income: | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Write-off | - | - | - | - | - | (42) | (42) |
| pension | | | | | | | |
| asset | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Cash | - | - | - | - | 2 | - | 2 |
| flow | | | | | | | |
| hedging | | | | | | | |
| movement | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Tax in | - | - | - | - | - | 12 | 12 |
| relation | | | | | | | |
| to | | | | | | | |
| components | | | | | | | |
| of other | | | | | | | |
| comprehensive | | | | | | | |
| income | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Total | - | - | - | - | 2 | 188 | 190 |
| comprehensive | | | | | | | |
| income for | | | | | | | |
| the period | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Employees | | | | | | | |
| share | | | | | | | |
| options | | | | | | | |
| schemes: | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Share | - | - | - | - | - | 6 | 6 |
| options | | | | | | | |
| charge | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Share | - | 3 | - | - | - | - | 3 |
| options | | | | | | | |
| exercised | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Shares | (2) | - | 2 | - | - | (50) | (50) |
| purchased | | | | | | | |
| for | | | | | | | |
| cancellation | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Dividends | - | - | - | - | - | (110) | (110) |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Total | (2) | 3 | 2 | - | - | (154) | (151) |
| transactions | | | | | | | |
| with owners | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| At 3 | 267 | 60 | 2 | 2,578 | 8 | 1,502 | 4,417 |
| August | | | | | | | |
| 2008 | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
Consolidated statement of changes in equity (continued)
+---------------+---------+---------+------------+---------+---------+----------+--------+
| | Attributable to the owners of the Company |
+---------------+------------------------------------------------------------------------+
| | Share | Share | Capital | Merger | Hedging | Retained | Total |
| | capital | premium | redemption | reserve | reserve | earnings | equity |
| | GBPm | GBPm | reserve | GBPm | GBPm | GBPm | GBPm |
| | | | GBPm | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Prior | | | | | | | |
| year | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| At 3 | 267 | 57 | - | 2,578 | 6 | 1,468 | 4,378 |
| February | | | | | | | |
| 2008 | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Profit | - | - | - | - | - | 460 | 460 |
| for | | | | | | | |
| the | | | | | | | |
| period | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Other | | | | | | | |
| comprehensive | | | | | | | |
| income: | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Actuarial | - | - | - | - | - | (101) | (101) |
| loss | | | | | | | |
| arising | | | | | | | |
| in | | | | | | | |
| the pension | | | | | | | |
| scheme | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Cash | - | - | - | - | 6 | - | 6 |
| flow | | | | | | | |
| hedging | | | | | | | |
| movement | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Foreign | - | - | - | - | - | 6 | 6 |
| exchange | | | | | | | |
| movements | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Tax in | - | - | - | - | - | 31 | 31 |
| relation | | | | | | | |
| to | | | | | | | |
| components | | | | | | | |
| of other | | | | | | | |
| comprehensive | | | | | | | |
| income | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Total | - | - | - | - | 6 | 396 | 402 |
| comprehensive | | | | | | | |
| income for | | | | | | | |
| the period | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Employees | | | | | | | |
| share | | | | | | | |
| options | | | | | | | |
| schemes: | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Share | - | - | - | - | - | 14 | 14 |
| options | | | | | | | |
| charge | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Share | - | 3 | - | - | - | - | 3 |
| options | | | | | | | |
| exercised | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Shares | (6) | - | 6 | - | - | (146) | (146) |
| purchased | | | | | | | |
| for | | | | | | | |
| cancellation | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Dividends | - | - | - | - | - | (131) | (131) |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| Total | (6) | 3 | 6 | - | - | (263) | (260) |
| transactions | | | | | | | |
| with owners | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
| At 1 | 263 | 60 | 6 | 2,578 | 12 | 1,601 | 4,520 |
| February | | | | | | | |
| 2009 | | | | | | | |
+---------------+---------+---------+------------+---------+---------+----------+--------+
+----+----------------------------+----------+-----------+------------+-------------+
| Notes to the condensed financial statements | | |
| 26 weeks ended 2 August 2009 | | |
| | | |
| | | |
+--------------------------------------------------------+------------+-------------+
| 1 | Underlying earnings | | | | |
+----+----------------------------+----------+-----------+------------+-------------+
| The Directors consider that the underlying earnings and underlying adjusted |
| earnings per share measures referred to in the Interim management report provide |
| useful information for shareholders on underlying trends and performance. The |
| adjustments are made to reported profit to (a) remove the impact of pension |
| interest income volatility on the income statement; (b) remove profits arising on |
| property transactions; (c) remove the one-off pensions credit as a result of the |
| move from final salary to CARE (note 6); and (d) apply an effective tax rate of |
| 30%, being an estimated normalised tax rate. |
+-----------------------------------------------------------------------------------+
| | | | 26 weeks | 26 weeks | 52 weeks |
| | | | ended | ended | ended |
+----+----------------------------+----------+-----------+------------+-------------+
| | | | 2 August | 3 August | 1 February |
| | | | 2009 | 2008 | 2009 |
+----+----------------------------+----------+-----------+------------+-------------+
| | | | GBPm | GBPm | GBPm |
+----+----------------------------+----------+-----------+------------+-------------+
| | Profit after tax | 309 | 218 | 460 |
+----+---------------------------------------+-----------+------------+-------------+
| | Add back: tax charge for the period 1 | 140 | 91 | 195 |
+----+---------------------------------------+-----------+------------+-------------+
| | Profit before tax | 449 | 309 | 655 |
+----+---------------------------------------+-----------+------------+-------------+
| | Adjustments for: | | | |
+----+---------------------------------------+-----------+------------+-------------+
| | Net pension interest cost/(income) 1 | 4 | (8) | (17) |
+----+---------------------------------------+-----------+------------+-------------+
| | Pensions credit 1 | (91) | - | - |
+----+---------------------------------------+-----------+------------+-------------+
| | Profits arising on property | (3) | (6) | (2) |
| | transactions 1 | | | |
+----+---------------------------------------+-----------+------------+-------------+
| | Underlying earnings before tax | 359 | 295 | 636 |
+----+---------------------------------------+-----------+------------+-------------+
| | Normalised tax charge at 30% 1 | (108) | (88) | (195) |
+----+---------------------------------------+-----------+------------+-------------+
| | Underlying earnings after tax charge | 251 | 207 | 441 |
+----+---------------------------------------+-----------+------------+-------------+
| |
+-----------------------------------------------------------------------------------+
| 1 Adjustments marked 1 equal GBP58m (3 August 2008: GBP11m, 2 February 2009: |
| GBP19m), as shown in reconciliation of earnings disclosed in note 4. |
+-----------------------------------------------------------------------------------+
| |
+----+----------------------------+----------+-----------+------------+-------------+
+----+----------------------------+----------+-----------+------------+------------+
| | | | | | |
+----+----------------------------+----------+-----------+------------+------------+
| | | | 26 weeks | 26 weeks | 52 weeks |
| | | | ended | ended | ended |
+----+----------------------------+----------+-----------+------------+------------+
| | | | 2 August | 3 August | 1 February |
| | | | 2009 | 2008 | 2009 |
+----+----------------------------+----------+-----------+------------+------------+
| 2 | Turnover | | GBPm | GBPm | GBPm |
+----+----------------------------+----------+-----------+------------+------------+
| | Sale of goods in stores | | 6,009 | 5,514 | 11,378 |
+----+----------------------------+----------+-----------+------------+------------+
| | Fuel | | 1,405 | 1,559 | 3,069 |
+----+----------------------------+----------+-----------+------------+------------+
| | Total store based sales | | 7,414 | 7,073 | 14,447 |
+----+----------------------------+----------+-----------+------------+------------+
| | Direct manufacturing sales | | 20 | 14 | 33 |
+----+----------------------------+----------+-----------+------------+------------+
| | Income from concessions | | 24 | 18 | 48 |
| | and commission | | | | |
+----+----------------------------+----------+-----------+------------+------------+
| | Total turnover | | 7,458 | 7,105 | 14,528 |
+----+----------------------------+----------+-----------+------------+------------+
+---+---+--------------------------------------+------------+------------+------------+
| | Notes to the condensed financial statements (continued) |
| | 26 weeks ended 2 August 2009 |
| | |
+---+--------------------------------------------------------------------+
| | | 26 weeks | 26 weeks | 52 weeks |
| | | ended | ended | ended |
+-------+--------------------------------------+------------+------------+------------+
| | | 2 August | 3 August | 1 February |
| | | 2009 | 2008 | 2009 |
+-------+--------------------------------------+------------+------------+------------+
| 3 | Finance costs and income | GBPm | GBPm | GBPm |
+-------+--------------------------------------+------------+------------+------------+
| | Interest payable on short term loans | (4) | (1) | (3) |
| | and bank overdrafts | | | |
+-------+--------------------------------------+------------+------------+------------+
| | Interest payable on bonds | (22) | (22) | (45) |
+-------+--------------------------------------+------------+------------+------------+
| | Interest capitalised | 1 | 2 | 4 |
+-------+--------------------------------------+------------+------------+------------+
| | Total interest payable | (25) | (21) | (44) |
+-------+--------------------------------------+------------+------------+------------+
| | Fair value movement of derivative | (4) | (3) | (8) |
| | instruments | | | |
+-------+--------------------------------------+------------+------------+------------+
| | Other finance costs | (5) | (4) | (8) |
+-------+--------------------------------------+------------+------------+------------+
| | Finance costs | (34) | (28) | (60) |
+-------+--------------------------------------+------------+------------+------------+
| | | | | |
+-------+--------------------------------------+------------+------------+------------+
| | Bank interest received | 3 | 12 | 17 |
+-------+--------------------------------------+------------+------------+------------+
| | Amortisation of bonds | 7 | 7 | 8 |
+-------+--------------------------------------+------------+------------+------------+
| | Other finance income | 1 | 1 | 2 |
+-------+--------------------------------------+------------+------------+------------+
| | Pension liability interest cost | (56) | (49) | (113) |
+-------+--------------------------------------+------------+------------+------------+
| | Expected return on pension assets | 52 | 57 | 130 |
+-------+--------------------------------------+------------+------------+------------+
| | Net pension interest (cost)/income | (4) | 8 | 17 |
+-------+--------------------------------------+------------+------------+------------+
| | Finance income | 7 | 28 | 44 |
+-------+--------------------------------------+------------+------------+------------+
| | | | | |
+-------+--------------------------------------+------------+------------+------------+
| | Net finance income | (27) | - | (16) |
+---+---+--------------------------------------+------------+------------+------------+
+---+----------------------------------+-------+---------+----+----+---------+----+----+---------+
| | Notes to the condensed financial statements (continued) |
| | 26 weeks ended 2 August 2009 |
| | |
+---+--------------------------------------------------------------------------------------------+
| 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 issuable dilutive ordinary |
| | shares. |
| | Underlying earnings per share |
| | It is the Directors' view that Underlying earnings per share is a fairer reflection |
| | of the underlying results of the business. |
| | |
+---+--------------------------------------------------------------------------------------------+
| | | 26 weeks ended | 26 weeks ended | 52 weeks |
| | | | | ended |
+---+----------------------------------+----------------------+-------------------+--------------+
| | | 2 August 2009 | 3 August 2008 | 1 February |
| | | | | 2009 |
+---+----------------------------------+----------------------+-------------------+--------------+
| | | pence | pence | pence |
+---+----------------------------------+----------------------+-------------------+--------------+
| | | Basic | Diluted | Basic | Diluted | Basic | Diluted |
+---+----------------------------------+-------+---------+---------+---------+---------+---------+
| | Basic earnings per share | 11.83 | 11.76 | 8.21 | 8.09 | 17.39 | 17.16 |
+---+----------------------------------+-------+---------+---------+---------+---------+---------+
| | Underlying earnings per share | 9.59 | 9.53 | 7.75 | 7.64 | 16.67 | 16.45 |
+---+----------------------------------+-------+---------+---------+---------+---------+---------+
| | | | | | |
+---+----------------------------------+-------+---------+-------------------+-------------------+
| | | GBPm | GBPm | GBPm |
+---+----------------------------------+-----------------+-------------------+-------------------+
| | | Basic | Diluted | Basic | Diluted | Basic | Diluted |
+---+----------------------------------+-------+---------+---------+---------+---------+---------+
| | Basic earnings | | | | | | |
+---+----------------------------------+-------+---------+---------+---------+---------+---------+
| | Earnings attributable to | 309 | 309 | 218 | 218 | 460 | 460 |
| | ordinary shareholders | | | | | | |
+---+----------------------------------+-------+---------+---------+---------+---------+---------+
| | | | | |
+---+----------------------------------+----------------------+-------------------+--------------+
| | Underlying earnings | | | | | | |
+---+----------------------------------+-------+---------+---------+---------+---------+---------+
| | Earnings attributable to | 309 | 309 | 218 | 218 | 460 | 460 |
| | ordinary shareholders | | | | | | |
+---+----------------------------------+-------+---------+---------+---------+---------+---------+
| | Adjustments to determine | (58) | (58) | (11) | (11) | (19) | (19) |
| | underlying profit (see note 1) | | | | | | |
+---+----------------------------------+-------+---------+---------+---------+---------+---------+
| | Underlying earnings attributable | 251 | 251 | 207 | 207 | 441 | 441 |
| | to ordinary shareholders | | | | | | |
+---+----------------------------------+-------+---------+---------+---------+---------+---------+
| | | | | |
+---+----------------------------------+-----------------+-------------------+-------------------+
| | | Millions | Millions | Millions |
+---+----------------------------------+-----------------+-------------------+-------------------+
| | | Basic | Diluted | Basic | Diluted | Basic | Diluted |
+---+----------------------------------+-------+---------+---------+---------+---------+---------+
| | Weighted average number of | | | | | | |
| | shares | | | | | | |
+---+----------------------------------+-------+---------+---------+---------+---------+---------+
| | Ordinary shares in issue/diluted | 2,615 | 2,631 | 2,664 | 2,702 | 2,665 | 2,681 |
| | ordinary shares* | | | | | | |
+---+----------------------------------+-------+---------+---------+---------+---------+---------+
| | | | | | | | |
+---+----------------------------------+-------+---------+---------+---------+---------+---------+
| | | | | | | | |
+---+----------------------------------+-------+---------+---------+---------+---------+---------+
| | * The weighted average ordinary shares in issue is adjusted for potentially dilutive |
| | shares and share options. |
+---+----------------------------------+-------+---------+----+----+---------+----+----+---------+
+---+----------------+--------+--------------+------------+------------+------------+
| | | 2 August | 3 August | 1 February |
| | | 2009 | 2008 | 2009 |
+---+----------------------------------------+------------+------------+------------+
| 5 | Property, plant and equipment | GBPm | GBPm | GBPm |
+---+----------------------------------------+------------+------------+------------+
| | Net book value | | | |
+---+----------------------------------------+------------+------------+------------+
| | At beginning of the period | 6,587 | 6,205 | 6,205 |
+---+----------------------------------------+------------+------------+------------+
| | Additions at cost | 547 | 233 | 684 |
+---+----------------------------------------+------------+------------+------------+
| | Interest capitalised | 1 | 2 | 4 |
+---+----------------------------------------+------------+------------+------------+
| | Transfers to/from investment property, | - | - | (2) |
| | long lease land premiums and assets | | | |
| | held for sale | | | |
+---+----------------------------------------+------------+------------+------------+
| | Disposals | (3) | (11) | (20) |
+---+----------------------------------------+------------+------------+------------+
| | Depreciation charge for the period | (147) | (127) | (284) |
+---+----------------------------------------+------------+------------+------------+
| | At end of the period | 6,985 | 6,302 | 6,587 |
+---+----------------------------------------+------------+------------+------------+
| | | | | | | |
+---+----------------+--------+--------------+------------+------------+------------+
| | In addition to the depreciation charge above of GBP147m, GBP4m (3 August |
| | 2008: GBP3m, 2 February 2009:GBP6m) is charged on Investment properties. |
| | Contracts placed for future capital expenditure not provided in the financial |
| | statements amount to GBP120m (3 August 2008:GBP103m, 2 February |
| | 2009:GBP321m). |
+---+----------------+--------+--------------+------------+------------+------------+
+---+---------------------------------------------------------------------------+
| | Notes to the condensed financial statements (continued) |
| | 26 weeks ended 2 August 2009 |
| | |
+---+---------------------------------------------------------------------------+
+---+--------------------------------------+------------+------------+------------+
| 6 | Pension | | | |
+---+--------------------------------------+------------+------------+------------+
| | Following consultation with members and approval by the Board and Trustees, |
| | the Group became committed to the final proposals from the Pension Review |
| | on 2 July 2009. |
| | The move from a final salary basis to Career Average Revalued Earnings |
| | (CARE) represents an accounting curtailment of certain pension liabilities. |
| | In accordance with IAS 19 Employee Benefits, the Defined Pension Schemes' |
| | obligations were revalued by the schemes actuaries immediately prior to the |
| | change and assumptions reviewed at that date. |
| | Comparative information is given for the prior year end (1 February 2009) |
| | where it is considered helpful to the understanding of the movement in the |
| | period. |
| | |
| | a) Income statement |
| | The change from final salary basis resulted in a pensions credit of GBP91m |
| | which is presented in the Consolidated statement of comprehensive income in |
| | this half year. |
| | b) Assumptions |
| | The major assumptions used in the valuation at this date were updated to |
| | reflect changes in the markets and revised assumptions. The assumptions |
| | used at the half year were the same as those used at the valuation date of |
| | 2 July 2009. All assumptions remained the same as the prior year end (1 |
| | February 2009) apart from the discount rate, which reduced from 6.25% to |
| | 6.00%.. |
| | |
+---+-----------------------------------------------------------------------------+
| | c) Valuations |
| | The movement in the present value of the defined benefit obligation from |
| | the prior year end to the interim reporting date was as follows: |
| | |
+---+-----------------------------------------------------------------------------+
| | | 2 August | 1 February |
| | | 2009 | 2009 |
| | | GBPm | GBPm |
+---+--------------------------------------+------------+------------+
| | Net pension liability at start of | (49) | (68) |
| | period | | |
+---+--------------------------------------+------------+------------+
| | Employers contributions | 22 | 141 |
+---+--------------------------------------+------------+------------+
| | Current service cost | (15) | (38) |
+---+--------------------------------------+------------+------------+
| | Expected return on scheme assets | 52 | 130 |
+---+--------------------------------------+------------+------------+
| | Interest on defined benefit | (56) | (113) |
| | obligation | | |
+---+--------------------------------------+------------+------------+
| | Actuarial gain recognised in Other | 6 | (101) |
| | comprehensive income | | |
+---+--------------------------------------+------------+------------+
| | Pensions credit | 91 | - |
+---+--------------------------------------+------------+------------+
| | Net pension asset/(liability) at end | 51 | (49) |
| | of period | | |
+---+--------------------------------------+------------+------------+
| | | | |
+---+--------------------------------------+------------+------------+------------+
+---+---------------------------------------------------------------------------+
| | Notes to the condensed financial statements (continued) |
| | 26 weeks ended 2 August 2009 |
| | |
+---+---------------------------------------------------------------------------+
+---+---------------------+--------+--------------+------------+------------+------------+
| | | |
| | | |
+--------------------------------------------------------------+------------+------------+
| | | | | 26 weeks | 26 weeks | 52 weeks |
| | | | | ended | ended | ended |
+---+---------------------+--------+--------------+------------+------------+------------+
| | | | | 2 August | 3 August | 1 February |
| | | | | 2009 | 2008 | 2009 |
+---+---------------------+--------+--------------+------------+------------+------------+
|7 | Cash flows from operating activities | GBPm | GBPm | GBPm |
+---+---------------------------------------------+------------+------------+------------+
| | Profit for the period | | 309 | 218 | 460 |
+---+------------------------------+--------------+------------+------------+------------+
| | Adjustments | | | | | |
| | for: | | | | | |
+---+---------------------+--------+--------------+------------+------------+------------+
| | Taxation | | | 140 | 91 | 195 |
+---+---------------------+--------+--------------+------------+------------+------------+
| | Depreciation and amortisation | 151 | 130 | 290 |
+---+---------------------------------------------+------------+------------+------------+
| | Profit on disposal of property, plant | (3) | (6) | (2) |
| | and equipment | | | |
+---+---------------------------------------------+------------+------------+------------+
| | Net finance cost | | 27 | - | 16 |
+---+------------------------------+--------------+------------+------------+------------+
| | Other non-cash | | | 8 | 6 | 17 |
| | changes | | | | | |
+---+---------------------+--------+--------------+------------+------------+------------+
| | Pensions | | | (91) | - | - |
| | credit | | | | | |
+---+---------------------+--------+--------------+------------+------------+------------+
| | Excess of contributions over pension | (7) | (107) | (103) |
| | service cost | | | |
+---+---------------------------------------------+------------+------------+------------+
| | Decrease/(increase) in stocks | 1 | (9) | (52) |
+---+---------------------------------------------+------------+------------+------------+
| | Decrease/(increase) in debtors | 26 | 7 | (44) |
+---+---------------------------------------------+------------+------------+------------+
| | (Decrease)/increase | | | (24) | 212 | 214 |
| | in creditors | | | | | |
+---+---------------------+--------+--------------+------------+------------+------------+
| | Decrease in provisions | (4) | (21) | (27) |
+---+---------------------------------------------+------------+------------+------------+
| | Cash generated from operations | 533 | 521 | 964 |
+---+---------------------+--------+--------------+------------+------------+------------+
+---+--------------------------------------+------------+------------+------------+
| | | 26 weeks | 26 weeks | 52 weeks |
| | | ended | ended | ended |
+---+--------------------------------------+------------+------------+------------+
| | | 2 August | 3 August | 1 February |
| | | 2009 | 2008 | 2009 |
+---+--------------------------------------+------------+------------+------------+
| 8 | Dividends | GBPm | GBPm | GBPm |
+---+--------------------------------------+------------+------------+------------+
| | Equity dividends paid in the period | 131 | 110 | 131 |
+---+--------------------------------------+------------+------------+------------+
| | The dividend paid in the period represents the cash payment of the final |
| | dividend from the 52 weeks ended 2 February 2009. |
| | The Directors are proposing an interim dividend of 1.08p per share which |
| | will be paid on 9 November 2009 to shareholders who are on the register of |
| | members on 2 October 2009. The interim dividend will absorb an estimated |
| | GBP30m of shareholders' funds. This amount will be charged to retained |
| | earnings when paid. |
+---+--------------------------------------+------------+------------+------------+
+---+---------------------------------------------------------------------------+
| | Notes to the condensed financial statements (continued) |
| | 26 weeks ended 2 August 2009 |
| | |
+---+---------------------------------------------------------------------------+
+---+----------------+--------+--------------+------------+------------+------------+
| | | | | | | |
+---+----------------+--------+--------------+------------+------------+------------+
| | | | | 2 August | 3 August | 1 February |
| | | | | 2009 | 2008 | 2009 |
+---+----------------+--------+--------------+------------+------------+------------+
| 9 | Analysis of | | | GBPm | GBPm | GBPm |
| | net debt | | | | | |
+---+----------------+--------+--------------+------------+------------+------------+
| | Cash and cash equivalents | 308 | 339 | 327 |
+---+----------------------------------------+------------+------------+------------+
| | Bank | | | (21) | (95) | - |
| | overdrafts | | | | | |
+---+----------------+--------+--------------+------------+------------+------------+
| | Cash and cash equivalents per cash | 287 | 244 | 327 |
| | flow | | | |
+---+----------------------------------------+------------+------------+------------+
| | | | | | | |
+---+----------------+--------+--------------+------------+------------+------------+
| | Long term cash on deposit | - | 25 | - |
+---+----------------------------------------+------------+------------+------------+
| | Interest and cross-currency swaps | 67 | 49 | 81 |
+---+----------------------------------------+------------+------------+------------+
| | Financial | | | 67 | 74 | 81 |
| | assets | | | | | |
+---+----------------+--------+--------------+------------+------------+------------+
| | | | | | | |
+---+----------------+--------+--------------+------------+------------+------------+
| | Bonds | (201) | - | - |
+---+----------------------------------------+------------+------------+------------+
| | Finance lease obligations | (1) | (1) | (1) |
+---+----------------------------------------+------------+------------+------------+
| | Derivative financial instruments | (13) | - | - |
+---+----------------------------------------+------------+------------+------------+
| | Current financial liabilities | (215) | (1) | (1) |
| | (excluding bank overdrafts) | | | |
+---+----------------------------------------+------------+------------+------------+
| | | | | | | |
+---+----------------+--------+--------------+------------+------------+------------+
| | Bonds | | | (561) | (760) | (784) |
+---+----------------+--------+--------------+------------+------------+------------+
| | Floating | | | (450) | - | (250) |
| | credit | | | | | |
| | facility | | | | | |
+---+----------------+--------+--------------+------------+------------+------------+
| | Other | | | (13) | (14) | (15) |
| | unsecured | | | | | |
| | loans | | | | | |
+---+----------------+--------+--------------+------------+------------+------------+
| | Finance lease obligations | - | (1) | - |
+---+----------------------------------------+------------+------------+------------+
| | Non-current financial liabilities | (1,024) | (775) | (1,049) |
+---+----------------------------------------+------------+------------+------------+
| | | | | | | |
+---+----------------+--------+--------------+------------+------------+------------+
| | Net debt | | | (885) | (458) | (642) |
+---+----------------+--------+--------------+------------+------------+------------+
+----+---------------------------------------------------------------------------+
| 10 | Contingent liabilities |
+----+---------------------------------------------------------------------------+
| | The investigation by the Office of Fair Trading into the alleged |
| | collusion in the setting of prices for certain dairy products continues. |
| | The Board strongly believes that Morrisons has no case to answer and have |
| | made representations in detail to this effect. Our view is unchanged by |
| | the Supplementary Statement of Objections issued by the OFT in July 2009. |
| | The Board does not consider it probable that the Company will ultimately |
| | incur a fine and, accordingly, have made not provision for such a |
| | liability. |
| | The OFT also continues to investigate the market for the sale of tobacco, |
| | and in this case there is a complex legal question as to whether well |
| | established industry practices represented a breach of competition law. |
| | It is likely that this can only be settled clearly through a formal |
| | judicial process. The Board has not made a provision for such a |
| | liability. |
| | |
+----+---------------------------------------------------------------------------+
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 DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules.
By order of the Board
9 September 2009
The Board
The Board of Directors that served during the 26 weeks to 2 August 2009 and
their respective responsibilities are:
Sir Ian Gibson - Chairman*
Marc Bolland - Chief Executive
Richard Pennycook - Group Finance Director
Mark Gunter - Group Retail Director
Martyn Jones - Group Trading Director
Philip Cox *
Brian Flanagan *
Paul Manduca *
Susan Murray *
Nigel Robertson *
* Non-Executive Director
Philip Cox joined the Board on 1 April 2009.
Principal risks and uncertainties
The principal risks and uncertainties set out in Wm Morrison Supermarkets PLC's
Annual report and financial statements for the 52 weeks ended 1 February 2009
remain the same for the Half-yearly financial report 2009/10. Those risks and
uncertainties can be summarised as follows:
Operational risks that may affect reputation, market share and financial
results:
Business strategy
Product quality and safety
Regulation
Corporate Social Responsibility
Business interruption
Stores
Systems and infrastructure
Financial risks that may affect financial results or the financial position of
the company:
Foreign currency risk
Liquidity risk.
Credit risk
More information on the principal risks and how we mitigate those risks can be
found on page 22 of the Annual report and financial statements 2009. You can
view the Annual report and financial statements 2009 online on our corporate
website, www.morrisons.co.uk/annual report09 .
Accounting policies
Basis of preparation
This Half-yearly financial report 2009/10 is the condensed consolidated
financial information of the Group for the 26 weeks ended 2 August 2009. It has
been prepared in accordance with the Disclosure and Transparency Rules of the UK
Financial Services Authority and the requirements of IAS 34 Interim Financial
Reporting as adopted by the European Union.
The Half-yearly financial report 2009/10 was approved by the Board of Directors
on 9 September 2009.
The Half-yearly financial report 2009/10 does not constitute financial
statements and does not include all of the information and disclosures required
for full annual financial statements. It should be read in conjunction with the
Annual report and financial statements for the 52 weeks ended 1 February 2009
which is available either on request from the company's registered office or to
download from www.morrisons.co.uk/annualreport09 .
The financial information contained in the Half-yearly report 2009/10 in respect
of the 52 weeks ended 1 February 2009 has been extracted from the Annual report
and financial statements 2009 which have been filed with the Registrar of
Companies. The auditors report on these financial statements was (i)
unqualified, (ii) did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their report, and
(iii) did not contain 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
2009/10 and their report is set out below.
Significant accounting policies
Except as described below, the accounting policies applied by the Group in these
condensed consolidated financial statements are consistent with those set out in
Wm Morrison Supermarkets PLC Annual report and financial statements for the 52
weeks ended 1 February 2009.
In preparing the condensed consolidated financial statements, management are
required to make accounting assumptions and estimates. The assumptions and
estimation methods were consistent with those applied to the Annual report and
financial statements for the 52 weeks ended 1 February 2009.
Presentation of financial statements
IAS 1(revised) Presentation of financial statements is mandatory for the first
time for the financial year beginning 2 February 2009. The standard requires
that all owner changes in equity are presented in the consolidated statement of
changes in equity and non-owner changes in equity to be presented in the
consolidated statement of comprehensive income. The Group adopts this policy and
there is no impact to the financial statements other than presentation.
The Group has elected to present one statement of comprehensive income.
Comparative information has been re-presented so that it is also in conformity
with the revised standard.
Segmental reporting
IFRS 8 Operating segments is mandatory for the first time for the financial year
beginning 2 February 2009. The standard requires that the segments should be
reported on the same basis as the internal reporting information that is
provided to the chief operating decision -maker. The Group adopts this policy
and the chief operating decision-maker has been identified as the CEO.
The Directors' consider there to be one business segment, being that of grocery
and related activities. The Group's main activity is supermarket retailing and
the CEO's focus is on the performance and growth of this activity. Internal
reports reviewed regularly by the CEO provide information to allow the chief
operating decision-maker to allocate resources and make decisions about the
operations. The internal reporting focuses on the operations of the Group as a
whole and does not identify individual operating segments. This set of condensed
financial statements is therefore presented as a single reportable segment.
The following new standards, amendments to standards and interpretations are
mandatory for the first time for the financial year beginning 2 February 2009,
but have no material effect on the Group's financial statements.
IFRS 2 Share based payment: Vesting conditions and cancellations*
IAS 23 Borrowing costs*
IFRSs Annual improvement to IFRSs*
*These standards and interpretations have been endorsed by the European Union.
Retirement benefits
The accounting policy in respect of retirement benefits remains the same as
those set out in Wm Morrison Supermarkets PLC Annual report and financial
statements for the 52 weeks ended 1 February 2009.
The pensions credit referred to throughout the interim management report is in
respect of the change to the pension schemes from final salary to CARE,
resulting in a reduction in the pension liabilities. In accordance with IAS 19,
the reduction in the liabilities is treated as a curtailment and the change to
the pension benefits requires the Defined Pension Schemes obligations to be
revalued by the schemes actuaries and the assumptions reviewed at that date. We
have carried out these procedures for the half year.
Independent review report to Wm Morrison Supermarkets PLC
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the Half-yearly financial report 2009/10 for the 26 weeks ended 2
August 2009 which comprises the Consolidated statement of comprehensive income,
the Consolidated balance sheet, the Consolidated statement of charges in equity,
the Consolidated cash flow statement, and the related explanatory notes.. We
have read the other information contained in the Half-yearly financial report
2009/10 and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Disclosure
and 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 the
Company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company for our review work, for
this report, or for the conclusions we have reached.
Directors' responsibilities
The Half-yearly financial report 2009/10 is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing the
Half-yearly financial report 2009/10 in accordance with the DTR of the UK FSA.
The annual financial statements of the Group are prepared in accordance with
IFRSs as adopted by the EU. The condensed set of financial statements included
in the Half-yearly financial report 2009/10 has been prepared in accordance with
IAS 34 Interim Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the Half-yearly financial report 2009/10 based on
our review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance with
International Standards on Auditing (UK and Ireland) and consequently does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express an
audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the Half-yearly financial
report 2009/10 for the 26 weeks ended 2 August 2009 is not prepared, in all
material respects, in accordance with IAS 34 as adopted by the EU and the DTR of
the UK FSA.
Chris Hearld Audit Director
For and on behalf of
KPMG Audit Plc
Chartered Accountants
1 The Embankment
Neville Street
Leeds
LS1 4DW
9 September 2009
This information is provided by RNS
The company news service from the London Stock Exchange
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