Finance for Managers: Morrison and Sainsbury Performance Analysis

This report provides a comprehensive financial and non-financial performance evaluation of two British retailers, Morrison and Sainsbury. It begins with an introduction to finance and its impact on business success, emphasizing the importance of financial analysis for investors. The report outlines key parameters for financial and non-financial analysis, including strategic financial analysis, profitability ratios, return on capital employed, and non-financial factors like SWOT analysis and CSR initiatives. It then delves into the specific financial performance of Morrison, analyzing turnover, cost of sales, and profitability narratives. A comparative analysis with Sainsbury is implied, although not fully developed in the provided text. The report aims to advise investors by assessing the companies' financial health, business models, and strategic approaches, ultimately offering insights into their investment potential. It incorporates ratio analysis, strategic analysis, CSR initiatives, SWOT analysis, and business models to provide a holistic view.

Finance for managers
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Table of Contents
INTRODUCTION................................................................................................................................3
1. Parameters for the financial as well as non-financial analysis....................................................3
2. Different financial and non-financial areas need to be consider by investor:..............................5
3. Evaluation of financial and non-financial performance of Morrison with its competitor
Sainsbury.........................................................................................................................................6
4. Reflection...................................................................................................................................12
RECOMMENDATION......................................................................................................................12
CONCLUSION..................................................................................................................................12
REFERENCES...................................................................................................................................14
APPENDIX........................................................................................................................................16
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INTRODUCTION
Finance is the most crucial element which has high level of impact on the growth and
success of the firm. It is mainly because, in order to carry out regular business operations and
functions, companies are require to gather appropriate amount of fund for meeting out its daily
expenditures and CAPEX such as investment in plant and property, meet out debt obligations,
administration and selling payments and so on. Looking at the present corporate world, companies
gather large amount of money from the investors either domestic or international. Before making
investment in any firm, investors ones assess their risk and return relationship associated with their
potential investment and invest money in that organization where risk is minimum and possibility of
return is maximum. In order to make such analysis, investors need to evaluate business operational
outcome and financial strength by calculating number of ratios like profitability, long-term solvency
and liquidity and so on. This assignment lay emphasizes on financial as well as non-financial
performance evaluation of two British retailers, Morrison and its competitor Sainsbury. It will be
done by ratio analysis strategic analysis, CSR initiatives, SWOT analysis, business model and
others so as to advice investors to make solid decisions.
Brief overview of business
UK retail sector shows a rapid growth as numbers of retailers are delivering excellent
services to the customers. WM Morrison Supermarket is a public limited company listed on LSE,
founded in 1899 and operates in retail sector. It provides retailing services to the people through via
both the established retail stores and online medium. The main aim of the company is to deliver top-
quality food and grocery products to the customers so as to gain competitive advantage.
Another retail organization that has been chosen for comparative analysis is Sainsbury
founded in the year 1869, listed on LSE. It delivers retailing services to the people through its
convenience stores, forecourt stores, hypermarket, supermarkets and superstores. Company also
deliver services to the target audiences using online channel i.e. website development and web
marketing etc.
1. Parameters for the financial as well as non-financial analysis
In the current era of tough competition, all the commercial establishments require to
examine and interpret their actual performance including both financial as well as non-financial
results. There are many parameters available to business analysts to compare and evaluate their
actual outcome either quantitative or qualitative for a given duration. The most often use parameters
for monetary as well as non-monetary analyses are enumerated hereunder:
Strategic Financial Analysis: SFA regarded as the process of examining and evaluating
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financial performance of an organization so as to diagnose business problems, operational
difficulties and reason for poor performance. There are various techniques available to the Morrison
for performance analysis such as common-size/vertical analysis, trend analysis and ratio analysis
(Shiller, 2013). Out of these, ratio analysis is considered as the best methodology that assesses
relationship between each and every variable of the reported annual accounts.
Profitability analysis: WM Morisson’s profitability can be examined by utilizing ratios like
gross profit and net profit (Brealey & et.al., 2012). In this, gross profits indicate the percentage that
company earned through adding a mark-up on their total turnover. However, net margin helps to
identify surplus percentage that company earned by generating excess revenue over total business
expenses.
Return on capital employed: This parameter can be used to determine percentage that firm
earned on their total capital invested. In other words, it measure that how efficiently Morrison is
generating yield on their total capital employed (total assets-current liabilities) in the business.
Earning per share: Companies like Morrison and others generate huge proportion of long-
term fund by shareholders. They invest money in the business so as to get optimum and maximum
return to meet their yield expectations (Masubuchi, 2013). EPS is an effective and often used
parameter to assess investment performance to interpret that in what extent, organization is able to
deliver favourable financial reward to their investors in return for undertaken risk.
Current ratio: This ratio helps to measure the proportion between current assets and
liabilities typically used to evaluate business ability to repay suppliers on right time. It is essential
for the managers to examine their liquidity position or creditworthiness to meet their short-term
obligations within extended credit period (Uechi & et.al., 2015).
Dividend payout ratio: In the real market, retailers kept some amount of their net earnings in
the business for the future growth, success and financial risk management (Wilson, 2016). DPS is
often used by the analysts to determine the proportion of net income that is distributed among
stockholders as dividend.
Gearing ratio: Investors often use this ratio as a parameter to determine the proportion or
mix of debt and equity fund so as to examine potential risk associated with their investment (Shiller,
2013).
Non-financial analysis/quantifiable performance
SWOT: It is a model used for identifying internal business strength and weaknesses as well
as market opportunity and threats due to volatile external market forces.
Strategic planning: Business strategies and planning can also be evaluate to measure that
how efficiently executives and managers plans proves successful for the corporate growth and
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success (Uechi & et.al., 2015).
Brand reputation: Market reputation and position also works as an indicator of business
strength. Customer loyalty, use of upgraded and advanced technology, globalized operations, strong
brand portfolio, expansion and growth projects helps to build a strong brand reputation.
CSR activities: In the present times, establishments like Morrison and other retailers have to
take several initiatives so as to meet their responsibilities towards all their stakeholders like
consumer, society, suppliers, employees and so on (Masubuchi, 2013).
2. Different financial and non-financial areas need to be consider by investor:
Every potential investor who is planning to invest fund in an organization desires to get
maximum return. Therefore, they require examining both the quantitative as well as qualitative
aspects so as to make solid investment decisions. According to Uechi and et.al., (2015), presented
ratio analysis as the best methodology for conducting quantitative and financial analysis. With the
help of this, investor can examine and evaluate business performance by computing variety of ratios
like profitability, solvency, liquidity and managerial efficiency. Gross margin, net margin, return on
shareholders fund, ROCE, debt to equity ratio, leverage and current ratio can be used for examining
the outcome of regular functions and financial health as well. Likewise, Shiller (2013), presented
that investors put their money in an organization to get maximum reward henceforth, they need to
examine current investors return. It can be done by computing investment ratios like earnings per
share and dividend payout ratio. EPS indicates return on each holding whereas dividend payout
ratio indicates that what proportion of net corporate yield is distributed among stockholders as
dividend.
However, it has been criticised by Wilson (2016), as the study outlined that ratio analysis
method has number of shortcomings. One of the most important limitations is that it gives
information about quantitative values and figures of historical years, however, investors are highly
motivated by the future performance. Moreover, the success of the decision based upon strategic
financial analysis of company’s annual accounts is highly dependent upon reliability, truthfulness
and validity of the information reported in financial statements. Incorrect and misleading
information can lead to take wrong decisions. Further, although comparative analysis is consider
useful for better decisions, but still, in the real corporate sector, companies use distinguish
accounting policies and rules which differentiate financial reporting structure and can lead to take
harmful decisions. In addition to this, changes in business performance may be the result of volatile
market conditions that are not considered by financial statement. Therefore, investors have to use a
combination of both the quantitative as well as qualitative methods for more accurate analysis.
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According to Chia-Hsing, Padmanabhan and Zhang (2013), initially, investor has to evaluate
several company/firm-specific factors, more importantly, business model. Before investigating
annual accounts, investors have to look at company’s business model at its website or financial
reports. It delivers information to the investors that how company work out its operations and
regular business activities. On the other hand, Masubuchi (2013), commented that it seems to be
difficult for the enterprises to understand business model clearly and precisely, therefore,
competitive advantage is considered as more essential element that an investor need to consider
before putting their money. It is an indicator of long-term business success, growth and
sustainability. In such respects, investor has to evaluate unique business preposition, strategic
planning and activities, technologies, operational effectiveness, strategic capabilities, market
presence and so on.
Despite this, in the study of Gelman, Carlin & Rubin (2014), it has been observed that
managers play a crucial role in the enterprise success, as they make policies, decisions and prepare
plans for the smooth functioning. Therefore, managerial efficiency is a key or vital element that an
investor needs to evaluate so as to invest money in that organization which managers are highly
skilled, talented and experienced and capable to reach business towards greatest heights.
However, on the critical note, Berk and et. al., (2013), said that every organization is a part
of society and have some responsibility towards all the stakeholders. Establishing excellent
managerial structure to meet interest and expectations of all the stakeholders is a sign of good
corporate governance. In other words, it refers to a set of transparent rules, policies, activities and
operational system which is developed to maintain reliability, integrity and meet out obligations
towards all the stakeholders. In contrast to this, Brealey & et.al. (2012), argued that
SWOT/PESTEL models can be used to conduct both the internal as well as external analysis. This
method gives assistance to the investor to examine the effectiveness of internal operations and the
impact of external market forces on regular business activities and functions. It enables investors to
make better and stronger decisions so as to make sure sufficient financial return for the money
invested.
3. Evaluation of financial and non-financial performance of Morrison with its competitor Sainsbury
Financial performance analysis of Morrison
Profitability narratives:
Gross margin: Morrison’s GM got declined from 6.89% to 3.83% in the year 2016 indicates
that company is generating less return on their total turnover due to following reasons:
Year Turnover % change
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2012 17663
2013 18116 2.56%
2014 17680 -2.41%
2015 16816 -4.89%
2016 16122 -4.13%
1.J Sainsbury PLC 2.WM Morrison Supermarkets P L C
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
th GBP
Std dev. Av. 1 2
11 12 13
11 12 13
11
12 13
11 12 13
Turnover: In 2013, firm’s turnover got improved from £17,663m to £18,116m by 2.56% due
to increased demand. However, thereafter sales shows a continuous decrease by 2.41% and 4.89%
and 4.13% respectively may be due to decrease in consumer demand, worst quality products and
availability of substitute products at cheaper prices. Cutting product prices, improvement in quality
of service, online operations and rapid growth in offered discounts were the main reasons for the
grown turnover. Growing brand portfolio, premium quality service, price cut strategies proven as a
key pillars for high like for like sales and other revenues. In this year, company cut down its prices
on around 100 products, more importantly, fresh fruit and vegetables bring significant growth in
sales revenues (Morrison’s returns to profit as sales rise, 2016). In addition to this, opening new
convenience stores and grocery shops at different locations also assist entrepreneur to maximize
their total turnover and reach success. Besides this, increase in real wages increased availability of
disposable income, which in turn, rose customer demand and results in increased turnover.
Expansion of services at stores has explored total revenue of the firm.
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Year Cost of sale % change
2012 16446
2013 16910 2.82%
2014 16606 -1.80%
2015 16055 -3.32%
2016 15505 -3.43%
Cost of sales: Another reason for decrease in profitability is ineffective control over cost of
sale. The table reflects that in 2013, cost got improved by 2.82%, however, thereafter; it dropped
down by 1.80%, 3.32% and 3.43%. Although % decrease in cost is rising but still it is
comparatively less than % change in sales resulted in decreased gross margin (WM Morrison
Supermarket Plc, 2016).
J Sainsbury PLC
(62.77%)
WM Morrison Supermarkets P L
C
(37.23%)
Net margin: Till 2015, NM got declined from 5.36% to -4.71%, but in 2016, it got increased
to 1.35% which indicates that this year, Morrison generated favourable return on their total
revenues. Following are the reasons for volatility in net profit, enumerated underneath:
Sales, general and administration expense: In 2016, SG&A shows a sudden decline from
£1,670m to £472m by 71.74%, which in turn, resulted in high net margin. However, in this year,
company recruited 5000 new employees to serve their customers in the best manner during heavy
workload and busiest time.
Interest expense: Continuous increasing in interest expenses from £39m to £65m, £81m,
£95m and 98m increased total spending and declined net return (Marciukaityte & Szewczyk,
2011).
Other operational expense/income: In 2012, Morrison incurred expenses worth £340m
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however, which was wholly removed in 2014 and 2015. While, in 2016, firm generated revenue
worth £97m from their regular course of activities and functions helps to maximize their net
earnings.
Although, restructuring cost and cutting price strategy controlled total cost but still,
ineffective cost control upon indirect expenditures like selling and administration expenditures is
the reason for declined performance. Moreover, heavy expenditures on marketing and promotional
campaign to attract more and more customers, price-cut and larger discount declined Morrison’s
profitability margin (Cleme & Reilly, 2013). In addition to this, Morrison is highly committed
towards minimization of wastage and cost reduction by restructuring head office and
underperforming superstores so as to ensure a cost effective performance.
1.WM Morrison Supermarkets P L C 2.J Sainsbury PLC
-15.00
-10.00
-5.00
0.00
5.00
10.00
15.00
%
Std dev. Av. 1 2
11 12
13 14
15
11
12
13
14
15
11
12
13 14
15
11 12 13
14
15
Return on capital employed: Morrison’s ROCE came down from 12.53% to -11.49% in
2015 demonstrates that firm generated loss on their total capital invested in the business (Kural &
et.al., 2016). However, in 2016, it got increased to 3.41% entails that firm generated positive return
on their capital employed due to transforming negative return into positive to £222m. It is a good
sign of business performance shows due to favourable return on total capital. Driven growth in sales
volume, control over cost and dealing effectively with underperforming assets were the reasons
towards grown ROCE (Marciukaityte & Szewczyk, 2011).
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EPS (earning per share): In 2012, EPS was 26.68p got improved to 27.26p in 2013,
Thereafter, it shows a continuous decrease to 23.08p, 10.93p and 7.77p. Changes in net earnings
available for the ordinary shareholders and stockholder’s equity are the reasons for volatility in
return on each holding. Regular decrease in EPS is a poor sign of business performance as investors
are getting less return on their equity capital and may give rise to dissatisfaction.
Price-earning ratio: In 2012, Morrison’s PE ratio was 10.23 shows an extreme level of
improvement in the year 2015 to 16.46. Increase in EPS is the main reasons for rising PE ratio
which is a good sign of business performance (Bull, 2007). Growth in PE ratio indicates that
investors are expecting more return from the company in return for the risk taken by putting their
own money.
Current ratio: In 2015, it remained constant to 0.57:1, while, after this, it shows a constant
decline to 0.57:1, 0.54:1 and 0.48:1. From the financial statement, it can be seen that till 2014, its
CA got improved to £1342m and £1430m but in 2014, it came down to £1228m. However, in 2016,
it rose to £1308m due to increased bank deposits from £241m to £488m. Contrary to this, from
2012 to 2016, Morrison’s current liabilities enhanced from £2303m to £2747m because of rise in
creditors, short-term loans and other nearby obligation (Rakićević & et.al., 2016). The ratio is also
far away from the idle ratio of 2:1 reflects that Morrison is unable to make their deferral payments
(short-term obligations) on right time because of having inadequate resources.
Dividend payout ratio: Morrison’s ratio rose up to 52.61% indicates that company delivered
more dividends to the investors out of profit generated to carry out regular business operations (WM
Morrison Supermarket Plc, 2016).
Gearing ratio: Till the end of 2015, Morrison’s gearing ratio got increased from 42.02 to
57.65, 79.22 and 92.13 indicates excessive risk because of rising mix of debt resources and
repayment of share capital to the investors. High ratio is a sign of improved risk because Morrison’s
debt obligation in relation to interest payment has been increased (Sharma & Mehra, 2016). But in
2016, it dropped down to 74.84 due to repayment of long-term debt worth £500m and more use of
shareholders equity as it got increased from £3594m to £3756m. It shows that management take
action to minimize financial risk and improve solvency position so as to meet long-term obligations
on right time as per repayment schedule (Weaver & Weston, 2007).
Financial performance analysis of Sainsbury
Gross margin: Sainsbury’s GM got enhanced from 5.43% to 6.19% which exhibits that
company generated greater return on their total sales due to following reasons:
Year Turnover % change Cost of sale % change
2012 22294 - 21091 -
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2013 23303 4.53% 22026 4.43%
2014 23949 2.77% 22562 2.43%
2015 23775 -0.73% 22567 0.02%
2016 23506 -1.13% 22050 -2.29%
Rise in turnover is the reasons for high gross margin till 2014, however, thereafter, although
sales moved downward, but still, effective cost control mechanism to curtail direct expenditures
helps to maximize gross margin and improved its performance.
Net margin: From 2012 to 2015, net margin dropped down from 3.58% to 0.30%, thereafter,
got increased to 2.33% more than Morrison’s NM demonstrates that Sainsbury is performing well.
Control over SG&A expenses by 24.91%, reduction in interest expense by 2.44% and high
operational income are the reason for better return in 2016. It shows that Sainsbury’s performance
has been improved as its net earnings have been converted from negative £166m to £471m
(Saisnbury’s annual report, 2016).
ROCE: In 2015, Sainsbury borne loss on their total capital as its ROCE is -1.30% whereas
in 2016, it shows a sudden increase to 8.61%. Positive return worth £471m is the reason behind
improved ROCE is a sign of greater performance on total capital invested in the firm to carry out
regular business activities and operations (Marciukaityte & Szewczyk, 2011). .
Earning per share: Sainsbury’s EPS came down from 0.32 to -0.08 in 2015, whereas, in
next year, it got increased to 0.23 depicts that company delivered more return to their investors by
generating more yield on their total revenues (Agarwal & et.al., 2015).
Dividend payout ratio: In 2016, Sainsbury’s dividend payout ratio rose to 60.3%
comparatively higher than Morrison’s ratio indicates that it is distributing more dividends to the
shareholders out of total generated net earnings (Sainsbury, 2016).
Current ratio: In 2013, it came down from 0.65:1 to 0.61:1 is a sign of poor liquidity
position. While, thereafter, it shows a constant increase as in 2016, it got inclined to 0.66:1 and also
higher than Morrison’s CR. Increase in short-term investment by 43.48%, prepaid expenses by
8.08% and other CA by 7.91% is the reason behind high availability of nearby resources (Cleme &
Reilly, 2013). However, CL came down by 2.87% due to repayment of some short-term debt,
decreased trade payables and other short-term liabilities. It indicates that liquidity position of the
Sainsbury is comparatively strong than that of Morrison (Patel, 2016).
Price earning ratio: Sainsbury’s PE ratio got decreased from 1.78 to 1.47 in 2014 while in
2015, it got improved to -0.50 which is not a good sign. Negative change in EPS by 19.51% in 2014
is the responsible reason behind declined PE ratio (Weaver & Weston, 2007).
. Decline in ratio may be due to exceptionally well performance as compare to the historical period
11

or firm also may be undervalued.
Gearing ratio: Till 2015, it shows a regular increase from 66.18% to 78.26%, whereas, in
2016, it dropped down to 64.52% and also less than Morrison’s GR of 74.84%. Excessive collection
of equity capital by 14.91% increase and repayment of debt worth 12.15% are the two responsible
reasons for declined gearing ratio. It indicates that managers are trying to minimize their investment
risk to strengthen their solvency position and repay long-term creditors like debt-holders on time
(Daka & Basu, 2016).
Non-financial analysis
Morrison’s SWOT analysis
Sainsbury’s SWOT analysis
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Morrison’s key priorities or preferences
 To deliver best quality and improved value to the consumers:
 To identify solutions to serve local customer in the best possible manner
 To develop standardized and popular services
 To build teamwork practices so as to strengthen work culture
 To maximize competitive strength
 To recruit talented, competent and committed people to render greater value to the users
All the set key priorities will deliver benefits to the investor as by delivering superior
quality products, Morrison will be able to generate maximum return. As a result, more net
profit will be available for the investors as their financial rewards in return for the risk taken.
Further, innovation, advancement and teamwork practices will facilitates Morrison to serve
customers in the best possible manner and handle issues and difficulties. As a result, they
can render superior quality customers; enlarge their business strength, customer base,
market share, competitive position and strategic capability.
With the help of this, they can gain excessive return and exceed investors return
expectations. Besides this, Morrison’s business strategy put their customer at the heart and
all the services and operations revolve around users expectations. This strategy of the firm
greatly enables business to generate optimum return on their revenue and meet investors
return expectations appropriately. Moreover, competitive position and rising market share
increase market price of the share and satisfy investors. Further, its financial strategy aims at
efficient capital allocation framework comprising investment in profitable growth,
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maintaining debt rations, giving surplus to shareholders and reduction in cost. This
framework has key preference to invest in stores and infrastructure so as to minimize cost.
Moreover, effective management of financial risk through maintained debt to equity ratio
assist investors to get surplus money from the operations as their investment return.
Saisnbury’s business strategy
Strategic priorities
 Customer-orientation to know customer demand
 To render quality items and services at affordable or reasonable prices
 To conduct training and development programmes to maximize workers competencies
Customer-focused strategy will enable Sainsbury to identify the actual demand of the
users and render services accordingly to meet targets. Further, quality items and acceptable
prices help firm to attract customers of different employment level, results in high revenue
and maximum return to meet investors. Moreover, T&D initiatives helps to expand workers
skills and deliver top-quality services to the users to get larger yield and satisfy investors
return demand.
Morrison’s CSR initiatives:
 In 2016, Morrison delivered 100% British owned fresh meat products in its stores to
improve sustainable supply chain.
 It introduced ethical trading policy in October 2015 to keep in line with the best industrial
practices. Furthermore, “Stronger together” initiatives and “Responsible Fishing Scheme”
14

also have been launched (Morrison’s annual report, 2016).
 Reduction in carbon footprint by 21%, waste decline by 2% and minimizing wastage and
scrap as well. Moreover, it also donated unsold food items and products to charity.
Sainsbury’s CSR initiatives:
 In the year 2015, Sainsbury launched “Waste less and Save More” initiatives to minimize
wastage, carbon emission and scrap. 100% farmed seafood certification proves its
sustainability.
 Ethical trading initiatives are also a step taken by Sainsbury to restrict unethical business
practices at the workplace.
 In 2016, Sainsbury reduced greenhouse gas emission programme, in which, it set targets to
reduce its emission by 30% till 2020 (Sainsbury’s annual report, 2016)..
4. Reflection
In completing the assignment, there were several barriers faced by me. One of the most
important barriers that I faced is to generate performance based data of both the companies. In order
to overcome such issue, I conducted web research and visited many sites like yahoo finance,
financial times and morning star and finally extracted data from financial times to conduct the
investigation. Moreover, I also faced several issues in comparative analysis, henceforth, initially, I
developed basic understanding about profitability, liquidity and solvency position so as to amke
comparative evaluation of Morrison’s performance with that of Sainsbury. Further, I did not have
any knowledge regards to non-financial factors so I read the books and take lecturer support and
guidance to develop prior understanding related to the topic. Thereafter, I gather necessary and
required information about Morrison’s strategic priorities, business model and various CSR
initiatives. I also read SWOT model and assess its usefulness in context to my assignment for
conducting non-financial performance evaluation. After developing brief understanding, I
investigate the annual financial reports of both the retailers and identify its key strength,
weaknesses, opportunity and threats as well.
RECOMMENDATION
 Morrison must use quality management techniques like TQM to improve quality of their
products and services and deliver improved value to the customers.
 Cost-control mechanism will assist business to curtail unnecessary spending result in better
yield.
 Affordable pricing policy is also a better way to attract more customers helps to maximize
total turnover.
15

 Advertisement and marketing campaign facilitates firm to encourage and promote potential
customers and increase sales. Furthermore, price-sensitive customers can be attracted by
providing them attractive discounting offers.
 Staff training initiatives also can be made to enhance workers skills and competency, which
in turn, they can deliver more effective services to the customers.
 Every departmental manager must monitor regular business activities and compare with the
targets so as to take necessary remedial measures to meet targets.
CONCLUSION
Report articulated that in 2016, although, Morrison’s net margin has been improved but still,
it is comparatively less than Sainsbury’s profitability ratios. Moreover, company’s liquidity
performance is not as sound as that of Sainsbury indicates that it is not able to pay suppliers timely.
Due to less return, investors are not receiving better return on their capital invested at high
investment risk. Henceforth, it is advised to Morrison to utilize TQM, cost-control mechanism,
advertisement and conduct training sessions so as to deliver best services to the consumers and meet
targets.
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http://financials.morningstar.com/balance-sheet/bs.html?t=SBRY&region=gbr&culture=en-
US. [Accessed on 5th December 2016].
Saisnbury’s annual report. (2016). [PDF]. Available through:
www.j-sainsbury.co.uk/media/3169495/sainsburys_ar_2016_2005.pdf. [Accessed on 5th
December 2016].
WM Morrison Supermarket Plc. (2016). [Online]. Available through:
https://markets.ft.com/data/equities/tearsheet/financials?s=MRW:LSE. [Accessed on 5th
December 2016].
18

APPENDIX
Morrison’s ratios
31/01/2016 01/02/2015 02/02/2014 03/02/2013 29/01
/2012
GBP GBP GBP GBP GBP
Profitability ratios
Return on Shareholders Funds (%) 5.78 -22.04 -3.75 16.81 17.55
Return on Capital Employed (%) 3.41 -11.49 -2.24 10.73 12.53
Return on Total Assets (%) 2.38 -8.64 -1.64 8.35 9.61
Profit margin (%) 1.35 -4.71 -1.00 4.85 5.36
Gross margin (%) 3.83 4.53 6.07 6.66 6.89
Berry ratio (x) 1.67 0.58 0.92 3.82 3.95
EBIT margin (%) 1.95 -4.14 -0.54 5.24 5.51
EBITDA margin (%) 4.32 4.79 4.75 7.25 7.39
Operational ratios
Net Assets Turnover (x) 2.53 2.44 2.25 2.21 2.34
Fixed Assets Turnover (x) 2.07 2.12 1.90 1.97 2.07
Interest Cover (x) 2.94 -6.54 -1.02 12.72 6.09
Stock Turnover (x) 26.17 25.56 20.75 23.20 23.27
Debtors Turnover (x) 122.14 94.47 98.22 107.83 92.48
Debtor Collection (days) 2.99 3.86 3.72 3.38 3.95
Creditors Payment (days) 38.26 30.32 29.65 30.24 29.12
Structure ratios
Current ratio (x) 0.48 0.54 0.50 0.57 0.57
Liquidity ratio (x) 0.25 0.25 0.20 0.24 0.24
Shareholders liquidity ratio (x) 1.44 1.09 1.48 1.77 2.50
Solvency ratio (Asset based) (%) 41.22 39.21 43.73 49.68 54.74
Solvency ratio (Liability based) (%) 70.11 64.49 77.72 98.74 n.s.
Asset Cover (x) 4.55 3.66 4.33 4.40 8.82
Gearing (%) 74.84 92.13 79.22 57.65 42.02
Per employee ratios
Profit per employee (unit) 1,795 -6,612 -1,381 6,830 7,218
Turnover per employee (unit) 133,336 140,393 138,772 140,756 134,619
Salaries/Turnover 12.06 11.72 11.15 10.75 10.85
Average Remuneration per
employee (unit)
16,078 16,447 15,478 15,128 14,603
19

Shareholders Funds per employee
(unit)
31,064 30,006 36,828 40,636 41,133
Working Capital per employee (unit) -7,791 -4,684 -3,171 -4,289 -3,498
Total Assets per employee (unit) 75,368 76,533 84,213 81,792 75,141
Morrison’s balance sheet 31/01/2016 01/02/2015 02/02/2014 03/02/2013 29/01/20
12
m GBP m GBP m GBP m GBP m GBP
12 months 12 months 12 months 12 months 12
months
Cons. Cons. Cons. Cons. Cons.
Unqualified Unqualified Unqualified Unqualified Unqualifi
ed
IFRS IFRS IFRS IFRS IFRS
Fixed Assets
Tangible Assets 7,161 7,252 8,625 8,616 7,943
Land & Buildings 6,424 6,576 7,847 7,656 7,365
Freehold Land 5,959 6,070 7,090 6,829 6,588
Leasehold Land 465 506 757 827 777
Fixtures & Fittings
Plant & Vehicles
Plant
Vehicles
Other Fixed Assets 737 676 778 960 578
Intangible Assets 483 520 458 415 303
Investments 161 167 216 154 291
Fixed Assets 7,805 7,939 9,299 9,185 8,537
Current Assets
Stock & W.I.P. 616 658 852 781 759
Stock 852 781 759
W.I.P.
Finished Goods 616 658
Trade Debtors 132 178 180 168 191
Bank & Deposits 488 241 261 265 241
Other Current Assets 60 61 136 123 129
Group Loans (asset)
Directors Loans (asset)
Other Debtors 4 10 20 37 46
Prepayments 56 51 116 86 83
Deferred Taxation
Investments 12 90 1 5 2
Current Assets 1,308 1,228 1,430 1,342 1,322
Current Liabilities
Trade Creditors -1,690 -1,397 -1,436 -1,501 -1,409
Short Term Loans & Overdrafts -201 -11 -553 -52 -109
20

Bank Overdrafts -1 -11 -403 -52 -29
Group Loans (short t.)
Director Loans (short t.)
Hire Purch. & Leas. (short t.)
Hire Purchase (short t.)
Leasing (short t.)
Other Short Term Loans -200 -150 -80
Total Other Current Liabilities -856 -865 -884 -781 -785
Corporation Tax -11 -23 -38 -149 -163
Dividends
Accruals & Def. Inc. (short t.) -475 -487 -463 -486 -439
Social Securities & V.A.T. -86 -96 -58 -31 -34
Other Current Liabilities -284 -259 -325 -115 -149
Current Liabilities -2,747 -2,273 -2,873 -2,334 -2,303
Net Current Assets (Working
Capital)
-1,439 -1,045 -1,443 -992 -981
Net Tangible Assets (Liab.) 5,883 6,374 7,398 7,778 7,253
Working Capital needs -942 -561 -404 -552 -459
Total Assets 9,113 9,167 10,729 10,527 9,859
Total Assets less Cur. Liab. 6,366 6,894 7,856 8,193 7,556
Long Term Liabilities
Long Term Debt -2,003 -2,508 -2,480 -2,392 -1,118
Group Loans (long t.)
Director Loans (long t.)
Hire Purch. & Leas. (long t.) -7 -7
Hire Purchase (long t.)
Leasing (long t.) -7 -7
Preference Shares
Other Long Term Loans -2,003 -2,508 -2,480 -2,385 -1,111
Total Other Long Term Liab. -55 -50 -36 -4 -482
Accruals & Def. Inc. (long t.)
Other Long Term Liab. -55 -50 -36 -4 -482
Provisions for Other Liab. -738 -703 -637 -547 -548
Deferred Tax -429 -415 -430 -471 -464
Other Provisions -309 -288 -207 -76 -84
Pension Liabilities 186 -39 -11 -20 -11
Balance sheet Minorities
Long Term Liabilities -2,610 -3,300 -3,164 -2,963 -2,159
Net assets 3,756 3,594 4,692 5,230 5,397
Shareholders Funds
Issued Capital 234 234 234 235 253
Ordinary Shares
Preference Shares
Other Shares
Total Reserves 3,522 3,360 4,458 4,995 5,144
21

Share Premium Account 127 127 127 107 107
Revaluation Reserves
Profit (Loss) Account 788 638 1,729 2,287 2,452
Other Reserves 2,607 2,595 2,602 2,601 2,585
Shareholders Funds 3,756 3,594 4,692 5,230 5,397
Morrison’s trends 2015-14 2014-13 2013-12 2012-11 2011-10 2010-09
Trends (%)
Fixed Assets (%) -1.69 -14.63 1.24 7.59 7.07 4.00
Current Assets (%) 6.51 -14.13 6.56 1.51 16.17 4.02
Stock (%) -6.38 -22.77 9.09 2.90 18.97 10.57
Debtors (%) -25.84 -1.11 7.14 -12.04 -3.05 34.01
Total Assets (%) -0.59 -14.56 1.92 6.78 8.21 4.01
Current Liabilities (%) 20.85 -20.88 23.09 1.35 10.40 -3.07
Creditors (%) 20.97 -2.72 -4.33 6.53 0.64 3.70
Loans/Overdraft (%) n.s. -98.01 963.46 -52.29
Long Term Liabilities (%) -20.91 4.30 6.78 37.24 34.52 -3.25
Changes (th GBP)
Fixed Assets (th GBP) -134,000 -1,360,000 114,000 648,000 564,000 307,000
Current Assets (th GBP) 80,000 -202,000 88,000 20,000 184,000 44,000
Stock (th GBP) -42,000 -194,000 71,000 22,000 121,000 61,000
Debtors (th GBP) -46,000 -2,000 12,000 -23,000 -6,000 50,000
Total Assets (th GBP) -54,000 -1,562,000 202,000 668,000 748,000 351,000
Current Liabilities (th GBP) 474,000 -600,000 539,000 31,000 217,000 -66,000
Creditors (th GBP) 293,000 -39,000 -65,000 92,000 9,000 50,000
Loans/Overdraft (th GBP) 190,000 -542,000 501,000 -57,000 109,000
Long Term Liabilities (th GBP) -690,000 136,000 201,000 804,000 554,000 -54,000
Comparison of turnover
22

1.J Sainsbury PLC 2.WM Morrison Supermarkets P L C
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
th GBP
Std dev. Av. 1 2
11 12 13
11 12 13
11
12 13
11 12 13
J Sainsbury PLC
(59.32%)
WM Morrison Supermarkets P L
C
(40.68%)
Comparison of profit and loss before taxes
23

1.WM Morrison Supermarkets P L C 2.J Sainsbury PLC
-800,000
-600,000
-400,000
-200,000
0
200,000
400,000
600,000
800,000
1,000,000
th GBP
Std dev. Av. 1 2
11 12
13
14
15
11 12
13
14
15
11
12
13 14
15
11 12
13
14
15
J Sainsbury PLC
(71.63%)
WM Morrison Supermarkets P L
C
(28.37%)
Current ratio comparison
24

1.J Sainsbury PLC 2.WM Morrison Supermarkets P L C
0.00
0.20
0.40
0.60
0.80
Std dev. Av. 1 2
11 12
13 14
15
11 12 13 14 15
11
12
13 14 15
11 12
13
14
15
J Sainsbury PLC
(71.63%)
WM Morrison Supermarkets P L
C
(28.37%)
Comparison of ROCE
25

1.WM Morrison Supermarkets P L C 2.J Sainsbury PLC
-15.00
-10.00
-5.00
0.00
5.00
10.00
15.00
%
Std dev. Av. 1 2
11 12
13 14
15
11
12
13
14
15
11
12
13 14
15
11 12 13
14
15
Comparison of net tangible assets
1.J Sainsbury PLC 2.WM Morrison Supermarkets P L C
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
th GBP
Std dev. Av. 1 2
11 12 13
14
15
11
12 13
14 15
11 12 13 14
15
11
12
13
14
15
26

1.J Sainsbury PLC 2.WM Morrison Supermarkets P L C
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
th GBP
Std dev. Av. 1 2
11 12 13
14
15
11
12 13
14 15
11 12 13 14
15
11
12
13
14
15
Gearing ratio
1.J Sainsbury PLC 2.WM Morrison Supermarkets P L C
0.00
20.00
40.00
60.00
80.00
100.00
%
Std dev. Av. 1 2
11
12 13 14 15
11
12
13
14
15 11
12 13
14
15
11
12
13
14
15
27