Morrisons Financial Summary

Comparing with the financial performance in 2012\13 (Morrisons plc, 2013), the overall revenue in 2013\14 reduced by 2.4% and ROCE decreased from 9.6% to 8.4%. Meanwhile, the operating margin fallen by 4.8% which doubled the falling trend of revenue. The change of margin is especially influenced by the sharply rise of administration expensive ratio, from 1.9% to 7.1%. These unfavourable results could be explained in two main aspects: overall industry environment and company business strategy. According to Kantar Worldpanel (2013), the Germany discounting chains LIDL and ALDI is growing fast in recent years even exceeding market average growth rate and trying to take British grocery market shares from the big four supermarkets which including

The increased sources of non-current asset are mainly from two columns. Despite the joint venture of online store discussed on financial performance sector, another growth is driven by Morrisons’ capital investment plan which focusing on increasing the development in convenience stores and improvement of IT system. As annual report suggested (Morrisons plc, 2014), Morrisons did not have much strength on this sector before and would regard convenience channel as a potential market to increase sales in the future. By taking capital investment in PPE, Morrisons opened 90 convenience stores and two distribution centers for convenience service supporting in the accounting year (Morrisons plc, 2014). IT system is also invested to enhance cost control management both in the decrease of labour cost in convenience stores and normalization of recording from vertical integration chains to retail stores. Those capital investments are recognized on property, plant and equipment segment and increased value of total non-current asset over

For the sake of supporting online store development and convenience stores establishment, significant amount of capital is required this year also in the long term. Moreover, as the outstanding debts are closed to maturity, by issuing new corporate bonds Morrisons can increase the average expired date of bonds in the finance market. Although Sainsbury’s gearing is increased gently each year than that of Morrisons at 39.7% currently (Sainsbury’s plc, 2014), most of the borrowings are generated by bank loan and lack of diversification. By mainly focusing on one source of debt may result in adverse result in borrowing further capital when the maximum approvable lending amount set by bank is reached. Morrisons has advantage in generating capital in multi-channels as different types of debt could diversify the investment to reduce risk and generate cash in different capital market with larger number of investors in different risk appetite. Additionally, Morrisons will decrease net debt next year with the expectation of 2.4-2.5million (Morrisons plc, 2014) indicates that current year’s high gearing will gradually decrease to ensure the purpose of going