Morrisons is the fourth largest food retailer with over 400 stores across the UK.
(Morrisons, 2013)
Profitability ratios:
Gross profit margin of Morrisons has decreased 0.1% from 6.8% in 2012 to
6.7%. Meanwhile, net profit margin has fell down to 5.2% (2013) from 5.5%
(2012). That means, the business should increase its sales as well as reduce
the cost of sales in order to improve its profitability.
Activity ratios:
Asset turnover
An increasing ratio from one year to the next indicates greater efficiency.
Stock holding period
The business which is improving in efficiency will have a quicker inventory
turnover comparing one year with the previous one,
Debtors’ collection period
Creditors’ payment period
Prefer to see C>D.
Liquidity ratios:
Current ratio shows whether or not the business have enough current assets
to meet the payment schedule of its current debts with a margin of safety for
possible losses in current assets, for example inventory shrinkage. As for
Morrison, its current ratio is stable on 0.57:1 over 2012 and 2013. As the figure
is obviously lower than the minimum acceptable ratio 1:1, it means that, the
business face liquidity problems and should consider to improving it by, for
example, increasing its current assets from new equity contributions.
By excluding inventories, quick asset ratio (acid-test) which concentrates on
the really liquid assets is the best measure of liquidity. Morrisons has the same
figure 0.24:1 in 2012 and 2013.
Financial structure:
Gearing is concerned with long-term financial stability. In 2012, the gearing of
Morrisons is 26.98%, and this figure increased to 41.43% in 2013. In general,
investors would accept a gearing percentage of lower than 100%.
Interest cover is 14.6 and 24.9 in the year of 2013 and 2012 respectively.
These are higher and much more acceptable figures as the higher, the better.
In the year of 2013, Morrisons’ market share has drop 1% to 11.8% from 12.8%
in 2012. (Annual Report 2012/2013)
Against difficult market conditions which challenging with ongoing commodity
inflation continuing to put further pressure on household budgets, Morrisons
has worked hard to build consumer confidence by deliver a unique
combination of value, freshness and quality to its customers. Despite the
overall performance during the year has not been as good as we would have
anticipated, some highlights in the dividend indicate our business model has
good resilience in a tough economic environment and the Board is confident
for the future. (Ian. G, 2013)
Store sales have grown by 1.8% to £13.7bn. The Group has increased space
by 4.0%, reflecting 17 new stores and the opening of nine further convenience
stores.
Investment ratios:
Return on capital employed 12.08% (13.41%)
Return on equity 16.81% (17.55%)
Earnings per share 26.65p (26.68p)
Price earnings ratio 9.44 (10.97)
Dividend cover 2.42 (2.31)
Dividend yield 4.38% (3.94%)
Reference:
Morrisons. (2013). About Morrisons: freshness, service and value. Retrieved
from:
http://www.morrisons-corporate.com/About-us/Company-history/
[Accessed on 12/11/2013]
Ian G. (2013). Chairman’s review – delivering value in the short term and for
the long term. Morrisons’ Annual Report 2012/2013. Retrieved from
http://www.morrisons-corporate.com/Documents/Annual-Report-2012-13.pdf
[Accessed on 2013/11/12]

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