Morrisons is the fourth largest food retailer withover 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 currentdebtswith a margin of safety for possible losses in current assets, for exampleinventoryshrinkage. 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]