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Morrison Share chat

Discussion in 'General Share Chat' started by Steamy, Jun 19, 2015.

  1. ShortTracker

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  12. Mongoose82

    Mongoose82 A Legendary Member

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    "Morrison checked-out with robust result for H1 FY2016, exceeding the consensus analyst expectation on both LFL sales growth as well as pre-tax profits. Something of a landmark event, given positive half-year LFL seen for the first time in 4 years! It was particularly strong in Q2, when the Group saw +2% increase in LFL sales growth. Morrison's peers are yet to announce their own interim result, however, we believe there are realistic chance where Morrison has outperformed. The Group achieved free cash flow target of £2bn, 6 months in advance, and delivered first £5m of the incremental £50m-£100m pre-tax profit target during the period. Having delivered this, the Group has set a new targets of; (1) Cost savings to exceed £1bn by end FY2017; (2) Working capital improvement target increased from £800m to £1bn; and (3) End-FY2017 net debt target lowered from £1.4bn-£1.5bn to c.£1.2bn, and net debt expected to fall to less than £1bn by the end of FY2018. Its Chairman praised the new team, led by its CEO, David Potts who joined the Group in 16 March 2015 after leaving Tesco, whose contribution has made a "real difference". Morrison has closed 7 stores during the period, bringing total closure for the last two years to 28 stores (or 5% of the space). As a part of restructuring, the Group has also broadened its customer reach through strategic partnership with Ocado (recently negotiated new terms) enabling more customers to shop at Morrisons.com and with Amazon for wholesale agreement. Moreover, the Group has also partnered with Doddle and Timpson to enable "one-stop-shop", in line with its strategy to develop popular and useful services. We believe online and wholesale agreement will increase the sales, while Doddle and Timpson will likely to boost the footfall to the stores, which fits perfectly to the modern customer behavior of low volume, more frequent 'top-up' shopping. The Group's strengthened balance sheet driven by significant deleveraging and strong free cash flow, together with management confidence for further improvement has pave the way for increased interim dividends, in line with its new policy of sustainable dividend covering c.2x the underlying earnings. The management confirmed in the analyst conference call that the Group will continue to invest in pricing and will return "surplus capital to shareholders at appropriate time". Although this may result in unwanted consequence of price war and food price deflation, Morrison seem to have gathered momentum to push forward. The management so far sees no impact on customer sentiment from the Brexit and said it sourcing most from the British suppliers compared to others, which provide some comfort towards Brexit related foreign currency cost concern. We are encouraged by the Group's progress and more optimistic about the Group's future performance. At this moment, however, we remain more favorable to Sainsbury who traded at FY2017E P/E of 11.7x along with dividend yield of 5.1% to Morrisons (FY2017E P/E of 20.3x and yield of 2.5%). Beaufort retains its Hold rating on the shares for now, but will consider upgrading to Buy following review of forthcoming results from its sector peers."

    Beaufort Update this morning
     

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