Table of Contents

Part A....................................................................................................................................................2
Company chosen..............................................................................................................................2
Major activities................................................................................................................................2
Revenue analysis..............................................................................................................................2
Sector................................................................................................................................................2
Stock price analysis.........................................................................................................................3
Long term investment.....................................................................................................................3
Foreign markets...............................................................................................................................4
Board of directors............................................................................................................................4
Part B.....................................................................................................................................................5
Assets................................................................................................................................................5
Liabilities..........................................................................................................................................5
Working capital...............................................................................................................................6
Debt ratio.........................................................................................................................................6
Revenues and Cost of goods sold....................................................................................................7
Net profits.........................................................................................................................................7
Part C.....................................................................................................................................................8
References............................................................................................................................................8
Part A
Company chosen
The company which is considered for the analysis is Morrison supermarket, a leading food
and retail company which is based in UK. The company was founded in 1899 and is fourth
largest supermarket chain in the country. The company is one of the fastest growing business
enterprises in the industry hence analysing the performance of the company is of importance
in order to enhance the understanding of business operations.
Major activities
The company is mainly involved in retail groceries offering food, home essentials and other
related products to the customers. There are nearly 494 supermarket stores in UK as of 2020,
The company made continuous growth and development after being considered as top 100
companies in London stock exchange, the company widely involved in selling food items
including bakery products, fruits, vegetables, packed meats, groceries and daily essentials.
The company has also ventured in selling medicines and other health related products in its
stores.
Revenue analysis
The company has consistently increased its revenues due to marketing more products,
competitive pricing and enhancing customer value
Revenue in
Millions 2016 2017 2018 2019
Sales 16122 16317 17262 17735
Increase in %   1.21% 5.79% 2.74%

The above table states that the management has increased its revenues continuously for all the
years of analysis, the major reason is due to increase in number of stores of the company, also
the competitive pricing strategy which the management adopts in order to attract more
customers. The company is in retail business and hence tend to store and market different
food products based on the needs of customers, these factors contribute to increased sales for
the company (Morrison, 2019).
Sector
Morrison majorly operates in the retail industry, most of the products are focused on daily
essentials like food, clothing, magazines, drinks, groceries and other home essentials. The
major competitors of the company are Sainsbury, Waitrose, Tesco, M&S, Aldi etc.
Revenue in Morriso Sainsbur
Millions n y Tesco M&S
Turnover 17735 35990 9900 12600
Morrison holds nearly 10.5% market share in UK, it is noted that the retail industry in the
country is highly competitive, due to presence of large companies and selling identical
products (Statista, 2019). Moreover, the advent of online shopping is transforming the way in
which the individuals make the purchase, the online sales accounts for nearly 17% of the total
sales made in the industry and this is considered as the new and effective manner of
enhancing sales and to attract more customers to purchase the products.
Stock price analysis
The following is the stock price analysis of the company
Stock Price 2016 2017 2018 2019
Price in GBP 230.7 219.65 214.7 204.1
Increase in %   -4.79% -2.25% -4.94%

From the above it can be stated that the price of the stock has been consistently decreasing,
the profits of the company were consistent for all the years, the price of the stocks has been
decreasing this is due to decrease in consumer demand in retail sector, the competitors are
focused in increasing their revenues and profits from various other products, however,
Morrison was more focused on retail sales for their growth. Moreover, the issue related to
Brexit and other market factors has contributed to lower sales, increase in cost and has
impacted the future of many companies in the country (Yahoo finance, 2020).
The management has stated that there is a change in consumer behaviour in the past few
years and there needs a sustaining effort so as to offer better products to the consumers. The
issue related to Brexit and other forces has impacted the overall market and company is
poised to be more competitive so as to meet the demands of the consumers (Morrison, 2019).
Long term investment
The company is making significant investments in enhancing online sales and also invested
in new fleets so as to meet with the new safety and Euro standards. It is also noted that the
company has focused in investing in new and enhanced checkout points so that the customers
need not wait for longer time in the queues, also the customer who wants purchase less goods
can make the checkout quickly thereby by-passing long queues and enable in smoother
transactions. The company also invested more in technology like cloud technology and other
so as to ensure that the data can be retrieved at any point in time. The management focuses in
aligning the technology with its business strategy so as to meet the future demands and needs
of the customers. The company has made a disposal in Fresh Direct in 2017, for a cash
consideration of nearly £44 million. The management has also made an overall focus in
enhancing the book value of the business by £14 million.
In 2017, the company has invested highly in competitive aspects so as to provide lesser price
for the customers, moreover, the management has invested in adding new range of stores so
as to meet the demands from local customers, also the management installed newer means of
checkout wait times and made higher capital investments in fruits and vegetables by
procuring more from home grown suppliers. The
Foreign markets
Based on the annual report, it is noted that the company is primarily present in England,
Wales and Scotland. The company does not possess any major international operations and
hence the breakdown of domestic and foreign markets was unavailable for Morrison.
Board of directors
The company sets high standards of providing and enhancing equal opportunities for all the
colleagues, the company has strict policy on racial discrimination against any race, gender,
colour etc. The company has formed the board with enhanced aspects which accounts for
better and effective gender compositions. Based on the annual report, the strategic planning
process was mainly involved in considering the gender composition and also enable in
enhancing the business performance by providing equal opportunities. The management also
plans and reviews the gender pay for the individuals and also board members by considering
the current wage structure and also enable in reviewing the maturity profile of the
individuals. Also, the group gender composition is highly stable which enables in enhancing
the business performance in an effective manner.
KPMG makes an independent assessment of the Board's routines and policies. During this
period, it will be considered whether the roles and responsibilities between Morrison's CEO
and the Board are well divided and clear. Is the role of non-managing directors clear? and
whether the board members are objective and neutral. According to market research firm
Kantar, Morrison's food market share in the UK increased from 10.6% to 10.3% last year,
while Aldi and Lidl's combined market share increased from 12.4% to more than 14%. Four
years ago, the duo's total share of discounts was less than 10%, but a relentless campaign to
open stores deprived other retailers of growth. If the supermarkets last year had only one
salvation, prices rose steadily, which more than compensated for the fall in volume. As a
result, total UK food sales in pounds fell just once in the last 12 months, so the "pie" has been
fairly stable. The wholesaler, which sells Morrison products through Amazon and through
gas stations through Harvest and Rontec, generated more than $ 700.7 billion in sales last
year.
The company's profits have been stable over the years, the exchange rate has fallen due to
reduced consumer demand in the retail trade, competitors focused on increasing revenues and
profits for several other products, but Morrison prefers to improve its retail trade. In addition,
the issue of Brexit and other market participants helped reduce sales, increase costs and the
future impact of many companies across the country. Morrison operates primarily in retail
and most products focus on daily needs, such as food, clothing, magazines, beverages, food
and other needs. Management has steadily increased its revenues during the year of the
analysis, mainly due to the increase in the number of branches in the company and the
competitive pricing strategy that management has adopted to attract more customers. The
company operates in the retail trade and therefore tends to transport and commercialize a
variety of food products according to the customer's needs, factors that contribute to the
growth in the company's sales.
The management has stated that there has been a change in consumer behaviour in recent
years and that continued efforts are needed to provide consumers with better products. The
issue of Brexit and other forces has affected the entire market and the company is ready to be
more competitive to meet consumer needs (Ray, 2016).

Part B
This section provides detailed financial analysis of the company based on the annual reports
from the previous years

Assets

Assets in Millions 2015 2016 2017 2018 2019

Total non-current
assets 7991 8070 9183 9287 9598
Change in %   0.99% 13.79% 1.13% 3.35%
Total current assets 1316 1176 1275 1340 1319
-
Change in %   10.64% 8.42% 5.10% -1.57%

The fixed assets of the company have been consistently increasing over the period of
analysis, the major reasons being increase in property, plant and equipment. The management
is focusing to enhance their presence in England, Wales and Scotland hence started to operate
new stores from different location which resulted in increase in the fixed assets, however the
current assets decreased in 2016 by 10.6% due to reduction in cash and other marketable
securities, however from 2017 the current assets increased due to increase in stocks and
debtors, these aspects has pushed the current assets higher during the analysis period (Smart,
2017).
Liabilities
Liabilities in
Millions 2015 2016 2017 2018 2019
Current 2755 2864 3080 3349 3396
    3.96% 7.54% 8.73% 1.40%
Non-Current 2796 2319 3132 2992 2983
-
    17.06% 35.06% -4.47% -0.30%
 Based on the analysis it is noted that the current liabilities of the company have been
increasing steadily due to increase in creditors, the company has ventured into new
businesses under food and other related products so as to meet the needs and demands of the
customers, these aspects increased the current liabilities for the years. However, when
comparing the non-current liabilities, it is identified that the long-term liabilities were
increasing during 2017 as the company chooses to use external borrowings for meeting the
investment needs. In 2017, the company has ventured in using technology like cloud
computing and other means for easing the waiting line of the customers, therefore they tend
to borrow additional loans to meet the needs (Titman, 2014). However, in 2018 and 2019, the
management has decided to payoff the loans and enhance the capital through issue of equity
shares and reserves. The basic aspect is that the company focuses more on internal sources of
capital like equity shares and reserves than raising funds from external borrowings like bank
loans and other interest-bearing liabilities
Working capital
Working capital in
Millions 2015 2016 2017 2018 2019
Total current assets 1316 1176 1275 1340 1319
Current liabilities 2755 2864 3080 3349 3396
Working capital -1439 -1688 -1805 -2009 -2077
Current ratio 0.48 0.41 0.41 0.40 0.39

Woking capital is considered as the capital required by the business to manage its day-to-day
operations, the analysis states that the working capital of the company is weak, meaning that
the current liabilities are higher than its current assets. Also, the current ratio has been in
consistent at around 0.40, this shows that the company liquidity position is weak and the
management needs to enhance their cash position to meet its current liabilities.
The company possess lesser cash when compared with the current liabilities, though the
management has higher credit period for the goods procured from supplies, the liquid cash is
very less which may impact the liquidity position of the business in the long run. Hence, it
can be suggested that the management need to enhance their cash reserves for possessing
better liquidity position.
Debt ratio
Debt ratio 2015 2016 2017 2018 2019
Non-Current 2796 2319 3132 2992 2983
Total Equity 3756 4063 4250 4325 4541
Debt to equity 0.74 0.57 0.74 0.69 0.66
Total Assets 9307 9246 10462 10666 10920
Debt Ratio 0.30 0.25 0.30 0.28 0.27

The debt ratio intends to state the level of external borrowings which the company possess in
relation to its assets, higher the ratio greater is the riskiness of the company as they rely more
on external sources, based on the analysis the debt ratio of the company is at moderate levels
in the range of 0.25 to 0.30, as the company total debt is less. Moreover, based on the
analysis it is noted that the debt-to-equity ratio of the company Is above 0.50, this shows that
the manament is effectively using the external funds for managing the investment and other
capital expenditure. (El-Dalabeeh, 2013). The company is highly focused in enhancing the
reserves and equity capital so as to meet the future investments through internal sources. It is
evident that the company is using the leverage to its advantage like funding long term
investment and generate better returns for their shareholders.
Revenues and Cost of goods sold
  2015 2016 2017 2018 2019
Sales 16816 16122 16317 17262 17735
COGS -16055 -15507 -15713 -16629 -17083
Gross profit 761 615 604 633 652
GP Ratio 4.53% 3.81% 3.70% 3.67% 3.68%
Operating profit -696 314 458 468 432
OP Ratio -4.14% 1.95% 2.81% 2.71% 2.44%

The above table states that the company has increased its revenues during the period of
analysis, the gross profit of the company is consistent with nearly 3.6% to total sales. The
company operating ratio has been negative in 2015 due to higher administrative expenses in
2015 which accounts for 1,670 million. however, for all other years the operating profits has
been consistent with the given levels of around 2.3%. The management is poised to enhance
their profits by reducing the administrative and other expenses through increase in online
sales and also to generate more profits from the company owned brands.
Net profits
  2015 2016 2017 2018 2019
Sales 16816 16122 16317 17262 17735
Net Profit -792 222 305 311 233
NP Ratio -4.71% 1.38% 1.87% 1.80% 1.31%

The table shows that the net profits of the company is highly consistent with nearly 1.5%,
which is considered to be average industry standards, however in 2015 the company posted
net loss due to higher administrative expenses. The analysis shows that the management is
poised to generate better revenues and profits for their shareholders and hence determining in
using technologies and other modes for increasing the profits in an efficient manner (Kaplan,
2015).
The company's fixed assets continued to grow during the analysis period, mainly due to an
increase in fixed assets. Management is focusing on strengthening its presence in England,
Wales and Scotland and as a result, new stores have been opened in various locations,
resulting in an increase in fixed assets, but current assets decreased by 10.6% in 2016 due to
the decrease in cash and cash equivalents. due to other marketable products. As of 2017,
current assets increased due to the increase in inventories and accounts receivable, aspects
that increased current assets at higher levels than the analysed period (Brooks 2015).
The goal of the indebtedness index is to show the level of external indebtedness that the
company has in relation to its assets, the greater the reason why the company has a higher
risk level, as they are dependent on external sources instead of indices. The company's debt is
moderate, 0.25 and 0.30, the company's total debt is smaller. Based on the analysis, it should
also be noted that the company's debt ratio is over 0.50, which shows that management uses
external resources efficiently to manage investments and other costs.( Dimitrijevic, 2015).
Woking capital is considered to be the capital needed to carry out the day - to - day
operations of a company; the analysis shows that the company's working capital is low,
which means that current liabilities are higher than current assets. In addition, the current
index indicates a stable value of approximately 0.40, which indicates that the company's
liquidity position is low and that management needs to improve cash flows to meet current
liabilities (Bragg, 2017). The company's liquidity is less than its current liabilities, although
management has a longer credit period for goods acquired from commissions, cash is much
less, which can affect long-term business (Brigham, 2013). Therefore, it can be argued that
management must increase its reserves in order to have a better liquidity position.

Part C
The assignment enables in understanding the company analysis in a detailed manner, the task
enables the student to collate the data from various secondary data source and also perform
the in-depth analysis of the company based on the financial statements. The assignment
provides critical application of the knowledge which were gained through training and
reading the subject related books. By reading through annual report, it can be identified the
current strategy of the business, future investments or areas which the management invest in
and the application of board of directors’ expertise in enhancing the revenues and
profitability for the business. Overall, the task enables the individuals to make detailed
company analysis and investigate whether the management has been taking adequate steps in
enhancing the wealth of the shareholders and also increase efficiency of business operations.

References
Berman, K. (2013). Financial Intelligence. 2nd edition. Harvard Business Review Press.
Bragg, Steven. (2017). Throughput Accounting: A Guide to Constraint Management. 1st
edition. Wiley & Sons
Brigham, E. F. (2013). Financial Management: Theory & Practice. 5th edition. Cengage
Learning.
Brooks, R. M. (2015). Financial Management. 4th edition. Prentice Hall.

Crux, James. (2019). This is why Morrison’s’ shares are falling despite fourth Christmas
sales boost in a row. Retrieved from: https://www.sharesmagazine.co.uk/news/shares/this-is-
why-morrisons-shares-are-falling-despite-fourth-christmas-sales-boost-in-a-row
Dimitrijevic, D., Milovanovic, V. & Stancic, V. (2015). "The role of a company's internal
control system in fraud prevention", e-Finanse, vol. 11, no. 3, pp. 34.
El-Dalabeeh, A.K. (2013). The Role of Financial Analysis Ratio in Evaluating Performance:,
Interdisciplinary Journal of Contemporary Research In Business, vol. 5, no. 2, pp. 13.
Kaplan, R. S., & Young, M. S. (2015). Management Accounting. 3rd edition. Prentice Hall.
Ray, G., & Eric, N. (2016). Managerial Accounting. McGraw-Hill/Irwin.
Morrison. (2019). Annual reports of Morrison
Smart, S., Megginson, W. and Gitman, L. (2017). Corporate finance. Mason, OH:
Thomson/South-Western.
Statista. (2019). Market share of grocery stores in Great Britain from January 2017 to
December 2020. Retrieved from: https://www.statista.com/statistics/280208/grocery-market-
share-in-the-united-kingdom-uk/
Titman, S. J. (2014). Financial Management. Prentice Hall.
Yahoo Finance. (2020). Stock prices of Morrison
Appendix