Chief Executive’s business review Marc Bolland
This has been a strong year for Morrisons, with growing customer numbers. We have always delivered good availability and service. Now we are also recognised for our great fresh food. Customer numbers have grown by an extra half million per week and we are well on track to becoming the ‘food specialist for everyone’.
Marc Bolland, Chief Executive
Strategy
Our three year strategy, as laid out in our 2007 Annual report, is to position the business as the UK's 'food specialist for everyone'. This builds on our historic strengths, now applied to a much bigger business following the Safeway acquisition. As a food specialist, we are differentiating ourselves from our larger competitors, all of whom are seeking to expand their non-food credentials. We are emphasising our deep understanding of food, through being closer to source than other retailers, through our unique manufacturing and packing facilities, through the amount of food preparation undertaken in our stores and through the employment of more specialist butchers, fishmongers and bakers than our competitors. We are also emphasising that our offer is for everyone, compared with our smaller, more expensive and exclusive competitors. Our great food is also always great value.
Our strategy builds on our strengths, and is in tune with our customers' increasing focus on the health, provenance, quality and freshness of the food that they buy. In order to deliver it fully, we outlined last year the building blocks that needed to be put in place, and our plans to do this by 2010. The operating review of the year highlights our progress towards these goals.
We believe that the strategy has delivered strongly improved profit margins for our shareholders, whilst also positioning the Group for long term growth.
The Group is securely financed and has a strong balance sheet. We are confident that our planned investment requirements over the next two years can be met from existing facilities. Our balance sheet strategy is based on a number of principles:
>> operational control of our retail stores is fundamental to us,
>> we are a prudent organisation and we structure our finances accordingly,
>> we wish to maintain a strong investment grade balance sheet,
>> our defined benefit pension schemes' assets and liabilities are effectively part of our balance sheet, and should be managed as such.
Based on these principles and a review of our future operating plans, the Board has concluded that surplus capital of £1bn should be returned to shareholders during 2008 and 2009, with £500m of that delivered in the first 12 months of the programme. Our current intention is to achieve this through a share buyback programme, and we will review progress at the end of the first year of operation. Additionally, we will target progressive dividend growth in the coming two years, over and above earnings growth, in order to bring dividend cover to a level in line with the rest of our sector. Funding for these enhanced returns to shareholders will come from existing cash resources and committed facilities available to the Group.