Future Development
Morrison's is a major British grocery store with a history spanning over a century. It offers a wide range of products, too numerous to list comprehensively, but we can provide an overview of some of Morrison's ongoing developments.
Acquisition of McColl’s
On May 9, 2022, Morrison's acquired the trade section and a majority of assets of McColl's, a company specializing in convenience stores. This move aims to establish a robust platform within the convenience sector. Part of this plan includes a target to increase the number of Morrison's own convenience stores under the Daily fascia from 450 to 1000 within the next two years.
It's worth noting that McColl's currently faces financial challenges, leading Morrison's decision to close 132 of its underperforming stores as part of the acquisition.
Additionally, Morrison's is actively working on enhancing various aspects of its business, including supply chain, logistics, workforce training, and administrative efficiency, as they integrate McColl's into their operations.
Environmental Protection Policies
To tackle the climate change and protect the environment, morrison has joined the "Task Force on Climate-related Finnical Discolosures(TFCD) and the board had layed out the following task to reduce waste and carbon:
Morrison is committed to reducing plastic usage with a specific goal of decreasing their own-brand plastic packaging by 50% by 2025. Notably, they are the first supermarket to pledge the complete removal of plastic bags for life. To address more challenging plastic items, they have introduced paper bags as an alternative, which is expected to reduce approximately 3,200 tons of plastic waste. In addition, Morrison has invested in recycling operations through a joint venture with Yes Recycling (Fife) Ltd. This partnership is focused on processing hard-to-recycle soft plastics and has the capacity to handle 15,000 tons of flexible plastic packaging
Supermarket | Average trolley price |
Morrisons | £342 |
Asda | £342 |
Tesco | £361 |
Ocado | £368 |
Sainsbury's | £371 |
Waitrose | £377 |
2018 FY | 2019 FY | 2020 FY | 2021 FY | 2022 FY | 2023 E | 2024 E | 2025 E | 2026 E | 2027 E | |
Total Revenue | 22,479 | 23,534 | 22,416 | 24,727 | 23,310 | 26,807 | 30,828 | 35,452 | 40,770 | 46,885 |
Magnitude: Millions (M)
Discounted Cash Flow
A discounted cash flow was undertaken to provide a valuation for Wm Morrison Supermarkets Limited by forecasting future cash flows over a specific period and estimating a terminal value, which represents the business's value beyond that period. The projected cash flows are then discounted back to their present value using the company's weighted average cost of capital (WACC). The sum of the present values of the future cash flows and terminal value provides an estimate of the company's intrinsic value.
The table below represented he Unlevered Free Cash Flow (FCF) data for Wm Morrison Supermarkets Limited from 2018 to 2027, the company experienced a drop in recent years (2022). The projected FCF for the years 2023 to 2027 shows increasing gradually, indicating that Morrison will regain its momentum in the near future.
Fiscal Year | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 |
FCF | 345 | 447 | 529 | NA | 194 | 214 | 235 | 258 | 284 | 313 |
Projection Year | 1 | 2 | 3 | 4 | 5 | |||||
Present Value | 227 | 265 | 310 | 362 | 423 |
Magnitude: Millions (M)
Wm Morrison Supermarkets Limited has an enterprise value of 20,674 units and an equity value of 17,250 units with a WACC of 6.21%. The implied share price is 7 units, showing a significant increase compared to the current share price of 3.65 units, with a remarkable 91.8% change.
WACC | 6.21% |
Sum of PV of FCF | 1,585 |
Growth rate | 4.50% |
Terminal Value | 25,801 |
Present Value of Terminal Value | 19,089 |
Enterpise Value | 20,674 |
(+) cash | 333 |
(-) Debt | 3,757 |
Equity Value | 17,250 |
Diluted Shares Outstanding | 2,451 |
Implied share price | 7 |
Current share price | 3.65 |
Magnitude: Millions (M)
Sensitivity Table | ||||||
Growth Rate | ||||||
7 | 3.50% | 4.00% | 4.50% | 5.00% | 5.50% | |
WACC | 5.21% | 6.943521281 | 5.17055606 | 5.17055606 | 6.943521281 | 17.96682183 |
5.71% | 10.11775476 | 6.896522233 | 6.896522233 | 10.11775476 | 62.28769622 | |
6.21% | 10.11775476 | 6.896522233 | 6.896522233 | 10.11775476 | 62.28769622 | |
6.71% | 6.943521281 | 5.17055606 | 5.17055606 | 6.943521281 | 17.96682183 | |
7.21% | 4.11841452 | 3.340505278 | 3.340505278 | 4.11841452 | 7.037923491 |