2 July 2019 – 2018/19 financial statements restated for IFRS 16

Morrisons is adopting the fully retrospective approach to the new IFRS 16 lease standard, as already announced.  Details of the impact of this on last year’s results have been released.  IFRS 16 will have no economic effect on the business or cash flow. However, it affects the way assets, liabilities and the income statement are presented.  The first financial statements to be prepared under IFRS 16 will be the 2019/20 interims, to be reported on 12 September.  Ahead of those results first half and full year restated 2018/19 results on a post-IFRS 16 basis have been published.  As Morrisons is mainly a freehold business, owning 86% of its stores, the impact of the new lease accounting standard on profit is relatively low.  As previously announced, restated 2018/19 profit before tax and exceptionals is £10m lower under IFRS 16, falling from £406m to £396m.  This is due to £103m lower rent, £58m higher depreciation and £55m higher finance costs.  Operating profit before exceptionals increases by £45m to £510m and operating margin by 25 basis points to 2.9%.  On the balance sheet lease liabilities of £1,397m will be recognised alongside right-of-use assets of £745m.  The net result is restated net assets for 2018/19 of £4,325m, £306m lower than the previously reported position.  We keep our BUY rating.