Report
Expert Corporate Governance Service (ECGS)
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WM Morrison Supermarkets – AGM 11 june 2020

Item 2: Remuneration report

 

ECGS considers the LTI payout disconnected with the groupns overall performance and shareholder value creation: for the year under review, the LTI vested at 93.5% and since the appointment of the CEO Mr. Potts in 2015 the average payout was 94.8%. ECGS questions the lack of relative performance metrics in LTI, especially TSR. The group underperformed peers and FTSE100, the three-year TSR confirms that shareholders lost 11.3% of their investment during the LTIP performance period but the CEO gained 93.5% of the LTI award. We consider the LTI payout irresponsible.

 

Items 4 and 19: Final dividend and share buybacks

 

The proposed dividend and share buybacks raise one major concern: the FCF dramatically decreased in the last 5 years. The new LTI targets for FCF confirms that the company anticipates a further decrease. The Company has already withdrawn the planned additional special dividend and only proposes a final one. The 2019/20 dividend is covered by free cash flow but the payout ratio is high (60% in 2019/20 vs. 127% in 2018/19). At the end of FY2019/20, net debt to FCF ratio stood at 7.8. We consider it is not prudent to pay a high dividend while the indebtedness is high and the FCF has been significantly decreasing.

Underlying
Wm Morrison Supermarkets plc

Morrisons (Wm) Supermarkets is engaged in the grocery retailing in the U.K. Through its subsidiaries, Co.'s principal activities include include the acquisition of food products, property management, maintenance and investment, manufacturing and distributing of food products, insurance captive, preparation and supply of seafood, meat processing, manufacturing of morning goods and bread, produce packer and purchaser, grocery retailer and pharmaecutical license holder. As of Jan 29 2017, Co. operated a total of 491 stores, 334 petrol filling stations, 401 cafes and 118 pharmacies.

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Expert Corporate Governance Service (ECGS)

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