Morrisons PLC Essay Example | Topics and Well Written Essays - 2500 words

Morrisons PLC - Essay Example specially during a period where intense competition and rising prices of doing business in grocery have squeezed profit margins available to retailers. Morrisons has recently experienced losses as it has struggled to integrate the Safeway chain of stores into its own retail base, which has caused its annual profits to drop substantially. Its shares plunged 3% in 2005, to recover somewhat by the end of the year and close off at 183 p or a 2% plunge of 3.75 pence.(Flanagan, 2005). As opposed to the predictions of financial analysts of an income of around 225 million pounds, it only posted profits of around 134.2 million pounds before taxation, with an earnings per share of 3 pounds and 52 pence.(www.morrisons.co.uk, 2006/7). In 2006 however, the position has improved for the 52 weeks that ended January 29, 2006, as per the revised income statement that has recently been published by Morrisons.(www.morrisons.co.uk, 2007). While the losses before taxation were reported as 312.9 million pounds, the same figure shoots upward to 374.4 million pounds when taking into account the Safeway conversion costs. However, the adjusted income before taxation is 61.5 million pounds profit, with net profit after taxes being 45.9 million pounds. However, as pointed out above, the earnings per share of the Company have dropped to 3.52 pounds per share in 2006. The current share prices of Morrison stock is in the range of 250 to 260 pence and has been moving within this range to about 350 pence, which is an average of about 3 pounds per share. The price to earnings ratio is therefore 3 /3.5 = 0.87, which provides an indication that the stock may be overpriced as compared to the returns that are being generated from it. Earnings on stocks are not substantial either, and the high price to earnings ratio provides an indication that that investors may not be actively pursuing purchase of this stock because of their perception that it does not offer very high potential for gain and is in