Final Results
Marks and Spencer Group plc
Final Results 2008/09
52 weeks ended 28 March 2009
Final Results:
-
Sales up 0.4% at £9.1bn: UK -1.7%; International +25.9%
-
UK like-for-like sales -5.9%: General Merchandise -6.9%; Food -5.0%
-
Operating profit1 £768.9m (last year £1,089.3m)
-
Adjusted profit before tax £604.4m1 (last year £1,007.1m)
-
Profit before tax £706.2m (last year £1,129.1m)
-
Adjusted basic earnings per share 28.0p1 (last year 43.6p)
-
Basic earnings per share 32.3p (last year 49.2p)
-
Final dividend 9.5p per share2; down 33.1%
-
Cash inflow £107.5m
-
Net debt £2.5bn3 (29 March 2008 £3.1bn)
1 Before property disposals and exceptional items
2 The Board has taken the decision to rebase the Group's dividend payment to 15p per share from the current level of 22.5p per share, a reduction of 33.3%. This will be achieved through a 33.1% reduction in the 2008/09 final dividend to 9.5p per share, followed by a reduction in the 2009/10 interim dividend to 5.5p per share. Having re-based the dividend to 15p per share, the Board's policy regarding future dividends is to re-build cover towards two times and, thereafter, to grow dividends in line with adjusted earnings per share
3 Reflecting change of terms in the Partnership agreement with the Pension Scheme
Business Highlights:
-
Market leading position maintained in Clothing by value and volume
-
Improved sales trend, values, availability and innovation in Food
-
Good year of growth in International; sales up 26%, 34 new stores opened
-
Margin investment to deliver better prices for our customers; significant action to reduce cost base
-
Strong cash flow; net debt reduced to £2.5bn
-
Good progress against Plan A objectives
-
Business review completed - 2020 change programme in place to:
- increase pace of change and operational execution
- accelerate multi-channel development
- drive developments in International
- re-focus brand communication
Sir Stuart Rose, Chairman, said:
'During the year we acted decisively to meet the challenges of the economic downturn, responding quickly to the changing needs of our customers, managing costs tightly and protecting our balance sheet. We sharpened our values without compromising on quality. We believe this, together with our investment programme, is creating stronger foundations for long-term growth.
Over the last six months, the Board has completed a thorough review of the business. This confirmed our long term growth plans but also highlighted the need to deliver a step change in the way we service our customers' needs and operate our business. We are giving Ian Dyson responsibility to drive the '2020 - Doing the Right Thing' change programme with immediate effect.
Given an uncertain economic outlook and in order to provide a stronger foundation for moving forward, the Board has taken the decision to rebase the Group's dividend payment to 15p per share from the current level of 22.5p per share, a reduction of 33%. This will be achieved through a 33% reduction in the 2008/09 final dividend to 9.5p per share, followed by a reduction in the 2009/10 interim dividend to 5.5p per share.
Trading for the first seven weeks of the year has been broadly in line with trends experienced in the fourth quarter. We remain cautious about the outlook for the remainder of the year. We will update on our first quarter sales on 1 July 2009.
As we start our 125th anniversary we do so with an unrivalled reputation for Quality, Value, Service, Innovation and Trust. These core values are as important today as they ever have been. They are all about doing the right thing which is, quite simply, how we do business.'
Guidance for the financial year 2009/10
-
The financial year incorporates a 53rd week. This will add £35m to £45m to full year profit before tax.
-
UK gross margin is expected to decrease by 125 to 175 bps.
-
UK operating costs are expected to decrease by c. 1%.
-
Capital expenditure is expected to be around £400m (last year £652m).
-
The planned opening of new footage in the UK will add around 3% to total space, representing a c. 3% increase in General Merchandise and c. 2% increase in Food, on a weighted average basis. Total UK square footage at 28 March 2009 was 14.9m square feet.
-
The planned opening of new footage in our International business will add around 20% to total space. Total International square footage at 28 March 2009 was 3.3m square feet.
-
Pension finance income, based on the 28 March 2009 valuation of the pension fund, is expected to be c. £12m (2008/09: £35.4m).
-
The effective tax rate is expected to be 28%.
Business Review:
In a very challenging economic environment, Group sales grew to £9.1 billion. Profit before tax and exceptional items was £604.4m. Whilst our profit was down on the previous year, we took decisive action to respond to the changing needs of our customers and to mitigate the impact of the economic downturn.
We invested margin, controlled our costs and took steps to protect the strength of our balance sheet. We generated net cash flow of £108m and restructured the terms of our property partnership with the pension fund to provide us with flexibility around the annual payments to the fund. As a consequence we reduced our net debt from £3.1 billion to £2.5 billion. We have also announced a 33.1% reduction in the final dividend for 2008/9 and the interim dividend for 2009/10 a tough but necessary decision which will further underpin our financial position and flexibility.
Over the last five years we have worked hard to reinforce our core values of Quality, Value, Service, Innovation and Trust which have stood the business in good stead for 125 years. We have made substantial improvements in product, service and environment and we have seen a real change in the shape and culture of the business.
Retail is a cyclical business and there is no doubt that the current market environment has been one of the toughest for a very long time. In November we set out key priorities to manage the business through the downturn:
-
to retain our market leading position in General Merchandise
-
to improve our performance in Food
-
to drive our International business
-
to optimise margins and tightly control costs
-
to maintain a strong balance sheet
-
to uphold high ethical standards
We have made good progress in all areas to ensure the business comes out of the downturn in the best possible shape.
Whilst we have a great brand and believe the steps we have taken are right for the current difficult environment, we also need to prepare for the future.
We have therefore completed a major review of where we are and what we need to do to drive M&S through its next phase of development. This review validated our existing objectives. However, it highlighted the need for us to speed up the changes that we have been making in the business. We now need to deliver a step change in the way we service our customers' needs and in the way in which we operate our business. In particular we need to:
-
increase the pace of change and operational execution in the business
-
accelerate towards becoming a multi-channel retailer, focusing all our actions on the customer whichever channel they wish to use
-
drive our International business, particularly China, India, and Central and Eastern Europe, balancing investment and returns
-
re-invigorate our brand communication with our customers, highlighting our ethical and sustainability objectives
In order to drive this process, we have launched a change programme under the banner '2020 - Doing the Right Thing'. This will be headed by Ian Dyson. Ian will have responsibility for the delivery of this programme across all areas of the business and will take this on in addition to his existing responsibilities reporting to Stuart Rose.
We are bringing together all our GM businesses together, and as a result Home will now report to Kate Bostock. M&S Direct will report to Steve Rowe, enabling us to consolidate all customer channels under one person. Regrettably, Carl Leaver has decided that reverting to the key role of driving International does not fit with his career aspirations. As a consequence, he will be leaving the business by mutual agreement over the next two-three months; he goes with our good wishes. An announcement about the future leadership of International will be made in due course.
Ian will chair a '2020' executive change team comprising John Dixon, Kate Bostock, Steve Rowe and Tanith Dodge. This team will be supported by a project team drawn from across the business.
A significant proportion of the capital expenditure required to deliver this step change has already been factored into our plans, in particular with regard to investment in supply chain and information technology. As a result we expect capital expenditure for 2009/10 to be c. £400m. Looking ahead, we anticipate additional investment over and above this level of around £200m to £300m across the following two financial years.
Review of the year
Retain our market leading position in General Merchandise
During the year we maintained our position as the leading clothing retailer by value and volume in the UK. Our clothing market share by value is 10.7%, and 11.2% by volume. (TNS: 52 weeks ended 29 March 2009). While Womenswear and Menswear had a more challenging year, we made good progress in market share in Kidswear, Lingerie and Home.
It has been a challenging year for Womenswear. We remain the number one brand. We continued to develop our brands and inject newness and style across our ranges. We launched 'Portfolio' designed to enhance our offer for our core customer. We are integrating 'per una', refreshing the ranges and eliminating any duplication with our other brands. Limited Collection enables us to respond quickly to catwalk trends by creating fast fashion ranges for our younger customers, highlighted by our collaborations with Patricia Field and Zandra Rhodes. Our ranges also deliver on affordability as well as style, as illustrated by our 'Dress for less' campaign.
In an increasingly competitive market our lingerie remains number one choice, with market share of 25.2%, up from 24.8%. We refreshed and broadened our ranges, and worked with our suppliers to dramatically cut the lead times and improve values across all price ranges.
In Menswear, where we are also number one, we continued to simplify our brands but we still have more work to do. North Coast brand, previously under the Blue Harbour umbrella, is now a stylish casual standalone brand. By the Autumn we will be extending our Autograph Essentials brand, improving the Blue Harbour brand appeal and re-launching Collezione.
In Kidswear, we have grown our market share from 4.8% to 5.4%, and are now the third largest kidswear retailer, our best performance in seven years, with styling and value the key drivers. We will be improving our product availability and extending the on-line offer to allow busy parents access to our full range.
Despite the difficulties experienced by the industry, our Home business had another good year. Our product delivers on quality and value, and our customers trust the M&S brand to deliver, particularly with high value furniture pieces. Our 'Improve don't move' campaign struck a cord with our customers and led to increased sales of items such as soft furnishings. We added new products and ranges including nursery furniture, white goods and M&S energy.
M&S Direct is fundamental to our commitment to becoming a truly multi-channel retailer. The business continued to grow despite tough comparatives last year and it is now a £324m business. We are on track to deliver our target of £500m sales by 2011/12.
Sales from our website were up 34%, outperforming the online market. Our on-line clothing market share increased to 5.3% from 4.5% (Fashiontrak). The traffic to the site grew by 36% over the year. The website successfully traded through its biggest ever day during our One Day Christmas Spectacular in November 2008. We ranked top of the latest eDigitalResearch E-Retail Index, up from 10th place previously. The survey noted our investment in the entire customer journey, improvement in all areas of the website, particularly our supporting customer communications.
We have continued to grow our customer base by launching a number of new initiatives to improve the breadth and convenience of our online service, such as international delivery, wine club and gift card redemption; stretching the brand into new areas such as white goods and M&S Energy and investing in improved service to our customer through better product availability and order fulfilment. We focused on providing a more engaging shopping experience through customer reviews and the ratings system, and the introduction of M&S TV with nine channels of interviews and videos.
In 2009/10 we will continue to focus on reinforcing our leading market positions with our core customer and driving areas of low market share across General Merchandise along with improving our operational execution by:
- Better segmenting our clothing offer
- Improving our cataloguing by demographic and customer profile
- Driving more excitement and newness
- Tight management of stocks
- Improving overall choice and reducing the number of ways
- Maintaining a strong and balanced price architecture - driving Good, Better and Best
- Driving efficiencies across our supply chain: better sourcing, quicker response and supply consolidation
Improve our performance in Food
In July 2008 we set out our priorities for improving our performance in Food:
-
Improved value
-
Clearer promotions
-
Outstanding quality and accelerated innovation
-
Better availability
We have made progress over the year, halting the rate of decline in our market share. Market share year on year declined from 4.3% to 3.9% (TNS Food & Drink: 52 weeks ended 22nd March 2009). The market remains highly promotional, price driven and continues to benefit from significant levels of price inflation. We are the only food retailer not benefiting from food inflation as we continue to provide better values for our customers. Year on year performance has improved for two consecutive quarters.
We have worked hard to rebuild our value credentials with our customers. This has meant substantial investment in margin. We reduced prices on around 10% of our food range - Key Value Items (KVIs), marketed as 'Wise Buys', where we are less differentiated. This has made us more competitive and helped improve customer perceptions of value by some 15% year on year.
A stronger promotional stance and execution has enabled us to engage better with our customers. Our 'Dine in for two for £10', 'weekend specials', 'family favourites for £4' and '£2 lunch to go meal deal' have been very successful in driving footfall, particularly from our occasional customers.
The M&S brand has always been synonymous with quality, and despite the work on our prices, we did not, and will not, compromise on quality. The recent independent Watchdog survey of more than 36,000 people voted us top choice for quality food, with 35% of the vote. All of our fresh beef, pork, chicken, turkey and salmon is British produced, and we are extending this to regional sourcing. The number of awards we won in 2008/09 is a testament to our high standards and the trust our customers place in us.
Constant innovation enables us to delight and excite our customers and encourage them to keep coming back. We have built a good pipeline of innovation which will deliver more newness, greater product differentiation and upgrading of key ranges. We re-launched our Italian range, introduced Cook 1234 and, most recently, extended our cake offer with a range of delicious cupcakes.
We have improved availability of key lines in our Top 100 stores. Sell-through in these stores has improved year on year and waste reduced.
In 2009/10 we will continue to focus on what our customers want by improving our values, innovation and store standards as well as looking at ways to broaden the appeal of our offer. Innovation is a key part of this but we need also to fill the gaps in our offer, look at ways of extending our ranges and continue with the brand trial which has now been extended to 22 further stores in the South of England.
Drive our International business
Our International business had a good year with revenues up 25.9%. While in the short-term the economic downturn is being felt in most of the markets we operate in, we remain on track to deliver our long term objective to increase this business to 15-20% of group revenues by 2012.
We will do this by:
-
Investing in key territories and with key franchise partners
-
Developing new markets
-
Continuing to grow our franchise business
We opened 32 new stores during the year taking our total international store count to 296, in 40 territories, and increasing our selling space to 3.3m sq ft.
Ireland was the most affected by the weakness in the local economy. We have stepped up the store opening programme in Central and Eastern Europe, and in October 2008 we acquired the Polish franchise business into our Czech partnership for £1.1m.
We opened our first store in Shanghai in October 2008 and are encouraged with trading.
In India, working with Reliance Retail, we acquired the existing 14 franchise stores into the partnership and opened a new 15,000 sq ft store in Mumbai last month. We remain on track to open 10-15 stores, representing around 250,000 sq ft, within the next two years.
Our franchise business performed well and remains an integral part of driving our International business. 15 new stores opened in Russia, Ukraine, Turkey, Saudi Arabia, UAE, Thailand and Singapore.
During the year we also made significant changes to our operational model which will drive cost efficiencies. We have enhanced our international supply chain by introducing regional hubs in Hong Kong, Singapore, Sri Lanka and Istanbul, eliminating the need to ship a large proportion of our international merchandise back to the UK for re-export. We also launched new buying and cataloguing systems and processes. Additionally, we are implementing a new SAP software system in China and Hong Kong, with a view to rolling it out through the rest of our international business.
We plan to grow our International selling space by 20% next year with around 50 new stores opening across Europe, Middle East and India.
Optimise margin and tightly control costs
Investment in margin
We responded to the economic downturn and the effect that this was having on our customers by making significant investments in pricing and promotions. While this has resulted in even better value for our customers and has been a major factor in retaining their loyalty to our brand, it has adversely impacted our UK gross margin, which was 170 bps lower than last year at 41.3%.
Food gross margin was down 235 bps at 31.5%. This reflects significant investment in prices across our range, but with particular emphasis on staple goods and a higher level of promotions. General Merchandise gross margin was down 70 bps with further gains in buying margin being more than offset by higher levels of price promotions and markdowns.
This year we are facing pressure from adverse currency movements but we continue to work with our supply base on mitigating the impact and continue to provide our customers with great values. We will continue to manage our stock levels and commitments tightly.
Cost management
As the economy worsened and our sales performance deteriorated, we took a series of actions to reduce our costs in 2008/09 and to help support profitability going forward. Total UK operating costs were £2,740.6m, excluding bonus, up 4.9%. If we take out the impact of new space opened during the year, cost inflation and increased depreciation costs arising out of the capital expenditure programme of the last few years, underlying costs were down 5.7% - representing an underlying saving of some £148m.
Staff costs: Retail staff costs were £863.3m which was up only 1.9% reflecting substantial improvements in productivity and staff scheduling, without affecting service levels. This can be seen in our monthly customer service tests - our Mystery Shopping programme. Our staff consistently scored highly, achieving an average of 84% in 2008/09. Our compliance audit scores, that measure our legal and safety performance, improved from 80% to 92%.
Distribution: We made significant changes to our logistics operations during the year as part of a long term programme to radically improve the operating efficiency of our supply chain. These changes benefited costs this year, but will have a more significant impact in 2009/10 and beyond. Key actions included changes to the management structure of logistics to bring GM and Food together, renegotiation of our key third party logistics contracts, rationalisation of our warehouse network, the introduction of mechanisation in two of our food warehouses, and the streamlining of our international distribution systems.
Marketing: Our marketing costs were 8.6% lower in 2008/09 at £127.4m and are planned to be lower again 2009/10. We will continue to be more effective in our targeting and use of this spend.
Support: We reduced spend in support areas by 2.4% to £391.6m, through disciplined control of expenditure and reduction in wasted activity.
During the year we made additional changes that will reduce our cost base in 2009/10. We closed 26 of our smaller, under-performing stores in order to focus on sites better suited to our customers needs. We also reduced headcount across our Head Offices by 15%, redeploying as many colleagues as possible; and made changes to our UK defined benefit pension scheme. These actions together with ongoing tight cost control mean that we expect costs in 2009/10 to be 1% below 2008/09, after taking space growth and inflation into account.
Maintain a strong balance sheet
During difficult economic times, it is vital to retain a strong financial position and the flexibility to invest in the future of the business.
We took a number of actions to improve our cash flow in 2008/09. In addition to reducing capital expenditure to £652m from over £1bn in the previous year, we generated a working capital inflow of £194.0m and raised £58.3m from the disposal of non-trading stores. As a result we generated a net cash inflow of £107.5m after paying interest, tax, dividend and share buyback of £661.2m. In addition we agreed certain changes to the property partnership with the pension fund that provide us with discretion around the annual payments from the partnership to the fund. This provides us with additional flexibility around our cash flows and also has the effect, from an accounting perspective, of reclassifying the obligation from debt to equity.
As a result of our good cash flow management and the changes to the property partnership, net debt at year-end was down to £2.5bn from £3.1bn at the end of 2007/08.
The retirement benefit valuation showed a deficit of £152.2m under IAS 19. The triennial actuarial valuation of the fund is underway with the results expected by the end of the calendar year. This valuation will form the basis of funding discussions with the pension trustee.
Looking forward, and with the economy still fragile, further strengthening of our balance sheet is a priority for the Group. We want to retain our investment grade credit rating, we want the ability to continue to invest in our business and we will need to continue to manage our pension obligations.
In view of these requirements, the Board has taken the decision to rebase the Group's dividend payment to 15p per share from the current level of 22.5p per share, a reduction of 33.3%. This will be achieved through a 33.1% reduction in the 2008/09 final dividend to 9.5p per share, followed by a reduction in the 2009/10 interim dividend to 5.5p per share. Having re-based the dividend to 15p per share, the Board's policy regarding future dividends is to re-build cover towards two times and, thereafter, to grow dividends in line with adjusted earnings per share.
Uphold high ethical standards
Although the recession has put household budgets under pressure, we believe our customers do not want low prices at the expense of quality or ethics. Customers are no longer accepting green marketing at face value. They are challenging companies to deliver on their promises so that they can be sure that they have made the right choices for their families.
We launched Plan A in January 2007 because we believed that all businesses have to take action to reduce their environmental and social impact. Our customers have always trusted us to make the right decisions on product sourcing and manufacturing, and to treat our 78,000 staff and over 2,000 suppliers fairly. It differentiates M&S in a crowded market place, and now more than ever it is what our customers have come to expect.
Two years after the launch of Plan A we are not put off by the short-term impact of the recession. We set ourselves 100 rigorous commitments as part of Plan A. We have achieved 16, and are already further on another 24 that we have also achieved. Another 53 commitments are on or ahead of plan and six are behind plan with one on hold. In addition to being the right thing to do, these commitments are now cost positive and will, over time, start to generate savings that we can invest back into our business.
We have compelling examples of the work in progress across each of the five pillars of Plan A. In Climate Change we have reduced carbon emissions from our operations by a net 18% saving the equivalent of 96,000 tonnes of carbon dioxide from our operations every year. In Waste we, together with Oxfam, saved over 3.2 million garments from going to landfill, raising £1.9 million for the charity. In Sustainable Raw Materials we have increased our usage of recycled plastic bottles to 37 million, shifting their use from clothes to recycled polyester filling for home products. In Fair Partner we have opened four ethical model factories - three in Bangladesh and one in the UK - helping us to raise the bar in terms of ethical performance. In Health, some 30% of our total food offer now comprises healthier food ranges and all our food and soft drinks are free from artificial colour and additives.
Current trading and outlook
Trading for the first seven weeks of the year has been broadly in line with trends experienced in the fourth quarter. However, we continue to remain cautious about the outlook for the remainder of the year. We will update on our first quarter sales on 1 July 2009.
Financial Review
|
Summary of Results |
52 weeks ended |
|
|
|
|
28 Mar 09 £m |
29 Mar 08 £m |
% inc |
|
Total revenue |
9,062.1 |
9,022.0 |
+0.4 |
|
UK |
8,164.3 |
8,309.1 |
-1.7 |
|
International |
897.8 |
712.9 |
+25.9 |
|
|
|
|
|
|
Operating profit before property disposals and exceptional items |
768.9 |
1,089.3 |
-29.4 |
|
UK |
652.8 |
972.9 |
-32.9 |
|
International |
116.1 |
116.4 |
-0.3 |
|
|
|
|
|
|
Profit before tax, property disposals and exceptional items |
604.4 |
1,007.1 |
-40.0 |
|
Profit on property disposals |
6.4 |
27.0 |
-76.3 |
|
Exceptional pension credit |
231.3 |
95.0 |
+143.5 |
|
Exceptional costs |
(135.9) |
- |
- |
|
Profit before tax |
706.2 |
1,129.1 |
-37.5 |
|
|
|
|
|
|
Adjusted basic EPS |
28.0p |
43.6p |
-35.8 |
|
Dividend per share (declared) |
17.8p |
22.5p |
-20.9 |
Revenues
Total revenues were up 0.4% driven by new space in the UK and a strong performance in our International business.
Revenue growth by area, by period in the UK was:
|
Total revenue |
Q3% |
Q4% |
H2% |
FY% |
|
Clothing |
-6.5 |
-1.0 |
-4.6 |
-4.1 |
|
Home |
1.0 |
-2.3 |
-0.8 |
1.1 |
|
General Merchandise |
-5.5 |
-1.2 |
-4.1 |
-3.5 |
|
Food |
-1.1 |
0.4 |
-0.6 |
-0.1 |
|
Total |
-3.4 |
-0.3 |
-2.3 |
-1.7 |
|
Like-for-like revenue |
|
|
|
|
|
General Merchandise |
-8.9 |
-4.8 |
-7.5 |
-6.9 |
|
Food |
-5.2 |
-3.7 |
-4.7 |
-5.0 |
|
Total |
-7.1 |
-4.2 |
-6.1 |
-5.9 |
UK revenues were down 1.7% in total with a like-for-like decline of 5.9%, reflecting the deterioration in market conditions and consumer spending. During the year, we added 5.6% of space (on a weighted average basis), representing 7.0% in Food and 5.0% in General Merchandise.
International revenues were up 25.9%. This performance reflects continued strong growth in our franchise business, in particular in the Middle East, Russia and Turkey, and the impact of the investments in Greece and the Czech Republic.
Operating profit
Operating profit before property disposals and exceptional items was £768.9m, down 29.4%.
In the UK, operating profit before property disposals and exceptional items was down 32.9% at £652.8m. Gross margin was 1.7 percentage points down on the year at 41.3%. General merchandise gross margin was down 0.7 percentage points at 51.9%, reflecting further improvement in primary margin offset by higher promotions and markdowns. Food gross margin was 2.35 percentage points lower than last year at 31.5% reflecting investment in price realignment and increased promotional activity, along with the planned growth in franchised Simply Food stores.
UK operating costs were up 4.3% to £2,743.4m. A breakdown of UK operating costs is shown below:
|
|
52 weeks ended |
|
|
|
|
28 Mar 09 £m |
29 Mar 08 £m |
% inc |
|
Retail staffing |
863.3 |
847.5 |
+1.9 |
|
Retail occupancy |
948.0 |
841.4 |
+12.7 |
|
Distribution |
410.3 |
383.8 |
+6.9 |
|
Marketing and related |
127.4 |
139.4 |
-8.6 |
|
Support |
391.6 |
401.1 |
-2.4 |
|
Total before bonus |
2,740.6 |
2,613.2 |
+4.9 |
|
Bonus |
2.8 |
16.8 |
-83.3 |
|
Total including bonus |
2,743.4 |
2,630.0 |
+4.3 |
Retail staffing costs remained tightly controlled despite growth in space, reflecting improved productivity whilst at the same time improving customer service levels. The increase in retail occupancy costs reflects space growth and higher energy costs as well as the increased depreciation related to the modernisation and space expansion programmes. Distribution costs rose due to higher fuel costs, as well as volume growth in M&S Direct and furniture deliveries. Reduction in marketing expenditure reflects fewer campaigns including reduced TV coverage. Support costs, which include non-store related overheads, were down 2.4% due to ongoing cost saving initiatives.
We will be paying a bonus of £2.8m for 2008/09 (last year - £16.8m). The level of bonus payment reflects performance against our original operating plan.
The UK operating profit includes a contribution of £24.8m (last year- £28.3m) from the Group's continuing economic interest in M&S Money.
International operating profit before property disposals was broadly level at £116.1m (last year £116.4m). Owned store operating profits were £45.8m, up 2.9%, reflecting the acquisition of our previously franchised businesses in Central and Eastern Europe. As a result of this change franchise operating profits were down 2.2% to £70.3m.
Profit on property disposals
Profit on property disposals was £6.4m (last year £27.0m). This includes the proceeds from the sale of our old stores in Edinburgh and Derby where we relocated to new premises.
Exceptional items
Exceptional charges of £135.9m (last year - nil) relate to changes announced in January 2009, including the head office restructuring programme, closure of 26 non-strategic stores and the rationalisation of the logistics network.
The exceptional pension credit of £231.3m (last year - £95m) has arisen due to the changes made in the terms of the UK defined benefit plan relating to how members' future benefits build up. Employees' annual increases in pensionable pay have been capped to 1%, and early retirement benefits for members who joined the scheme before 1996 amended. The credit reflects the impact of adjusting the projected final pensionable salaries.
Net finance costs
|
52 weeks ended |
||
|
|
28 Mar 09 £m |
29 Mar 08 £m |
|
Interest payable |
(166.0) |
(119.3) |
|
Interest income |
14.6 |
5.5 |
|
Net interest payable |
(151.4) |
(113.8) |
|
Unwinding of discount on partnership liability to the Marks and Spencer UK Pension Scheme |
(38.0) |
(27.3) |
|
Pension finance income (net) |
35.4 |
58.9 |
|
Fair value movement on financial instruments |
(10.5) |
- |
|
Net finance costs |
(164.5) |
(82.2) |
Net interest payable was up 33.0% at £151.4m reflecting an increase in the average net debt over the year. Net finance costs were up £82.3m after pension finance income of £35.4m (last year £58.9m), and the unwinding of the discount on the partnership liability to the pension scheme. The Group's average cost of funding was up marginally to 6.1% (last year - 5.9%).
Taxation
The taxation charge is based on full year pre-exceptional effective tax rate of 27.0% (last year 27.0%).
Earnings per share
Adjusted earnings per share from continuing operations, which excludes the effect of property disposals and exceptional items, decreased by 35.8% to 28.0p per share. The weighted average number of shares in issue during the period was 1,573.2m (last year 1,671.3m).
Dividend
The Board has taken the decision to rebase the Group's dividend payment to 15p per share from the current level of 22.5p per share, a reduction of 33.3%. This will be achieved through a 33.1% reduction in the 2008/09 final dividend to 9.5p per share, followed by a reduction in the 2009/10 interim dividend to 5.5p per share. Having re-based the dividend to 15p per share, the Board's policy regarding future dividends is to re-build cover towards two times and, thereafter, to grow dividends in line with adjusted earnings per share.
Share buyback
Since 29 March 2008, we have bought-back 10.9m shares for cancellation, for a consideration of £40.9m. This now takes the total of shares bought back as part of the buyback programme announced in November 2007 to 136.6m representing 8.0% of the shares in issue in July 2007.
Capital expenditure
|
|
52 weeks ended |
|
|
|
28 Mar 09 £m |
29 Mar 08 £m |
|
Modernisation programme |
216 |
536 |
|
New stores |
150 |
203 |
|
International |
40 |
48 |
|
Supply chain and technology |
188 |
162 |
|
Maintenance |
58 |
106 |
|
Total capital expenditure |
652 |
1,055 |
Following significant investment in the business over the last three years, we reduced capital expenditure to £652m in 2008/09 from over £1bn in 2007/08. We stepped up the investment in our supply chain and technology in line with our strategy to build an infrastructure fit to support the future growth of the business.
Since March 2008 we have added 5.6% of trading space, representing over 623,000 square feet. We opened 75 stores during the year in out-of-town, (including the opening of two major flagship stores in Colliers Wood, South London and the new Westfield Centre at White City, West London), retail parks and high street locations, while continuing to review the portfolio to ensure it is working to its fullest potential. These openings included our 100th BP Simply Food store, with our franchise 'travel hubs' continuing to perform well in service stations, train stations and airports. We also improved the look and feel of 24 stores, with 80% of our portfolio now in the new modernised format. We will complete the remaining 20% of the portfolio in the next few years.
In IT we are delivering new tills and point of sale software, which will speed up customer transactions and allow store colleagues to spend more time on the shop floor and less time carrying out administrative office duties. We are also improving our trading and administrative systems.
Construction is underway on a distribution centre in Bradford that will open in late 2010 - consolidating our stock holdings and improving our speed and flexibility in getting product into stores. Following two trials we are also investing in mechanising our food distribution centres to improve accuracy and efficiency in picking chilled goods.
We are investing in systems and infrastructure so that goods produced overseas can now be transported directly to all our markets without the need to first come through the UK. This will dramatically reduce export costs and speed up distribution.
We will spend c. £400m in 2009/10, shifting the focus of our capital expenditure from our property portfolio, where we have made considerable investment over the last three years, to our IT and supply chain infrastructure.
Cash flow and net debt
|
|
52 weeks ended |
|
|
|
28 Mar 09 £m |
29 Mar 08 £m |
|
Cash flow from operations |
1,371.9 |
1,236.0 |
|
Capex and disposals |
(604.1) |
(927.4) |
|
Interest and taxation |
(265.7) |
(250.3) |
|
Dividends and share issues |
(349.3) |
(312.0) |
|
Share buyback |
(40.9) |
(555.9) |
|
Other movements |
(4.4) |
(107.9) |
|
Net cash flow |
107.5 |
(917.5) |
|
Opening net debt |
(3,077.7) |
(1,949.5) |
|
Partnership liability to the UK Pension Scheme |
539.6 |
(199.0) |
|
Exchange and other non-cash movements |
(60.2) |
(11.7) |
|
Closing net debt |
(2,490.8) |
(3,077.7) |
The Group reported a net cash inflow of £107.5m (last year - outflow £917.5m). Cash inflow from operations increased by £135.9m, reflecting a working capital inflow of £194.0m compared with an outflow of £170.9m last year. Capital expenditure, net of disposals, was £604.1m (last year - £927.4m) reflecting further investment in our modernisation programme as well as new space growth. We generated £58.3m during the year from disposal of properties and equipment.
As part of actions taken to better manage our debt and balance sheet, the Group agreed changes to the property partnership with the pension fund on 25 March 2009. These changes make the annual distributions to the pension scheme at the discretion of the Group in relation to financial years 2010/11 onwards. This discretion is exercisable if the Group does not pay a dividend or make any other form of return to its shareholders.
As a result, the distributions to the pension fund in 2009 and 2010 remain as financial liabilities while the remaining balance of £571.7m is now an equity instrument. £539.6m of this was previously included in net debt. The Group's interest charge will therefore no longer reflect the unwinding of the discount from 2010/11. The valuation of the pension asset relating to the interest in the property partnership remains unchanged reflecting amounts that would accrue to the pension fund on a deferral.
Pensions
At 28 March 2009 the IAS 19 net retirement benefit deficit was £152.2m (29 March 2008 surplus of £483.5m). The decrease in value is largely due to the impact the economic downturn on the market value of the pension asset portfolio, partly offset by a decrease in inflation and the exceptional pension credit.
For further information, please contact:
Investor Relations:
Amanda Mellor +44 (0)20 8718 3604
Majda Rainer +44 (0)20 8718 1563
Media enquiries:
Corporate Press Office: +44 (0)20 8718 1919
Investor & Analyst webcast:
There will be an investor and analyst presentation at 09.30 (BST) on Tuesday 19 May 2009. This presentation can be viewed live on the Marks and Spencer Group plc website on: www.marksandspencer.com/thecompany.
Video interviews with Stuart Rose, Chief Executive and Ian Dyson, Group Finance and Operations Director will be available on the above website. The interviews are also available in audio and transcript.
Fixed Income Investor Conference Call:
This will be hosted by Ian Dyson at 14.30 (BST) on Tuesday 19 May 2009:
Dial in number: +44 (0)20 8515 2376
A recording of this call will be available until Friday 29 May 2009:
Dial in number: +44 (0)20 7190 5901 Access Code: 141933#
Statements made in this announcement that look forward in time or that express management's beliefs, expectations or estimates regarding future occurrences and prospects are 'forward-looking statements' within the meaning of the United States federal securities laws. These forward-looking statements reflect Marks & Spencer's current expectations concerning future events and actual results may differ materially from current expectations or historical results. Any such forward-looking statements are subject to various risks and uncertainties, including failure by Marks & Spencer to predict accurately customer preferences; decline in the demand for products offered by Marks & Spencer; competitive influences; changes in levels of store traffic or consumer spending habits; effectiveness of Marks & Spencer's brand awareness and marketing programmes; general economic conditions or a downturn in the retail or financial services industries; acts of war or terrorism worldwide; work stoppages, slowdowns or strikes; and changes in financial and equity markets.
|
Consolidated income statement |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52 weeks ended |
52 weeks ended |
|
|
|
|
|
|
|
28 March 2009 |
29 March 2008 |
|
|
|
|
|
|
Notes |
£m |
£m |
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
2 |
9,062.1 |
9,022.0 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
|
3 |
870.7 |
1,211.3 |
||
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
4 |
50.0 |
64.4 |
||
|
Finance costs |
|
|
4 |
(214.5) |
(146.6) |
||
|
|
|
|
|
|
|
|
|
|
Profit on ordinary activities before taxation |
|
|
|
706.2 |
1,129.1 |
||
|
|
|
|
|
|
|
|
|
|
Analysed between: |
|
|
|
|
|
||
|
Before property disposals and exceptional items |
|
|
|
604.4 |
1,007.1 |
||
|
Profit on property disposals |
|
|
|
6.4 |
27.0 |
||
|
Exceptional costs |
|
|
3 |
(135.9) |
- |
||
|
Exceptional pension credit |
|
|
3,8 |
231.3 |
95.0 |
||
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
5 |
(199.4) |
(308.1) |
||
|
Profit on ordinary activities after taxation |
|
|
|
506.8 |
821.0 |
||
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
|
|
506.8 |
821.0 |
||
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
||
|
Equity shareholders of the Company |
|
|
|
508.0 |
821.7 |
||
|
Minority interests |
|
|
|
(1.2) |
(0.7) |
||
|
|
|
|
|
|
506.8 |
821.0 |
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
|
6A |
32.3p |
49.2p |
||
|
Diluted earnings per share |
|
|
6B |
32.3p |
48.7p |
||
|
|
|
|
|
|
|
|
|
|
Non-GAAP measure: |
|
|
|
|
|
||
|
Adjusted profit before taxation (£m) |
|
|
1 |
604.4 |
1,007.1 |
||
|
Adjusted basic earnings per share |
|
|
6A |
28.0p |
43.6p |
||
|
Adjusted diluted earnings per share |
|
|
6B |
28.0p |
43.2p |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated statement of recognised income and expense |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52 weeks ended |
52 weeks ended |
|
|
|
|
|
|
|
28 March 2009 |
29 March 2008 |
|
|
|
|
|
|
|
£m |
£m |
|
|
Profit for the year |
|
|
|
506.8 |
821.0 |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation differences |
|
|
|
33.1 |
21.3 |
|
|
|
Actuarial (losses)/gains on retirement benefit schemes |
|
|
|
(927.1) |
605.4 |
|
|
|
Cash flow and net investment hedges |
|
|
|
|
|
|
|
|
- fair value movements in equity |
|
|
|
304.8 |
(33.5) |
|
|
|
- recycled and reported in net profit |
|
|
|
(206.8) |
1.3 |
|
|
|
- amount recognised in inventories |
|
|
|
(8.6) |
2.4 |
|
|
|
Tax on items taken directly to equity |
|
|
|
225.8 |
(185.7) |
|
|
|
Net (losses)/gains not recognised in the income statement |
|
|
|
(578.8) |
411.2 |
|
|
|
Total recognised income and expense for the year |
|
|
|
(72.0) |
1,232.2 |
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
Equity shareholders of the Company |
|
|
|
(70.8) |
1,232.9 |
|
|
|
Minority interests |
|
|
|
(1.2) |
(0.7) |
|
|
|
|
|
|
|
|
(72.0) |
1,232.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated balance sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
As at |
|
|
|
|
|
|
|
28 March 2009 |
29 March 2008 |
|
|
|
|
|
|
Notes |
£m |
£m |
|
|
ASSETS |
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
Intangible assets |
|
|
|
400.3 |
305.5 |
|
|
|
Property, plant and equipment |
|
|
|
4,834.0 |
4,704.0 |
|
|
|
Investment property |
|
|
|
24.8 |
25.0 |
|
|
|
Investment in joint ventures |
|
|
|
13.8 |
9.6 |
|
|
|
Other financial assets |
|
|
|
3.0 |
3.0 |
|
|
|
Retirement benefit asset |
|
|
8 |
- |
504.0 |
|
|
|
Trade and other receivables |
|
|
|
336.8 |
410.0 |
|
|
|
Derivative financial instruments |
|
|
|
254.0 |
18.2 |
|
|
|
Deferred tax assets |
|
|
|
|
1.6 |
- |
|
|
|
|
|
|
|
5,868.3 |
5,979.3 |
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Inventories |
|
|
|
536.0 |
488.9 |
|
|
|
Other financial assets |
|
|
|
53.1 |
48.8 |
|
|
|
Trade and other receivables |
|
|
|
285.2 |
307.6 |
|
|
|
Derivative financial instruments |
|
|
|
92.6 |
18.4 |
|
|
|
Cash and cash equivalents |
|
|
|
422.9 |
318.0 |
|
|
|
|
|
|
|
|
1,389.8 |
1,181.7 |
|
|
Total assets |
|
|
|
7,258.1 |
7,161.0 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
|
1,073.5 |
976.6 |
|
|
|
Borrowings and other financial liabilities |
|
|
|
942.8 |
878.6 |
|
|
|
Partnership liability to the Marks & Spencer UK Pension Scheme |
|
|
71.9 |
50.0 |
|
||
|
Derivative financial instruments |
|
|
|
76.2 |
35.1 |
|
|
|
Provisions |
|
|
|
63.6 |
11.1 |
|
|
|
Current tax liabilities |
|
|
|
78.9 |
37.5 |
|
|
|
|
|
|
|
|
2,306.9 |
1,988.9 |
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
|
|
Retirement benefit deficit |
|
|
8 |
152.2 |
20.5 |
|
|
|
Trade and other payables |
|
|
|
243.8 |
191.2 |
|
|
|
Borrowings and other financial liabilities |
|
|
|
2,117.9 |
1,936.5 |
|
|
|
Partnership liability to the Marks & Spencer UK Pension Scheme |
|
|
68.0 |
673.2 |
|
||
|
Derivative financial instruments |
|
|
|
3.0 |
- |
|
|
|
Provisions |
|
|
|
40.2 |
14.6 |
|
|
|
Deferred tax liabilities |
|
|
|
225.5 |
372.1 |
|
|
|
|
|
|
|
|
2,850.6 |
3,208.1 |
|
|
Total liabilities |
|
|
|
5,157.5 |
5,197.0 |
|
|
|
Net assets |
|
|
|
2,100.6 |
1,964.0 |
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
|
|
|
Called-up share capital - equity |
|
|
|
394.4 |
396.6 |
|
|
|
Share premium account |
|
|
|
236.2 |
231.4 |
|
|
|
Capital redemption reserve |
|
|
|
2,202.6 |
2,199.9 |
|
|
|
Hedging reserve |
|
|
|
62.6 |
(36.9) |
|
|
|
Other reserve |
|
|
|
(6,542.2) |
(6,542.2) |
|
|
|
Retained earnings |
|
|
|
5,728.1 |
5,707.9 |
|
|
|
Total shareholders' equity |
|
|
9 |
2,081.7 |
1,956.7 |
|
|
|
Minority interests in equity |
|
|
|
18.9 |
7.3 |
|
|
|
Total equity |
|
|
|
2,100.6 |
1,964.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated cash flow information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW STATEMENT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52 weeks ended |
52 weeks ended |
|
|
|
|
|
|
|
28 March 2009 |
29 March 2008 |
|
|
|
|
|
|
Notes |
£m |
£m |
|
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Cash generated from operations |
|
|
11 |
1,371.9 |
1,236.0 |
|
|
|
Tax paid |
|
|
|
(81.3) |
(166.2) |
|
|
|
Net cash inflow from operating activities |
|
|
|
1,290.6 |
1,069.8 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Acquisition of subsidiaries, net of cash acquired |
|
|
|
- |
(46.4) |
|
|
|
Purchase of property, plant and equipment |
|
|
|
(540.8) |
(958.4) |
|
|
|
Proceeds from sale of property, plant & equipment |
|
|
|
58.3 |
91.6 |
|
|
|
Purchase of intangible assets |
|
|
|
(121.6) |
(60.6) |
|
|
|
Purchase of non-current financial assets |
|
|
|
(4.4) |
- |
|
|
|
(Purchase)/sale of current financial assets |
|
|
|
(1.1) |
2.8 |
|
|
|
Interest received |
|
|
|
12.7 |
4.8 |
|
|
|
Net cash outflow from investing activities |
|
|
|
(596.9) |
(966.2) |
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Interest paid |
|
|
|
(197.1) |
(88.9) |
|
|
|
Cash (outflow)/inflow from borrowings |
|
|
|
(25.8) |
8.7 |
|
|
|
Drawdown/(repayment) of syndicated bank facility |
|
|
|
108.1 |
317.6 |
|
|
|
Issue of medium-term notes |
|
|
|
- |
631.7 |
|
|
|
Payment of liability to the Marks & Spencer UK Pension Scheme |
|
|
(15.1) |
- |
|
||
|
Repayments under finance leases |
|
|
|
(1.0) |
(3.5) |
|
|
|
Equity dividends paid |
|
|
|
(354.6) |
(343.6) |
|
|
|
Shares issued on exercise of employee share options |
|
|
|
5.3 |
31.6 |
|
|
|
Shares purchased in buy back |
|
|
|
(40.9) |
(555.9) |
|
|
|
Purchase of own shares by employee trust |
|
|
|
- |
(31.9) |
|
|
|
Net cash outflow from financing activities |
|
|
|
(521.1) |
(34.2) |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash inflow from activities |
|
|
|
172.6 |
69.4 |
|
|
|
Effects of exchange rate changes |
|
|
|
7.8 |
1.5 |
|
|
|
Opening net cash |
|
|
|
117.9 |
47.0 |
|
|
|
Closing net cash |
|
|
|
298.3 |
117.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT |
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52 weeks ended |
52 weeks ended |
|
|
|
|
|
|
|
28 March 2009 |
29 March 2008 |
|
|
|
|
|
|
|
|
Restated |
|
|
Opening net debt |
|
|
|
(3,077.7) |
(1,949.5) |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash inflow from activities |
|
|
|
172.6 |
69.4 |
|
|
|
Increase/(decrease) in current financial assets |
|
|
|
1.1 |
(2.8) |
|
|
|
Increase in debt financing |
|
|
|
(66.2) |
(954.5) |
|
|
|
Debt financing net of liquid resources acquired with subsidiaries |
|
|
- |
(29.6) |
|
||
|
Partnership liability to the Marks & Spencer UK Pension Scheme (non-cash) |
539.6 |
(199.0) |
|
||||
|
Exchange and other non-cash movements |
|
|
|
(60.2) |
(11.7) |
|
|
|
Movement in net debt |
|
|
|
586.9 |
(1,128.2) |
|
|
|
Closing net debt |
|
|
|
(2,490.8) |
(3,077.7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 General information and basis of preparation |
|
|
|
||||
|
The financial information which comprises the consolidated income statement, consolidated statement of recognised income and expense, consolidated balance sheet, consolidated cash flow statement and related notes do not constitute full accounts within the meaning of s240 of the Companies Act 1985. The auditors have reported on the Group's statutory accounts for each of the years 2008/09 and 2007/08 under s235 of the Companies Act 1985, which do not contain statements under s237(2) or s237(3) of the Companies Act 1985 and are unqualified. The statutory accounts for 2007/08 have been delivered to the Registrar of Companies and the statutory accounts for 2008/09 will be filed with the Registrar in due course. |
|
||||||
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The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, IFRIC interpretations and those parts of the Companies Act 1985 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, as modified by the use of valuations for certain financial instruments, share-based payments and retirement benefits. |
|
||||||
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|
Following a review of the definition of net debt, a non-GAAP measure, the directors believe that it is appropriate to include the fair value of derivatives which are directly related to debt instruments within net debt. The comparative net debt figure has been restated to reflect this change - see note 12. |
|
||||||
|
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|
|
|
|
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|
|
|
Amendment to IFRS 2 'Share-Based Payments' was issued in January 2008. It clarifies the terms 'vesting condition' and 'cancellations'. It was implemented by the Group from 29 March 2008 and has led to a £12.4m charge to the income statement in the current year. |
|
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The directors believe that the 'adjusted' profit and earnings per share measures provide additional useful information for shareholders on underlying performance of the business, and are consistent with how business performance is measured internally. It is not a recognised profit measure under IFRS and may not be directly comparable with 'adjusted' profit measures used by other companies. The adjustments made to reported profit before tax are to exclude the following: |
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||||||
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|
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2 Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Group's primary reporting segments are geographic, with the Group operating in two geographic areas being the UK and International. The geographic segments disclose revenue and operating profit by destination and reflect management responsibility. Within each geographic segment the Group sells both food and general merchandise and secondary segment disclosure is given for revenue. |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52 weeks ended |
52 weeks ended |
|
|
|
|
|
|
|
28 March 2009 |
29 March 2008 |
|
|
|
|
|
|
|
£m |
£m |
|
|
|
|
|
|
|
|
|
|
|
UK Retail |
|
|
|
8,164.3 |
8,309.1 |
|
|
|
|
|
|
|
|
|
|
|
|
International Retail |
|
|
|
|
|
|
|
|
Owned stores1 |
|
|
|
625.5 |
426.7 |
|
|
|
Franchised stores |
|
|
|
272.3 |
286.2 |
|
|
|
|
|
|
|
|
897.8 |
712.9 |
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
|
9,062.1 |
9,022.0 |
|
|
|
|
|
|
|
|
|
|
|
|
1Owned stores consists of the Group's owned businesses in the Republic of Ireland, Hong Kong, China and since 29 February 2008, Greece, a number of other Balkan states and Switzerland, and since 20 March 2008, the Czech Republic, Slovakia, Latvia and Lithuania, which were included in franchised stores up to that date. |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52 weeks ended |
52 weeks ended |
|
|
|
|
|
|
|
28 March 2009 |
29 March 2008 |
|
|
|
|
|
|
|
£m |
£m |
|
|
|
|
|
|
|
|
|
|
|
UK Retail |
|
|
|
|
|
|
|
|
General merchandise |
|
|
|
3,918.3 |
4,059.3 |
|
|
|
Food |
|
|
|
4,246.0 |
4,249.8 |
|
|
|
|
|
|
|
|
8,164.3 |
8,309.1 |
|
|
International Retail |
|
|
|
|
|
|
|
|
General merchandise |
|
|
|
625.5 |
491.7 |
|
|
|
Food |
|
|
|
272.3 |
221.2 |
|
|
|
|
|
|
|
|
897.8 |
712.9 |
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
|
9,062.1 |
9,022.0 |
|
|
|
|
|
|
|
|
|
|
|
|
3 Operating profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
52 weeks ended |
52 weeks ended |
|
|
|
|
|
|
|
28 March 2009 |
29 March 2008 |
|
|
|
|
|
|
|
£m |
£m |
|
|
|
|
|
|
|
|
|
|
|
UK Retail1 |
|
|
|
|
|
|
|
|
Before property disposals and exceptional items |
|
|
|
652.8 |
972.9 |
|
|
|
Profit on property disposals |
|
|
|
6.8 |
28.0 |
|
|
|
Exceptional costs2 |
|
|
|
(135.9) |
- |
|
|
|
Exceptional pension credit3 |
|
|
|
231.3 |
95.0 |
|
|
|
|
|
|
|
|
755.0 |
1,095.9 |
|
|
International Retail |
|
|
|
|
|
|
|
|
Owned stores |
|
|
|
45.8 |
44.5 |
|
|
|
Franchised stores |
|
|
|
70.3 |
71.9 |
|
|
|
Before property disposals |
|
|
|
116.1 |
116.4 |
|
|
|
Loss on property disposals |
|
|
|
(0.4) |
(1.0) |
|
|
|
|
|
|
|
|
115.7 |
115.4 |
|
|
|
|
|
|
|
|
|
|
|
Total operating profit |
|
|
|
870.7 |
1,211.3 |
|
|
|
|
|
|
|
|
|
|
|
|
1 Included within UK Retail is an operating profit of £24.8m (last year £28.3m) in respect of fees received from HSBC in relation to M&S Money. |
|
||||||
|
2 The exceptional costs relate to strategy changes and are not regular running costs of the underlying business, these include: |
|
||||||
|
3 The exceptional pension credit has arisen due to changes in the UK defined benefit pension plan relating to how members' benefits build up. In January 2009 the Group announced that it had made changes to the scheme by capping employees' annual increases in pensionable pay to 1% and changing the early retirement benefits for members who joined the scheme before 1996. There is a credit to the income statement to reflect the impact of adjusting employees' projected final pensionable salaries. |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 Finance income/(costs) |
|
|
|
|
|
|
|
|
|
|
|
|
|
52 weeks ended |
52 weeks ended |
|
|
|
|
|
|
|
28 March 2009 |
29 March 2008 |
|
|
|
|
|
|
|
£m |
£m |
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
|
|
|
|
|
|
Bank and other interest receivable |
|
|
|
14.6 |
5.5 |
|
|
|
Pension finance income (net) |
|
|
|
35.4 |
58.9 |
|
|
|
Finance income |
|
|
|
50.0 |
64.4 |
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
|
|
|
|
|
|
|
Interest payable on bank borrowings, facilities and medium-term notes |
|
(161.1) |
(115.9) |
|
|||
|
Interest payable on finance leases |
|
|
|
(4.9) |
(3.4) |
|
|
|
Fair value movements on financial instruments |
|
|
|
(10.5) |
- |
|
|
|
Unwinding of discount on partnership liability to the Marks & Spencer UK Pension Scheme |
(38.0) |
(27.3) |
|
||||
|
Finance costs |
|
|
|
(214.5) |
(146.6) |
|
|
|
|
|
|
|
|
|
|
|
|
Net finance costs |
|
|
|
(164.5) |
(82.2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 Taxation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The post-exceptional effective tax rate was 28.2% (last year 27.3%) and the pre-exceptional effective tax rate was 27.0% (last year 27.0%). |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The calculation of earnings per ordinary share is based on earnings after tax and the weighted average number of ordinary shares in issue during the year. |
|
||||||
|
|
|
|
|
|
|
|
|
|
The adjusted earnings per share figures have been calculated based on earnings excluding the effect of property disposals and exceptional items. These have been calculated to allow the shareholders to gain an understanding of the underlying trading performance of the Group. |
|
||||||
|
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Group has only one class of dilutive potential ordinary shares being those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year. |
|
||||||
|
|
|
|
|
|
|
|
|
|
Details of the adjusted earnings per share are set out below: |
|
|
|
|
|
|
|
|
|
|
|
|
|
52 weeks ended |
52 weeks ended |
|
|
|
|
|
|
|
28 March 2009 |
29 March 2008 |
|
|
|
|
|
|
|
£m |
£m |
|
|
Earnings after tax |
|
|
|
508.0 |
821.7 |
|
|
|
Property disposals (net of tax) |
|
|
|
(6.4) |
(27.0) |
|
|
|
Exceptional costs (net of tax) |
|
|
|
105.7 |
- |
|
|
|
Exceptional pension credit (net of tax) |
|
|
|
(166.6) |
(66.5) |
|
|
|
Adjusted earnings after tax |
|
|
|
440.7 |
728.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
million |
million |
|
|
Weighted average number of ordinary shares in issue |
|
|
|
1,573.2 |
1,671.3 |
|
|
|
Potentially dilutive share options under Group's share option schemes |
|
0.8 |
16.0 |
|
|||
|
Weighted average number of diluted ordinary shares |
|
|
|
1,574.0 |
1,687.3 |
|
|
|
|
|
|
|
|
|
|
|
|
A Basic earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
pence |
pence |
|
|
Basic earnings per share |
|
|
|
32.3 |
49.2 |
|
|
|
Property disposals per share |
|
|
|
(0.4) |
(1.6) |
|
|
|
Exceptional costs per share |
|
|
|
6.7 |
- |
|
|
|
Exceptional pension credit per share |
|
|
|
(10.6) |
(4.0) |
|
|
|
Adjusted basic earnings per share |
|
|
|
28.0 |
43.6 |
|
|
|
|
|
|
|
|
|
|
|
|
B Diluted earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
pence |
pence |
|
|
Diluted earnings per share |
|
|
|
32.3 |
48.7 |
|
|
|
Property disposals per share |
|
|
|
(0.4) |
(1.6) |
|
|
|
Exceptional costs per share |
|
|
|
6.7 |
- |
|
|
|
Exceptional pension credit per share |
|
|
|
(10.6) |
(3.9) |
|
|
|
Adjusted diluted earnings per share |
|
|
|
28.0 |
43.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7 Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52 weeks ended |
52 weeks ended |
|
|
|
|
|
|
|
28 March 2009 |
29 March 2008 |
|
|
|
|
|
|
|
£m |
£m |
|
|
Dividends on equity ordinary shares |
|
|
|
|
|
|
|
|
Paid final dividend of 14.2p per share (last year 12.0p per share) |
|
|
224.1 |
203.5 |
|
||
|
Paid interim dividend of 8.3p per share (last year 8.3p per share) |
|
|
130.5 |
140.1 |
|
||
|
|
|
|
|
|
354.6 |
343.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In addition the directors have proposed a final dividend in respect of the year ended 28 March 2009 of 9.5p per share amounting to a dividend of £149.5m. It will be paid on 10 July 2009 to shareholders who are on the Register of Members on 29 May 2009. In line with the requirements of IAS 10 - 'Events after the Balance Sheet Date', this dividend has not been recognised within these results. |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8 Retirement benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
52 weeks ended |
52 weeks ended |
|
|
|
|
|
|
|
28 March 2009 |
29 March 2008 |
|
|
|
|
|
|
|
£m |
£m |
|
|
|
|
|
|
|
|
|
|
|
Opening net retirement benefit asset/(deficit) |
|
|
|
483.5 |
(283.3) |
|
|
|
Current service cost |
|
|
|
(72.2) |
(106.1) |
|
|
|
Exceptional pension credit (see note 3) |
|
|
|
231.3 |
95.0 |
|
|
|
Curtailment gain |
|
|
|
5.0 |
3.0 |
|
|
|
Interest cost |
|
|
|
(299.2) |
(283.8) |
|
|
|
Expected return on plan assets |
|
|
|
334.6 |
342.7 |
|
|
|
Employer contributions |
|
|
|
92.1 |
111.1 |
|
|
|
Actuarial (loss)/gain recognised in the year |
|
|
|
(927.1) |
605.4 |
|
|
|
Acquisition of subsidiary |
|
|
|
- |
(0.4) |
|
|
|
Exchange movement |
|
|
|
(0.2) |
(0.1) |
|
|
|
Closing net retirement benefit (deficit)/asset |
|
|
|
(152.2) |
483.5 |
|
|
|
|
|
|
|
|
|
|
|
|
Analysed on the balance sheet as: |
|
|
|
|
|
|
|
|
Retirement benefit asset |
|
|
|
- |
504.0 |
|
|
|
Retirement benefit deficit |
|
|
|
(152.2) |
(20.5) |
|
|
|
Closing net retirement benefit (deficit)/asset |
|
|
|
(152.2) |
483.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total market value of assets |
|
|
|
3,977.0 |
5,045.5 |
|
|
|
Present value of scheme liabilities |
|
|
|
(4,112.4) |
(4,542.3) |
|
|
|
Net funded pension plan (deficit)/asset |
|
|
|
(135.4) |
503.2 |
|
|
|
Unfunded retirement benefits |
|
|
|
(1.0) |
(1.3) |
|
|
|
Post-retirement healthcare |
|
|
|
|
(15.8) |
(18.4) |
|
|
Net retirement benefit (deficit)/asset |
|
|
|
(152.2) |
483.5 |
|
|
|
|
|
|
|
|
|
|
|
|
The main financial assumptions used to assess the liabilities of the scheme have been updated by independent qualified actuaries to assess the liabilities of the scheme. The most significant of these are the discount rate and the inflation rate which are 6.75% (last year 6.8%) and 2.9% (last full year 3.5%) respectively. |
|
||||||
|
|
|
|
|
|
|
|
|
|
The amount of the deficit varies if the main financial assumptions change, particularly the discount rate. If the discount rate increased/decreased by 0.1% the IAS 19 deficit would decrease/increase by c.£75m. |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 Statement of changes in shareholders' equity |
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52 weeks ended |
52 weeks ended |
|
|
|
|
|
|
|
28 March 2009 |
29 March 2008 |
|
|
|
|
|
|
|
£m |
£m |
|
|
|
|
|
|
|
|
|
|
|
Opening shareholders' equity as previously reported |
|
|
|
1,956.7 |
1,646.8 |
|
|
|
Profit for the year attributable to shareholders |
|
|
|
508.0 |
821.7 |
|
|
|
Dividends |
|
|
|
(354.6) |
(343.6) |
|
|
|
Derecognition of financial liability |
|
|
|
|
571.7 |
- |
|
|
Foreign currency translation |
|
|
|
33.1 |
21.3 |
|
|
|
Shares issued on exercise of employee share options |
|
|
|
5.3 |
31.6 |
|
|
|
Shares purchased in buy-back |
|
|
|
(40.9) |
(555.9) |
|
|
|
Purchase of own shares held by employee trusts |
|
|
|
- |
(31.9) |
|
|
|
Put option for acquisition of minority interest |
|
|
|
- |
(52.2) |
|
|
|
Actuarial (loss)/gain on retirement benefit scheme |
|
|
|
(927.1) |
605.4 |
|
|
|
Deferred tax on retirement benefit scheme |
|
|
|
254.9 |
(172.4) |
|
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|
Deferred tax on share schemes |
|
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|
0.2 |
(10.6) |
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Charge for share-based payments |
|
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14.3 |
29.0 |
|
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Cash flow and net investment hedges |
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89.4 |
(29.8) |
|
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|
Tax on fair value gains |
|
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|
(29.3) |
(2.7) |
|
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Closing shareholders' equity |
|
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2,081.7 |
1,956.7 |
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10 Capital commitments and contingencies |
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A Capital commitments |
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Year ended |
Year ended |
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28 March 2009 |
29 March 2008 |
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£m |
£m |
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Commitments in respect of properties in the course of construction |
52.1 |
182.8 |
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B Other material contracts |
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In the event of a material change in the trading arrangements with certain warehouse operators, the Group has a commitment to purchase property, plant and equipment, at values ranging from historical net book value to market value, which are currently owned and operated by them on the Group's behalf. |
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11 Cash flow analysis |
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52 weeks ended |
52 weeks ended |
|
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28 March 2009 |
29 March 2008 |
|
|
|
|
|
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|
£m |
£m |
|
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Profit on ordinary activities after taxation |
|
|
|
506.8 |
821.0 |
|
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Income tax expense |
|
|
|
199.4 |
308.1 |
|
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|
Interest payable and similar charges |
|
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|
214.5 |
146.6 |
|
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Interest receivable |
|
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|
(50.0) |
(64.4) |
|
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|
Operating profit |
|
|
|
870.7 |
1,211.3 |
|
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|
Increase in inventories |
|
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|
(46.0) |
(54.4) |
|
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|
Decrease/(increase) in receivables |
|
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|
55.0 |
(33.5) |
|
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Payments to acquire leasehold properties |
|
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|
(14.1) |
(47.6) |
|
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Increase/(decrease) in payables |
|
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|
212.2 |
(61.9) |
|
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Exceptional operating cash outflow |
|
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|
(27.4) |
(2.5) |
|
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Depreciation and amortisation |
|
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|
409.0 |
317.6 |
|
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Share-based payments |
|
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|
14.3 |
29.0 |
|
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|
Profit on property disposals |
|
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|
(6.4) |
(27.0) |
|
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Exceptional costs |
|
|
|
135.9 |
- |
|
|
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Exceptional pension credit |
|
|
|
(231.3) |
(95.0) |
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Cash generated from operations |
|
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|
1,371.9 |
1,236.0 |
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12 Reconciliation of net debt to balance sheet |
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Year ended |
Year ended |
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28 March 2009 |
29 March 2008 |
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Restated |
|
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Balance sheet and related notes |
|
|
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Cash and cash equivalents |
|
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|
422.9 |
318.0 |
|
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Current financial assets |
|
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|
53.1 |
48.8 |
|
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Bank loans and overdrafts |
|
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|
(159.1) |
(257.4) |
|
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Syndicated bank facility |
|
|
|
(781.2) |
(615.0) |
|
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Medium-term notes - net of US dollar hedging derivatives1 |
|
|
|
(1,848.1) |
(1,842.0) |
|
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Finance lease liabilities |
|
|
|
(101.9) |
(83.5) |
|
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Partnership liability to the Marks & Spencer UK Pension Scheme |
|
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|
(139.9) |
(723.2) |
|
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|
(2,554.2) |
(3,154.3) |
|
|
Interest payable included within related borrowing |
|
|
|
63.4 |
76.6 |
|
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|
Total net debt |
|
|
|
(2,490.8) |
(3,077.7) |
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1 Medium-term notes have been restated for this note to include the derivatives relating to them. |
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13 Related party transactions |
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Supplier transactions occurred during the year between the Group and a company controlled by a close family member of Kate Bostock. These transactions amounted to £5.2m during the year (last year £5.4m) with an outstanding trade payable of £nil at 28 March 2009 (last year £0.1m). The company was a supplier prior to Kate's employment by the Group. |
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PRINCIPAL RISKS AND UNCERTAINTIES
There are risks and uncertainties which could impact the Group's long-term performance. The risk assessment process is designed to identify, manage and mitigate business risk. The table below gives examples of activities across Group functions to mitigate against risks and uncertainties identified. The Board considers that these are the most significant risks to achieving business goals. The risks listed do not comprise all those associated with Marks & Spencer and are not set out in any order of priority. Additional risks and uncertainties not presently known to management, or currently deemed to be less material, may also have an adverse effect on the business.
|
Risk |
Impact |
Examples of Mitigating Activities |
|
|
ECONOMIC DOWNTURN: Our current priorities place a greater emphasis on managing our business through the downturn, underpinning our strong financial position and continuing to invest for the long term, to be well placed when the market improves. |
|||
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Strategy |
|
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|
We fail to set the strategic direction to balance short term and long term profitability |
Adverse effect on financial results |
|
|
|
Finance |
|
|
|
|
We fail to protect brand and profitable revenues whilst driving cost savings |
Adverse effect on financial performance and brand reputation |
|
|
|
We fail to react to changes in foreign currency exchange or inflation rates |
Adverse effect on operating costs or accounting impact on operations |
|
|
|
We fail to maintain cost efficient funding |
Increased costs and tighter conditions Adverse effect on business and financial results |
|
|
|
We fail to respond to/recover from key counterparty failure |
Disruption to supply chain resulting in financial loss Adverse effect on financial performance and brand reputation |
|
|
|
We fail to react to changes in pension funding requirements |
Adverse effect on financial condition |
|
|
|
Risk |
Impact |
Examples of Mitigating Activities |
||
|
PEOPLE: As we continue to grow our business and invest for the future, it's important we keep strengthening our team at every level from the shop floor to the boardroom. |
||||
|
We fail to attract, develop and retain talent with the correct skills to succeed into senior positions |
Inability to develop and execute business plans Competitive disadvantage |
|
||
|
We fail to retain the confidence and motivation of our employees |
Poor employee morale |
|
||
|
PRODUCT: We are the UK's leading retailer of high quality, great value clothing, food and home products, which are all sourced and made responsibly. |
||||
|
Clothing We fail to maintain clothing market share We fail to maintain appropriate inventory levels We fail to respond to market trends and consumer preferences |
Adverse effect on financial results Adverse effect on market share and customer loyalty |
|
||
|
Food We fail to strike the right balance between delivering short term profit and protecting longer term business growth We fail to halt the decline in market share We fail to maintain product standards |
Adverse effect on financial results Adverse effect on market share and customer loyalty Adverse effect on brand reputation |
|
||
|
SELLING CHANNELS: We have ambitious plans for our M&S Direct and International businesses as part of our commitment to broadening our multi-channel offer. |
||||
|
M&S Direct We fail to meet customer expectations when they buy online. |
Adverse effect on financial results Adverse effect on market share and customer loyalty |
|
||
|
Risk |
Impact |
Examples of Mitigating Activities |
|
International We fail to grow our international business through franchise operations, partnerships and wholly-owned businesses |
Adverse effect on financial results Adverse effect on brand reputation |
|
|
REPUTATION: We are proud of our brand values of Quality, Value, Service, Innovation and Trust which differentiate our products and services. We have a responsibility to protect the Company's reputation in everything we do. |
||
|
Plan A We fail to maintain momentum for Plan A in the face of current trading priorities and cost efficiencies Our suppliers fail to meet our ethical standards |
Adverse effect on stakeholder Adverse effect on brand reputation Adverse effect on financial performance |
|
|
Business Interruption We fail to recover from a major incident (e.g. pandemic flu, terrorism, key system failure) which severely impacts our ability to trade. |
Adverse effect on financial results Adverse effect on stakeholder trust and confidence |
|
Financial risks and uncertainties
The principal financial risks faced by the Group are liquidity/funding, interest rate, foreign currency and counterparty risks. The policies and strategies for managing these risks are summarised as follows:
(a) Liquidity/funding risk
The risk that the Group could be unable to settle or meet its obligations as they fall due at a reasonable price.
-
The Group's funding strategy ensures a mix of funding sources offering flexibility and cost effectiveness to match the requirements of the Group.
-
Operating subsidiaries are financed by a combination of retained profits, bank borrowings, medium-term notes and committed syndicated bank facilities.
(b) Counterparty risk
Counterparty risk exists where the Group can suffer financial loss through default or non-performance by financial institutions.
Exposures are managed through Group treasury policy which limits the value that can be placed with each approved counterparty to minimise the risk of loss. The counterparties are limited to the approved institutions with secure long-term credit ratings A+/A2 or better assigned by Moody's and Standard & Poor's respectively, unless approved on an exceptional basis by a Board director. Limits are reviewed regularly by senior management. The credit risk of these financial instruments is estimated as the fair value of the assets resulting from the contracts.
The Group has very low retail credit risk due to transactions being principally of a high volume, low value and short maturity.
(c) Foreign currency risk
Transactional foreign currency exposures arise from both the export of goods from the UK to overseas subsidiaries, and from the import of materials and goods directly sourced from overseas suppliers.
Group treasury hedge these exposures principally using forward foreign exchange contracts progressively covering up to 100% out to 18 months. Where appropriate hedge cover can be taken out longer than 18 months with Board approval. The Group is primarily exposed to foreign exchange in relation to sterling against movements in US dollar and euro.
Forward foreign exchange contracts in relation to the Group's forecast currency requirements are designated as cash flow hedges with fair value movements recognised directly in equity. To the extent that these hedges cover actual currency payables or receivables then associated fair value movements previously recognised in equity are recorded in the income statement in conjunction with the corresponding asset or liability.
The translation exposures arising on the overseas net assets are hedged with foreign currency debt.
The Group also hedges foreign currency intercompany loans where these exist.
Forward foreign exchange contracts in relation to the hedging of the Group's foreign currency intercompany loans are designated as held for trading with fair value movements being recognised in the income statement. The corresponding fair value movement of the intercompany loan balance results in an overall nil impact on the income statement.
(d) Interest rate risk
The Group is exposed to interest rate risk in relation to the sterling, US dollar, euro and Hong Kong dollar variable rate financial assets and liabilities.
The Group's policy is to use derivative contracts where necessary to maintain a mix of fixed and floating rate borrowings to manage this risk. The structure and maturity of these derivatives correspond to the underlying borrowings and are accounted for as fair value or cash flow hedges as appropriate.
Responsibility statement
The 2009 Annual Report, which will be issued on 4 June 2009, contains a responsibility statement in compliance with DTR 4.1.12. This states that on 18 May 2009, the date of approval of the Annual Report, the Directors confirm that to the best of their knowledge:
- the Group and Company financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and
- the Business review contained in the Annual report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.
The Directors of Marks and Spencer Group plc are listed in the Group's 2008 Annual Report, with the exception of Jan du Plessis who was appointed as a non-executive director with effect from 1 November 2008 and Steven Esom who resigned from the Board on 1 July 2008. A list of current Directors is maintained on the Group's website: www.marksandspencer.com
This information is provided by RNS
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