Preliminary Results
Marks & Spencer Group PLC
20 May 2003
Released 20 May 2003
Marks and Spencer Group p.l.c.
Preliminary Results Announcement
52 weeks ended 29 March 2003
FINANCIAL HIGHLIGHTS
CONTINUING OPERATIONS BEFORE EXCEPTIONAL ITEMS
• Group operating profit up 21.1% to £761.8m
• Group profit before tax up 11.5% to £721.3m
• Earnings per share up 39.6% to 22.2 pence per share
• Final dividend of 6.5 pence per share, up 12.1%
• Group operating cash flow of £1.2bn
2003 2002 % inc/
Continuing operations £m £m (dec)
Turnover 8,077.2 7,619.4 6.0
Pre-exceptional results
Operating profit 761.8 629.1 21.1
Profit before tax 721.3 646.7 11.5
Earnings per share 22.2p 15.9p 39.6
Post-exceptional results
Operating profit 717.9 629.1 14.1
Profit before tax 679.0 687.9 (1.3)
Earnings per share 20.7p 17.4p 19.0
OVERVIEW
Continued focus on enhancing our offer to customers through improved product
appeal, quality and availability has enabled the Group to deliver profit and
market share growth.
In UK Clothing, sales (inc. VAT) increased by 10% due to a strong performance in
the first three quarters although in the fourth quarter, performance was level
year-on-year. We increased market share by 0.7% over the year, with womenswear,
menswear and lingerie all showing gains, with a particularly strong performance
across our casualwear ranges.
We gained a further 1.3% in the Clothing primary margin as a result of further
improvements in our world-wide sourcing and we have made progress on delivering
the next phase of supply chain efficiencies. This is targeted to improve the
Clothing primary margin by 1% per annum over the next three years.
Our Food business out-performed the market and delivered strong growth for the
second year in succession. Customers continue to rate us highly on trust,
innovation and quality. We opened a further 15 Simply Food and larger
neighbourhood Food stores, designed to make our offer more accessible to more
customers, and these stores are trading well.
In Home we have shown a good performance over the year, assisted by new products
across the range, and we plan to open a stand-alone Home concept store in spring
2004.
In Financial Services, we maintained profitability through strong cost control
and reduced bad debts in our existing business, while investing in and piloting
our credit card and loyalty programme, which we plan to launch nationally in the
second half of the year.
Luc Vandevelde, Chairman, comments:
'This year we have once again concentrated on restoring the fundamentals of our
business and winning back the trust of our customers. In doing so we have
regained market share, increased our profitability and re-built the foundations
on which this Group can grow and prosper. In view of the performance over the
last year, I am pleased to propose a final dividend per share of 6.5 pence, up
12.1 per cent, giving a full year dividend of 10.5 pence per share. An important
factor in delivering this result has been to strengthen the top team and the
capabilities of our people. Whatever the achievements of this year, we see
ourselves on a journey of continuous improvement, where we will never be
satisfied, but will always strive to do better.'
Roger Holmes, Chief Executive, comments:
'We are excited about our potential to drive future growth by deepening our
relationship with our most loyal customers and extending our appeal to our more
occasional shoppers. We will do this by continuing to innovate and develop our
core business while opening new paths to growth. In the coming year we will open
a further 50 food only stores, launch a combined credit and loyalty card on a
national basis, and open a new concept Home store.
We recognise that we are operating in a more testing environment. But we also
see significant opportunities for improved efficiency in sourcing and costs to
underpin our performance as we build for the future.'
OPERATING REVIEW
Group Summary for continuing operations
2003 2002 % inc/
Turnover (excl. VAT and sales taxes) £m £m (dec)
Retailing
UK Retail 7,066.0 6,575.2 7.5
International Retail 681.3 693.4 (1.7)
7,747.3 7,268.6 6.6
Financial Services 329.9 350.8 (6.0)
8,077.2 7,619.4 6.0
2003 2002 % inc/
Operating profit before exceptional items £m £m (dec)
Retailing
UK Retail 631.9 505.2 25.1
International Retail 43.5 33.3 30.6
675.4 538.5 25.4
Financial Services 86.4 84.2 2.6
Excess interest charged to cost of sales
of Financial Services - 6.4
761.8 629.1 21.1
Profit before tax and exceptional items 721.3 646.7 11.5
Earnings per share 20.7p 17.4p 19.0
Adjusted earnings per share 22.2p 15.9p 39.6
Retailing
UK Retail
Turnover including VAT was up 7.8% on last year, 6.7% on a like-for-like basis.
The quarterly sales performance for the year is set out below:
Actual increase / (decrease) on last year Q1 Q2 H1 Q3 Q4 H2 TOTAL
% % % % % % %
Clothing (including footwear and gifts) 14.8 13.8 14.4 9.8 (0.3) 6.6 10.0
Home 5.9 15.1 10.0 5.0 9.3 6.5 8.0
Food 2.9 7.5 5.0 5.7 4.6 5.3 5.1
Total 9.1 11.1 10.0 8.0 2.4 6.1 7.8
The improvement in Clothing sales performance is attributable to:
• volume increases of approximately 7.0%;
• lower average price cuts on reduced merchandise; and
• changes to the product mix, towards higher value items.
In Home, the increase is largely volume-related.
Food inflation during the period was 0.7%.
Total selling space increased by 0.1m sq ft to 12.3m sq ft (General Merchandise
8.8m sq ft and Food 3.5m sq ft). The weighted average footage for the period
rose by less than 1%.
On a like-for-like basis, sales were as follows:
Like-for-like increase / (decrease) on Q1 Q2 H1 Q3 Q4 H2 TOTAL
last year % % % % % % %
General Merchandise 12.7 13.2 13.0 8.8 (0.4) 5.5 9.0
Food 1.5 6.0 3.6 4.0 2.6 4.6 3.7
Total 7.7 10.0 8.8 7.0 1.0 4.3 6.7
Clothing performance during the year was strong as a result of a focus on the
appeal, quality, availability and fit of our product. Womenswear, menswear and
lingerie all increased market share for the year (source: Fashiontrak).
Casualwear performed particularly strongly, with core womenswear ranges, per una
and Blue Harbour all showing strong year-on-year increases. The fourth quarter
was a more difficult trading period, particularly in Greater London.
The performance of childrenswear has been disappointing. Action has been taken
to improve design and to consolidate ranges to offer more choice. The initial
strong response to the DB07, David Beckham, range has been maintained, and in
addition schoolwear is now showing signs of improvement.
We are continuing to realise gains in our primary margin as a result of actions
taken to increase overseas production and consolidate our supply base. For the
full year this delivered a further 1.3 percentage point improvement in the
Clothing bought-in margin. In addition, markdowns as a percentage of sales were
lower than last year, leading to a further 0.3 percentage point improvement in
the Clothing achieved margin. In absolute terms markdowns were higher than
planned and largely arose within childrenswear and womenswear, where we drove
for high sales growth and improved availability during the autumn season.
Distribution costs, which are included in cost of sales, increased marginally
less than the rate of sales growth. Following a review of the general
merchandise logistics operation, we recently announced the closure of our Hayes
distribution centre and a reduction in the number of warehousing contractors
from four to two. These changes, which are expected to generate annual savings
of £20m, have resulted in an exceptional charge of £36.3m this year.
The Home business benefited from the introduction of new products across the
range, particularly within home accessories and bedding, and the performance of
furniture was helped by promotional events around bank holidays. However, a
reduction in allocated store space in the second half affected underlying sales.
In Food, we have had another year of strong sales growth. We out-performed the
market in the last three quarters of the year, increasing our market share for
the year as a whole. Key to this success has been the high quality of our
products, continued innovation including the re-launch of our Indian and Chinese
ranges, strong cohesive marketing and a focus on special occasions.
We continue to focus on extending the reach of our Food offer. We are making it
accessible to more customers, through the Simply Food format and larger
neighbourhood Food stores, opening 15 stores in the year. Progress to date in
the Simply Food stores has been encouraging. Sales per square foot are in excess
of the average for Food, offset by slightly higher costs. These stores are on
target to deliver an operating profit which is in line with the rest of the Food
business. We have also extended the agreement with Compass Group to place Simply
Food stores in railway stations. In total, we plan to have opened 150 Simply
Food stores by March 2006.
We have invested further in the in-store environment and have now modernised 256
stores, representing approximately 93% of UK Retail selling space. There are now
141 Cafe Revive coffee shops in stores; these have contributed almost £80m to
turnover (incl. VAT) this year.
UK Retail operating costs of £1,863m, excluding exceptional charges, increased
by 4.9% over the same period last year:
• employee costs which, at £975m, represent over half of total operating
costs increased by 1.8%. The anticipated cost of performance bonuses for
management and store staff this year is £34m, a decrease of 35% on last
year;
• property, repair and renewal costs of £335m have increased by 8.0%,
largely as a result of the sale and leaseback transaction entered into last
year, which added £15m to rental costs this year;
• depreciation was £218m, an increase of 4.9%; and
• other operating costs of £335m increased by 11.9%. This was largely due to
increased expenditure on marketing, rising insurance costs and IT
expenditure to upgrade our business systems.
During the year, £7.6m of revenue costs were incurred in connection with the
relocation of the corporate head office, which is planned to take place next
year. These costs have been charged as exceptional operating costs. A further
£25m to £30m of revenue costs are expected to be incurred next year and will
also be charged as exceptional operating costs.
UK Retail capital expenditure for the period was £303m.
2003 2002
Capital expenditure £m £m
New stores and extensions 81 63
Store renewal, refurbishment and new selling initiatives 96 122
Refrigeration equipment 45 32
IT equipment 25 17
Other 56 31
303 265
During the year, 130 stores were renewed at a capital cost of £41m and £81m was
spent on new space. We are in the second year of a five year programme to
upgrade our refrigeration equipment, investing approximately £40m annually.
UK Retail capital expenditure for 2003/04 is expected to be in the region of
£540m. The increase on this year is attributable to the acquisition of the UK
general merchandise warehouses owned by contractors, the head office move to
Paddington Basin, together with investment in the Simply Food roll-out and the
Home business.
International Retail
At actual exchange rates At constant exchange rates
2003 2002 % inc/ 2003 2002 % inc/
£m £m (dec) £m £m (dec)
Turnover
Marks &Spencer branded
businesses 391.2 364.7 7.3 389.7 364.7 6.9
Kings Super Markets 290.1 328.7 (11.7) 314.5 328.7 (4.3)
681.3 693.4 (1.7) 704.2 693.4 1.6
Operating profit
Marks & Spencer branded
businesses 35.6 20.7 72.0 35.3 20.7 70.1
Kings Super Markets 7.9 12.6 (37.3) 8.5 12.6 (32.5)
43.5 33.3 30.6 43.8 33.3 31.5
The results from continuing operations include sales and operating profits from
Kings Super Markets as the planned disposal of this business has not taken place
to date. The performance of Kings Super Markets has been affected by uncertainty
surrounding the sale and a one-off charge of £1.4m in connection with the
closure of two stores.
Turnover for the period in the Marks & Spencer branded businesses (Republic of
Ireland, franchises and Hong Kong) increased by 7.3% (6.9% at constant exchange
rates).
Operating profit for the Marks & Spencer branded businesses increased by 72.0%
to £35.6m, an underlying increase of 39% after adding back £5m of abortive sale
and restructuring costs in Hong Kong last year. The Republic of Ireland
performed ahead of last year and we have also seen an improvement in the
performance and profitability of our franchise business. In Hong Kong, actions
taken last year to decrease footage in selected locations and reduce costs,
together with a new pricing strategy which has increased sales, have delivered
results. However, trading in Hong Kong and some franchises in the last month of
the year was affected by the outbreak of the SARS virus and the war in Iraq.
Financial Services
2003 2002 % inc/
Operating profit £m £m (dec)
Financial Services retailing activities 72.5 73.2 (1.0)
MS Insurance 13.9 11.0 26.4
86.4 84.2 2.6
Operating profit from Financial Services increased by £2.2m to £86.4m. Within
this, the underlying operating profit from existing retail activities increased
by £20.2m, an increase of 26%, to £97.5m, before expenditure of approximately
£25m on the credit card and loyalty programme.
The Chargecard continues to suffer as a result of our decision to accept credit
cards without supporting the Chargecard business. The proportion of retail sales
made on the Chargecard fell to approximately 17% and the number of active
accounts decreased by 8.2%. However, with an increase in the average outstanding
balance per customer, Chargecard borrowing decreased by only 3.2%. Together with
improved margins, this resulted in Chargecard operating income increasing by
2.0%.
In personal lending, competitive forces were strong throughout the year and, as
a result, outstanding balances decreased by 9.4% on reduced new business
volumes. As a consequence, personal lending operating income decreased by 9.1%.
The savings and protection products suffered from uncertain economic conditions
and operating income was level with last year. Within this, bearish stock market
conditions reduced Unit Trust operating income by 9.4% to £9.9m, even though
gross new retail investment was £88m, an increase of 53.5%. In contrast the
life, pensions and general insurance products delivered an operating income
increase of 8.6%.
The introduction of a revised bad debt methodology resulted in a one-off
increase in bad debt charges in the second half of last year. Declining customer
balances and the absence of a one-off charge, together with the implementation
of improved collection procedures, have resulted in the bad debt charge for the
year being £20.5m lower than last year.
In order to combat falling income levels, a programme of cost reduction was
initiated which resulted in a decrease in operating costs for the existing
retailing activities of £10.4m. The reduction in operating costs and bad debt
charges more than offset the decline in net income and resulted in operating
profit for the existing business increasing by 26%. This strong increase in
profitability financed the additional investment during the year of
approximately £25m in the credit card and loyalty programme.
Credit Card and Loyalty pilot
We began a trial in September 2002 in South Wales to validate the business case
and our operational capability to deliver a joint credit and loyalty card for
our customers.
The key measures we assessed were the take-up of the new card, average balances,
the number of new cardholders, propensity to borrow, card penetration and
incremental sales. On each of these measures, the pilot was successful.
Therefore we are progressing with the necessary commitments for a national
roll-out in the second half of the year.
Total revenue costs incurred on the card and loyalty programme during the year
amounted to approximately £25m. These costs covered the development of
technological and operational infrastructure as well as the costs of running the
pilot.
The revenue cost of rolling out the card and loyalty programme will be
approximately £60m in the current financial year. This covers: the cost of
developing further infrastructure associated with becoming a major new credit
card provider; the cost of providing customer service capability; and
acquisition and card issue costs up to and through the national launch.
The costs of the development of the credit and loyalty card will mean that
Financial Services profit will reach a low point in 2003/04 and grow from that
base in 2004/05.
Discontinued operations
Last year, we closed the Continental European operations and sold Brooks
Brothers. The results of these businesses up until the dates of closure or
disposal are reported under discontinued operations.
Net interest expense
Net interest expense was £40.5m compared to net interest income of £17.6m last
year. This arises as a result of the increase in debt following the capital
restructuring of the Group at the end of last year when £1.7bn was returned to
shareholders. The average rate of interest on borrowings during the period was
5.8%. Interest cover was 17.7 times and fixed charge cover was 7.6 times.
Taxation
The tax charge reflects an effective tax rate of 28.6% before exceptional
charges, compared to 29.6% for the same period last year. This rate is less than
the UK corporation tax rate of 30%, largely as a result of prior year
contributions to European subsidiary closure costs being accepted as tax
deductible in the UK.
Earnings per share
Adjusted earnings per share, which excludes the effect of exceptional items, has
increased by 39.6% to 22.2 pence per share. This increase arises as a result of
the improved profitability of the business and the more efficient balance sheet
as a result of the capital restructuring last year, which reduced the number of
shares in issue.
Capital structure
During the year, 44,894,601 ordinary shares (representing 2.0% of the issued
share capital) were purchased in the market at a total cost of £141.7m and a
weighted average price of 316p.
On 25 September 2002 and 25 March 2003, 181,478,363 and 43,905,265 B shares
respectively, were redeemed at par at a total cost of £157.8m. Following this
redemption, 168,819,801 B shares remain in issue. The next opportunity for
redemption will be in September 2003.
Cash flow
The Group generated an operating cash inflow for the year of £1,168.7m (last
year £1,093.7m). Within this, the cash inflow from retailing activities was
£826.4m (last year £785.4m excluding an inflow of £68.1m from discontinued
operations) and the cash inflow from financial services activities was £342.3m
(last year £240.2m). The increase in the Financial Services cash inflow is
largely due to a decrease in customer balances of £167.1m (last year £76.2m).
During the period, the Group acquired tangible fixed assets totalling £311.0m
(last year £290.5m). After taking into account the timing of payments, the cash
outflow for capital expenditure was £324.5m (last year £285.7m).
The cash outflow from acquisitions and disposals was £38.8m, which includes a
repayment of £30.2m to the purchaser of Brooks Brothers for the difference
between working capital at the date of the agreement and the date of completion,
which was anticipated and provided for last year.
The overall cash inflow before funding of £354.2m has been partly used to fund
the redemption of B shares and the purchase of ordinary shares.
At the end of the period, net debt was £1.8bn, a decrease of £76m, giving rise
to retail gearing of 24.3%, with total gearing at 43.1%.
Pro-forma earnings
The sale and leaseback transaction last year, which has increased property
rental costs, and the return of capital to shareholders, which introduced a
level of debt to the retail balance sheet, have had a significant effect on
earnings in the current year. If these transactions had occurred at the
beginning of last year, then we estimate that the effect on the earnings from
continuing operations, but before exceptional items, for last year would have
been as follows:
As Sale and Return of Pro-forma
reported leaseback capital earnings
Continuing operations before exceptional items £m £m £m £m
Operating profit 629.1 (14.8) - 614.3
Interest 17.6 - (66.6) (49.0)
Profit before tax 646.7 (14.8) (66.6) 565.3
Tax (195.1) 4.4 20.0 (170.7)
Profit after tax 451.6 (10.4) (46.6) 394.6
Adjusted earnings per share 15.9p 17.1p
Number of shares (m) 2,841 2,307
Accounting for pensions
We continue to account for pension costs under SSAP 24 and our UK pension cost
for the year was £136m. Under FRS 17 this would have been £95m.
The actuary of the Group's UK defined benefit pension scheme carried out a
formal actuarial valuation of the scheme as at 31 March 2001. This valuation
revealed a shortfall of £134m (£94m after deferred tax) in the market value of
the assets of £3,102m compared to the actuarial liability for pension benefits
(a funding level of 96%). As a result, the contributions to the scheme were
increased to fund this deficit over twelve years.
Last year, the actuary prepared a valuation of the UK scheme as at 30 March 2002
in accordance with FRS 17. The FRS 17 valuation basis is a more volatile measure
reflecting market values at a point in time. This valuation showed a deficit of
£400m (£280m after deferred tax). The actuary has updated this FRS 17 valuation
as at 29 March 2003. The results of this update reflect the poor performance of
the financial markets during the year and show that the deficit has increased to
£1.2bn (£0.9bn after deferred tax). On this basis, the profit and loss account
charge under FRS 17 in 2003/04 would increase to £142m.
The pension scheme has a positive cash flow which is expected to continue for
some time as the Group's contributions to the scheme, together with investment
income, are greater than the annual payments to pensioners. It is therefore
expected to be many years before the defined benefit scheme needs to liquidate a
material portion of scheme assets.
We recognise the importance of pension provision to our employees and we
continue to review the long-term funding strategy for the defined benefit
scheme. As a result of the deterioration in the value of equities, we will bring
forward the next formal actuarial valuation planned for March 2004 to allow us
to make an earlier informed decision as to the contribution level and asset mix
going forward. We recognise this will require increased funding.
Outlook for 2003/04
• We anticipate further improvement in the clothing primary margin
(bought-in margin) of approximately 1 percentage point for 2003/04 and a
further 1 percentage point in each of the two subsequent years.
• Underlying UK retailing operating costs, including logistics, for 2003/04
are planned to be held level on this year. However, as a result of
investment in growth initiatives, total UK Retail operating costs will
increase by approximately 3%. These incremental investment costs cover
initiatives such as Simply Food, Home and marketing and system costs in UK
Retail associated with the loyalty elements of a national rollout of the
combined credit and loyalty card.
• The revenue costs of the head office move to Paddington Basin will be
approximately £25m to £30m, compared to £7.6m incurred this year. These
costs will be treated as exceptional.
• The impact of a national rollout of the combined credit and loyalty card
will be to reduce Financial Services profits by approximately £60m for the
financial year 2003/04, compared to the £25m in 2002/03. This is in line
with the guidance given at the time of our Interim Results in November 2002.
• The financial year incorporates a 53rd week. This will add £30m to £40m to
full year profit before tax.
• Group capital expenditure will be approximately £560m in 2003/04, compared
to £311m this year. This is due to the acquisition of the UK general
merchandise warehouses owned by contractors (£100m), the head office move to
Paddington Basin (£45m) and investment in the Simply Food roll-out and the
Home business.
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.
For further information, please contact:
Media enquiries:
Marks & Spencer Corporate Press Office: 020 7268 1919
Photography:
Photography available from:
www.newscast.co.uk
or
www.marksandspencer.com/mediacentre
Analyst enquiries:
Tony Quinlan 020 7268 4195
Video Interviews
To see video interviews with Roger Holmes, Chief Executive, and Alison Reed,
Chief Financial Officer, please go to:
www.marksandspencer.com/thecompany
or
www.cantos.com
Consolidated profit and loss
account
52 weeks Ended 52 weeks ended
29 March 2003 30 March 2002
Continuing Discontinued Total Continuing Discontinued Total
operations operations operations operations
Notes £m £m £m £m £m £m
Turnover 2 8,077.2 - 8,077.2 7,619.4 516.0 8,135.4
Operating profit
Continuing operations
Before exceptional operating 761.8 - 761.8 629.1 - 629.1
charges
Exceptional operating charges 5 (43.9) - (43.9) - - -
Continental European operations - - - - (42.5) (42.5)
Less provision made in 2001 - - - - 42.5 42.5
Other discontinued operations - - - - 14.7 14.7
Total operating profit 3 717.9 - 717.9 629.1 14.7 643.8
Profit on sale of property and 6A 1.6 - 1.6 41.2 - 41.2
other fixed assets
Loss on sale / termination of 6B
operations:
Loss arising on sale / closure - (12.3) (12.3) - (102.8) (102.8)
Less provision made in 2001 - 10.8 10.8 - 104.3 104.3
- (1.5) (1.5) - 1.5 1.5
Goodwill previously written off - - - - (368.2) (368.2)
Net loss on sale / termination of - (1.5) (1.5) - (366.7) (366.7)
operations
Net interest (expense) / income 4 (40.5) - (40.5) 17.6 - 17.6
Profit / (loss) on ordinary 679.0 (1.5) 677.5 687.9 (352.0) 335.9
activities before taxation
Analysed between:
Profit on ordinary activities before 721.3 - 721.3 646.7 14.7 661.4
taxation and exceptional items
Exceptional items (42.3) (1.5) (43.8) 41.2 (366.7) (325.5)
Taxation on ordinary activities 7 (197.4) - (197.4) (195.1) 12.6 (182.5)
Profit / (loss) on ordinary 481.6 (1.5) 480.1 492.8 (339.4) 153.4
activities after taxation
Minority interests (all equity) 0.4 - 0.4 1.1 (1.5) (0.4)
Profit / (loss) attributable to 482.0 (1.5) 480.5 493.9 (340.9) 153.0
shareholders
Dividends (including dividends in 9 (246.0) - (246.0) (238.9) - (238.9)
respect of non-equity shares)
Retained profit / (loss) for the 236.0 (1.5) 234.5 255.0 (340.9) (85.9)
period
Earnings per share 8 20.7p 20.7p 17.4p 5.4p
Diluted earnings per share 8 20.4p 20.4p 17.3p 5.4p
Adjusted earnings per share 8 22.2p 22.2p 15.9p 16.3p
Diluted adjusted earnings per 8 21.9p 21.9p 15.8p 16.2p
share
Dividend per share 9 10.5p 9.5p
Consolidated statement of total recognised
gains and losses
52 weeks 52 weeks
ended ended
29 March 30 March
2003 2002
£m £m
Profit attributable to 480.5 153.0
shareholders
Exchange differences on foreign currency 3.4 0.1
translation
Unrealised (deficit) / surplus on revaluation of (0.8) 0.5
investment properties
Total recognised gains and losses relating 483.1 153.6
to the period
Consolidated balance sheet
As at As at
29 March 30 March
2003 2002
£m £m
Fixed assets
Tangible assets 3,435.1 3,381.2
Investments 31.5 50.3
3,466.6 3,431.5
Current assets
Stocks 361.8 325.3
Debtors 2,455.4 2,619.3
Cash and investments 471.9 816.1
3,289.1 3,760.7
Current liabilities
Creditors : amounts falling due (1,678.9) (1,750.8)
within one year
Net current assets 1,610.2 2,009.9
Total assets less current 5,076.8 5,441.4
liabilities
Creditors : amounts falling due after more (1,810.0) (2,156.3)
than one year
Provisions for liabilities and (228.4) (203.8)
charges
Net assets 3,038.4 3,081.3
Capital and reserves
Called up share capital 685.7 852.7
Share premium account 23.8 2.8
Capital redemption reserve 1,886.9 1,717.9
Revaluation reserve 370.6 387.3
Other reserve (6,542.2) (6,542.2)
Profit and loss account 6,613.6 6,662.4
Shareholders' funds (including 3,038.4 3,080.9
non-equity interests)
Minority interests (all equity) - 0.4
Total capital employed 3,038.4 3,081.3
Equity shareholders' funds 2,920.2 2,804.9
Non-equity shareholders' funds 118.2 276.0
Total shareholders' funds 3,038.4 3,080.9
Reconciliation of movement in
shareholders' funds
As at As at
29 March 30 March
2003 2002
£m £m
Profit attributable to 480.5 153.0
shareholders
Dividends (246.0) (238.9)
234.5 (85.9)
Other recognised gains and losses 2.6 0.6
relating to the year
New share capital subscribed 23.0 8.9
Issue / redemption expenses - (9.3)
Amounts (deducted from) / added to profit and loss account in respect of shares (2.9) 2.5
issued to the QUEST
Redemption of B shares (158.0) (1,717.9)
Purchase of own shares (141.7) (52.0)
Goodwill transferred to the profit and loss account on - 368.2
sale / closure of business
Net reduction in shareholders' (42.5) (1,484.9)
funds
Opening shareholders' funds 3,080.9 4,565.8
Closing shareholders' funds 3,038.4 3,080.9
Consolidated cash flow statement
52 weeks 52 weeks
ended ended
29 March 30 March
2003 2002
£m £m
Cash inflow from operating 1,168.7 1,093.7
activities (see note 10)
Dividend received from joint 8.0 -
venture
Returns on investments and
servicing of finance
Interest received 11.9 38.8
Interest paid (51.3) (2.0)
Non-equity dividends paid (6.8) -
Net cash (outflow) / inflow from returns on investments (46.2) 36.8
and servicing of finance
Taxation
UK corporation tax paid (212.0) (172.0)
Overseas tax paid (4.9) (7.4)
Cash outflow for taxation (216.9) (179.4)
Capital expenditure and financial
investment
Purchase of tangible fixed assets (324.5) (285.7)
Sale of tangible fixed assets 25.0 455.6
Purchase of fixed asset (2.9) (2.9)
investments
Sale of fixed asset investments 7.2 9.0
Net cash (outflow) / inflow for capital expenditure and (295.2) 176.0
financial investment
Acquisitions and disposals
Closure of operations (10.8) 122.2
Sale of subsidiaries (30.2) 139.4
Repayment of loan by joint venture 2.2 -
Cash (outflow) / inflow from (38.8) 261.6
acquisitions and disposals
Equity dividends paid (225.4) (256.7)
Cash inflow before management of liquid 354.2 1,132.0
resources and financing
Management of liquid resources and
financing
Management of liquid resources (46.9) (29.1)
(see note 10ii)
Financing (see note 10iii) (711.5) (730.2)
(Decrease) / increase in cash (404.2) 372.7
Reconciliation of net cash flow to movement
in net debt
52 weeks 52 weeks
ended ended
29 March 30 March
2003 2002
£m £m
(Decrease) / increase in cash (404.2) 372.7
Cash outflow from increase in liquid 46.9 29.1
resources
Cash outflow / (inflow) from decrease / (increase) in debt financing 431.4 (1,031.7)
(see note 10 iii)
Exchange movements 1.5 0.7
Movement in net debt 75.6 (629.2)
Opening net debt (1,907.0) (1,277.8)
Closing net debt (1,831.4) (1,907.0)
Notes
1. Basis of preparation
The results comprise those of Marks and Spencer Group p.l.c. and its UK and
international subsidiaries for the 52 week period ended 29 March 2003 and have
been prepared using accounting polices consistent with those adopted last year.
This summary of results does not constitute the full Financial Statements within
the meaning of s240 of the Companies Act 1985. The full Financial Statements
have been reported on by the Company's auditors, but have not been delivered to
the Registrar of Companies. The audit report was unqualified and did not contain
a Statement under s237(2) or s237(3) of the Companies Act 1985.
2. Turnover
Turnover (excluding sales taxes for international operations) is
analysed as follows:-
52 weeks 52 weeks
ended ended
29 March 30 March
2003 2002
£m £m
Continuing operations:-
UK Retail (incl. VAT)
Clothing, Footwear and Gifts 4,149.1 3,773.4
Home 403.2 373.3
Foods 3,252.7 3,093.5
7,805.0 7,240.2
Less : United Kingdom VAT (739.0) (665.0)
7,066.0 6,575.2
International Retail
Marks & Spencer branded(1) 391.2 364.7
Kings Super Markets 290.1 328.7
681.3 693.4
Total Retailing 7,747.3 7,268.6
Financial Services 329.9 350.8
Turnover from continuing 8,077.2 7,619.4
operations
Turnover from discontinued - 516.0
operations
Total turnover 8,077.2 8,135.4
Turnover from continuing operations is
analysed as follows:-
United Kingdom 7,395.9 6,926.0
International 681.3 693.4
8,077.2 7,619.4
(1)Marks & Spencer branded businesses within International Retail consists of
Republic of Ireland, Hong Kong and sales to franchise operations.
The value of goods exported from the UK, including shipments to overseas
subsidiaries, amounted to £271.6m (last year £329.8m).
3. Operating profit
Operating profit arises as
follows:-
52 weeks 52 weeks
ended ended
29 March 30 March
2003 2002
£m £m
Continuing operations:-
UK Retail
Before exceptional operating 631.9 505.2
charges
Exceptional operating charges (43.9) -
588.0 505.2
International Retail
Marks & Spencer branded 35.6 20.7
Kings Super Markets 7.9 12.6
43.5 33.3
Total Retailing 631.5 538.5
Financial Services 86.4 84.2
Segmental operating profit from 717.9 622.7
continuing operations
Add : excess interest charged to cost of sales of - 6.4
Financial Services
Operating profit from continuing 717.9 629.1
operations
Operating profit from discontinued - 14.7
operations
Total operating profit 717.9 643.8
Geographical analysis of segmental operating profit from continuing
operations:-
United Kingdom 674.4 589.4
International 43.5 33.3
717.9 622.7
4. Interest charged to cost of sales
Financial Services operating profit is stated after charging £85.7m (last year
£103.7m) of interest to cost of sales. This interest represents the cost of
funding the Financial Services business as a separate segment, including both
intra group interest and third party funding. The amount of third party interest
payable by the Group amounted to £137.0m (last year £116.9m). Intra group
interest of £nil (last year £6.4m), being the excess over third party interest
payable, has been added back in the segmental analysis to arrive at total
operating profit. The intra group interest added back last year arose in the
first half of the year when the interest charged to cost of sales of Financial
Services was greater than the interest payable for that period.
5. Exceptional operating charges
52 weeks 52 weeks
ended ended
29 March 30 March
2003 2002
£m £m
Head office relocation 7.6 -
Restructuring of general merchandise 36.3 -
logistics operations
Exceptional operating charges 43.9 -
6. Non-operating exceptional items
A. Profit on sale of property and
other fixed assets
52 weeks 52 weeks
ended ended
29 March 30 March
2003 2002
£m £m
Profit on sale and leaseback - 50.0
Other asset disposals(1) 1.6 (8.8)
Profit on sale of property and 1.6 41.2
other fixed assets
(1)Other asset disposals mainly relate to
the disposal of UK stores
B. Loss on sale / termination of
operations
52 weeks 52 weeks
ended ended
29 March 30 March
2003 2002
£m £m
Loss on sale / termination (12.3) (102.8)
Goodwill previously written off - (368.2)
(12.3) (471.0)
Less provision made in 2001 10.8 104.3
Loss on sale / termination of (1.5) (366.7)
operations
The loss on sale / termination of operations in the current year is
analysed as follows:-
Continental Brooks
Europe Brothers Total
£m £m £m
Net closure costs (10.8) (1.5) (12.3)
Less provision made in 2001 10.8 - 10.8
Loss on sale / termination of - (1.5) (1.5)
operations
7. Taxation
The pre-exceptional tax charge for the year was £206.5m, giving an effective tax
rate of 28.6% (last year 29.6%). The tax effect of exceptional charges is to
reduce this liability by £9.1m to £197.4m.
8. Earnings per share
The calculation of earnings per ordinary share is based on earnings after tax,
minority interests and non-equity dividends of £473.7m (last year £153.0m), and
on 2,293,929,979 ordinary shares (last year 2,841,723,149), being the weighted
average number of ordinary shares in issue during the year ended 29 March 2003.
The weighted average number of ordinary shares used in the calculation of
diluted earnings per ordinary share is 2,322,924,309 ordinary shares (last year
2,865,434,256).
An adjusted earnings per share figure has been calculated in addition to the
earnings per share required by FRS 14 and is based on earnings excluding the
effect of the exceptional items. It has been calculated to allow the
shareholders to gain a clearer understanding of the trading performance of the
Group. Details of the adjusted earnings per share are set out below:-
52 weeks 52 weeks
ended ended
29 March 30 March
2003 2002
Earnings per share 20.7p 5.4p
Exceptional operating charges 1.5p -
Profit on sale of property and (0.1)p (1.5)p
other fixed assets
Loss on sale / termination of 0.1p 12.4p
operations
Adjusted earnings per share 22.2p 16.3p
9. Dividends
52 weeks 52 weeks
ended ended
29 March 30 March
2003 2002
£m £m
On equity shares
Ordinary - interim dividend of 4.0p per share (last year 91.8 105.2
3.7p per share)
Ordinary - final dividend of 6.5p per share 147.4 133.7
(last year 5.8p per share)
239.2 238.9
On non-equity shares
B share - interim dividend at 3.32% 4.6 -
B share - final dividend at 2.98% 2.2 -
6.8 -
246.0 238.9
The Directors have proposed a final dividend of 6.5p per share (last year 5.8p
per share). This makes a total ordinary dividend of 10.5p per share (last year
9.5p per share). The total cost of dividends is £239.2m (last year £238.9m). The
ordinary shares will be quoted ex dividend on 28 May 2003. The final dividend
will be paid on 18 July 2003 to shareholders whose names are on the Register of
Members at the close of business on 30 May 2003. Shareholders may choose to take
this dividend in shares or in cash.
10. Analysis of cash flows given in the
cash flow statement
52 weeks 52 weeks
ended ended
29 March 30 March
2003 2002
£m £m
Operating activities
Operating profit 717.9 643.8
Exceptional operating charges (see 43.9 -
note 5)
Operating profit before 761.8 643.8
exceptional charges
Utilisation of provision against - (42.5)
European trading losses
Depreciation 234.9 249.6
Decrease in working capital (see 191.3 272.8
note i)
Net cash inflow before exceptional 1,188.0 1,123.7
items
Exceptional operating cash outflow (19.3) (30.0)
Cash inflow from operating 1,168.7 1,093.7
activities
52 weeks 52 weeks
ended ended
29 March 30 March
2003 2002
£m £m
(i) Decrease in working capital
(Increase) / decrease in stocks (37.5) 66.2
Decrease in customer advances 167.1 76.2
Increase in creditors 52.1 174.9
Other working capital movements 9.6 (44.5)
Net cash inflow from decrease in 191.3 272.8
working capital
(ii) Management of liquid
resources
Increase in cash deposits treated (14.6) (16.3)
as liquid resources
Net (purchase) / sale of (9.5) 19.6
government securities
Net purchase of listed investments (24.3) (36.8)
Net sale / (purchase) of unlisted 1.5 (0.3)
investments
Net sale of unlisted investments - 4.7
on sale of business
Cash outflow from increase in (46.9) (29.1)
liquid resources
(iii) Financing
Decrease in bank loans, overdrafts and commercial paper (125.1) (268.6)
treated as financing
(Redemption) / issue of medium (308.4) 977.5
term notes
(Redemption) / issue of (2.3) 319.4
securitised loan notes
Increase in other creditors 4.4 3.4
treated as financing
Debt financing as shown in (431.4) 1,031.7
analysis of net debt
Purchase of own shares (141.7) (52.0)
Redemption of B shares (158.0) (1,717.9)
Issue / redemption expenses - (9.3)
Shares issued under employees' 19.6 17.3
share schemes
Net cash outflow from decrease in (711.5) (730.2)
financing
11. Date of approval
The financial statements for the year ended 29 March 2003 were approved by the
Directors on 19 May 2003.
This information is provided by RNS
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Monday, 20th May 2024
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