TIDMMKS
RNS Number : 1639E
Marks & Spencer Group PLC
04 November 2020
Marks and Spencer Group Plc
Half Year Results For 26 Weeks Ended 26 September 2020
" ROBUST PERFORMANCE IN UNPRECEDENTED TIMES AS TRANSFORMATION
ACCELERATES "
Robust performance in the face of Covid
-- Food adjusted operating profit up 19% as the Group mitigated
hospitality/franchise closures: Total LFL up 2.7%, ex. hospitality
up 6.6%
-- Ocado Retail revenue up 47.9% and growth in profitability.
M&S H1 share of net profit GBP38.8m
-- Improving C&H performance post spring lockdown: Revenue decline of 61.5% Q1; 21.3% Q2
-- C&H online sales up 34.3% and market share grown, now #2 in the market
-- Strong sell through of surplus stock. GBP8m raised for NHS Charities through 'Rainbow Sale'
-- Adjusted operating profit of GBP61.8m and free cashflow of GBP77.6m
-- Net debt reduced, substantial liquidity with GBP1.4bn of cash and available facilities
-- Group revenue down 15.8%, adjusted loss before tax of
GBP17.4m and statutory loss before tax of GBP87.6m
Never the Same Again actions to accelerate transformation
-- Central leadership streamlined and strengthened; support centre costs reduced
-- M&S on Ocado delivered: Overwhelmingly favourable customer response and synergies on track
-- Store estate for the future: Streamlining of store costs and
improved productivity, supported by market leading technology
-- Sparks loyalty programme relaunched and grown to over 8m
members, with over 1.5m app downloads
-- Building on investment in data and digital with launch of a
new division 'MS2' within C&H to step change online growth
26 weeks ended 26 Sep 20 28 Sep Change
19 %
Restated(2)
------------ -------------
Group revenue GBP4,090.9m GBP4,860.9m -15.8
Group operating profit before adjusting
items GBP61.8m GBP269.9m -77.1
(Loss)/profit before tax & adjusting GBP(17.4)m GBP176.3m -
items
Adjusting items GBP(70.2)m GBP(17.5)m -
(Loss)/profit before tax GBP(87.6)m GBP158.8m -
(Loss)/profit after tax GBP(71.6)m GBP122.4m -
Basic (loss)/earnings per share (3.5)p 6.4p -
Adjusted basic (loss)/earnings per
share (0.4)p 7.1p -
Free cash flow(1) GBP77.6m GBP23.3m 233.0
Net debt GBP3.91bn GBP4.14bn -5.6
Net debt excluding lease liabilities GBP1.40bn GBP1.61bn -13.1
Dividend per share - 3.9p -
----------------------------------------- ------------ -------------
(1) Free cash flow is cash generated from operating activities
less capital expenditure, cash lease payments and interest paid
(2) The comparative figures for the half year ended 28 September
2019 have been restated to reflect the correction of an error that
resulted from the transition to IFRS 16 Leases, resulting in an
increase in profit for the period of GBP5.3m
There are a number of non-GAAP measures and alternative profit
measures "APM", discussed within this announcement and a glossary
and reconciliation to statutory measures is provided at the end of
this report. Adjusted results are consistent with how business
performance is measured internally and presented to aid
comparability of performance. Refer to adjusting items table below
for further details.
Steve Rowe CEO: "In a year when it has become impossible to
forecast with any degree of accuracy, our performance has been much
more robust than at first seemed possible. This reflects the
resilience of our business and the incredible efforts of my M&S
colleagues who have been quite simply outstanding. But out of
adversity comes opportunity and, through our Never the Same Again
programme, we have brought forward three years change in one to
become a leaner, faster and more digital business. From launching
M&S Food online with Ocado to establishing an integrated online
business division 'MS2' to step-change growth, we are taking the
right actions to come through the crisis stronger and set up to win
in the new world."
NEVER THE SAME AGAIN
In May we outlined our intention to bring forward elements of
the transformation as a result of the crisis to accelerate change
under the Never the Same Again ("NTSA") programme. NTSA has
impacted the shape and ways of working across the whole family of
businesses with a focus on delivering a faster more streamlined
digital multichannel business now. Highlights in the period
include:
-- A strengthened central leadership team with the arrival of
Eoin Tonge, CFO, Richard Price MD Clothing & Home and Katie
Bickerstaffe, Chief Transformation and Strategy Director and
multiple further appointments in each of the businesses
-- The successful switchover to supply of M&S products to
Ocado Retail from 1 September and the strong performance of M&S
products on the platform since launch
-- Substantial restructuring and store cost reduction
introducing new more flexible working and shifting focus and time
to front of house service, enabled by the roll-out of market
leading store technology
-- Sparks loyalty programme relaunched and grown to over 8
million members as a digital first loyalty scheme through the
M&S App, building on recent investment in data science
capabilities to drive greater loyalty and engagement
-- A substantial acceleration in the reshaping of Clothing &
Home reflecting both lower demand but also the need to move to more
popular faster moving mainstream product
-- The launch of 'MS2' our new integrated global digital, data
and online business division to enable Clothing & Home to
compete like a pure play and maximise the significant online
opportunity
These changes, combined with the continued transformation of the
underlying businesses leave M&S well positioned to exit from
the crisis in a stronger, leaner and more focused position.
ROBUST PERFORMANCE IN THE FACE OF COVID
The business has performed better than expected during the first
half with revenue down 15.8%, outperforming the Covid-19 planning
scenario by 22.8%. As a result, the Group exited the period with
reduced stock levels year on year and generated free cashflow.
Group net debt reduced GBP118.5m and at the end of the period we
had GBP1.4bn of cash and available facilities including the
GBP1.1bn undrawn revolving credit facility.
Strong Food performance mitigating hospitality and franchise
closures: LFL ex hospitality up 6.6%
The Food business has performed strongly despite substantial
Covid headwinds during the six-month period achieving 2.7% LFL
growth or 6.6% when excluding hospitality, which was largely closed
during lockdown. It adapted rapidly to the change in shape of
demand to deliver improving LFL growth across the period. This was
despite headwinds which included the exposure to travel and office
locations, high dependence on food-to-go and a presence in full
line stores in impacted shopping centre locations.
The change in shape of trade is illustrated in the table below
with the adversely affected areas collectively accounting for c.40%
of prior year sales.
% change to LY (Q2) % change to LY (Q2)
-------------------------------- ---- ------------------------------------- ----
Simply Food 19 High Street -14
Retail Parks 13 Shopping centre -13
Franchise fuel 9 City centre -29
M&S.com (flowers/hampers/wine) 119 Franchise travel (rail/air/roadside) -75
-------------------------------- ---- ------------------------------------- ----
Total 18 Total -26
During this period as customers completed larger shops
categories such as grocery & household and meat, fish and
poultry performed well, offsetting the adverse impact on categories
such as hospitality and food-on the-move which together accounted
for around one quarter of prior year sales in total.
% change to LY (Q2) % change to LY (Q2)
----------------------- --- ---------------------- ----
Meat, fish, poultry,
deli 16 Food-on-the-move -41
Produce & flowers 5 Hospitality -65
Beers, wines, spirits 22 Bakery, cakes & -
biscuits
Grocery & household 46
Frozen 41
----------------------- --- ---------------------- ----
Total 12 Total -27
Operating profit before adjusting items increased 19.0% driven
by the strong underlying performance with product mix effects due
to the reduced sales in food-on-the-move and hospitality more than
offset by lower costs.
Transformation priorities
The Food transformation plan has an objective of protecting the
magic of M&S Food while modernising its systems, processes and
store base, broadening its appeal and moving to 'trusted value'
-- Value perception continues to improve, supported by the
further expansion of Remarksable lines and fewer promotions
-- We are creating over 750 new lines including in organic,
Remarksable value, grocery and homecare to broaden appeal both on
Ocado and in store, where c.450 of these products are now also
available
-- The five renewal stores reopened last year performed well as
customers responded to broader ranges and better display. Key
elements of this format have been successfully implemented in new
stores such as Notting Hill, Nottingham Giltbrook and Maidstone
-- The Vangarde supply chain processes have been implemented
across 159 stores, with early indications from the first phase of
positive sales growth averaging 1.8% compared with similar
stores
-- In September, a new ambient Food depot opened in Milton
Keynes providing capacity for further growth.
The business successfully executed on the critical strategic
milestone of making the M&S range available online for the
first time at Ocado.com. The customer response to switchover was
overwhelmingly positive with demand for the new range driving both
an increase in the number of products in customer baskets and
strong forward demand. Suppliers have benefited from the additional
volume opportunity from online growth through Ocado Retail and
synergies are on track with an expected GBP15m in the current
financial year.
Growth of 47.9% and strong initial return on investment from
Ocado Retail
Last year's investment in 50% of Ocado Retail means M&S is
well positioned to take advantage of the long-term opportunity
created by the step change in online grocery shopping in the UK.
Ocado Retail delivered 47.9% year on year revenue growth for the 26
weeks to 30 August 2020. This has been an exceptional period for
Ocado Retail helped by Covid related increase in demand for online
shopping. Higher than normal average basket size, combined with
optimisation initiatives, drove efficiencies in customer fulfilment
centres (CFCs) and lower delivery costs as a percent of sales.
Including exceptional anticipated insurance receipts, Ocado Retail
generated a first full half year contribution to M&S Group
adjusted profit before tax of GBP38.8m.
Revenue growth at Ocado Retail is currently constrained by the
capacity limits of its established CFC network, but investment is
in place to drive substantial growth with 40% additional capacity
coming on stream by Autumn 2021 and further growth thereafter.
Improving C&H performance post lockdown with strong online
sales growth and sell through of surplus seasonal stock
The Clothing & Home result was heavily impacted by the full
Covid lockdown in the first quarter, ongoing social distancing and
the priority to clear stock. As a result total revenue declined
40.8%, comprising a decline of 61.5% in quarter one and 21.3% in
quarter two. Online revenue increased 34.3% driven by strong
traffic, increased conversion and lower returns. Online growth was
supported by previous investment in capacity at Castle Donington
distribution centre which performed well during the period,
although, this growth was insufficient to offset the decline in
store sales. The business is emerging well ahead of the Covid-19
scenario both in sales and stock position and there are signs that
new range structures can drive sales.
After stores reopened in the second quarter following the Spring
lockdown, the business still had substantial headwinds to deal with
in the form of a store estate generating two thirds of sales in
high streets, shopping centres and town centres and a product mix
in which formal, outerwear and event related categories accounted
for around one quarter of sales last year.
The underperformance of destination stores in city centres and
shopping centres is illustrated in the table below with retail
parks, outlets and clothing lines sold within Simply Food stores
outperforming the average.
% change to % change to
LY (Q2) LY (Q2)
-------------- ---- ---------------- ----
Retail Parks -25 High street -39
Outlets -26 Shopping centre -46
C&H in Food
stores -30 City centre -53
--------------- ---- ---------------- ----
Total -25 Total -45
The strong category shift is illustrated in the table below with
casual clothing, kids, lingerie and home strongly outperforming
formal, holiday, shoes and outerwear, with the variance
particularly marked online.
% change to LY Online Stores % change to Online Stores
(Q2) LY (Q2)
----------------- ------- ------- -------------------- ------- -------
Casual 40 -37 Formal -16 -54
Kids 83 -31 Holiday -34 -50
Lingerie & mens
essentials 87 -37 Shoes & accessories -20 -55
Home & beauty 27 -33 Outerwear -5 -46
----------------- ------- ------- -------------------- ------- -------
Total 54 -36 Total -17 -54
We expect some of the changes in mix to continue into the future
as working life and the use of offices changes but post Covid,
there will also be a recovery in demand for occasion and formalwear
as events return.
C&H recorded an operating loss before adjusting items of
GBP107.5m reflecting the lower sales and the successful clearance
of surplus seasonal ranges, partly offset by a reduction in
operating costs.
Transformation priorities
Central to the transformation programme is a far-reaching
re-engineering of the Clothing & Home range and these changes
have been accelerated and made even more urgent as a result of
Covid. With the arrival of Richard Price as MD of Clothing &
Home we are bringing forward implementation of the strategy:
-- Turbo-charging online growth through the launch of 'MS2',
creating an integrated global digital, data and online business
division within Clothing & Home with operating flexibility to
compete with pure play competition and develop our growing
portfolio of guest brands
-- Further reducing option count and the long tail of
slow-moving SKUs to reshape the range to volume buys of faster
moving lines and concentrating supply into fewer, high quality
suppliers delivering better quality and cost price. For Autumn
Winter, option count has been reduced by a further 20% resulting in
an estimated 30% reduction versus 2018
-- Moving to 'trusted value' and maintaining quality while
reducing the proportion of sales sold at discount including store
wide blanket sale events and materially reducing the quantum of
product ending up in clearance. Already 'Friends & Family'
promotions have been removed.
-- Reducing costs and improving stock flow by re-engineering the
end to end supply chain under an integrated supply and sourcing
team led by Paul Babbs our new Supply Chain director. Already we
are planning a substantial shift away from the highly
labour-intensive singles picking network which was designed to
manage the old, wide, slow-moving range under the previous 'single
tier' project
-- Using the new instore technology base, more concentrated
ranges and supply chain improvements to restructure store operating
costs whilst moving resource from administration and stock shifting
to front of house service.
Launching a fully integrated online, digital and dat a division
'MS2' to maximise the online opportunity
Over the past three years the group has made significant
investment in its online capabilities including transitioning its
web platform to the cloud, building a comprehensive customer data
engine for over 20m customers, and improving and relaunching the
Sparks loyalty programme. This has been supported by expansion of
capacity and improvements to operations at the Castle Donington
distribution centre, which has enabled a c.50% increase in singles
despatch in the first half of the year and recent growth in market
share such that it is now the second largest Clothing online
business in the UK.
However, to date M&S.com has been structured as the online
channel of a stores retail business moving in lockstep with the
rhythm of physical store-based trading rather than competing head
to head with pure play competitors. Building on the investments we
have made in recent years and embedding the pure play mentality and
ways of working we began to adopt during lockdown, we are launching
a new division within the Clothing & Home business MS2 to
maximise online growth. MS2 inverts the model to create a single
integrated online, digital and data team within Clothing & Home
supported by our stores and a refocused product supply engine.
MS2 will bring together online, data and digital trading
capabilities under a single team trading at a faster pace with
range and availability adapted to the online model. The group will
be led jointly by Richard Price and Katie Bickerstaffe with a
mandate to compete as a 'pure play'. It will include:
-- A step change in online product, presentation, pricing and
social marketing including recognition that the online business
will need a focused range
-- A mandate to ensure we move towards more rapid fulfilment,
investing in and expanding Castle Donington capacity
-- Maximum usage of one of the best customer databases in the UK
to drive digital customer engagement and build loyalty following
the Sparks relaunch which has built to over 8m members
-- A reinvented M&S App at the centre of online growth
initiatives, building on the 1.5m downloads since the relaunch of
Sparks and completely repositioning M&S financial and other
services
-- Creating a seamless "order online-order in store" approach by
bringing a new click and collect and digital sales experience into
five test and learn stores
-- A commitment to drive growth in our International business
through online propositions more aggressively at pace. Our
International eCommerce operations will be brought into MS2 so they
are managed alongside the UK business instead of being operated as
separate channels
-- Growing a curated portfolio of brand partnerships following the launch of Nobody's Child.
-- All of this will be supported by the work being done on our
end-to-end supply chain so that we're set up to deliver as a true
omnichannel business.
Over three years our ambition is to achieve an online sales mix
of at least 40%.
International Franchise and online contribution offset Covid
pressures
Total International revenue declined 25.5% in the period
reflecting the impact of lockdowns in multiple geographies in
quarter one, peaking with the closure of 84% of all international
stores and progressive reopening in quarter two. These impacts were
partly offset by an International online sales increase of
75.4%.
Operating profit before adjusting items of GBP19.7m reflected
the impact of lockdown in key owned markets such as India, where
the closures were prolonged, and in Ireland. This was offset by
resilient profit from franchise operations and a rapidly growing
income stream online.
Transformation priorities
Through the crisis the capital light franchise and partner
driven International model continues to work well. Our priority is
to focus on developing online and partner sales globally. In the
period, this included the launch of 6 dedicated flagship websites
and the launch of M&S product on third party sites such as
Zalando. In addition we are supporting partner growth with an
increasingly localised proposition and fulfilment.
Shifting gears on store estate for the future
During the crisis, the business has demonstrated that it can use
technology to communicate effectively and work more flexibly and
productively. This has enabled colleagues multi-tasking and
transitioning between Food and Clothing & Home and focusing on
front line customer service. In August, the group announced a
programme to streamline its store operations, regional management
structures and support centres, which is now complete generating
annualised cost savings of at least GBP115m helping us emerge from
the crisis with a more productive business.
Covid has also underlined the imperative to continue to drive
the modernisation of the store estate as many of the modern retail
park stores with good parking outperformed but the business has
been held back by the legacy estate: We now have a long term
programme to catch up on the task of rotating the estate and
releasing cash from the group's freehold and leasehold asset base
to manage liability and reduce cost. During the period (three) new
full line stores were successfully launched, five Simply Food
stores were opened and 10 stores were closed. (11) leases were
re-geared with an average (34%) rent reduction.
Plan A
As the world emerges from the crisis, we believe customers will
look to brands they can trust and have confidence in to offer
quality and value through trading ethically. During the first half
of the year, our Plan A programme focused on managing the impact of
Covid on the most vulnerable and healthcare workers. Highlights of
the programme in the period included:
-- Raising over GBP8m for NHS staff, volunteers and patients
through the Rainbow sale in Clothing & Home, which helped trade
through the surplus seasonal stock
-- Redesigning packaging to remove unnecessary plastic such as
carton lids, light weighting to use less plastic and making
packaging easier to recycle with new bakery bags and sandwich packs
that are recyclable
-- Enhancing our climate change commitments from carbon neutral
operations today to net zero emissions by 2035
-- Replacing soya feed in M&S RSPCA Assured milk avoiding
4,000 tonnes being used each year. We also highlighted the
sustainability credentials of over 4,000 products on
M&S.com
-- Working with our longstanding partner, Neighbourly, we have
helped to put more than 6 million meals on the table for those who
need it most by working with 1,500 local community groups
Net debt reduced with substantial available liquidity of
GBP1.4bn, providing resistance against further disruption
At the start of the year the group outlined a Covid-19 scenario
for liquidity planning purposes which anticipated peak drawings on
its credit facilities in excess of GBP650m at half year reducing to
GBP300-350m at year end. A combination of stronger trading than the
scenario, concerted action on cash management and reduced costs has
resulted in substantial outperformance of the liquidity scenario
with cash generation and a reduction in debt at the half. The group
has substantial liquidity comprising GBP286m of cash at the half
year and GBP1.1bn of committed facilities which are undrawn,
positioning it well for the remainder of the year and for the
medium term.
Preparedness for Brexit
Our plans for the transition period ending 31 December 2020 are
well advanced. Preparations have covered both the changes required
for the transition, and further activity and mitigation in the
event no Free Trade Agreement deal is signed with the EU.
A key focus in Food has been managing the administrative changes
to import from the EU and moving goods from Great Britain to
Northern Ireland and our European markets. We have invested in
technology that will support us in tracking goods and providing the
information required for the new customs and certification
requirements. For goods inbound to the UK from the EU we are
working with suppliers on import compliance to ensure continuity of
supply. We have also created a single export centre in Motherwell
to manage goods movements from Great Britain to the island of
Ireland.
The increased administration will result in additional costs for
both our Food and International businesses. If no Free Trade
Agreement is signed with the EU there will be further costs for all
food retailers in the UK which will likely affect retail pricing.
There would also be a potential further reduction in the
profitability of our International businesses. In particular this
could have a material impact on our businesses in the Republic of
Ireland and the Czech Republic and on our franchise food stores
business in France.
The impact on the Clothing & Home business is much less than
on Food. We have taken steps to mitigate any tariffs on inbound
supply by establishing a customs warehouse and on ensuring business
continuity in Northern Ireland and the Republic of Ireland by
ensuring product labelling meets UK and EU requirements.
Outlook
There remains significant uncertainty regarding the near-term
outlook in relation to both Covid and Brexit. Trading in the first
four weeks of the second half has continued at similar rates to the
end of Q2, with Food revenue up 3.0%, C&H revenue down 21.5%
and International revenue up 7.4% due to the timing of
shipments.
Although trading strongly, the business is entering a period of
new Covid-related restrictions including the proposed circuit
breaker lockdown. This will impact C&H profit as store sales
are significantly reduced, albeit offset by increased online sales
and reduced costs supported by furlough income. Prior to this
impact our planning assumption for the balance of H2 in Clothing
& Home was for similar sales trends to the first few weeks of
H2. We enter this period with C&H stock levels down by more
than GBP100m on last year and with less stock hibernated to next
Spring than previously envisaged.
The group has made substantial plans to ensure customers can
shop with confidence this Christmas, including the expansion of the
teams to serve online orders by 30% in Castle Donington and an
increase in-store picking capacity and the introduction of the book
and shop app to help eliminate the requirement to queue over peak.
We have also invested behind product lines which will provide
flexible options for smaller gatherings.
Throughout this uncertain period and as we start to emerge from
the crisis, our financial priority is to fund the transformation
while focusing on generating cash and strengthening the balance
sheet. Our objective is to ensure the business emerges from these
uncertainties in a stronger, leaner and more focused position and
with balance sheet metrics consistent with investment grade in the
medium term.
We expect to report a third quarter trading update on 8 January
2021.
For further information, please contact:
Investor Relations:
Fraser Ramzan: +44 (0)20 3884 7080
Hannah Chambers: +44 (0)20 3882 4714
Media enquiries:
Corporate Press Office: +44 (0)20 8718 1919
Investor & Analyst presentation and Q&A:
A pre-recorded investor and analyst presentation will be
available on the Marks and Spencer Group plc website from 8.00am on
4 November 2020.
Steve Rowe and Eoin Tonge will host a Q&A session at 9.30am
on 4 November 2020:
Dial in number: +44 33 0606 1122 Room Number: 016384 Pin: 7140
Fixed Income Investor Conference Call:
This will be hosted by Eoin Tonge, Chief Finance Officer, at 2pm
on 4 November 2020:
Dial in number: +44 33 0606 1122 Room Number: 753824 Pin: 7026
International Access Numbers
US: +1 646 813 7960
ITFS: International Access Numbers
A recording of this call will be available until 5pm on 11th
November 2020:
Dial in number: +44 33 0606 1122 Access code: 186855
HALF YEAR FINANCIAL REVIEW
Financial Summary
26 weeks ended 26 Sep 20 28 Sep 19 Change 28 Mar
Restated 20
GBPm GBPm %
GBPm
-------------------------------- ----------------------- ---------- ------- ----------
Group revenue before adjusting
items 4,102.1 4,860.9 -15.6 10,181.9
UK Food 2,838.6 2,845.8 -0.3 6,028.2
UK Clothing & Home 917.2 1,550.4 -40.8 3,209.1
International 346.3 464.7 -25.5 944.6
Group operating profit
before adjusting items 61.8 269.9 -77.1 590.7
UK Food 109.7 92.2 19.0 236.7
UK Clothing & Home (107.5) 109.6 - 223.9
International 19.7 55.8 -64.7 110.7
M&S Bank and services 1.1 12.9 -91.5 16.8
Share of result in associates
and joint ventures 38.8 (0.6) - 2.6
Interest on leases (62.2) (68.3) 8.9 (133.4)
Net financial Interest (17.0) (25.3) 32.8 (54.2)
(Loss)/profit before tax
& adjusting items (17.4) 176.3 - 403.1
Adjusting items (70.2) (17.5) - (335.9)
(Loss)/profit before tax (87.6) 158.8 - 67.2
(Loss)/profit after tax (71.6) 122.4 - 27.4
Basic (loss)/earnings per
share (3.5)p 6.4p - 1.3p
Adjusted basic (loss)/earnings
per share (0.4)p 7.1p - 16.7p
Dividend per share - 3.9p - 3.9p
Net debt GBP3.91bn GBP4.14bn -5.6 GBP4.03bn
-------------------------------- ----------------------- ---------- ------- ----------
Notes:
There are a number of non-GAAP measures and alternative profit
measures "APM", discussed within this announcement and a glossary
and reconciliation to statutory measures is provided at the end of
this report. Adjusted results are consistent with how business
performance is measured internally and presented to aid
comparability of performance. Refer to adjusting items table below
for further details.
Group results
Group revenue decreased 15.6%. UK revenue declined 14.6% driven
by Clothing & Home and International revenue declined 25.5%. As
a result the group generated an adjusted loss before tax of
GBP17.4m and a statutory loss before tax of GBP87.6m.
Statutory loss before tax includes total charges for adjusting
items of GBP70.2m including charges of GBP92.1m related to
organisation restructure and a GBP49.4m stock related credit
representing the partial release of the provision established at
FY19/20 as directly attributable to Covid following better than
expected trading results. For full details on adjusting items and
the group's related policy see notes 1 and 3 to the financial
information.
The following items related to the Covid pandemic contributed a
total of GBP10m to the adjusted loss before tax.
Items relating to Covid within Group C&H Food International
adjusted loss before tax GBPm GBPm GBPm GBPm
-------------------------------- -------- -------- ------- --------------
Salary costs for colleagues
on furlough (149.9) (109.9) (32.6) (7.4)
Government grants - furlough
income 97.6 72.6 21.6 3.4
Bonuses for non-furloughed
colleagues (26.7) (5.6) (21.0) (0.1)
Estimated lower colleague
holiday hours 19.4 7.3 12.1 -
Business rates relief 83.7 49.2 34.5 -
Operational costs related
to Covid (34.1) (7.7) (26.4) -
-------------------------------- -------- -------- ------- --------------
Total adjusted loss impact (10.0) 5.9 (11.8) (4.1)
-------------------------------- -------- -------- ------- --------------
Reporting of accountable businesses
In FY 2019/20, the Group completed a comprehensive review of the
way operating costs are allocated, allowing management to review
the operating profit of each business. As a result, the Group now
recognises three operating segments, being UK Clothing & Home,
UK Food and International (previously UK and International). This
allows the financial information to align to the way the business
is managed and holds leadership appropriately to account.
The review has resulted in for the half year ended 28 September
2019 a reallocation of GBP6.8m of central costs from the previous
UK segment to International (GBP5.8m) and M&S Bank (GBP1.0m).
In addition, certain M&S.com flagship websites, which last year
generated GBP19.1m of revenue and GBP1.7m of operating profit
before adjusting items have been reclassified from UK Clothing
& Home to International.
UK: Food
UK Food revenue decreased 0.3% with the decline attributable to
the initial effects of lockdown in April which was followed by an
improving trend in performance from quarter one to quarter two.
Revenue was adversely impacted by the closure of franchise stores
in travel locations and hospitality and café areas within stores.
Like for like revenue grew in both quarters.
% change to LY Q1 Q2 H1
-------------------- -------------------- ----------- -----------
Food -2.1 1.6 -0.3
Food LFL 2.0 3.4 2.7
Food LFL ex hospitality 6.7 6.5 6.6
Operating profit before adjusting items increased 19.0%, largely
due to reduced costs which more than offset an adverse mix impact
on gross margin.
28 Sep 19
26 Sep 20 Restated Change %
26 weeks ended GBPm GBPm
----------------------------- ----------- ----------- -----------
Revenue 2,838.6 2,845.8 -0.3
Operating profit before
adjusting items 109.7 92.2 19.0
Operating margin 3.9% 3.2% 70bps
The table below sets out the drivers of the movement in
operating profit before adjusting items.
GBPm
------------------------------ -------
19/20 operating profit 92.2
Gross profit (25.5)
Store staffing 8.8
Other store costs 32.7
Distribution and warehousing (16.9)
Central costs 18.4
------------------------------ -------
20/21 operating profit 109.7
------------------------------ -------
-- Gross profit decreased GBP25.5m or c.80bps. This was driven
by an adverse mix impact of an estimated 140bps as a result of the
shift in sales from hospitality and food on the move and into
categories such as milk, fish and poultry, grocery and produce,
which was partly offset by cost saving programmes including initial
synergies from Ocado supply
-- The reduction in gross profit was more than offset by
operating cost savings. Overall we incurred GBP67.9m of costs
relating to Covid which were offset by GBP56.1m of government
support measures
-- The reduction in Store staffing costs was driven by in store
operational efficiencies including increased flexibility and
permanent changes to ways of working partly helped through the
prior investment in front-line tech enabled communication. We
incurred GBP68.1m of costs relating to furloughed colleagues, staff
bonuses for working through lockdown and the costs of additional
door hosts which was partly offset by furlough support and the
benefit of lower holiday hours in the period
-- The movement in other store costs largely relates to business rates relief of GBP34.5m
-- Distribution costs increase driven by delivery costs of
strong online orders of flowers and wine and additional costs
related to cleaning and social distancing in depots
-- The reduction in central costs was largely driven by lower marketing activity.
UK: Clothing & Home
Clothing & Home revenue decreased 40.8% as a result of the
impact of lockdown on store sales in quarter one, with improved
performance following reopening in quarter two. Following initial
disruption in April, online sales remained strong throughout the
period supported by lower returns rates. There was a substantial
shift from office dressing and formalwear , into casual adult
clothing, while kids, home and beauty also performed well
online.
% change to LY Q1 Q2 H1
-------------------- -------------------- ----------- -----------
Clothing & Home -61.5 -21.3 -40.8
Clothing & Home stores -83.8 -39.5 -61.1
Clothing & Home online 21.5 46.4 34.3
Clothing & Home LFL -59.3 -21.2 -39.3
Full price sales decreased 43.4% with discounted sales
outperforming total sales as the Group's 'Rainbow sale' helped
clear surplus stock, particularly in store and generated an GBP8m
charitable donation to NHS charities.
The business generated an operating loss before adjusting items
of GBP107.5m. While online growth resulted in a substantial
improvement in online contribution margin, this was more than
offset by the decline in stores.
26 weeks ended 26 Sep 20 28 Sep 19
GBPm restated Change %
GBPm
------------------------- ---------- ---------- -----------
Revenue 917.2 1,550.4 -40.8
Operating (loss)/profit
before adjusting items (107.5) 109.6 -
Operating margin -11.7% 7.1% -
The table below sets out the drivers of the movement in Clothing
& Home operating (loss)/profit before adjusting items.
C&H
GBPm
------------------------------ --------
19/20 operating profit 109.6
Gross Profit (389.1)
Store staffing 80.0
Other store costs 54.7
Distribution and warehousing (5.7)
Central costs 43.0
------------------------------ --------
20/21 operating (loss) (107.5)
------------------------------ --------
-- Gross profit decreased GBP389.1m or 310bps. While buying
margin increased 20bps driven by reduced input costs, the margin
decline was largely a result of the closure of stores in quarter
one and the resulting increased weight of discounted sales as
surplus stock sold through at better than expected rates post
lockdown
-- The decrease in gross profit was partially offset by actions
to lower costs. Overall, we incurred GBP115.9m of costs relating to
Covid which were offset by GBP121.8m of government support
measures
-- Store staffing costs reduced driven by in store operational
efficiencies including permanent changes to ways of working partly
helped through the prior investment in front-line tech enabled
communication. We incurred GBP108.6m of costs relating to
furloughed colleagues, staff bonuses for working through lockdown
and the costs of additional door hosts which was partly offset by
furlough support and the benefit of lower holiday hours in the
period
-- Other store costs reduced due to business rates relief of
GBP49.2m as well as utility savings in Clothing & Home space
closed off during lockdown
-- Distribution and warehousing increased by GBP5.7m with higher
costs to serve online demand both from the Castle Donington
warehouse and in-store partially offset by volume savings from
reduced deliveries to store. The overall increase in distribution
and warehousing costs was offset by delivery income within
revenue
-- The decline in central costs was largely driven by lower
marketing activity and a reduction in depreciation of technology
assets as we move to cloud-based solutions.
International
International revenue decreased 24.7% at constant currency with
stores in both owned and franchise markets adversely impacted by
Covid restrictions in quarter one, followed by a subsequent
improvement following reopening in quarter two. Online sales
remained strong throughout, particularly in markets in which the
group has a store presence and through partner websites.
% change to LY Q1 Q2 H1 H1
CC CC Reported CC
---------------------- ------ ----- ---------- ------
International -40.7 -9.2 -25.5 -24.7
International online 91.9 61.8 75.4 76.6
26 weeks ended 28 Sep 19
26 Sep 20 Restated Change Change
Revenue GBPm GBPm % CC %
------------------ ------------- ---------- ------------- ---------
Franchise 144.2 191.6 -24.7 -24.4
Owned 202.1 273.1 -26.0 -24.9
Total 346.3 464.7 -25.5 -24.7
------------------ ------------- ---------- ------------- ---------
Operating profit before adjusting items
--------------------------------------------- -------------
Franchise 23.0 32.3 -28.8
Owned 2.3 29.3 -92.2
Corporate costs (5.6) (5.8) 3.4
Total 19.7 55.8 -64.7
------------------ ------------- ---------- -------------
Within the owned business, India was heavily impacted by strict
lockdown measures and the weighting of the business towards
Clothing & Home. In European markets the Republic of Ireland
and Czech Republic benefited from their more resilient Food
offering and strong online growth. Franchise profits reflect the
decline in shipments as partners managed stock positions in the
face of restricted trading.
Operating profit before adjusting items decreased 64.7%, with
resilient franchise profitability and online contribution helping
to partly mitigate the impact of lower sales in owned markets.
Covid related costs of GBP7.5m largely relating to colleagues on
International staff support schemes were partially offset by
government support of GBP3.4m. In addition, in owned markets the
result benefited from GBP4.6m of both government and landlord rent
relief.
Ocado Retail Limited
The Group holds a 50% interest in Ocado Retail Ltd ("Ocado").
The remaining 50% interest is held by Ocado Group plc ("Ocado
Group"). H alf year results are consistent with the quarterly
results reported by Ocado Group on behalf of Ocado Retail for the
quarterly periods ended 31 May 2020 and 30 August 2020.
Group share of consolidated results of Ocado Retail Limited
26 weeks to
30 August
20
GBPm
--------------------------------- ------------
Revenue 1,167.7
EBITDA before exceptional items 89.1
Exceptional items 28.5
Operating profit 100.5
Profit after tax 77.6
--------------------------------- ------------
M&S 50% share of profit 38.8
--------------------------------- ------------
Ocado Retail Limited is reported as an associate of M&S as
certain rights are conferred on Ocado Group plc for an initial
period of at least five years from acquisition. Exceptional items
are defined within the Ocado Group plc Annual Report and
Accounts
Retail revenue grew 47.9% as the channel shift to online grocery
in the UK continues. While order size began to normalise from Covid
related peaks, it remained above pre pandemic levels, with orders
per week increasing to 345,000 in the second quarter as a result of
a combination of strong demand, a phased re-opening of the website
to new customers, and a normalisation of shopping patterns.
Ocado Retail EBITDA before exceptional items was GBP89.1m,
driven by strong revenue growth and cost performance reflecting a
period of sustained high demand. Units per hour throughput (UPH)
increased in customer fulfilment centres (CFCs), driven mainly by
improvements at Erith CFC. Trunking and delivery costs as a percent
of sales were lower despite frontline worker bonuses and reduced
deliveries per van, as a result of higher items per basket.
Finally, the business had reduced marketing activity as a result of
increased demand caused by Covid.
In addition Ocado Retail has recognised GBP28.5m of exceptional
income before tax related to anticipated insurance receipts for
business interruption for the period up to 30 August 2020 arising
from the Andover fire in 2019, the value of which increased as a
result of Covid.
As a result of strong EBITDA growth and insurance receipts,
Group share of Ocado Retail profit after tax for the period was
GBP38.8m. After a charge of GBP7.1m in adjusting items relating to
the amortisation of the intangibles on the investment, Ocado Retail
contributed GBP31.7m to Group profit after tax.
This continuing strong performance was reflected in the
increased full year guidance by Ocado Group plc in its trading
update on 2 November 2020.
M&S Bank and services
M&S Bank and services income before adjusting items was down
GBP11.8m to GBP1.1m. This was the result of the increase in bad
debt forward economic guidance provisions recognised due to the
Covid impact on unemployment forecasts as well as a significant
decrease in income from credit card income and travel money sales.
M&S Bank and services income after adjusting items relating to
PPI decreased GBP2.5m to GBP(0.3)m.
Net finance cost
26 weeks ended 52 weeks
ended
---------------------------------- ---------------------- ------- ----------
26 Sep 20 28 Sep 19 Change 28 Mar 20
Restated
GBPm GBPm GBPm GBPm
---------------------------------- ---------- ---------- ------- ----------
Interest payable (38.0) (42.6) 4.6 (80.5)
Interest income 1.3 6.0 (4.7) 8.6
Net interest payable (36.7) (36.6) (0.1) (71.9)
Pension net finance income 22.8 11.3 11.5 23.6
Unwind of discount on Scottish
Limited Partnership liability (2.4) (3.4) 1.0 (6.9)
Unwind of discount on provisions (1.3) (2.5) 1.2 (4.9)
Ineffectiveness on financial
instruments 0.6 5.9 (5.3) 5.9
Net financial interest (17.0) (25.3) 8.3 (54.2)
Net interest payable on
lease liabilities (62.2) (68.3) 6.1 (133.4)
Net finance costs (79.2) (93.6) 14.4 (187.6)
---------------------------------- ---------- ---------- ------- ----------
Net finance costs decreased GBP14.4m to GBP79.2m. This was
primarily due to higher pension income due to the increased IAS19
pension surplus at last year end of GBP1,902.6m. In addition, there
was a decrease in the interest payable on lease liabilities and
lower interest payable on debt due to the refinancing of the 2019
bond.
Group loss before tax
Group loss before tax was GBP87.6m, down GBP246.4m on last year.
This includes adjusting items of GBP70.2m (last half year
GBP17.5m).
Group loss before tax & adjusting items
Group loss before tax and adjusting items was GBP17.4m, down
GBP193.7m on last year. The profit decrease was due to the decline
in Clothing & Home and International operating profits
reflecting the impact of Covid related social distancing measures
and reduced footfall.
Adjustments to loss before tax
Consistent with previous years, the Group makes certain
adjustments to statutory profit measures in order to derive
alternative performance measures that provide stakeholders with
additional helpful information and to aid comparability of the
performance of the business. For further detail on these
charges/gains and the Group's policy for adjusting items please see
notes 1 and 3 to the financial information.
26 weeks ended 52 weeks ended
--------------------------------------------------------------------- ---------------------- ------- --------------
26 Sep 20 28 Sep 19 Change 28 Mar 20
Restated
GBPm GBPm GBPm GBPm
--------------------------------------------------------------------- ---------- ---------- ------- --------------
Strategic programmes - Organisation (92.1) (11.3) (80.8) (13.8)
Directly attributable to Covid-19 49.4 - 49.4 (163.6)
Sparks loyalty programme transition (15.3) - (15.3) -
Amortisation and fair value adjustments arising from the investment
in Ocado Retail Limited (7.1) - (7.1) (16.8)
Strategic programmes - UK store estate (2.9) (9.9) 7.0 (29.3)
Remeasurement of contingent consideration including discount unwind 1.0 - 1.0 (2.9)
Establishing the investment in Ocado Retail Limited (1.7) - (1.7) (1.2)
M&S Bank charges incurred in relation to insurance mis-selling and
Covid-19 forward economic
guidance provision (1.4) (10.7) 9.3 (12.6)
Strategic programmes - Other (0.1) (9.1) 9.0 (27.3)
Store impairments and other property charges - - - (78.5)
Goodwill impairment - per una - - - (13.4)
Other - 23.5 (23.5) 23.5
Adjusting items (70.2) (17.5) (52.7) (335.9)
--------------------------------------------------------------------- ---------- -------
A charge of GBP92.1m has been recognised in relation to the
Group's plan to integrate more flexible management structures into
store operations as well as streamline the business at store and
management level as part of the 'Never the Same Again' programme
which resulted in a reduction of c.7,950 roles across central
support centres, regional management, and our UK stores.
A gain of GBP49.4m has been recognised as being directly
attributable to the Covid pandemic relating to the release of a
portion of the inventory provision offset by further costs relating
to cancellations and storage. The sell through of Clothing &
Home stock has been much stronger than anticipated assisted by the
Rainbow sale for NHS Charities resulting in a write back of
inventory provisions and to align with our latest estimates of net
realisable value based on current sales performance.
Charges of GBP15.3m have been incurred in relation to the
one-off transition costs associated with the closure of the old
Sparks loyalty programme following the launch of the new programme
in July 2020.
A charge of GBP7.1m has been recognised relating to the
amortisation of intangible assets acquired on the purchase of our
share in Ocado Retail.
A charge of GBP2.9m has been recognised in relation to store
closures identified as part of transformation plans reflecting an
updated view of latest store closure costs. Further material
charges relating to the closure and re-configuration of the UK
store estate are anticipated as the programme progresses with total
future charges of up to c.GBP120m estimated within the next seven
financial years.
A charge of GBP1.7m relating to establishing the investment in
Ocado Retail Limited has been incurred. These charges related to
preparations for the launch of M&S products being sold on the
Ocado platform from 1 September 2020.
Charges of GBP1.4m have been incurred relating to M&S Bank,
primarily relating to the insurance mis-selling provision. The
Group's share of the total insurance mis-selling provisions of
GBP358.7m exceeds the total offset against profit share of
GBP244.1m to date and this deficit will be deducted from the
Group's share of future profits from M&S Bank.
Taxation
The effective tax rate on profit before adjusting items was
27.0% (last half year 23.1%). Given the lower anticipated level of
profits, the effect of the recapture of previous tax relief under
the Marks and Spencer Scottish Limited Partnership ("SLP")
structure has increased compared with previous years. The effective
tax rate on statutory profit before tax was 18.3% (last half year
22.9%) due to the impact of disallowable adjusting items.
Loss/Earnings per share
Basic loss per share was (3.5)p (last half year earnings of
6.4p), due to the decrease in profit year-on-year and the increase
in weighted average shares outstanding. The weighted average number
of shares in issue during the period was 1,951.7m (last half year
1,840.2m).
Adjusted basic loss per share was (0.4)p (last half year
earnings of 7.1p) due to lower adjusted profit year-on-year and the
increase in weighted average shares outstanding.
Capital expenditure
26 weeks ended 28 Sep 20 28 Sep 19 Change
GBPm GBPm GBPm
------------------------------------- ---------- ---------- -------
UK store remodelling 3.6 22.8 (19.2)
New UK stores 9.0 15.6 (6.6)
International 2.3 4.2 (1.9)
Supply chain 10.4 18.6 (8.2)
IT & M&S.com 23.9 32.3 (8.4)
Property asset replacement 5.1 28.2 (23.1)
Capital expenditure before
disposals 54.3 121.7 (67.4)
Property acquisitions and disposals 1.1 (1.5) 2.6
Capital expenditure 55.4 120.2 (64.8)
------------------------------------- ---------- ---------- -------
Group capital expenditure before disposals decreased GBP67.5m to
GBP54.3m as a result of a decision to halt all non-essential
spending during the pandemic.
The higher UK store remodelling spend last year largely
reflected the investment in three trial renewal stores. Spend on UK
store space was down due to the timing of store openings year on
year.
Supply chain expenditure reflects investment in Food equipment
to support anticipated volume growth and spend on improvements to
Castle Donington capabilities to ensure readiness for peak trading
during Covid.
IT and M&S.com spend related to the licence for the Food
ordering and allocation system and investment in digital
capability. Property asset replacement decreased GBP23.1m due to
the prior year asset replacement programme in stores.
Cash flow & net debt
26 weeks ended 52 weeks ended
------------------------------------------------------ ------------------------------ -------- ---------------
26 Sep 20 28 Sep 19 Change 28 Mar 20
Restated
GBPm GBPm GBPm GBPm
------------------------------------------------------ ---------- ------------------ -------- ---------------
Adjusted operating profit 61.8 269.9 (208.1) 590.7
Depreciation and amortisation before adjusting items 306.1 315.9 (9.8) 632.5
Cash lease payments (129.1) (159.2) 30.1 (335.7)
Working capital 75.0 (67.7) 142.7 (48.5)
Defined benefit scheme pension funding (36.2) (36.5) 0.3 (37.9)
Capex and disposals (132.6) (149.1) 16.5 (325.9)
Financial interest and taxation (38.4) (86.4) 48.0 (171.1)
Investment in associate Ocado Retail Limited 11.5 (577.6) 589.1 (577.8)
Investment in Joint Venture (2.5) (2.9) 0.4 (2.5)
Employee related share transactions 6.9 1.8 5.1 9.7
Proceeds from rights issue net of costs - 583.2 (583.2) 574.4
Share of (profit)/loss from associate (38.8) 0.5 (39.3) (2.6)
Cash received from settlement of derivatives 12.7 - 12.7 7.7
Adjusting items outflow (18.8) (68.6) 49.8 (88.0)
Free cash flow 77.6 23.3 54.3 225.0
Dividends paid - (115.1) 115.1 (191.1)
Free cash flow after shareholder returns 77.6 (91.8) 169.4 33.9
Exchange and other non-cash movements (13.1) 4.4 (17.5) 0.8
Change in net financial debt 64.5 (87.4) 151.9 34.7
Decrease in lease obligations 77.5 90.2 (12.7) 201.4
New lease commitments (11.5) (55.8) 44.3 (204.1)
Exchange and other non-cash movements on leases (12.0) (10.0) (2.0) 18.2
Opening net debt (4,025.2) (4,075.4) 50.2 (4,075.4)
Closing net debt (3,906.7) (4,138.4) 231.7 (4,025.2)
------------------------------------------------------ ---------- ------------------ -------- ---------------
The business generated free cash flow of GBP77.6m largely driven
by lower working capital, reduced lease payments due to timing,
lower tax payments and lower adjusting items offset by a lower
adjusted operating profit.
The working capital inflow since year end 2019/20 was driven by
the extension of payment terms for Clothing and Home suppliers and
a reduction in Food franchise receivables as a result of travel
store closures.
Lower capital expenditure reflects the decision to halt
non-essential spend during the Covid pandemic. Cash capital
expenditure includes GBP77.2m relating to prior year capital
accruals.
The decrease in financial interest and tax payments of GBP48.0m
is due to the fact that no UK corporation tax has been paid
reflecting the half year taxable loss position.
Defined benefit scheme pension funding of GBP36.2m reflects the
second limited partnership interest distribution to the pension
scheme.
Adjusting items cash outflow was GBP18.8m. This included GBP5.6m
in relation to the transition to the new Sparks loyalty programme,
GBP4.7m in relation to the store closure programme, GBP2.9m
relating to Head office restructure, GBP1.7m relating to costs
associated with the launch of M&S product on the Ocado Retail
platform, GBP1.4m for M&S Bank and GBP1.1m paid for deep
storage during the Covid pandemic.
Net financial debt decreased GBP64.5m from the start of the
year. The group currently has GBP1,386m of total cash and committed
credit facilities which are undrawn.
There was a further reduction in the value of discounted lease
obligations outstanding. New lease obligations capitalised in the
period of GBP11.5m is largely as a result of the new ambient Food
depot. This was more than offset by GBP77.5m of lease
repayments.
Of the outstanding discounted lease commitment at period end
approximately 41% related to Full line stores and 30% to Simply
Food stores with the balance largely relating to warehousing and
offices.
Dividend
We did not pay a final dividend for 2019/20 and the board has
announced the decision not to pay a dividend for the 2020/21
financial year.
Pension
At 26 September 2020, the IAS 19 net retirement benefit surplus
was GBP890.0m (GBP1,902.6m at 28 March 2020). The surplus at last
year end had increased significantly due to unusually high credit
spreads due to the impact of Covid. During the half year period,
credit spreads have reverted to more normalised levels giving rise
to the decrease in the surplus.
In September 2020, the Scheme purchased additional pensioner
buy-in policies with two insurers for approximately GBP750m.
Together with the policies purchased in April 2019 and March 2018,
the Scheme has now, in total, insured around 80% of the pensioner
cash flow liabilities for pensions in payment. The buy-in policies
cover specific pensioner liabilities and pass all risks to an
insurer in exchange for a fixed premium payment, thus reducing the
Group's exposure to changes in longevity, interest rates, inflation
and other factors.
Statement of financial position
Net assets were GBP2,712.5m at the half year end, a decrease of
26.9% since the start of the year largely due to the decrease in
the net retirement benefit surplus.
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 forward-looking statements are subject to
various risks and uncertainties, including, but not limited to,
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 including, but not limited to, those related to
the Covid-19 pandemic 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 regarding risks to Marks
& Spencer's business, please consult the risk management
section of the 2020 Annual Report (pages 33-42).
The forward-looking statements contained in this document speak
only as of the date of this announcement, and Marks & Spencer
does not undertake to update any forward-looking statement to
reflect events or circumstances after the date hereof or to reflect
the occurrence of unanticipated events.
- Ends -
Principal risks and uncertainties
The principal risks and uncertainties which could impact the
Group's long-term performance and additional information on the
impact of Covid-19 on the Group's risk profile were set out on
pages 33-42 of the Group's 2020 Annual Report and Financial
Statements, along with mitigating activities relevant to each risk.
Information on financial risk management was also set out on pages
152-162. A copy of the 2020 Annual Report and Financial Statements
is available on the Group's website www.marksandspencer.com. An
update on this disclosure is set out below.
Covid-19
The Annual Report identified specific changes to our risk
profile as a consequence of the Covid-19 pandemic. In summary, it
explained how a failure to effectively respond to the trading,
operational, legal and financial consequences of the Covid-19
pandemic in the short term or during the course of a prolonged
outbreak would adversely impact business performance.
The Covid-19 specific risks relating to Protection of customers
& colleagues, Store portfolio management and Post-crisis
recovery have not changed since the publication of the Annual
Report and Financial Statements.
The Covid-19 specific risks which have evolved since publication
of the Annual Report relate to Liquidity, Clothing & Home
Inventory Management and Strategic realignment.
Liquidity: At the start of the year the group outlined a
scenario for liquidity planning purposes which anticipated peak
drawings on its credit facilities in excess of GBP650m at half year
with a GBP300-350m increase at year end. However, a combination of
stronger trading, concerted action on cash management and reduced
costs has resulted in substantial outperformance of the scenario.
This has resulted in net cash generation and a reduction in debt at
the half year, with committed facilities undrawn. While these
activities have had a positive impact, the risk of significantly
reduced trading over an extended and currently undetermined
timeframe remains and could impact the business's ability to
operate within committed credit facilities.
Clothing & Home Inventory Management: The Annual Report
noted 'A failure to effectively manage the implications of the
lockdown period on all aspects of the Clothing & Home supply
chain and inventory management would adversely impact customer
experience, trading performance, liquidity, operational efficiency
and third-party relationships for an extended period'. Actions
taken by our sourcing teams to manage orders, better than
anticipated performance to clear stock lines and implementation of
deep storage plans have improved the risk position since the year
end. However, the continued uncertainty around the future impact of
Covid-19 on customer behaviours and trading conditions means that
while reduced, unpredictability of the impact on inventory
valuation remains.
Strategic realignment: The Annual Report noted ' An inability to
define and successfully implement a revised strategy to rapidly
respond to a post-Covid world and the associated changes in
customer behaviours and operational requirements would
significantly undermine the transformational imperatives of the
business'. Significant progress has been made in the period since
to align the strategic priorities through the Never The Same Again
programme particularly around the focus of online activities. While
significant strategic and planning progress has been made since
year end, this remains a risk factor as we transition to
implementation.
The Covid-19 pandemic may continue to have a significant impact
on the business and amplify the existing principal risks and
uncertainties as set out below. This now includes the potential
consequences of a second period of lockdown in the UK or in our
international markets.
Principal risks and uncertainties
The directors do not consider the following principal risks and
uncertainties to have changed since the publication of the Annual
Report for the year ended 28 March 2020:
-- Trading performance recovery
-- Business transformation
-- Liquidity & funding
-- Food safety and integrity
-- Corporate compliance and responsibility
-- Information security
-- Business continuity and resilience
-- Third-party management
-- Talent, culture and capability
-- Technology capability
-- Brand, loyalty and customer experience
The following principal risks and uncertainties have changed
since the publication of the Annual Report:
Brexit
The Annual Report included a principal risk linked to the UK's
exit from the European Union, specifically 'An inability to quickly
identify and effectively respond to the challenges of a post-Brexit
environment could have a significant impact on performance across
our business.' While this remains applicable, the continued delay
in agreeing the terms of the UK's departure from the European Union
has elevated the risk of a 'no deal' exit and, consequently,
increased the likelihood of more severe operational and economic
challenges for both our UK and international business activities
following the end of the transitional period than would have
occurred under an orderly exit. The potential implications for the
business include:
-- Deterioration in customer sentiment
-- Operational complexity and cost due to restrictions on the
movement of goods and stricter border controls (including the
movement of goods between Great Britain and Northern Ireland)
-- Costs passed through from our suppliers
-- Continuity of supply and supplier viability
-- The imposition of import and export duties
-- Additional regulatory responsibilities and costs
-- Increased complexity and cost in our international
operations, particularly in the Republic of Ireland, the Czech
Republic and our franchise activities in France.
The mitigating activities remain consistent with those disclosed
in the Annual Report.
Ocado Retail Investment
The Annual Report and accounts included a risk related to the
launch of M&S food products on-line through the investment in
Ocado Retail Limited. Specifically, the risk had identified that 'A
failure to effectively execute the launch of M&S products for
Ocado Retail would significantly impact the achievement of our
strategy to take our food online in a profitable, scalable and
sustainable way'. Having successfully launched our food range
online in September 2020, this risk is no longer applicable.
The directors have concluded however that it should be replaced
with a new risk linked to our investment in Ocado Retail Limited
and that ' A failure to effectively manage the strategic and
operational relationship with Ocado Retail, or a significant
deterioration in the trading performance of the business, would
significantly impact the achievement of our multi-channel food
strategy and the ability to deliver shareholder value' has been
added to the principal risks and uncertainties. Mitigating
activities include representation on the Ocado Retail Limited Board
and Audit Committee, a dedicated M&S project team, and agreed
operating processes and ways of working.
Statement of directors' responsibilities
The directors confirm that, to the best of their knowledge, this
condensed consolidated interim financial information has been
prepared in accordance with IAS 34 as adopted by the European Union
and that the interim management report includes a fair review of
the information required by DTR 4.2.4R, DTR 4.2.7R and DTR 4.2.8R,
namely:
- the condensed set of financial statements gives a true and
fair view of the assets, liabilities, financial position, cash
flows and profit or loss of the issuer, or undertakings included in
the consolidation;
- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
- material related party transactions in the first six months
and any material changes in the related party transactions
described in the last annual report.
There have been no changes to the directors of Marks and Spencer
Group plc to those listed in the Group's 2020 Annual Report and
Financial Statements. A list of current directors is maintained on
the Group's website: www.marksandspencer.com.
By order of the Board
Steve Rowe
Chief Executive
Condensed consolidated income statement
26 weeks ended 52 weeks
ended
------------------------
26 Sep 2020 28 Sep 2019 28 March
2020
(Unaudited) (Unaudited) (Audited)
(Restated)
Total Total Total
Notes GBPm GBPm GBPm
--------------------------------- ----- ----------- ----------- ---------
2,
Revenue 3 4,090.9 4,860.9 10,181.9
Share of result in associate 3,
- Ocado Retail Limited 8 31.7 (0.5) (14.2)
--------------------------------- ----- ----------- ----------- ---------
2,
Operating (loss)/profit 3 (9.4) 252.4 254.8
Finance income 4 28.3 26.4 46.9
Finance costs 4 (106.5) (120.0) (234.5)
2,
(Loss)/profit before tax 3 (87.6) 158.8 67.2
--------------------------------- ----- ----------- ----------- ---------
Income tax credit/(expense) 5 16.0 (36.4) (39.8)
(Loss)/profit for the period (71.6) 122.4 27.4
--------------------------------- ----- ----------- ----------- ---------
Attributable to:
Owners of the parent (67.4) 118.1 23.7
Non-controlling interests (4.2) 4.3 3.7
--------------------------------- ----- ----------- ----------- ---------
(71.6) 122.4 27.4
--------------------------------- ----- ----------- ----------- ---------
Earnings per share
Basic 6 (3.5p) 6.4p 1.3p
Diluted 6 (3.5p) 6.4p 1.2p
--------------------------------- ----- ----------- ----------- ---------
Reconciliation of adjusted (loss)/profit before tax:
(Loss)/profit before tax (87.6) 158.8 67.2
Adjusting items 3 70.2 17.5 335.9
--------------------------------- ----- ----------- ----------- ---------
Adjusted (loss)/profit before tax
& adjusting items - non-GAAP measure (17.4) 176.3 403.1
---------------------------------------- ----------- ----------- ---------
Adjusted earnings per share - non-GAAP measure
Basic 6 (0.4p) 7.1p 16.7p
Diluted 6 (0.4p) 7.1p 16.6p
--------------------------------- ----- ----------- ----------- ---------
Condensed consolidated statement of comprehensive income
26 weeks ended 52 weeks ended
------------------------------------------------------------------------------------------------------------
26 Sep 2020 28 Sep 2019 28 March 2020
(Unaudited) (Unaudited) (Audited)
(Restated)
Notes GBPm GBPm GBPm
----------------------------------------------------------------------------------------- --------------- ---------------------------------------------------------- ------------------------------------------------ --------------------------------------------
(Loss)/profit for the period (71.6) 122.4 27.4
----------------------------------------------------------------------------------------- --------------- ---------------------------------------------------------- ------------------------------------------------ --------------------------------------------
Other comprehensive income/(expense):
Items that will not be reclassified subsequently to profit or loss
Remeasurements of retirement benefit schemes 9 (1,069.3) 29.2 927.9
Tax credit/(charge) on retirement benefit schemes 203.7 (5.8) (196.7)
----------------------------------------------------------------------------------------- --------------- ---------------------------------------------------------- ------------------------------------------------ --------------------------------------------
(865.6) 23.4 731.2
----------------------------------------------------------------------------------------- --------------- ---------------------------------------------------------- ------------------------------------------------ --------------------------------------------
Items that may be reclassified subsequently to profit or loss
Foreign currency translation differences
- movement recognised in other comprehensive income (4.2) 11.9 5.1
- reclassified and reported in profit or loss - - 2.9
Cash flow hedges
- fair value movements in other comprehensive income (80.3) 75.4 140.3
- reclassified and reported in profit or loss 8.8 (15.3) (18.4)
Tax credit/(charge) on cash flow hedges 13.6 (13.7) (27.0)
----------------------------------------------------------------------------------------- --------------- ---------------------------------------------------------- ------------------------------------------------ --------------------------------------------
(62.1) 58.3 102.9
----------------------------------------------------------------------------------------- --------------- ---------------------------------------------------------- ------------------------------------------------ --------------------------------------------
Other comprehensive (expense)/income for the period, net of tax (927.7) 81.7 834.1
----------------------------------------------------------------------------------------- --------------- ---------------------------------------------------------- ------------------------------------------------ --------------------------------------------
Total comprehensive (expense)/income for the period (999.3) 204.1 861.5
----------------------------------------------------------------------------------------- --------------- ---------------------------------------------------------- ------------------------------------------------ --------------------------------------------
Attributable to:
Owners of the parent (995.1) 199.8 857.8
Non-controlling interests (4.2) 4.3 3.7
----------------------------------------------------------------------------------------- --------------- ---------------------------------------------------------- ------------------------------------------------ --------------------------------------------
(999.3) 204.1 861.5
----------------------------------------------------------------------------------------- --------------- ---------------------------------------------------------- ------------------------------------------------ --------------------------------------------
Condensed consolidated statement of financial position
As at As at As at
26 Sep 2020 28 Sep 2019 28 March 2020
(Unaudited) (Unaudited) (Audited)
(Restated)
Notes GBPm GBPm GBPm
---------------------------------------------------------------------------------------------------------- --------------- ------------------------------------------------ ----------------------------------------- --------------------------------------------
Assets
Non-current assets
Intangible assets 351.6 445.6 399.1
Property, plant and equipment 5,293.5 5,563.9 5,494.2
Investment property 15.5 15.5 15.5
Investment in joint ventures and associates 8 793.9 754.8 760.4
Other financial assets 11 9.7 9.9 9.7
Retirement benefit asset 9 902.3 1,026.2 1,915.0
Trade and other receivables 262.6 261.8 262.6
Derivative financial instruments 11 51.7 61.4 112.4
Deferred tax assets - - -
---------------------------------------------------------------------------------------------------------- --------------- ------------------------------------------------ ----------------------------------------- --------------------------------------------
7,680.8 8,139.1 8,968.9
---------------------------------------------------------------------------------------------------------- --------------- ------------------------------------------------ ----------------------------------------- --------------------------------------------
Current assets
Inventories 3 663.4 820.9 564.1
Other financial assets 11 13.2 144.0 11.7
Trade and other receivables 255.4 266.3 298.0
Derivative financial instruments 11 34.5 80.8 73.5
Current tax assets 25.2 - 19.3
Cash and cash equivalents 285.9 351.4 248.4
---------------------------------------------------------------------------------------------------------- --------------- ------------------------------------------------ ----------------------------------------- --------------------------------------------
1,277.6 1,663.4 1,215.0
---------------------------------------------------------------------------------------------------------- --------------- ------------------------------------------------ ----------------------------------------- --------------------------------------------
Total assets 8,958.4 9,802.5 10,183.9
---------------------------------------------------------------------------------------------------------- --------------- ------------------------------------------------ ----------------------------------------- --------------------------------------------
Liabilities
Current liabilities
Trade and other payables 1,431.3 1,461.8 1,426.4
Partnership liability to the Marks & Spencer UK Pension Scheme 10 124.9 71.9 71.9
Borrowings and other financial liabilities 350.2 672.3 316.6
Derivative financial instruments 11 31.0 4.0 13.0
Provisions 122.8 33.2 21.5
Current tax liabilities - 6.8 -
---------------------------------------------------------------------------------------------------------- --------------- ------------------------------------------------ ----------------------------------------- --------------------------------------------
2,060.2 2,250.0 1,849.4
---------------------------------------------------------------------------------------------------------- --------------- ------------------------------------------------ ----------------------------------------- --------------------------------------------
Non-current liabilities
Retirement benefit deficit 9 12.3 35.0 12.4
Trade and other payables 218.1 185.8 222.6
Partnership liability to the Marks & Spencer UK Pension Scheme 10 66.0 132.1 135.5
Borrowings and other financial liabilities 3,752.3 3,858.1 3,865.9
Derivative financial instruments 11 1.7 0.3 0.7
Provisions 37.2 76.4 56.5
Deferred tax liabilities 98.1 138.3 332.4
---------------------------------------------------------------------------------------------------------- --------------- ------------------------------------------------ ----------------------------------------- --------------------------------------------
4,185.7 4,426.0 4,626.0
---------------------------------------------------------------------------------------------------------- --------------- ------------------------------------------------ ----------------------------------------- --------------------------------------------
Total liabilities 6,245.9 6,676.0 6,475.4
---------------------------------------------------------------------------------------------------------- --------------- ------------------------------------------------ ----------------------------------------- --------------------------------------------
Net assets 2,712.5 3,126.5 3,708.5
---------------------------------------------------------------------------------------------------------- --------------- ------------------------------------------------ ----------------------------------------- --------------------------------------------
Equity
Issued share capital 488.4 487.6 487.6
Share premium account 910.4 910.7 910.4
Capital redemption reserve 2,210.5 2,210.5 2,210.5
Hedging reserve 8.5 25.6 68.6
Cost of hedging reserve 3.5 10.1 5.7
Other reserve (6,542.2) (6,542.2) (6,542.2)
Foreign exchange reserve (40.1) (32.7) (35.9)
Retained earnings 5,671.7 6,052.9 6,597.8
---------------------------------------------------------------------------------------------------------- --------------- ------------------------------------------------ ----------------------------------------- --------------------------------------------
Equity attributable to owners of the parent 2,710.7 3,122.5 3,702.5
Non-controlling interests 1.8 4.0 6.0
---------------------------------------------------------------------------------------------------------- --------------- ------------------------------------------------ ----------------------------------------- --------------------------------------------
Total equity 2,712.5 3,126.5 3,708.5
---------------------------------------------------------------------------------------------------------- --------------- ------------------------------------------------ ----------------------------------------- --------------------------------------------
The notes on pages 27 to 42 form an integral part of the condensed consolidated interim financial
information.
Condensed consolidated statement of changes in equity
26 weeks ended 26 Sep 2020 Ordinary share capital Share premium account Capital redemption reserve Hedging reserve Cost of hedging reserve Other reserve(1) Foreign exchange reserve Retained earnings(2) Total Non-controlling interest Total equity
(Unaudited)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ---------------------- --------------------- ---------------------------- --------------- ----------------------- ---------------- -------------------------- -------------------- --------- ------------------------ --------------
As at 29 March 2020 487.6 910.4 2,210.5 68.6 5.7 (6,542.2) (35.9) 6,597.8 3,702.5 6.0 3,708.5
(Loss) for the period - - - - - - - (67.4) (67.4) (4.2) (71.6)
Other comprehensive
income/(expense):
Foreign currency translation
- movement recognised in
other comprehensive income - - - - - - (4.2) - (4.2) - (4.2)
Remeasurements of retirement
benefit schemes - - - - - - - (1,069.3) (1,069.3) - (1,069.3)
Tax credit on retirement
benefit schemes - - - - - - - 203.7 203.7 - 203.7
Cash flow hedges
- fair value movements in
other comprehensive income - - - (77.6) (2.7) - - - (80.3) - (80.3)
- reclassified and reported
in profit or loss - - - 8.8 - - - - 8.8 - 8.8
Tax on cash flow hedges - - - 13.1 0.5 - - - 13.6 - 13.6
----------------------------- ---------------------- --------------------- ---------------------------- --------------- ----------------------- ---------------- -------------------------- -------------------- --------- ------------------------ --------------
Other comprehensive
income/(expense) - - - (55.7) (2.2) - (4.2) (865.6) (927.7) - (927.7)
----------------------------- ---------------------- --------------------- ---------------------------- --------------- ----------------------- ---------------- -------------------------- -------------------- --------- ------------------------ --------------
Total comprehensive
income/(expense) - - - (55.7) (2.2) - (4.2) (933.0) (995.1) (4.2) (999.3)
----------------------------- ---------------------- --------------------- ---------------------------- --------------- ----------------------- ---------------- -------------------------- -------------------- --------- ------------------------ --------------
Cash flow hedges recognised
in inventories - - - (5.4) - - - - (5.4) - (5.4)
Tax on cash flow hedges
recognised in inventories - - - 1.0 - - - - 1.0 - 1.0
Transactions with owners:
Shares issued on exercise of
employee share options 0.8 - - - - - - - 0.8 - 0.8
Purchase of own shares held
by employee trusts - - - - - - - (0.8) (0.8) - (0.8)
Credit for share-based
payments - - - - - - - 7.7 7.7 - 7.7
As at 26 Sep 2020 488.4 910.4 2,210.5 8.5 3.5 (6,542.2) (40.1) 5,671.7 2,710.7 1.8 2,712.5
----------------------------- ---------------------- --------------------- ---------------------------- --------------- ----------------------- ---------------- -------------------------- -------------------- --------- ------------------------ --------------
26 weeks ended 28 Sep 2019 Ordinary share capital Share premium account Capital redemption reserve Hedging reserve Cost of hedging reserve Other reserve(1) Foreign exchange reserve Retained earnings(2) Total Non-controlling interest Total equity
(Unaudited)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ---------------------- --------------------- ---------------------------- --------------- ----------------------- ---------------- -------------------------- -------------------- --------- ------------------------ --------------
As at 31 March 2019 406.3 416.9 2,210.5 (14.6) 11.7 (6,542.2) (43.9) 6,024.8 2,469.5 (0.3) 2,469.2
Profit for the period
(Restated) - - - - - - - 118.1 118.1 4.3 122.4
Other comprehensive
income/(expense):
Foreign currency translation
- movement recognised in
other comprehensive income - - - 0.7 - - 11.2 - 11.9 - 11.9
Remeasurements of retirement
benefit schemes - - - - - - - 29.2 29.2 - 29.2
Tax charge on retirement
benefit schemes - - - - - - - (5.8) (5.8) - (5.8)
Cash flow hedges
- fair value movements in
other comprehensive income - - - 77.9 (2.5) - - - 75.4 - 75.4
- reclassified and reported
in profit or loss - - - (15.3) - - - - (15.3) - (15.3)
Tax on cash flow hedges - - - (14.6) 0.9 - - - (13.7) - (13.7)
----------------------------- ---------------------- --------------------- ---------------------------- --------------- ----------------------- ---------------- -------------------------- -------------------- --------- ------------------------ --------------
Other comprehensive
income/(expense) - - - 48.7 (1.6) - 11.2 23.4 81.7 - 81.7
----------------------------- ---------------------- --------------------- ---------------------------- --------------- ----------------------- ---------------- -------------------------- -------------------- --------- ------------------------ --------------
Total comprehensive
income/(expense) - - - 48.7 (1.6) - 11.2 141.5 199.8 4.3 204.1
----------------------------- ---------------------- --------------------- ---------------------------- --------------- ----------------------- ---------------- -------------------------- -------------------- --------- ------------------------ --------------
Cash flow hedges recognised
in inventories - - - (10.5) - - - - (10.5) - (10.5)
Tax on cash flow hedges
recognised in inventories - - - 2.0 - - - - 2.0 - 2.0
Transactions with owners:
Dividends - - - - - - - (115.1) (115.1) - (115.1)
Shares issued on exercise of
employee share options - 0.1 - - - - - - 0.1 - 0.1
Shares issued on rights
issue(3) 81.3 493.7 - - - - - - 575.0 - 575.0
Purchase of own shares held
by employee trusts - - - - - - - (8.4) (8.4) - (8.4)
Credit for share-based
payments - - - - - - - 10.1 10.1 - 10.1
As at 28 Sep 2019 (Restated) 487.6 910.7 2,210.5 25.6 10.1 (6,542.2) (32.7) 6,052.9 3,122.5 4.0 3,126.5
----------------------------- ---------------------- --------------------- ---------------------------- --------------- ----------------------- ---------------- -------------------------- -------------------- --------- ------------------------ --------------
52 weeks ended 28 March 2020 Ordinary share capital Share premium account Capital redemption reserve Hedging reserve Cost of hedging reserve Other reserve(1) Foreign exchange reserve Retained earnings(2) Total Non-controlling interest Total equity
(Audited)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ---------------------- --------------------- ---------------------------- --------------- ----------------------- ---------------- -------------------------- -------------------- --------- ------------------------ --------------
As at 31 March 2019 406.3 416.9 2,210.5 (14.6) 11.7 (6,542.2) (43.9) 6,024.8 2,469.5 (0.3) 2,469.2
Profit for the year - - - - - - - 23.7 23.7 3.7 27.4
Other comprehensive
income/(expense):
Foreign currency translation
- movement recognised in
other comprehensive income - - - - - - 5.1 - 5.1 - 5.1
- reclassified and reported
in profit and loss - - - - - - 2.9 - 2.9 - 2.9
Remeasurements of retirement
benefit schemes - - - - - - - 927.9 927.9 - 927.9
Tax charge on items that will
not be reclassified - - - - - - - (196.7) (196.7) - (196.7)
Cash flow hedges
- fair value movements in
other comprehensive income - - - 147.8 (7.5) - - - 140.3 - 140.3
- reclassified and reported
in profit or loss - - - (18.4) - - - - (18.4) - (18.4)
Tax on cash flow hedges - - - (28.5) 1.5 - - - (27.0) - (27.0)
----------------------------- ---------------------- --------------------- ---------------------------- --------------- ----------------------- ---------------- -------------------------- -------------------- --------- ------------------------ --------------
Other comprehensive
income/(expense) - - - 100.9 (6.0) - 8.0 731.2 834.1 - 834.1
----------------------------- ---------------------- --------------------- ---------------------------- --------------- ----------------------- ---------------- -------------------------- -------------------- --------- ------------------------ --------------
Total comprehensive
income/(expense) - - - 100.9 (6.0) - 8.0 754.9 857.8 3.7 861.5
----------------------------- ---------------------- --------------------- ---------------------------- --------------- ----------------------- ---------------- -------------------------- -------------------- --------- ------------------------ --------------
Cash flow hedges recognised
in inventories - - - (21.8) - - - - (21.8) - (21.8)
Tax on cash flow hedges
recognised in inventories - - - 4.1 - - - - 4.1 - 4.1
Transactions with owners:
Dividends - - - - - - - (191.1) (191.1) - (191.1)
Transactions with
non-controlling shareholders - - - - - - - - - 2.6 2.6
Shares issued on exercise of
employee share options - 0.1 - - - - - - 0.1 - 0.1
Shares issued on rights
issue(4) 81.3 493.4 - - - - - - 574.7 - 574.7
Purchase of shares held by
employee trusts - - - - - - (8.9) (8.9) - (8.9)
Credit for share-based
payments - - - - - - - 18.5 18.5 - 18.5
Deferred tax on share schemes - - - - - - (0.4) (0.4) - (0.4)
----------------------------- ---------------------- --------------------- ---------------------------- --------------- ----------------------- ---------------- -------------------------- -------------------- --------- ------------------------ --------------
As at 28 March 2020 487.6 910.4 2,210.5 68.6 5.7 (6,542.2) (35.9) 6,597.8 3,702.5 6.0 3,708.5
----------------------------- ---------------------- --------------------- ---------------------------- --------------- ----------------------- ---------------- -------------------------- -------------------- --------- ------------------------ --------------
(1) The 'Other reserve' was originally created as part of the
capital restructuring that took place in 2002. It represents the
difference between the nominal value of the shares issued prior to
the capital reduction by the Company (being the carrying value of
the investment in Marks and Spencer plc) and the share capital,
share premium and capital redemption reserve of Marks and Spencer
plc at the date of the transaction.
(2) Included within "Retained earnings" is the fair value
through other comprehensive income reserve.
(3) The share premium amount of GBP493.7m is net of GBP26.3m in
relation to transaction costs associated with the rights issue.
(4) The share premium amount of GBP493.4m is net of GBP26.6m in
relation to transaction costs associated with the rights issue.
Condensed consolidated statement
of cash flows
26 weeks ended 52 weeks
ended
------------------------
26 Sep 2020 28 Sep 2019 28 March
2020
(Unaudited) (Unaudited) (Audited)
Notes GBPm GBPm GBPm
-------------------------------------- ----- ----------- ----------- ---------
Cash flows from operating activities
Cash generated from operations 13 356.8 423.6 1,064.7
Income tax paid (6.0) (54.4) (91.6)
-------------------------------------- ----- ----------- ----------- ---------
Net cash inflow from operating
activities 350.8 369.2 973.1
-------------------------------------- ----- ----------- ----------- ---------
Cash flows from investing activities
Proceeds on property disposals 2.1 1.5 2.7
Purchase of property, plant and
equipment (110.6) (118.3) (251.0)
Purchase of intangible assets (24.1) (32.3) (77.6)
Purchase of current financial
assets (1.7) (2.2) 130.1
Purchase of investments in associates
and joint ventures(1) 9.0 (580.5) (580.3)
Interest received 5.0 4.4 10.4
-------------------------------------- ----- ----------- ----------- ---------
Net cash used in investing activities (120.3) (727.4) (765.7)
-------------------------------------- ----- ----------- ----------- ---------
Cash flows from financing activities
Interest paid(2) (89.0) (105.4) (224.2)
Issuance of medium term notes - 250.0 250.0
Redemption of medium term notes - - (400.0)
Repayment of lease liabilities (77.5) (90.2) (201.4)
Payment of liability to the Marks
& Spencer UK Pension Scheme (17.2) (63.5) (63.5)
Equity dividends paid 7 - (115.1) (191.1)
Shares issued on exercise of
employee share options - 0.1 0.1
Proceeds from rights issue net
of costs - 583.2 574.4
Purchase of own shares by employee
trust (0.8) (8.4) (8.9)
Cash received from settlement
of derivatives 12.7 - 7.7
-------------------------------------- ----- ----------- ----------- ---------
Net cash (used)/generated in
financing activities (171.8) 450.7 (256.9)
-------------------------------------- ----- ----------- ----------- ---------
Net cash inflow/(outflow) from
activities 58.7 92.5 (49.5)
Effects of exchange rate changes (0.3) 2.0 0.5
Opening net cash 164.1 213.1 213.1
-------------------------------------- ----- ----------- ----------- ---------
Closing net cash 222.5 307.6 164.1
-------------------------------------- ----- ----------- ----------- ---------
(1) Includes receipt from Ocado Group plc Limited of GBP(11.5)m
on finalisation of completion statement (last half year: GBP577.8m;
last full year: GBP577.6m) and investment in Founders Factory
Retail Limited of GBP2.5m (last half year: GBP2.5m; last full
year: GBP2.5m).
(2) Includes interest paid on the partnership liability to
the Marks & Spencer UK Pension Scheme of GBP6.3m (last half
year: GBP8.4m; last full year: GBP8.4m) and interest paid on
lease liabilities of GBP51.6m (last half year: GBP69.0m; last
full year: GBP134.3m).
Notes to the financial statements (Unaudited)
1 General information and basis of preparation
General information
This condensed consolidated interim information for the period
does not constitute statutory financial statements within the
meaning of s434 of the Companies Act 2006.
The summary of results for the year ended 28 March 2020 is an
extract from the published Annual Report and Financial Statements
which were approved by the board of Directors on 26 May 2020, have
been reported on by the Group's auditors and delivered to the
Registrar of Companies. The audit report on the Annual Report and
Financial Statements was unqualified, did not contain an emphasis
of matter paragraph and did not contain any statement under s498
(2) or (3) of the Companies Act 2006.
Basis of preparation
The financial information has been prepared in accordance with
International Financial Reporting Standards (IFRS) and IFRS
Interpretations Committee (IFRIC) interpretations, as adopted by
the European Union and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS. The condensed
financial statements for the 26 weeks ended 26 September 2020 have
been prepared in accordance with the Disclosure and Transparency
Rules of the Financial Conduct Authority and with IAS 34 'Interim
Financial Reporting' as adopted by the European Union.
The comparative figures for the financial year ended 28 March
2020 are consistent with the Group's annual financial statements.
The comparative figures for the half year ended 28 September 2019
have been restated to reflect the correction of an error that
resulted from the transition to IFRS 16 Leases and had been
identified and corrected before the 2020 Annual Report and
Financial Statements were issued. The correction has resulted in an
increase to net assets of GBP9.2m and an increase in profit for the
period of GBP5.3m.
Going concern basis
The financial statements have been prepared on a going concern
basis. In adopting the going concern basis, the directors have
considered the business activities as set out on pages 1 to 8 and
the principal risks and uncertainties as set out on pages 20 to 21,
giving particular consideration to the ongoing uncertainty
regarding the future impact of the Covid-19 pandemic on the trading
performance of the Group.
The Group's 2020 Annual Report and Financial Statements set out
the revised budget and three-year plan that was modelled in
response to the pandemic, known as the Covid-19 scenario.
The Group continues to monitor and track performance against the
Covid-19 scenario and, in line with the announcement in August
2020, has performed ahead of the Covid-19 scenario through-out the
period. The forecast cashflows for the next 18 month period to
March 2022 used to support the assessment of going concern are
based on the Covid-19 scenario, having been updated for actual
cashflows, and any material new information, additional actions
taken, changes in trading trends and updates to assumptions, the
most significant of which includes:
-- Reflecting the on-going government restrictions (including
the national lockdown announced on 31 October 2020) and the
likelihood of a recession on Clothing & Home sales, and the
change in mix between online and retail sales witnessed in the
first six months of the year. This has also been factored into
Clothing & Home sales in FY21/22 vs the original Covid-19
scenario.
-- The cash flows arising from the redundancies announced in
July and August, with an annualised cash flow benefit from November
onwards.
At 26 September 2020 the Group had cash and cash equivalents of
GBP285.9m which represents a c.GBP750m improvement in the cash
position vs the Covid-19 scenario. The Group also had a further
GBP1.15bn of available facilities which included an undrawn
committed syndicated bank revolving credit facility of GBP1.1bn,
set to mature in April 2023, and a number of undrawn uncommitted
facilities amounting to GBP50m. As announced in April 2020, the
Group has also secured access to the Covid Corporate Financing
Facility ("CCFF") and has established a commercial paper programme
to enable drawings of up to GBP300m at any time until March 2021,
subject to ongoing Bank of England requirements. At 26 September
2020, this facility was also undrawn.
Based on the updated Covid-19 scenario forecast cashflows,
throughout the next 18 month period to March 2022, the Group does
not anticipate needing to draw on its available facilities and has
adequate headroom at the point at which the covenant is reinstated
in September 2021.
As a result, despite the continued uncertainty relating to
market conditions and the duration of any further measures to
control the pandemic, including further local and national
lockdowns, the Board believes that the Group is well placed to
manage its financing and other significant risks satisfactorily and
that the Group will be able to operate within the level of its
facilities for the foreseeable future. For this reason, the Board
considers it appropriate for the Group to adopt the going concern
basis in preparing its interim financial statements.
Accounting policies
The results for the first half of the financial year have been
reviewed, not audited and are prepared on the basis of the
accounting policies set out in the Group's 2020 Annual Report and
Financial Statements, except as described below. Accounting
policies which have been amended during the half year ended 26
September 2020 can be seen in the sub-section "Amended accounting
policies" below.
The Group has applied the following new standards and
interpretations for the first time for the reporting period
commencing 29 March 2020:
- Amendments to IAS 1 and IAS 8: Definition of Material.
- Amendments to IFRS 3: Definition of a Business.
- Amendments to References to the Conceptual Framework in IFRS Standards.
- Amendments to IFRS 16: Covid-19-Related Rent Concessions.
Except for the adoption of the amendments to IFRS 16, the above
standards and interpretations have not led to any changes to the
Group's accounting policies or have any other material impact on
the financial position or performance of the Group.
New and amended accounting policies
Amendments to IFRS 16: Covid-19-Related Rent Concessions
The Group early adopted the Amendment to IFRS 16: Covid-19
Related Rent Concessions with effect from 29 March 2020 and, as a
result, has treated rent concessions occurring as a direct
consequence of Covid-19 meeting the following conditions as
variable lease payments rather than as lease modifications:
a) The change in lease payments results in revised consideration
for the lease that is substantially the same as, or less than, the
consideration for the lease immediately preceding the change.
b) Any reduction in lease payments affects only payments
originally due on or before 30 June 2021.
c) There is no substantive change to other terms and conditions of the lease.
Application of this practical expedient has resulted in:
-- Recognition of a reduction in lease payments as a negative
variable lease payment in profit or loss in the period of
GBP4.8m.
-- Derecognition of GBP4.8m of lease liabilities that have been
extinguished by the forgiveness of lease payments.
The Group has applied the practical expedient to all rent
concessions that have met the above criteria.
Government grants
The Group has received government assistance income in the
period as a result of the Covid-19 pandemic. Government grants are
recognised where there is reasonable assurance that the grant will
be received and that the Group will comply with the conditions
attached to them.
Government grants that compensate the Group for expenses
incurred are recognised in profit or loss, as a deduction against
the related expense, over the periods necessary to match them with
the related costs.
Alternative performance measures
In reporting financial information, the Group presents
alternative performance measures (APMs) which are not defined or
specified under the requirements of IFRS.
The Group believes that these APMs, which are not considered to
be a substitute for, or superior to, IFRS measures, provide
stakeholders with additional helpful information on the performance
of the business. The APMs are consistent with how the business
performance is planned and reported within the internal management
reporting to the Board and Executive Committee. Some of these
measures are also used for the purpose of setting remuneration
targets.
The key APMs that the Group uses include: like-for-like revenue
growth; operating (loss)/profit before adjusting items;
(loss)/profit before tax and adjusting items; adjusted basic
earnings per share; net debt and free cash flow. Each of these
APMs, and others used by the Group, are set out in the Glossary,
including explanations of how they are calculated and how they can
be reconciled to a statutory measure where relevant.
The Group reports some financial measures, primarily
International sales, on both a reported and constant currency
basis. The constant currency basis, which is an APM, retranslates
the previous year revenues at the average actual periodic exchange
rates used in the current financial year. This measure is presented
as a means of eliminating the effects of exchange rate fluctuations
on the year-on-year reported results.
The Group makes certain adjustments to the statutory
(loss)/profit measures in order to derive many of these APMs. The
Group's policy is to exclude items that are considered significant
in nature and/or quantum to the financial statement line item or
applicable disclosure note or are consistent with items that were
treated as adjusting in prior periods. The Group's definition of
adjusting items is consistent with prior periods. Previously these
were presented in the condensed consolidated income statement in a
columnar format; the Group now presents a reconciliation of
adjusted (loss)/profit before tax to (loss)/profit before tax.
Treatment as an adjusting item provides stakeholders with
additional useful information to assess the year-on-year or
period-on-period trading performance of the Group. On this basis,
the following items were included within adjusting items for the
26-week period ended 26 September 2020:
- Net charges associated with the strategic programme in
relation to the review of the UK store estate.
- Significant restructuring costs and other associated costs
arising from strategy changes that are not considered by the Group
to be part of the normal operating costs of the business.
- Adjustments to income from M&S Bank due to a provision
recognised by M&S Bank for the cost of providing redress to
customers in respect of possible mis-selling of M&S Bank
financial products as well as forward economic guidance provisions
recognised by M&S Bank as a result of Covid-19.
- Significant costs arising from establishing the investment in Ocado Retail Limited.
- Amortisation of the identified intangible assets arising as
part of the investment in Ocado Retail Limited.
- Remeasurement of contingent consideration including discount unwind.
- Directly attributable gains and expenses resulting from the Covid-19 pandemic.
- Transition costs associated with the Sparks loyalty programme.
Adjusting items in the current year include the charges
associated with the transition of the Sparks loyalty programme.
Whilst the Group provides vouchers to customers as part of its
ongoing operations, vouchers of this nature and quantum have never
been provided before in relation to a one-off event (refer to note
3 for further details). The Group has reviewed how it applies its
policy and has concluded to include these charges in adjusting
items.
Refer to note 3 for a summary of the adjusting items.
Critical accounting judgements and key sources of estimation
uncertainty
The preparation of the consolidated financial statements
requires the Group to make estimates and judgements that affect the
application of policies and reported amounts. The critical
accounting judgements and key sources of estimation uncertainty
remain consistent with those presented in note 1 of the Group's
2020 Annual Report and Financial Statements.
The Group does not consider that Covid-19 has resulted in any
additional significant estimates or judgments that could materially
affect the amounts included in the Group's results for the
period.
The Group has considered the impact of Covid-19 on the existing
judgements and estimates and, given the increased uncertainty over
the future economic outlook in the countries and markets that the
Group operates, has provided additional information on the
following judgements and estimates:
UK store estate programme
The Group is undertaking a significant strategic programme to
review its UK store estate. The most significant judgement that
impacts the charge is that the stores identified as part of the
programme are more likely than not to close. Significant estimation
uncertainty arises in respect of determining the recoverable amount
of assets and the costs to be incurred as part of the programme.
The significant assumptions adopted are detailed in the Group's
2020 Annual Report and Financial Statements, with those most likely
to have a material impact being closure dates and changes to future
sales.
The charge recognised at 28 March 2020 reflected cash flow
projections from the Covid-19 scenario, which is described in the
Glossary and in Note 1 to the Group's 2020 Annual Report and
Financial Statements. As this continues to be the most recent
Board-approved budget, and trading performance in the period is
ahead of the Covid-19 scenario, no changes have been made to the
cash flow projections. Similarly, most other assumptions have
remained consistent with those used at 28 March 2020, with only
small adjustments made to reflect any known changes to closure
dates. Given only minor updates have been made, the sensitivities
disclosed in Note 15 to the Group's 2020 Annual Report and
Financial Statements remain relevant. See note 3 for further
details.
Impairment of property, plant and equipment and intangibles
Property, plant and equipment and computer software intangibles
are reviewed for impairment if events or changes in circumstances
indicate that the carrying amount may not be recoverable. At 28
March 2020, the Group identified the trade restrictions implemented
by the UK government as a result of the Covid-19 pandemic as an
impairment trigger and all stores were tested for impairment. The
cash flow projections used in those impairment tests incorporated
the Covid-19 scenario.
Given that trading performance and the related cash flows for
the period are ahead of the Covid-19 scenario, the Group has
determined that no impairment trigger has occurred either at a
Group or individual CGU level in the period and , as a result, a
detailed impairment test has not been performed in the period.
Consequently, the sensitivities disclosed in Note 15 to the Group's
2020 Annual Report and Financial Statements remain relevant.
Inventory provisioning
At 28 March 2020, the Group assessed the recoverability of
inventories, applying assumptions around when trade restrictions
might be eased leading to resumption of sales and expectations of
the future saleability of items, which resulted in a write-down of
GBP157.0m. Following better than expected sell-through of inventory
driven by the actions taken by the Group and an earlier than
anticipated reopening of stores, a net release of GBP49.4m of this
provision has been recognised in the period. See note 3 for further
details.
2 Segmental Information
IFRS 8 Operating Segments requires operating segments to be
identified on the basis of internal reporting on components of the
Group that are regularly reviewed by the chief operating
decision-maker to allocate resources to the segments and to assess
their performance.
The chief operating decision maker has been identified as the
Executive Committee. The Executive Committee reviews the Group's
internal reporting in order to assess performance and allocate
resources across each operating segment.
The Group's reportable operating segments are:
- UK Clothing & Home - comprises the retailing of
womenswear, menswear, lingerie, kidswear and home products through
UK retail stores and online.
- UK Food - includes the results of the UK retail food business
and UK Food franchise operations, with the following five main
categories: protein deli and diary; produce; ambient and in-store
bakery; meals, desert and frozen; hospitality and 'Food on the
Move'; and direct sales to Ocado Retail Limited.
- International - consists of Marks and Spencer-owned businesses
in Europe and Asia and the international franchise operations.
Other business activities and operating segments, including the
Group's share of profits or losses from the investment in Ocado
Retail Limited, M&S Bank and M&S Energy, are combined and
presented in "All other segments". Finance income and costs are not
allocated to segments as each is managed on a centralised
basis.
The Executive Committee assesses the performance of the
operating segments based on a measure of operating profit before
adjusting items. This measurement basis excludes the effects of
adjusting items from the operating segments.
The following is an analysis of the Group's revenue and results
by reportable segment:
26 weeks ended 26 Sep 2020 (Unaudited)
--------------------------------------------------------------------
Note UK Clothing UK Food International All other Group
& Home segments(3)
GBPm GBPm GBPm GBPm GBPm
----------------------------- ----- ------------- ------- ------------------ -------------- --------
Revenue before adjusting
items(1) 3 917.2 2,838.6 346.3 - 4,102.1
----------------------------- ----- ------------- ------- ------------------ -------------- --------
Operating (loss)/profit
before
adjusting items(2) 3 (107.5) 109.7 19.7 39.9 61.8
----------------------------- ----- ------------- ------- ------------------ -------------- --------
Finance income before
adjusting
items 3 27.3
----------------------------- ----- ------------- ------- ------------------ -------------- --------
Finance costs before
adjusting
items (106.5)
----------------------------- ----- ------------- ------- ------------------ -------------- --------
(Loss)/profit before tax and
adjusting items 3 (107.5) 109.7 19.7 39.9 (17.4)
----------------------------- ----- ------------- ------- ------------------ -------------- --------
Adjusting items 3 (70.2)
----------------------------- ----- ------------- ------- ------------------ -------------- --------
(Loss)/profit before tax 3 (107.5) 109.7 19.7 39.9 (87.6)
----------------------------- ----- ------------- ------- ------------------ -------------- --------
26 weeks ended 28 Sep 2019 (Unaudited)
(Restated)
--------------------------------------------------------------------
UK Clothing UK Food International(4,5) All other Group(7)
& Home(4) segments(3,6)
GBPm GBPm GBPm GBPm GBPm
----------------------------- ----- ------------- ------- ------------------ -------------- --------
Revenue before adjusting
items 1,550.4 2,845.8 464.7 - 4,860.9
----------------------------- ----- ------------- ------- ------------------ -------------- --------
Operating profit before
adjusting
items(2) 3 109.6 92.2 55.8 12.3 269.9
----------------------------- ----- ------------- ------- ------------------ -------------- --------
Finance income before
adjusting
items 26.4
----------------------------- ----- ------------- ------- ------------------ -------------- --------
Finance costs before
adjusting
items (120.0)
----------------------------- ----- ------------- ------- ------------------ -------------- --------
Profit before tax and
adjusting
items 3 109.6 92.2 55.8 12.3 176.3
----------------------------- ----- ------------- ------- ------------------ -------------- --------
Adjusting items 3 (17.5)
----------------------------- ----- ------------- ------- ------------------ -------------- --------
Profit before tax 3 109.6 92.2 55.8 12.3 158.8
----------------------------- ----- ------------- ------- ------------------ -------------- --------
52 weeks ended 28 March 2020
(Audited)
----------------------------------------------------------------------
Note UK Clothing UK Food International All other Group
& Home segments(3)
GBPm GBPm GBPm GBPm GBPm
----------------------------- ----- ------------- ------- ------------------ -------------- ----------
Revenue before adjusting
items 3,209.1 6,028.2 944.6 - 10,181.9
----------------------------- ----- ------------- ------- ------------------ -------------- ----------
Operating profit before
adjusting
items(2) 3 223.9 236.7 110.7 19.4 590.7
----------------------------- ----- ------------- ------- ------------------ -------------- ----------
Finance income before
adjusting
items 3 44.0
----------------------------- ----- ------------- ------- ------------------ -------------- ----------
Finance costs before
adjusting
items 3 (231.6)
----------------------------- ----- ------------- ------- ------------------ -------------- ----------
Profit before tax and
adjusting
items 3 223.9 236.7 110.7 19.4 403.1
----------------------------- ----- ------------- ------- ------------------ -------------- ----------
Adjusting items 3 (335.9)
----------------------------- ----- ------------- ------- ------------------ -------------- ----------
Profit before tax 3 223.9 236.7 110.7 19.4 67.2
----------------------------- ----- ------------- ------- ------------------ -------------- ----------
(1) Revenue is stated prior to adjusting items of GBP11.2m
(see note 3).
(2) Operating profit before adjusting items is stated as gross
profit less operating costs prior to adjusting items. At reportable
segment level costs are allocated where directly attributable
or based on an appropriate cost driver for the cost.
(3) The result of 'All other segments' split by the material
parts are:
- Group's investment in Ocado Retail Limited GBP38.8m (last
half year: (GBP0.5m); last full year: GBP2.6m); and
- M&S Bank, M&S Energy and Share of result in other associates
GBP1.1m (last half year: GBP12.8m; last full year: GBP16.8m).
(4) The reporting of results from certain international M&S.com
websites has been transferred from UK Clothing & Home (previously
UK) to International to align reporting with the day-to-day
management of these operations, resulting in revenue of GBP19.1m
and operating profit of GBP1.7m being transferred.
(5) International operating profit was previously reported
as GBP59.9m and has been restated to GBP55.8m due to the reallocation
of central costs between the Group's reportable segments (decreased
by GBP5.8m) and the impact of footnote 4 (increased by GBP1.7m).
(6) All other segments have been restated from GBP13.3m to
GBP12.3m due to the reallocation of central costs between the
Group's reportable segments (decreased by GBP1.0m).
(7) Group comparative figures have been restated to reflect
the correction of an error that resulted from the transition
to IFRS 16 Leases. The correction has resulted in a decrease
to Group operating profit before adjusting items of GBP1.7m
(restatement GBP0.3m and GBP1.4m made to UK Clothing & Home
and UK Food respectively), a decrease to finance costs of GBP1.5m
and a decrease to adjusting items of GBP5.5m. The overall impact
is an increase in Group profit for the period of GBP5.3m.
Segment assets and liabilities, including investments in
associates and joint ventures, are not disclosed because they are
not reported to or reviewed by the Executive Committee.
Other disclosures
As at As at As at
26 Sep 2020 28 Sep 2019 28 March
2020
(Unaudited)(1) (Unaudited) (Audited)
GBPm GBPm GBPm
--------------------------------- --------------- ------------ ----------
Write-down of inventories to net
realisable value 19.7 95.7 389.0
--------------------------------- --------------- ------------ ----------
(1) Includes write-back of inventories to net realisable value
in relation to Covid-19. See note 3 for further detail.
3 Adjusting items
The total adjusting items reported for the 26 week period ended
26 September 2020 is a net charge of GBP70.2m. The adjustments made
to reported profit before tax to arrive at adjusted profit are:
26 weeks ended Year ended
------------------------
26 Sep 2020 28 Sep 2019 28 Mar 2020
(Unaudited) (Unaudited) (Audited)
(Restated)
GBPm GBPm GBPm
------------------------------------------- ----------- ----------- -----------
Included in revenue
Sparks loyalty programme transition 11.2 - -
------------------------------------------- ----------- ----------- -----------
11.2 - -
------------------------------------------- ----------- ----------- -----------
Included in operating profit
Strategic programmes - Organisation 92.1 11.3 13.8
Directly attributable (gains)/expenses
resulting from the Covid-19 pandemic(1,2) (49.4) - 166.5
Amortisation and fair value adjustments
arising as part of the investment
in Ocado Retail Limited 7.1 - 16.8
Sparks loyalty programme transition 4.1 - -
Strategic programmes - UK store estate(1) 2.9 9.9 29.3
Establishing the investment in Ocado
Retail Limited 1.7 - 1.2
M&S Bank charges incurred in relation
to the insurance mis-selling and
Covid-19 forward economic guidance
provision 1.4 10.7 12.6
Strategic programmes - UK logistics 0.1 0.5 10.2
Strategic programmes - Operational
transformation - 6.5 11.6
Strategic programmes - Changes to
pay and pensions - 1.5 2.9
Strategic programmes - IT restructure - 0.7 0.4
Strategic programmes - International
store closures and impairments - (0.1) 2.2
Store impairments and other property
charges(1) - - 78.5
Goodwill impairment - per una(1) - - 13.4
Other - (23.5) (23.5)
------------------------------------------- ----------- ----------- -----------
60.0 17.5 335.9
------------------------------------------- ----------- ----------- -----------
Included in net finance costs
Remeasurement of contingent consideration
including discount unwind (1.0) - 2.9
Directly attributable (gains)/expenses
resulting from the Covid-19 pandemic(1,2) - - (2.9)
------------------------------------------- ----------- ----------- -----------
(1.0) - -
------------------------------------------- ----------- ----------- -----------
Adjustment to profit before tax 70.2 17.5 335.9
------------------------------------------- ----------- ----------- -----------
(1.) (Gains)/expenses directly attributable to the Covid-19
pandemic in the current and previous periods are presented
below; this includes the resulting incremental impairment charge
disclosed within the strategic programmes above related to
the UK store estate, UK store impairments, International store
impairments and the impairment of per una goodwill.
26 weeks ended Year ended
------------------------
26 Sep 2020 28 Sep 2019 28 Mar 2020
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
------------------------------------------- ----------- ----------- -----------
Directly attributable (gains)/expenses
resulting from the Covid-19 pandemic(2) (49.4) - 163.6
Store impairments - - 24.2
UK store estate impairments - - 11.6
Goodwill impairment - per una - - 13.4
------------------------------------------- ----------- ----------- -----------
Total Covid-19 (gains)/charges (49.4) - 212.8
------------------------------------------- ----------- ----------- -----------
(2.) The 2019/20 net charge for Directly attributable (gains)/expenses
resulting from the Covid-19 pandemic is made up of GBP166.5m
of charges within operating expenses and a GBP2.9m gain within
net finance costs relating to forecast purchases no longer
expected to occur.
Strategic programmes - Organisation (GBP92.1m)
During 2016/17, the Group announced a wide-ranging strategic
review across a number of areas of the business which included UK
organisation and the programme to centralise our London Head Office
functions into one building.
In May 2020, as part of the 'Never the Same Again'
transformation, the Group announced a commitment to integrate more
flexible management structures into store operations as well as
streamline the business at store and management level. The changes
are expected to result in a reduction of c.7,950 roles across
central support centres, regional management and our UK stores,
with a charge of GBP92.1m recognised in the period primarily for
redundancy costs associated with these changes.
These costs are recognised as adjusting items on the basis that
they are significant in quantum, relate to a strategic initiative
and are consistent with the disclosure of costs for similar
restructuring programmes previously undertaken. Total programme
costs incurred to date are GBP165.5m.
Directly attributable (gains)/expenses resulting from the
Covid-19 pandemic (GBP49.4m CR)
In March 2020, following the declaration by the World Health
Organization of the Covid-19 global pandemic and subsequent UK
government restrictions, the Group sustained significant disruption
to its operations, with the Group able to continue to trade its
Food business (albeit with social-distancing rules in place) but
unable to trade Clothing & Home from full-line stores, with
sales predominantly coming from online sales and Click &
Collect in stores. In addition, all M&S Outlets stores and a
number of Food franchise stores were also closed. In response to
the global political and economic uncertainty resulting from the
Covid-19 pandemic, coupled with the fast-paced changes taking place
across the retail sector, the Board approved a Covid-19 scenario to
reflect management's best estimate of the significant volatility
and business disruption expected as a result of the on-going
pandemic.
As a result, in order to improve the transparency and usefulness
of the financial information presented and improve year-on-year
comparability, in 2019/20 the Group identified total Covid-19
charges of GBP212.8m across four adjusting items programmes. The
charges related to three separately identifiable areas of
accounting judgement and estimates: the write-down of inventories
to net realisable value; impairments of intangible assets and
property, plant and equipment; and onerous contract provisions,
cancellation charges and one-off costs. The Group disclosed in
2019/20 that should the estimated charges prove to be in excess of
the amounts required, the release or reassessment of any amounts
previously provided would also be treated as adjusting items.
The pandemic has continued to impact the Group through-out the
period and it has become increasingly more difficult to
differentiate Covid-19 items from costs that support the underlying
performance of the business. In addition the estimated timeframe
over which these effects may impact the business has increased. As
a result, the Group has taken the decision to only include changes
in estimates to items that were included in adjusting items at year
end, in this case relating to the inventory provision. The impact
that Covid-19 has had on underlying trading continues not to be
recognised within adjusting items. The Group has provided
additional disclosure of the significant impacts of Covid-19 on the
underlying results on page 10.
In particular, the Group has received support from the
Government during the period in the form of Business Rates relief
of GBP83.7m and the Coronavirus Job Retention Scheme of GBP94.5m.
The Group took the decision to furlough up to c. 29,000 colleagues
across our stores and support centres. The furlough income,
received in the form of a government grant, has been deducted
against the corresponding staff costs for furloughed colleagues and
recognised within the underlying results. Further details of which
are provided in note 15 - government support.
Write-back of inventories to net realisable value (GBP49.4m
CR)
The carrying value of the Group's inventories at 28 March 2020
was GBP564.1m. The carrying value of this inventory split across
the UK Clothing & Home, UK Food and International businesses
included gross inventories of GBP539.7m, GBP162.9m and GBP66.3m
respectively, against which a provision of GBP184.3m, GBP8.3m and
GBP12.2m was recognised.
Included within directly attributable expenses resulting from
the Covid-19 pandemic of GBP163.6m at 2019/20, was an incremental
write-down of inventory to net realisable value of GBP157.0m (UK
Clothing & Home: GBP145.3m; UK Food: GBP6.0m and International:
GBP5.7m), reflecting management's best estimate of the impact on
the Group of the Covid-19 pandemic.
In response to the earlier than anticipated reopening of our
Clothing & Home and Outlet stores and strong trading over the
summer driven by our NHS Charity Rainbow sale, albeit at lower
margins, the Group has been able to sell much higher volumes of
stock than assumed versus the Covid-19 scenario. As a result, a net
credit of GBP49.4m has been recorded, representing a release to the
inventory provisions recorded in the 2019/20 financial statements
to align to our latest estimates based on current sales
performance, offset by charges in the period relating to
reassessment of storage and fabric cancellation provisions.
As a result, the carrying value of the Group's inventories at 26
September 2020 is GBP663.4m. The carrying value of this inventory
split across the UK Clothing & Home, UK Food and International
businesses represents gross inventories of GBP535.5m, GBP181.2m and
GBP74.7m respectively, against which against which a provision of
GBP113.8m, GBP3.9m and GBP10.3m has been recognised. Included
within the UK Clothing & Home provision is an incremental
write-down of inventory to net realisable value of GBP71.2m
reflecting management's best estimate of the impact of the Covid-19
pandemic on UK Clothing & Home inventory as at 26 September
2020. The total UK Clothing & Home inventory provisions
represent 21% of UK Clothing & Home inventory. A 5% increase in
the UK Clothing & Home inventory provision would result in a
reduction in inventory held on the balance sheet of GBP26.8m and
would result in a corresponding reduction to recognised loss before
tax in the period.
The GBP49.4m directly attributable net gains from the Covid-19
pandemic are considered to be adjusting items as they meet the
Group's established definition, being both significant in nature
and value to the results of the Group in the current period and
treatment as adjusting items is consistent with the treatment of
charges of a consistent nature recognised in 2019/20. Further
charges are anticipated during the second half of 2020/21 to
reflect actions that will be taken as a direct result of the length
of time that the on-going government restrictions are in place, and
how trade and consumer behaviour is impacted. Any future credits
relating to these items will continue to also be classified as
adjusting.
Amortisation and fair value adjustments arising as part of the
investment in Ocado Retail Limited (GBP7.1m)
Intangible assets of GBP366.0m were acquired as part of the
investment in Ocado Retail Limited relating to the Ocado brand and
acquired customer relationships. These intangibles are being
amortised over their useful economic lives of 10 - 40 years with an
amortisation charge of GBP8.8m recognised in the period and a
related deferred tax credit of GBP1.7m.
These charges are considered to be adjusting as they are based
on judgements about their value and economic life and are not
related to the Group's underlying trading performance. Identifying
these items as adjusting allows greater comparability of underlying
performance.
Sparks loyalty programme transition (GBP15.3m)
In July 2020, the Group relaunched its Sparks loyalty programme
as a Digital First loyalty scheme, with a promise that "Good Things
Happen Every Time You Shop". The new Sparks programme removes
certain elements of the old, such as points and sale access tiers,
and introduces new instant rewards to deliver immediate and clearer
value to customers for shopping with M&S. As part of the
transition to the new Sparks programme, customers who were members
of the old loyalty scheme were provided with 'thank you' gifts for
their loyalty, the value of which was determined in part with
reference to the number of Sparks pointed earnt historically. These
'thank you' gifts consisted of tote bags and vouchers for money-off
future purchases. As a result, a charge of GBP15.3m has been
recognised in the period relating to one-off transition and
'thank-you' costs associated with the closure of the old Sparks
programme.
These costs are directly attributable to the closure of the old
Sparks programme and are considered to be adjusting as they are
significant in quantum, are one-off in nature and not considered to
be part of the normal operating costs of the business. No similar
charges of this type have been incurred by the Group in the past,
and no further charges are expected in future years.
Strategic programmes - UK store estate (GBP2.9m)
In November 2016, the Group announced a strategic programme to
transform the UK store estate. During 2017/18, the Group announced
its intention to accelerate this programme in line with the
strategic aim of significantly growing the online share of sales,
as well as better than expected levels of sales transfer achieved
from recent store closures. This acceleration of the UK store
estate programme resulted in an acceleration of the timing of
recognition of the associated costs, primarily driven by a
shortening of the useful economic life, for impairment testing
purposes, of those stores identified as part of the transformation
plans.
Whilst Covid-19 has continued to impact the Group's day-to-day
operations our UK store estate strategic programme remains on
track. A charge of GBP2.9m has been recognised in the period for
those stores identified as part of the transformation plans. The
charge primarily reflects an updated view of latest store exit
routes and assumptions underlying estimated store closure costs.
There have been no further directly attributable incremental
charges due to Covid-19 reflected during the period.
Further material charges relating to the closure and
reconfiguration of the UK store estate are anticipated as the
programme progresses, the quantum of which is subject to change
throughout the programme period as decisions are taken in relation
to the size of the store estate and the specific stores affected.
Following the latest view of store closure costs, at 26 September
2020, further charges of c.GBP120m are estimated within the next
seven financial years, bringing anticipated total programme costs
to be up to c.GBP680m.
Establishing the investment in Ocado Retail Limited
(GBP1.7m)
In 2018/19 the Group announced its 50/50 investment in Ocado
Retail Limited. GBP4.6m of charges were recognised across 2018/19
and 2019/20 primarily relating to due diligence for the Ocado
Retail transaction and one-off charges, that are not part of the
day-to-day operational costs our business with Ocado Retail,
incurred in preparation for the launch in September 2020.
A further GBP1.7m of "getting ready" charges were incurred in
the period prior to launch on 1 September, bring the total one-off
charges relating to Ocado Retail Limited to GBP6.3m. No further
costs are expected post launch in the second half of the financial
year.
These costs are adjusting items as they relate to a major
transaction and but for the transaction the business would not have
incurred these costs and as a result prior to the Ocado "go-live"
in September 2020 are not considered to be normal operating costs
of the business.
M&S Bank charges incurred in relation to the insurance
mis-selling provision and Covid-19 forward economic guidance
provision (GBP1.4m)
The Group has an economic interest in Marks and Spencer
Financial Services plc (trading as M&S Bank), a wholly owned
subsidiary of HSBC UK Bank plc, by way of a Relationship Agreement
that entitles the Group to a 50% share of the profits of M&S
Bank after appropriate deductions. The Group does not share in any
losses of M&S Bank and is not obliged to refund any profit
share received from HSBC, although future income may be impacted by
significant one-off deductions.
Since the year ended 31 December 2010, M&S Bank has
recognised in its audited financial statements an estimated
liability for redress to customers in respect of possible
mis-selling of financial products. The Group's profit share and fee
income from M&S Bank has been reduced by the deduction of the
estimated liability in both the current and prior years. In line
with the accounting treatment under the Relationship Agreement,
there is a cap on the amount of charges that can be offset against
the profit share in any one year, whereby excess liabilities
carried forward are deducted from the Group's future profit share
from M&S Bank. The deduction in the period is GBP1.4m.
The treatment of this in adjusting items is in line with
previous charges in relation to settlement of PPI claims and
although it is recurring, it is significant in quantum in the
context of the total charges recognised for PPI mis-selling to-date
and is not considered representative of the normal operating
performance of the Group. As previously noted, whilst the August
2019 deadline to raise potential mis-selling claims has now passed,
costs relating to the estimated liability for redress are expected
to continue in the second half of the year and beyond. The total
charges recognised in adjusting items since September 2013 for both
PPI and Covid-19 forward economic guidance provision is GBP358.7m
which exceeds the total offset against profit share of GBP244.1m to
date and this deficit will be deducted from the Group's share of
future profits from M&S Bank.
Strategic programmes - UK logistics (GBP0.1m)
In 2017/18, as part of the previously announced long-term
strategic programme to transition to a single-tier UK distribution
network, the Group announced the opening of a new Clothing &
Home distribution centre in Welham Green in 2019. As a direct
result, the Group announced the closure of two existing
distribution centres.
In February 2020, the next phase of the single tier programme
was announced with the closure of two further distribution centres
across 2020/21 and 2021/22. A net charge of GBP0.1m has been
recognised in the period, reflecting an updated view of estimated
closure costs and transition project costs relating to these
closures. Total programme costs to date are GBP37.7m with further
charges expected in the second half of this financial year.
The Group considers these costs to be adjusting items as they
have been significant in quantum and relate to a significant
strategic initiative of the Group. Treatment of the costs as being
adjusting items is consistent with the treatment of charges in
previous periods in relation to the creation of a single-tier
logistics network.
Remeasurement of contingent consideration including discount
unwind (GBP1.0m CR)
Contingent consideration, resulting from the investment in Ocado
Retail Limited, is remeasured at fair value at each reporting date
with the changes in fair value recognised in profit or loss. The
change in fair value and the related unwind of discounting is
considered to be an adjusting item as it relates to a major
transaction and consequently is not considered representative of
the normal operating performance of the Group. The gain for the
period of GBP1.0m represents the unwind of discounting from the
year end. Discount unwind will be (credited)/charged to adjusting
items until the final contingent consideration payment is made in
2023/24.
4 Finance income/(costs)
26 weeks ended 52 weeks
ended
------------------------
26 Sep 2020 28 Sep 2019 28 March
2020
(Unaudited) (Unaudited) (Audited)
(Restated)
Notes GBPm GBPm GBPm
-------------------------------------- ----- ----------- ----------- ---------
Bank and other interest receivable 1.3 6.0 8.6
Pension net finance income 9 22.8 11.3 23.6
Other finance income 0.6 5.9 5.9
Interest income on subleases 2.6 3.2 5.9
-------------------------------------- ----- ----------- ----------- ---------
Finance income before adjusting
items 27.3 26.4 44.0
-------------------------------------- ----- ----------- ----------- ---------
Finance income in adjusting items 3 1.0 - 2.9
-------------------------------------- ----- ----------- ----------- ---------
Finance income 28.3 26.4 46.9
-------------------------------------- ----- ----------- ----------- ---------
Interest on bank borrowings (0.2) (0.3) -
Interest payable on syndicated
bank facility (1.9) (1.2) (2.3)
Interest payable on medium-term
notes (35.6) (41.1) (78.2)
Interest payable on commercial
paper facility (0.3) - -
Interest payable on lease liabilities (64.8) (71.5) (139.3)
Unwinding of discount on partnership
liability to the Marks and Spencer
UK Pension Scheme 10 (2.4) (3.4) (6.9)
Unwind of discount on provisions (1.3) (2.5) (4.9)
Ineffectiveness on financial - - -
instruments
-------------------------------------- ----- ----------- ----------- ---------
Finance costs before adjusting
items (106.5) (120.0) (231.6)
-------------------------------------- ----- ----------- ----------- ---------
Finance costs in adjusting items 3 - - (2.9)
-------------------------------------- ----- ----------- ----------- ---------
Finance costs (106.5) (120.0) (234.5)
-------------------------------------- ----- ----------- ----------- ---------
Net finance costs (78.2) (93.6) (187.6)
-------------------------------------- ----- ----------- ----------- ---------
Finance income/(costs) of GBP1.0m (last half year: GBPnil;
last full year: (GBP2.9m)) relating to the remeasurement of
contingent consideration including discount unwind and finance
income of GBPnil (last half year: GBPnil; last full year: GBP2.9m)
relating to directly attributable gains resulting from the
Covid-19 pandemic included within adjusting items as detailed
in note 3.
5 Taxation
Taxes on income in the interim period are accrued using the tax
rate that would be applicable to expected total annual earnings,
adjusted for actual tax on adjusting items.
The taxation charge in the income statement for the half year is
based on a forecast full year tax rate on (loss)/profit before
adjusting items of 27.0% (last half year 23.1% and last full year
20.7%) and 16.1% tax on adjusting items arising in the period to 26
September 2020 (last half year (restated) 25.1% and last full year
12.9%) to give an effective tax rate on (loss)/profit before
taxation of 18.3% (last half year (restated) 22.9% and last full
year 59.3%). The effective tax rate on the (loss)/profit before
adjusting items is higher than the UK statutory rate of 19.0%
(19.0% last year) principally due to the unwind of the tax benefit
in respect of the Scottish Limited Partnership pension
structure.
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 also been
calculated based on earnings before adjusting items that are
significant in nature and/or value (see note 3). These have been
presented to provide shareholders with an additional measure of the
Group's year-on-year performance.
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 four types 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
period; unvested shares granted under the Deferred Share Bonus
Plan; unvested shares granted under the Restricted Share Plan; and
unvested shares within the Performance Share Plan that have met the
relevant performance conditions at the end of the reporting
period.
Details of the adjusted earnings per share are set out
below:
26 weeks ended 52 weeks
ended
------------------------
26 Sep 28 Sep 28 March
2020 2019 2020
(Unaudited) (Unaudited) (Audited)
(Restated)
GBPm GBPm GBPm
-------------------------------------------- ----------- ----------- ---------
(Loss)/profit attributable to equity
shareholders of the Company (67.4) 118.1 23.7
-------------------------------------------- ----------- ----------- ---------
Add/(less):
Adjusting items (see note 3) 70.2 17.5 335.9
Tax on adjusting items (11.3) (4.4) (43.6)
-------------------------------------------- ----------- ----------- ---------
(Loss)/profit before adjusting items
attributable to equity shareholders
of the Company (8.5) 131.2 316.0
-------------------------------------------- ----------- ----------- ---------
Million Million Million
-------------------------------------------- ----------- ----------- ---------
Weighted average number of ordinary
shares in issue 1,951.7 1,840.2 1,894.9
Potentially dilutive share options under
Group's share option schemes(1) 17.4 2.0 10.7
-------------------------------------------- ----------- ----------- ---------
Weighted average number of diluted ordinary
shares 1,969.1 1,842.2 1,905.6
-------------------------------------------- ----------- ----------- ---------
Pence Pence Pence
-------------------------------------------- ----------- ----------- ---------
Basic earnings per share (3.5) 6.4 1.3
Diluted earnings per share (3.5) 6.4 1.2
Adjusted basic earnings per share (0.4) 7.1 16.7
Adjusted diluted earnings per share (0.4) 7.1 16.6
-------------------------------------------- ----------- ----------- ---------
(1) The current year potentially dilutive share options figure
includes all outstanding shares on the 2020 PSP scheme as the
performance conditions have not yet been set by the Remuneration
Committee due to the Covid-19 global pandemic. These will be
agreed by 31 December 2020.
7 Dividends
26 weeks ended 52 weeks
ended
------------------------
26 Sep 2020 28 Sep 2019 28 March
2020
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
------------------------------- ----------- ----------- ---------
Prior period final dividend of
6.8p per share - 115.1 115.1
Prior period interim dividend
of 3.9p per share - - 76.0
------------------------------- ----------- ----------- ---------
- 115.1 191.1
------------------------------- ----------- ----------- ---------
The Board of Directors have not proposed an interim dividend for
2020/21. The Board of Directors will continue to defer
consideration of further dividends until visibility of the pace and
scale of market recovery has improved.
8 Investments in joint ventures and associates
The Group holds a 50% interest in Ocado Retail Limited. The
remaining 50% interest is held by Ocado Group Plc. Ocado Retail
Limited is considered an associate of the Group as certain rights
are conferred on Ocado Group Plc for an initial period of at least
five years from acquisition in August 2019, giving Ocado Group Plc
control of the company. Following this initial period, a
reassessment of control will be required as the Group will have an
option to obtain more power over Ocado Retail Limited if certain
conditions are met. If the Group is deemed to have obtained
control, Ocado Retail Limited will then be consolidated as a
subsidiary of the Group. Through Board representation and
shareholder voting rights, the Group is currently considered to
have significant influence, therefore the investment in Ocado
Retail Limited is treated as an associate and applies the equity
method of accounting.
Ocado Retail Limited has a year end date of 29 November 2020,
aligning with its parent company, Ocado Group Plc. Ocado Retail
Limited will prepare financial information for the Group purposes
to the nearest quarter-end date of Ocado Retail Limited's year end.
The results of Ocado Retail Limited are incorporated in this
interim financial statement from 2 March 2020 to 30 August 2020.
There were no significant events or transactions in the period from
31 August 2020 to 26 September 2020 that had a material effect.
The carrying amount of the Group's interest in Ocado Retail
Limited is GBP786.5m (last half year: GBP748.7m; last full year:
GBP754.8m). The Group's share of Ocado Retail Limited profits of
GBP31.7m (last half year: GBP0.5m loss; last full year: GBP14.2m
loss) includes the Group's share of underlying profits of GBP38.8m,
which includes GBP14.3m of exceptional income before tax related to
anticipated insurance receipts (share of result last half year:
GBP0.5m loss; last full year: GBP2.6m profit) and adjusting item
charges of GBP7.1m (last half year: GBPnil; last full year:
GBP16.8m) (see note 3).
Summarised financial information in respect of Ocado Retail
Limited is set out below and represents amounts in the Ocado Retail
Limited financial statements prepared in accordance with IFRS,
adjusted by the Group for equity accounting purposes.
As at 30 August 2020 As at 1 March 2020
(Unaudited) (Unaudited)
GBPm GBPm
------------------------- --------------------- -------------------
Ocado Retail Limited
Current assets 308.4 484.9
Non-current assets 250.3 206.6
Current liabilities (250.7) (489.7)
Non-current liabilities (206.6) (178.2)
------------------------- --------------------- -------------------
Net assets 101.4 23.6
------------------------- --------------------- -------------------
2 March 2020 to 30 August 2020
(Unaudited)
GBPm
---------------------------- -------------------------------
Revenue 1,167.7
Profit for the period 77.6
Other comprehensive income -
---------------------------- -------------------------------
Total comprehensive income 77.6
---------------------------- -------------------------------
As part of the investment, a contingent consideration was
agreed. The contingent consideration arrangement requires Ocado
Retail Limited to achieve a target level of earnings in the
financial year ending in November 2023, for specified capacity
levels to be achieved and utilised within a specific customer
fulfilment centre (CFC) by November 2023 and to begin providing
service to customers from a new CFC. The potential undiscounted
amount of all future payments that the Group could be required to
pay under the contingent consideration arrangement is up to
GBP187.5m plus 4% interest.
The fair value of the contingent consideration arrangement of
GBP204.3m was estimated by applying an appropriate discount rate to
the expected future payments which are based on the current
five-year plan for Ocado Retail Limited (see note 11).
In addition, the Group holds immaterial investments in joint
ventures totalling GBP7.4m (last half year: GBP6.1m; last full
year: GBP5.6m). The Group's share of losses totalled GBP0.7m (last
half year: GBP0.6m loss; last full year: GBP0.9m loss).
9 Retirement benefits
26 weeks ended 52 weeks
ended
------------------------
26 Sep 2020 28 Sep 2019 28 March
2020
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
------------------------------------ ----------- ----------- ---------
Opening net retirement benefit
surplus 1,902.6 914.3 914.3
Current service cost (0.1) (0.1) (0.2)
Administration costs (2.3) (2.0) (4.5)
Net interest income 22.8 11.3 23.6
Employer contributions 39.0 39.2 41.8
Remeasurements(1) (1,071.8) 29.2 927.9
Exchange movement (0.2) (0.7) (0.3)
------------------------------------ ----------- ----------- ---------
Closing net retirement benefit
surplus 890.0 991.2 1,902.6
------------------------------------ ----------- ----------- ---------
Total market value of assets 11,349.0 11,364.6 10,653.8
Present value of scheme liabilities (10,451.0) (10,364.1) (8,743.3)
------------------------------------ ----------- ----------- ---------
Net funded pension plan asset 898.0 1,000.5 1,910.5
Unfunded retirement benefits (4.0) (3.7) (3.9)
Post-retirement healthcare (4.0) (5.6) (4.0)
------------------------------------ ----------- ----------- ---------
Net retirement benefit surplus 890.0 991.2 1,902.6
------------------------------------ ----------- ----------- ---------
Analysed in the Statement of
Financial Position as:
Retirement benefit asset 902.3 1,026.2 1,915.0
Retirement benefit deficit (12.3) (35.0) (12.4)
------------------------------------ ----------- ----------- ---------
Net retirement benefit surplus 890.0 991.2 1,902.6
------------------------------------ ----------- ----------- ---------
(1) The 26 September 2020 remeasurement loss includes GBP2.5m
relating to an equalisation charge recognised in FY18/19 that
was reclassified from provisions in the current period.
In addition to the amounts disclosed above the Group made
payments of GBP33.1m (last half year: GBP32.9m; last full year:
GBP65.6m) /relating to the Your M&S Pension Saving Plan (a
defined contribution arrangement).
Financial assumptions
The main financial assumptions for the UK scheme and the most
recent actuarial valuations of the other post-retirement schemes
have been updated by independent qualified actuaries to take
account of the requirements of IAS 19 - Employee Benefits in order
to assess the liabilities of the schemes.
The most significant of these are the discount rate and the
inflation rate which are 1.55 % (last half year: 1.85%; last full
year: 2.40%) and 2.90 % (last half year: 3.10%; last full year:
2.70%) respectively. The inflation rate of 2.90 % reflects the
Retail Price Index (RPI) rate. Certain benefits have been
calculated with reference to the Consumer Price Index (CPI) as the
inflationary measure and in these instances a rate of 2.20 % (last
half year: 2.30%; last full year: 2.00%) has been used.
The amount of the surplus varies if the main financial
assumptions change. If the discount rate decreased by 0.25%, the
surplus would decrease by GBP20m (last half year: decrease by
GBP50m; last full year: increase by GBP50m). If the discount rate
decreased by 0.50%, the surplus would decrease by GBP50m (last full
year: increase by GBP100m). If the inflation rate decreased by
0.25%, the surplus would decrease by GBP10m (last half year:
decrease by GBP50m; last full year: decrease by GBP50m). If the
inflation rate decreased by 0.50%, the surplus would decrease by
GBP20m (last full year: decrease by GBP100m). A one year decrease
in life expectancy would increase the schemes surplus by GBP280m
(last half year: increase by GBP300m; last full year: increase by
GBP240m).
The discount rate sensitivity is comparable to the sensitivity
quoted at the year end. However, the sign has changed from an
increase in surplus to a reduction in surplus. The pension scheme
hedges against a different basis to IAS19, which leads to an IAS19
over-hedge on gilt yields and this increased materially over the
prior year. Consequently, assets were projected to grow by more
than liabilities in this scenario, whereas now assets are projected
to grow by less than liabilities. Given changes in inflation and
discount rate assumptions over the past year, the range of
sensitivities shown has been widened. Within the discount rates
scenarios, a quarter of the change is from credit spreads with the
remainder from gilt yields. The sensitivity analysis above is based
on a change in one assumption while holding all others constant.
Therefore interdependencies between the assumptions have not been
taken into account within the analysis.
The most recent actuarial valuation of the Marks & Spencer
UK Pension Scheme was carried out as at 31 March 2018 and showed a
funding surplus of GBP652m. This is an improvement on the previous
position at 31 March 2015 (statutory surplus of GBP204m), primarily
due to lower assumed life expectancy. The Company and Trustees have
confirmed, in line with the current funding arrangement, that no
further contributions will be required to fund past service as a
result of this valuation (other than those already contractually
committed under the existing Marks and Spencer Scottish Limited
Partnership arrangements - see note 10).
In September 2020, the Scheme purchased additional pensioner
buy-in policies with two insurers for approximately GBP750m.
Together with the policies purchased in April 2019 and March 2018,
the Scheme has now, in total, insured around 80% of the pensioner
cash flow liabilities for pensions in payment. The buy-in policies
cover specific pensioner liabilities and pass all risks to an
insurer in exchange for a fixed premium payment, thus reducing the
Group's exposure to changes in longevity, interest rates, inflation
and other factors.
10 Marks and Spencer Scottish Limited Partnership
Marks and Spencer plc is a general partner and the Marks and
Spencer UK Pension Scheme is a limited partner of the Marks and
Spencer Scottish Limited Partnership (the "Partnership"). Under the
partnership agreement, the limited partners have no involvement in
the management of the business and shall not take any part in the
control of the partnership. The general partner is responsible for
the management and control of the partnership and as such, the
Partnership is consolidated into the results of the Group.
The Partnership holds GBP1.4bn (last half year: GBP1.4bn; last
full year: GBP1.4bn) of properties which have been leased back to
Marks and Spencer plc. The Group retains control over these
properties, including the flexibility to substitute alternative
properties into the Partnership. The first limited partnership
interest (held by the Marks and Spencer UK Pension Scheme),
entitles the Pension Scheme to receive an annual distribution of
GBP71.9m until June 2022 from the Partnership. The second
partnership interest (also held by the Marks and Spencer UK Pension
Scheme) entitles the Pension Scheme to receive a further GBP36.4m
annually from June 2017 until June 2031. All profits generated by
the Partnership in excess of this are distributable to Marks and
Spencer plc.
The partnership liability in relation to the first interest of
GBP190.9m (last half year: GBP204.0m; last full year: GBP207.4m) is
valued at the net present value of the future expected
distributions from the Partnership and is included as a liability
in the Group's financial statements as it is a transferrable
financial instrument. During the period to 26 September 2020 an
interest charge of GBP2.4m (last half year: GBP3.4m; last full
year: GBP6.9m) was recognised in the income statement representing
the unwinding of the discount included in this obligation. The
first limited partnership interest of the Pension Scheme is
included within the UK DB pension scheme assets valued at GBP141.5m
(last half year: GBP210.5m; last full year: GBP211.2m).
The second partnership interest is not a transferable financial
instrument as the Scheme Trustee does not have the right to
transfer it to any party other than a successor Trustee. It is
therefore not included as a plan asset within the UK DB pension
scheme surplus reported in accordance with IAS 19. Similarly, the
associated liability is not included on the Group's statement of
financial position, rather the annual distribution is recognised as
a contribution to the scheme each year.
11 Financial Instruments
Fair Value Hierarchy
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique:
- Level 1: quoted (unadjusted) prices in active markets for
identical assets and liabilities. The Group had no level 1
investments or financial instruments.
- Level 2: not traded in an active market, but the fair values
are based on quoted market prices or alternative pricing sources
with reasonable levels of price transparency. The Group's level 2
financial instruments include interest rate and foreign exchange
derivatives. Fair value is calculated using discounted cash flow
methodology, future cash flows are estimated based on forward
exchange rates and interest rates (from observable market curves)
and contract rates, discounted at a rate that reflects the credit
risk of the various counterparties for those with a long
maturity.
- Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable
market data.
At the end of the reporting period, the Group held the following
financial instruments at fair value:
(Unaudited) (Audited)
As at As
at
26 Sep 2020 28 March 2020
------------------------------- ---------------------------------
Level Level Level Total Level Level Level Total
1 2 3 1 2 3
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ----- ------ ------- ------- ----- ------ ------- ---------
Assets measured at fair
value
Financial assets at fair
value through profit or
loss
- trading derivatives - 1.5 - 1.5 - 2.5 - 2.5
Derivatives used for hedging - 84.7 - 84.7 - 183.4 - 183.4
Short term investments - 13.2 - 13.2 - 11.7 - 11.7
Unlisted investments(1) - - 9.7 9.7 - - 9.7 9.7
Liabilities measured at
fair value
Financial liabilities
at fair value through
profit and loss
- trading derivatives - (0.4) - (0.4) - (2.8) - (2.8)
- contingent consideration
(see note 8)(2) - - (204.3) (204.3) - - (202.4) (202.4)
Derivatives used for hedging - (32.3) - (32.3) - (10.9) - (10.9)
----------------------------- ----- ------ ------- ------- ----- ------ ------- ---------
(1) There were no transfers between the levels of the fair
value hierarchy during the period. There were also no changes
made to any of the valuation techniques applied as of 28 March
2020. The Group holds GBP9.7m in unlisted equity securities
measured at fair value through other comprehensive income (last
half year: GBP9.9m; last full year: GBP9.7m) which is a Level
3 instrument. The fair value of this investment is determined
with reference to the net asset value of the entity in which
the investment is held, which in turn derives the majority
of its net asset value through a third-party property valuation.
(2) The determination of the fair value of the contingent
consideration is based on discounted cash flows. The key assumptions
take into consideration the probability of meeting each performance
target and the discount factor. The performance targets are
binary and, based on the latest five-year plan of Ocado Retail
Limited, are expected to be met and therefore the full (discounted)
amount has been recognised. The discount rates used ranged
from 2.0% to 2.7% and a 0.5% change in the discount rates would
result in a change in fair value of GBP3.3m.
Fair value of financial instruments
With the exception of the Group's fixed rate bond debt and the
Partnership liability to the Marks and Spencer UK Pension scheme,
there were no material differences between the carrying value of
non -- derivative financial assets and financial liabilities and
their fair values as at the balance sheet date.
The carrying value of the Group's fixed rate bond debt (Level 1
equivalent) was GBP1,531.0m (last half year: GBP1,957.1m; last full
year: GBP1,536.2m); the fair value of this debt was GBP1,600.7m
(last half year: GBP2,066.5m; last full year: GBP1,531.4m) which
has been calculated using quoted market prices and includes accrued
interest. The carrying value of the Partnership liability to the
Marks & Spencer UK Pension scheme is GBP190.9m (last half year:
GBP204.0m; last full year: GBP207.4m) and the fair value of this
liability, which represents only the principal value excluding
accrued interest is GBP185.5m (last half year: GBP202.7m; last full
year: GBP202.7m).
Lease liabilities
Future cash outflows related to the post break clause period
included in the lease liability
The Group holds certain leases that contain break clause options
to provide operational flexibility. In accordance with IFRS 16 the
Group has calculated the full lease term, beyond break, to
represent the reasonably certain lease term (except for those
stores identified as part of the UK store estate programme) within
the total GBP2,507.9m of lease liabilities held on the balance
sheet.
Cash flow hedge accounting
The Group hedges its exposure to foreign currency risk using
forward foreign exchange contracts and hedge accounting is applied
when the requirements of IFRS 9 are met, including that forecast
transactions are "highly probable". The Group has continued to
apply judgment in assessing whether forecast purchases remain
"highly probable". There have been no de-designated hedges or
realised ineffectiveness in the foreign exchange forward contracts
in the period and as at 26 September 2020, all forecast purchases
qualify for hedge accounting.
12 Capital expenditure and commitments
Capital expenditure
Additions to the cost of property, plant and equipment,
investment property and intangible assets, excluding right of use
assets are GBP62.2m (last half year: GBP125.9m) and for the year
ended 28 March 2020 were GBP352.3m. Disposals in net book value of
property, plant and equipment, investment property and intangible
assets, excluding right of use assets are GBPnil (last half year:
GBPnil) and for the year ended 28 March 2020 were GBPnil.
Capital commitments
As at As at As at
26 Sep 2020 28 Sep 2019 28 March
2020
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
------------------------------------------ ----------- ----------- ---------
Commitments in respect of properties
in the course of construction 75.3 109.1 78.7
Software capital commitments 4.1 15.1 8.6
------------------------------------------ ----------- ----------- ---------
79.4 124.2 87.3
------------------------------------------ ----------- ----------- ---------
13 Analysis of cash flows given
in the statement of cash flows
26 weeks ended 52 weeks
ended
------------------------
26 Sep 2020 28 Sep 2019 28 March
2020
(Unaudited) (Unaudited) (Audited)
(Restated)
GBPm GBPm GBPm
------------------------------------------ ----------- ----------- -----------
(Loss)/profit on ordinary activities
after taxation (71.6) 122.4 27.4
Income tax (credit)/expense (16.0) 36.4 39.8
Finance costs 106.5 120.0 234.5
Finance income (28.3) (26.4) (46.9)
------------------------------------------ ----------- ----------- -----------
Operating (loss)/profit (9.4) 252.4 254.8
Share of result in associate - Ocado
Retail Limited before adjusting
items (38.8) 0.5 (2.6)
Decrease/(increase) in inventories 8.2 (119.2) (29.3)
Decrease/(increase) in receivables 28.1 8.1 (9.2)
Increase/(decrease) in payables 38.7 43.4 (10.0)
Adjusting items net cash outflows(1,2) (17.4) (57.9) (75.4)
Depreciation, amortisation and write-offs
before adjusting items 306.1 315.9 632.5
Non-cash share-based payment charges 7.7 10.1 18.5
Defined benefit pension funding (36.2) (36.5) (37.9)
Adjusting items M&S Bank(3) (1.4) (10.7) (12.6)
Adjusting operating profit items 71.2 17.5 335.9
------------------------------------------ ----------- ----------- -----------
Cash generated from operations 356.8 423.6 1,064.7
------------------------------------------ ----------- ----------- -----------
(1) Excludes GBP12.4m (last half year: GBP6.3m; last year
end: GBP11.3m) of surrender payments included within repayment
of lease liabilities in the consolidated statement of cashflows
relating to leases within the UK store estate programme.
(2.) Adjusting items net cash outflows relate to the utilisation
of the provisions for International store closures and impairments,
strategic programme costs associated with the UK store estate,
organisation, operational transformation, UK logistics, IT
restructure, changes to pay and pensions, store impairments
and property charges, directly attributable (gains)/expenses
arising from the Covid-19 pandemic, Sparks loyalty programme
and establishing the investment in Ocado Retail Limited.
(3.) Adjusting items M&S Bank relates to M&S Bank income recognised
in operating profit offset by charges incurred in relation
to the insurance mis-selling provision, which is a non-cash
item.
14 Analysis of net debt
Reconciliation of net cash flow to movement in net debt
26 weeks ended 52 weeks
ended
------------------------
26 Sep 2020 28 Sep 2019 28 March
2020
(Unaudited) (Unaudited) (Audited)
(Restated)
GBPm GBPm GBPm
------------------------------------------ ----------- ----------- ---------
Opening net debt (4,025.2) (4,075.4) (4,075.4)
------------------------------------------ ----------- ----------- ---------
Net cash inflow/(outflow) from activities 58.7 92.5 (49.5)
Increase/(decrease) in current financial
assets 1.7 2.2 (130.1)
Decrease/(increase) in debt financing 94.7 (96.3) 414.9
New lease commitments (11.5) (55.8) (204.1)
Exchange and other non cash movements (25.1) (5.6) 19.0
------------------------------------------ ----------- ----------- ---------
Movement in net debt 118.5 (63.0) 50.2
------------------------------------------ ----------- ----------- ---------
Closing net debt (3,906.7) (4,138.4) (4,025.2)
------------------------------------------ ----------- ----------- ---------
Reconciliation of net debt to statement
of financial position
As at As at As at
26 Sep 2020 28 Sep 2019 28 March
2020
(Unaudited) (Unaudited) (Audited)
(Restated)
GBPm GBPm GBPm
---------------------------------------- ----------- ----------- ---------
Statement of financial position
and related notes
Cash and cash equivalents 285.9 351.4 248.4
Current financial assets 13.2 144.0 11.7
Bank loans and overdrafts (63.4) (43.9) (84.3)
Medium term notes - net of hedging
derivatives (1,486.1) (1,891.2) (1,471.4)
Lease liabilities (2,507.9) (2,529.3) (2,562.0)
Partnership liability to the Marks
and Spencer UK Pension Scheme (note
10) (190.9) (204.0) (207.4)
---------------------------------------- ----------- ----------- ---------
(3,949.2) (4,173.0) (4,065.0)
Prepaid interest relating to lease
liabilities(1) - (22.1) -
Interest payable included within
related borrowing and the partnership
liability to the Marks and Spencer
UK Pension Scheme 42.5 56.7 39.8
---------------------------------------- ----------- ----------- ---------
Total net debt (3,906.7) (4,138.4) (4,025.2)
---------------------------------------- ----------- ----------- ---------
(1) Lease liabilities as at 28 Sep 2019 are net of prepaid
interest due to the timing of the balance sheet date and the
lease payment due date.
15 Government support
The Group has utilised government support measures in the
geographies in which it operates, including employee furlough
schemes. At the peak for four weeks in May, c.29,000 UK employees
were furloughed who were all paid at least 90% of their salary,
with the Group making up any difference beyond the government
subsidy limits. The total UK, Greek, Czech and Irish government
grant income recognised in the period in relation to these schemes
was GBP97.6m. The salary expense relating to those colleagues on
furlough during the period was GBP149.9m.
In addition, the Group has made use of government-backed tax
deferral schemes, including UK VAT payments that were due between
March and June 2020 that can be deferred until March 2021,
resulting in a benefit to working capital of GBP36.3m.
The Group also benefited from the business rates holiday for the
retail, hospitality and leisure sector of GBP83.7m and the Eat Out
to Help Out Scheme of GBP2.6m in the period.
There are no unfulfilled conditions or contingencies attached to
these grants.
16 Related party transactions
The Group's significant related parties are disclosed in the
Group's 2020 Annual Report.
Associate
The following transactions were carried out with Ocado Retail
Limited, an associate of the Group.
Sales and purchases of goods and services:
26 weeks ended 52 weeks ended
------------------------
26 Sep 2020 28 Sep 2019 28 March 2020
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
-------------------------------- ----------- ----------- --------------
Sales of goods and services 5.8 - -
Purchases of goods and services 0.1 - -
-------------------------------- ----------- ----------- --------------
Included within trade and other receivables is a balance of
GBP3.3m (last half year: GBPnil; last full year: GBPnil) owed by
Ocado Retail Limited.
Key management compensation
Transactions between the Group and key management personnel in
the period relate only to remuneration consistent with the policy
set out in the Directors' Remuneration Report within the Group's
2020 Annual Report.
There have been no other material changes to the arrangements
between the Group and key management personnel in the period.
17 Subsequent events
Subsequent to the balance sheet date, the Group has monitored
trade performance, internal actions, as well as other relevant
external factors (such as changes in any of the government
restrictions). No material changes in key estimates and judgements
have been identified as adjusting post balance sheet events. There
have been no material non-adjusting events since 26 September
2020.
In making its going concern statement, the Group has considered
the impact of the national lockdown announced by the government on
31 October 2020. Refer to note 1 for further details of the going
concern assessment.
Glossary
Alternative Closest Reconciling Definition and purpose
performance equivalent items to
measure statutory statutory
measure measure
Income Statement Measures
Like-for-like Movement Sales from The period on period change
revenue in revenue non in revenue (excluding VAT)
growth per the like-for-like from stores which have been
Income stores trading and where there has
Statement been no significant change
(greater than 10%) in footage
for at least 52 weeks and
online sales. The measure
is used widely in the retail
industry as an indicator of
sales performance. It excludes
the impact of new stores,
closed stores or stores with
significant footage change. HY 20/21 HY 19/20 %
GBPm GBPm
UK Food
Like-for-like 2,762.8 2,691.2 2.7
Net new space(1) 75.8 154.6
Total UK Food revenue 2,838.6 2,845.8
UK Clothing & Home
Like-for-like 904.1 1,488.6 (39.3)
Net new space 13.1 61.8
Total UK Clothing & Home revenue 917.2 1,550.4
(1) UK Food net new space includes sales to Ocado Retail Limited.
-------------- -------------- -------------- -----------------------------------------------------------------------------------------------------------
Food LFL Movement Sales from The period on period change
ex hospitality in revenue non in Food excluding the hospitality
per the Income like-for-like category revenue (excluding
Statement stores and VAT) from stores which have
hospitality been trading and where there
category has been no significant change
(greater than 10%) in footage
for at least 52 weeks and
online sales. The LFL measure
is used widely in the retail
industry as an indicator of
sales performance. It excludes
the impact of new stores,
closed stores or stores with
significant footage change.
The hospitality category includes
cafés, counters and marketplace. HY 20/21 HY 19/20 %
GBPm GBPm
UK Food
Like-for-like 2,762.8 2,691.2 2.7
Hospitality (25.2) (123.3)
Like-for-like ex hospitality 2,737.6 2,567.9 6.6
Clothing None Not applicable Clothing & Home revenue through
& Home stores stores. These revenues are
reported within the UK Clothing
& Home segment results. Store
revenue excludes revenue from
'shop your way' and click
& collect, which are included
in online revenue. The growth
in revenues on a year-on-year
basis is a good indicator
of the performance of the
stores channel. HY 20/21 HY 19/20 %
GBPm GBPm
UK Clothing & Home
Stores 475.8 1,221.8 (61.1)
Online 441.4 328.6 34.3
Total UK Clothing & Home revenue 917.2 1,550.4
M&S.com None Not applicable Total revenue through the
revenue Group's online platforms.
/ Online These revenues are reported
revenue within the relevant UK and
International segment results.
The growth in revenues on
a year-on-year basis is a
good indicator of the performance
of the online channel and
is a measure used within the
Group's incentive plans.
Clothing None Not applicable Clothing & Home revenue through
& Home online the Clothing & Home online
platforms. These revenues
are reported within the UK
Clothing & Home segment results.
The growth in revenues on
a year-on-year basis is a
good indicator of the performance
of the online channel. HY 20/21 HY 19/20 %
GBPm GBPm
UK Clothing & Home
Stores 475.8 1,221.8 (61.1)
Online 441.4 328.6 34.3
Total UK Clothing & Home revenue 917.2 1,550.4
International None Not applicable International revenue through
online International online platforms.
These revenues are reported
within the International segment
results. The growth in revenues
on a year-on-year basis is
a good indicator of the performance
of the online channel. HY 20/21 HY 19/20 %
GBPm GBPm
International Revenue
Stores 283.6 429.0 (33.9)
Online 62.7 35.7 75.4
At reported currency 346.3 464.7 (25.5)
Revenue None Not applicable The period-on-period change
growth in revenue retranslating the
at constant previous year revenue at the
currency average actual periodic exchange
rates used in the current
financial year. This measure
is presented as a means of
eliminating the effects of
exchange rate fluctuations
on the period-on-period reported
results. HY 20/21 HY 19/20 %
GBPm GBPm
International Revenue
At constant currency 346.3 459.9 (24.7)
Impact of FX retranslation - 4.8
At reported currency 346.3 464.7 (25.5)
-------------- -------------- -------------- -----------------------------------------------------------------------------------------------------------
Adjusting None Not applicable Those items which the Group
items excludes from its adjusted
profit metrics in order to
present a further measure
of the Group's performance.
Each of these items, costs
or incomes, is considered
to be significant in nature
and/or quantum or are consistent
with items treated as adjusting
in prior periods. Excluding
these items from profit metrics
provides readers with helpful
additional information on
the performance of the business
across periods because it
is consistent with how the
business performance is planned
by, and reported to, the Board
and the Executive Committee.
-------------- -------------- -------------- -----------------------------------------------------------------------------------------------------------
Revenue Revenue Adjusting Revenue before the impact
before items of adjusting items. The Group
adjusting (See note considers this to be an important
items 3) measure of Group performance
and is consistent with how
the business performance is
reported and assessed by the
Board and the Executive Committee.
-------------- -------------- -------------- -----------------------------------------------------------------------------------------------------------
Operating Operating Adjusting Operating (loss)/profit before
(loss)/profit (loss)/profit items the impact of adjusting items.
before (See note The Group considers this to
adjusting 3) be an important measure of
items Group performance and is consistent
with how the business performance
is reported and assessed by
the Board and the Executive
Committee.
-------------- -------------- -------------- -----------------------------------------------------------------------------------------------------------
Finance Finance Adjusting Finance income before the
income income items impact of adjusting items.
before (See note The Group considers this to
adjusting 3) be an important measure of
items Group performance and is consistent
with how the business performance
is reported and assessed by
the Board and the Executive
Committee.
-------------- -------------- -------------- -----------------------------------------------------------------------------------------------------------
Finance costs Finance costs Adjusting Finance costs before the impact
before items of adjusting items. The Group
adjusting (See note considers this to be an important
items 3) measure of Group performance
and is consistent with how
the business performance is
reported and assessed by the
Board and the Executive Committee.
-------------- -------------- -------------- -----------------------------------------------------------------------------------------------------------
Interest Finance Finance The net of interest income
on leases income/costs income/ on subleases and interest
costs payable on lease liabilities.
(See note The Group considers this to
4) be an important measure of
Group performance and is consistent
with how the business performance
is reported and assessed by
the Board and the Executive
Committee.
-------------- -------------- -------------- -----------------------------------------------------------------------------------------------------------
(Loss)/profit (Loss)/profit Adjusting (Loss)/profit before the impact
before tax before tax items of adjusting items and tax.
and adjusting (See note The Group considers this to
items 3) be an important measure of
Group performance and is consistent
with how the business performance
is reported and assessed by
the Board and the Executive
Committee.
This is a measure used within
the Group's incentive plans.
Refer to the Remuneration
Report in the FY19/20 annual
report for explanation of
why this measure is used within
incentive plans.
-------------- -------------- -------------- -----------------------------------------------------------------------------------------------------------
Adjusted Earnings Adjusting (Loss)/profit after tax attributable
basic earnings per share items to owners of the parent and
per share (See note before the impact of adjusting
3) items, divided by the weighted
average number of ordinary
shares in issue during the
financial year.
This is a measure used within
the Group's incentive plans.
Refer to the Remuneration
Report in the FY19/20 annual
report for explanation of
why this measure is used.
Adjusted Diluted Adjusting (Loss)/profit after tax attributable
diluted earnings items to owners of the parent and
earnings per share (See note before the impact of adjusting
per share 3) items, divided by the weighted
average number of ordinary
shares in issue during the
financial year adjusted for
the effects of any potentially
dilutive options.
-------------- -------------- -------------- -----------------------------------------------------------------------------------------------------------
Effective Effective Adjusting Total income tax charge for
tax rate tax rate items and the Group excluding the tax
before their tax impact of adjusting items
adjusting impact divided by the (loss)/profit
items (See note before tax and adjusting items.
3) This measure is an indicator
of the ongoing tax rate for
the Group.
Balance Sheet Measures
Net debt None Reconciliation Net debt comprises total borrowings
of net debt (bank and bonds net of accrued
(see note interest and lease liabilities),
14) net derivative financial instruments
that hedge the debt and the
Scottish Limited Partnership
liability to the Marks and
Spencer UK Pension Scheme
less cash, cash equivalents
and unlisted and short-term
investments. Net debt does
not include contingent consideration
as it is conditional upon
future events which are not
yet certain at the balance
sheet date.
This measure is a good indication
of the strength of the Group's
balance sheet position and
is widely used by credit rating
agencies.
-------------- -------------- -------------- -----------------------------------------------------------------------------------------------------------
Cash Flow Measures
Free cash Net cash See Financial The cash generated from the
flow inflow from Review Group's operating activities
operating less capital expenditure,
activities cash lease payments and interest
paid. This measure shows the
cash retained by the Group
in the year.
Free cash Net cash See Financial Calculated as the cash generated
flow pre inflow from Review from the Group's operating
shareholder operating activities less capital expenditure
returns activities and interest paid excluding
returns to shareholders (dividends
and share buyback).
This measure shows the cash
generated by the Group during
the year that is available
for returning to shareholders
and is used within the Group's
incentive plans.
Other Measures
Capital None Not applicable Calculated as the purchase
expenditure of property, plant and equipment,
investment property and intangible
assets during the year less
proceeds of asset disposals
excluding any assets acquired
as part of a business combination
or through an investment in
an associate.
Covid-19 None Not applicable As part of the Group's normal
scenario financial planning process,
the Board approved the 2020/21
budget and three-year plan.
As a result of the UK government
restrictions on trade that
were announced in response
to the Covid-19 pandemic,
the Group revisited the 2020/21
budget and three-year plan
to determine a downside scenario.
The downside scenario assumed
the government guidelines
at the period end continued
for a period of at least four
months, resulting in a significant
decline in sales for the remainder
of 2020/21, as outlined in
the basis of preparation.
This downside scenario was
approved by the Directors
and is defined as the Covid-19
scenario.
Ocado Retail None Not applicable References made to Ocado Retail
Limited Limited also include its two
subsidiaries, Speciality Stores
Limited and Paws & Purrs Limited.
INDEPENDENT REVIEW REPORT TO MARKS AND SPENCER GROUP PLC
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
26 weeks ended 26 September 2020 which comprises the condensed
consolidated income statement, the condensed consolidated statement
of comprehensive income, the condensed consolidated statement of
financial position, the condensed consolidated statement of changes
in equity, the condensed consolidated statement of cash flows and
related notes 1 to 17. We have read the other information contained
in the half-yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial
statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the 26 weeks ended 26
September 2020 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
Use of our report
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review
work, for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
4 November 2020
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR LXLLBBFLBFBE
(END) Dow Jones Newswires
November 04, 2020 02:00 ET (07:00 GMT)
Grafico Azioni Marks And Spencer (LSE:MKS)
Storico
Da Mar 2024 a Apr 2024
Grafico Azioni Marks And Spencer (LSE:MKS)
Storico
Da Apr 2023 a Apr 2024
