Marks and Spencer Group
Plc
Full Year Results for 52
Weeks Ended 30 March 2024
"THE BEGINNINGS OF A NEW
M&S"
Another year of strong financial
performance
·
Profit before tax and adjusting items of £716.4m
(2022/23: £453.3m1).
·
Statutory profit before tax of £672.5m (2022/23:
£475.7m).
·
Food sales up 13.0%; adjusted operating profit
£395.3m (2022/23: £248.0m) and margin of 4.8%.
·
Clothing & Home sales up 5.3%; adjusted
operating profit £402.8m (2022/23: £323.8m) and margin of
10.3%.
·
Ocado Retail JV; share of adjusted loss £37.3m
(2022/23: £29.5m).
·
International (exc. ROI) constant currency sales
down 1%, adjusted operating profit £47.7m (2022/23:
£67.9m).
·
Adjusted return on capital employed 14.1%
(2022/23: 10.6%).
The Beginnings of a New M&S
·
Food delivers market-leading volume growth and
strong innovation whilst broadening customer appeal.
·
C&H delivers market-leading share growth.
Trading model delivering style, value, quality, and lower
markdown.
·
Strong returns from store rotation and renewal.
Increased renewal this year and pipeline of new stores
developing.
·
M&S.com accelerating growth, attracting new
customers, and increasing profitability.
·
Gist acquisition generating quick pay back,
creating foundations for Food distribution network
development.
·
Structural cost savings of £180m in 2023/24, with
5-year objective increasing to £500m from £400m.
·
Increased free cash flow of £414m driving further
balance sheet improvement and net funds position at year
end.
·
Capacity to accelerate high returning investment
and to restore a full year dividend of 3 pence per
share.
Group Results (52 weeks
ended)
|
30 March
24
|
1 April 23
|
Change (%)
|
Statutory revenue
|
£13,040.1m
|
£11,931.3m
|
9.3
|
Sales2
|
£13,109.3m
|
£11,988.0m
|
9.4
|
Operating profit before adjusting
items
|
£838.6m
|
£626.6m
|
33.8
|
Profit before tax and adjusting
items1
|
£716.4m
|
£453.3m
|
58.0
|
Adjusting
items1
|
(£43.9m)
|
£22.4m
|
n/a
|
Profit before tax
|
£672.5m
|
£475.7m
|
41.4
|
Profit after tax
|
£425.2m
|
£364.5m
|
16.7
|
Basic earnings per
share
|
21.9p
|
18.5p
|
18.4
|
Adjusted basic earnings per
share1
|
24.6p
|
16.9p
|
45.6
|
Adjusted return on capital
employed1
|
14.1%
|
10.6%
|
33.0
|
Free cash flow from
operations
|
£413.7m
|
£170.4m
|
n/a
|
Net (debt)
|
(£2.17bn)
|
(£2.64bn)
|
n/a
|
Net funds/(debt) excl. lease
liabilities
|
£45.7m
|
(£355.6m)
|
n/a
|
1. Adjusted measures for 1 April 2023 have been restated as a
result of net pension finance income being reclassified as an
adjusting item (2023/24 £24.0m, 2022/23 £28.7m).
2. References to 'sales'
throughout this announcement are statutory revenue plus the gross
value of consignment sales ex. VAT.
Non-GAAP measures and alternative
profit measures (APMs) are discussed within this release. A glossary
and reconciliation to statutory measures is provided at the end.
Adjusted results are consistent with how business performance is
measured internally and presented to aid comparability.
Refer to Notes 1 and 3 of the financial
information for further details.
Stuart Machin, Chief Executive said:
"Two years into our plan to Reshape
for Growth we can see the beginnings of a new M&S. Food and
Clothing & Home grew volume and value share ahead of the market
and sales increased across stores and online. Both businesses have
now delivered 12 consecutive quarters of sales growth and this
trading momentum gives us wind in our sails, and confidence that
our plan is working. We are becoming more relevant, to more people,
more of the time.
We remained unswerving in our
commitment to trusted value, offering customers exceptional quality
at the very best price. Food's leading quality perception increased
even further with over 1,000 products upgraded and 1,300 new lines
launched. Continued progress was made on value perception with £60m
invested in price. In Clothing & Home, style perception
continued to improve and our decisive lead on quality and value
perception was extended. Our commitment to 'First Price Right
Price' supported full price sell through ahead of last
year.
Investment in store rotation and the
end-to-end supply chain is beginning to pay off. New stores and
renewals are performing ahead of forecast and attracting new
customers. Supply chain modernisation supported margin growth
across both businesses. In Clothing & Home, stock flow improved
enabling historically low levels of stock cover, and in Food, Gist
is delivering payback ahead of expectations.
Disciplined capital allocation
underpins our plan, and the financial health of the business is as
strong as it's been in decades. Free cash flow has increased,
financial net debt has been eliminated, and returns on investment
have improved. The strength of the balance sheet, coupled with the
sustained improvement in performance, means we have the headroom
and confidence to invest for future growth as well as introduce a
3p dividend.
It has been a good year, and I would
like to thank all of our colleagues for their hard work and
commitment. However, there remains much work to do and that's a
good thing as every challenge is an opportunity for growth. The
soft wiring of the organisation - who we are and how we show up -
is changing and we are building a culture where everyone is
sleeves rolled up, M&S first, closer
to customers and closer to colleagues. But culture change is a job
that is never 'done' and it is critically important to reshaping
M&S.
We have made progress on
'hardwiring' sustainable change - how and when we execute our
strategic priorities - with progress in store rotation and supply
chain. However, we need to move faster and be ruthlessly
challenging on the areas where progress has been slower, building a
more effective digital and technology infrastructure, accelerating
the move to a truly personalised customer experience, and resetting priorities in
International.
We have a clear plan, a clear vision
for the future, and there is so much opportunity ahead of us. We
are at the beginnings of a new M&S."
________
RESHAPING FOR
GROWTH
Over the past two years, the
strategy of reshaping M&S has delivered growth in sales, market
share, margins, return on capital and free cash flow. The programme
is in its early stages with substantial scope for further
operational efficiency and sustainable growth and we are
laser-focused on the continued execution of the plan which we set
out at the Capital Markets Day in 2022.
Creating exceptional products
Our vision is to be the UK's most
trusted retailer, with exceptional quality products at the heart of
everything we do. The M&S Food model is focused on a tightly
edited range and concentrated supply base, consistently innovating
and improving products, whilst investing in trusted value. As we
evolve the range and open larger renewal format stores, customer
appeal is broadening to family shoppers. Clothing & Home's
transition to a new trading model includes buying more deeply into
core lines, translating fashion trends into greater newness and
concentrating supply with strategic partners and a faster supply
chain. This is resulting in improved perceptions in style, quality
and value, and reduced promotion and markdown. Market share
increased to 10.0% (from 9.6%) in Clothing and 3.7% (from 3.55%) in
Food in the 52 weeks ending March 2024. There are substantial
opportunities for growth to achieve our ambition of a 1% market
share increase in both businesses between FY23 and FY28.
Reshaping the channels of growth
A more productive store estate is
critical to long term growth as performance is constrained by
legacy stores that are more expensive to operate and do not
demonstrate the M&S brand of today. Rotation towards a target
estate of 180 full line and 420 Food stores provides significant
opportunity to invest and grow in the years ahead. New and renewed
stores are attracting new customers and returns on investment have
been strong. Investment is planned to increase as attractive new
sites are secured, and as renewal performance continues to be
robust.
Our long-term objective for
M&S.com's share of Clothing & Home sales is to grow towards
50%, having increased from 22% five years ago. Online growth has
increased, supported by better product and more effective
marketing. Despite this, profitability is not yet market leading
despite our scale advantage. There is much more to do to develop
the online and M&S App experience and customer engagement,
whilst growing partner brands. All of this will help retain
customers within our M&S eco-system.
As a reminder, results for Ocado
Retail are reported by Ocado Group, and are not consolidated in
this release. We believe the Ocado Retail model of automated
fulfilment powered by Ocado technology, and M&S product, could
be the most competitive model for online grocery sales in the UK.
M&S Food has worked closely with Ocado Retail to reset the
business and we are now seeing encouraging active customer and
sales growth, although profitability is well below the original
business plan and expectations. There is enormous opportunity to
improve trust in value, website experience, logistics, and supply
chain, which will be the focus for the next two to three
years.
The transformation in our
International business has not made as much progress as our UK
businesses, so it is now undergoing a reset. Over time, we plan to
leverage our UK business and trusted brand to increase global reach
through capital light partnerships and a multi-platform online
business.
Increasing efficiency of operations
In Food, the integration of the Gist
acquisition has generated strong returns and provides the
foundation for a ten-year programme to invest in, and modernise,
the supply chain.
The Clothing & Home supply chain
is now more focused with fewer, more strategic suppliers having
also rationalised the number of distribution centres in the UK.
There is lots to do to reduce costs, improve stock flow and drive
availability with plans underway to modernise our merchandise and
range management technology.
With the evolution towards an
omni-channel and personalised customer experience, a more effective
digital and technology infrastructure is a critical enabling step
and progress to date has been slower than planned. With new
leadership soon to be in place, we expect to accelerate change and
increase investment in core technology infrastructure, including an
upgrade in SAP starting this year.
Overall, these operational
improvements mean there is substantial further scope for structural
cost reduction. With continuing cost headwinds, notably from
investment in colleague pay, the structural cost programme is
critical to our profit progression. The £180m delivered to date has
supported a 0.8% pt. reduction in UK operating costs as a percent
of sales. We are increasing the objective for cost reduction from
£400m to £500m, to be delivered by 2027/28. This will support
continued delivery of our target operating margins of over 4% in
Food and over 10% in Clothing & Home, as well as further
investment in quality and value.
Generating cash for investment and shareholder
returns
Our financial goals prioritise
operating cash flow generation and a strong balance sheet to
provide the capacity for investment in growth and structural cost
reduction. Free cash flow has increased and we have net funds
excluding lease liabilities at the year end. The returns we are
delivering on recent investments have been in excess of our cost of
capital and the minimum hurdle rates set out at the last Capital
Markets Day. The business now has the capacity to increase capital
allocated to the rotation and renewal of stores, to invest in the
Food and Clothing & Home supply chains and in improved digital
and online capability.
The stronger financial position and
performance also provides the opportunity to restore dividend
payments at a sustainable level, with a proposed final dividend of
2p, resulting in a full year dividend of 3p for 2023/24.
________
OUTLOOK
Through the Reshaping M&S
strategy, our focus continues to be on driving volume growth in
Food and Clothing & Home to deliver the market share and margin
objectives we set out at the Capital Markets Day.
This year we have made a further
significant investment in colleague pay. This will be funded by
structural cost reductions and other efficiencies. Other cost
inflation will largely be offset by reduced energy
costs.
Given our track record of delivering
volume growth, market share and free cash flow we are confident
that we will make further progress in 2024/25 and
beyond.
________
FOOD INVESTING IN INNOVATION AND VALUE, ATTRACTING FAMILY
SHOPPERS
M&S Food is gaining new
customers and broadening its appeal. Our objective is to grow
volume and market share by investing in value, quality, and
innovation, growing through new space, store rotation and renewal,
and investing in the supply chain to improve availability and
efficiency.
Long term changes, improving the growth potential of Food
include:
· Investing in trusted value, with promotions reducing to 12%
sales versus 26% in 2017/18.
· Upgrading and innovating one third of the range each year,
driving volume lines and development in health.
· Developing bigger, 'fresh market' style stores in the renewal
format, offering a broader range and improved customer experience,
increasingly catering to family shoppers.
· Increasing the share of larger baskets by a quarter since
2019/20.
Market leading volume growth in 2023/24
In 2023/24, Food sales grew 13.0%
with LFL sales up 11.3%. As a result of sales and volume growth,
the benefits of sourcing and structural cost reduction and the
acquisition of Gist, adjusted operating profit increased to £395.3m
(4.8% margin) from £248.0m (3.4% margin) last year.
· Prices were lowered on more of our 'Remarksable Value'
products, with over half of the range in M&S's healthier 'eat
well range'. Remarksable sales grew 34%. We also 'Dropped and
Locked' prices on a further 90 lines, building customer trust in
M&S value for money in an increasingly promotional
market.
· 1,300 new lines were launched, including category resets in
basket building products such as biscuits and hot beverages, and
product development in high protein and gut health. We also
upgraded the quality of more than 1,000 customer
favourites.
· With
the price of eating out increasing, the 'Dine-In' offer, which
provides an 'always on' restaurant quality alternative, saw sales
growth of over 40%.
· Market share of M&S sales in stores increased to 3.7%
(from 3.6% in 2022/23) driven by growth in volume, larger baskets
and across all demographics. Once M&S on Ocado is included,
market share increases to 4.2% (from 4.0% in 2022/23).
· Customer perceptions of value, quality and sustainability all
improved.
In 2024/25, further value investment
is planned, with a focus on driving volume growth further, together
with renewing and developing key product ranges such as the recent
'Cook' menu, 'Dine-In' launch and further investment in
quality.
Store renewal and expansion continues to
plan
Six new Foodhalls were opened as
part of full line store rotations, and we opened eight standalone
Food stores. New Simply Food stores averaged c.13,000 sq. ft.
compared with a current average of c.8,000 sq. ft., enabling the
ranging of a fuller catalogue and illustrating the growth
opportunity for the business.
· 8
Food stores were also renewed, bringing the total to 104, with
renewal store sales performing ahead of plan.
· Renewals that opened in 2022/23 saw sales increase by a
further 14% in 2023/24, with healthy customer metrics for frequency
and basket size.
· The
ten 'full' Food renewals opened since 2019 with annualised trading
are expected to pay back the capital invested in four
years.
· This
year, we expect to open 9 new Food locations and to accelerate
investment in renewal, completing around 25 schemes, strengthening
the pipeline of openings.
Good progress on the Food 'backbone'
programme
The Food supply chain programme is
driving a series of changes to create a more modern cost
competitive flow of product from field or factory through to
checkout. This will drive availability and reduce waste and costs
to distribute whilst creating a more sustainable
operation.
· Long
term supplier commitments and joint efficiency plans delivered cost
of goods savings enabling investment in value and quality, with
further progress planned this year.
· The
Gist acquisition has delivered logistics savings which were greater
than expected and a rapid pay back on invested capital, largely
through integrated management. Despite this, the network is old and
a high cost to serve. This year will see the first steps in new
capacity investment as we develop the longer term network
plan.
· The
roll out of a new forecasting and ordering system reached c.50% of
lines with availability increasing without increasing waste,
although there is substantial scope for improvement. In 2024/25 we
expect to complete roll out to all categories. Alongside this, we
are working on a more consistent approach to space and range
changes.
· A
new retail operations programme 'One Best Way' was trialled in the
year, succeeding the former 'Operation Vangarde', and started to
deliver further availability and productivity benefits.
· Over
100m pieces of plastic packaging have been removed including
through the introduction of first-to-market fully recyclable
takeaway cups. £1m is being invested to reduce carbon emissions in
the creation of our RSPCA assured milk.
M&S Food is a unique model
driven by its focussed own label range, integrated relationships
with core suppliers, continuous focus on quality and innovation and
its commitment to provide better quality and sustainability at
great value for money. Our confidence in growth is underpinned by
the fact that market share is substantially higher than average in
some parts of the UK, showing the potential.
CLOTHING & HOME GROWTH REFLECTING THE TRANSITION TO A NEW
TRADING MODEL
The improved performance of Clothing
& Home is driven by better product, style and quality at
everyday great value. This is appealing to a broader customer base,
showing the growth potential from improving the product and online
shopping experience, and the store environment through
renewal.
Long term changes, improving the growth potential of Clothing
& Home include:
· Reducing the long tail of option count, with double digit
percentage reduction in womenswear since 2019/20.
· Buying bolder and deeper, growing lines with over £1m of
sales by c.50% over the last two years.
· A
shift to everyday trusted value, with full price sales mix
increasing from 63% to 81% since 2019/20.
· Improving stock flow with stock cover now less than 12 weeks,
compared with 18 weeks in 2018/19.
· Increased focus on availability, with more controls on stock
flow into the UK and on to stores based on demand.
Delivering sales and market share growth across
categories
In 2023/24, overall Clothing &
Home sales grew 5.3% with LFL sales up 5.2%. As a result of
improved gross margin supported by full price
sales growth and the benefits of the
structural cost reduction programme, adjusted operating profit
increased to £402.8m (10.3% margin) from £323.8m (8.7% margin) last
year. Sales in heartland categories of women's and menswear
outperformed, due to improved product style, quality, and value.
Particular highlights were:
· Robust performance in core product in categories such as
denim/casual bottoms, knitwear, and bras.
· Quality improvement translating into top tier sales growth
with men's Autograph sales up over 50%.
· Growth in holiday sales of c15%, reflecting a return to
travel and events.
· Clothing market share increased to 10.0% (from 9.6%), and
full price share increased to 12.4% (from 11.6%).
· Customer perceptions of style, quality and value all improved
further year on year.
We remain laser-focused on the
growth opportunities across women's, men's, kids, and core Home. As
part of this, we are simplifying the bulky 'two-person' delivered
furniture operation. This will impact annual online sales by c.£80m
but will release space and resources to expand the growing core
Home business.
Store rotation generating strong returns
Store sales increased 4.1%, with a
good performance in shopping centre and retail park stores. We
opened six full line stores, which sell both Clothing & Home
and Food and closed twelve, of which five were relocations. All
replacement stores substantially outperformed the closed stores and
exceeded forecast returns:
· Full
line openings included the relocation to five former Debenhams
stores in Leeds, Manchester, Liverpool, Birmingham and Thurrock and
a new store in Purley Way.
· Performance of the relocations to date has been very strong,
with the stores attracting new customers and delivering sales
growth of c.50% from similar space, as we move to the renewal
format in better locations.
· New
stores typically require substantially less energy to operate
relative to sales and generate a lower carbon footprint, supporting
reduction in Scope 1 and 2 emissions.
· Since 2019, £100m of capital has been invested to open twelve
full line stores, with expected pay back of c.2 years.
· In
2024/25 we anticipate opening up to four new full line stores and
are implementing a refreshed renewal format, while progressing
asset disposals.
· We
continue to seek new sites, to enable us to accelerate store
closures and create an estate we are proud of by
2027/28.
Online growth accelerating
Online sales increased 7.8%. Growth
accelerated in the second half, as the effectiveness of online
marketing started to improve, particularly in
womenswear.
· Overall participation in C&H sales increased to
32%.
· The
M&S App continued to grow, accounting for 44% of online orders
(2022/23: 37%).
· Partner brand sales grew 33%, with new partners added
including Adidas, Puma, and Sweaty Betty, supporting the growth of
average basket value.
· The
removal of unprofitable lines, logistics efficiencies and reduced
failed deliveries enabled sales growth to convert to an increased
online operating margin of 8.2% (2022/23: 5.0%).
There is substantial opportunity to
improve the online and M&S App experience, make further
improvements to fulfilment, and invest in systems changes to
support delivery of the brands strategy.
Progress on phase one of the supply chain 'end to end'
programme.
Our ambition is to move from a
slow-moving operation with a broad supply base and DCs which store
stock, to a group of strategic suppliers with a rationalised
network of automated DCs, where full visibility enables us to flow
stock more directly to the customer.
· We
have begun to consolidate knitwear, denim, and lingerie across
fewer suppliers. The number of fabric mills has also reduced as
volumes are combined.
· In
UK logistics, volumes were consolidated into nine core sites.
Investment in omni-channel capability and the increased use of hub
stores for returns consolidation delivered cost savings. This year,
further investment will be made in boxed storage and hanging goods
automation, creating capacity for growth.
· Investment into a new planning, merchandising and range
management platform starts this year, to deliver efficiencies in
the planning process, in sourcing, and in stock flow.
· Progress on Plan A was made with the use of recycled
polyester increasing to c70%, and 100% of cotton is now responsibly
sourced in clothing.
We are at the beginnings of a new
Clothing, Home and Beauty business, with a better product and
trading model and an improving customer proposition, which is
resonating with a broader customer base. There is substantial
opportunity and restructuring plans are underway across the product
offer, store estate, online experience, and supply chain which
offer the potential for sustained growth.
INTERNATIONAL RESET TO ADDRESS SLOW GROWTH
The International business'
objective is to drive growth by leveraging the UK business and
M&S brand through capital light franchise partnerships and a
multi-platform online business with global reach. In more recent
years, the business has not delivered consistent growth. This year,
priorities for International have been reset under new leadership
to provide stronger foundations for long term growth. We remain
committed to the opportunity to expand global reach as outlined at
the Capital Markets Day in 2022.
Slow growth in partnership markets
International (excluding Republic of
Ireland) sales declined 1.0% at constant currency to £719.1m. As a
result of weaker sales growth in the second half and action to
reduce stock levels, adjusted operating profit declined to £47.7m
(6.6% margin) from £67.9m (9.1% margin) last year.
· Retail sales growth was weaker in the second half, declining
3.6% in constant currency against tough comparatives and a softer
market backdrop. Action was taken in India to clear overstocks and
reduce inventory holdings.
· Online sales were £118.6m in 2023/24, down 10.2% as
promotional activity was reduced and changes were made to the
delivery proposition to improve profitability.
· Operational investments are focused on reducing delivery
times and cost to serve, for instance through a new e-commerce
distribution centre in Poland for direct shipment of online orders
to the EU from Q4 2024/25.
The business has strong franchise
and JV partnerships in high growth markets. The longer term
opportunity is to work with partners to deliver the best of M&S
on a global scale, with more choice and more timely flow of new
products.
Improved profitability in the Republic of
Ireland
Sales in the Republic of Ireland
were encouraging, growing by 2.4% at constant currency to
£320.7m.
· Operating profit before adjusting items improved to £27.9m
from £16.9m last year.
· Lower supply chain costs in the Food business drove much of
the improvement.
· Food
has made progress on local sourcing and has successfully expanded
its presence through franchising with Applegreen, which now
operates 10 stores.
From the 2024/25 financial year, the
results of the Republic of Ireland will be reported as part of a
new UK and Republic of Ireland segment within both Food and
Clothing & Home.
OCADO RETAIL STARTING TO DELIVER IMPROVED REVENUE
GROWTH
Results for Ocado Retail are
reported by Ocado Group and are not consolidated in this release.
M&S accounts for the joint venture as an associate
interest.
Our vision for Ocado Retail remains
to combine the magic of M&S Food with Ocado's unique and
proprietary technology to offer unbeatable choice, compelling
service, and reassuringly good value, underpinned by efficient and
effective operations.
Ocado Retail is in the early stages of driving
growth
Revenue increased 11.2% to £2.47bn
and adjusted EBITDA was £26.8m (2022/23: loss £15.1m). While
adjusted EBITDA improved, M&S group's share of adjusted loss
increased to £37.3m (2022/23: £29.5m) due to higher interest costs
on shareholder loan funding and a write off of a deferred tax asset
in the current year.
The rate of revenue growth
accelerated during the year, driven by increased choice of M&S
products, and improved value for money and service as part of the
Ocado Retail 'Perfect Execution' programme. This has been reflected
in a sharp improvement in net promoter scores. Despite this,
profitability is well below original expectations and there is
considerable scope to leverage our combined capabilities in
sourcing and marketing, and to develop Ocado's delivery service and
online experience.
Increased choice, availability, and value
· 4,800 M&S Food products were available on Ocado.com by
year end, a 20% increase on last year. Availability has improved
considerably, although there is further opportunity on the most
important lines and at key event periods.
· Ocado's price inflation was less than the market, driven by
improved value for money on M&S products as well as reductions
under the Big Price Drop campaign. As a result of greater choice
and improved value, sales of M&S products grew 15% in Q4 and
represented 30% of basket items.
Developing more effective and efficient
operations
· The
new Luton CFC opened in September 2023 and delivered a rapid ramp
up in operations as business transferred from less productive
capacity at Hatfield, with the new site also providing a test bed
for on-grid robotic picking. With capacity fees for Hatfield
continuing to be charged by Ocado Group, we do not currently expect
Ocado Retail to reap the full financial benefit of transferring to
the new site.
· Ocado Retail still operates on legacy technology for its
website, last mile delivery and supply chain systems. It will be
migrating to Ocado Technology's much delayed 'OSP' solution over
the course of the next 18 months, which is anticipated to offer
customers increased convenience and greater personalisation, as
well as long term operational efficiencies for the
business.
Although the financial performance
of Ocado Retail remains disappointing, the revenue improvement this
year under the new management team has been marked. And in a world
where several operators have exited the online food delivery
market, the potential competitive advantages of the M&S / Ocado
combination are increasingly evident.
STRONG BALANCE SHEET AND RETURN ON CAPITAL IMPROVEMENT,
GIVING SCOPE FOR INCREASED INVESTMENT
M&S ended the year in the
strongest financial health since 1997, with net funds of £45.7m
excluding lease liabilities (2022/23: net debt £355.6m). A focus on
operational cash flow generation combined with a disciplined
approach to capital allocation has driven improved return on
capital employed and substantial deleveraging. We therefore have
the scope to increase investment, while restoring dividends to
shareholders.
· In
2023/24 M&S generated free cash flow of £413.7m, compared with
£170.4m last year, as a result of increased profits and supported
by working capital inflows due to the timing of payments over
year-end, including the effects of Easter.
· As a
result of a stronger balance sheet, and the repayment of £405m of
medium-term bonds, our credit metrics strengthened further, with
S&P Global Ratings upgrading M&S to 'Investment Grade' in
November 2023.
· Store rotation and renewal plus the acquisition of Gist
generated pay back ahead of expectations, our cost of capital, and
the minimum hurdle rates set out at the last Capital Markets Day.
This provides the foundations to increase investment in 2024/25
when we plan for capital expenditure net of disposals to increase
to c.£500m.
· Given the improved cash generation and balance sheet and
allowing for the considerable opportunities to invest in the
reshaping of M&S for growth, we are proposing a total dividend
for the full year of 3 pence per share.
CREATING A HIGH-PERFORMANCE CULTURE
Creating a high-performance culture
is critical to reshaping M&S for growth. Much progress has been
made, with lots of opportunity ahead of us:
· In
2023/24 a clear vision, purpose and a set of behaviours that are
valued at M&S were established. At the heart of this is a
culture of 'always aiming higher' and one where we are closer to
customers and closer to colleagues.
· The
biggest ever investment in front line colleague pay of £89m was
made this year. From 1 April 2024, the rate of pay for c.40,000 UK
Customer Assistants increased from £10.90 to £12.00 per hour, a 26%
increase since March 2022, alongside the introduction of additional
benefits.
· New
monthly pulse surveys have been launched for colleagues to feedback
on the part they play in delivering change.
· Every support centre colleague is now required to spend seven
days each year working in store as part of their performance
objectives. Delivering change requires challenge, learning and
creativity and we firmly believe that this happens best when
colleagues are together. Most colleagues therefore work in the
support centre at least three days a week, with one day in stores
or with suppliers.
· Leadership is expected to be sleeves rolled up and, in the
detail, and we have continued to attract and promote talent. Some
examples of this include Rachel Higham who joins soon as Chief
Digital & Technology Officer in June, and Mark Lemming who has
recently been promoted from running the Clothing & Home supply
chain to International Managing Director.
For further information, please contact:
Investor Relations
Fraser Ramzan: +44 (0) 7554 227
758
Helen Lee: +44 (0) 7880 294 990
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 here from
7:30am on 22 May 2024.
Stuart Machin and Jeremy Townsend
will host a Q&A session at 9.30am on 22 May 2024:
For the quickest joining
experience, please register prior
to attending the call
here. After registering, you will
be given unique dial in details to join the call.
Alternatively, you can use the
below details to join the call but please join 5-10 minutes before
the start time in order to register your details with the
operator.
Dial in: +44 (0) 33
0551 0200
Passcode: Quote M&S Analyst Call when prompted by the
operator
Replay: A recording will be
available for 48 hours after the call
here
Fixed Income Investor Conference Call
Jeremy Townsend will host a fixed
income conference call at 2pm on 22 May 2024:
For the quickest joining
experience, please register prior to attending the call
here. After registering, you
will be given unique dial in details to join the call.
Alternatively, you can use the
below details to join the call but please join 5-10 minutes before
the start time in order to register your details with the
operator.
Dial in: +44 (0) 33 0551
0200
Passcode: Quote M&S Investor Call when prompted by the
operator
Replay: A recording will be
available for 48 hours after the call
here
Important Notice: The
information contained within this announcement is deemed by the
Company to constitute inside information as stipulated under the UK
version of the Market Abuse Regulation (EU) No. 596/2014 as it
forms part of UK law by virtue of the European Union (Withdrawal)
Act 2018. Upon the publication of this announcement, this inside
information is now considered to be in the public
domain.
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, 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 2024 Annual Report (pages
62-70).
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.
2023/24 FULL YEAR FINANCIAL
REVIEW
Financial Summary
52 weeks ended
|
30 Mar 24
£m
|
1 Apr 23
Restated
£m1
|
Change vs 2022/23
%
|
Group statutory revenue
|
13,040.1
|
11,931.3
|
9.3
|
Group sales
|
13,109.3
|
11,988.0
|
9.4
|
UK Food
|
8,158.8
|
7,218.0
|
13.0
|
UK Clothing & Home
|
3,910.7
|
3,715.0
|
5.3
|
International
|
1,039.8
|
1,055.0
|
(1.4)
|
|
|
|
|
Group operating profit before adjusting
items
|
838.6
|
626.6
|
33.8
|
UK Food
|
395.3
|
248.0
|
59.4
|
UK Clothing & Home
|
402.8
|
323.8
|
24.4
|
International
|
75.6
|
84.8
|
(10.8)
|
Share of result in Ocado Retail
Limited
|
(37.3)
|
(29.5)
|
(26.4)
|
M&S Bank and other
segments
|
2.2
|
(0.5)
|
n/a
|
|
|
|
|
Net interest payable on lease
liabilities
|
(110.5)
|
(111.1)
|
0.5
|
Net financial interest
|
(11.7)
|
(62.2)
|
81.2
|
Profit before tax and adjusting items
|
716.4
|
453.3
|
58.0
|
Adjusting items
|
(43.9)
|
22.4
|
(296.0)
|
Profit before tax
|
672.5
|
475.7
|
41.4
|
Profit after tax
|
425.2
|
364.5
|
16.7
|
|
|
|
|
Basic earnings per
share
|
21.9p
|
18.5p
|
18.4
|
Adjusted basic earnings per
share
|
24.6p
|
16.9p
|
45.6
|
Dividend per share
|
3.0p
|
-
|
n/a
|
Net debt
|
(2.17bn)
|
(2.64bn)
|
(17.8)
|
Net funds/(debt) excluding lease
liabilities
|
45.7
|
(355.6)
|
112.9
|
|
|
|
|
Group capex and disposals
|
(423.2)
|
(409.2)
|
(3.4)
|
Free cash flow from operations
|
413.7
|
170.4
|
|
Adjusted return on capital employed
|
14.1%
|
10.6%
|
33.0
|
Notes:
1Due to a change in the
Group's classification of pension net finance income as an
adjusting item (see note 3 to the financial information), the
comparative amounts have been restated. The impact on the 52 weeks
ended 1 April 2023 income statement is a decrease to the adjusting
items charge of £28.7m (resulting in a net adjusting items credit),
a decrease to profit before tax & adjusting items of
£28.7m, a decrease to adjusted
earnings per share of 1.2p. There is no impact on profit before
tax, earnings per share or net assets.
There are a number of non-GAAP measures and alternative
profit measures ("APMs") 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 the adjusting items table
below for further details.
Group results
Group sales were £13,109.3m. This
was an increase of 9.4% versus 2022/23, driven by Food sales up
13.0% and Clothing & Home sales up 5.3%. Statutory revenue in
the period was £13,040.1m, an increase of 9.3% versus
2022/23.
The Group generated profit before
tax and adjusting items of £716.4m compared with £453.3m in the
prior year. Prior year results have been restated to reflect net
finance income on the IAS19 pension surplus which has been
reclassified as an adjusting item.
Adjusting items were a net charge
of £43.9m, compared with a credit of £22.4m in the prior year. The
net charge in the period primarily consists of costs relating to
the UK store rotation plans and the ceasing of operations at Ocado
Retail's Hatfield CFC, partially offset by a credit relating to the
remeasurement of Ocado Retail contingent consideration to
nil.
As a result, the Group generated a
statutory profit before tax of £672.5m, compared with £475.7m in
the prior year.
Adjusted basic EPS was 24.6p, up
45.6% on 2022/23 reflecting higher adjusted profit in the period.
Basic EPS was 21.9p, up 18.4% on 2022/23, reflecting the increased
profit in the period.
A final dividend of 2p per share
has been declared, payable on 5 July 2024, resulting in a full year
dividend of 3p.
For full details the Group's
related policy and adjusting items, read more in notes 1 and 3 to
the financial information.UK: Food
UK Food sales increased 13.0%,
with like-for-like sales up 11.3%, underpinned by strong innovation
and broadening customer appeal.
Change vs 22/23 %
|
|
Q1
|
Q2
|
Q3
|
Q4
|
FY
|
Food
|
|
15.1
|
14.2
|
10.5
|
13.0
|
13.0
|
Food like-for-like
sales
|
|
12.5
|
11.0
|
9.9
|
11.9
|
11.3
|
M&S Food has an online grocery
presence with Ocado Retail and these sales are reported through
Ocado Retail and are not included within these numbers.
52 weeks ended
|
30 Mar 24
|
1 Apr 23
|
Change vs 2022/23
%
|
Transactions, m
(average/week)
|
9.7
|
9.0
|
7.8
|
Basket value inc VAT
(£)
|
16.0
|
15.2
|
5.3
|
Total sales ex VAT £m1
|
8,158.8
|
7,218.0
|
13.0
|
1 Includes M&S.com and
third-party sales by Gist Limited.
Like-for-like sales growth of
11.3% was driven by volume growth of 5.2% as customer numbers,
particularly those completing larger shops, increased. Basket value
was up 5.3% and larger basket transactions continued to grow with
the value of baskets over £30 up 15.0%.
52 weeks ended
|
30 Mar 24
£m
|
1 Apr 23
£m
|
Change vs
2022/23 %
|
Sales
|
8,158.8
|
7,218.0
|
13.0
|
Operating profit before adjusting
items
|
395.3
|
248.0
|
59.4
|
Adjusted operating margin
|
4.8%
|
3.4%
|
1.4% pts
|
Operating profit before adjusting
items was £395.3m compared with £248.0m in 2022/23, with an
adjusted operating margin of 4.8%.
Food adjusted operating margin
increased by 1.4% pts. Gross margin improved 0.7% pts whilst
continued investment in trusted value was funded by the lowering
cost programme.
Operating costs as a percent to
sales reduced 0.7% pts as sales growth of 13.0% exceeded cost
growth of 9.9%. The impact of investment in colleague pay and
energy headwinds was largely offset by structural cost savings and
other efficiencies, part of which came from the acquisition of
Gist. Cost growth was therefore largely driven by volume and
investments in colleagues and technology.
The 0.7% pt reduction breaks down
as follows:
· Store staffing was down 0.3% pts, with colleague pay
investment partly offset by structural cost savings.
· Other store costs were level, as sales leverage was offset by
energy inflation headwinds.
· Distribution and warehousing costs were down 0.2% pts, with
the effects of inflation and volume growth offset by benefits from
the acquisition of Gist.
· Central costs decreased 0.2% pts as sales leverage was partly
offset by technology investments and colleagues.
Operating profit margin before adjusting
items
|
%
|
2022/23
|
3.4
|
Gross margin
|
0.7
|
Store staffing
|
0.3
|
Other store costs
|
0.0
|
Distribution and
warehousing
|
0.2
|
Central costs
|
0.2
|
2023/24
|
4.8
|
UK: Clothing & Home
Clothing & Home sales
increased 5.3% driven by strong full price sales growth, with
promotions and markdown reducing. Sales mix by channel evolved
during the year with stronger online growth in the second
half.
Change vs 22/23 %
|
Q1
|
Q2
|
Q3
|
Q4
|
FY
|
Clothing & Home
sales1
|
7.4
|
4.1
|
4.8
|
5.0
|
5.3
|
Clothing & Home like-for-like
sales
|
7.2
|
3.8
|
4.8
|
5.1
|
5.2
|
|
|
|
|
|
|
Clothing & Home online
sales
|
3.1
|
6.0
|
10.9
|
10.3
|
7.8
|
Clothing & Home store
sales
|
9.4
|
3.2
|
2.0
|
2.4
|
4.1
|
Clothing & Home statutory revenue
|
7.1
|
4.1
|
4.5
|
4.7
|
5.0
|
1 'Sales' are statutory
revenue plus the gross value of consignment sales ex.
VAT
To enable greater insight into
these movements, further detail is provided on the performance of
each channel.
Online
52 weeks ended
|
30 Mar 24
|
1 Apr 23
|
Change vs 2022/23
%
|
|
Active customers
(m)1
|
9.4
|
9.2
|
2.2
|
Frequency2
|
3.5
|
3.4
|
2.9
|
Transactions (m)
|
33.2
|
31.1
|
6.8
|
Average Basket value
£3
|
63.7
|
61.7
|
3.2
|
Returns rate
(%)4
|
31.3
|
29.5
|
1.8%
pts
|
Sales ex VAT £m
|
1,268.4
|
1,176.4
|
7.8
|
1 Active customers is the
count of unique customers who transacted online in the last 52
weeks.
2 Frequency is the count of
purchasing transactions divided by customers.
3 Prior year average basket
value has been restated to reflect alternative source data as a
result of cookie compliance tracking
4 Returns rate represents
returns on dispatch sales.
Online sales increased by 7.8%.
Active customers increased by 2.2% as ranges have begun to appeal
to more customers. Average basket value grew 3.2% reflecting higher
average selling price, including a higher mix of brand partner
sales, and reduced promotions.
The online returns rate increased
year on year as expected, driven by a higher sales mix of partner
brands and growth in more trend-led product.
Stores
52 weeks ended
|
30 Mar 24
|
1 Apr 23
|
Change vs 2022/23
%
|
|
Transactions, m
(average/week)
|
1.8
|
1.8
|
-
|
Average basket value inc VAT pre
returns (£)
|
39.2
|
37.4
|
4.8
|
Sales ex VAT £m
|
2,642.3
|
2,538.6
|
4.1
|
UK Clothing & Home store sales
increased 4.1%, with strong growth in shopping centres and retail
parks, supported by the opening of six new stores in the renewal
format.
Total Clothing & Home
52 weeks ended
|
30 Mar 24
£m
|
1 Apr
23
£m
|
Change vs
2022/23 %
|
Statutory revenue
|
3,841.5
|
3,658.3
|
5.0
|
|
|
|
|
Sales
|
3,910.7
|
3,715.0
|
5.3
|
Operating profit before adjusting items
|
402.8
|
323.8
|
24.4
|
Adjusted operating margin
|
10.3%
|
8.7%
|
1.6% pts
|
Operating profit before adjusting
items was £402.8m compared with £323.8m in 2022/23, with an
adjusted operating margin of 10.3%.
Clothing & Home adjusted
operating margin increased by 1.6% pts. Gross margin increased 1.5%
pts, as buying headwinds including currency, were more than offset
by the annualisation of pricing action and increased full price
sales.
Operating costs as a percent of
sales were 0.1% pts lower than last year, as cost growth of 5.1%
was marginally lower than sales growth. Cost inflation was largely
offset by structural cost reduction. Further cost increases,
largely in the second half, were driven by an increase in
investments in technology, in store service and
colleagues.
The 0.1% pt reduction breaks down
as follows:
· Store staffing increased 0.3% pts, driven by investment in
service and colleague pay, partly offset by structural cost
savings.
· Other store costs decreased 0.7%, structural cost reduction
and one-off savings more than offset inflationary
headwinds.
· Distribution and warehousing costs were down 0.5% pts, with
the effects of inflation and volume growth offset by structural
cost savings and efficiencies.
· Central costs increased 0.8% pts, driven by investment in
colleagues and an increase in technology spend, including a new
planning platform and system changes to support the growth in
partner brands.
Operating profit margin before adjusting
items
|
%
|
2022/23
|
8.7
|
Gross margin
|
1.5
|
Store staffing
|
(0.3)
|
Other store costs
|
0.7
|
Distribution and
warehousing
|
0.5
|
Central costs
|
(0.8)
|
2023/24
|
10.3
|
As outlined above, the overall
Clothing & Home adjusted operating margin increased by 1.6%
pts. Store margin increased 0.8% pts to 11.3% and online margin
increased 3.25% pts to 8.2%.
International
International sales excluding
Republic of Ireland, decreased by 3.0% (1.0% at constant currency)
to £719.1m. This was predominantly due to lower shipments to
partners as a result of weaker sales in the second half. Adjusted
operating margin declined 2.6% pts due to lower sales, and action
taken to reduce stock levels in India.
Sales in Republic of Ireland grew
2.2% (2.4% at constant currency), driven by Food performance.
Adjusted operating margin increased by 3.3% pts, largely driven by
lower supply chain costs in Food.
From 2024/25 financial year the
results of the Republic of Ireland will be reported as part of a
new UK and Republic of Ireland segment within both Food and
Clothing & Home.
52 weeks ended
|
30 Mar 24
£m
|
1 Apr 23
£m
|
Change vs
2022/23 %
|
Change vs
2022/23 CC
%
|
International excl. Republic of Ireland:
|
|
|
|
|
Sales
|
719.1
|
741.0
|
(3.0)
|
(1.0)
|
|
|
|
|
|
Operating profit before adjusting
items
|
47.7
|
67.9
|
(29.7)
|
(26.9)
|
Adjusted operating margin
|
6.6%
|
9.2%
|
(2.6%
pts)
|
(2.4%
pts)
|
|
|
|
|
|
Republic of Ireland:
|
|
|
|
|
Sales
|
320.7
|
313.9
|
2.2
|
2.4
|
|
|
|
|
|
Operating profit before adjusting
items
|
27.9
|
16.9
|
65.1
|
66.7
|
Adjusted operating margin
|
8.7%
|
5.4%
|
3.3% pts
|
3.4% pts
|
Ocado Retail Limited
The Group holds a 50% interest in
Ocado Retail Limited ("Ocado Retail"). The remaining 50% interest
is held by Ocado Group Plc ("Ocado Group"). Full Year Results are
consistent with the quarterly results reported by Ocado Group on
behalf of Ocado Retail for the quarterly periods ended 28 May 2023,
27 August 2023, 3 December 2023 and 3 March 2024.
Revenue increased by £248.3m in
the 53 weeks to 3 March 2024. This was driven by active customer
growth and higher average selling prices, whilst items per basket
declined.
M&S penetration of basket
increased by 0.2% pts versus the prior year, with growth increasing
to 1.3% pts in the final quarter reflecting an increased number of
M&S products on the Ocado website and improved
availability.
53 weeks ended
|
3 Mar 24
£m
|
26 Feb 23
£m
|
Change
£m
|
Revenue
|
2,470.3
|
2,222.0
|
248.3
|
|
|
|
|
Adjusted EBITDA
|
26.8
|
(15.1)
|
41.9
|
Adjusting
items1
|
(61.1)
|
21.2
|
(82.3)
|
Depreciation and
amortisation
|
(61.2)
|
(69.4)
|
8.2
|
Operating loss
|
(95.5)
|
(63.3)
|
(32.2)
|
Net interest charge
|
(30.3)
|
(14.3)
|
(16.0)
|
Taxation
|
(7.9)
|
18.6
|
(26.5)
|
Loss after tax
|
(133.7)
|
(59.0)
|
(74.7)
|
M&S 50% share of loss after tax
|
(67.0)
|
(29.5)
|
(37.5)
|
|
|
|
|
Reported in M&S Group adjusted
profit before tax
|
(37.3)
|
(29.5)
|
(7.8)
|
Reported in M&S Group
adjusting items
|
(29.7)
|
-
|
(29.7)
|
1Adjusting items are defined
within the Ocado Group Plc Annual
Report and Accounts 2023. Adjusting
items relating to UK network capacity review, which is new in the
year, have been reported in M&S Group adjusting items. All
other adjusting items have been reported in M&S Group
underlying results.
EBITDA before adjusting items
improved versus last year driven by revenue growth and leverage
over fixed costs.
Adjusting items within the Ocado
Retail results primarily relate to the ceasing of operations at the
Hatfield site. These are reported within adjusting items in M&S
Group share of Ocado Retail results.
Net interest charge increased,
driven by higher interest expense on loans from shareholders, of
which the M&S share is reported in the Group's finance income
(£6.0m in 2023/24, £0.9m in 2022/23).
Tax was a charge of £7.9m compared
with a credit of £18.6m last year, driven by the write-off of a
deferred tax asset in the current year.
Overall Ocado Retail reported a
loss after tax of £133.7m. M&S group share was £67.0m, of which
£37.3m is reported in M&S Group adjusted profit before tax and
£29.7m primarily related to the ceasing of operations at Hatfield,
is reported within M&S Group adjusting items.
M&S Bank and Services
M&S Bank and Services
generated a profit before adjusting items of £2.2m, compared with a
loss of £0.5m in 2022/23, largely driven by a provision release
following the exit of M&S Energy.
On 9 April 2024, the Group and
HSBC UK agreed a new seven-year deal focused on enhancing M&S'
credit offering and payment solutions through M&S Bank and
bringing together digital payments and loyalty for M&S
customers.
Net finance cost
52 weeks ended
|
30 Mar 24
£m
|
1 Apr 23
£m
|
Change vs
2022/23 £m
|
Interest payable
|
(53.3)
|
(76.3)
|
23.0
|
Interest income
|
52.3
|
23.8
|
28.5
|
Net interest payable
|
(1.0)
|
(52.5)
|
51.5
|
Unwind of discount on Scottish
Limited Partnership liability
|
(4.1)
|
(4.3)
|
0.2
|
Unwind of discount on
provisions
|
(6.6)
|
(5.4)
|
(1.2)
|
Net financial interest
|
(11.7)
|
(62.2)
|
50.5
|
Net interest payable on lease liabilities
|
(110.5)
|
(111.1)
|
0.6
|
|
|
|
|
Net finance cost before adjusting items
|
(122.2)
|
(173.3)
|
51.1
|
Adjusting items included in net
finance cost
|
80.5
|
133.9
|
(53.4)
|
Net finance cost
|
(41.7)
|
(39.4)
|
(2.3)
|
Net finance cost before adjusting
items decreased £51.1m to £122.2m. This was driven by higher
average interest rates on cash balances, an increase in interest
receivable on shareholder loans to Ocado Retail, and reduced
interest expense with 2023 maturing bonds being fully repaid in the
period, and part of 2025 and 2026 bonds repurchased.
Adjusting items within net finance
costs reflects a credit of £80.5m, £64.7m relates to the
remeasurement of Ocado Retail contingent consideration to nil;
£24.0m net finance income relating to the IAS19 pension surplus,
which was reclassified as an adjusting item in the period and the
comparative restated; and a charge of £8.2m reflecting the discount
unwind on deferred and contingent consideration on the acquisition
of Gist Limited.
Group profit before tax and
adjusting items
Group profit before tax and
adjusting items was £716.4m, up 58.0% on 2022/23. The profit
increase was primarily due to strong growth in Food and Clothing
& Home and reduced interest expense, partly offset by an
increased share of net loss of the Ocado Retail
investment.
Group profit before tax
Group profit before tax was £672.5m, up 41.4% on 2022/23. This
includes a net charge for adjusting items of £43.9m (2022/23:
credit of £22.4m).
Adjusting items
The Group makes certain adjustments to statutory profit measures in
order to derive alternative performance measures (APMs) that
provide stakeholders with additional helpful information and 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. These (charges)/gains are reported as adjusting items
on the basis that they are significant in quantum in current or
future years and aid comparability from one period to the
next.
52 weeks ended
|
30 Mar 24
£m
|
1 Apr
23
Restated
£m
|
Change vs 2022/23
£m
|
Included in share of result of associate - Ocado Retail
Limited
|
(42.6)
|
(14.0)
|
(28.6)
|
Ocado Retail Limited - UK network
capacity review
|
(29.7)
|
-
|
(29.7)
|
Amortisation and fair value
adjustments arising as part of the investment in Ocado Retail
Limited
|
(12.9)
|
(14.0)
|
1.1
|
|
|
|
|
Included in operating profit
|
(81.8)
|
(97.5)
|
15.7
|
Strategic programmes - Store
estate
|
(93.0)
|
(51.3)
|
(41.7)
|
Strategic programmes - Furniture
simplification
|
(18.3)
|
-
|
(18.3)
|
Strategic programmes -
Organisation
|
(3.5)
|
(10.7)
|
7.2
|
Strategic programmes - Structural
simplification
|
-
|
(16.4)
|
16.4
|
Strategic programmes - UK
logistics
|
5.3
|
(10.5)
|
15.8
|
Store impairments, impairment
reversals and other property charges
|
35.1
|
15.1
|
20.0
|
M&S Bank transformation and
insurance mis-selling provisions
|
(7.0)
|
(2.0)
|
(5.0)
|
Acquisition of Gist
Limited
|
(0.4)
|
(22.1)
|
21.7
|
Franchise restructure
|
-
|
0.4
|
(0.4)
|
|
|
|
|
Included in net finance income/(costs)
|
80.5
|
133.9
|
(53.4)
|
Remeasurement of Ocado Retail
Limited contingent consideration
|
|
64.7
|
108.0
|
(43.3)
|
Pension net finance
income
|
24.0
|
28.7
|
(4.7)
|
Net finance costs incurred in
relation to Gist Limited deferred and contingent
consideration
|
(8.2)
|
(2.8)
|
(5.4)
|
|
|
|
|
Adjustments to profit before tax
|
(43.9)
|
22.4
|
(66.3)
|
|
|
|
|
|
|
| |
Adjusting items recognised were a
net charge of £43.9m. These include:
A charge of £29.7m included within
the share of result in associate. This reflects the group share of
costs relating to the ceasing of operations at Ocado Retail's
Hatfield CFC and wider network review. A non-cash charge of £12.9m
with respect to the amortisation of intangible assets acquired on
the purchase of our share in Ocado Retail is included in the Group
results.
A charge of £93.0m in relation to
store estate rotation plans. This reflects the revised view of
store exit routes, assumptions, estimated closure costs, charges
relating to the impairment of buildings, fixtures and fittings, and
accelerated depreciation.
A charge of £18.3m in relation to
furniture simplification, this reflects one-off costs relating to
the exit of the two-person furniture delivery operation. The charge
primarily relates to contractual obligations with suppliers and
redundancy costs.
A non-cash charge of £3.5m within
organisation relating to an increase in the IFRS 9 impairment held
in relation to the finance lease receivable for the sublet of
previously closed Merchant Square offices.
A credit of £5.3m within
logistics. This reflects the latest view of estimated closure costs
of a further distribution centre, announced in January 2023, part
of the long-term strategic programme to transition to a single-tier
UK distribution network.
A non-cash net credit of £35.1m in
relation to store impairment reversals, driven by revised future
cash flow projections in relation to the carrying value of
stores.
A charge of £7.0m in relation
to M&S Bank transformation and
insurance mis-selling provisions. £2.0m of which has been incurred in relation to M&S Bank
insurance mis-selling provisions. The remaining £5.0m
relates to legal and
consultancy costs recognised in the period in connection to the new
seven-year deal with HSBC. Under the
terms of the new agreement, material charges are expected over the
next seven years. For further details see note 3 to the
financial information.
Taxation
The effective tax rate on profit
before tax and adjusting items was 33.2% (2022/23 restated for
pension income: 26.4%). This was
higher than the UK statutory tax rate primarily due to the impact
of the recapture of tax relief on distributions to the Scottish
Limited Partnership (SLP), non-deductible Ocado JV Losses, and due
to a deferred tax charge arising from the reduction of buildings
residual value to nil.
Without the impact of the above
deferred tax item, the effective tax rate on adjusted profit before
tax and adjusting items was 30.2%. In 2024/25 we expect the
effective tax rate on profit before tax and adjusting items to be
at a similar rate of c30%.
The effective tax rate on
statutory profit before tax was 36.8% (2022/23: 23.4%). This is
higher than the effective tax rate on profit before adjusting items
due to the impact of non-taxable adjusting items.
Prior year deferred tax
liabilities have been restated as an error was identified within
the Group's deferred tax calculations which was triggered by a
series of historic changes in the residual value applied to
Buildings impacting the portion of the asset to be recovered
through use and the portion through sale. In line with IAS 8, the
Group has restated balances as at 1 April 2023 and 2 April
2022.
The impact on the financial
results as at 1 April 2023 was a £134.1m increase in deferred tax
liabilities recognised in relation to Buildings following
management's downwards revision of its estimate of the residual
value of Buildings. There is no impact on cash flow statement in
any years. See note 1 to the financial information for more
detail.
Earnings per share
Basic earnings per share was 21.9p
(2022/23: 18.5p). Adjusted basic earnings per share was 24.6p
(2022/23 restated for pension income: 16.9p) due to higher adjusted
profit year on year.
The weighted average number of
ordinary shares in issue during the period was 1,973.2m (2022/23:
1,963.5m), with the weighted average number of diluted ordinary
shares 2,075.9m (2022/23: 2,033.9m).
Cash flow
|
30 Mar 24
£m
|
1 Apr 23
£m
|
Change vs
2022/23
£m
|
Operating profit
|
714.2
|
515.1
|
199.1
|
Adjusting items within operating
profit
|
124.4
|
111.5
|
12.9
|
Operating profit before adjusting items
|
838.6
|
626.6
|
212.0
|
Depreciation and amortisation
before adjusting items
|
526.3
|
523.2
|
3.1
|
Cash lease and surrender
payments
|
(345.5)
|
(353.8)
|
8.3
|
Working capital
|
77.2
|
(14.7)
|
91.9
|
Non-cash pension
expense
|
5.3
|
4.6
|
0.7
|
Defined benefit scheme pension
funding
|
(0.4)
|
(36.8)
|
36.4
|
Capex and disposals
|
(423.2)
|
(409.2)
|
(14.0)
|
Financial interest
|
(31.2)
|
(66.5)
|
35.3
|
Taxation
|
(191.2)
|
(70.6)
|
(120.6)
|
Employee-related share
transactions
|
22.2
|
37.9
|
(15.7)
|
Share of result from
Associate
|
37.3
|
29.5
|
7.8
|
Loans to Associates
|
(62.0)
|
(30.0)
|
(32.0)
|
Share of results in other joint
ventures
|
0.3
|
-
|
0.3
|
Adjusting items in cash
flow
|
(40.0)
|
(69.9)
|
29.9
|
Free cash flow from operations
|
413.7
|
170.4
|
243.3
|
|
|
|
|
Acquisitions, investments, and
divestments
|
(2.6)
|
(106.8)
|
104.2
|
Free cash flow
|
411.1
|
63.6
|
347.5
|
Dividends paid
|
(19.6)
|
-
|
(19.6)
|
Free cash flow after shareholder returns
|
391.5
|
63.6
|
327.9
|
|
|
|
|
Opening net debt excluding lease
liabilities
|
(355.6)
|
(420.1)
|
64.5
|
Free cash flow after shareholder
returns
|
391.5
|
63.6
|
327.9
|
Exchange and other non-cash
movements excluding leases
|
9.8
|
0.9
|
8.9
|
Closing net funds/ (debt) excluding lease
liabilities
|
45.7
|
(355.6)
|
401.3
|
|
|
|
|
Opening net debt
|
(2,637.2)
|
(2,698.8)
|
61.6
|
Free cash flow after shareholder
returns
|
391.5
|
63.6
|
327.9
|
Decrease in lease
obligations
|
243.5
|
231.8
|
11.7
|
New lease commitments and
remeasurements
|
(176.0)
|
(249.4)
|
73.4
|
New leases from
acquisitions
|
-
|
(21.3)
|
21.3
|
Exchange and other non-cash
movements
|
12.4
|
36.9
|
(24.5)
|
Closing net debt
|
(2,165.8)
|
(2,637.2)
|
471.4
|
The business generated free cash
flow from operations of £413.7m, a year on year improvement of
£243.3m. This was driven by higher operating profit as a result of
strong performance across Food and Clothing & Home, working
capital inflow and reduced interest expense.
Cash inflow from working capital
was £77.2m, an improvement of £91.9m versus the prior year, which
was driven by a higher year-end payables balance partly due to the
timing of Easter.
Decreased defined benefit scheme
pension funding reflects a deferral of the SLP payment into the
pension scheme.
Increased taxation was principally
due to the increased profit in the year.
Cash outflow from adjusting items
was £40.0m. This included £24.5m relating to the store estate
strategy, £5.9m relating to structural simplification, £2.6m
relating to the logistics strategy, £2.6m in relation to M&S
financial services transformation, £2.0m relating to the M&S
Bank insurance mis-selling provisions, and £1.4m payment to
Gist.
Loans to Associates principally
reflects a £60.0m drawdown of the shareholder loan facility by
Ocado Retail.
After dividend payments of £19.6m,
reflecting payment of an interim dividend in January, the business
generated free cash flow after shareholder returns of £391.5m,
resulting in a further reduction of net debt.
Capital expenditure
52 weeks ended
|
30 Mar 24
£m
|
1 Apr 23
£m
|
Change vs
2022/23
£m
|
UK store remodelling
|
51.5
|
70.5
|
(19.0)
|
New UK stores
|
77.4
|
55.0
|
22.4
|
International
|
18.0
|
28.9
|
(10.9)
|
Supply chain
|
69.3
|
36.8
|
32.5
|
IT and M&S.com
|
80.8
|
109.5
|
(28.7)
|
Property asset
replacement
|
99.1
|
102.1
|
(3.0)
|
Capital expenditure before property acquisitions and
disposals
|
396.1
|
402.8
|
(6.7)
|
Property acquisitions and
disposals
|
(6.1)
|
(1.1)
|
(5.0)
|
Capital expenditure
|
390.0
|
401.7
|
(11.7)
|
Movement in capital accruals and
other items
|
33.2
|
7.5
|
25.7
|
Capex and disposals as per cash flow
|
423.2
|
409.2
|
14.0
|
Group capital expenditure before
property acquisitions and disposals decreased £6.7m to £396.1m due
to increased investment in new UK stores and supply chain,
partially offset by reduced spend UK store remodelling, technology
and International.
UK store remodelling costs were
primarily driven by 8 store renewals in the period, 4 of which were
full line renewals, and one extension.
Spend on new UK stores primarily
related to the opening of 6 full line and 8 Food stores in the
period.
Supply chain expenditure reflects
investment in expanding C&H fulfilment capabilities, as well as
replacement of vehicles and handling equipment.
IT and M&S.com spend includes
technology replacement, network upgrades, and continued investment
in website and app development. The reduction versus prior
year was largely due to completion of retail
initiatives.
Property asset replacement largely
relates to reinvestment in and replacement of core assets across
the store estate, including building repairs, self-service tills
and click-and-collect facilities, as well as spend on energy
efficiency initiatives and maintenance.
The movement in capital accruals
was largely driven by the timing of payments relating to new stores
and remodelling and property maintenance.
Net debt
Group net debt decreased £471.4m
since the start of the year driven by free cash flow after
shareholder returns of £391.5m and a net decrease in lease
liabilities of £70.1m.
The composition of Group net debt
is as follows:
52 weeks ended
|
30 Mar 24
£m
|
1 Apr 23
£m
|
Change vs
2022/23
£m
|
Cash and cash
equivalents
|
1,022.4
|
1,067.9
|
(45.5)
|
Medium Term Notes
|
(921.7)
|
(1,346.4)
|
424.7
|
Current financial assets and
other
|
26.9
|
44.8
|
(17.9)
|
Partnership liability
|
(81.9)
|
(121.9)
|
40.0
|
Net funds / (debt) excluding lease
liabilities
|
45.7
|
(355.6)
|
401.3
|
Lease liabilities
|
(2,211.5)
|
(2,281.6)
|
70.1
|
Group net debt
|
(2,165.8)
|
(2,637.2)
|
471.4
|
The Medium Term Notes include four
bonds, with maturities out to 2037, and the associated accrued
interest. During the period the maturing 2023 bond was fully
repaid, and part of 2025 and 2026 bonds were repurchased. The USD
300m 2037 bond is valued by reference to the embedded exchange rate
in the associated cross currency swaps. The full breakdown of
maturities is as follows:
Bond and maturity date
|
Value (£m)
|
Jun 2025, GBP
|
205.6
|
May 2026, GBP
|
200.8
|
Jul 2027, GBP
|
248.9
|
Dec 2037, USD
|
251.8
|
Total principal value
|
907.1
|
Interest and FX
revaluation
|
14.6
|
Total carrying value
|
921.7
|
Lease Liabilities
|
30 Mar 24
£m
|
1 Apr 23
£m
|
Change vs
2022/23
£m
|
Average lease length to
break1
|
Full line
stores2
|
(860.1)
|
(882.2)
|
22.1
|
c.19yrs
|
Simply Food
stores2
|
(682.2)
|
(689.9)
|
7.7
|
c.9yrs
|
Offices, warehouses and
other2
|
(459.7)
|
(504.8)
|
45.1
|
c.15yrs
|
International
|
(209.5)
|
(204.7)
|
(4.8)
|
|
Total lease liability
|
(2,211.5)
|
(2,281.6)
|
70.1
|
|
1 Liability-weighted average
lease length to break.
2 Last year comparative categories have been
restated.
New lease commitments and
remeasurements in the period were £176.0m, largely relating to 16
UK lease additions, lease additions in India, and UK property
liability remeasurements. This was offset by £243.5m of capital
lease repayments.
Full-line store lease liabilities
include £126.5m relating to stores identified as part of the Store
estate strategic programme. The average lease lengths on these
stores are skewed by five particularly long leases which are
trading well in locations the business wishes to remain in.
Excluding these five leases, the average term to break of leases
outside the programme is c.15 years.
Simply Food store lease
liabilities include £28.3m relating to stores identified as part of
the Store estate strategic programme.
Within offices, warehouses and
other lease liabilities, £139.9m relates to the sublet lease on our
Merchant Square offices.
International leases relate
primarily to India (c.£117m) and Ireland (c.£55m).
Pension
At 30 March 2024, the IAS 19 net
retirement benefit surplus was £77.2m (2022/23: £477.4m). There has
been a decrease of £400.2m since the start of the year largely
driven by a narrowing in the credit spreads of corporate bonds
relative to government bonds. Nevertheless, there has been no
material worsening of the scheme's overall funding position and the
scheme remains fully funded on a technical provisions
basis.
The most recent actuarial
valuation of the Marks & Spencer UK Pension Scheme was carried
out as at 31 March 2021 and showed a funding surplus of £687m. This
is an improvement on the previous position at 31 March 2018
(statutory surplus of £652m), 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.
Marks and Spencer Scottish Limited
Partnership
Marks and Spencer Plc is a general
partner of the Marks and Spencer Scottish Limited Partnership, with
the UK defined benefit pension scheme, which is a limited
partner.
The Partnership holds £1.3bn
(2022/23: £1.3bn) of properties at book value which have been
leased back to Marks and Spencer Plc. The first limited Partnership
interest held by the scheme entitled it to receive £73.0m in 2023
and £54.4m in 2024 and is included as a financial liability in the
financial statements as it is a transferable financial instrument.
The second Partnership interest held by the scheme entitles it to
receive a further £36.4m annually from June 2017 until June 2031.
As it is not a transferable financial instrument, 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.
The Group and the Pension scheme
are in ongoing discussions to ensure that the distributions to the
scheme are appropriate. During the period, the Group and the
Pension Scheme Trustees agreed to amend the distribution dates in
relation to the first limited partnership interest so that the
Pension Scheme received £40.0m in October 2023 and is scheduled to
receive £89.7m in June 2024. Additionally, the Group and the
Pension Scheme Trustees agreed to amend the distribution dates in
respect of the second interest so that the Pension Scheme is
entitled to £38.3m in June 2024 and is scheduled an annual
distribution of £36.4m from June 2024 to June 2031. If the
ongoing discussions are successfully concluded, the profile of
contributions to the scheme would be revised so that distributions
in the year would substantially reduce and the Group would commit
to extending the distribution profile, if required, to ensure that
the scheme was fully funded.
Liquidity
At 30 March
2024, the Group held cash and cash
equivalents of £1,022.4m
(2022/23: £1,067.9m). In
the period, the Group bought back £276.8m of medium-term maturities
and subsequently fully repaid £128.1m for the 2023 maturing
bond.
The Group currently has an unused
£850m revolving credit facility, the expiry of which has been
extended to June 2027, on terms linked to delivery of its net zero
roadmap. With the facility undrawn, the Group had total liquidity
headroom of £1.9bn at 30 March 2024.
Dividend
With the Group generating a
further improvement in operating performance, balance sheet and
credit metrics, a final dividend of 2p has been declared, resulting
in a full year dividend of 3p in 2023/24. The final dividend is due
to be paid on 5 July 2024 to shareholders on the register of
members as at close of business on 31 May 2024.
Statement of financial position
Net assets were £2,830.1m at the
period end. The profit made in the period and the reduction in
borrowings was largely offset by a decrease in the net retirement
benefit surplus, resulting in an overall increase in net assets of
5.6% since the start of the year.
Consolidated income statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52 weeks
ended
30 March
2024
|
|
|
52 weeks
ended
1 April
2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Total
|
|
|
Notes
|
|
|
£m
|
|
|
£m
|
Revenue
|
|
2
|
|
|
13,040.1
|
|
|
11,931.3
|
|
|
|
|
|
|
|
|
|
Share of result in associate -
Ocado Retail Limited
|
17
|
|
|
(79.9)
|
|
|
(43.5)
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
3
|
|
|
714.2
|
|
|
515.1
|
|
|
|
|
|
|
|
|
|
Finance income
|
|
3,
4
|
|
|
146.7
|
|
|
166.1
|
Finance costs
|
|
3,
4
|
|
|
(188.4)
|
|
|
(205.5)
|
|
|
|
|
|
|
|
|
|
Profit before tax
|
|
3
|
|
|
672.5
|
|
|
475.7
|
Income tax expense
|
|
5
|
|
|
(247.3)
|
|
|
(111.2)
|
Profit for the year
|
|
|
|
|
425.2
|
|
|
364.5
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
Owners of the parent
|
|
|
|
|
431.2
|
|
|
363.4
|
Non-controlling
interests
|
|
|
|
|
(6.0)
|
|
|
1.1
|
|
|
|
|
|
425.2
|
|
|
364.5
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
|
6
|
|
|
21.9p
|
|
|
18.5p
|
Diluted earnings per
share
|
|
6
|
|
|
20.8p
|
|
|
17.9p
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of profit before tax & adjusting
items:
|
|
|
|
|
|
|
|
Profit before tax
|
|
|
|
|
672.5
|
|
|
475.7
|
Adjusting
items1
|
|
3
|
|
|
43.9
|
|
|
(22.4)
|
Profit before tax & adjusting
items¹ - non-GAAP measure
|
|
|
|
716.4
|
|
|
453.3
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per share - non-GAAP
measure
|
|
|
|
|
|
|
|
Adjusted basic earnings per
share1
|
|
6
|
|
|
24.6p
|
|
|
16.9p
|
Adjusted diluted earnings per
share1
|
|
6
|
|
|
23.3p
|
|
|
16.4p
|
1 Comparative information has been restated due to a change in
adjusting items classification. See note 1 for details.
|
Consolidated statement of comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
52 weeks
ended
|
52 weeks
ended
|
|
|
|
|
30 March
2024
|
1
April
2023
|
|
|
|
Notes
|
£m
|
£m
|
|
Profit for the year
|
|
|
425.2
|
364.5
|
|
Other comprehensive income/ (expense):
|
|
|
|
|
|
Items that will not be reclassified subsequently to profit or
loss
|
|
|
|
|
|
Remeasurements of retirement
benefit schemes
|
|
8
|
(419.2)
|
(622.8)
|
|
Tax on retirement benefit
schemes
|
|
|
104.8
|
158.0
|
|
|
|
|
(314.4)
|
(464.8)
|
|
Items that may be reclassified subsequently to profit or
loss
|
|
|
|
|
|
Foreign currency translation
differences
|
|
|
|
|
|
- movements recognised in other
comprehensive income
|
|
|
(11.5)
|
4.3
|
|
Cash flow hedges
|
|
|
|
|
|
- fair value movements recognised
in other comprehensive income
|
|
|
(27.5)
|
77.0
|
|
- reclassified and reported in
profit or loss
|
|
|
5.3
|
(14.4)
|
|
Tax credit/(charge) on cash flow
hedges
|
|
|
6.1
|
(18.6)
|
|
|
|
|
(27.6)
|
48.3
|
|
Other comprehensive (expense) for
the year, net of tax
|
|
|
(342.0)
|
(416.5)
|
|
Total comprehensive income/(expense) for the
year
|
|
|
83.2
|
(52.0)
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
Owners of the parent
|
|
|
89.2
|
(53.1)
|
|
Non-controlling
interests
|
|
|
(6.0)
|
1.1
|
|
|
|
|
83.2
|
(52.0)
|
|
|
|
|
|
|
|
Consolidated statement of financial
position
|
|
|
|
|
|
|
|
|
|
|
|
|
As at
|
As
at
|
As
at
|
|
|
|
|
30 March
2024
|
1 April
2023
(restated)
|
3 April
2022
(restated)
|
|
|
|
Notes
|
£m
|
£m
|
£m
|
|
Assets
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
Intangible assets
|
|
10
|
179.5
|
163.1
|
192.5
|
|
Property, plant and
equipment
|
|
11
|
5,190.1
|
5,203.7
|
4,902.3
|
|
Investment property
|
|
|
11.6
|
11.8
|
15.0
|
|
Investments in joint ventures and
associates
|
|
17
|
684.2
|
767.9
|
810.9
|
|
Other financial assets
|
|
|
12.6
|
7.9
|
4.5
|
|
Retirement benefit
assets
|
|
8
|
81.8
|
482.0
|
1,043.9
|
|
Trade and other
receivables
|
|
|
356.7
|
298.7
|
270.6
|
|
Derivative financial
instruments
|
|
|
0.7
|
0.1
|
21.4
|
|
Deferred tax assets
|
|
|
11.7
|
7.6
|
-
|
|
|
|
|
6,528.9
|
6,942.8
|
7,261.1
|
|
Current assets
|
|
|
|
|
|
|
Inventories
|
|
|
776.9
|
764.4
|
706.1
|
|
Other financial assets
|
|
|
12.3
|
13.0
|
17.6
|
|
Trade and other
receivables
|
|
|
302.0
|
280.6
|
217.1
|
|
Derivative financial
instruments
|
|
|
6.8
|
22.6
|
43.6
|
|
Current tax assets
|
|
|
32.9
|
6.5
|
-
|
|
Cash and cash
equivalents
|
|
|
1,022.4
|
1,067.9
|
1,197.9
|
|
|
|
|
2,153.3
|
2,155.0
|
2,182.3
|
|
Total assets
|
|
|
8,682.2
|
9,097.8
|
9,443.4
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
Trade and other
payables
|
|
|
2,107.9
|
2,048.8
|
1,960.9
|
|
Partnership liability to the Marks
& Spencer UK Pension Scheme
|
|
9
|
88.8
|
73.0
|
71.9
|
|
Borrowings and other financial
liabilities
|
|
|
250.4
|
444.0
|
247.2
|
|
Derivative financial
instruments
|
|
|
20.0
|
58.1
|
3.2
|
|
Provisions
|
|
|
47.6
|
44.0
|
53.6
|
|
Current tax liabilities
|
|
|
1.5
|
38.5
|
34.0
|
|
|
|
|
2,516.2
|
2,706.4
|
2,370.8
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
Retirement benefit
deficit
|
|
8
|
4.6
|
4.6
|
5.7
|
|
Trade and other
payables
|
|
|
116.7
|
181.3
|
188.2
|
|
Partnership liability to the Marks
& Spencer UK Pension Scheme
|
|
9
|
-
|
51.8
|
120.4
|
|
Borrowings and other financial
liabilities
|
|
|
2,882.8
|
3,184.0
|
3,561.0
|
|
Derivative financial
instruments
|
|
|
21.9
|
7.1
|
0.4
|
|
Provisions
|
|
|
104.1
|
75.4
|
91.8
|
|
Deferred tax
liabilities
|
|
|
205.8
|
206.4
|
321.3
|
|
|
|
|
3,335.9
|
3,710.6
|
4,288.8
|
|
Total liabilities
|
|
|
5,852.1
|
6,417.0
|
6,659.6
|
|
Net assets
|
|
|
2,830.1
|
2,680.8
|
2,783.8
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
Issued share capital
|
|
|
20.5
|
19.8
|
19.7
|
|
Share premium account
|
|
|
967.0
|
910.7
|
910.6
|
|
Capital redemption
reserve
|
|
|
2,680.4
|
2,680.4
|
2,680.4
|
|
Hedging reserve
|
|
|
(8.4)
|
(31.9)
|
17.6
|
|
Cost of hedging reserve
|
|
|
5.4
|
4.2
|
3.6
|
|
Other reserve
|
|
|
(6,542.2)
|
(6,542.2)
|
(6,542.2)
|
|
Foreign exchange
reserve
|
|
|
(81.1)
|
(69.6)
|
(73.9)
|
|
Retained earnings
|
|
|
5,789.6
|
5,705.0
|
5,763.8
|
|
Equity attributable to owners of the parent
|
|
|
2,831.2
|
2.676.4
|
2,779.6
|
|
Non-controlling
interests
|
|
|
(1.1)
|
4.4
|
4.2
|
|
Total equity
|
|
|
2,830.1
|
2,680.8
|
2,783.8
|
|
Deferred tax and retained earnings
have been restated in the comparative information. See note 1 for
further details.
|
|
Consolidated statement of changes in equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary
share capital
|
Share
premium account
|
Capital
redemption reserve
|
Hedging
reserve
|
Cost of
hedging
|
Other
reserve¹
|
Foreign
exchange reserve
|
Retained
earnings
|
Total
|
Non-controlling
interest
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
As at 3 April 2022
|
19.7
|
910.6
|
2680.4
|
17.6
|
3.6
|
(6,542.2)
|
(73.9)
|
5,897.9
|
2,913.7
|
4.2
|
2,917.9
|
Prior year restatement
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(134.1)
|
(134.1)
|
-
|
(134.1)
|
As at 3 April 2022 (restated)
|
19.7
|
910.6
|
2,680.4
|
17.6
|
3.6
|
(6,542.2)
|
(73.9)
|
5,763.8
|
2,779.6
|
4.2
|
2,783.8
|
Profit for the year
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
363.4
|
363.4
|
1.1
|
364.5
|
Other comprehensive (expense)/income:
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation
|
|
|
|
|
|
|
|
|
|
|
|
- movements recognised in other
comprehensive income
|
-
|
-
|
-
|
-
|
-
|
-
|
4.3
|
-
|
4.3
|
-
|
4.3
|
Remeasurements of retirement
benefit schemes
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(622.8)
|
(622.8)
|
-
|
(622.8)
|
Tax on retirement benefit
schemes
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
158.0
|
158.0
|
-
|
158.0
|
Cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
|
- fair value movement in other
comprehensive income
|
-
|
-
|
-
|
76.2
|
0.8
|
-
|
-
|
-
|
77.0
|
-
|
77.0
|
- reclassified and reported in
profit or loss
|
-
|
-
|
-
|
(14.4)
|
-
|
-
|
-
|
-
|
(14.4)
|
-
|
(14.4)
|
Tax on cash flow hedges
|
-
|
-
|
-
|
(18.4)
|
(0.2)
|
-
|
-
|
-
|
(18.6)
|
-
|
(18.6)
|
Other comprehensive (expense)/income:
|
-
|
-
|
-
|
43.4
|
0.6
|
-
|
4.3
|
(464.8)
|
(416.5)
|
-
|
(416.5)
|
Total comprehensive (expense)/income
|
-
|
-
|
-
|
43.4
|
0.6
|
-
|
4.3
|
(101.4)
|
(53.1)
|
1.1
|
(52.0)
|
Cash flow hedges recognised in
inventories
|
-
|
-
|
-
|
(123.9)
|
-
|
-
|
-
|
-
|
(123.9)
|
-
|
(123.9)
|
Tax on cash flow hedges recognised
in inventories
|
-
|
-
|
-
|
31.0
|
-
|
-
|
-
|
-
|
31.0
|
-
|
31.0
|
Transactions with owners:
|
|
|
|
|
|
|
|
|
|
|
|
Transactions with non-controlling
shareholders
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(0.9)
|
(0.9)
|
Shares issued in respect of
employee share options
|
0.1
|
0.1
|
-
|
-
|
-
|
-
|
-
|
(0.1)
|
0.1
|
-
|
0.1
|
Purchase of shares held by
employee trusts
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(0.1)
|
(0.1)
|
-
|
(0.1)
|
Credit for share-based
payments
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
38.0
|
38.0
|
-
|
38.0
|
Deferred tax on share
schemes
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
4.8
|
4.8
|
-
|
4.8
|
As at 1 April 2023
|
19.8
|
910.7
|
2,680.4
|
(31.9)
|
4.2
|
(6,542.2)
|
(69.6)
|
5,705.0
|
2,676.4
|
4.4
|
2,680.8
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 2 April 2023
|
19.8
|
910.7
|
2,680.4
|
(31.9)
|
4.2
|
(6,542.2)
|
(69.6)
|
5,705.0
|
2,676.4
|
4.4
|
2,680.8
|
Profit for the year
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
431.2
|
431.2
|
(6.0)
|
425.2
|
Other comprehensive income/(expense):
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation
|
|
|
|
|
|
|
|
|
|
|
|
- movements recognised in other
comprehensive income
|
-
|
-
|
-
|
-
|
-
|
-
|
(11.5)
|
-
|
(11.5)
|
-
|
(11.5)
|
Remeasurements of retirement
benefit schemes
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(419.2)
|
(419.2)
|
-
|
(419.2)
|
Tax on retirement benefit
schemes
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
104.8
|
104.8
|
-
|
104.8
|
Cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
|
- fair value movement in other
comprehensive income
|
-
|
-
|
-
|
(29.1)
|
1.6
|
-
|
-
|
-
|
(27.5)
|
-
|
(27.5)
|
- reclassified and reported in
profit or loss
|
-
|
-
|
-
|
5.3
|
-
|
-
|
-
|
-
|
5.3
|
-
|
5.3
|
Tax on cash flow hedges
|
-
|
-
|
-
|
6.5
|
(0.4)
|
-
|
-
|
-
|
6.1
|
-
|
6.1
|
Other comprehensive (expense)/income
|
-
|
-
|
-
|
(17.3)
|
1.2
|
-
|
(11.5)
|
(314.4)
|
(342.0)
|
-
|
(342.0)
|
Total comprehensive (expense)/income
|
-
|
-
|
-
|
(17.3)
|
1.2
|
-
|
(11.5)
|
116.8
|
89.2
|
(6.0)
|
83.2
|
Cash flow hedges recognised in
inventories
|
-
|
-
|
-
|
54.4
|
-
|
-
|
-
|
-
|
54.4
|
-
|
54.43
|
Tax on cash flow hedges recognised
in inventories
|
-
|
-
|
-
|
(13.6)
|
-
|
-
|
-
|
-
|
(13.6)
|
-
|
(13.6)
|
Transactions with owners:
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(19.6)
|
(19.6)
|
-
|
(19.6)
|
Transactions with non-controlling
shareholders
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
0.5
|
0.5
|
Shares issued in respect of
employee share options
|
0.7
|
56.3
|
-
|
-
|
-
|
-
|
-
|
-
|
57.0
|
-
|
57.0
|
Purchase of shares held by
employee trusts
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(83.1)
|
(83.1)
|
-
|
(83.1)
|
Credit for share-based
payments
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
48.3
|
48.3
|
-
|
48.3
|
Tax on share schemes
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
22.2
|
22.2
|
-
|
22.2
|
As at 30 March 2024
|
20.5
|
967.0
|
2,680.4
|
(8.4)
|
5.4
|
(6,542.2)
|
(81.1)
|
5789.6
|
2,831.2
|
(1.1)
|
2,830.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
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.
Consolidated statement of cash flows
|
|
|
|
|
|
|
|
|
|
52 weeks
ended
|
52 weeks
ended
|
|
|
|
30 March
2024
|
1 April
2023
|
|
|
Notes
|
£m
|
£m
|
Cash flows from operating activities
|
|
|
|
|
Cash generated from
operations
|
|
14
|
1,492.9
|
1,100.5
|
Income tax paid
|
|
|
(191.2)
|
(70.6)
|
Net cash inflow from operating activities
|
|
|
1,301.7
|
1,029.9
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
Proceeds on property
disposals
|
|
|
6.1
|
1.1
|
Purchase of property, plant and
equipment
|
|
|
(359.5)
|
(325.8)
|
Purchase of intangible
assets
|
|
|
(69.8)
|
(84.5)
|
Proceeds on disposal of current
financial assets
|
|
|
0.7
|
5.3
|
Purchase of non-current financial
assets
|
|
|
(2.6)
|
(4.2)
|
Proceeds on disposal of
non-current financial assets
|
|
|
-
|
0.2
|
Acquisition of subsidiary, net of
cash acquired1
|
|
|
-
|
(102.8)
|
Loans to related
parties
|
|
16
|
(62.0)
|
(30.0)
|
Interest received
|
|
|
51.8
|
24.1
|
Net cash used in investing activities
|
|
|
(435.3)
|
(516.6)
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
Interest
paid2
|
|
|
(185.0)
|
(212.5)
|
Redemption of Medium Term
Notes3
|
|
|
(395.6)
|
(189.9)
|
Repayment of lease
liabilities
|
|
|
(243.5)
|
(231.8)
|
Payment of partnership liability
to the Marks & Spencer UK Pension Scheme
|
|
|
(40.0)
|
(66.0)
|
Equity dividends paid
|
|
|
(19.6)
|
-
|
Shares issued on exercise of
employee share options
|
|
|
57.0
|
-
|
Purchase of own shares by employee
trust
|
|
|
(83.1)
|
(0.1)
|
Cash received from settlement of
derivatives
|
|
|
-
|
56.5
|
Net cash used in financing activities
|
|
|
(909.8)
|
(643.8)
|
|
|
|
|
|
Net cash outflow from activities
|
|
|
(43.4)
|
(130.5)
|
Effects of exchange rate
changes
|
|
|
(2.1)
|
0.5
|
Opening net cash
|
|
|
1,067.9
|
1,197.9
|
Closing net cash
|
|
15
|
1,022.4
|
1,067.9
|
|
|
|
|
|
1 Last year includes £102.8m relating to the purchase of Gist
Limited, being consideration of £170.6m net of cash acquired of
£67.8m.
|
|
2
Includes interest paid on the
partnership liability to the Marks & Spencer UK Pension Scheme
of £nil (last year: £5.9m) and interest paid on lease liabilities
of £102.0m (last year: £121.9m).
|
|
3 Includes £267.5m of outstanding 2023, 2025 and 2026 notes
repurchased in June 2023, resulting in a gain of £10.3m recognised
within 'interest payable on Medium Term Notes' in net finance
costs.
|
|
|
|
|
|
| |
1
Accounting policies
General information
The financial information set out
in the announcement does not constitute the Company's statutory
accounts for the years ended 30 March 2024 or 1 April 2023. The
financial information for the year ended 1 April 2023 is derived
from the statutory accounts for that year which have been delivered
to the Registrar of Companies. The auditors reported on those
accounts: their report was unqualified, did not draw attention to
any matters by way of emphasis and did not contain a statement
under s498(2) or (3) of the Companies Act 2006. The statutory
accounts for the year ended 30 March 2024 will be delivered to the
Registrar of Companies following the Company's annual general
meeting.
Basis of preparation
While the financial information
included in this press release has been prepared in accordance with
the recognition and measurement criteria of UK-adopted
International Accounting Standards, this announcement does not
itself contain sufficient information to comply with these
standards. The financial information has been prepared using
accounting policies and methods of computation consistent with
those applied in the financial statements for the year ended 1
April 2023, with the exception of the change in accounting policy
and new accounting standards adopted in the year set out below. The
Company's full financial statements will be prepared in compliance
with UK-adopted International Accounting Standards.
Going concern basis
The financial statements have been
prepared on a going concern basis. In adopting the going concern
basis, the Board has considered the business activities, the
financial position of the Group, its cash flows, liquidity position
and borrowing facilities, the Group's financial risk management
objectives and exposures to liquidity and other financial risks as
set out in note 12 and the principal risks and
uncertainties.
The Group continues to maintain a
robust financial position providing it with sufficient access to
liquidity, through a combination of cash and committed facilities,
to meet its needs in the short and medium term. At 30 March 2024,
the Group had liquidity of £1,897.4m (last year: £1,942.9m),
comprising cash and cash equivalents of £1,022.4m, an undrawn
committed syndicated bank revolving credit facility ("RCF") of
£850.0m, and undrawn uncommitted facilities amounting to
£25.0m.
In December 2023, the Group
successfully extended its RCF, which now expires in June 2027. The
facility contains a financial covenant, being the ratio of earnings
before interest, tax, depreciation and amortisation; to net
interest and depreciation on right-of-use assets under IFRS 16. The
covenant is measured biannually.
In adopting the going concern
basis of preparation, the Board has assessed the Group's cash flow
forecasts which incorporate a latest estimate of the ongoing impact
of current market conditions on the Group and include a number of
assumptions including sales growth and customer behaviour. While
trading continues to be strong, in forming their outlook on the
future financial performance, the Board considered a variety of
downsides that the Group might experience, such as a sustained
economic recession and an inability for the Group to execute the
transformation plan.
Under these latest forecasts, the
Group is able to operate without the need to draw on its available
facilities and without taking any supplementary mitigating actions,
such as reducing capital expenditure and other discretionary spend.
The forecast cash flows also indicate that the Group will comply
with all relevant banking covenants during the forecast period,
being at least 12 months from the approval of the financial
statements.
The Board has modelled a severe,
but plausible, downside scenario. This downside scenario assumes
that:
· There will be a period of economic recession in 2024/25,
resulting in a decline in sales of 2.0 - 5.0% across all three
business units compared to the Budget and Three-Year
Plan.
· A
delay on transformation benefits results in incremental sales
expected from the transformation declining by 7.5%, 15% and 30%
respectively across the three-year period across all three business
units.
· Ocado Retail Limited experiences limited customer demand,
with a 5.0% decline in volumes each year across the three-year
period compared to the Budget and Three-Year Plan.
Even under this severe but
plausible downside scenario, the Group would continue to have
sufficient liquidity and headroom on its existing facilities and
against the RCF financial covenant for the forecast period. In
addition, should such a scenario arise, there are a range of
mitigating actions that could be taken to reduce the impact. Given
current trading and expectations for the business, the Board
considers that this downside scenario reflects a plausible, but
remote, outcome for the Group.
In addition, reverse stress
testing has been applied to the model to determine the decline in
sales that the Group could absorb before exhausting the Group's
total liquidity. Such a scenario, and the sequence of events which
could lead to it, is considered to be extremely remote.
As a result, the Board expects the
Group to have adequate resources to continue in operation, meet its
liabilities as they fall due, retain sufficient available cash and
not breach the covenant under the revolving credit facility for the
foreseeable future, being a period of at least 12 months from the
approval of the financial statements. The Board therefore considers
it appropriate for the Group to adopt the going concern basis in
preparing its financial statements.
New accounting standards adopted by the
Group
The Group has applied the
following new standards and interpretations for the first time for
the annual reporting period commencing 2 April 2023:
· IFRS
17 Insurance Contracts.
· Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure
of Accounting Policies.
· Amendments to IAS 8: Definition of Accounting
Estimates.
· Amendments to IAS 12: Deferred Tax Related to Assets and
Liabilities arising from a Single Transaction.
· Amendments to IAS 12: International Tax reform - Pillar Two
Model rules.
The adoption of the standards and
interpretations listed above has not led to any changes to the
Group's accounting policies or had any other material impact on the
financial position or performance of the Group.
New accounting standards in issue but not yet
effective
New standards and interpretations
that are in issue but not yet effective are listed
below:
· Amendment to IFRS 16: Lease Liability in a Sale and
Leaseback.
· Amendments to IAS 1: Classification of Liabilities as Current
or Non-Current.
· Amendments to IAS 1: Non-current Liabilities with
Covenants.
· Amendments to IAS 7 and IFRS7: Supplier Finance
Arrangements.
· Amendments to IAS 21: Lack of Exchangeability.
· Amendments to IFRS 10 and IAS 28: Sale or Contribution of
Assets between an Investor and its Associate or Joint
Venture.
· IFRS
18: Presentation and Disclosure in Financial Statements.
With the exception of the adoption
of IFRS 18, the adoption of the above standards and interpretations
is not expected to lead to any changes to the Group's accounting
policies nor have any other material impact on the financial
position or performance of the Group.
IFRS 18 was issued in April 2024
and is effective for periods beginning on or after 1 January 2027.
Early application is permitted and comparatives will require
restatement. The standard will replace IAS 1 'Presentation of
financial statements' and although it will not change how items are
recognised or measured, the standard brings a focus on the income
statement and reporting of financial performance. Specifically
classifying income and expenses into three new defined categories -
"operating", "investing" and "financing" and two new subtotals
"operating profit or loss" and "profit or loss before financing and
income tax", introducing disclosures of management defined
performance measures (MPMs) and enhancing general requirements on
aggregation and disaggregation. The impact of the standard on the
Group is currently being assessed and it is not yet practicable to
quantify the effect of IFRS 18 on these consolidated financial
statements, however there is no impact on presentation for the
Group in the current year given the
effective date - this will be applicable for the Group's 2027/28
Annual Report.
Prior year restatement
An error has been identified
within the Group's deferred tax calculations which was triggered by
a series of historic changes in the residual value applied to
Buildings impacting the portion of the asset to be recovered
through use and the portion through sale. In line with IAS 8, the
Group has restated balances as at 1 April 2023 and 2 April
2022.
Specifically the impact on the
financial results as at 1 April 2023 was a £134.1m increase in
deferred tax liabilities recognised in relation to Buildings
following management's downwards revision of its estimate of the
residual value of Buildings. There is no impact on cash flow
statement in any years.
The financial impact of the errors
identified are as follows:
|
|
|
As at 1 April
2023
|
As at 2
April 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported
|
Adjustment
|
Restated
|
Reported
|
Adjustment
|
Restated
|
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
|
|
Deferred tax liability
|
|
|
72.3
|
134.1
|
206.4
|
187.2
|
134.1
|
321.3
|
Retained earnings
|
|
|
5,839.1
|
(134.1)
|
5,705.0
|
5,897.9
|
(134.1)
|
5,763.8
|
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. These 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: sales; like-for-like sales growth; adjusted operating
profit; adjusted operating margin; profit before tax and adjusting
items; adjusted basic earnings per share; net debt; net debt
excluding lease liabilities; free cash flow; free cash flow from
operations; capital expenditure; and return on capital employed.
Each of these APMs, and others used by the Group, is 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 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 over the total
expected life of the programme 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. Adjusted
results are consistent with how business performance is measured
internally and presented to aid comparability of performance. On
this basis, the following items were included within adjusting
items for the 52-week period ended 30 March 2024:
· Net
charges associated with the strategic programme in relation to the
review of the store estate.
· Significant restructuring costs and other associated costs
arising from strategy or operational changes that are not
considered by the Group to be part of the normal operating costs of
the business.
· Impairment charges and provisions that are considered to be
significant in nature and/or value to the trading performance of
the business.
· Charges and reversals of previous impairments arising from
the write-off of assets and other property charges that are
significant in nature and/or value. Impairment charges are
recognised in adjusted operating profit where they relate to stores
not previously impaired or do not otherwise meet the Group's
adjusting items policy.
· 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.
· Amortisation of the identified intangible assets arising as
part of the investment in Ocado Retail Limited.
· Remeasurement of Ocado Retail Limited contingent
consideration.
· Significant costs relating to the acquisition of Gist
Limited.
· Net
finance costs incurred in relation to Gist Limited deferred and
contingent consideration.
· (New) Share of net charges associated with Ocado Retail
Limited's UK network capacity review.
· (New) Net pension finance income in relation to closed scheme
not considered part of ongoing operating activities of the
Group.
· (New) Significant charges relating to the renegotiation of
the Group's Relationship Agreement with M&S Bank.
· (New) Significant charges in relation to the furniture
simplification programme that are not considered
to be day-to-day operational costs of the business, mainly relating
to contractual obligations with suppliers.
Refer to note 3 for a summary of
the adjusting items.
Due to a change in the Group's
classification of pension net finance income as an adjusting item
(see note 3), the comparative amounts have been restated. The
impact on the 52 weeks ended 1 April 2023 income statement is a
decrease to the adjusting items charge of £28.7m (resulting in a
net adjusting items credit), a decrease to profit before tax &
adjusting items of £28.7m, a decrease to adjusted basic earnings
per share of 1.2p and a decrease to adjusted diluted earnings per
share of 1.1p. There is no impact on profit before tax, earnings
per share or net assets.
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 have therefore been identified as follows:
• 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, UK Food
franchise operations and UK supply chain services, with the
following five main categories: protein deli and dairy; produce;
ambient and in-store bakery; meals, dessert 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.
• Ocado - includes the Group's share of
profits or losses from the investment in Ocado Retail
Limited.
Other business activities and
operating segments, including 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
adjusted operating profit. 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:
|
52 weeks ended 30 March
2024
|
52
weeks ended 1 April 2023
|
|
|
UK Clothing &
Home
|
UK
Food
|
International
|
Ocado
|
All other
segments
|
Group
|
UK
Clothing & Home
|
UK
Food
|
International
|
Ocado
|
All
other segments
|
Group
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Sales 1
|
3,910.7
|
8,158.8
|
1,039.8
|
-
|
-
|
13,109.3
|
3,715.0
|
7,218.0
|
1,055.0
|
-
|
-
|
11,988.0
|
|
Revenue
|
3,841.5
|
8,158.8
|
1,039.8
|
-
|
-
|
13,040.1
|
3,658.3
|
7,218.0
|
1,055.0
|
-
|
-
|
11,931.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating profit/(loss)
2
|
402.8
|
395.3
|
75.6
|
(37.3)
|
2.2
|
838.6
|
323.8
|
248.0
|
84.8
|
(29.5)
|
(0.5)
|
626.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income before adjusting
items 3
|
|
|
|
|
|
58.0
|
|
|
|
|
|
29.4
|
|
Finance costs before adjusting
items 3
|
|
|
|
|
|
(180.2)
|
|
|
|
|
|
(202.7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) before tax and adjusting items
3
|
402.8
|
395.3
|
75.6
|
(37.3)
|
2.2
|
716.4
|
323.8
|
248.0
|
84.8
|
(29.5)
|
(0.5)
|
453.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusting items
3
|
|
|
|
|
|
(43.9)
|
|
|
|
|
|
22.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) before tax
|
402.8
|
395.3
|
75.6
|
(37.3)
|
2.2
|
672.5
|
323.8
|
248.0
|
84.8
|
(29.5)
|
(0.5)
|
475.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Sales is revenue stated prior to adjustments for UK Clothing
& Home brand consignment sales of £69.2m (last year:
£56.7m).
|
|
2 Adjusted operating profit/(loss) 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 See note 1 for details on a change in adjusting items and the
resulting restatement.
|
|
Other segmental information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52 weeks ended 30 March
2024
|
52
weeks ended 1 April 2023
|
|
|
UK Clothing &
Home
|
UK Food
|
International
|
Ocado
|
All other
segments
|
Group
|
UK
Clothing & Home
|
UK
Food
|
International
|
Ocado
|
All
other segments
|
Group
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Additions to property, plant and
equipment, and intangible assets (excluding goodwill and
right-of-use assets)
|
193.5
|
201.0
|
18.9
|
-
|
-
|
413.4
|
170.4
|
221.1
|
29.9
|
-
|
-
|
421.4
|
Depreciation and amortisation
1,2
|
(219.6)
|
(236.6)
|
(45.4)
|
-
|
-
|
(501.6)
|
(267.9)
|
(274.8)
|
(35.7)
|
-
|
-
|
(578.4)
|
Impairment charges, impairment
reversals and asset disposals 1
|
(43.4)
|
(29.0)
|
-
|
-
|
-
|
(72.4)
|
10.2
|
6.1
|
(1.9)
|
-
|
-
|
14.4
|
1 These costs are allocated to a reportable segment where they
are directly attributable. Where costs are not directly
attributable, a proportional allocation is made to each segment
based on an appropriate cost driver.
|
|
2 Includes £0.2m (last year: £0.2m) depreciation and
impairments on investment property.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
3
Adjusting items
The total adjusting items reported
for the 52-week period ended 30 March 2024 is a net charge of
£43.9m (last year: restated net credit of £22.4m). Refer to note 1
for further details on the restatement. The adjustments made to
reported profit before tax to arrive at adjusted profit
are:
|
|
2024
|
2023
|
|
Notes
|
£m
|
£m
|
Included in share of result of associate - Ocado Retail
Limited
|
|
|
|
Ocado Retail Limited - UK network
capacity review
|
17
|
(29.7)
|
-
|
Amortisation and fair value
adjustments arising as part of the investment in Ocado Retail
Limited
|
17
|
(12.9)
|
(14.0)
|
|
|
(42.6)
|
(14.0)
|
Included in operating profit
|
|
|
|
Strategic programmes - Store
estate
|
11
|
(93.0)
|
(51.3)
|
Strategic programmes - Furniture
simplification
|
|
(18.3)
|
-
|
Strategic programmes -
Organisation
|
|
(3.5)
|
(10.7)
|
Strategic programmes - Structural
simplification
|
|
-
|
(16.4)
|
Strategic programmes - UK
logistics
|
11
|
5.3
|
(10.5)
|
Store impairments, impairment
reversals and other property charges
|
11
|
35.1
|
15.1
|
M&S Bank transformation and
insurance mis-sellling provisions
|
|
(7.0)
|
(2.0)
|
Acquisition of Gist
Limited
|
|
(0.4)
|
(22.1)
|
Franchise restructure
|
|
-
|
0.4
|
|
|
(81.8)
|
(97.5)
|
|
|
|
|
Included in net finance income/(costs)
|
|
|
|
Remeasurement of Ocado Retail
Limited contingent consideration
|
|
64.7
|
108.0
|
Pension net finance
income1
|
8
|
24.0
|
28.7
|
Net finance costs incurred in
relation to Gist Limited deferred and contingent
consideration
|
|
(8.2)
|
(2.8)
|
|
|
80.5
|
133.9
|
|
|
|
|
Adjustments to profit before
tax1
|
|
(43.9)
|
22.4
|
1See note 1 for details on restatement
|
|
|
|
Ocado Retail Limited - UK network capacity review
(£29.7m)
On 25 April 2023, Ocado Retail
Limited announced the plan to cease operation at its Customer
Fulfilment Centre ("CFC") in Hatfield as part of the wider review
of UK network capacity. During H2 2023/24, Ocado Retail Limited
also undertook a strategy and capacity review for the Zoom
network.
As a result, Ocado Retail Limited
has recorded impairment charges, restructuring costs and other
related costs of closure.
The Group's share of these costs,
reported within the Group's "share of result of associate - Ocado
Retail Limited", are considered to be adjusting items as they are
one-off in nature and significant in value to the results of the
Group and to the Ocado segment. No further charges are expected in
this programme.
Amortisation and fair value adjustments arising as part of
the investment in Ocado Retail Limited (£12.9m)
Intangible assets of £366.0m were
acquired as part of the investment in Ocado Retail Limited in
2019/20 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 £17.2m (last year: £17.1m) recognised in the period and a
related deferred tax credit of £4.3m (last year: £3.1m).
The amortisation charge and
changes in the related deferred tax liability are included within
the Group's share of the profit or loss of the associate and are
considered to be adjusting items as they are based on judgments
about their value and economic life and are not related to the
Group's underlying trading performance. These charges are reported
as adjusting items on the basis that they are significant in
quantum and to aid comparability from one period to the
next.
Strategic programmes - Store estate
(£93.0m)
In November 2016, the Group
announced a strategic programme to transform and rotate the store
estate with the overall objective to improve our store estate to
better meet our customers' needs. The Group has incurred charges of
£963m in the eight years up to March 2024 under this programme
primarily relating to closure costs associated with stores
identified as part of the strategic transformation
plans.
The Group has recognised a charge
of £93.0m in the period in relation to those stores identified as
part of the rotation plans. The charge primarily reflects the
latest view of store closure plans and latest assumptions for
estimated store closure costs, as well as charges relating to the
impairment of buildings and fixtures and fittings, and depreciation
as a result of shortening the useful economic life of stores based
on the most recent approved exit routes.
Further charges relating to the
closure and rotation of the store estate are anticipated over the
next seven years as the programme progresses, the quantum of which
is subject to change throughout the programme period as the Group
gets greater certainty of circumstances that need to be in place to
make closure financially viable. Future charges will not include
Foodhall closures at a lease event where there is opportunity for a
better location, as this is not in the scope of the
programme.
As at 30 March 2024, the total
closure programme now consists of 211 stores, 122 of which have
already closed. Further charges of c.£209m are estimated within the
next seven financial years, bringing anticipated total programme
costs since 2016 to c.£1.2bn. In addition, where store exit routes
in the next seven years lead to the recognition of gains on exit,
particularly those relating to asset management, these credits will
also be recognised within adjusting items as part of the programme.
The anticipated total programme costs to date do not include any
costs that may arise in relation to a further c.30 stores currently
under consideration for closure within the next seven years. At
this stage these c.30 stores remain commercially supportable and in
the event of a decision to close the store, the exit routes are not
yet certain.
These costs are reported as
adjusting items on the basis that they are significant in quantum,
relate to a strategic initiative focused on reviewing our store
estate and to aid comparability from one period to the next. The
programme includes all stores within the programme to be closed by
2030/31, but charges in the year, and future charges, did not
include Foodhall closures at a lease event where there is
opportunity to secure a better location.
Strategic programmes - Furniture simplification
(£18.3m)
In March 2024 the Group withdrew
from its two-person furniture delivery operation. Following this
the Group will no longer sell bulky products through its existing
'2-person delivery network'.
As part of this closure the Group
has incurred £18.3m of one-off charges that are not considered to
be day-to-day operational costs of the business. This mainly
relates to contractual obligations with suppliers.
These costs are adjusting items as
they relate to a significant withdrawal of an operation within the
UK Clothing & Home segment and the business would not have
incurred these costs but for the closure. Further costs of £7.2m
are expected in 2024/25 in relation to the operation closure,
expected to be offset by profit on disposal of a distribution
centre in the range of £5.0m to £15.0m.
Strategic programmes - Organisation (£3.5m)
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
the period, an impairment charge of £3.5m has been recognised (last
year: £10.7m impairment). This relates to the updating of
assumptions and market fluctuations over the life of the sub-let of
previously closed offices. Total costs of centralising our London
Head Office functions into one building incurred to date are
c.£101m. Any future charges/reversals will relate to the updating
of assumptions and market fluctuations over the life of the sub-let
lease to September 2040.
These charges are reported as
adjusting items as they are significant in value in total, relate to a strategic initiative, are not
considered to be normal operating costs of the business and are
consistent with the disclosure of costs previously
recognised.
Strategic programmes - UK logistics (£5.3m
credit)
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, Hertfordshire. 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 three further distribution centres across 2020/21,
2021/22 and 2022/23.
A net credit of £5.3m has been
recognised in the period, reflecting a revised view of estimated
closure costs. Total programme costs to date are £23.1m with
further net charges of £14.7m expected over the next four financial
years.
These charges are reported as
adjusting items on the basis that they are significant in quantum,
relate to a strategic initiative focused on reviewing our UK
logistics network and to aid comparability from one period to the
next.
Store impairments, impairment reversals and property charges
(£35.1m credit)
The Group has recognised a number
of charges and credits in the period associated with the carrying
value of items of property, plant and equipment.
The Group has performed impairment
testing based on the latest Board approved budget and three year
plan future cash flow projections for UK and International stores
(excluding those stores that have been captured as part of the
store estate programme). As a result, store impairment testing has
identified stores where the current and anticipated future
performance does not support the carrying value of the stores. A
charge of £0.5m (last year: £18.0m) has been incurred primarily in
respect of the impairment of assets associated with these stores.
In addition, a credit of £35.6m (last year: £33.1m) has been
recognised for the reversal of store impairments incurred in
previous periods, where revised future cash flow projections more
than support the carrying value of the stores, reflecting improved
trading expectations compared to those assumed at the prior year
end. Refer to note 11 for further details on the
impairments.
The charges/credits have been
classified as an adjusting item on the basis of the significant
quantum of the charge/credit in the period to the results of the
Group. Any future charges or reversals relating to stores
previously impaired within adjusting items will continue to be
recognised within adjusting items in line with the original charge.
Any future charges or reversals relating to stores not previously
impaired within adjusting items or not otherwise meeting the
Group's adjusting items policy will be recognised in the underlying
results.
M&S Bank transformation and insurance mis-selling
provisions (£7.0m)
Up until April 2024, the Group had
an economic interest in Marks and Spencer Financial Services plc
(trading as M&S Bank), a wholly owned subsidiary of HSBC UK
Bank plc ("HSBC UK"), 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 did 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 have been 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 that was in the
Relationship Agreement, there was a cap on the amount of charges
that could be offset against the profit share in any one year,
whereby excess liabilities carried forward would be deducted from
the Group's future profit share from M&S Bank. The deduction in
the period is £2.0m (last year: £2.0m).
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,
while 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. The total charges recognised
in adjusting items since September 2012 for PPI is £321.9m which
exceeds the total offset against profit share of £248.7m to date
resulting in a deficit of £73.2m as at 30 March 2024.
On 9 April 2024, the Group and
HSBC UK agreed a new seven-year deal focused on enhancing M&S'
credit offering and payment solutions through M&S Bank and
bringing together digital payments and loyalty for M&S
customers.
£5.0m of legal and consultancy
costs have been recognised during the period in connection with the
new agreement. Under the terms of the new agreement, material
charges are expected over the next seven years, predominantly
related to the settlement of the existing deficit of
£73.2m.
All of these costs are considered
to be adjusting items as they are significant in quantum and have
crystalised as a result of major business change linked to M&S
Bank. Recognition of these costs within adjusting items is
consistent with the disclosure of costs relating to the deficit
previously recognised within adjusting items. Furthermore these
costs are significant in value to the results of both the Group and
to the 'all other segments' segment.
Acquisition of Gist Limited (£0.4m)
On 30 September 2022 the Group
completed the acquisition of Gist Limited from Storeshield Limited,
a subsidiary of The BOC Group Limited, as part of M&S'
multi-year programme to modernise its Food supply chain network to
support growth. As part of the transaction the Group has incurred
charges of £0.4m in the period relating to retention bonuses and
had in the previous year incurred £28.3m of one-off charges to date
that are not considered to be day-to-day operational costs of the
business. Transaction costs of £6.8m were incurred and £3.3m of
other costs, mainly retention bonuses, along with £18.2m of charges
relating to the settlement of our pre-existing relationship with
Gist Limited. This was offset by a £6.2m gain on bargain
purchase.
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
are not considered to be normal operating costs of the business. No
future charges are expected in this programme.
Remeasurement of contingent consideration including discount
unwind (£64.7m credit)
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. A credit of £64.7m has
been recognised in the period, representing the revaluation of the
contingent consideration payable. See note 12 for further details.
The change in fair value 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.
Net pension finance income (£24.0m credit)
During the year, the Group has
reviewed the classification of net pension finance income or costs
and concluded these should be treated as adjusting items, in line
with the Group's adjusting items policy.
The net pension finance income or
expense can fluctuate significantly each year due to changes in
external market factors that are outside management's control.
Furthermore, as the scheme is now closed, it is not considered to
be part of the ongoing operating activities of the
Group.
Therefore, consistent with how
management assess the performance of the business, the net pension
finance income is considered to be an adjusting item. To aid
comparability, the comparative amount of £28.7m has been
restated.
Net finance costs incurred in relation to Gist Limited
deferred and contingent consideration (£8.2m)
Deferred consideration, resulting
from the acquisition of Gist Limited, is held at amortised cost,
whilst the contingent consideration is remeasured at fair value at
each reporting date with the changes in fair value recognised in
profit or loss. A charge of £8.2m (last year: £2.8m) has been
recognised in the period, representing the discount unwind of the
deferred consideration and revaluation of the contingent
consideration payable. See note 12 for further details. The
discount unwind and change in fair value 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 discount unwind and
remeasurement will be recognised in adjusting items until the final
payments are made.
4 Finance
income/(costs)
|
|
|
|
|
2024
|
2023
|
|
£m
|
£m
|
Bank and other interest
receivable
|
52.3
|
22.9
|
Other finance income
|
-
|
0.9
|
Interest income of
subleases
|
5.7
|
5.6
|
Finance income before adjusting items¹
|
58.0
|
29.4
|
Finance income in adjusting
items¹
|
88.7
|
136.7
|
Finance income
|
146.7
|
166.1
|
|
|
|
Other finance costs
|
(6.3)
|
(6.4)
|
Interest payable on syndicated
bank facility
|
(4.8)
|
(4.5)
|
Interest payable on Medium Term
Notes
|
(42.2)
|
(65.4)
|
Interest payable on lease
liabilities
|
(116.2)
|
(116.7)
|
Unwind of discount on
provisions
|
(6.6)
|
(5.4)
|
Unwind of discount on Partnership
liability to the Marks & Spencer UK Pension Scheme (see note
9)
|
(4.1)
|
(4.3)
|
Finance costs before adjusting items
|
(180.2)
|
(202.7)
|
Finance costs in adjusting
items
|
(8.2)
|
(2.8)
|
Finance costs
|
(188.4)
|
(205.5)
|
Net finance costs
|
(41.7)
|
(39.4)
|
1. Due to a change in
classification of pension net finance income as an adjusting item,
the comparative amounts have been restated. See notes 1 and 3 for
details.
|
5
Income tax expense
The effective tax rate was 36.8%
(last year: 23.4%) and the effective tax rate of profit excluding
adjusting items was 33.2% (last year: 26.4% restated).
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 quantum and
are considered distortive to underlying results (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 year; 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:
|
2024
|
2023
|
|
£m
|
£m
|
Profit attributable to equity shareholders of the
Company
|
431.2
|
363.4
|
Add/(less):
|
|
|
Adjusting items (see note
3)1
|
43.9
|
(22.4)
|
Tax on adjusting
items1
|
9.5
|
(8.2)
|
Profit before adjusting items attributable to equity
shareholders of the Company
|
484.6
|
332.8
|
|
|
|
|
Million
|
Million
|
Weighted average number of
ordinary shares in issue
|
1,973.2
|
1,963.5
|
Potentially dilutive share options
under Group's share option schemes
|
102.7
|
70.4
|
Weighted average number of diluted ordinary
shares
|
2,075.9
|
2,033.9
|
|
|
|
|
|
Pence
|
Pence
|
Basic earnings per
share
|
21.9
|
18.5
|
Diluted earnings per
share
|
20.8
|
17.9
|
Adjusted basic earnings per
share1
|
24.6
|
16.9
|
Adjusted diluted earnings per
share1
|
23.3
|
16.4
|
1 See note 1 for details on a change in adjusting items and the
resulting restatement.
|
|
|
7
Dividends
|
|
|
|
|
|
|
2024
|
2023
|
2024
|
2023
|
|
per share
|
per
share
|
£m
|
£m
|
Dividends on equity ordinary shares
|
|
|
|
|
Paid interim dividend
|
1.0p
|
-
|
19.6
|
-
|
|
1.0p
|
-
|
19.6
|
-
|
|
|
|
|
|
|
| |
With the Group generating a
further improvement in operating performance, balance sheet and
credit metrics, the Board restored a dividend to shareholders in
the year, starting with an interim dividend of 1.0p per share (last
year: 0.0p per share), paid on 12 January 2024.
The directors have approved a
final dividend of 2.0p per share (last year: 0.0p per share),
which, in line with the requirements of IAS 10 Events after the
Reporting Period, has not been recognised within these results.
This final dividend of c.£40.8m (last year: £nil) will be paid on 5
July 2024 to shareholders whose names are on the Register of
Members at the close of business on 31 May 2024. The ordinary
shares will be quoted ex dividend on 30 May 2024.
A dividend reinvestment plan
(DRIP) is available to shareholders who would prefer to invest
their dividends in the shares of the Company. For those
shareholders electing to receive the DRIP, the last date for
receipt of a new election is 14 June 2024
8
Retirement benefits
|
2024
|
2023
|
|
£m
|
£m
|
Opening net retirement benefit
surplus
|
477.4
|
1,038.2
|
Current service cost
|
(0.1)
|
(0.1)
|
Administration cost
|
(5.2)
|
(4.8)
|
Net interest income
|
24.0
|
28.7
|
Employer contributions
|
0.5
|
38.1
|
Remeasurements
|
(419.2)
|
(622.8)
|
Exchange movement
|
(0.2)
|
0.1
|
Closing net retirement benefit surplus
|
77.2
|
477.4
|
|
|
|
2024
|
2023
|
|
£m
|
£m
|
Total market value of
assets
|
6,108.9
|
6,781.9
|
Present value of scheme
liabilities
|
(6,027.1)
|
(6,299.9)
|
Net funded pension plan
asset
|
81.8
|
482.0
|
Unfunded retirement
benefits
|
(2.2)
|
(2.2)
|
Post-retirement
healthcare
|
(2.4)
|
(2.4)
|
Net retirement benefit surplus
|
77.2
|
477.4
|
|
|
|
Analysed in the statement of
financial position as:
|
|
|
Retirement benefit
asset
|
81.8
|
482.0
|
Retirement benefit
deficit
|
(4.6)
|
(4.6)
|
Net retirement benefit surplus
|
77.2
|
477.4
|
|
|
|
Financial assumptions
The financial assumptions for the
UK DB pension 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 4.80% (last year: 4.75%) and 3.20%
(last year: 3.25%). The inflation rate of 3.20% (last year: 3.25%)
reflects the Retail Price Index (RPI) rate.
The amount of the surplus varies
if the main financial assumptions change, particularly the discount
rate. If the discount rate decreased by 0.25% the surplus would
decrease by c.£30m. If the inflation rate decreased by 0.25%, the
surplus would decrease by c.£20m.
With the pensioner buy-in policies
purchased in September 2020, April 2019 and March 2018, the Scheme
has now, in total, insured around 73% 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.
|
|
|
|
| |
9
Marks and Spencer Scottish Limited Partnership
Marks and Spencer plc is a general
partner and the Marks & 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 £1.3bn (last
year: £1.3bn) of properties at book value 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 & Spencer UK Pension Scheme),
previously entitled the Pension Scheme to receive £73.0m in 2023
and £54.4m in 2024. During the period, the Group and the Pension
Scheme Trustees agreed to amend the distribution dates so that the
Pension Scheme received £40.0m in October 2023 and will receive
£89.7m in June 2024.
The second Partnership interest
(also held by the Marks & Spencer UK Pension Scheme),
previously entitled the Pension Scheme to receive a further annual
distribution of £36.4m from June 2017 until June 2031. During the
period, the Group and the Pension Scheme Trustees agreed to amend
the distribution dates so that the Pension Scheme is entitled to
£38.3m in June 2024 and then an annual distribution of £36.4m from
June 2024 to June 2031. All profits generated by the Partnership in
excess of these amounts are distributable to Marks and Spencer
plc.
The Partnership liability in
relation to the first interest of £88.8m (last year: £124.8m) is
included as a financial liability in the Group's financial
statements as it is a transferable financial instrument and
measured at amortised cost, being the net present value of the
future expected distributions from the Partnership. During the year
to 30 March 2024 an interest charge of £4.1m (last year: £4.3m) 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 £88.5m (last year:
£122.8m).
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.
The Group and Pension scheme are
in ongoing discussions to ensure that the distributions to the
scheme are appropriate. If the ongoing discussions are successfully
concluded, the profile of contributions to the scheme would be
revised so that distributions in the year would substantially
reduce and the Group would commit to extending the distribution
profile, if required, to ensure that the scheme was fully
funded.
10 Intangible assets
|
|
|
|
|
|
|
|
|
Goodwill
|
Brands
|
Computer
software
|
Computer
software under development
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
At 2 April 2022
|
|
|
|
|
|
|
Cost
|
|
140.6
|
118.7
|
1,570.1
|
76.1
|
1,905.5
|
Accumulated amortisation,
impairments and disposals
|
|
(112.0)
|
(113.1)
|
(1,455.8)
|
(32.1)
|
(1,713.0)
|
Net book value
|
|
28.6
|
5.6
|
114.3
|
44.0
|
192.5
|
Year ended 1 April 2023
|
|
|
|
|
|
|
Opening net book value
|
|
28.6
|
5.6
|
114.3
|
44.0
|
192.5
|
Additions
|
|
-
|
-
|
5.3
|
79.1
|
84.4
|
Acquired through business
combinations
|
|
-
|
-
|
1.5
|
1.2
|
2.7
|
Transfers and
reclassifications
|
|
-
|
-
|
35.6
|
(64.2)
|
(28.6)
|
Disposals
|
|
-
|
-
|
(0.7)
|
-
|
(0.7)
|
Amortisation charge
|
|
-
|
(0.6)
|
(86.4)
|
-
|
(87.0)
|
Exchange difference
|
|
(0.2)
|
-
|
-
|
-
|
(0.2)
|
Closing net book value
|
|
28.4
|
5.0
|
69.6
|
60.1
|
163.1
|
At 1 April 2023
|
|
|
|
|
|
|
Cost
|
|
140.6
|
118.7
|
1,612.5
|
92.2
|
1,964.0
|
Accumulated amortisation,
impairments and disposals
|
|
(112.2)
|
(113.7)
|
(1,542.9)
|
(32.1)
|
(1,800.9)
|
Net book value
|
|
28.4
|
5.0
|
69.6
|
60.1
|
163.1
|
Year ended 30 March
2024
|
|
|
|
|
|
|
Opening net book value
|
|
28.4
|
5.0
|
69.6
|
60.1
|
163.1
|
Additions
|
|
-
|
-
|
1.0
|
68.8
|
69.8
|
Transfers and
reclassifications
|
|
-
|
-
|
89.3
|
(82.2)
|
7.1
|
Disposals
|
|
-
|
-
|
(5.6)
|
-
|
(5.6)
|
Amortisation charge
|
|
-
|
(0.7)
|
(54.0)
|
-
|
(54.7)
|
Exchange difference
|
|
-
|
-
|
(0.2)
|
-
|
(0.2)
|
Closing net book value
|
|
28.4
|
4.3
|
100.1
|
46.7
|
179.5
|
At 30 March 2024
|
|
|
|
|
|
|
Cost
|
|
140.6
|
118.7
|
1,702.5
|
78.8
|
2,040.6
|
Accumulated amortisation,
impairments and disposals
|
|
(112.2)
|
(114.4)
|
(1,602.4)
|
(32.1)
|
(1,861.1)
|
Net book value
|
|
28.4
|
4.3
|
100.1
|
46.7
|
179.5
|
|
|
|
|
|
|
|
Goodwill related to the following
assets and groups of cash generating units (CGUs):
|
|
|
per una
|
India
|
Sports
Edit
|
Other
|
Total
Goodwill
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
Net book value at 1 April 2023 and
30 March 2024
|
|
16.5
|
6.4
|
4.8
|
0.7
|
28.4
|
|
Goodwill impairment testing
Goodwill is not amortised but is
tested annually for impairment with the recoverable amount being
determined from value in use calculations.
The goodwill balance relates to
the goodwill recognised on the acquisition of per una £16.5m (last
year: £16.5m), India £6.4m (last year: £6.4m), Sports Edit £4.8m
(last year: £4.8m) and other £0.7m (last year: £0.7m).
Goodwill for India is monitored by
management at a country level, including the combined retail and
wholesale businesses, and has been tested for impairment on that
basis.
The per una brand is a definite
life intangible asset amortised on a straight-line basis over a
period of 15 years. The brand intangible was acquired for a cost of
£80.0m and has been fully amortised. It is held at a net book value
of £nil (last year: £nil). The per una goodwill of £16.5m is tested
for annually for impairment.
The cash flows used for impairment
testing are based on the Group's latest budget and forecast cash
flows, covering a three-year period, which have regard to
historical performance and knowledge of the current market,
together with the Group's views on the future achievable growth and
the impact of committed cash flows. The cash flows include ongoing
capital expenditure required to maintain the store network, but
exclude any growth capital initiatives not committed.
Cash flows beyond this three-year
period are extrapolated using a long-term growth rate based on the
Group's current view of achievable long-term growth. The Group's
current view of achievable long-term growth for per una is 2.0%
(last year: 1.6%), which is the same as the overall Group long-term
growth rate of 2.0% (last year: 2.0%). The Group's current view of
achievable long-term growth for India is 5.5% (last year:
5.5%).
Management estimates discount
rates that reflect the current market assessment of the time value
of money and the risks specific to each asset or CGU. The pre-tax
discount rates are derived from the Group's post-tax weighted
average cost of capital ("WACC") which has been calculated using
the capital asset pricing model, the inputs of which include a
country risk-free rate, equity risk premium, Group size premium and
a risk adjustment (beta). The post-tax WACC is subsequently grossed
up to a pre-tax rate and was 13.5% for per una (last year: 13.4%)
and 16.1% for India (last year: 15.4%).
The immediately quantifiable
impacts of climate change and costs expected to be incurred in
connection with our net zero commitments, are included within the
Group's budget and three-year plan which have been used to support
the impairment reviews, with no material impact on cash
flows.
Management has performed
sensitivity analysis on the key assumptions in the impairment model
using reasonably possible changes in these key assumptions, both
individually and in combination. Management has considered
reasonably possible changes in key assumptions that would cause the
carrying amounts of goodwill or brands to exceed the value in use
for each asset.
For both per una and India
respectively, there are no reasonably possible changes in key
assumptions that would lead to an impairment and the assumptions do
not give rise to a key source of estimation uncertainty.
11 Property, plant and equipment
The Group's property, plant and
equipment of £5,190.1m (last year: £5,203.7m) consists of owned
assets of £3,760.8m (last year: £3,747.7m) and right-of-use assets
of £1,429.3m (last year: £1,456.0m).
Property, plant and equipment - owned
|
|
|
|
|
|
Land and
buildings
|
Fixtures, fittings and equipment
|
Assets
in the course of construction
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
At 2 April 2022
|
|
|
|
|
Cost
|
2,764.8
|
5,275.7
|
141.2
|
8,181.7
|
Accumulated depreciation,
impairments and disposals
|
(812.5)
|
(3,864.5)
|
(18.2)
|
(4,695.2)
|
Net book value
|
1,952.3
|
1,411.2
|
123.0
|
3,486.5
|
Year ended 1 April 2023
|
|
|
|
|
Opening net book value
|
1,952.3
|
1,411.2
|
123.0
|
3,486.5
|
Additions
|
0.8
|
40.0
|
296.2
|
337.0
|
Acquired through business
combinations
|
150.5
|
38.7
|
3.8
|
193.0
|
Transfers and
reclassifications
|
15.0
|
292.3
|
(280.7)
|
26.6
|
Disposals
|
-
|
(0.7)
|
-
|
(0.7)
|
Impairment reversals
|
25.8
|
14.4
|
-
|
40.2
|
Impairment charge
|
(22.5)
|
(9.3)
|
-
|
(31.8)
|
Depreciation charge
|
(59.9)
|
(250.4)
|
-
|
(310.3)
|
Exchange difference
|
5.5
|
1.6
|
0.1
|
7.2
|
Closing net book value
|
2,067.6
|
1,537.7
|
142.4
|
3,747.7
|
At 1 April 2023
|
|
|
|
|
Cost
|
2,911.4
|
5,532.3
|
160.6
|
8,604.3
|
Accumulated depreciation,
impairments and disposals
|
(843.8)
|
(3,994.6)
|
(18.2)
|
(4,856.6)
|
Net book value
|
2,067.6
|
1,537.7
|
142.4
|
3,747.7
|
Year ended 30 March 2024
|
|
|
|
|
Opening net book value
|
2,067.6
|
1,537.7
|
142.4
|
3,747.7
|
Additions
|
3.4
|
26.9
|
313.3
|
343.6
|
Transfers and
reclassifications
|
10.3
|
304.9
|
(324.0)
|
(8.8)
|
Disposals
|
(46.5)
|
(1.6)
|
(1.1)
|
(49.2)
|
Impairment reversals
|
19.2
|
12.8
|
-
|
32.0
|
Impairment charge
|
(9.1)
|
(14.9)
|
-
|
(24.0)
|
Depreciation charge
|
(32.5)
|
(242.3)
|
-
|
(274.8)
|
Exchange difference
|
(3.5)
|
(2.1)
|
(0.1)
|
(5.7)
|
Closing net book value
|
2,008.9
|
1,621.4
|
130.5
|
3,760.8
|
At 30 March 2024
|
|
|
|
|
Cost
|
2,852.7
|
5,709.5
|
148.8
|
8,711.0
|
Accumulated depreciation,
impairments and disposals
|
(843.8)
|
(4,088.1)
|
(18.3)
|
(4,950.2)
|
Net book value
|
2,008.9
|
1,621.4
|
130.5
|
3,760.8
|
Disposals in the year include assets
with gross book value of £216.1m (last year: £240.9m).
Right-of-use assets
Set out below are the carrying
amounts of right-of-use assets recognised and the movements during
the period:
Right-of-use assets
|
|
|
|
|
Land and
buildings
|
Fixtures, fittings and equipment
|
Total
|
|
£m
|
£m
|
£m
|
At 2 April 2022
|
1,368.4
|
47.4
|
1,415.8
|
|
|
|
|
Additions
|
198.0
|
37.3
|
235.3
|
Acquired through business
combinations
|
6.7
|
14.1
|
20.8
|
Transfers and
reclassifications
|
2.1
|
(0.1)
|
2.0
|
Disposals
|
(27.8)
|
(10.7)
|
(38.5)
|
Impairment reversals
|
14.9
|
-
|
14.9
|
Impairment charge
|
(14.8)
|
-
|
(14.8)
|
Depreciation charge
|
(159.0)
|
(21.9)
|
(180.9)
|
Exchange difference
|
1.3
|
0.1
|
1.4
|
At 1 April 2023
|
1,389.8
|
66.2
|
1,456.0
|
Additions
|
161.1
|
15.0
|
176.1
|
Transfers and
reclassifications
|
1.7
|
-
|
1.7
|
Disposals
|
(17.6)
|
-
|
(17.6)
|
Impairment reversals
|
13.6
|
-
|
13.6
|
Impairment charge
|
(21.7)
|
-
|
(21.7)
|
Depreciation charge
|
(148.8)
|
(23.3)
|
(172.1)
|
Exchange difference
|
(6.6)
|
(0.1)
|
(6.7)
|
As at 30 March 2024
|
1,371.5
|
57.8
|
1,429.3
|
|
|
|
|
| |
Impairment of property, plant and equipment and right-of-use
assets
For impairment testing purposes,
the Group has determined that each store is a separate CGU, with
the exception of Outlets stores, which are considered together as
one CGU. Click & Collect sales are included in the cash flows
of the relevant CGU.
Each CGU is tested for impairment
at the balance sheet date if any indicators of impairment and
impairment reversal have been identified. Stores identified within
the Group's store estate programme are automatically tested for
impairment (see note 3).
The value in use of each CGU is
calculated based on the Group's latest budget and forecast cash
flows, covering a three-year period, which have regard to historic
performance and knowledge of the current market, together with the
Group's views on the future achievable growth and the impact of
committed initiatives. The cash flows include ongoing capital
expenditure required to maintain the store network,
but exclude any growth capital initiatives not committed. Cash
flows beyond this three-year period are extrapolated using a
long-term growth rate based on management's future expectations,
with reference to forecast GDP growth. These growth rates
do not exceed the long-term growth rate for the Group's retail
businesses in the relevant territory. If the CGU relates to a store
which the Group has identified as part of the store
estate programme, the value in use calculated has been
modified by estimation of the future cash flows up to the point
where it is estimated that trade will cease and then estimation of
the timing and amount of costs associated with closure detailed
fully in note 3. The immediately quantifiable impacts of climate
change and costs expected to be incurred in connection with our net
zero commitments, are included within the Group's budget and three
year plan which have been used to support the impairment reviews,
with no material impact on cash flows. We also expect any potential
store refurbishments to be phased over multiple years and therefore
any changes required due to climate change would not have a
material impact in any given year and the warehouse and support
centres are located in areas which we would not expect to be
physically impacted by climate change. As a consequence there has
been no material impact in the forecast cash flows used for
impairment testing.
The key assumptions in the value
in use calculations are the growth rates of sales and gross profit
margins, changes in the operating cost base, long-term growth rates
and the risk-adjusted pre-tax discount rate. The pre-tax discount
rates are derived from the Group's weighted average cost of
capital, which has been calculated using the capital asset pricing
model, the inputs of which include a country risk-free rate, equity
risk premium, Group size premium and a risk adjustment (beta). The
pre-tax discount rates range from 12.5% to 17.6% (last year: 12.5%
to 18.1%). If the CGU relates to a store which the Group has
identified as part of the UK store estate programme, the additional
key assumptions in the value-in-use calculations are costs
associated with closure, the disposal proceeds from store exits and
the timing of the store exits.
Impairments - UK stores excluding the store estate
programme
During the year, the Group has
recognised an impairment charge of £0.5m and impairment reversals of £31.5m in property, plant and
equipment as a result of UK store
impairment testing unrelated to the store estate programme (last
year: impairment charge of £17.3m and impairment reversals of £33.1m).
These have been recognised within adjusting items (see note 3). The
impaired stores were impaired to their value-in-use recoverable
amount of £37.4m, which is their carrying value at year end.
The stores with impairment reversals were written
back to the lower of their value-in-use recoverable amount, and the
carrying value if the impairment had not occurred, of
£171.7m.
For UK stores, when considering
both impairment charges and reversals, cash flows beyond the
three-year period are extrapolated using the Group's current view
of achievable long-term growth of 2.0%, adjusted to 0% where
management believes the current trading performance and future
expectations of the store do not support the growth rate of 2.0%.
The rate used to discount the forecast cash flows for UK stores is
12.5% (last year: 12.5%).
As disclosed in the accounting
policies (note 1), the cash flows used within the impairment model
are based on assumptions which are sources of estimation
uncertainty and small movements in these assumptions could lead to
further impairments. Management has performed sensitivity analysis
on the key assumptions in the impairment model using reasonably
possible changes in these key assumptions across the UK store
portfolio.
Neither an increase or reduction
in sales of 5% from the three-year plan in year 3, a 25 basis point
increase in the discount rate, a 25 basis point increase or
reduction in gross profit margin from year 3 onwards, result in a
significant change to the impairment charge or impairment reversal,
individually or in combination with the other reasonably possible
scenarios considered.
Impairments -store estate programme
During the year, the Group has
recognised an impairment charge of £37.0m and impairment reversals
of £14.1m relating to the ongoing store estate programme (last
year: impairment charge of £28.6m and impairment reversals of
£22.0m). These stores were impaired to their value-in-use
recoverable amount of £120.2m, which is their carrying value at
year end. The impairment charge relates to the store closure
programme and has been recognised within adjusting items (see note
3). Impairment reversals predominantly reflect changes to expected
store closure dates and improved trading expectations compared to
those assumed at the end of the prior year end.
Where the planned closure date for
a store is outside the three-year plan period, no growth rate is
applied. The rate used to discount the forecast cash flows for UK
stores is 7.3% (last year: 8.5%).
As disclosed in the accounting
policies (note 1), the cash flows used within the impairment models
for the store estate programme are based on assumptions which are
sources of estimation uncertainty and small movements in these
assumptions could lead to further impairments. Management has
performed sensitivity analysis on the key assumptions in the
impairment model using reasonably possible changes in these key
assumptions across the store estate programme.
A delay of 12 months in the date
of each store exit would result in a decrease in the impairment
charge of £53.5m.
Neither an increase or decrease of 5% in planned sales from the
three-year plan in years 2 and 3 (where relevant), a 25
basis point increase in the discount rate, a 25
basis point reduction in gross profit margin during the period of
trading nor a 2% increase in the costs associated with exiting a
store would result in a significant increase to the impairment
charge, individually or in combination with the other reasonably
possible scenarios considered.
Impairments - International stores
During the year the Group
recognised an impairment charge of £0.7m (last year: £0.7m) in
International stores as a result of store impairment
testing.
12 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.
· 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 that 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:
|
|
|
|
2024
|
|
|
|
2023
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Level
1
|
Level
2
|
Level
3
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Assets measured at fair value
|
|
|
|
|
|
|
|
|
Financial assets at fair value
through profit or loss (FVTPL)
|
|
|
|
|
|
|
|
|
- derivatives held at
FVTPL
|
-
|
0.2
|
-
|
0.2
|
-
|
-
|
-
|
-
|
- other
investments1
|
-
|
12.3
|
12.6
|
24.9
|
-
|
12.3
|
8.6
|
20.9
|
Derivatives used for
hedging
|
-
|
7.5
|
-
|
7.5
|
-
|
22.7
|
-
|
22.7
|
|
|
|
|
|
|
|
|
|
Liabilities measured at fair value
|
|
|
|
|
|
|
|
|
Financial liabilities at fair
value through profit or loss
|
|
|
|
|
|
|
|
|
- derivatives held at
FVTPL
|
-
|
(1.8)
|
-
|
(1.8)
|
-
|
(2.1)
|
-
|
(2.1)
|
- Ocado contingent
consideration2
|
-
|
-
|
-
|
-
|
-
|
-
|
(64.7)
|
(64.7)
|
- Gist contingent
consideration3
|
-
|
-
|
(25.6)
|
(25.6)
|
-
|
-
|
(25.0)
|
(25.0)
|
Derivatives used for
hedging
|
-
|
(40.2)
|
-
|
(40.2)
|
-
|
(63.1)
|
-
|
(63.1)
|
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 during
the period.
1 Within Level 3 other investments, the Group
holds £9.4m of venture capital investments, managed by True Capital
Limited, measured at FVTPL (last year: £7.3m) which are Level 3
instruments. The fair value of these investments has been
determined in accordance with the International Private Equity and
Venture Capital ("IPEV") Valuation Guidelines. Where investments
are either recently acquired or there have been recent funding
rounds with third parties, the primary input when determining the
valuation is the latest transaction price.
2 As part of the investment in Ocado Retail
Limited, a contingent consideration arrangement was agreed. The
arrangement comprises three separate elements which only become
payable on the achievement of three separate financial and
operational performance targets. In 2021/22, £33.8m was settled,
relating to the first two targets. The final target relates to
Ocado Retail Limited achieving a specified target level of earnings
in the financial year ending November 2023, with any resulting
payment due in 2024 following completion of the Ocado Retail
Limited audited FY23 statutory accounts. The performance target is
binary, meaning that a payment of £156.3m plus interest will be
made if the performance target is met. Should the target not be
met, no consideration would be payable.
Previously, the fair value of the
contingent consideration was estimated using an expected present
value technique and was based on probability-weighting possible
scenarios. With Ocado Retail Limited's FY23 year now closed, the
end of the measurement period for the target has been reached and
the valuation of the contingent consideration has been
revisited.
The actual FY23 performance is
below the target required for automatic payment of the contingent
consideration. However, there is a mechanism for reasonable
adjustments to be made to the performance target to reflect certain
events, if applicable. Both shareholders have proposed
adjustments which are currently being evaluated but we have not, to
date, seen evidence we believe would result in a payment being
made.
In these circumstances, the fair
value of the liability has been recorded as £nil.
3 As part of the investment in Gist Limited, the Group
has agreed to pay the former owners of Gist Limited additional
consideration of up to £25.0m plus interest when freehold
properties are disposed of under certain conditions. There is no
minimum amount payable. The Group has the ability to retain the
properties should it wish to do so, in which case the full amount
of £25.0m plus interest will be payable on the third anniversary of
completion.
The fair value
of the contingent consideration arrangement of £25.6m was estimated
by calculating the present value of the future expected cashflows.
The estimates are based on a discount rate of 5.1%. A 2.5% change
in the discount rate would result in a change in fair value of
£0.9m.
The Marks & Spencer UK Pension
Scheme holds a number of financial instruments which make up the
pension asset of £6,108.9m (last year: £6,781.9m). Level 1 and
Level 2 financial assets measured at fair value through other
comprehensive income amounted to £2,074.3m (last year: £2,754.7m).
Additionally, the scheme assets include £4,034.6m (last year:
£4,027.2m) of Level 3 financial assets. See note 8 for information
on the Group's retirement benefits.
The following table represents the
changes in Level 3 instruments held by the Pension
Schemes:
|
2024
|
2023
|
|
£m
|
£m
|
Opening balance
|
4,027.2
|
5,144.9
|
Fair value gain/(loss) recognised
in other comprehensive income
|
362.5
|
(401.8)
|
Cash withdrawals
|
(355.1)
|
(715.9)
|
Closing balance
|
4,034.6
|
4,027.2
|
Fair value of financial instruments
With the exception of the Group's
fixed rate bond debt and the Partnership liability to the Marks
& Spencer UK Pension Scheme (note 9), 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 £921.7m (last year:
£1,346.4m); the fair value of this debt was £919.8m (last year:
£1,264.3m) 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 (level 2
equivalent) is £88.8m (last year: £124.8m) and the fair value of
this liability is £81.9m (last year: £121.9m).
13 Contingencies and commitments
|
|
|
|
A. Capital commitments
|
|
2024
|
2023
|
|
£m
|
£m
|
Commitments in respect of
properties in the course of construction
|
175.2
|
100.8
|
Software capital
commitments
|
6.5
|
6.1
|
|
181.7
|
106.9
|
During 2021/22, the Group
committed to invest up to £25.0m, over a three-year period to
2024/25, in an innovation and consumer growth fund managed by True
Capital Limited. This period was extended to 2026/27 during the
year. The fund can drawdown amounts at any time over the five-year
period to make specific investments. At 30 March 2024, the Group
had invested £10.1m (last year: £7.5m) of this commitment, which is
held as a non-current other investment and measured at fair value
through profit or loss.
B. Other material contracts
See note 9 for details on the
Partnership arrangement with the Marks & Spencer UK Pension
Scheme.
14 Analysis of cash flows given in the statement of
cash flows
|
Cash flows from operating activities
|
|
|
2024
|
2023
|
|
|
£m
|
£m
|
Profit on ordinary activities
after taxation
|
|
425.2
|
364.5
|
Income tax expense
|
|
247.3
|
111.2
|
Finance costs
|
|
188.4
|
205.5
|
Finance income
|
|
(146.7)
|
(166.1)
|
Operating profit
|
|
714.2
|
515.1
|
Share of results of Ocado Retail
Limited
|
|
37.3
|
29.5
|
Share of results in other joint
ventures
|
|
0.3
|
-
|
Increase in inventories
|
|
(31.3)
|
(58.5)
|
Increase in receivables
|
|
(17.5)
|
(33.7)
|
Increase in payables
|
|
126.0
|
82.1
|
Depreciation, amortisation and
disposals
|
|
526.3
|
523.2
|
Non-cash share based payment
expense
|
|
48.3
|
38.0
|
Non-cash pension
expense
|
|
5.3
|
-
|
Defined benefit pension
funding
|
|
(0.4)
|
(36.8)
|
Adjusting items net cash
outflows1,2
|
|
(38.0)
|
(67.9)
|
Adjusting items M&S
Bank3
|
|
(2.0)
|
(2.0)
|
Adjusting operating profit
items
|
|
124.4
|
111.5
|
Cash generated from operations
|
|
1,492.9
|
1,100.5
|
|
1 Excludes £24.1m (last year: £11.5m) of surrender payments
included within repayment of lease liabilities in the consolidated
statement of cashflows relating to leases within the store estate
programme.
2 Adjusting items net cash outflows relate to strategic
programme costs associated with the Store estate, UK logistics,
Structural simplification programme, M&S financial services
transformation and interest payments relating to the deferred and
contingent consideration for the acquisition of Gist
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.
15 Analysis of net debt
|
|
A. Reconciliation of movement in net debt
|
|
|
At
|
|
Changes
in fair values
|
Lease
additions and remeasurements
|
Exchange
and other
|
At
|
|
|
3
April
|
|
non-cash
|
1
April
|
|
|
2022
|
Cash flow
|
movements1
|
2023
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Net debt
|
|
|
|
|
|
|
|
Bank loans and
overdrafts
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Cash and cash
equivalents
|
1,197.9
|
(130.5)
|
-
|
-
|
0.5
|
1,067.9
|
|
Net cash per statement of cash flows
|
1,197.9
|
(130.5)
|
-
|
-
|
0.5
|
1,067.9
|
|
Current other financial assets
|
17.6
|
(5.3)
|
-
|
-
|
0.7
|
13.0
|
|
Liabilities from financing activities
|
|
|
|
|
|
|
|
Medium Term Notes
|
(1,529.5)
|
262.3
|
-
|
-
|
(79.2)
|
(1,346.4)
|
|
Lease liabilities
|
(2,278.7)
|
353.8
|
-
|
(270.7)
|
(86.0)
|
(2,281.6)
|
|
Partnership liability to the Marks
& Spencer UK Pension Scheme (see note 9)
|
(187.9)
|
66.0
|
-
|
-
|
-
|
(121.9)
|
|
Derivatives held to hedge Medium
Term Notes
|
18.5
|
(57.4)
|
33.7
|
-
|
-
|
(5.2)
|
|
Liabilities from financing activities
|
(3,977.6)
|
624.7
|
33.7
|
(270.7)
|
(165.2)
|
(3,755.1)
|
|
Less: Cashflows related to
interest and derivative instruments
|
63.3
|
(171.7)
|
(33.7)
|
-
|
179.1
|
37.0
|
|
Net debt
|
(2,698.8)
|
317.2
|
-
|
(270.7)
|
15.1
|
(2,637.2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
2
April
2023
|
Cash
flow
|
Changes
in fair values
|
Lease
additions and remeasurments
|
Exchange
and other non-cash movements1
|
At 30 March
2024
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Net debt
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
1,067.9
|
(43.4)
|
-
|
-
|
(2.1)
|
1,022.4
|
|
Net cash per statement of cash flows
|
1,067.9
|
(43.4)
|
-
|
-
|
(2.1)
|
1,022.4
|
|
Current other financial assets
|
13.0
|
(0.7)
|
-
|
-
|
-
|
12.3
|
|
Liabilities from financing activities
|
|
|
|
|
|
|
|
Medium Term Notes
|
(1,346.4)
|
461.3
|
-
|
-
|
(36.6)
|
(921.7)
|
|
Lease liabilities
|
(2,281.6)
|
345.5
|
-
|
(176.0)
|
(99.4)
|
(2,211.5)
|
|
Partnership liability to the Marks
& Spencer UK Pension Scheme (see note 9)
|
(121.9)
|
40.0
|
-
|
-
|
-
|
(81.9)
|
|
Derivatives held to hedge Medium
Term Notes
|
(5.2)
|
-
|
(16.4)
|
-
|
-
|
(21.6)
|
|
Liabilities from financing activities
|
(3,755.1)
|
846.8
|
(16.4)
|
(176.0)
|
(136.0)
|
(3,236.7)
|
|
Less: Cashflows related to
interest and derivative instruments
|
37.0
|
(185.7)
|
16.4
|
-
|
168.5
|
36.2
|
|
Net debt
|
(2,637.2)
|
617.0
|
-
|
(176.0)
|
30.4
|
(2,165.8)
|
|
1Exchange and other non-cash movements includes interest
charges on Medium Term Notes of £42.2m (last year: £65.4m),
interest charges on lease liabilities of £116.2m (last year:
£116.7m) and interest charges on the Partnership liability to the
Marks & Spencer UK Pension Scheme of £4.1m (last year:
£4.3m).
|
|
|
|
B. Reconciliation of net debt to statement of financial
position
|
|
|
|
|
|
|
2024
|
2023
|
|
|
|
|
|
|
£m
|
£m
|
|
Statement of financial position and related
notes
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
|
|
1,022.4
|
1,067.9
|
|
Current other financial
assets
|
|
|
|
|
12.3
|
13.0
|
|
Medium Term Notes - net of foreign
exchange revaluation
|
|
|
|
|
(937.2)
|
(1,356.6)
|
|
Lease liabilities
|
|
|
|
|
(2,211.5)
|
(2,281.6)
|
|
Partnership liability to the Marks
& Spencer UK Pension Scheme (see note 9)
|
(88.8)
|
(124.8)
|
|
|
|
|
|
|
(2,202.8)
|
(2,682.1)
|
|
Interest payable included within
related borrowing and the partnership liability to the Marks &
Spencer UK Pension Scheme
|
37.0
|
44.9
|
|
Net debt
|
|
|
|
|
(2,165.8)
|
(2,637.2)
|
|
|
|
|
|
|
|
|
|
16
Related party transactions
A.
Joint ventures and associates
Ocado Retail
Limited
The following transactions were
carried out with Ocado Retail Limited, an associate of the
Group.
Loan to Ocado Retail Limited
|
2024
|
2023
|
|
£m
|
£m
|
Opening balance
|
30.9
|
-
|
Loans advanced
|
60.0
|
30.0
|
Interest charged
|
6.0
|
0.9
|
Interest repaid
|
(4.7)
|
-
|
Closing balance
|
92.2
|
30.9
|
The loan matures during 2039/40
and accrues interest at Sterling Overnight Index Average ("SONIA")
plus an applicable margin.
Parent guarantee
Ocado Retail Limited, an associate
of the Group, had entered into a £30m revolving credit facility
which expired on 19 December 2023 (last year: £25.0m drawn) and
subsequent to the year end, on 9 May 2024, was renewed. The Group,
along with Ocado Group plc, jointly guarantee the
facility.
Sales and purchases of goods and services
|
2024
|
2023
|
|
£m
|
£m
|
Sales of goods and
services
|
44.9
|
35.7
|
Purchases of goods and
services
|
0.1
|
0.1
|
Included within trade and other
receivables is a balance of £4.1m (last year: £2.9m) owed by Ocado
Retail Limited.
Nobody's Child
Limited
Nobody's Child Limited became an
associate of the Group in November 2021.
During the year, the Group made
purchases of goods amounting to £7.0m (last year: £6.3m)
At 30 March 2024, there was a
balance of £0.1m within trade and other payables (last year: £nil)
owed to Nobody's Child Limited, and £2.7m included within other
financial assets (last year: £0.7m) owed from Nobody's Child
Limited.
|
|
|
B.
Other related party transactions
|
The Group acquired 77.7% of the
issued share capital of The Sports Edit Limited ("TSE") in February
2022. A further 4.8% of TSE's issued share capital was owned by Mr.
Justin King, a Non-Executive Director of the Group (the "JK TSE
Shares"). Following shareholder approval, the Group acquired the JK
TSE Shares from Mr. Justin King at a total purchase price of £0.3m
in July 2022.
|
17 Investments in joint ventures and
associates
The Group holds a 50% interest in
Ocado Retail Limited, a company incorporated in the UK. The
remaining 50% interest is held by Ocado Group Plc. Ocado Retail
Limited is an online grocery retailer, operating through the
ocado.com and ocadozoom.com websites.
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. Through Board representation and shareholder voting
rights, the Group is currently considered to have significant
influence and therefore the investment in Ocado Retail Limited is
treated as an associate and the Group applies the equity method of
accounting. It is currently expected that Ocado Group plc will give
up those rights to the Group in early April 2025. There will be no
change in economic interest of both shareholders in Ocado Retail
Limited, or any consideration paid by the Group, as a result of
this proposed change. After Ocado Group plc give up the rights, it
is expected that Ocado Retail Limited will then be consolidated as
a subsidiary of the Group.
Ocado Retail Limited had a
financial year end date of 3 December 2023, aligning with its
parent company, Ocado Group plc. For the Group's purpose of
applying the equity method of accounting, Ocado Retail Limited has
prepared financial information to the nearest quarter-end date of
its financial year end, as to do otherwise would be impracticable.
The results of Ocado Retail Limited are incorporated in these
financial statements from 27 February 2023 to 3 March 2024. There
were no significant events or transactions in the period from 3
March 2024 to 30 March 2024.
The carrying amount of the Group's
interest in Ocado Retail Limited is £677.1m (last year: £756.9m).
The Group's share of Ocado Retail Limited losses of £79.9m (last
year: loss of £43.5m) includes the Group's share of underlying
losses of £37.3m (last year: share of underlying losses: £29.5m)
and the Group's share of adjusting items of £29.7m (last year:
£nil) and adjusting item charges of £12.9m (last year: £14.0m) (see
note 3).
Summarised financial information
in respect of Ocado Retail Limited (the Group's only material
associate) 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 3
March
2024
|
As at 26
February 2023
|
|
£m
|
£m
|
Ocado Retail Limited
|
|
|
Current assets
|
261.7
|
220.0
|
Non-current assets
|
517.4
|
618.7
|
Current liabilities
|
(272.3)
|
(267.7)
|
Non-current liabilities
|
(491.2)
|
(421.7)
|
Net assets
|
15.6
|
149.3
|
|
|
|
|
27 February 2023 to 3 March
2024
|
28
February 2022 to 26 February 2023
|
|
£m
|
£m
|
Revenue
|
2,470.3
|
2,222.0
|
Loss for the period
|
(133.7)
|
(59.0)
|
Total comprehensive loss
|
(133.7)
|
(59.0)
|
Reconciliation of the above
summarised financial information to the carrying amount of the
interest in Ocado Retail Limited recognised in the consolidated
financial statements:
|
As at 30 March
2024
|
As at 1
April 2023
|
|
£m
|
£m
|
Ocado Retail Limited
|
|
|
Net assets
|
15.6
|
149.3
|
Proportion of the Group's
ownership interest
|
7.8
|
74.6
|
Goodwill
|
449.1
|
449.1
|
Brand
|
229.7
|
236.2
|
Customer relationships
|
56.5
|
67.1
|
Other adjustments to align
accounting policies
|
(71.7)
|
(75.8)
|
Acquisition costs
|
5.7
|
5.7
|
Carrying amount of the Group's interest in Ocado Retail
Limited
|
677.1
|
756.9
|
In addition, the Group holds
immaterial investments in joint ventures and associates totaling
£7.1m (last year: £11.0m). The Group's share of losses totaled
£0.5m (last year: £0.5m profit) and an impairment of £3.5m (last
year: £nil) was recognised.
18 Contingent assets
The Group is currently seeking
damages from an independent third party following their involvement
in anti-competitive behaviour that adversely impacted the Group.
The Group expects to receive an amount from the claim (either in
settlement or from the legal proceedings), a position reinforced by
recent court judgments in similar claims. The value of the claim is
confidential and is therefore not disclosed.
19 Subsequent
events
On 10 April 2024 M&S and HSBC
UK announced a new seven-year deal focused on enhancing M&S'
credit and payments offering through M&S Bank. See note 3 for
further details.
The Board have approved a tender
offer to repurchase the Group's 2025 and 2026 Medium Term Notes on
an "any and all" basis, which will be announced on 22 May
2024.
Principal risks &
uncertainties
The Board reviews and monitors the
principal risks and uncertainties which could have a material
effect on the Group's results. The updated principal risks and
uncertainties for 2023/24 are listed below. A fuller disclosure of
the risks, including the associated mitigating activities will be
set out in the Strategic Report of the 2023/24 Annual Report and
Accounts.
An
uncertain environment
|
The business continues to operate in an uncertain environment
impacted by a suite of challenging events which could individually,
or in aggregate, negatively impact our performance. Some of the
factors we are currently monitoring include: supply chain
disruption; the political environment; cost of goods sold;
financial instability; and health & wellbeing.
|
Business transformation
|
Ongoing business transformation is
dependent on our ability to prioritise capital spend and resources
to accelerate and successfully implement the suite of strategic
projects. Delays or deferrals of transformation activity could
impact the delivery of our medium- and longer-term growth
ambitions.
|
Joint ventures, including Ocado Retail, and
franchise
|
The successful long-term
performance of any joint venture is inherently complex due to a
number of factors, including the ownership and/or operational
structure and the need to align different perspectives. Similarly,
the success of our franchise operations is dependent on our ability
to work effectively with both domestic and international
partners.
|
Business continuity and resilience
|
A major operational or resilience
failure at a key business location, such as one of our distribution
centres, could result in business interruption. More broadly, an
inability to effectively respond to large, disruptive external
events like extreme weather or infrastructure failures could also
impact our performance.
|
Information security
|
A significant or wide-reaching data
breach or cyber-attack, directly or at a connected third party,
could result in loss of information for our customers, colleagues
and/or business and loss of confidence in M&S. This could
adversely impact our reputation, result in legal exposure including
significant fines, and potentially cause business
disruption.
|
Culture, talent and capability
|
The success of the business is
dependent upon being an employer of choice - attracting, retaining
and developing the right talent, skills and capabilities and having
a clear focus on: driving a high-performance culture; meeting the
financial and wellbeing expectations of our colleagues; effectively
managing labour cost pressures; and working collaboratively with
our Business Involvement Group and unions. Any shortfall in
executing against these objectives could impact the delivery of
core operational activities and longer-term strategy, including
aspects of our transformation programme.
|
Product safety and integrity
|
A failure to prevent and/or
effectively respond to a major food or product safety incident, or
to maintain product integrity, could impact customer confidence in
our brand and business performance.
|
Corporate compliance and responsibility
|
A failure to consistently deliver
against an increasingly demanding set of legal and regulatory
obligations or broader corporate responsibility commitments would
undermine our reputation as a responsible retailer. The
consequences include a loss of trust by customers, investors and
other stakeholders; and/or legal exposure or regulatory sanctions
which could negatively impact our ability to operate and/or cause
financial losses and harm.
|
Climate change and environmental
responsibility
|
There is increasing focus and
pressure from carbon-conscious stakeholders for the business to
operate in a more environmentally sound and sustainable manner. A
failure to take appropriate actions to reduce the environmental
impact of our business over time and progress towards our net zero
targets - those linked to our directly controlled operations and
externally within our supply chain - as well as effectively manage
the consequences of climate-related risks (such as regulations or
extreme weather events) could impact our brand, future trading
performance and other business costs, including
financing.
|
Liquidity and funding
|
Barriers to maintaining affordable
short- and long-term funding to meet business needs or an inability
to effectively manage associated market risks could impact our
ability to transform at pace, as well as have an adverse impact on
business performance and/or viability.
Fragility in the financial markets
could also impact the business directly (such as heightening
counterparty risk or restricting access to capital), or indirectly
(such as triggering liquidity or funding support for the M&S
Pension Scheme).
|
Glossary and Alternative Performance
Measures
The Group tracks a number of
alternative performance measures in managing its business, which
are not defined or specified under the requirements of IFRS because
they exclude amounts that are included in, or include amounts that
are excluded from, the most directly comparable measure calculated
and presented in accordance with IFRS, or are calculated using
financial measures that are not calculated in accordance with
IFRS.
The Group believes that these
alternative performance measures, 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. These alternative performance measures are consistent
with how the business performance is planned and reported within
the internal management reporting to the Board. Some of these
alternative performance measures are also used for the purpose of
setting remuneration targets.
These alternative performance
measures should be viewed as supplemental to, but not as a
substitute for, measures presented in the consolidated financial
information relating to the Group, which are prepared in accordance
with IFRS. The Group believes that these alternative performance
measures are useful indicators of its performance. However, they
may not be comparable with similarly-titled measures reported by
other companies due to differences in the way they are
calculated.
Alternative performance measure ("APM")
|
Closest equivalent statutory measure
|
Reconciling items to statutory measure
|
Definition and purpose
|
Income Statement Measures
|
Sales
|
Revenue
|
Consignment sales
|
Sales includes the gross value of
consignment sales (excluding VAT). Where third-party branded goods
are sold on a consignment basis, only the commission receivable is
included in statutory revenue. This measure has been introduced
given the Group's focus on launching and growing third-party brands
and is consistent with how the business performance is reported and
assessed by the Board and the Executive Committee.
|
Clothing & Home store
/
Clothing & Home online sales
|
None
|
Not applicable
|
The growth in revenues on a
year-on-year basis is a good indicator of the performance of the
stores and online channels.
|
|
|
|
|
2023/24
£m
|
2022/23
£m
|
%
|
UK Clothing & Home
|
|
|
|
Store sales1
|
2,642.3
|
2,538.6
|
4.1
|
Consignment sales
|
(18.6)
|
(21.4)
|
|
Store revenue
|
2,623.7
|
2,517.2
|
4.2
|
|
|
|
|
Online sales1
|
1,268.4
|
1,176.4
|
7.8
|
Consignment sales
|
(50.6)
|
(35.3)
|
|
Online revenue
|
1,217.8
|
1,141.1
|
6.7
|
|
|
|
|
UK Clothing & Home
sales
|
3,910.7
|
3,715.0
|
5.3
|
Consignment sales
|
(69.2)
|
(56.7)
|
|
Total UK Clothing & Home revenue
|
3,841.5
|
3,658.3
|
5.0
|
|
|
|
|
1 UK Clothing & Home store sales excludes revenue from
"shop your way" and Click & Collect, which are included in UK
Clothing & Home online sales.
|
|
|
|
|
|
|
|
There is no material difference
between sales and revenue for UK Food and International.
|
Like-for-like sales
growth
|
Movement in revenue per the income
statement
Revenue from non-retail
businesses
|
Revenue from non like-for-like
stores
Consignment sales
|
The period-on-period change in
sales (excluding VAT) from stores which have been trading and where
there has 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, stores with
significant footage change and non-retail businesses such as supply
chain services.
|
2023/24
£m
|
2022/23
£m
|
%
|
UK Food
|
|
|
|
Like-for-like
|
7,780.6
|
6,992.9
|
11.3
|
Net new
space1
|
378.2
|
225.1
|
|
Total UK Food sales
|
8,158.8
|
7,218.0
|
13.0
|
|
|
|
|
UK Clothing & Home
|
|
|
|
Like-for-like
|
3,814.8
|
3,626.9
|
5.2
|
Net new space
|
95.9
|
88.1
|
|
Total UK Clothing & Home sales
|
3,910.7
|
3,715.0
|
5.3
|
1 UK Food net new space includes Gist third party
revenue.
|
|
M&S.com sales / Online
sales
|
None
|
Not applicable
|
Total sales through the Group's
online platforms. These sales are reported within the relevant UK
Clothing & Home, UK Food and International segment results. The
growth in sales 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. Refer to the Remuneration Report for an
explanation of why this measure is used within incentive
plans.
|
International online
|
None
|
Not applicable
|
International sales through
International online platforms. These sales are reported within the
International segment results. The growth in sales on a
year-on-year basis is a good indicator of the performance of the
online channel. This measure has been introduced given the Group's
focus on online sales.
|
2023/24
£m
|
2022/23
£m
|
%
|
International sales
|
|
|
|
Stores
|
875.6
|
874.5
|
0.0
|
Online
|
164.2
|
180.5
|
(9.0)
|
At reported currency
|
1,039.8
|
1,055.0
|
(1.4)
|
|
|
|
|
|
Sales growth at constant
currency
|
None
|
Not applicable
|
The period-on-period change in
sales retranslating the previous year sales 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 period-on-period reported
results.
|
2023/24
£m
|
2022/23
£m
|
%
|
International sales
|
|
|
|
At constant currency
|
1,039.8
|
1,039.9
|
0.0
|
Impact of FX
retranslation
|
-
|
15.1
|
|
At reported currency
|
1,039.8
|
1,055.0
|
(1.4)
|
|
|
|
|
|
Adjusting items
|
None
|
Not applicable
|
Those items which the Group
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.
|
Adjusted operating
profit
Operating profit before adjusting
items
|
Operating profit
|
Adjusting items
(See note 3)
|
Operating profit before the impact
of adjusting items. The Group considers this to 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.
|
Adjusted operating
margin
Operating margin before adjusting
items
|
None
|
Not applicable
|
Adjusted operating profit as a
percentage of sales.
|
Finance income before adjusting
items
|
Finance income
|
Adjusting items
(See note 3)
|
Finance income before the impact of
adjusting items. The Group considers this to 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.
|
Finance costs before adjusting
items
|
Finance costs
|
Adjusting items
(See note 3)
|
Finance costs before the impact of
adjusting items. The Group considers this to 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.
|
Net interest payable on
leases
|
Finance income/costs
|
Finance income/costs
(See note 4)
|
The net of interest income on
subleases and interest payable on lease liabilities. This measure
has been introduced as it allows the Board and Executive Committee
to assess the impact of IFRS 16 Leases.
|
Net financial interest
|
Finance income/costs
|
Finance income/costs
(See note 4)
|
Calculated as net finance costs,
excluding interest on leases and adjusting items. The Group
considers this to 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.
|
EBIT before adjusting
items
|
EBIT1
|
Adjusting items
(See note 3)
|
Calculated as profit before the
impact of adjusting items, net finance costs and tax as disclosed
on the face of the consolidated income statement. This measure is
used in calculating the return on capital employed for the
Group.
|
Ocado Retail Limited Adjusted
EBITDA
|
EBIT1
|
Not applicable
|
Calculated as Ocado Retail Limited
earnings before interest, taxation, depreciation, amortisation,
impairment and adjusting items.
|
Profit before tax and adjusting
items
|
Profit before tax
|
Adjusting items
(See note 3)
|
Profit before the impact of
adjusting items and tax. The Group considers this to 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 for an
explanation of why this measure is used within incentive
plans.
|
Adjusted basic earnings per
share
|
Earnings per share
|
Adjusting items
(See note 3)
|
Profit after tax attributable to
owners of the parent and before the impact of adjusting 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 for an
explanation of why this measure is used.
|
Adjusted diluted earnings per
share
|
Diluted earnings per
share
|
Adjusting items
(See note 3)
|
Profit after tax attributable to
owners of the parent and before the impact of adjusting 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 tax rate before adjusting
items
|
Effective tax rate
|
Adjusting items and their tax
impact
(See note 3)
|
Total income tax charge for the
Group excluding the tax impact of adjusting items divided by the
profit before tax and adjusting items. This measure is an indicator
of the ongoing tax rate for the Group.
|
Balance Sheet Measures
|
Net debt
|
None
|
Reconciliation of net debt (see
note 15)
|
Net debt comprises total borrowings
(bank and bonds net of accrued interest and lease liabilities), the
spot foreign exchange component of 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.
|
Net funds/(debt) excluding lease
liabilities
|
None
|
Reconciliation of net debt (see
note 15)
|
Calculated as net debt less lease
liabilities. 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 flow from
operations
|
Operating profit
|
See Financial Review
|
Calculated as operating profit less
adjusting items within operating profit, depreciation and
amortisation before adjusting items, cash lease payments, working
capital, defined benefit scheme pension funding, capex and
disposals, financial interest, taxation, employee-related share
transactions, share of (profit)/loss from associate, adjusting
items in cashflow and loans to associates.
|
Free cash flow
|
Operating profit
|
See Financial Review
|
Calculated as free cash flow from
operations less acquisitions, investments and divestments. 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.
|
Free cash flow after shareholder
returns
|
Operating profit
|
See Financial Review
|
Calculated as free cash flow less
dividends paid.
This measure shows the cash
retained by the Group in the year.
|
Other Measures
|
Capital expenditure
|
None
|
Not applicable
|
Calculated as the purchase of
property, plant and equipment, investment property and intangible
assets during the year, less proceeds from asset disposals
excluding any assets acquired or disposed of as part of a business
combination or through an investment in an associate.
|
Adjusted return on capital employed
("ROCE")
|
None
|
Not applicable
|
Calculated as being adjusted
operating profit divided by the average of opening and closing
capital employed. The measures used in this calculation are set out
below:
|
2023/24
£m
|
2022/23
£m
|
Operating profit
|
714.2
|
515.1
|
Adjusting items included in
operating profit (see note 3)1
|
124.4
|
111.5
|
Adjusted operating profit
|
838.6
|
626.6
|
|
|
|
Net assets
|
2,830.1
|
2,680.8
|
Add back:
|
|
|
Partnership liability to the Marks
& Spencer UK Pension Scheme
|
88.8
|
124.8
|
Deferred tax liabilities
|
205.8
|
206.4
|
Non-current borrowings and other
financial liabilities
|
2,882.8
|
3,184.0
|
Retirement benefit
deficit
|
4.6
|
4.6
|
Derivative financial
instruments
|
34.4
|
42.5
|
Current tax liabilities
|
1.5
|
38.5
|
Less:
|
|
|
Investment property
|
(11.6)
|
(11.8)
|
Retirement benefit
assets
|
(81.8)
|
(482.0)
|
Current tax assets
|
(32.9)
|
(6.5)
|
Deferred tax assets
|
(11.7)
|
(7.6)
|
Net operating assets
|
5,910.0
|
5,773.7
|
Add back: Provisions related to
adjusting items
|
130.6
|
100.3
|
Capital employed
|
6,040.6
|
5,874.0
|
Average capital employed
|
5,957.3
|
5,888.4
|
ROCE %
|
14.1%
|
10.6%
|
1 See note 1 for details on a change in adjusting items and the
resulting restatement.
This measure is used within the
Group's incentive plans. Refer to the Remuneration Report for an
explanation of why this measure is used within incentive
plans.
|
|
|
|
| |
1 EBIT is not defined within IFRS but is a widely accepted
profit measure being earnings before interest and tax.