TIDMBB90
RNS Number : 6075Y
Lewis(John) PLC
10 September 2015
John Lewis plc
Unaudited condensed Interim Financial Statements for the half
year ended 1 August 2015
Strict Stock Exchange Embargo, 7.00am
Thursday 10 September 2015
Solid first half for the Group in a difficult market
Financial Summary
Waitrose John Lewis Group
GBPm YoY GBPm YoY change GBPm YoY change
change
-------- -------- -------- ----------- ----- -----------
Gross sales 3,180.8 1.1% 1,935.8 3.8% 5,116.6 2.1%
LFL sales(1) (1.3)% 3.0%
Revenue 2,998.7 1.1% 1,548.5 3.6% 4,547.2 1.9%
Operating profit
before exceptional
item(2)(3) 135.5 (6.7)% 47.1 (16.3)% 144.9 (17.7)%
Operating profit(3) 272.9 55.0%
PBT(4) before
exceptional item(2)(3) 96.7 (26.0)%
PBT(3) (4) 224.7 72.1%
------------------------ -------- -------- ---- -------- ----------- ----------- -----------
(1) Waitrose like-for-like sales excludes petrol
(2) Exceptional income of GBP128.0m (2014/15: GBPnil) following
the sale of the Clearings building
(3) Includes property profits of GBPnil (2014/15: GBP10.5m in
Waitrose and GBP0.5m in Group). Excluding property profits,
Waitrose operating profit is up 0.6%
(4) Profit before Partnership Bonus and tax
Operating highlights
-- Robust sales performance and increased market share(5) in both Waitrose and John Lewis
-- Continued growth in customer numbers, up 7% in Waitrose and 6% in John Lewis
-- 18% increase in number of active myWaitrose card holders and
strong take-up of "Pick Your Own Offers" scheme with 700,000
customers now taking part
-- 5 new Waitrose branches and a new .com distribution centre in
Coulsdon; first John Lewis full line department store in 4 years
set to open in Birmingham following GBP35m investment
-- Waitrose national distribution centre (NDC) opened and
announcement of third John Lewis NDC, both in Milton Keynes
-- International expansion with new John Lewis shop-in-shops in Singapore and the Philippines
Financial highlights
-- Operating profit before property profits up GBP0.8m (0.6%) in
Waitrose and down GBP9.2m (16.3%) in John Lewis; both impacted by
incremental holiday pay costs(6) and a higher share of central
costs as well as restructuring costs in John Lewis
-- Waitrose total volume growth of 1.8%; LFL sales decline of
1.3% reflecting tough grocery market conditions, with price
deflation, and strong prior year comparative through
promotion-driven online performance last year
-- Johnlewis.com gross sales(7) up 17.1% to GBP647m. Sales
transacted in shops decreased 1.8%, partly due to comparison to 150
Year anniversary celebrations last year, but were up 1.7% over a
two year period
-- PBT before exceptional items down 26.0%, predominantly due to
higher pension charges, arising from volatility in the market
driven assumptions, and last year's property profits
-- As pension charges for the full year will be approximately
GBP60m higher than the comparable figure for last year, and given
the tough trading environment, PBT before exceptional items for the
year ending 30 January 2016 expected to be between GBP270m and
GBP320m versus GBP341.6m last year
-- Strong cash generation driven by lower capital investment and
the sale of the Clearings building
-- Net debt(8) of GBP558.1m, GBP30.2m (5.1%) lower than July
2014 despite the issue of a GBP300m bond in December 2014, with net
proceeds contributed to the pension scheme
-- Pension deficit of GBP1,156.4m, GBP92.9m (7.4%) lower than January 2015
(5) Kantar
(6) Incremental costs to take paid overtime into account when
calculating holiday pay for Partners
(7) Online returns to shops deducted from shop sales
(8) Net debt has been restated for 2014/15. See note 2 of the
interim statement on page 12 for further details
Sir Charlie Mayfield, Chairman of John Lewis Partnership,
commented:
"This has been a solid first half for the Group in a difficult
market. Both Waitrose and John Lewis are growing sales and
increasing market share. Profit before tax and exceptionals was
down by GBP33.9m to GBP96.7m, predominantly driven by higher
pension charges arising from volatility in the market driven
assumptions and last year's property profits. Excluding these, at a
trading level our profits were broadly level with last year,
despite the turmoil in the grocery market. That reflects tight
management of costs and the steps we have taken to strengthen the
appeal of our trading brands, where we have seen an encouraging
increase in the number of customers shopping with us.
Outlook 2015/16
Conditions in the market will remain difficult, especially in
grocery where there is little sign of any price inflation. However,
I expect sales in both Waitrose and John Lewis to perform
comparatively well against the market, helped by promising new
ranges and online capability.
For the full year, pension charges will be approximately GBP60m
higher than the comparable figure last year, predominantly arising
from volatility in the market driven assumptions. In the current
market, even a strong trading performance is unlikely to offset
this fully and therefore we expect to see Profit before Partnership
Bonus, tax and exceptionals of between GBP270m and GBP320m, versus
GBP341.6m last year. Despite this, through tight cash management,
we expect to achieve a further reduction in our net debt."
Financial Results
In the first six months of the year, the Group delivered robust
sales growth. Both Waitrose and John Lewis grew sales ahead of
their respective markets, increasing their market shares. Group
gross sales (inc VAT) were GBP5.12bn, an increase of GBP105.2m, or
2.1%, on last year. Revenue, which is adjusted for sale or return
sales and excludes VAT, was GBP4.55bn, up by GBP86.0m or 1.9%.
Group operating profit was GBP272.9m, up GBP96.8m, or 55.0% on
last year. This includes exceptional income of GBP128.0m following
the sale of the Clearings building. Excluding the exceptional item,
operating profit was GBP144.9m, down GBP31.2m or 17.7% on last
year.
Profit before tax was GBP224.7m, up by GBP94.1m, or 72.1% on
last year. Excluding the exceptional item it was GBP96.7m, down by
GBP33.9m or 26.0%.
Waitrose
Despite exceptionally tough conditions in the UK grocery market
caused by falling prices and changing customer shopping patterns,
our plans to create Modern Waitrose progressed well as we continued
to outperform the industry on sales and increased our market share
and volumes. Gross sales for the first half grew by 1.1% to
GBP3.18bn, with like-for-like sales down 1.3%. We had on average
280,000 more customer transactions each week compared to the same
period last year, total volume growth of 1.8% and our market
share(9) grew to 5.1%.
(9) Kantar
Operating profit before property profits was up 0.6% to
GBP135.5m, despite incremental costs for holiday pay and absorbing
a greater share of centrally incurred functional costs. Effective
management of our costs and capital expenditure, together with a
focus on efficiency throughout the business, helped our profit
position.
Because we are confident in our value, quality, provenance and
service we have not joined the industry in across-the-board price
cutting aimed at driving volume in the short-term. Our approach is
to achieve sustainable sales growth through the targeted price
investment of our "Pick Your Own Offers" scheme which launched in
June. This gives myWaitrose members the power to choose the ten
products (from a list of nearly a thousand) on which they can save
20% every time they shop, whether in branch or online.
The scheme has had a strong take-up with 700,000 customers now
taking part and is a clear example of how myWaitrose is enabling us
to deepen our relationships with our customers. There has been a
year-on-year 18% uplift in the number of active myWaitrose card
holders.
Building our online business is also a key strategic driver.
Although online grocery gross sales were down 13.0%, these were
impacted by a strong promotion-driven performance last year.
Average order value was up by 8.2%. We closed our Acton .com
fulfilment centre in the half and our first purpose-built .com
distribution centre opened in March on a seven acre site in
Coulsdon, increasing our capacity to handle online orders in London
by a third.
We opened five new branches in the first half, including one
acquisition, two relocations and one convenience store, and
announced the planned closure of two convenience stores. In August
we opened a branch in Bagshot and there are five more core
branches, two major redevelopments and one convenience store
planned for the rest of this year.
Creating additional reasons for customers to visit branches in
the online era is a key part of Modern Waitrose and the
newly-opened core shops all have hospitality offers. Our
hospitality business successfully taps into the growing trend for
casual dining and showed increases of 23.5% in the first half.
We now have 114 cafes in our branches and 35 bakery grazing
areas, with grazing planned for 26 more branches in the second
half. In addition we now have outdoor seating in 82 branches.
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Offering services is another way we attract customers into our
branches. The popularity of Click & Collect continues to grow,
with orders up nearly 50%, and we have introduced foreign exchange
Click & Collect in 94 branches. Dry cleaning is now offered in
128 shops.
We continued to invest in transforming our IT capability, which
is the enabler for strategic developments such as Pick Your Own and
the growth of our online business. We are also using technology to
improve customer service and to drive efficiency. Our customers
were some of the first to use Apple Pay when it launched in the UK
in July.
We also maintained investment in our supply chain and our first
National Distribution Centre opened in Milton Keynes at the end of
July and will handle 25,000 longer-life ambient products.
John Lewis
John Lewis saw solid sales growth in the first half, with gross
sales of GBP1.94bn and like-for-like sales up 3.0%. Operating
profit fell by 16.3% to GBP47.1m, impacted by restructuring costs,
incremental costs for holiday pay and absorbing a greater share of
centrally incurred functional costs. It also reflects the costs
associated with the ongoing shift in both channel and fulfilment
mix, a consequence of operating in an omni-channel world.
We continued to outperform both the BRC and IMRG - a good
performance in the context of lower consumer confidence at the
beginning of the year. The results are also achieved against a
strong Spring / Summer season last year, with 2014 boosted by our
150 Year anniversary promotions and exceptional demand for
Electricals and Home Technology (EHT) products in the run-up to the
FIFA World Cup.
Gross sales in our fashion and home directorates accelerated
during the period whilst EHT experienced a slower market.
-- Fashion was the standout performance, up 7.5%, with our
strategy of combining an ambitious John Lewis own-brand offer with
the best of other brands continuing to pay dividends. Menswear was
particularly strong, up 10.5%, with John Lewis Kin tailoring up
23.9%. A new womenswear collaboration with the designer Bruce
Oldfield started in September.
-- Sales in Home were up 4.9% - a good performance against the
impact of the General Election and a late start to summer sales.
Outdoor living was up 33.5%. Own-brand continues to be our star
performer with our newest range, Croft, achieving an increase of
87.5%.
-- In EHT, sales fell by 0.7% against strong figures from the
same period last year and impacted by a lack of new product
launches in the home technology market. In the first half we
launched sim-free mobile phones and announced a partnership with
Vodafone to sell John Lewis mobile contracts. We have also
announced that Apple Watch will be available in our shops, which
will give us more momentum in technology sales for the second
half.
Johnlewis.com gross sales(10) grew by 17.1% to GBP647m. Online
returns to shops are currently deducted from shops sales, but from
2016/17 onwards we intend to change our reporting so that online
returns to shops are deducted from online sales. After four years
of consecutive growth, sales transacted in our shops were down by
1.8%, partly due to comparison to our 150 Year anniversary
celebrations last year, but up 1.7% over a two year period. Our
main focus continues to be on investing in both our shops and
online to maintain and develop our omnichannel proposition.
(10) Online returns to shops deducted from shop sales
John Lewis Birmingham, opening in September, will be our first
full line department store to open in four years and represents a
GBP35m investment in the heart of the UK's second city. It will be
the first to feature new concepts including an &Beauty spa.
September also saw the reopening of our home department at Oxford
Street after a GBP14m investment, which will showcase London's
largest single selection of home products and services, and
underline our leadership in this key market. The first half saw the
opening of a new at home shop in Horsham, which will be followed by
a further at home shop in Basingstoke in October.
Our range of in-store services and experiences continued to
expand during the half with the opening of three foreign exchange
bureaus and the announcement of ten further Joe & the Juice or
Rossopomodoro restaurants, and another in-store Opticians. We have
expanded our international footprint, with shop-in-shops in
Singapore and the Philippines joining our existing Korean
sites.
Alongside our shop investment we continue to focus on the
strength of our distribution model, with the announcement of a
third national distribution centre in Milton Keynes. We are
determined to build a sustainable model so that we deliver on our
customer promises at Christmas. In addition, the introduction of a
GBP30 threshold for free Click & Collect has gone smoothly.
Looking forward, Black Friday and Christmas will again be
defined by the importance of logistics and operational excellence,
coupled with ensuring our shops remain the "must visit" destination
on the high street. We go into the second half with confidence in
both our ability to deliver outstanding customer service and in our
strongest-ever product assortment.
Partnership Services Group
Partnership Services and Group includes the operating costs for
our Group offices and shared services, as well as the costs for
transformation programmes and certain pension operating costs.
Partnership Services and Group net operating costs decreased by
GBP14.6m or 47.2% reflecting lower costs for transformation
programmes and an increase in the share of functional costs charged
to Waitrose and John Lewis. However, overall costs increased by
GBP12.3m to GBP37.7m predominantly due to the increase in pension
operating costs resulting from changes in financial
assumptions.
Investment in the future
Capital investment in the first half of the year was GBP237.9m,
a decrease of GBP94.2m (28.4%) on the previous year. However, we
have continued to increase our investment in IT and distribution,
which now represents 48% of our total capital investment.
Investment in Waitrose was GBP114.8m, down GBP105.4m (47.9%) on
the previous year, and in John Lewis investment was GBP109.2m, up
GBP17.9m (19.6%).
Pensions
The pension operating cost was GBP122.4m, an increase of
GBP30.3m or 32.9% on the prior year costs, predominantly reflecting
the substantial decline in the real discount rate used to determine
the cost to 0.35% at the beginning of the year from 1.10% at the
beginning of the previous year. Pension finance costs were
GBP18.5m, a decrease of GBP1.3m or 6.6% on the prior year,
reflecting a reduction due to the lower discount rate partly offset
by a higher accounting pension deficit at the beginning of the year
than at the beginning of the previous year. As a result, total
pension costs were GBP140.9m, an increase of GBP29.0m or 25.9% on
the prior year.
Following the conclusion of the triennial actuarial valuation of
our defined benefit pension scheme as at 31 March 2013, we agreed
to increase the ongoing contribution rate to 16.4% of members'
gross taxable pay and put in place a plan to eliminate the deficit
over a 10 year period through a one-off contribution and annual
deficit reduction contributions. However, to secure long term debt
at low interest rates, we issued a GBP300m bond in December 2014
and used the net proceeds of the issue to prepay almost 7 years of
the previously-agreed deficit reduction contributions to the
pension scheme. As a result, in the first half of the year total
cash contributions to the pension scheme totalled GBP82.8m, a
decrease of GBP17.8m or 17.7% on the prior year. Our next triennial
actuarial valuation will take place as at 31 March 2016.
The total accounting pension deficit at 1 August 2015 was
GBP1,156.4m, a decrease of GBP92.9m (7.4%) since 31 January 2015,
mainly reflecting a marginal increase in the real discount rate
used to value the liabilities. Net of deferred tax, the deficit was
GBP944.1m. The accounting valuation of pension fund liabilities
decreased by GBP11.0m (0.2%) to GBP5,290.0m, while pension fund
assets increased by GBP81.9m (2.0%) to GBP4,133.6m.
The pension continues to be one of the most important benefits
offered to Partners, but it also accounts for the greatest single
investment made each year by the Group. The move to a hybrid
pension scheme combining defined benefit and defined contribution
pensions, where future pension risk is shared between Partners and
the Group, was approved earlier this year. However, the changes
will only start impacting our pension operating costs during
2016/17 and will take a number of years to be fully effected.
Financing
At 1 August 2015, net debt(11) was GBP558.1m, a decrease of
GBP57.1m (9.3%) in the half year and GBP30.2m (5.1%) lower than 26
July 2014. Net debt decreased year-on-year, despite the issue of a
GBP300m 4.25% bond in December 2014 with net proceeds contributed
to the pension scheme. The reduction reflects our focus on cash
generation, the reduction in capital investment and the completion
of the sale of our Clearings building. We expect our net debt at
the end of the year will be materially lower than at January
2015.
Net finance costs on borrowings and investments increased by
GBP6.2m (25.6%) to GBP30.4m, reflecting the additional finance
costs on the GBP300m bond issued in December 2014. After including
the financing elements of pensions and long service leave and
non-cash fair value adjustments, net finance costs increased by
GBP2.7m (5.9%) to GBP48.2m.
(11) Net debt has been restated for 2014/15. See note 2 of the
interim statement on page 12 for further details
Sustainability
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Our sustainability strategy is bringing together the outcomes of
our recent materiality assessment. We have prioritised the issues
in our supply chains, our operations and our communities which are
of greatest importance to our Partners, our stakeholders and the
long-term commercial health of the business. Further details on our
strategy and performance are included in our Annual Report &
Accounts at
www.johnlewispartnership.co.uk/financials/our-results.html
Enquiries
For further information please contact:
John Lewis Partnership
Andrew Moys, Director of Communications 07525 272377
Citigate Dewe Rogerson
Simon Rigby / Jos Bieneman 020 7638 9571
John Lewis
Peter Cross, Director, Communications 07764 697674
Ann Bryon, Head of External Communications 07767 304853
Waitrose
Christine Watts, Communications Director 07764 676414
Gill Smith, Senior Manager, Corporate PR 07887 898133
Notes to editors
The John Lewis Partnership - The John Lewis Partnership operates
44 John Lewis shops across the UK, johnlewis.com, 340 Waitrose
shops, waitrose.com and business to business contracts in the UK
and abroad. The business has annual gross sales of over GBP10bn. It
is the UK's largest example of an employee-owned business where all
88,700 staff are Partners in the business.
Waitrose - the Nation's Favourite Supermarket(1) and winner of
the Best Supermarket(2) and Best Food and Grocery Retailer(3)
awards - currently has 340 shops in England, Scotland, Wales and
the Channel Islands, including 61 convenience branches, and another
28 shops at Welcome Break locations. It combines the convenience of
a supermarket with the expertise and service of a specialist shop -
dedicated to offering quality food that has been responsibly
sourced, combined with high standards of customer service. Waitrose
also exports its products to 53 countries worldwide and has seven
shops which operate under licence in the Middle East. Waitrose's
omnichannel business includes the online grocery service,
Waitrose.com, as well as direct services websites including a
specialist wine website (waitrosecellar.com).
(1) Conlumino Awards, 2014
(2) Good Housekeeping Best Supermarket 2014, Which? Best
Supermarket 2014, 2015
(3) Verdict Best Food and Grocery Retailer 2015
John Lewis - John Lewis operates 44 John Lewis shops across the
UK (31 department stores, 11 John Lewis at home and shops at St
Pancras International and Heathrow Terminal 2) as well as
johnlewis.com. John Lewis, 'Best Clothing Retailer 2015', 'Best
Electricals Retailer 2015' and 'Best Homewares Retailer 2015'(4) ,
typically stocks more than 350,000 separate lines in its department
stores across fashion, home and technology. Johnlewis.com stocks
over 280,000 products, and is consistently ranked one of the top
online shopping destinations in the UK. John Lewis Insurance offers
a range of comprehensive insurance products - home, car, wedding
and event, travel and pet insurance and life cover - delivering the
values of expertise, trust and customer service expected from the
John Lewis brand.
(4) Verdict Consumer Satisfaction Awards 2015
You can follow John Lewis on the following social media
channels:
www.johnlewis.com/twitter
www.johnlewis.com/facebook
www.johnlewis.com/youtube
Where this interim report contains forward-looking statement
these are made by the Directors in good faith based on the
information available to them up to the time of their approval of
this report. These statements should be treated with caution due to
inherent uncertainties underlying any such forward-looking
information.
Consolidated income statement
for the half year ended 1 August 2015
Notes Half year to 1 August 2015 Half year to 26 July 2014 Year to
31 January 2015*
GBPm GBPm GBPm
------ --------------------------------- --------------------------- -------------------------- ------------------
5 Gross sales 5,116.6 5,011.4 10,942.6
------ --------------------------------- --------------------------- -------------------------- ------------------
5 Revenue 4,547.2 4,461.2 9,701.0
Cost of sales (3,012.9) (2,971.9) (6,426.9)
------ --------------------------------- --------------------------- -------------------------- ------------------
Gross profit 1,534.3 1,489.3 3,274.1
Other operating income before
exceptional item 47.2 40.0 86.1
Operating expenses (1,436.6) (1,353.2) (2,920.4)
------ --------------------------------- --------------------------- -------------------------- ------------------
5 Operating profit before 144.9 176.1 439.8
exceptional item
4 Exceptional item 128.0 - 7.9
------ --------------------------------- --------------------------- -------------------------- ------------------
5 Operating profit 272.9 176.1 447.7
6 Finance costs (49.4) (47.3) (101.0)
6 Finance income 1.2 1.8 2.8
------ --------------------------------- --------------------------- -------------------------- ------------------
Profit before Partnership Bonus
and tax 224.7 130.6 349.5
Partnership Bonus - - (156.2)
------ --------------------------------- --------------------------- -------------------------- ------------------
Profit before tax 224.7 130.6 193.3
7 Taxation (51.7) (32.9) (50.2)
------ --------------------------------- --------------------------- -------------------------- ------------------
Profit for the period 173.0 97.7 143.1
------ --------------------------------- --------------------------- -------------------------- ------------------
5 Profit before Partnership Bonus, tax and exceptional item 96.7 130.6 341.6
--- ----------------------------------------------------------- ----- ------ ------
Consolidated statement of comprehensive income/(expense)
for the half year ended 1 August 2015
Notes Half year to 1 August 2015 Half year to 26 July 2014 Year to
31 January 2015*
GBPm GBPm GBPm
------- -------------------------------- --------------------------- -------------------------- ------------------
Profit for the period 173.0 97.7 143.1
Other comprehensive
income/(expense):
Items that will not be
reclassified to profit or loss:
10 Remeasurement of defined 144.6 (20.7) (523.5)
benefit pension schemes
7 Movement in deferred tax on (28.9) 4.4 38.3
pension schemes
7 Movement in current tax on - - 70.8
pension schemes
Items that may be reclassified
subsequently to profit or loss:
Net (loss)/gain on cash flow hedges (7.5) (5.5) 8.8
7 Movement in deferred tax on 1.5 2.2 (0.6)
cash flow hedges
------- -------------------------------- --------------------------- -------------------------- ------------------
Other comprehensive income/(expense)
for the period 109.7 (19.6) (406.2)
---------------------------------------- --------------------------- -------------------------- ------------------
Total comprehensive income/(expense)
for the period 282.7 78.1 (263.1)
---------------------------------------- --------------------------- -------------------------- ------------------
* 53 week year
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Consolidated balance sheet
as at 1 August 2015
Notes 1 August 2015 26 July 2014 31 January 2015
(restated, see note 2) (restated, see
note 2)
GBPm GBPm GBPm
------ --------------------------------- -------------- ------------------------ ----------------
Non-current assets
8 Intangible assets 363.1 297.3 335.5
8 Property, plant and equipment 4,153.1 4,059.8 4,160.1
Trade and other receivables 65.8 61.7 62.7
Deferred tax asset 81.3 79.0 123.8
------ --------------------------------- -------------- ------------------------ ----------------
4,663.3 4,497.8 4,682.1
------ --------------------------------- -------------- ------------------------ ----------------
Current assets
Inventories 552.8 536.7 580.7
Trade and other receivables 228.5 230.1 208.3
Current tax receivable - - 19.2
13 Derivative financial instruments 3.9 1.1 9.6
9 Assets held for sale 9.3 32.5 15.7
Cash and cash equivalents 401.0 118.8 336.9
------ --------------------------------- -------------- ------------------------ ----------------
1,195.5 919.2 1,170.4
------ --------------------------------- -------------- ------------------------ ----------------
Total assets 5,858.8 5,417.0 5,852.5
------ --------------------------------- -------------- ------------------------ ----------------
Current liabilities
12 Borrowings and overdrafts (57.4) (35.0) -
Trade and other payables (1,462.4) (1,384.8) (1,679.3)
Current tax payable (17.3) (34.9) -
12 Finance lease liabilities (3.2) (3.6) (3.1)
Provisions (107.1) (111.0) (110.1)
13 Derivative financial instruments (8.7) (10.9) (6.6)
------ --------------------------------- -------------- ------------------------ ----------------
(1,656.1) (1,580.2) (1,799.1)
------ --------------------------------- -------------- ------------------------ ----------------
Non-current liabilities
12 Borrowings (867.1) (629.2) (923.7)
Trade and other payables (185.8) (144.1) (175.9)
12 Finance lease liabilities (26.6) (29.5) (28.3)
Provisions (165.7) (145.4) (158.0)
10 Retirement benefit obligations (1,156.4) (1,029.0) (1,249.3)
(2,401.6) (1,977.2) (2,535.2)
------ --------------------------------- -------------- ------------------------ ----------------
Total liabilities (4,057.7) (3,557.4) (4,334.3)
------ --------------------------------- -------------- ------------------------ ----------------
Net assets 1,801.1 1,859.6 1,518.2
------ --------------------------------- -------------- ------------------------ ----------------
Equity
Share capital 6.7 6.7 6.7
Share premium 0.3 0.3 0.3
Other reserves (2.0) (7.5) 3.8
Retained earnings 1,796.1 1,860.1 1,507.4
Total equity 1,801.1 1,859.6 1,518.2
------ --------------------------------- -------------- ------------------------ ----------------
Consolidated statement of changes in equity
for the half year ended 1 August 2015
Notes Share Share Capital Hedging Foreign Retained Total
capital premium reserve reserve currency earnings equity
translation
reserve
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------- ---------------------------------- -------- -------- -------- -------- ------------ --------- --------
Balance at 25 January 2014 6.7 0.3 1.4 (5.8) 0.2 1,778.7 1,781.5
Profit for the period - - - - - 97.7 97.7
10 Remeasurement of defined benefit - - - - - (20.7) (20.7)
pension schemes
Fair value losses on cash flow hedges - - - (1.1) - - (1.1)
- transfers to inventories - - - (4.0) - - (4.0)
* transfers to property, plant a
nd equipment - - - (0.4) - - (0.4)
Tax on above items recognised in equity - - - 2.2 - 4.4 6.6
Balance at 26 July 2014 6.7 0.3 1.4 (9.1) 0.2 1,860.1 1,859.6
------------------------------------------ -------- -------- -------- -------- ------------ --------- --------
Balance at 25 January 2014 6.7 0.3 1.4 (5.8) 0.2 1,778.7 1,781.5
Profit for the year - - - - - 143.1 143.1
10 Remeasurement of defined benefit - - - - - (523.5) (523.5)
pension schemes
Fair value gains on cash flow hedges - - - 0.4 - - 0.4
- transfers to inventories - - - 9.1 - - 9.1
- transfers to property, plant and
equipment - - - (0.7) - - (0.7)
Tax on above items recognised in equity - - - (0.6) - 109.1 108.5
Loss on currency translations - - - - (0.2) - (0.2)
------------------------------------------ -------- -------- -------- -------- ------------ --------- --------
Balance at 31 January 2015* 6.7 0.3 1.4 2.4 - 1,507.4 1,518.2
Profit for the period - - - - - 173.0 173.0
10 Remeasurement of defined benefit - - - - - 144.6 144.6
pension schemes
Fair value losses on cash flow hedges - - - (4.7) - - (4.7)
- transfers to inventories - - - (1.9) - - (1.9)
* transfers to property, plant a
nd equipment - - - (0.9) - - (0.9)
Tax on above items recognised in equity - - - 1.5 - (28.9) (27.4)
Gain on currency translations - - - - 0.2 - 0.2
Balance at 1 August 2015 6.7 0.3 1.4 (3.6) 0.2 1,796.1 1,801.1
------------------------------------------ -------- -------- -------- -------- ------------ --------- --------
* 53 week year
Consolidated statement of cash flows
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for the half year ended 1 August 2015
Notes Half year to 1 August 2015 Half year to Year to
26 July 2014 31 January 2015*
(restated, see note 2) (restated, see
note 2)
GBPm GBPm GBPm
------ ---------------------------------- --------------------------- ------------------------ -------------------
11 Cash generated from operations 341.7 281.0 881.4
Net taxation paid - (1.5) (16.1)
Partnership Bonus paid (156.0) (202.7) (202.8)
Additional contribution to the
Pension Scheme - - (294.1)
Finance costs paid (2.4) (2.5) (3.0)
Net cash generated from operating
activities 183.3 74.3 365.4
------ ---------------------------------- --------------------------- ------------------------ -------------------
Cash flows from investing
activities
Purchase of property, plant and
equipment (166.8) (268.6) (526.2)
Purchase of intangible assets (71.1) (63.5) (144.7)
Proceeds from sale of property,
plant and equipment and
intangible assets 144.6 16.9 44.7
Finance income received 0.5 0.4 0.5
Net cash used in investing
activities (92.8) (314.8) (625.7)
------ ---------------------------------- --------------------------- ------------------------ -------------------
Cash flows from financing
activities
Finance costs paid in respect of
bonds (25.0) (24.9) (44.0)
Payment of capital element of
finance leases (1.5) (2.7) (4.4)
Payments to preference
shareholders - - (0.1)
Cash inflow from borrowings - 35.0 293.8
Net cash (used in)/generated from
financing activities (26.5) 7.4 245.3
------ ---------------------------------- --------------------------- ------------------------ -------------------
Increase/(decrease) in net cash
and cash equivalents 64.0 (233.1) (15.0)
Net cash and cash equivalents at
beginning of period 336.9 351.9 351.9
------ ---------------------------------- --------------------------- ------------------------ -------------------
Net cash and cash equivalents at
end of period 400.9 118.8 336.9
------ ---------------------------------- --------------------------- ------------------------ -------------------
Net cash and cash equivalents
comprise:
Cash at bank and in hand 89.7 73.7 96.8
Short-term investments 311.3 45.1 240.1
Bank overdraft (0.1) - -
400.9 118.8 336.9
------ ---------------------------------- --------------------------- ------------------------ -------------------
* 53 week year
Notes to the financial statements
1 Basis of preparation
This condensed set of interim financial statements was approved
by the Board on 9 September 2015. The condensed set of interim
financial statements is unaudited, but has been reviewed by the
auditors and their review report is set out on pages 24 to 25. They
do not comprise statutory accounts within the meaning of Section
434 of the Companies Act 2006. The comparative information for the
half year to or as at 26 July 2014 has not been audited, but has
been reviewed in accordance with the International Standard on
Review Engagements (UK and Ireland) 2410.
The results for the half year to 1 August 2015 have been
prepared using the discrete period approach, considering the half
year as an accounting period in isolation. The tax charge is based
on the effective rate estimated for the full year, which has been
applied to the profits in the first half year.
The Group's published financial statements for the year ended 31
January 2015 has been reported on by the Group's auditors and filed
with the Registrar of Companies. The report of the auditors was
unqualified, did not contain an emphasis of matter paragraph and
did not contain any statement under section 498 of the Companies
Act 2006.
This condensed set of interim financial statements for the half
year ended 1 August 2015 has been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Conduct
Authority (previously the Financial Services Authority) and IAS 34
'Interim Financial Reporting' as adopted by the European Union. The
condensed set of interim financial statements should be read in
conjunction with the Annual Report and Accounts for the year ended
31 January 2015, which has been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union.
Going concern
Having reviewed the Group's principal risks, operating budgets,
investment plans and financing arrangements, the Directors are
satisfied that it is appropriate to adopt the going concern basis
in preparing the condensed set of interim financial statements.
Supplier income
Within trade receivables is accrued rebate income of GBP18.1m
(31 January 2015: GBP6.5m). During the interim period, supplier
income was received in line with estimates recorded at 31 January
2015. There has been no change in the criteria used to recognise
supplier income, though at the half year specific judgement is
required to estimate the amount that will be received from
suppliers in relation to annual agreements. These judgements have
been based on management's best estimates of full year purchases
using the latest information available.
2 Accounting policies
The Group's results for the half year to 1 August 2015 have been
prepared on a basis consistent with the Group's accounting policies
published in the financial statements for the year ended 31 January
2015, except as noted below.
Restatement
During the first half of the year, the Directors reviewed the
accounting for certain cash in transit balances and determined
that, because outgoing payments have been instructed but not
completed at the balance sheet date, it is more appropriate to
retain the associated payables balance than to recognise an
overdraft. In addition, it was determined that certain outstanding
payments are more appropriately recognised as a reduction in cash
than in overdrafts, in line with the Group's cash pooling
arrangements. This has resulted in a reclassification of part of
the overdraft balance into current trade and other payables of
GBP58.5m at 31 January 2015 and GBP61.1m at 26 July 2014 and into
cash of GBP2.9m at 31 January 2015 and GBP20.4m at 26 July 2014.
Net debt, segmental net assets, opening cash balances and working
capital movements in the cash flow have been restated. Net assets
are unchanged.
3 Risks and uncertainties
The principal and other significant risks and uncertainties
affecting the Group were identified as part of the Group Strategic
Report, set out on page 8 of the John Lewis plc Annual Report and
Accounts 2015, a copy of which is available on the John Lewis
Partnership's website www.johnlewispartnership.co.uk.
The Partnership has a formal risk identification process, which
includes a rigorous analysis of internal and external risks both at
a Divisional Board and Partnership Board level. The Partnership has
identified the following key risks, which are unchanged from year
end and remain relevant for the second half of the financial year,
with the addition of a funding and liquidity risk.
-- Competition: aggressive price competition puts pressure on
our margin and profitability as the current environment in the
retail grocery sector means that Waitrose customers focus more on
value for money and less on loyalty;
-- Pension obligations: the open nature of the Partnership's
defined benefit scheme could lead to a future increase in pension
liabilities, with the risk that cash flows are put under strain in
order to address a significant pension deficit;
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-- Property valuation: continuing market shifts in the retail
grocery sector, from the current channel format towards online and
convenience stores, could cause a fall in freehold estate valuation
for Waitrose's freehold properties;
-- Efficiency: in response to the ever changing external
environment and pressures on our operating model, we have developed
programmes to optimise our efficiency and productivity. There is a
risk that these programmes fail and therefore the required savings
are not delivered;
-- Economic environment: a worsening external economic
environment, for instance due to government spending restrictions,
a static economy and lack of pay increases, reduces our customers'
spending power and harms our suppliers' financial resilience;
-- Operating model strain: changing customer requirements, a
shift to online and the need to increase investment in supply chain
and IT put strain on our operating model and threaten our ability
to meet customer needs and grow profitably;
-- IT infrastructure capability: as our customer needs change
and our ambitions grow, our IT infrastructure becomes less 'fit for
purpose' for our current operational needs and is not able to adapt
to meet our future aspirations;
-- Change delivery: due to the size, nature and complexity of
our change agenda, we may experience issues with planning and
governance, resourcing and investment, and engaging our
Partners;
-- Data protection breach: due to increasing external attempts
to cause disruption or access sensitive data and the pace of
technological development, we may be vulnerable to a breach of our
Partner or customer data;
-- Talent: in a changing and competitive market and in
consideration of our Partnership model, we constantly need to
assess what talent the Partnership needs to deliver our business
goals and how we can attract, develop and retain it; and
-- Funding and liquidity: as the Partnership looks to grow,
whilst maintaining its financial independence and commercial
vitality, we may need to raise new finance or refinance existing
facilities. Depending on circumstances at the time, we may not be
able to achieve this.
4 Exceptional item
On 16 April 2015, the Group disposed of a property which was
previously held for sale. The profit on disposal of GBP128.0m has
been recorded as exceptional operating income in the period to 1
August 2015. A tax charge of GBP27.4m was recognised on the
exceptional item.
In the year to 31 January 2015, exceptional operating income was
recorded totalling GBP7.9m in respect of a review of the Group's
holiday pay policy in 2014. This comprised a release of GBP3.4m
from the pension liability and a release of GBP4.5m from other
provisions, as the estimated costs for correcting our systems
following the review, and updating pension scheme members'
entitlements were lower than originally expected. A tax charge of
GBP1.7m was recognised on the exceptional item.
5 Segmental reporting
The Group's three reporting segments are Waitrose, John Lewis
and Partnership Services and Group, which includes the operating
costs for our Group offices, Partnership Services, transformation
programmes and certain pension operating costs. The operating
profit of each segment is reported after charging relevant
Partnership Services and Group costs based on the business
segments' usage of these facilities and services, and before the
exceptional item.
Waitrose's business is not subject to highly seasonal
fluctuations although there is an increase in trading in the fourth
quarter of the year. There is a more marked increase in the fourth
quarter for the John Lewis business.
Waitrose John Lewis Partnership Total
Services
and Group
GBPm GBPm GBPm GBPm
------------------------------ --------- ----------- ------------ --------
Half year to 1 August 2015
Gross sales 3,180.8 1,935.8 - 5,116.6
Adjustment for sale or
return sales - (85.4) - (85.4)
Value added tax (182.1) (301.9) - (484.0)
------------------------------ --------- ----------- ------------ --------
Revenue 2,998.7 1,548.5 - 4,547.2
------------------------------ --------- ----------- ------------ --------
Operating profit before
exceptional item and profit
on sale of property 135.5 47.1 (37.7) 144.9
Profit on sale of property - - - -
------------------------------ --------- ----------- ------------ --------
Operating profit before
exceptional item 135.5 47.1 (37.7) 144.9
Exceptional item - - 128.0 128.0
------------------------------ --------- ----------- ------------ --------
Operating profit 135.5 47.1 90.3 272.9
Finance costs - - (49.4) (49.4)
Finance income - - 1.2 1.2
------------------------------ --------- ----------- ------------ --------
Profit before tax 135.5 47.1 42.1 224.7
Taxation - - (51.7) (51.7)
------------------------------ --------- ----------- ------------ --------
Profit for the period 135.5 47.1 (9.6) 173.0
------------------------------ --------- ----------- ------------ --------
Profit before tax and exceptional
item 135.5 47.1 (85.9) 96.7
----------------------------------- ------ ----- ------- -----
5 Segmental reporting (continued)
Waitrose John Lewis Partnership Total
Services
and Group
GBPm GBPm GBPm GBPm
------------------------------ --------- ----------- ------------ --------
Half year to 26 July 2014
Gross sales 3,146.4 1,865.0 - 5,011.4
Adjustment for sale or
return sales - (78.8) - (78.8)
Value added tax (179.5) (291.9) - (471.4)
------------------------------ --------- ----------- ------------ --------
Revenue 2,966.9 1,494.3 - 4,461.2
------------------------------ --------- ----------- ------------ --------
Operating profit before
exceptional item and profit
on sale of property 134.7 56.3 (25.9) 165.1
Profit on sale of property 10.5 - 0.5 11.0
------------------------------ --------- ----------- ------------ --------
Operating profit before
exceptional item 145.2 56.3 (25.4) 176.1
Exceptional item - - - -
------------------------------ --------- ----------- ------------ --------
Operating profit 145.2 56.3 (25.4) 176.1
Finance costs - - (47.3) (47.3)
Finance income - - 1.8 1.8
------------------------------ --------- ----------- ------------ --------
Profit before tax 145.2 56.3 (70.9) 130.6
Taxation - - (32.9) (32.9)
------------------------------ --------- ----------- ------------ --------
Profit for the period 145.2 56.3 (103.8) 97.7
------------------------------ --------- ----------- ------------ --------
Profit before tax and exceptional
item 145.2 56.3 (70.9) 130.6
----------------------------------- ------ ----- ------- ------
5 Segmental reporting (continued)
Waitrose John Lewis Partnership Total
Services
and Group
GBPm GBPm GBPm GBPm
------------------------------ --------- ----------- ------------ ----------
Year to 31 January 2015
Gross sales 6,508.9 4,433.7 - 10,942.6
Adjustment for sale or
return sales - (173.1) - (173.1)
Value added tax (373.6) (694.9) - (1,068.5)
------------------------------ --------- ----------- ------------ ----------
Revenue 6,135.3 3,565.7 - 9,701.0
------------------------------ --------- ----------- ------------ ----------
Operating profit before
exceptional item and profit
on sale of property 226.9 247.7 (49.0) 425.6
Profit on sale of property 10.5 2.8 0.9 14.2
------------------------------ --------- ----------- ------------ ----------
Operating profit before
exceptional item 237.4 250.5 (48.1) 439.8
Exceptional item - - 7.9 7.9
------------------------------ --------- ----------- ------------ ----------
Operating profit 237.4 250.5 (40.2) 447.7
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Finance costs - - (101.0) (101.0)
Finance income - - 2.8 2.8
------------------------------ --------- ----------- ------------ ----------
Profit before Partnership
Bonus and tax 237.4 250.5 (138.4) 349.5
Partnership Bonus - - (156.2) (156.2)
------------------------------ --------- ----------- ------------ ----------
Profit before tax 237.4 250.5 (294.6) 193.3
Taxation - - (50.2) (50.2)
------------------------------ --------- ----------- ------------ ----------
Profit for the period 237.4 250.5 (344.8) 143.1
------------------------------ --------- ----------- ------------ ----------
Profit before Partnership
Bonus, tax and exceptional
item 237.4 250.5 (146.3) 341.6
----------------------------- ------ ------ -------- ------
1 August 2015
Segment assets 2,983.4 1,987.1 888.3 5,858.8
Segment liabilities (770.8) (727.8) (2,559.1) (4,057.7)
---------------------------- -------- -------- ---------- ----------
Net assets/(liabilities) 2,212.6 1,259.3 (1,670.8) 1,801.1
---------------------------- -------- -------- ---------- ----------
26 July 2014 (restated,
see note 2)
Segment assets 2,944.8 1,873.8 598.4 5,417.0
Segment liabilities (675.2) (691.5) (2,190.7) (3,557.4)
---------------------------- -------- -------- ---------- ----------
Net assets/(liabilities) 2,269.6 1,182.3 (1,592.3) 1,859.6
31 January 2015 (restated,
see note 2)
Segment assets 2,946.1 2,001.9 904.5 5,852.5
Segment liabilities (710.9) (789.7) (2,833.7) (4,334.3)
---------------------------- -------- -------- ---------- ----------
Net assets/(liabilities) 2,235.2 1,212.2 (1,929.2) 1,518.2
---------------------------- -------- -------- ---------- ----------
6 Net finance costs
Half year Half year Year to
to 1 August to 31 January
2015 26 July 2015
2014
GBPm GBPm GBPm
---------------------------------------- ------------- -------------- ------------
Finance costs
Finance costs in respect of borrowings (30.8) (24.5) (52.0)
Fair value measurements and other (0.1) - (1.5)
Net finance costs arising on
defined benefit and other employee
benefit schemes (18.5) (22.8) (47.5)
---------------------------------------- ------------- -------------- ------------
Total finance costs (49.4) (47.3) (101.0)
---------------------------------------- ------------- -------------- ------------
Finance income
Finance income in respect of
cash and short-term investments 0.4 0.3 0.6
Fair value measurements and other 0.7 1.5 2.2
Net finance income on other employee 0.1 - -
benefit schemes
---------------------------------------- ------------- -------------- ------------
Total finance income 1.2 1.8 2.8
---------------------------------------- ------------- -------------- ------------
Net finance costs (48.2) (45.5) (98.2)
---------------------------------------- ------------- -------------- ------------
Half year Half year Year to
to to 31 January
1 August 26 July 2014 2015
2015
GBPm GBPm GBPm
---------------------------------------- ------------- -------------- ------------
Finance costs in respect of borrowings (30.8) (24.5) (52.0)
Finance income in respect of
cash and short-term investments 0.4 0.3 0.6
---------------------------------------- ------------- -------------- ------------
Net finance costs in respect
of borrowings and short-term
investments (30.4) (24.2) (51.4)
Fair value measurements and other 0.6 1.5 0.7
Net finance costs arising on
defined benefit retirement schemes (18.5) (19.8) (37.6)
Net finance income/(costs) arising
on other employee benefit schemes 0.1 (3.0) (9.9)
---------------------------------------- ------------- -------------- ------------
Net finance costs (48.2) (45.5) (98.2)
---------------------------------------- ------------- -------------- ------------
7 Income taxes
Income tax expense is recognised based on management's best
estimate of the full year effective tax rate based on estimated
full year profits. The estimated pre-exceptional full year
effective tax rate for the year to 30 January 2016 is 25.1% (the
estimated effective tax rate for the period to 26 July 2014 was
25.2%).
8 Property, plant and equipment and intangible assets
Property, Intangible Total
plant and assets
equipment
GBPm GBPm GBPm
------------------------------- ----------- ----------- --------
Net book value at 31 January
2015 4,160.1 335.5 4,495.6
Additions 143.9 71.1 215.0
Depreciation and amortisation (140.1) (42.7) (182.8)
Disposals (1.5) (0.8) (2.3)
Transfers to assets held for
sale (9.3) - (9.3)
------------------------------- ----------- ----------- --------
Net book value at 1 August
2015 4,153.1 363.1 4,516.2
------------------------------- ----------- ----------- --------
Intangible assets primarily relate to internally developed
computer software.
9 Assets held for sale
At 1 August 2015, one property asset was recorded as held for
sale totalling GBP9.3m. It is expected to be disposed of within 12
months.
At 31 January 2015, one property asset was recorded as held for
sale totalling GBP15.7m, which was disposed of post the 31 January
2015 year end and the gain was recorded as an exceptional item in
the first half of the year (see note 4). At 26 July 2014, two
properties were held for sale totalling GBP32.5m.
10 Retirement benefit obligations
The principal pension scheme operated by the Group is the John
Lewis Partnership Trust for Pensions. The scheme is a funded final
salary defined benefit pension scheme, providing pension and death
benefits to members, and is open to new members. All contributions
to the scheme are funded by the Group.
Pension commitments have been calculated based on the most
recent actuarial valuations, as at 31 March 2013, which have been
updated by the actuaries to reflect the assets and liabilities of
the scheme as at 1 August 2015.
Scheme assets are stated at market value at 1 August 2015.
The following financial assumptions have been used:
Half year Half year Year to
to to 31 January
1 August 26 July 2015
2015 2014
Discount rate 3.65% 4.25% 3.15%
Future retail price inflation
(RPI) 3.25% 3.25% 2.80%
Future consumer price inflation
(CPI) 2.25% 2.25% 1.80%
Increase in earnings 3.75% 3.75% 3.30%
Increase in pensions - in payment 3.00% 3.00% 2.70%
Increase in pensions - deferred 2.25% 2.25% 1.80%
----------------------------------- ---------- ---------- ------------
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The movement in the defined benefit liability in the period is
as follows:
Half year Half year Year to
to to 31 January
1 August 26 July 2015
2015 2014
GBPm GBPm GBPm
--------------------------------- ---------- ---------- ------------
Net defined benefit liability
at beginning of period (1,249.3) (1,003.4) (1,003.4)
Operating cost (116.0) (85.7) (177.6)
Interest cost on liabilities (82.7) (91.5) (183.1)
Interest income on assets 64.2 71.7 145.5
Contributions 82.8 100.6 492.8
Total gains/(losses) recognised
in equity 144.6 (20.7) (523.5)
--------------------------------- ---------- ---------- ------------
Net defined benefit liability
at end of period (1,156.4) (1,029.0) (1,249.3)
--------------------------------- ---------- ---------- ------------
11 Reconciliation of profit before tax to cash generated from operations
Half year Half year Year to
to to
1 August 26 July 2014 31 January
2015 2015
(restated, (restated,
see note see
2)
note 2)
GBPm GBPm GBPm
------------------------------------- ----------- -------------- -------------
Profit before tax 224.7 130.6 193.3
Amortisation of intangible assets 42.7 33.1 76.1
Depreciation 140.1 128.4 281.7
Net finance costs 48.2 45.5 98.2
Partnership Bonus - - 156.2
Fair value losses on derivative 0.6 - -
financial instruments
Profit on disposal of property,
plant and equipment and intangible
assets (126.6) (11.7) (12.3)
Decrease/(increase) in inventories 27.9 17.3 (26.7)
(Increase)/decrease in receivables (23.5) (1.5) 19.3
(Decrease)/increase in payables (30.4) (40.9) 116.7
Increase/(decrease) in retirement
benefit obligations 33.2 (15.1) (21.2)
Increase/(decrease) in provisions 4.8 (4.7) 0.1
------------------------------------- ----------- -------------- -------------
Cash generated from operations 341.7 281.0 881.4
------------------------------------- ----------- -------------- -------------
12 Analysis of net debt
31 January Cash flow Other 1 August
2015 2015
(restated, non-cash
see note movements
2)
GBPm GBPm GBPm GBPm
---------------------------------- ------------ ---------- ------------ ---------
Current assets
Cash and cash equivalents 336.9 64.1 - 401.0
Derivative financial instruments 9.6 - (5.7) 3.9
346.5 64.1 (5.7) 404.9
---------------------------------- ------------ ---------- ------------ ---------
Current liabilities
Borrowings and overdrafts - (0.1) (57.4) (57.5)
Unamortised bond transaction
costs - - 0.1 0.1
Finance leases (3.1) 1.5 (1.6) (3.2)
Derivative financial instruments (6.6) - (2.1) (8.7)
---------------------------------- ------------ ---------- ------------ ---------
(9.7) 1.4 (61.0) (69.3)
---------------------------------- ------------ ---------- ------------ ---------
Non-current liabilities
Borrowings (934.4) - 57.2 (877.2)
Unamortised bond transaction
costs 10.7 - (0.6) 10.1
Finance leases (28.3) - 1.7 (26.6)
(952.0) - 58.3 (893.7)
---------------------------------- ------------ ---------- ------------ ---------
Total net debt (615.2) 65.5 (8.4) (558.1)
---------------------------------- ------------ ---------- ------------ ---------
12 Analysis of net debt (continued)
Reconciliation of net cash flow to net debt
Half year Half year Year to
to to
1 August 26 July 2014 31 January
2015 2015
(restated, (restated,
see see
note 2) note 2)
GBPm GBPm GBPm
-------------------------------- ----------- --------------- -------------
Increase/(decrease) in
net cash and cash equivalents
in the period 64.0 (233.1) (15.0)
Cash outflow/(inflow) from
movement in debt and lease
financing 1.5 (32.3) (289.4)
-------------------------------- ----------- --------------- -------------
Movement in debt for the
period 65.5 (265.4) (304.4)
Opening net debt (615.2) (317.7) (317.7)
Non-cash movements (8.4) (5.2) 6.9
-------------------------------- ----------- --------------- -------------
Closing net debt (558.1) (588.3) (615.2)
-------------------------------- ----------- --------------- -------------
13 Management of financial risks
The principal financial risks to which the Group is exposed are
liquidity risk, interest rate risk, foreign currency risk, credit
risk, capital risk and energy risk.
This condensed set of interim financial statements does not
include all risk management information and disclosures required in
the annual financial statements and should be read in conjunction
with the Annual Report and Accounts for the year ended 31 January
2015. During the half year to 1 August 2015, the Group has
continued to apply the financial risk management process and
policies as detailed in the Annual Report and Accounts for the year
ended 31 January 2015.
Valuation techniques and assumptions applied in determining the
fair value of each class of asset or liability are consistent with
those used as at 31 January 2015 and reflect the current economic
environment.
Fair value estimation
The different levels per the IFRS 13 fair value hierarchy have
been defined as follows:
Level 1: Quoted prices (unadjusted) in active markets for
identical assets or liabilities
Level 2: Inputs other than quoted prices included within level 1
that are observable for the asset or liability, either directly
(that is, as prices) or indirectly (that is, derived from
prices)
Level 3: Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs)
13 Management of financial risks (continued)
During the half year to 1 August 2015, there have been no
transfers between any levels of the IFRS 13 fair value hierarchy
and there were no reclassifications of financial assets as a result
of a change in the purpose or use of those assets.
The fair value of the derivative financial instruments held by
the Group are classified as Level 2 under the IFRS 13 fair value
hierarchy, as all significant inputs to the valuation model used
are based on observable market data and are not traded in an active
market.
At 1 August 2015, the net fair value of derivative financial
instruments was GBP4.8m, liability (31 January 2015: GBP3.0m,
asset; 26 July 2014: GBP9.8m, liability).
The fair value of a derivative financial instrument represents
the difference between the value of the outstanding contracts at
their contracted rates and a valuation calculated using the forward
rates of exchange and interest rates prevailing at the balance
sheet date.
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