TIDMBD45
RNS Number : 2209H
Lewis(John)Partnership PLC
12 March 2015
John Lewis Partnership plc
Unaudited results for 53 weeks ended 31 January 2015
[This does not constitute a preliminary announcement]
Strict Stock Exchange Embargo, 9.15am
Thursday 12 March 2015
93,800 Partners share 11% Bonus
Financial Summary
Waitrose John Lewis Partnership
52 week 52 week 52 week
GBPm Change change GBPm Change change GBPm Change change
(1) (1) (1)
-------- --------- -------- -------- --------- -------- --------- --------- --------
Gross sales 6,508.9 6.5% 4.6% 4,433.7 9.2% 7.5% 10,942.6 7.6% 5.7%
LFL sales(2) 1.4% 6.5%
Revenue 6,135.3 6.6% 4.7% 3,565.7 8.9% 7.3% 9,701.0 7.5% 5.6%
Operating
profit
before
exceptional
items(3)(4) 237.4 (23.4)% (24.4)% 250.5 10.8% 10.4% (5) 442.3 (6.1)% (7.5)%
Operating
profit (4) 450.2 6.3% 4.7%
PBT(6) before
exceptional
items (3)
(4) 342.7 (9.0)% (10.5)%
PBT(4)(6) 350.6 6.5% 4.7%
-------------- -------- --------- -------- -------- --------- -------- ---- --------- --------- --------
(1) The results for 2014/15 comprise 53 weeks. To provide
meaningful comparison, 52 week changes have been provided which
exclude the impact of the final trading week of 2014/15
(2) Waitrose like-for-like sales excludes petrol
(3) Exceptional income of GBP7.9m (2013/14: charge of GBP47.3m)
following last year review of holiday pay policy
(4) Includes property profits of GBP10.5m in Waitrose, GBP2.8m
in John Lewis and GBP0.9m in Group (2013/14: GBP0.3m)
(5) Includes restructuring costs of GBP14.4m in 2013/14
(6) Profit before Partnership Bonus and tax
Partnership
-- Strong sales performance and increased market share in both
Waitrose and John Lewis
-- Continued growth in customer numbers, up 6% in Waitrose and
4% in John Lewis
-- PBT before exceptional items down 9.0% as Waitrose operating
profit impacted by trading in a highly competitive and deflationary
market, significantly higher level of investment and one-off
items
-- Net debt of GBP780.2m, up GBP294.4m (60.6%) following issue
of GBP300m bond, with net proceeds used for additional one-off
pension contribution
-- Pension deficit of GBP1,249.3m, up GBP245.9m (24.5%)
-- Partnership Bonus of GBP156.2m; 11% of salary (equivalent to
nearly 6 weeks' pay for Partners with us for the whole year)
Waitrose
-- Volume growth as customer transactions rise by average of
400,000 a week
-- Online grocery sales up by 31.2%(7) , average order value
increased by 5%
-- 13 new core supermarkets and 20 convenience shops opened
-- myWaitrose membership up to 5.4 million customers
-- 4,900 new or improved products
(7) On a 52 week basis
John Lewis
-- Growth across online and shops reflecting the strength of our
omnichannel model
-- Sales growth and market share gains across all three
categories
-- Click & Collect grown by 47%(8)
-- Robust distribution operations allowed us to deliver on
customer expectations
-- Innovation and investment will give us the platform for
growth in 2015
(8) On a 52 week basis
Sir Charlie Mayfield, Chairman of John Lewis Partnership,
commented:
"The Partnership achieved a strong sales performance with
increased market share in both Waitrose and John Lewis, and
customer numbers up by 6% and 4% respectively. Profit before
Partnership Bonus, tax and exceptional items is down 9.0% (down
10.5% on a 52 week basis), with increased profits in John Lewis
offset by a decline in Waitrose.
In its 150th year, John Lewis increased gross sales by 9.2% to
GBP4.43bn (7.5% on a 52 week basis) and operating profit grew by
10.8% to GBP250.5m (10.4% on a 52 week basis). The investments made
over many years in systems, logistics and IT infrastructure,
combined to enable John Lewis to make more deliveries via Click
& Collect than to customers' homes for the first time. John
Lewis was able to fulfil over 6.4m orders over the year with 98.7%
of parcels in store the following day.
Waitrose grew sales by 6.5% to GBP6.51bn (4.6% on a 52 week
basis) with like for like sales up 1.4%. Operating profit fell by
23.4% to GBP237.4m (down 24.4% on a 52 week basis), held back by
three factors: the impact of trading in a highly competitive and
deflationary market; a significantly higher level of investment in
the year; and the impact of one-off items, including property
impairments and onerous leases.
Our 93,800 Partners will receive a Bonus of 11%, equivalent to
nearly 6 weeks' pay. And for the first time in 15 years, thanks to
the new legislation that puts Employee Ownership on a similar
footing to other forms of ownership, no Partner will pay tax on
their Bonus up to GBP3,600.
Outlook 2015/16
Gross sales after the first five weeks of the current year are
up by 1.9% against last year. In grocery, the market remains
challenging, with Waitrose gross sales up 0.9% (-2.8%
like-for-like, excluding petrol). In John Lewis gross sales are
3.7% higher than last year (2.6% like-for-like).
We expect the returns for the grocery sector to be materially
lower for a period of time. Waitrose's value perception has
improved significantly over the last few years and we will continue
to defend that hard won position during this period of change in
the grocery sector.
For John Lewis, the outlook is robust. Our focus remains on
positioning our brand to outperform and our investment in supply
chain and systems, which has been growing for some years, will
exceed that in new shops and refurbishment for the first time this
year."
Financial Results
In 2014/15 the Partnership delivered good sales growth. Both
Waitrose and John Lewis grew sales well ahead of their respective
markets, increasing market share. Partnership gross sales (inc VAT)
were GBP10.94bn, an increase of GBP771.1m, or 7.6%, on last year
(5.7% on a 52 week basis). Revenue, which is adjusted for sale or
return sales and excludes VAT, was GBP9.70bn, up by GBP673.2m or
7.5% (5.6% on a 52 week basis).
Partnership operating profit before exceptional items was
GBP442.3m, down by GBP28.6m or 6.1% on last year (down 7.5% on a 52
week basis). Last year, following a review of the Partnership's
holiday pay policy, an exceptional cost of GBP47.3m was recorded.
This year, following a reassessment of the total costs that were
recognised, we have released remaining liabilities as exceptional
income of GBP7.9m. Partnership operating profit, including
exceptional items, was GBP450.2m, up GBP26.6m, or 6.3% on last year
(4.7% on a 52 week basis).
Profit before Partnership Bonus, tax and exceptional items was
GBP342.7m, down by GBP33.7m or 9.0% on last year (down 10.5% on a
52 week basis). After including the exceptional items, it was
GBP350.6m, up by GBP21.5m, or 6.5% on last year (4.7% on a 52 week
basis).
Our Partners, as co-owners, each receive the same percentage of
pay as Partnership Bonus, which flexes from year to year reflecting
the performance of our business. Partners will share GBP156.2m in
profit, which represents 11% of pay or the equivalent of nearly 6
weeks' pay.
Partners also continue to benefit from a number of other
benefits. In total we have invested GBP773m in benefits to our
Partners, including Partnership Bonus, pensions, Partner discount,
catering subsidy, long service leave, leisure spending and the
running of our five holiday centres.
Waitrose
Gross sales for the year grew by 6.5% to GBP6.51bn (4.6% on a 52
week basis), with like-for-like sales up 1.4%. We had, on average,
400,000 more customer transactions a week compared to last year and
our market share(9) grew to 5.4%.
Operating profit was down by 23.4% to GBP237.4m (down 24.4% on a
52 week basis), held back by a significantly higher level of
investment in the year in new branches and IT resilience, and the
impact of one-off items. The year-on-year impact on our profits
from these factors were approximately GBP30m and GBP27m
respectively. The remaining profit decline of GBP26m, after
excluding property profits, is primarily the impact of trading in a
highly competitive and deflationary market. One-off items include
property impairments and onerous lease costs (GBP16m), and costs
associated with the planned closure of our Acton .com fulfilment
centre (GBP4m).
Against the backdrop of a tough market where prices are falling
and customer shopping patterns are changing, our strategy of
investing to create the modern Waitrose has supported us in
increasing sales, growing customer transactions and gaining market
share.
As a co-owned business we are able to take the long-term view
and so we have invested in new and existing space, improving our IT
capability and strengthening our supply chain. In addition we
continued to build our online business, convenience offer,
hospitality and services in our branches and - through the
myWaitrose card - our understanding of our customers.
In the year we opened 13 new core branches (including eight
acquired from the Co-operative) and another 20 convenience shops.
The launch costs associated with this opening programme and the
expected lower returns from new space in the early months impacted
profit this year.
One of the most visible and impactful aspects of our IT
investment has been the rollout of more than 4,000 iPads this year.
This programme provides branch management teams with easier access
to information and supports enhanced customer service by, for
example, being able to answer product queries on the shop
floor.
Behind the scenes, we invested in supply chain efficiency to
support our growth. Work has started on the first National
Distribution Centre in Milton Keynes, which is due to open in
summer 2015, and will handle 25,000 longer-life ambient
products.
Our online business was another area of investment and strong
performance. Grocery gross sales were up 31.2% (on a 52 week basis)
and we saw 5% growth in average order value. Our new specialist
wine website - Waitrose Cellar - launched in May and we introduced
Click & Collect for wine orders in October. In addition, more
branches handled Click & Collect for John Lewis orders,
supported by new processes that are making the service faster and
more efficient.
We are deepening our understanding of and relationships with
customers through the myWaitrose card. The number of customers with
a card is now 5.4 million and 68% of sales are to cardholders. By
using the information customers make available to us, we are
increasingly able to target promotions and personalise our offers
to customers. As a result in the last year we have doubled the
number of direct customer communications.
In the context of food price deflation and increased competitor
activity we continued to invest in value. This included matching
Tesco on branded products (excluding promotions) and Sainsburys on
own-label, increased promotional participation and special deals
for myWaitrose customers, including 10% off hundreds of everyday
products each week.
Quality, innovation and trusted provenance are at the heart of
our brand. We launched 4,900 new or improved lines last year.
Waitrose own brand grew sales by 5.6%, outperforming the market(10)
. One of the highlights was the Horticulture and Garden range with
impressive growth driven from the new outdoor pods in 167
branches.
(9) (10) Source: Kantar
John Lewis
John Lewis continued to outperform the market with gross sales
up 9.2% to GBP4.43bn (7.5% on a 52 week basis), beating the BRC by
4.9%, combined with growth in operating profit, up 10.8% to
GBP250.5m (10.4% on a 52 week basis).
Every channel and category grew during the year. On a 52 week
basis, shop sales were up 2.2% with LFL shop sales growth at 0.6%,
while johnlewis.com saw an increase of 21.6% to GBP1.4bn.
We saw the significance of new ways to shop and changing
customer expectations in two key shifts in consumer behaviour.
First, Click & Collect overtook home deliveries this year, now
accounting for 54% of online orders; and secondly, a new shape of
peak trade was firmly established with Black Friday marking our
busiest single day. Our distribution and online operations stood up
well to the challenges and allowed us to deliver on a 'logistics
Christmas'.
All three categories (Fashion, Home and EHT) saw increases in
sales and in market share. On a 52 week basis:
-- Fashion had a particularly strong performance, up 8.3%, with
growth from nursery at 16.3%, childrenswear at 8.2%, women's
accessories at 8.5% and our own-brand Kin range at 46.6%.
-- Home was up 7.2% with furniture the highlight at 12.8%, floor
covering up 6.1% and our House range continuing to grow at 24.2%.
We also signed up to WWF's Forest Campaign, joining other retailers
in a collaborative effort to support responsible forest trade.
-- EHT was up 7.9%, performing well across the year, despite a
challenging market, with large electrical at 12.5% and audio at
23.4%.
In our physical estate, we opened two convenience-driven shop
formats at London's St Pancras station and Heathrow Terminal 2, and
our new flexible format shop in York has seen trade exceed
expectations. In our existing shops, we further enhanced the
in-store customer experience by opening Opticians and expanding our
third party catering offer, and completed a major refurbishment of
our Southampton shop, which now includes a Little Waitrose within
the branch.
While omnichannel capability and innovation remain at the heart
of our success, logistics came to the forefront in driving
differentiation and delivering to changing customer expectations.
2014 saw us invest GBP92.5m in our IT and systems, giving us the
foundations of a fully joined-up customer experience across the
customer journey. Work continued on our second distribution centre
in Magna Park, which takes us to over 1.3 million sq ft of space
when combined with our existing Magna Park site, and we have also
announced the opening of a third distribution centre in Milton
Keynes in 2016.
In our 150th anniversary year we took time to mark the history
of our business at a one-off celebratory event for Partners from
across the UK, as well as creating a range of innovative products
through brand and designer collaborations. Our 150th anniversary
year saw us raise over GBP0.6m through our charity partnership with
Barnardo's.
The pace of change looks set to continue in 2015, with the
strongest retailers combining bricks and clicks to create the
customer service levels and convenience that customers want. In
2015 we will open our regional flagship shop in Birmingham, setting
a new benchmark in bricks and mortar retailing.
Partnership Services and 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
GBP19.7m to GBP45.6m reflecting an increase in the share of pension
and shared service costs charged to Waitrose and John Lewis.
Investment in the future
Capital investment in 2014/15 was GBP670.9m, an increase of
GBP175.9m (35.5%) on the previous year. This includes GBP143.2m
invested in freehold properties, an increase of GBP87.4m on the
previous year, and includes six freehold branches purchased from
the Co-operative.
The majority of our spend continues to be invested in our store
base, either on new stores or the refurbishment of existing ones.
However, to enhance the agility and robustness of our systems and
infrastructure and invest in our future capability given the
changing dynamics within retail, we have also significantly
increased our capital investment in distribution and IT in the
year.
Investment in Waitrose was GBP388.5m, up GBP100.8m (35.0%) on
the previous year, and in John Lewis investment was GBP231.9m, up
GBP67.1m (40.7%).
Pensions
The pension operating cost before exceptional items was
GBP194.5m, an increase of GBP26.8m or 16.0% on the prior year
costs. The increase reflects changes to financial assumptions,
growth in scheme membership and a one-off cost in the year of
GBP6.5m for an increase in future pension liabilities following our
decision to take all paid overtime into account when calculating
holiday pay for Partners, for holiday taken from 1 November 2014.
Pension finance costs were GBP37.6m, an increase of GBP2.3m or 6.5%
on the prior year, reflecting 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 before exceptional items
were GBP232.1m, an increase of GBP29.1m or 14.3%.
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. In the year, total contributions to the pension
scheme therefore totalled GBP492.8m, an increase of GBP229.9m or
87.4% on the prior year.
The total accounting pension deficit at 31 January 2015 was
GBP1,249.3m, an increase of GBP245.9m (24.5%) since 25 January
2014. Net of deferred tax, the deficit was GBP1,018.4m. The
accounting valuation of pension fund liabilities increased by
GBP1,082.8m (25.7%) to GBP5,301.0m mainly reflecting market
volatility in the financial assumptions as the real discount rate
used to value the liabilities decreased substantially from 1.10% at
the beginning of the year to 0.35% at the end of the year. Pension
fund assets increased by GBP836.9m (26.0%) to GBP4,051.7m,
including the GBP294.1m one-off contribution made by the
Partnership in December 2014.
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 Partnership. We undertook a review
of the pension scheme to ensure that it remains fair to Partners
and affordable from a business perspective. This review has taken
two years and encapsulated significant communication, discussion
and debate across the Partnership. The final proposal, which was
unanimously approved by Partnership Council, moves to a hybrid
scheme combining defined benefit and defined contribution pensions,
where future pension risk is shared between Partners and the
Partnership.
Financing
In December 2014, we issued a GBP300m 4.25% bond due in 2034 and
used the net proceeds of GBP294.1m to prepay previously-agreed
deficit reduction contributions to the pension scheme. As a
consequence, at 31 January 2015, net debt was GBP780.2m, an
increase of GBP294.4m (60.6%).
Net finance costs on borrowings and investments decreased by
GBP6.0m (10.2%) to GBP52.8m. The year-on-year decrease reflects the
repayment of a GBP100m bond at the end of the previous year. After
including the financing elements of pensions and long service leave
and non-cash fair value adjustments, net finance costs increased by
GBP5.1m (5.4%) to GBP99.6m.
Sustainability
This year we concluded our CSR materiality assessment,
prioritising the issues which are of the greatest importance to our
stakeholders, our Partners and to the commercial health of the
business. This assessment will underpin future decisions on
sustainability and community investment and will help with our move
to publishing an integrated Annual Report and Accounts.
Existing initiatives have continued to deliver tangible benefits
to our business, the environment and the wider community. For
example, our new John Lewis store in York was awarded BREEAM
Outstanding status, the only department store in the world to
achieve this benchmark for environmental construction. Waitrose was
placed at the top of Compassion in World Farming's Business
Benchmark on Animal Welfare. Finally, more than 3.5% of our pre-tax
profits were invested in our communities through partnerships,
donations, fundraising and volunteering.
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
43 John Lewis shops across the UK (31 department stores, 10 John
Lewis at home and shops at St Pancras International and Heathrow
Terminal 2), johnlewis.com, 336 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 93,800 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 336 shops in England, Scotland, Wales and
the Channel Islands, including 60 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 50 countries worldwide and has seven
shops in the Middle East.
(1) Conlumino Awards, 2014
(2) Good Housekeeping Best Supermarket 2014, Which? Best
Supermarket 2014
(3) Verdict Best Food and Grocery Retailer 2014
John Lewis - John Lewis, 'Multichannel Retailer of the Year
2014'(4) , 'Best Overall Retailer'(5) and 'Best Retailer 2014'(6) ,
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 (www.johnlewis.com). 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) Oracle Retail Week Awards 2014
(5) Verdict Consumer Satisfaction Awards 2014
(6) Which? Awards 2014
You can follow John Lewis on the following social media
channels:
www.johnlewis.com/twitter
www.johnlewis.com/facebook
www.johnlewis.com/youtube
John Lewis Partnership plc
UNAUDITED RESULTS FOR THE 53 WEEKS TO 31 JANUARY 2015
2014/15 2013/14 Change
GBPm GBPm %
GROSS SALES (including
VAT)
Waitrose 6,508.9 6,111.9 6.5
John Lewis 4,433.7 4,059.6 9.2
Gross sales 10,942.6 10,171.5 7.6
-------------------------------------------- ----------- ---------- --------
REVENUE
Waitrose 6,135.3 5,753.7 6.6
John Lewis 3,565.7 3,274.1 8.9
Revenue 9,701.0 9,027.8 7.5
----------------------------------------------- ----------- ---------- --------
OPERATING PROFIT
Waitrose 237.4 310.1 (23.4)
John Lewis 250.5 226.1 10.8
----------------------------------------------- ----------- ---------- --------
487.9 536.2 (9.0)
Partnership Services and
Group (45.6) (65.3) 30.2
Operating profit before exceptional
item 442.3 470.9 (6.1)
Exceptional item 7.9 (47.3) -
-------------------------------------------- ----------- ---------- --------
Operating profit 450.2 423.6 6.3
Net finance costs (99.6) (94.5) (5.4)
-------------------------------------------- ----------- ---------- --------
Profit before Partnership Bonus and
tax 350.6 329.1 6.5
Partnership Bonus (156.2) (202.5) 22.9
-------------------------------------------- ----------- --------
Profit before tax 194.4 126.6 53.6
-------------------------------------------- ----------- ---------- --------
Profit before Partnership Bonus,
tax and exceptional item 342.7 376.4 (9.0)
-------------------------------------------- ----------- ---------- --------
Notes
1. 2014/15 is a 53 week reporting period whereas 2013/14 was a 52
week reporting period.
2. This statement does not constitute a preliminary announcement.
These results are subject to audit. The Annual Report & Accounts for
2014/15 will be published in April 2015.
==================================================================================
This information is provided by RNS
The company news service from the London Stock Exchange
END
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