Issued: 22 May 2014
Final Results (Replacement)
With reference to the 'Final Results' announcement released on 20/5/2014 at 7:00am under the RNS No 5267H, 'Other Segmental Information' within Note 2 is being re-presented for the segmental split of assets between the UK and International segments whilst not affecting total assets. There is no impact on the reported results and all other details remain unchanged.
The full amended text is shown below.
Issued: 20 May 2014
MARKS AND SPENCER GROUP PLC
FULL YEAR RESULTS 2013/14
52 WEEKS ENDED 29 MARCH 2014
'From transformation to delivery'
Full year results:
• Group sales up 2.7%1 at £10.3bn
• Total UK sales +2.3%: Food +4.2%; General Merchandise 0.0%
• Like-for-like UK sales +0.2%: Food +1.7%; General Merchandise -1.4%
• International sales +6.2%1
• Multi-channel sales +22.8%
• Underlying profit before tax2 -3.9%3 to £623m
• Statutory profit before tax +6.1%3 to £580m
• Underlying basic earnings per share2 +0.9%3 to 32.2p
• Basic earnings per share +14.8%3 to 32.5p
• Full year dividend 17.0p per share level on the year
• Net debt down £150.7m to £2.46bn
Marc Bolland, Chief Executive, said:
"M&S grew sales by 2.7% last year. We are focused on improving our performance in General Merchandise and were pleased to see early signs of improvement. Our Food business had a very strong year, consistently outperforming the market.
"Three years ago, we recognised the scale of investment required to transform our business, investing to strengthen our foundations and improve our customer offer. We are making solid progress on this journey and are now focused on delivery."
Robert Swannell, Chairman, said:
"The investment made in executing our strategy over the last three years puts M&S in a stronger position to compete in a retail world undergoing profound change. Our priorities now are to deliver on the investment we have made and to make M&S a more profitable, stronger and well-equipped business.
"In line with our dividend policy, the Board is recommending a final dividend of 10.8p per share, resulting in a full year dividend of 17.0p per share, level on last year."
Guidance for financial year 2014/15
• Gross margin is expected to grow by c.100bps in General Merchandise as a result of sourcing benefits, particularly in the second half of the year. Food gross margin is expected to grow by 10bps to 30bps due to further operational efficiency.
• Operating costs are expected to increase by c.4% as a result of an increase in depreciation, inflation and the addition of new space.
• Group capital expenditure is expected to be lower at c.£500m to £550m.
• The planned opening of new space will add c.1% to UK space, with c.2.5% in Food and no net space growth in GM. International space is expected to grow by c.10%.
• Underlying effective tax rate is expected to be 19.0%.
Looking ahead - 2014/15 onwards
Our initial programme of investment associated with our strategic priorities is now largely completed. Capital expenditure is expected to drop to c.£500m to £550m per annum in each of the next three years.
The operational improvements we are making lead us to expect to deliver a significant improvement in our General Merchandise gross margin over the next three years, through a combination of a new approach to sourcing and trading capabilities. We expect a further step up to come beyond this with the completion of the single tier logistics network and GM4 systems implementation in 2016/17.
As a result of this, we are focused on improving free cash flow. The Board is committed to maintaining a progressive dividend policy with dividends broadly twice covered by earnings. We are targeting a net debt/EBITDA ratio within the range of 2.0x - 1.5x and remain committed to an investment grade rating. This gives potential for any excess cash to be returned to shareholders on a regular basis.
Current trading
As previously indicated, our new M&S.com site will take four to six months to settle in and, as a consequence, will have some impact on General Merchandise performance in the first quarter. The improving trend in Clothing sales we saw in the fourth quarter has continued in our stores. Our Food business continues to outperform the market.
We will update on our first quarter sales on 8 July 2014.
Notes:
1 On constant currency basis.
2 Underlying results are consistent with how the business is measured internally. Adjustments to derive underlying profit include profit on disposal of property, UK and Ireland one-off pension credits, interest income on tax repayment, restructuring costs, international store review, fair value movements on embedded derivatives and the impact to income earned from M&S Bank following M&S Bank's recognition of a provision for potential financial product mis-selling.
3 Last year results have been restated for the changes to IAS 19 "Employee Benefits". Refer to the Financial Review for further details.
2013/14 operating review:
Business highlights:
• New General Merchandise strategy launched - reasserting leadership in quality and style
• Clothing sales returned to growth in the last quarter of the year
• Continued improvement in Womenswear full price sales
• Food continued to outperform the market on a like-for-like basis
• Food availability up; customer satisfaction scores at record high
• Managed our cost base tightly with cost growth of 3.5%, lower than guidance
• M&S.com sales +23%, outperforming the market
• 55% of M&S.com sales now picked up in store
• New web platform launched on time and on budget
• International sales +6.2% on a constant currency basis, with like-for-like growth in key markets
• 55 international stores opened
• Castle Donington EDC/NDC ramp up of volume and capability
We made these improvements against a challenging economic backdrop. Consumer confidence improved over the financial year but overall increases in incomes lagged inflation, meaning that consumers did not feel the benefit in their discretionary spending.
Sales
Group sales were up 2.7% on a constant currency basis (+2.8% reported currency), driven by good performances in our Food, International and Multi-channel businesses.
General Merchandise sales were level on the year with like-for-like sales down 1.4%. Our priority was delivering our strategy to refocus on quality and style, and after a year of changes our customers are noticing the difference, with Clothing returning to growth in the fourth quarter for the first time in three years on a like-for-like basis.
Food sales were up 4.2%, with like-for-like sales up 1.7%. We continued our focus on differentiation through quality and innovation. Through improvements in availability and choice, we made M&S food more relevant to our customers, more often.
International sales were up 6.2% on a constant currency basis (up 7.3% on a reported basis). Our priority markets delivered a good performance with strong growth in India and our flagship stores in China. While trading in the Republic of Ireland continued to be difficult, performance in our European business improved and we took full control of our Czech and Eastern European business. Our franchise business across the Middle East and Asia continued to perform well.
UK gross margin
General Merchandise gross margin was down 110bps at 50.7% as a result of increased cost of promotions and markdowns. Food gross margin was up 80bps at 32.5% due to supply chain efficienciesand effective management of promotional activity.
Total UK gross margin was down 20bps at 40.6%, as a result of the decline in General Merchandise gross margin as well as the mix change due to a difference in the rate of sales growth in General Merchandise and Food.
UK operating costs
UK operating costs were up 3.5% on last year. We continued to manage costs tightly despite upward pressures from new space, inflation and investment in business initiatives such as the supply chain infrastructure and improved customer service in stores. These pressures were mitigated by efficiencies generated through the supply chain and IT programme, and in our stores.
Operating profit
Underlying group operating profit was £741.9m (last year £778.6m). Within this, UK operating profit was £619.2m (last year £658.4m) and International operating profit was £122.7m (last year £120.2m). Statutory profit before tax was higher at £580.4m (last year £547.2m) after a reduction in net non-underlying charges.
Net debt and cash flow
Net debt at the end of the year was £2.46bn (last year £2.61bn). Net cash inflow of £154.3m (last year £67.2 outflow) primarily reflects a decrease in capital expenditure cash outflow which was £616.6m (last year £829.7m). Working capital was well managed with a £47.9m inflow in the year. Free cash flow before dividends was £427.9m (last year £204.1m).
2013/14 business review:
2013/14 marks a significant year on our journey to transform M&S from a traditional UK retailer into an international, multi-channel retailer.
1) Focus on the UK
Stores
Our priority over the last year has been to ensure that we offer an improved shopping experience for the 20 million people who shop with us each week. We have continued to improve the look and feel of our stores through the roll-out of our new store layout concept. The first phase is now complete and we are currently implementing the second phase.
Our top 70 stores now have refreshed Womenswear departments. Designed to showcase the latest collections and improve navigation, the new look and feel features high-impact entrance zones highlighting the latest trends, as well as new look destination departments such as Coat Shops and Dress Shops. We are also introducing revamped Footwear, Menswear, Accessories and Beauty departments.
General Merchandise
General Merchandise sales were level, with like-for-like sales down 1.4%. We faced a challenging clothing market, with unseasonal conditions and high levels of promotional activity.
In May 2013 we outlined the strategy to refocus our GM business on the values that make us famous - quality and style. Over the course of last year, we upgraded 70% of our fabrics, added more luxurious finishes and improved our 'better and best' offer with more leather, silk and cashmere. We delivered more clarity and distinction to our sub-brands to make them more compelling and easier to shop. We launched M&S Collection, and by streamlining the brands reduced product overlap by 10%.
The re-launch was also accompanied by a new, more inspirational store concept and our successful Leading Ladies marketing campaign. After a year of changes our customers are noticing the difference. We returned the GM division to growth in the fourth quarter for the first time in three years.
We have continued to make improvements in our buying and merchandising. We strengthened our top team with key appointments to our product, buying and design teams, as well as the appointment of two new Sourcing Directors, based in the Far East, to oversee our GM sourcing in the region as we look to speed up our supply chain and improve margins. We worked hard to improve newness and availability, moving to 'push allocation' stock replenishment which has helped to deliver a 2.3% improvement in availability.
Food
Our Food business had a very strong year, with sales up 4.2%, up 1.7% on a like-for-like basis. We consistently outperformed the market, delivering 18 consecutive quarters of like-for-like growth.
Our strategy is to be more specialist and focus on quality and innovation. Our products are made exclusively for M&S and this unique position means they are not comparable with the rest of the market. Rather than joining the race to the bottom on price, we are focused on developing top-quality ranges that are competitively priced, whilst ensuring our farmers get a fair deal too.
With a core catalogue of over 6,400 products, we offer everything from everyday essentials to special occasion food. This year, more people turned to us to help deliver Christmas and we saw record sales. With a 38% market share, we are the established market leader in party food and sold 5.5 million packs during the festive season. At the same time, we continue to highlight the great value we offer on everyday essentials with sales of our Simply M&S range continuing to grow - accounting for 11% of total sales.
Our innovation is unrivalled, with 20% of our products new this year. This year we expanded our healthy food offer with Delicious & Nutritious, a range of salads and flatbreads inspired by Middle Eastern and Asian flavours. In a nod to the American trend, our Grill range included Posh Dogs barbecue hotdogs, which were a summer hit, selling 926,000 units.
We continued to enhance the shopping experience for our customers, introducing new ways of displaying products and improving choice by bringing the full range to c.110 stores. We improved on-shelf availability by seven percentage points over the last three years. As a result, we are seeing more customers shop with us more often.
We have worked hard to deliver efficiencies from our supply chain, which have allowed us to continue to invest in product quality and innovation to stay ahead of the market, keep our prices competitive as well as improve our margins without compromising product quality.
2) Multi-channel
M&S.com has delivered a strong performance in 2013/14 and outperformed the market with sales up 22.8%. Visits to the site increased by 9% this year and our online business accounted for 16% of General Merchandise sales compared to 13% last year.
As customer shopping habits continue to evolve we have seen mobile sales increase by over 90%. Sales from tablet devices have doubled and now account for c.25% of online sales compared with 15% last year.
This was also a landmark year for M&S.com, as two major infrastructure projects went live. In May 2013 we opened our dedicated 900,000 sq ft Distribution Centre at Castle Donington and in mid-February we completed the migration of our website from Amazon to a new M&S owned platform.
Our new flagship M&S.com website offers improved search functionality, enhanced imagery and a better view of stock availability that is refreshed every 15 minutes and live at the checkout so customers can buy with confidence. The site is also built on a flexible platform to enable continuous improvement in line with evolving technology and retail trends. We are managing this large transition carefully since we expected it would take time for our customers to migrate and get used to the site as well as for it to settle down technically. We have migrated 2.5m customers, processed over three million orders and made hundreds of optimisations to website journeys. We expect it to take four to six months for the new site to settle and for migration to be substantially complete.
Since the launch last May, we have been building capacity at Castle Donington and are now handling around 2 million singles every week. Activity at the site will continue to ramp up ahead of the peak trading season enabling us to make further improvements to our delivery proposition.
Customers continued to enjoy the convenience of our Shop Your Way service, with 55% of multi-channel orders now collected in store or ordered in-store for home delivery.
3) International
Sales in our International business were up 6.2% on a constant currency basis (7.3% reported currency), to £1.15bn. We opened 55 new stores and now trade from 455 stores across 54 territories.
In Asia, sales were up 15.7% on a constant currency basis. We opened 22 new stores, focusing on driving growth in our key priority territories of India and China. In India our sales were strongly up with good like-for-like growth and we opened 10 new stores including our new flagship store in Bandra, Mumbai. In November we announced our plans to double our Indian store presence by 2016 through our partnership with Reliance Retail.
In China, we saw strong results from our Hong Kong stores, while our flagship Shanghai stores also performed well. In April we announced plans to focus on our centrally-located Shanghai stores and to open flagships in other cities, including Beijing and Guangzhou, and to find a local partner to support this roll out.
Our franchise operations continue to grow. One of our priority markets, the Middle East, saw sales increase by 2.6% on a constant currency basis. In February we unveiled our largest international store, a 72,000 sq ft flagship in Kuwait with our franchise partner Al-Futtaim Group. We opened 20 new stores across 10 markets, including the opening of our first standalone Lingerie & Beauty stores in Saudi Arabia with our franchise partner Al Hokair.
Sales in Europe were up 3.9% on a constant currency basis. We continued to grow our presence in Western Europe, opening our largest continental European store in The Hague. In France, we now have five stores including our flagship store at Beaugrenelle which features our largest Food Hall outside of the UK and Ireland. Through our new franchise partnerships with Relay France we will be opening our first standalone M&S Food store this Summer.
Following the actions we took to address the performance in the Czech Republic, Eastern Europe and Greece, we are pleased that sales improved during the year. Following a strategic review of our business in the Republic of Ireland we took the difficult decision to close four stores. We remain committed to the business in Ireland and will invest in our remaining stores.
Supply Chain and IT
In May 2013 we set out the details of our supply chain vision, with an aim of creating a single tier network by 2016/17. We have made good progress over the past year.
Our dedicated e-commerce and national distribution centre at Castle Donington opened in May 2013. Ramp up of volume continues as planned, with around 90% of e-commerce orders now processed through this new facility. We have also commenced the fit-out of the Bradford NDC. The roll-out of Allocation and Replenishment, the first part in our GM4 programme, has also started in General Merchandise.
Following a thorough review of our plans, we have taken a decision not to proceed with the site at London Gateway and have developed an alternative plan. This will secure the delivery of the single tier network by 2016/17 as planned, by operating from the two new NDCs, at Castle Donington and Bradford, supported by four of the existing regional distribution centres which will be converted into NDC use. This will use our capital investment more efficiently, with a planned £130m reduction in investment whilst largely retaining associated benefits.
Plan A
Plan A remains at the heart of the business, driving greater efficiency and environmental and ethical excellence into our operations.
This year we've helped 1,000 young people into work through the Make Your Mark programme, our customers recycled four million used or unwanted garments (worth an estimated £3.2 million to Oxfam) through the Shwopping scheme and we reached our target of training ½ million clothing supply chain workers on subjects such as employee rights, financial literacy and health care.
We've maintained our zero waste to landfill commitment and our status as the UK's only carbon neutral major retailer. More than half of our products now have an environmental or social feature built-in that is above and beyond the market norm, for example Fairtrade and Organic food and drink, clothing made in an eco factory or homeware made using recycled materials.
4,000 employees volunteered to clean beaches with the Marine Conservation Society and we maintained our support for charities addressing a range of social and environmental issues including Breakthrough Breast Cancer, Royal British Legion, Oxfam, UNICEF and WWF.
Plan A continues to be recognised externally for its achievements. Since launch it has helped M&S win 140 awards, including last month being named the most ethical clothing retailer on the high street by Ethical Consumer Magazine.
Our detailed, annual environmental and social Plan A Report is published next month.
Financial Review
Summary of Results |
52 weeks ended |
|
29 Mar 14 £m |
30 Mar 13 £m Restated* |
% var |
Group revenue |
10,309.7 |
10,026.8 |
+2.8 |
UK |
9,155.7 |
8,951.4 |
+2.3 |
International |
1,154.0 |
1,075.4 |
+7.3 |
Underlying operating profit |
741.9 |
778.6 |
-4.7 |
UK |
619.2 |
658.4 |
-6.0 |
International |
122.7 |
120.2 |
+2.1 |
Underlying profit before tax |
622.9 |
648.1 |
-3.9 |
Non-underlying items |
(42.5) |
(100.9) |
|
Statutory profit before tax |
580.4 |
547.2 |
+6.1 |
Underlying basic earnings per share |
32.2p |
31.9p |
+0.9 |
Basic earnings per share |
32.5p |
28.3p |
+14.8 |
Dividend per share (declared) |
17.0p |
17.0p |
|
* The Group has adopted the revised IAS 19 'Employee Benefits' which has retrospective application and has resulted in the restatement of last year's results (last year reported underlying profit before tax £665.2m and statutory profit before tax £564.3m.)
Revenues
Group revenues were up 2.8% (+2.7% on a constant currency basis), driven by good performance across both the UK and the International business.
UK revenues were up 2.3% in total with a like-for-like increase of 0.2%. We added 1.8% of space, 1.6% in General Merchandise and 2.3% in Food, on a weighted average basis.
International revenues were up 7.3% (6.2% on a constant currency basis).
Operating profit
Underlying operating profit was £741.9m, down 4.7%.
In the UK, underlying operating profit was down 6.0% at £619.2m. Gross margin was down 20bps at 40.6%. General Merchandise gross margin was down 110bps at 50.7% as a result of increased markdown and promotional cost due to the highly competitive market during the year. Food gross margin was up 80bps at 32.5% due to supply chain efficienciesand effective management of promotional activity more than offsetting commodity price inflation.
UK underlying results for the year include the previously disclosed double running costs which were partially offset by credits in the year relating to changes in accounting estimates.
Underlying UK operating costs were up 3.5% to £3,159.6m. A breakdown of the costs is shown below:
|
52 weeks ended |
|
|
29 Mar 14 £m |
30 Mar 13 £m Restated* |
% inc |
Retail staffing |
978.8 |
931.3 |
5.1 |
Retail occupancy |
1,054.4 |
1,030.7 |
2.3 |
Distribution |
445.5 |
405.1 |
10.0 |
Marketing and related |
147.7 |
155.3 |
-4.9 |
Support |
533.2 |
530.4 |
0.5 |
Total |
3,159.6 |
3,052.8 |
3.5 |
*Restated from the reported £3,049.8m as a result of adoption of the revised IAS19 'Employee benefits'.
Retail staffing costs increased as a result of our investment in store staffing in order to improve customer service. In addition, costs were impacted by pension auto-enrolment as well as growth in selling space and the annual pay review.
The increase in occupancy costs reflects new space, rent, rates and utilities inflation as well as double running costs associated with the new M&S.com platform.
During the year we opened the new EDC/NDC, and in addition to the resulting double running costs also saw distribution costs rise as a result of higher volumes in multi-channel and Food.
Marketing and related cost reduction reflects a decrease in the number and a change in approach to marketing campaigns in both GM and Food. Support costs increased due to salary and pension costs as well as higher IT costs associated with the launch of the new web platform.
The underlying UK operating profit includes a contribution from the Group's continuing economic interest in M&S Bank of £57.2m (last year £51.1m).
International underlying operating profit was up 2.1% (up 4.6% on a constant currency basis). Franchise operating profits were up 7.4% to £114.2m, with improvements across all regions. Owned store operating profits were down 38.1% to £8.5m, due to start-up costs of new stores in priority markets including Western Europe and India, as well as continued macroeconomic pressure in the Republic of Ireland.
Non-underlying profit items
52 weeks ended
|
29 Mar 14 £m |
30 Mar 13 £m |
Profit on property disposal |
82.2 |
- |
One-off pension credits (UK and Ireland) |
27.5 |
- |
Interest income on tax repayment net of fees |
3.3 |
- |
Restructuring costs |
(77.3) |
(9.3) |
International store review |
(21.9) |
- |
Fair value movement of embedded derivative |
(3.5) |
5.8 |
Strategic programme costs |
(2.0) |
(6.6) |
Fair value movement on buy back of puttable callable bonds |
- |
(75.3) |
Reduction in M&S Bank Income |
(50.8) |
(15.5) |
Total non-underlying profit items |
(42.5) |
(100.9) |
The profit on property disposal relates to the sale of a warehouse site and mock shop in White City for a total consideration of £100m, with £25m received on completion and the remaining consideration deferred over three years. The property has been leased back to Marks and Spencer plc for a period of five years on an operating lease basis.
The one-off pension credit in Ireland of £17.5m has arisen as a result of changes to the Marks and Spencer Ireland defined benefit scheme rules. In the UK the one-off pension credit of £10.0m has arisen as a result of ceasing to grant pension increases to transferred-in pensions for all members in the UK defined benefit scheme.
Interest income on tax repayment relates to a successful tax litigation claim and is presented net of related fees.
Restructuring costs relate to the Group strategy of transitioning to a single tier distribution network and the associated closure costs of legacy logistics sites (£53.2m) and restructuring costs incurred in Ireland including the closure costs of four stores and redundancies (£24.1m).
International store review relates to the impairment of assets (£13.6m) and onerous lease provisions (£8.3m) in poor performing international stores in non-strategic locations in the Czech Group and China.
The fair value movement on the embedded derivative results from a decrease in the expected RPI rate.
Strategic programme costs are the cost of implementing the Focus on the UK element of the strategy announced in November 2010. We do not anticipate incurring any further costs in relation to this programme.
The reduction in the fee income received from M&S Bank is due to M&S Bank's potential redress to customers in respect of possible mis-selling of financial products, as previously announced. M&S Bank recognised a further estimated liability in the year.
Net finance costs
|
52 weeks ended |
|
29 Mar 14 £m |
30 Mar 13 £m Restated* |
Interest payable |
(121.1) |
(125.3) |
Interest income |
8.4 |
5.3 |
Net underlying interest payable |
(112.7) |
(120.0) |
Pension finance income (net) |
11.7 |
7.1 |
Unwinding of discount on partnership liability |
(17.8) |
(16.6) |
Unwinding of discounts on financial instruments |
(0.2) |
(1.0) |
Underlying net finance costs |
(119.0) |
(130.5) |
Fair value movement on buy back of puttable callable bonds |
- |
(75.3) |
Interest income on tax repayment |
4.9 |
- |
Net Finance Cost |
(114.1) |
(205.8) |
*Restated from the reported £191.7m as a result of adoption of the revised IAS19 'Employee benefits'.
The net underlying interest payable was down 6.1% (£7.3m) at £112.7m as a result of a higher proportion of floating debt and lower cost of funding of 5.4% (last year 5.9%.) Underlying net finance costs were down a total of £11.5m to £119.0m due to an increase in pension interest income as a result of a favourable movement in the net pension benefit.
Statutory profit before tax
Statutory profit before tax was higher at £580.4m (last year £547.2m) after a reduction in net non-underlying charges.
Taxation
The full year underlying effective tax rate was 18.8% (last year 22.7%) and the statutory effective tax rate was 12.8% (last year 18.7%). The non-underlying adjustment to the tax charge principally arises from the successful outcome of litigation in relation to the Group's claim for UK tax relief of losses of its former European subsidiaries (£18.5m).
Earnings per share
Underlying basic earnings per share increased by 0.9% to 32.2p per share. Statutory basic earnings per share increased by 14.8% to 32.5p per share. The weighted average number of shares in issue during the period was 1,615.0m (last year 1,599.7m).
Dividend
The Board is recommending a final dividend of 10.8p per share. This will result in a total dividend of 17.0p, in line with last year. The Board's dividend policy remains unchanged; a progressive policy with dividends broadly twice covered by earnings.
Capital expenditure
|
52 weeks ended |
|
29 Mar 14 £m |
30 Mar 13 £m |
|
|
|
Focus on the UK |
138.2 |
197.4 |
Multi-channel |
96.8 |
75.3 |
New stores |
89.4 |
94.1 |
Store modernisation programme |
25.0 |
85.7 |
International |
69.0 |
53.7 |
Supply chain and technology |
249.4 |
247.2 |
Maintenance |
67.2 |
67.9 |
Proceeds from property disposals |
(25.0) |
- |
Total capital expenditure |
710.0 |
821.3 |
|
|
|
We continued to invest in our UK stores in order to create a more inspiring environment. The first phase of the new store layout concept has now been completed.
Last year we completed the significant investment in improved multi-channel capabilities with the launch of our new web platform in February.
We added 1.8% of selling space in the UK (on a weighted average basis), trading from 16.6m square feet at the end of March 2014. We opened a net 32 new stores during the year, including 28 Simply Food stores. In our International business, space increased by c.10%.
We continued to invest in our supply chain and technology in line with our strategy to build an infrastructure fit to support the future growth of the business. Our new EDC/NDC in Castle Donington opened in May.
Cash flow and net debt
|
52 weeks ended |
|
29 Mar 14 £m |
30 Mar 13 £m Restated* |
Underlying EBITDA |
1,219.7 |
1,241.8 |
Working capital |
47.9 |
75.3 |
Pension funding |
(92.0) |
(70.9) |
Capex net of disposals |
(616.6) |
(829.7) |
Interest and taxation |
(175.2) |
(235.3) |
Dividends and share issues / purchases |
(229.5) |
(248.4) |
Net cash inflow / (outflow) |
154.3 |
(67.2) |
Opening net debt |
(2,614.3) |
(2,463.1)** |
Exchange and other movements |
(3.6) |
(84.0) |
Closing net debt |
(2,463.6) |
(2,614.3) |
Free cash flow pre dividends |
427.9 |
204.1 |
|
|
|
*Restated as a result of adoption of the revised IAS 19 'Employee Benefits' in relation to underlying EBITDA and working capital
**Opening net debt in the FY 2013 has been restated to reflect the impact of the change in terms of the property partnership in May 2012, which resulted in £606.0m being transferred from reserves to liabilities.
The Group reported a net cash inflow of £154.3m (last year outflow of £67.2m). This inflow reflects a £213.1m reduction in capital expenditure and a £60.1m decrease in interest and taxation. This is partly offset by a £22.1m reduction in underlying EBITDA, a £21.1m increase in pension funding driven by auto-enrolment of the defined contribution scheme and a £27.4m reduction in the working capital inflow.
In March 2014, the Group repaid a £400m bond from existing facilities and operating cash.
Pensions
At 29 March 2014 the IAS 19 net retirement benefit surplus was £189.0m (last year £236.0m). The decrease is due to a £200.6m reduction in the market value of scheme assets partly offset by a decrease in the present value of scheme liabilities due to an increase in the discount rate from 4.30% to 4.45%.
The investment strategy of the UK defined benefit scheme has hedging that covers 80% of interest rate movements and 84% of inflation movements which aims to reduce significant fluctuations in the scheme assets relative to the liabilities.
The most recent actuarial valuation of the UK Defined Benefit Pension Scheme was carried out at 31 March 2012 and showed a deficit of £290m. As a result a funding plan of £112m cash contributions was agreed with the Trustees. The Group has contributed c.£28m to the UK defined benefit scheme on 31 March 2014 and expects to contribute an additional c.£28m each year until 31 March 2017. The difference between the valuation and the funding plan is expected to be met by better than expected investment returns on the scheme's assets.
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For further information, please contact:
Investor Relations:
Majda Rainer: +44 (0)20 8718 1563
Helen Cox: +44 (0)20 8718 8491
Media enquiries:
Corporate Press Office: +44 (0)20 8718 1919
Investor & Analyst webcast:
Investor and analyst presentation will be held at 9am on 20 May 2014. This presentation can be viewed live on the Marks and Spencer Group plc website on:
www.marksandspencer.com/investors
Fixed Income Investor Conference Call:
This will be hosted by Alan Stewart, Chief Finance Officer at 2pm on 20 May 2014:
Dial in number: +44 (0)20 8515 2319
A recording of this call will be available until 30 May 2014:
Dial in number: +44 (0)20 7959 6720 Access code: 4683276
Statements made in this announcement that look forward in time or that express management's beliefs, expectations or estimates regarding future occurrences and prospects are "forward-looking statements" within the meaning of the United States federal securities laws. These forward-looking statements reflect Marks & Spencer's current expectations concerning future events and actual results may differ materially from current expectations or historical results. Any such forward-looking statements are subject to various risks and uncertainties, including failure by Marks & Spencer to predict accurately customer preferences; decline in the demand for products offered by Marks & Spencer; competitive influences; changes in levels of store traffic or consumer spending habits; effectiveness of Marks & Spencer's brand awareness and marketing programmes; general economic conditions or a downturn in the retail or financial services industries; acts of war or terrorism worldwide; work stoppages, slowdowns or strikes; and changes in financial and equity markets.
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