TIDMMKS
RNS Number : 7110S
Marks and Spencer Group PLC
08 November 2023
Marks and Spencer Group Plc
Half Year Results for 26 Weeks Ended 30 September 2023
"RESHAPING M&S" STRATEGY DELIVERS STRONG RESULTS
Strong first half results
-- Profit before tax and adjusting items of GBP360.2m (2022/23: GBP205.5m)
-- Statutory profit before tax of GBP325.6m (2022/23: GBP208.5m)
-- Food sales up 14.7%; adjusted operating profit GBP164.9m
(2022/23: GBP71.8m) and margin of 4.3%
-- Clothing & Home sales(1) up 5.7%; adjusted operating
profit GBP223.4m (2022/23: GBP171.4m) and margin of 12.1%
-- Ocado Retail share of adjusted loss GBP23.4m (2022/23: share of loss GBP0.7m)
-- International constant currency sales up 3.9%; adjusted
operating profit GBP43.4m (2022/23: GBP39.0m)
-- Stronger balance sheet: free cash flow reducing net debt and
interest costs. Restoration of dividend of 1p per share.
Strategy to reshape M&S is delivering
-- Food driving volume and share reflecting value investment,
product innovation and quality upgrades
-- Clothing & Home building improved style and value
perceptions and increasing full price sales mix
-- Ocado Retail reset progress; early stages of investment in
value, service and increased M&S range
-- Structural cost reduction programme on track with savings of
over GBP100m delivered in the first half
-- Accelerating store rotation; new full line stores and renewals performing ahead of plan
-- Progress on supply chain modernisation; Gist benefits on
track; C&H early savings from network plan
-- More to do to drive online growth and improve returns on
data, digital and technology investment
-- Reshaping with a clearer vision, purpose and
performance-driven culture to drive execution and pace
Stuart Machin, Chief Executive said:
"Our strategy to reshape M&S for growth has delivered strong
results in the first half. We have maintained our relentless focus
on trusted value, giving our customers exceptional quality product
at the best possible price. In Food, we delivered over 500 quality
upgrades and invested over GBP30m in price, lowering the price of
200 products and locking prices on 150 customer favourites. Our
lead on quality perception widened and value perception continued
to improve. In Clothing & Home we backed lines with authority
across core and seasonal product, maintaining our lead on quality
and value perception and improving our style credentials. As a
result, we've sold more product and served more customers across
Food and Clothing & Home, with both businesses outperforming
the market.
Sales growth was supported by our investment in store rotation,
which continued at pace. Three full line stores opened and six were
renewed, all attracting new customers and performing ahead of plan.
Our cost reduction programme is on track with over GBP100m savings
delivered in the half and investment in supply chain modernisation
driving efficiencies, translating volume growth to improved margin
and profitability.
I am clear that if we serve our customers well, we serve our
shareholders well, and our unrelenting focus on trusted value is
matched by disciplined capital allocation. We have further
strengthened our balance sheet and net debt position, with an
interim dividend payment being made to shareholders for the first
time in four years.
Looking ahead, trading momentum has been maintained through
October, with customers responding positively to our Christmas
ranges. There will be challenges and headwinds in the year ahead
and progress won't be linear, but we are ambitious for future
growth and are driving what is in our control.
Everyone at M&S makes change happen and I want to thank my
colleagues for their contribution to these results. I also want to
thank them in advance for what they are about to do. All of us will
be sleeves rolled up, out in stores and distribution centres,
bringing the magic of M&S alive for our customers this
Christmas. In summary - we're only just beginning. Lots done, lots
to do, lots of opportunity."
Group Results (26 weeks 30 September 1 October 22 Change (%/GBP)
ended) 23
Statutory revenue GBP6,134.0m GBP5,538.2m 10.8%
Sales(1) GBP6,164.4m GBP5,563.6m 10.8%
Operating profit GBP315.0m GBP171.5m 83.7%
Operating pro t before
adjusting items GBP410.4m GBP280.7m 46.2%
Pro t before tax and adjusting
items GBP360.2m GBP205.5m 75.3%
Adjusting items GBP(34.6)m GBP3.0m n/a
Profit before tax GBP325.6m GBP208.5m 56.2%
Profit after tax GBP206.9m GBP166.7m 24.1%
Basic earnings per share 10.6p 8.5p 24.7%
Adjusted basic earnings
per share 12.7p 7.8p 62.8%
Dividend per share 1.0p - -
Free cash ow from operations GBP27.7m GBP(116.8)m GBP144.5m
Net debt GBP(2.56)bn GBP(2.93)bn GBP0.37bn
Net debt excluding lease GBP(0.32)bn GBP(0.63)bn GBP0.31bn
liabilities
------------ ------------ --------------
Non-GAAP measures and alternative pro t measures (APMs) are
discussed within this release. A glossary and reconciliation to
statutory measures is provided at the end. Adjusted results are
consistent with how business performance is measured internally and
presented to aid comparability. Refer to adjusting items table
below for further details. (1) References to 'sales' throughout
this announcement are statutory revenue plus the gross value of
consignment sales ex. VAT.
STRONG FIRST HALF RESULTS
M&S's first half results showed a good year on year
improvement in almost all businesses. Favourable market conditions,
surprisingly resilient consumer demand and the effect of competitor
exits from the market provided a solid backdrop. In this
environment, the strategy to reshape for growth has enabled M&S
to increase customer numbers and market share in both businesses,
with healthy volume growth and reduced promotions in Food, higher
than expected full price sales in Clothing & Home and
structural cost reduction supporting robust margins.
Profit before tax and adjusting items for the period was
GBP360.2m (2022/23: GBP205.5m). Adjusting items of GBP34.6m
(2022/23: GBP3.0m) included a credit due to the remeasurement of
contingent consideration for Ocado Retail. Statutory profit before
tax was GBP325.6m (2022/23: GBP208.5m).
-- Food sales grew 14.7% with LFL sales up 11.7%, outperforming
all mainline grocers on volume as customer numbers increased.
Growth was underpinned by further investment in trusted value,
category resets in basket building areas such as grocery and
homecare, and on-going quality upgrades of products in key customer
missions including 'Dinner for tonight' and 'Events'. Adjusted
operating margin recovered to 4.3% from 2.2% last year, (2021/22:
4.6%). This was driven by growth in volume and market share,
manufacturing efficiencies and the benefits of the Gist acquisition
completed last year of over GBP30m.
-- Clothing & Home sales grew 5.7% with LFL sales up 5.5%,
supported by more confident buying and further improvements in
style perceptions, driving sales with notable highlights in areas
such as holiday and denim. Customer numbers increased, and sales
grew across channels, with stores outperforming online. Adjusted
operating margin increased to 12.1% from 9.8% last year (2021/22:
10.2%), supported by a modest increase in full price sales mix to
82%, cost reduction in the logistics network and better currency
and freight rates than anticipated. Online sales grew 4.6%, and
online adjusted operating profit margin increased to 9.0% from 6.9%
as a result of robust full price sales and growth of click and
collect, which helped to reduce fulfilment costs.
-- International sales increased 3.9% at constant currency, with
more modest partner demand following restocking last year. Adjusted
operating profit increased 11.3% to GBP43.4m supported by
structural cost reduction savings.
-- Ocado Retail sales increased 6.9%. The recovery strategy at
Ocado Retail started to have some impact. Active customers
increased, supported by the 'Big Price Drop' campaign and an
increase in the M&S range available on Ocado.com. The M&S
share of Ocado Retail net loss increased to GBP23.4m from GBP0.7m
driven by the continued effect of costs related to new and excess
capacity, plus the one-off accrual release in the prior year
result.
OUTLOOK AND GUIDANCE
Trading momentum has been maintained through October and we are
planning for a good Christmas, with customers already responding
positively to our ranges. However, as we enter 2024, we are not
relying on the favourable recent market conditions persisting. The
outlook remains uncertain with the probable impact on the consumer
of the highest interest rates in 20 years, deflation, geopolitical
events, and erratic weather. Notwithstanding this backdrop, we will
continue to invest in trusted value for our customers and we are
increasing our investment in the reshaping of M&S in the second
half. Therefore, against more challenging comparatives, we expect
profit before tax and adjusting items to be weighted towards the
first half, as we remain laser-focused on our long-term ambition to
reshape M&S for future growth.
DIVID
The board remains committed to sustaining a strong balance sheet
and investing for growth as well as restoring an investment grade
credit rating. However, with M&S generating a further
improvement in operating performance, balance sheet and credit
metrics, we are restoring a modest dividend to shareholders,
starting with an interim dividend of 1p per share. This will be
paid on 12 January 2024 to shareholders on the register of members
as at close of business on 17 November 2023.
STRATEGY TO RESHAPE M&S IS DELIVERING
Our vision for M&S is to be the UK's most trusted retailer,
doing the right thing for our customers, where products are at the
heart of everything we do. To deliver this, in October last year,
the new Executive team set out nine strategic priorities to reshape
M&S for growth and value creation, with 5-year objectives of a
1% increase in market share in both Clothing & Home and Food
and adjusted operating margins of over 10% in Clothing & Home
and now over 4% in Food. This is supported by capital investment
programmes focused on increasing volume in growth channels and on
structural reduction of the cost base. During the first half, a
clear medium-term capital investment envelope of c.GBP450m net of
disposals was established and hurdle rates on non-store investments
were strengthened further. We have made good progress, with lots
done, but lots still to do.
EXCEPTIONAL PRODUCT, TRUSTED RETAILER
-- Food continued its investment in trusted value, with prices
reduced across more than 200 lines including 'Remarksable value'
where sales increased 45% and products featured in over 20% of
customer baskets. In addition, prices were locked on over 150
customer favourites. Category resets in ambient products delivered
strong sales growth with biscuits up 29% and homecare up 27%.
Alongside this, M&S Food is upgrading quality on over 1000
products, further widening the gap to competitors' products, with
over 560 upgrades in the half. This helped to drive a further
improvement in net promoter scores for quality and sustainability.
Food market share increased 10bps to 3.4%. (Source: Kantar 12 w/e 1
October 2023)
-- Clothing & Home bought into core products and seasonal
lines with increased confidence, and further reduced the percent of
sales sold at discount. As it moves towards modernising the supply
chain, shorter lead time replenishment helped to support growth in
sales. Women's denim and casual bottom sales increased 17%, while
holiday wear increased 18%. Prices were frozen on school uniforms
for the third consecutive year, while improvements to kids'
casualwear drove sales growth. M&S Clothing continues to hold
leading net promoter scores for quality and value, with style
perceptions improving further. It achieved the leading market share
position for summer in womenswear for the first time in 4 years,
with overall market share for Clothing & Footwear reaching
9.5%. (Source: Kantar 12 w/e 17 September 2023)
CUSTOMER CENTRIC OMNI-CHANNEL BUSINESSES
Clothing & Home's omni-channel objective is to deliver an
integrated, personalised experience to customers combining the
M&S App and Sparks loyalty membership. This means improving and
investing in the online buying experience and integrating
fulfilment and delivery with a national store and distribution
network to offer a convenient and consistent service, whenever,
wherever and however customers choose to shop with us. We believe
we are in the early stages of our omni-channel programme, with the
following progress made:
-- The period saw further reversion to normal shopping patterns
after the pandemic, and as a result, store sales outperformed
online sales. In the year ahead, we expect to see a return of
stronger online growth.
-- Active App users has increased 7% to 4.9m since the start of
the year. Over 40% of Clothing & Home online sales went through
the App compared with 34% last year. There was a further increase
in the Sparks membership base driven by engagement initiatives.
There is, however, more to do to support conversion through a
better App shopping experience and to improve Sparks scan rates and
leverage our data to deliver personalised experiences.
-- Customer fulfilment metrics improved, with 64% of orders
fulfilled through click and collect compared with 59% last year,
helping to reduce costs. Working with carrier delivery partners,
customer failure rates reduced, supported by supply chain
investment and systems changes. The transfer of returns to local
hub stores is helping to increase the speed of refund and resale of
returned stock.
Ocado Retail is in the early stages of restoring direction and
profitability. Our vision for Ocado Retail is to combine the
strength of M&S Food with Ocado's unique and proprietary
technology to create a compelling offer and advantaged service for
online food shopping. Ocado Retail has already generated
significant volume growth and buying benefits for M&S Food, but
the potential of the venture has yet to be realised:
-- Collaboration between M&S and Ocado Retail is increasing.
The range of M&S products on Ocado.com has increased to over
80% of the addressable range. In addition, the first joint sourcing
tender was completed, and joint customer acquisition tested.
Towards the end of the period, there were increases in M&S
volume and sales growth rates.
-- A programme of service improvements was launched in January
since when "on time and in full" orders have increased by 6%. A new
robotic customer fulfilment centre opened in Luton, with operations
at Hatfield ceasing. The new Luton CFC has the potential to achieve
double the productivity of the previous site.
EXPANDED GLOBAL REACH
The International business's objective is to grow retail sales
by leveraging the M&S brand through capital light franchise
partnerships and a multi-platform online business with global
reach. Growth has been slower in the current year with a net 9
stores opening in the first half and modest growth in orders
following restocking last year. International is trialling new ways
of working with franchise partners, to encourage them to buy more
confidently into key seasonal lines and to develop the omni-channel
proposition, while also working to reduce overall stock
holding.
STRUCTURALLY LOWER COST BASE
The purpose of the cost reduction programme is to underpin
operating margins of over 10% in Clothing & Home and over 4% in
Food through structurally reducing costs by more than GBP400m by
FY28. Savings of over GBP100m were delivered in the first half and
M&S is on track to deliver over GBP150m in the current year,
although further work is needed to embed permanent reductions in
the underlying cost base.
-- Retail operational efficiencies delivered through investments
in in-store technology and a reduction in store stock handling
through the 'One Best Way' programme, have resulted in savings of
over GBP30m.
-- Logistics efficiencies across both main businesses helped
offset rising warehouse and transport costs, and included the
closure of the West Thurrock Clothing & Home DC, generating
benefits of c.GBP30m.
-- Organisational simplification across digital, technology and
central teams in support centres started to reduce headcount,
realising savings of c.GBP15m against the context of rising central
costs.
In addition to the structural cost savings, as noted below, the
Gist acquisition has delivered over GBP30m of benefits in the first
half.
HIGH PERFORMANCE CULTURE
Our objective is to raise the bench strength at M&S through
a relentless focus on talent and to make M&S an exceptional
place to pursue retail and technology careers with a more
performance-driven organisation focused on delivering for
customers. During the first half, the CEO and Executive team
refreshed M&S's vision, purpose and behaviours with the aim of
creating a simpler, faster, technically enabled organisation, which
is closer to customers and colleagues and is supported by a core
set of expectations as to how the business operates day to day.
-- The Closer to Colleagues and Closer to Customers programmes
have already resulted in over 10,000 ideas entered to the Straight
to Stuart programme, and support centre colleagues have spent over
28,000 hours working in stores, bringing them closer to the front
line.
-- Over 3,000 managers in the UK are taking part in development
programmes, which are now being introduced to International
locations.
-- M&S is raising the bar on talent with over 230 colleagues
participating in fast-track learning and future leaders' programmes
in the first half, with the aim of reducing the need for external
hires. More robust goal setting and appraisal processes have been
put in place, to ensure colleagues who deliver to high standards
are recognised and underperformance is identified.
ACCELERATING STORE ROTATION
For many years, M&S has been constrained by its historic
failure to modernise a legacy store base. As a result, even today,
we depend on ageing stores that are costly to operate and maintain
and, in some cases, no longer on pitch. Our objective is to
accelerate store rotation to create a brand-enhancing, productive
estate of c.180 full line stores and c.400 M&S-operated Food
stores in growth locations by FY28. Meeting these challenging
targets will mean accelerating the pipeline of new development:
-- During the first half, the full line estate decreased by two
stores, while the M&S-operated Food estate also decreased by
two. Rotation included flagship relocations of full line stores at
Leeds White Rose and Liverpool One as well as the opening of a new,
smaller full line format at Purley Way. These stores are attracting
new customers and trading ahead of plan. The Birmingham Bullring
relocation opened yesterday and further relocations in Manchester
Trafford Centre and Thurrock will open before Christmas.
-- An additional six stores were renewed in the period,
increasing capacity in areas catering to the larger family shop and
improving productivity in Clothing & Home, with stores
performing well and exceeding our objectives. During the second
half, a further six renewals are planned, and alongside new stores,
this will bring the total to 108 stores in the new format.
MODERNISED SUPPLY CHAIN
In both Clothing & Home and Food, M&S has historically
suffered from a high cost and under-invested supply chain. In both
cases there are substantial opportunities for improvement, and for
the first time, strong teams are in place, focused on reshaping
both the networks and operating practices:
-- In Food, the integration of Gist has gone well, with early
cost savings and multiple small improvements arising from operating
in a single collaborative team. The annualised contribution from
Gist from the elimination of management fees, operational savings
and improved service is now running at c.GBP60m, with benefits of
over GBP30m delivered in the first half. M&S and Gist are now
embarking on a multi-year programme to 'fix the backbone' processes
and systems including work to define long-term network
requirements.
-- Clothing & Home is initiating a long-term programme of
change to deliver a smoother, more store-friendly flow of goods,
less trapped stock, and a faster supply chain. This will mean
focusing on fewer, more strategic suppliers, systems upgrades to
increase visibility and connectivity, and the creation of an
omni-channel logistics network. Changes underway include the
planned consolidation of denim supply and investment in online
order fulfilment capability at the Stoke and Ollerton
warehouses.
DATA, DIGITAL AND TECHNOLOGY
The aim of data, digital and technology investment is to drive
growth through creating an engaging customer experience, supported
by efficient operations and business infrastructure. The combined
costs of investment in data, digital and technology where we have a
potential strategic advantage, and modernisation of legacy
technology systems, will require careful prioritisation and
sequencing. We are therefore re-evaluating our overall data,
digital and technology investment envelope to ensure the sequencing
of investment generates effective returns on investment.
In the first half, we made continued progress on developing and
implementing mission critical systems. New Food forecasting,
ordering and stock allocation systems have now been rolled out
across c.60% of categories. Alongside this, a partner for the new
Clothing & Home planning system was selected in the first half.
We also began the programme to upgrade M&S's enterprise
resource planning system.
DISCIPLINED CAPITAL ALLOCATION
M&S's ability to invest is driven by its capital allocation
framework which is focused on the generation of free cash flow from
operations. The first half saw another period of cash generation
and net debt reduced further.
Having delivered a transformed balance sheet over the last few
years, we are in a much stronger position to sustain growth and
reduce funding costs. With improvements to the balance sheet,
ratios of debt to EBITDA and cash flow to net debt are expected to
remain at levels consistent with an investment grade credit rating.
Our approach balances the needs of shareholders and creditors while
providing a robust sponsor covenant to our pension trustees.
With M&S generating a further improvement in operating
performance, balance sheet and credit metrics, the Board is
restoring a modest dividend to shareholders, starting with an
interim dividend of 1p per share.
For further information, please contact:
Investor Relations:
Fraser Ramzan: +44 7554 227 758
Sandeep Dasgupta +44 7868 735 381
Media enquiries:
Corporate Press Office: +44 (0)20 8718 1919
Investor & Analyst presentation and Q&A:
A pre-recorded investor and analyst presentation will be
available on the Marks and Spencer Group Plc website here from
7:30am on 8 November 2023.
Stuart Machin and Jeremy Townsend will host a Q&A session at
9.30am on 8 November 2023:
For the quickest joining experience, please register prior to
attending the call here . After registering, you will be given
unique dial in details to join the call.
Alternatively, you can use the below details to join the call
but please join 5-10 minutes before the start time in order to
register your details with the operator.
Dial in: +44 (0) 33 0551 0200
Passcode: Quote Analyst Call when prompted by the operator
Replay: A recording of the 9.30am call will be available
here
Important Notice:
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the UK version of the Market Abuse Regulation (EU) No. 596/2014 as
it forms part of UK law by virtue of the European Union
(Withdrawal) Act 2018. Upon the publication of this announcement,
this inside information is now considered to be in the public
domain.
Statements made in this announcement that look forward in time
or that express management's beliefs, expectations or estimates
regarding future occurrences and prospects are "forward-looking
statements" within the meaning of the United States federal
securities laws. These forward-looking statements reflect Marks and
Spencer's current expectations concerning future events and actual
results may differ materially from current expectations or
historical results. Any forward-looking statements are subject to
various risks and uncertainties, including, but not limited to,
failure by Marks and Spencer to predict accurately customer
preferences; decline in the demand for products offered by Marks
and Spencer; competitive influences; changes in levels of store
traffic or consumer spending habits; effectiveness of Marks and
Spencer's brand awareness and marketing programmes; general
economic conditions including, but not limited to, those related to
the Covid-19 pandemic or a downturn in the retail or financial
services industries; acts of war or terrorism worldwide; work
stoppages, slowdowns or strikes; and changes in financial and
equity markets. For further information regarding risks to Marks
and Spencer's business, please consult the risk management section
of the 2023 Annual Report (pages 56-65).
The forward-looking statements contained in this document speak
only as of the date of this announcement, and Marks and Spencer
does not undertake to update any forward-looking statement to
reflect events or circumstances after the date hereof or to reflect
the occurrence of unanticipated events.
HALF YEAR FINANCIAL REVIEW
Financial Summary
26 weeks ended 30 Sept 23 1 Oct 22 Change vs 22/23 %
GBPm GBPm
----------------------------------------------- ----------- --------- ------------------
Group statutory revenue 6,134.0 5,538.2 10.8
Group sales 6,164.4 5,563.6 10.8
UK Food 3,803.6 3,317.5 14.7
UK Clothing & Home 1,849.5 1,749.7 5.7
International 511.3 496.4 3.0
Group operating profit before adjusting items 410.4 280.7 46.2
UK Food 164.9 71.8 129.7
UK Clothing & Home 223.4 171.4 30.3
International 43.4 39.0 11.3
Share of result in Ocado Retail Limited (23.4) (0.7)
All other segments 2.1 (0.8)
Net interest payable on lease liabilities (54.7) (55.7)
Net financial interest 4.5 (19.5)
Profit before tax & adjusting items 360.2 205.5 75.3
Adjusting items (34.6) 3.0
Profit before tax 325.6 208.5 56.2
Profit after tax 206.9 166.7 24.1
Basic earnings per share 10.6p 8.5p 24 .7
Adjusted basic earnings per share 12.7p 7.8p 62.8
Dividend per share 1.0p -
Net debt (2,564) (2,929) (12.5)
Group capex and disposals (190.0) (183.6) 3.5
Free cash flow from operations 27.7 (116.8)
Notes:
There are a number of non-GAAP measures and alternative profit
measures ("APMs") discussed within this announcement, and a
glossary and reconciliation to statutory measures is provided at
the end of this report. Adjusted results are consistent with how
business performance is measured internally and presented to aid
comparability of performance. Refer to the adjusting items table
below for further details.
Group results
Group sales were GBP6,164.4m. This was an increase of 10.8%
versus 2022/23, driven by Food sales up 14.7%, Clothing & Home
sales up 5.7%, and International sales up 3.0%. UK Food sales
growth also reflects the impact of third-party sales by Gist
Limited of GBP71.9m following its acquisition, which had a positive
effect of c.2.2% in the half. Like-for-like sales were unaffected
by the acquisition of Gist.
Statutory revenue in the period was GBP6,134.0m, an increase of
10.8% versus 2022/23.
The Group generated profit before tax and adjusting items of
GBP360.2m, compared with GBP205.5m in the prior year.
Adjusting items were a net charge of GBP34.6m, compared with a
credit of GBP3.0m in the prior year. The net charge in the period
primarily consists of costs relating to the UK store estate
rotation plans and to the ceasing of operations at Ocado Retail's
Hatfield CFC , partially offset by a credit relating to the
remeasurement of Ocado Retail contingent consideration to nil.
As a result, the Group generated a statutory profit before tax
of GBP325.6m, compared with GBP208.5m in the prior year.
Adjusted basic EPS was 12.7p, up 62.8% on 2022/23 reflecting
higher adjusted profit in the period. Basic EPS was 10.6p, up 24.7%
on 2022/23, reflecting the increased profit in the period.
An interim dividend of 1p per share was declared, payable on 12
January 2024.
For full details on adjusting items and the Group's related
policy, read more on notes 3 and 1 to the financial
information.
UK: Food
UK Food sales increased 14.7%, with like-for-like sales up
11.7%, underpinned by investment in value and quality, and strong
growth in basket-building categories such as Grocery, Homecare and
Frozen.
Change vs 22/23 % Q1 Q2 HY
-------------------------- ----- ----- -----
Food (1) 15.1 14.2 14.7
Food like-for-like sales 12.5 11.0 11.7
(1) UK Food sales growth in Q1 and Q2 reflects the impact of
third-party sales by Gist Limited, which had a positive effect of
c.2.2%. UK Food sales are equal to statutory revenue.
M&S Food has an online grocery presence with Ocado Retail
and these sales are reported through Ocado Retail and are not
contained within these numbers .
26 weeks ended 30 Sept 23 1 Oct 22 Change vs 22/23 %
-------------------------------- ------------- --------- ------------------
Transactions, m (average/week) 9.41 8.77 7.3
Basket value inc VAT (GBP) 15.23 14.45 5.4
Total sales ex VAT GBPm(1) 3,803.6 3,317.5 14.7
(1) Includes M&S.com and third-party sales by Gist
Limited.
Transactions increased, driven by growth in new customers, and
basket value was up 5.4%, primarily due to increased average
selling prices. Larger basket transactions continued to grow with
the value of baskets over GBP30 up 15.8%.
30 Sept 23 1 Oct 22 Change vs 22/23 %
26 weeks ended GBPm GBPm
----------------------------------------- ----------- --------- ------------------
Sales 3,803.6 3,317.5 14.7
Operating profit before adjusting items 164.9 71.8 129.7
Adjusted operating margin 4.3% 2.2% 210bps
Operating profit before adjusting items was GBP164.9m compared
with GBP71.8m in 2022/23, with a net adjusted operating margin of
4.3%.
Food adjusted operating margin increased by c.210bps. Gross
margin improved c.65bps, largely as a result of manufacturing,
operational and packaging efficiencies within cost of goods, while
operating costs as a percent to sales improved c.145bps as sales
growth of 14.7% exceeded cost growth of 8.4%. Cost growth included
colleague pay and energy related inflation of c.GBP50m, which was
more than offset by structural cost reduction and the benefits of
the Gist acquisition.
The table below sets out the resulting movement in Food adjusted
operating margin by key cost driver:
Operating profit margin %
before adjusting items
----------------------------- -----
2022/23 2.2
Gross margin 0.65
Store staffing 0.55
Other store costs 0.15
Distribution and warehousing 0.25
Central Food costs 0.50
2023/24 4.3
UK: Clothing & Home
Clothing & Home sales increased 5.7% driven by higher
average selling price and increased customer numbers, with stores
outperforming online. There was good growth in Womenswear, Menswear
and Kidswear.
Change vs 22/23 % Q1 Q2 HY
------------------------------------- ---- ---- ----
Clothing & Home sales 7.4 4.1 5.7
Clothing & Home like-for-like sales 7.2 3.8 5.5
Clothing & Home stores sales 9.4 3.2 6.2
Clothing & Home online sales 3.1 6.0 4.6
Clothing & Home statutory revenue 7.1 4.1 5.5
To enable greater insight into these movements, further detail
is provided on the performance of each channel.
Online
30 Sept 23 1 Oct 22 Change vs 22/23 %
---------------------------------------------------- ----------- ------------------
26 weeks ended
---------------------------------------------------- ----------- -------- ------------------
Traffic (m)(1) 234.8 203.7 15.3
Conversion (%)(2) 6.3 7.0 -70bps
Average order value incl. VAT pre returns (GBP)(3) 66.12 64.04 3.2
Returns rate (%)(4) 32.4 30.5 190bps
Sales ex VAT GBPm 579.4 554.1 4.6
(1) Traffic: the number of site visits to M&S.com and the
app. Prior year numbers restated due to basis of calculation.
(2) Conversion: the number of orders as a % of the number of
site visits.
(3) Prior year numbers restated due to basis of calculation.
(4) Prior year numbers restated due to basis of calculation.
Returns rate represents returns on despatch sales.
Online sales remained solid with growth in the half despite the
channel mix being more in favour of stores. Traffic increased over
15% as brand marketing drew in more visitors to the site but
conversion declined 70bps as new customers browsed with more
consideration before making a purchase. Average order value grew
3.2% reflecting a higher average selling price, including a higher
mix of third-party brand sales.
The online returns rate increased year on year. This was due to
an increasing number of multi size baskets and the growth of
third-party brands which have a higher returns rate.
Stores
30 Sept 23 1 Oct 22 Change vs 22/23 %
------------------------------------------------ ----------- ------------------
26 weeks ended
------------------------------------------------ ----------- -------- ------------------
Transactions, m (average/week) 1.68 1.71 -1.8
Average basket value inc VAT pre returns (GBP) 40.06 37.69 6.3
Sales ex VAT GBPm 1,270.1 1,195.6 6.2
UK Clothing & Home store sales increased 6.2%, with strength
in retail parks, city centre and shopping centre locations,
supported by higher average selling price and strong full price
sales.
Total Clothing & Home
Operating profit before adjusting items was GBP223.4m compared
with GBP171.4m in 2022/23, an increase of 30.3%.
30 Sept 23 1 Oct 22 Change vs 22/23 %
26 weeks ended GBPm GBPm
----------------------------------------- ----------- --------- ------------------
Statutory revenue 1,819.1 1,724.3 5.5
Sales 1,849.5 1,749.7 5.7
Operating profit before adjusting items 223.4 171.4 30.3
Adjusted operating margin 12.1% 9.8% 230bps
Clothing & Home adjusted operating margin increased by
c.230bps. Gross margin increased c.90bps driven by lower than
anticipated freight and currency related costs, as well as average
selling price increases in the prior year. Operating costs as a
percent to sales improved c.140bps as sales growth of 5.7% exceeded
cost growth of 2.5%. Cost growth included colleague pay and energy
related inflation of c.GBP28m, which was more than offset by
structural cost reduction such as technology improvements in store
and logistics network changes.
The table below sets out the drivers of the movement in Clothing
& Home operating profit before adjusting items for the total
segment.
Operating profit margin Total
before adjusting items %
----------------------------- ------
2022/23 9.8
Gross margin 0.9
Store staffing 0.2
Other store costs 1.0
Distribution and warehousing 1.0
Central Clothing &
Home costs (0.8)
2023/24 12.1
As outlined above, the overall Clothing & Home adjusted
operating margin increased by c.230bps. Within channels, stores
margin increased c.240bps to 13.5% and online margin increased
c.210bps to 9.0%.
International
Total International sales increased 3.0% (3.9% at constant
currency). Store sales grew 3.4% driven by the opening of net 9 new
stores and higher reduced-price sales in India, as well as Food
sales growth in the Channel Islands. Online sales were up 0.9%,
with growth in India offset by higher returns and more challenging
conditions in other markets.
30 Sept 23 1 Oct 22 Change vs 22/23 % Change vs
26 weeks ended GBPm GBPm 22/23 CC %
------------------------------------------------------------- ----------- --------- ------------------ -----------
Total sales 511.3 496.4 3.0 3.9
Memo: Sales excl. Republic of Ireland 363.2 352.0 3.2 5.0
Operating profit before adjusting items 43.4 39.0 11.3 15.3
Adjusted operating margin 8.5% 7.9% 60bps 80bps
Memo: Operating profit before adjusting items excl. Republic
of Ireland 32.4 31.7 2.2 6.6
Total International operating profit before adjusting items was
up 11.3% to GBP43.4m, with adjusted operating margin up 60bps to
8.5%. This was largely driven by operating cost savings within
International logistics and improved efficiency from shifting
European volume from the UK to the new distribution hub in
Croatia.
Ocado Retail Limited
The Group holds a 50% interest in Ocado Retail Limited ("Ocado
Retail"). The remaining 50% interest is held by Ocado Group Plc
("Ocado Group"). Half Year Results are consistent with the
quarterly results reported by Ocado Group on behalf of Ocado Retail
for the quarterly periods ended 28 May 2023 and 27 August 2023.
Q1 Q2 HY
--------------------------------------------- ----- ---- ----
Revenue growth (%) 6.7 7.2 6.9
Active customer growth (period end) (%) (1) 10.6 1.5 1.5
Average order per week growth (%) 3.8 1.9 2.1
Notes: Retail revenue comprises revenues from Ocado.com and
Ocado Zoom. Average orders per week refers to results of
Ocado.com
(1) HY active customer growth reflects the exit rate of the
period.
Revenue increased 6.9% over the 26 weeks to 27 August 2023. This
was primarily driven by an increase in average selling price,
growth in active customers and higher average orders per week.
26 weeks ended 27 Aug 23 28 Aug 22 Change
GBPm GBPm GBPm
-------------------------------------------------- ---------- ---------- -------
Revenue 1,164.4 1,089.0 75.4
EBITDA before exceptional items 5.3 9.8 (4.5)
Exceptional items(1) (33.4) 31.2 (64.6)
Depreciation and amortisation (31.2) (28.5) (2.7)
Operating (loss)/profit (59.3) 12.5 (71.8)
Net interest charge (13.5) (14.3) 0.8
Taxation (7.8) 0.5 (8.3)
Loss after tax (80.6) (1.3) (79.3)
M&S 50% share of loss after tax (40.3) (0.7) (39.6)
Reported in M&S Group adjusted profit before tax (23.4) (0.7) (22.7)
Reported in M&S Group adjusting items (16.9) - (16.9)
(1) Exceptional items are defined within the Ocado Group Plc
Annual Report and Accounts 2022.
Ocado Retail EBITDA before exceptional items was down,
reflecting a one-off accrual release in the prior year.
M&S Group share of Ocado Retail underlying loss after tax
was GBP23.4m, driven by lower EBITDA before exceptional items,
increased depreciation and amortisation, and increased
taxation.
M&S Group share of Ocado Retail exceptional items was
GBP16.9m, relating to the ceasing of operations at the Hatfield
CFC.
The increased tax charge was the release of a deferred tax
provision in the period.
Combining both underlying performance and exceptional items,
M&S Group share of Ocado Retail loss after tax was
GBP40.3m.
M&S Bank and Services
M&S Bank and Services generated a profit before adjusting
items of GBP2.4m, compared with a loss of GBP0.8m in 2022/23 .
During the period, M&S Bank benefited from lower forward
provisions for economic guidance year on year, although this was
more than offset by increased funding and other operating
expenses.
Net finance cost
26 weeks ended 30 Sept 23 1 Oct 22 Change vs 22/23 GBPm
GBPm GBPm
-------------------------------------------------------------- ----------- --------- ---------------------
Interest payable (24.7) (37.9) 13.2
Interest income 22.7 8.5 14.2
Net interest payable (2.0) (29.4) 27.4
Pension net finance income 12.1 14.2 (2.1)
Unwind of discount on Scottish Limited Partnership liability (2.3) (2.4) 0.1
Unwind of discount on provisions (3.3) (1.9) (1.4)
Net financial interest 4.5 (19.5) 24.0
Net interest payable on lease liabilities (54.7) (55.7) 1.0
Net finance costs before adjusting items (50.2) (75.2) 25.0
Adjusting items included in net finance costs 60.8 112.2 (51.4)
Net finance costs 10.6 37.0 (26.4)
Net finance costs before adjusting items decreased GBP25.0m to
GBP50.2m. This was driven by higher average interest rates on cash
balances and reduced interest expense as a result of the buy-back
of medium-term note maturities.
Adjusting items within net finance costs reflect a credit of
GBP64.7m relating to the remeasurement of Ocado Retail contingent
consideration to nil and a charge of GBP3.9m reflecting the
discount unwind on deferred and contingent consideration on the
acquisition of Gist Limited.
Group profit before tax and adjusting items
Group profit before tax and adjusting items was GBP360.2m, up
75.3% on 2022/23. The profit increase was primarily due to strong
growth in Food and Clothing & Home and reduced interest
expense, partly offset by an increased net loss in Ocado
Retail.
Group profit before tax
Group profit before tax was GBP325.6m, up 56.2% on 2022/23. This
includes a net charge for adjusting
items of GBP34.6m (2022/23: credit of GBP3.0m).
Adjusting items
The Group makes certain adjustments to statutory profit measures
in order to derive alternative performance measures (APMs) that
provide stakeholders with additional helpful information and aid
comparability of the performance of the business. For further
detail on these (charges)/gains and the Group's policy for
adjusting items, please see notes 3 and 1 to the financial
information. These (charges)/gains are reported as adjusting items
on the basis that they are significant in quantum in current or
future years and aid comparability from one period to the next.
26 weeks ended 30 Sept 23 1 Oct 22 Change vs 22/23
GBPm GBPm GBPm
---------------------------------------------------------------------------- ----------- --------- ----------------
Included in share of result of associate - Ocado Retail Limited
Ocado Retail Limited - UK network capacity review (16.9) - (16.9)
(16.9) - (16.9)
Included in operating profit
Strategic programmes - UK store estate (67.1) (26.3) (40.8)
Strategic programmes - Organisation (3.5) (14.6) 11.1
Store impairments, impairment reversals and other property charges - (36.3) 36.3
Amortisation and fair value adjustments arising as part of the investment
in Ocado Retail
Limited (6.5) (7.0) 0.5
M&S Bank charges incurred in relation to the insurance mis-selling
provisions (1.0) (1.0) -
Acquisition of Gist Limited (0.4) (24.4) 24.0
Franchise restructure - 0.4 (0.4)
(78.5) (109.2) 30.7
Included in net finance income/(costs)
Remeasurement of Ocado Retail Limited contingent consideration 64.7 112.2 (47.5)
Net finance costs incurred in relation to Gist Limited deferred and
contingent consideration (3.9) - (3.9)
60.8 112.2 (51.4)
Adjustments to profit before tax (34.6) 3.0 (37.6)
Adjusting items recognised were a net charge of GBP34.6m. These
include:
A charge of GBP16.9m included within the share of result in
associate. This reflects the group share of costs relating to the
ceasing of operations at Ocado Retail's Hatfield CFC after a wider
review of UK network capacity.
A charge of GBP67.1m in relation to UK store estate rotation
plans. This reflects a revised view of latest store exit routes,
assumptions, estimated closure costs, charges relating to the
impairment of buildings, fixtures and fittings, and accelerated
depreciation.
A non-cash charge of GBP3.5m within organisation relating to an
increase in the IFRS 9 impairment held in relation to the finance
lease receivable for the sublet of previously closed Merchant
Square offices.
A non-cash charge of GBP6.5m with respect to the amortisation of
intangible assets acquired on the purchase of our share in Ocado
Retail .
Charges of GBP1.0m have been incurred in relation to M&S
Bank insurance mis-selling provisions.
Taxation
Taxes on income in the interim period are accrued using the tax
rate that would be applicable to expected total annual earnings,
adjusted for actual tax on adjusting items.
The taxation charge in the income statement for the half year is
based on the forecast full year tax rate on profit before adjusting
items of 31.2% (last half year 24.8%; last full year 25.9%). This
is higher than the UK statutory rate primarily due to the impact of
the recapture of tax relief on SLP distributions and non-taxable
Ocado Retail losses.
The effective tax rate on profit before taxation is 36.5% (last
half year: 20.0%; last full year: 23.4%).
Earnings per share
Basic earnings per share was 10.6p (2022/23: 8.5p). Adjusted
basic earnings per share was 12.7p (2022/23: 7.8p) due to higher
adjusted profit year on year.
The weighted average number of ordinary shares in issue during
the period was 1,967.0m (2022/23: 1,962.4m), with the weighted
average number of diluted ordinary shares 2,080.6m (2022/23:
2,006.6m).
Cash flow
26 weeks ended 30 Sept 23 1 Oct 22 Change vs 22/23
GBPm GBPm GBPm
-------------------------------------------------------- ----------- ---------- ----------------
Operating profit 315.0 171.5 143.5
Adjusting items within operating profit 95.4 109.2 (13.8)
Operating profit before adjusting items 410.4 280.7 129.7
Depreciation and amortisation before adjusting items 258.5 250.6 7.9
Cash lease payments (155.5) (171.8) 16.3
Surrender payments (8.9) (2.2) (6.7)
Working capital (135.2) (148.8) 13.6
Non-cash pension expense 2.6 - 2.6
Defined benefit scheme pension funding (0.5) (36.9) 36.4
Capex and disposals (190.0) (183.6) (6.4)
Financial interest (37.5) (59.2) 21.7
Taxation (73.8) (26.2) (47.6)
Employee-related share transactions 9.5 15.0 (5.5)
Share of loss from associate 23.4 0.7 22.7
Share of results in other joint ventures (0.2) - (0.2)
Adjusting items in cash flow (28.1) (35.1) 7.0
Loans to Associates (47.0) - (47.0)
Free cash flow from operations 27.7 (116.8) 144.5
Acquisitions, investments, and divestments (2.1) (98.7) 96.6
Free cash flow 25.6 (215.5) 241.1
Dividends paid - - -
Free cash flow after shareholder returns 25.6 (215.5) 241.1
Opening net debt excluding lease liabilities (355.6) (420.1) 64.5
Free cash flow after shareholder returns 25.6 (215.5) 241.1
Exchange and other non-cash movements excluding leases 10.1 7.2 2.9
Closing net debt excluding lease liabilities (319.9) (628.4) 308.5
Opening net debt (2,637.2) (2,698.8) 61.6
Free cash flow after shareholder returns 25.6 (215.5) 241.1
Decrease in lease obligations 115.3 109.9 5.4
New lease commitments and remeasurements (67.3) (141.6) 74.3
Exchange and other non-cash movements (0.4) 17.3 (17.7)
Closing net debt (2,564.0) (2,928.7) 364.7
The business generated free cash flow from operations of
GBP27.7m, a year on year improvement of GBP144.5m. This was driven
by higher operating profit as a result of strong performance across
Food and Clothing & Home, as well as lower pension funding and
interest payments.
Decreased defined benefit scheme pension funding of GBP36.4m
reflects the deferral of the SLP 'Series C' payment into the
pension scheme.
Increased taxation was principally due to the increased profit
in the prior year.
Adjusting items in cash flow was GBP28.1m. This included
GBP13.6m relating to the UK store estate strategy, GBP5.8m related
to structural simplification, GBP4.1m for interest payments on the
Gist contingent consideration and GBP1.0m relating to the M&S
Bank insurance mis-selling provisions.
Loans to Associates principally reflects a GBP45.0m drawdown of
the shareholder loan facility by Ocado Retail.
The business generated free cash flow of GBP25.6m, resulting in
a further reduction of net debt.
Capital expenditure
26 weeks ended 30 Sept 23 1 Oct 22 Change vs 22/23
GBPm GBPm GBPm
---------------------------------------------------------------- ----------- --------- ----------------
UK store remodelling 13.4 26.0 (12.6)
New UK stores 54.0 20.8 33.2
International 6.4 5.5 0.9
Supply chain 24.1 16.0 8.1
IT and M&S.com 33.1 40.1 (7.0)
Property asset replacement 48.8 42.3 6.5
Capital expenditure before property acquisitions and disposals 179.8 150.7 29.1
Property acquisitions and disposals (0.3) - (0.3)
Capital expenditure 179.5 150.7 28.8
Movement in capital accruals and other items 10.5 32.9 (22.4)
Capex and disposals as per cash flow 190.0 183.6 6.4
Group capital expenditure before property acquisitions and
disposals increased GBP29.1m to GBP179.8m due to increased
investment in new UK stores and supply chain, partially offset by
reduced spend on store remodelling and technology.
UK store remodelling costs reflected 5 Food renewals in the half
and upgrades to Clothing & Home space in full line stores.
Spend on new UK stores primarily related to the opening of 3
full line, 2 Food stores and one Food renewal (incl. extension) in
the period.
Supply chain expenditure reflects investment in upgrading
vehicles, as well as replacement of logistics equipment.
IT and M&S.com spend includes technology replacement and
upgrades in stores, and continued investment in website and app
development.
Property asset replacement largely relates to reinvestment in
and replacement of core assets across the store estate, including
building repairs, refrigeration, lifts and escalators, as well as
spend on energy efficiency initiatives and maintenance.
The movement in capital accruals and other items is driven by
the timing of new store and construction invoices versus the prior
year.
Net debt
Group net debt decreased GBP73.2m since the start of the year
driven by free cash flow from operations of GBP27.7m and a net
decrease in lease liabilities.
New lease commitments and remeasurements in the period were
GBP67.3m, largely relating to 7 UK lease additions, lease additions
in India, and UK property liability remeasurements. This was offset
by GBP115.3m of capital lease repayments.
The composition of Group net debt is as follows:
26 weeks ended 30 Sept 23 1 Oct 22 Change vs 22/23
GBPm GBPm GBPm
-------------------------------------- ----------- ---------- ----------------
Cash and cash equivalents 828.7 772.7 56.0
Medium Term Notes (1,047.9) (1,396.0) 348.1
Current financial assets and other 21.2 110.9 (89.7)
Partnership liability (121.9) (116.0) (5.9)
Net debt excluding lease liabilities (319.9) (628.4) 308.5
Lease liabilities (2,244.1) (2,300.3) 56.2
- Full line stores (877.2) (902.1) 24.9
- Simply Food stores (685.3) (699.8) 14.5
- Offices, warehouses and other (475.2) (484.5) 9.3
- International (206.4) (213.9) 7.5
Group net debt (2,564.0) (2,928.7) 364.7
The Medium Term Notes include five bonds, with maturities out to
2037, and the associated accrued interest. During the period, part
of the 2023, 2025 and 2026 bonds were repurchased, reducing
near-term liquidity draws. The USD 300m 2037 bond is valued by
reference to the embedded exchange rate in the associated cross
currency swaps. The full breakdown of maturities is as follows:
Bond and maturity Value (GBPm)
date
------------------- -------------
Dec 2023, GBP 128.1
Jun 2025, GBP 206.3
May 2026, GBP 200.7
Jul 2027, GBP 248.8
Dec 2037, USD 251.8
Total principal
value 1,035.7
Other 12.2
Total carrying
value 1,047.9
Full line store lease liabilities include GBP177.3m relating to
stores identified as part of the UK store estate strategic
programme. Of the remaining full line stores lease liability, the
liability-weighted average lease length to break is c.19 years.
However, these average lease lengths are skewed by three
particularly long leases we hold, with the longest of these having
133 years remaining. These three leases are not deemed probable for
closure in our UK store estate strategic programme as they are
currently trading well at locations we wish to remain in. Excluding
these three leases, the average term to break of leases outside the
programme is c.15 years.
Simply Food store lease liabilities include GBP25.8m relating to
stores identified as part of the UK store estate strategic
programme. Of the remaining lease liability, the average lease
length to break is c.9 years.
Within offices, warehouses and other lease liabilities,
GBP142.0m relates to the sublet lease on the Merchant Square
offices. Average lease length of all other offices and warehouses
to break is c.9 years.
International leases relate primarily to India (c.GBP107m) and
Ireland (c.GBP59m). Average lease length to break in India is close
to nil, as the majority of these leases are past the break point,
and so we have the flexibility to exit these at any time on several
months' notice. Average length to lease break or expiry in Ireland
is c.8 years.
Pension
At 30 September 2023, the IAS 19 net retirement benefit surplus
was GBP179.7m (FY 2022/23: GBP477.4m). There has been a decrease of
GBP297.7m since the start of the year largely driven by an increase
in gilt yields.
The pension scheme is fully hedged for movements in gilt yields.
However, on an IAS 19 basis, there is an inherent basis risk to the
scheme valuation, with the pension assets moving with underlying
movements in rates and scheme liabilities exposed to the movement
in corporate bond yields. In a normal period, this always results
in some dislocation between movements in the scheme assets and
liabilities. However, the increase in gilt yields in the year led
to a larger dislocation. Nevertheless, there has been no material
worsening of the scheme's overall funding position and the scheme
remains fully funded on a technical provisions basis.
The most recent actuarial valuation of the Marks & Spencer
UK Pension Scheme was carried out as at 31 March 2021 and showed a
funding surplus of GBP687m. This is an improvement on the previous
position at 31 March 2018 (statutory surplus of GBP652m), primarily
due to lower assumed life expectancy. The Company and Trustees have
confirmed, in line with the current funding arrangement, that no
further contributions will be required to fund past service as a
result of this valuation (other than those already contractually
committed under the existing Marks and Spencer Scottish Limited
Partnership arrangements).
Marks and Spencer Scottish Limited Partnership
Marks and Spencer Plc is a general partner of the Marks and
Spencer Scottish Limited Partnership, with the UK defined benefit
pension scheme, which is a limited partner.
The Partnership holds GBP1.3bn (last year: GBP1.3bn) of
properties at book value which have been leased back to Marks and
Spencer Plc. The first limited Partnership interest held by the
scheme entitles it to receive GBP73.0m in 2023 and GBP54.4m in 2024
and is included as a financial liability in the financial
statements as it is a transferable financial instrument. During the
period, the Group and the Pension Scheme Trustees agreed to amend
the distribution dates so that the Pension Scheme is entitled to
receive GBP40.0m in October 2023, GBP34.9m in March 2024 and
GBP54.4m in June 2024.
The second Partnership interest held by the scheme entitles it
to receive a further GBP36.4m annually from June 2017 until June
2031. During the period, the Group and the Pension Scheme Trustees
agreed to amend the distribution dates so that the Pension Scheme
is entitled to GBP37.8m in March 2024 and then an annual
distribution of GBP36.4m from June 2024 to June 2031. It is not a
transferable financial instrument, so the associated liability is
not included on the Group's statement of financial position, rather
the annual distribution is recognised as a contribution to the
scheme each year.
Liquidity
At 30 September 2023 , the Group held cash and cash equivalents
of GBP828.7m (2022/23: GBP772.7m). In the period, as part of its
approach to liability management, the Group bought back GBP276.8m
of its medium-term maturities and does not expect to refinance its
December 2023 maturity of GBP128.1m.
The Group currently has an unused GBP850m revolving credit
facility which is due to expire in June 2026 on terms linked to
delivery of its net zero roadmap. With the facility undrawn, the
Group has total liquidity headroom of GBP1.7bn.
Dividend
With the Group generating a further improvement in operating
performance, balance sheet and credit metrics, the Board is
restoring a modest dividend to shareholders, starting with an
interim dividend of 1p per share, payable on 12 January 2024.
Statement of financial position
Net assets were GBP2,847.5m at the period end. The profit made
in the period and the reduction in borrowings due to the buy-back
of medium-term maturities was largely offset by a decrease in the
net retirement benefit surplus, resulting in an overall increase in
net assets of 1.2% since the start of the year.
Principal risks and uncertainties
The principal risks and uncertainties which could impact the
Group's long-term performance are set out on pages 56 - 65 of the
Group's 2023 Annual Report and Financial Statements, along with
mitigating activities relevant to each risk. Additionally,
information on financial risk management is set out on pages 184 -
194. A copy of the Annual Report and Financial Statements is
available on the Group's website: www.marksandspencer.com.
The Board of Directors have considered the principal risks and
uncertainties disclosed in the 2023 Annual Report and Financial
Statements and confirm that they remain relevant for the remainder
of the financial year. The principal risks covered are:
-- An uncertain trading environment;
-- Business transformation;
-- JV investments;
-- Business continuity and resilience;
-- Product safety and integrity;
-- Talent, capability and culture;
-- Information security;
-- Corporate compliance and responsibility;
-- Climate change and environmental responsibility;
-- Liquidity, funding and financial markets; and
-- EU border challenges.
Statement of directors' responsibilities
The directors confirm that, to the best of their knowledge, this
condensed consolidated interim financial information has been
prepared in accordance with UK-adopted IAS 34 and that the interim
management report includes a fair review of the information
required by DTR 4.2.4R, DTR 4.2.7R and DTR 4.2.8R, namely:
- the condensed set of financial statements gives a true and
fair view of the assets, liabilities, financial position, cash
flows and profit or loss of the issuer, or undertakings included in
the consolidation;
- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
- material related party transactions in the first six months
and any material changes in the related party transactions
described in the last annual report.
There have been no changes to the directors of Marks and Spencer
Group plc to those listed in the Group's 2023 Annual Report and
Financial Statements. A list of current directors is maintained on
the Group's website: www.marksandspencer.com.
By order of the Board
Stuart Machin
Chief Executive
Condensed consolidated income statement
26 weeks ended 52 weeks
ended
----------------------------------------
30 Sep 1 Oct 2022 1 April
2023 2023
(Unaudited) (Unaudited) (Audited)
Total Total Total
Notes GBPm GBPm GBPm
----------------------------- ------- ------------------- ------------------- ---------------------
Revenue 2 6,134.0 5,538.2 11,931.3
2,
Share of result of associate 3,
- Ocado Retail Limited 8 (46.8) (7.7) (43.5)
----------------------------- ------- ------------------- ------------------- ---------------------
2,
Operating profit 3 315.0 171.5 515.1
Finance income 4 102.3 137.7 166.1
Finance costs 4 (91.7) (100.7) (205.5)
2,
Profit before tax 3 325.6 208.5 475.7
----------------------------- ------- ------------------- ------------------- ---------------------
Income tax expense 5 (118.7) (41.8) (111.2)
Profit for the period 206.9 166.7 364.5
----------------------------- ------- ------------------- ------------------- ---------------------
Attributable to:
Owners of the parent 208.0 166.1 363.4
Non-controlling interests (1.1) 0.6 1.1
----------------------------- ------- ------------------- ------------------- ---------------------
206.9 166.7 364.5
----------------------------- ------- ------------------- ------------------- ---------------------
Earnings per share
Basic 6 10.6p 8.5p 18.5p
Diluted 6 10.0p 8.3p 17.9p
----------------------------- ------- ------------------- ------------------- ---------------------
Reconciliation of adjusted profit before tax:
Profit before tax 325.6 208.5 475.7
Adjusting items 3 34.6 (3.0) 6.3
----------------------------- ------- ------------------- ------------------- ---------------------
Profit before tax & adjusting
items - non-GAAP measure 360.2 205.5 482.0
-------------------------------------- ------------------- ------------------- ---------------------
Adjusted earnings per share - non-GAAP
measure
Basic 6 12.7p 7.8p 18.1p
Diluted 6 12.0p 7.7p 17.5p
----------------------------- ------- ------------------- ------------------- ---------------------
Condensed consolidated statement of comprehensive
income
26 weeks ended 52 weeks
ended
----------------------------------------
30 Sep 1 Oct 2022 1 April
2023 2023
(Unaudited) (Unaudited) (Audited)
Notes GBPm GBPm GBPm
----------------------------- ------- ------------------- ------------------- ---------------------
Profit for the period 206.9 166.7 364.5
----------------------------- ------- ------------------- ------------------- ---------------------
Other comprehensive
income/(expense):
Items that will not be
reclassified subsequently
to profit or loss
Remeasurements of retirement
benefit schemes 9 (307.5) (247.7) (622.8)
Tax credit on retirement
benefit schemes 76.9 62.0 158.0
----------------------------- ------- ------------------- ------------------- ---------------------
(230.6) (185.7) (464.8)
----------------------------- ------- ------------------- ------------------- ---------------------
Items that may be
reclassified
subsequently to profit
or loss
Foreign currency translation
differences
- movement recognised in
other comprehensive income (4.4) 22.2 4.3
Cash flow hedges
- fair value movements
in other comprehensive
income 26.3 271.4 77.0
- reclassified and reported
in profit or loss (3.1) (42.9) (14.4)
Tax charge on cash flow
hedges (5.4) (51.0) (18.6)
----------------------------- ------- ------------------- ------------------- ---------------------
13.4 199.7 48.3
----------------------------- ------- ------------------- ------------------- ---------------------
Other comprehensive
income/(expense)
for the period, net of
tax (217.2) 14.0 (416.5)
----------------------------- ------- ------------------- ------------------- ---------------------
Total comprehensive income
for the period (10.3) 180.7 (52.0)
----------------------------- ------- ------------------- ------------------- ---------------------
Attributable to:
Owners of the parent (9.2) 180.1 (53.1)
Non-controlling interests (1.1) 0.6 1.1
----------------------------- ------- ------------------- ------------------- ---------------------
(10.3) 180.7 (52.0)
----------------------------- ------- ------------------- ------------------- ---------------------
Condensed consolidated statement of financial position
As at As at As at
30 Sep 1 Oct 1 April
2023 2022 2023
(Unaudited) (Unaudited) (Audited)
Notes GBPm GBPm GBPm
----------------------------- ------- ------------------- ------------------- ---------------------
Assets
Non-current assets
Intangible assets 179.5 201.4 163.1
Property, plant and equipment 5,119.4 5,056.5 5,203.7
Investment property 11.8 14.9 11.8
Investment in joint ventures
and associates 8 721.3 804.0 767.9
Other financial assets 11 12.5 7.0 7.9
Retirement benefit asset 9 184.2 845.0 482.0
Trade and other receivables 348.7 255.2 298.7
Derivative financial
instruments 11 6.1 112.6 0.1
Deferred tax assets 7.6 9.9 7.6
----------------------------- ------- ------------------- ------------------- ---------------------
6,591.1 7,306.5 6,942.8
----------------------------- ------- ------------------- ------------------- ---------------------
Current assets
Inventories 999.7 1,017.6 764.4
Other financial assets 11 9.0 10.5 13.0
Trade and other receivables 313.0 295.5 280.6
Derivative financial
instruments 11 25.3 199.8 22.6
Current tax assets 6.5 0.8 6.5
Cash and cash equivalents 828.7 772.7 1,067.9
----------------------------- ------- ------------------- ------------------- ---------------------
2,182.2 2,296.9 2,155.0
----------------------------- ------- ------------------- ------------------- ---------------------
Total assets 8,773.3 9,603.4 9,097.8
----------------------------- ------- ------------------- ------------------- ---------------------
Liabilities
Current liabilities
Trade and other payables 2,141.9 2,230.9 2,048.8
Partnership liability to
the Marks & Spencer UK
Pension
Scheme 10 127.1 73.0 73.0
Borrowings and other
financial
liabilities 335.4 197.2 444.0
Derivative financial
instruments 11 20.8 20.3 58.1
Provisions 38.1 37.1 44.0
Current tax liabilities 57.3 38.5 38.5
----------------------------- ------- ------------------- ------------------- ---------------------
2,720.6 2,597.0 2,706.4
----------------------------- ------- ------------------- ------------------- ---------------------
Non-current liabilities
Retirement benefit deficit 9 4.5 5.0 4.6
Trade and other payables 116.5 175.3 181.3
Partnership liability to
the Marks & Spencer UK
Pension
Scheme 10 - 49.9 51.8
Borrowings and other
financial
liabilities 2,956.5 3,499.1 3,184.0
Derivative financial
instruments 11 5.6 0.7 7.1
Provisions 83.9 77.8 75.4
Deferred tax liabilities 38.2 185.3 72.3
----------------------------- ------- ------------------- ------------------- ---------------------
3,205.2 3,993.1 3,576.5
----------------------------- ------- ------------------- ------------------- ---------------------
Total liabilities 5,925.8 6,590.1 6,282.9
----------------------------- ------- ------------------- ------------------- ---------------------
Net assets 2,847.5 3,013.3 2,814.9
----------------------------- ------- ------------------- ------------------- ---------------------
Equity
Issued share capital 20.0 19.8 19.8
Share premium account 911.6 910.7 910.7
Capital redemption reserve 2,680.4 2,680.4 2,680.4
Hedging reserve 19.4 92.7 (31.9)
Cost of hedging reserve 4.1 5.5 4.2
Other reserve (6,542.2) (6,542.2) (6,542.2)
Foreign exchange reserve (74.0) (51.7) (69.6)
Retained earnings 5,824.9 5,893.3 5,839.1
----------------------------- ------- ------------------- ------------------- ---------------------
Equity attributable to
owners of the parent 2,844.2 3,008.5 2,810.5
Non-controlling interests 3.3 4.8 4.4
----------------------------- ------- ------------------- ------------------- ---------------------
Total equity 2,847.5 3,013.3 2,814.9
----------------------------- ------- ------------------- ------------------- ---------------------
The notes on pages 29 to 50 form an integral part
of the condensed consolidated interim financial information.
Condensed consolidated statement of changes in equity
26 weeks ended 30 Ordinary Share Capital Hedging Cost Other Foreign Retained Total Non-controlling Total
September 2023 share premium redemption reserve of reserve(1) exchange earnings(2) interest equity
capital account reserve hedging reserve
reserve
(Unaudited)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------- -------- ------- ---------- ------- ------- ---------- -------- ----------- ------- --------------- -------
As at 2 April 2023 19.8 910.7 2,680.4 (31.9) 4.2 (6,542.2) (69.6) 5,839.1 2,810.5 4.4 2,814.9
Profit for the
period - - - - - - - 208.0 208.0 (1.1) 206.9
Other comprehensive
income/(expense):
Foreign currency
translation
- movement
recognised
in other
comprehensive
income - - - - - - (4.4) - (4.4) - (4.4)
Remeasurements of
retirement benefit
schemes - - - - - - - (307.5) (307.5) - (307.5)
Tax credit on
retirement
benefit schemes - - - - - - - 76.9 76.9 - 76.9
Cash flow hedges
- fair value
movements
in other
comprehensive
income - - - 26.5 (0.2) - - - 26.3 - 26.3
- reclassified and
reported in profit
or loss - - - (3.1) - - - - (3.1) - (3.1)
Tax on cash flow
hedges - - - (5.5) 0.1 - - - (5.4) - (5.4)
------------------- -------- ------- ---------- ------- ------- ---------- -------- ----------- ------- --------------- -------
Other comprehensive
income/(expense) - - - 17.9 (0.1) - (4.4) (230.6) (217.2) - (217.2)
------------------- -------- ------- ---------- ------- ------- ---------- -------- ----------- ------- --------------- -------
Total comprehensive
income/(expense) - - - 17.9 (0.1) - (4.4) (22.6) (9.2) (1.1) (10.3)
------------------- -------- ------- ---------- ------- ------- ---------- -------- ----------- ------- --------------- -------
Cash flow hedges
recognised
in inventories - - - 44.6 - - - - 44.6 - 44.6
Tax on cash flow
hedges
recognised in
inventories - - - (11.2) - - - - (11.2) - (11.2)
Transactions with
owners:
Shares issued in
respect
of employee share
options 0.2 0.9 - - - - - - 1.1 - 1.1
Purchase of shares
held by employee
trusts - - - - - - - (16.7) (16.7) - (16.7)
Credit for
share-based
payments - - - - - - - 25.1 25.1 - 25.1
As at 30 September
2023 20.0 911.6 2,680.4 19.4 4.1 (6,542.2) (74.0) 5,824.9 2,844.2 3.3 2,847.5
------------------- -------- ------- ---------- ------- ------- ---------- -------- ----------- ------- --------------- -------
26 weeks ended 1 Ordinary Share Capital Hedging Cost Other Foreign Retained Total Non-controlling Total
October 2022 share premium redemption reserve of reserve(1) exchange earnings(2) interest equity
capital account reserve hedging reserve
reserve
(Unaudited)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------- -------- ------- ---------- ------- ------- ---------- -------- ----------- ------- --------------- -------
As at 3 April 2022 19.7 910.6 2,680.4 17.6 3.6 (6,542.2) (73.9) 5,897.9 2,913.7 4.2 2,917.9
Profit for the
period - - - - - - - 166.1 166.1 0.6 166.7
Other comprehensive
(expense)/income:
Foreign currency
translation
- movement
recognised
in other
comprehensive
income - - - - - - 22.2 - 22.2 - 22.2
Remeasurements of
retirement benefit
schemes - - - - - - - (247.7) (247.7) - (247.7)
Tax credit on
retirement
benefit schemes - - - - - - - 62.0 62.0 - 62.0
Cash flow hedges
- fair value
movements
in other
comprehensive
income - - - 268.8 2.6 - - - 271.4 - 271.4
- reclassified and
reported in profit
or loss - - - (42.9) - - - - (42.9) - (42.9)
Tax on cash flow
hedges - - - (50.3) (0.7) - - - (51.0) - (51.0)
------------------- -------- ------- ---------- ------- ------- ---------- -------- ----------- ------- --------------- -------
Other comprehensive
income/(expense) - - - 175.6 1.9 - 22.2 (185.7) 14.0 - 14.0
------------------- -------- ------- ---------- ------- ------- ---------- -------- ----------- ------- --------------- -------
Total comprehensive
income/(expense) - - - 175.6 1.9 - 22.2 (19.6) 180.1 0.6 180.7
------------------- -------- ------- ---------- ------- ------- ---------- -------- ----------- ------- --------------- -------
Cash flow hedges
recognised
in inventories - - - (124.1) - - - - (124.1) - (124.1)
Tax on cash flow
hedges
recognised in
inventories - - - 23.6 - - - - 23.6 - 23.6
Transactions with
owners:
Shares issued on
exercise
of employee share
options 0.1 0.1 - - - - - - 0.2 - 0.2
Credit for
share-based
payments - - - - - - - 15.0 15.0 - 15.0
As at 1 October
2022 19.8 910.7 2,680.4 92.7 5.5 (6,542.2) (51.7) 5,893.3 3,008.5 4.8 3,013.3
------------------- -------- ------- ---------- ------- ------- ---------- -------- ----------- ------- --------------- -------
52 weeks ended 1 Ordinary Share Capital Hedging Cost Other Foreign Retained Total Non-controlling Total
April 2023 share premium redemption reserve of reserve(1) exchange earnings(2) interest equity
capital account reserve hedging reserve
reserve
(Audited)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------- -------- ------- ---------- ------- ------- ---------- -------- ----------- ------- --------------- -------
As at 3 April 2022 19.7 910.6 2,680.4 17.6 3.6 (6,542.2) (73.9) 5,897.9 2,913.7 4.2 2,917.9
Profit for the year - - - - - - - 363.4 363.4 1.1 364.5
Other comprehensive
income/(expense):
Foreign currency
translation
- movement
recognised
in other
comprehensive
income - - - - - - 4.3 - 4.3 - 4.3
Remeasurements of
retirement benefit
schemes - - - - - - - (622.8) (622.8) - (622.8)
Tax credit on
retirement
benefit schemes - - - - - - - 158.0 158.0 - 158.0
Cash flow hedges
- fair value
movements
in other
comprehensive
income - - - 76.2 0.8 - - - 77.0 - 77.0
- reclassified and
reported in profit
or loss - - - (14.4) - - - - (14.4) - (14.4)
Tax on cash flow
hedges - - - (18.4) (0.2) - - - (18.6) - (18.6)
------------------- -------- ------- ---------- ------- ------- ---------- -------- ----------- ------- --------------- -------
Other comprehensive
income/(expense) - - - 43.4 0.6 - 4.3 (464.8) (416.5) - (416.5)
------------------- -------- ------- ---------- ------- ------- ---------- -------- ----------- ------- --------------- -------
Total comprehensive
income/(expense) - - - 43.4 0.6 - 4.3 (101.4) (53.1) 1.1 (52.0)
------------------- -------- ------- ---------- ------- ------- ---------- -------- ----------- ------- --------------- -------
Cash flow hedges
recognised
in inventories - - - (123.9) - - - - (123.9) - (123.9)
Tax on cash flow
hedges
recognised in
inventories - - - 31.0 - - - - 31.0 - 31.0
Transactions with
owners:
Transactions with
non-controlling
shareholders - - - - - - - - - (0.9) (0.9)
Shares issued in
respect
of employee share
options 0.1 0.1 - - - - - (0.1) 0.1 - 0.1
Purchase of shares
held by employee
trusts - - - - - - - (0.1) (0.1) - (0.1)
Credit for
share-based
payments - - - - - - - 38.0 38.0 - 38.0
Deferred tax on
share
schemes - - - - - - - 4.8 4.8 - 4.8
------------------- -------- ------- ---------- ------- ------- ---------- -------- ----------- ------- --------------- -------
As at 1 April 2023 19.8 910.7 2,680.4 (31.9) 4.2 (6,542.2) (69.6) 5,839.1 2,810.5 4.4 2,814.9
------------------- -------- ------- ---------- ------- ------- ---------- -------- ----------- ------- --------------- -------
(1) The 'Other reserve' was originally created as part of the
capital restructuring that took place in 2002. It represents the
difference between the nominal value of the shares issued prior to
the capital reduction by the Company (being the carrying value of
the investment in Marks and Spencer plc) and the share capital,
share premium and capital redemption reserve of Marks and Spencer
plc at the date of the transaction.
(2) Included within "Retained earnings" is the fair value
through other comprehensive income reserve.
Condensed consolidated statement of cash flows
26 weeks ended 52 weeks ended
------------------------
30 Sep 2023 1 Oct 2022 1 April 2023
(Unaudited) (Unaudited) (Audited)
Notes GBPm GBPm GBPm
--------------------------------------------------------- ----- ----------- ----------- --------------
Cash flows from operating activities
Cash generated from operations 13 556.0 326.2 1,100.5
Income tax paid (73.8) (26.2) (70.6)
--------------------------------------------------------- ----- ----------- ----------- --------------
Net cash inflow from operating activities 482.2 300.0 1,029.9
--------------------------------------------------------- ----- ----------- ----------- --------------
Cash flows from investing activities
Proceeds on property disposals 0.3 - 1.1
Purchase of property, plant and equipment (161.4) (143.6) (325.8)
Purchase of intangible assets (28.9) (40.0) (84.5)
Sale of current financial assets 3.2 7.8 5.3
Purchase of non-current financial assets (2.1) (3.5) (4.2)
Proceeds on disposal of non-current financial assets - 0.2 0.2
Acquisition of subsidiary, net of cash acquired(1) - (95.4) (102.8)
Loans to related parties (47.0) - (30.0)
Interest received 21.8 6.8 24.1
--------------------------------------------------------- ----- ----------- ----------- --------------
Net cash used in investing activities (214.1) (267.7) (516.6)
--------------------------------------------------------- ----- ----------- ----------- --------------
Cash flows from financing activities
Interest paid(2) (108.3) (130.1) (212.5)
Redemption of Medium Term Notes (267.5) (150.6) (189.9)
Repayment of lease liabilities (115.3) (109.9) (231.8)
Payment of liability to the Marks & Spencer UK Pension Scheme - (71.9) (66.0)
Shares issued on exercise of employee share options 1.1 - -
Purchase of own shares by employee trust (16.7) - (0.1)
Cash received from settlement of derivatives - - 56.5
--------------------------------------------------------- ----- ----------- ----------- --------------
Net cash used in financing activities (506.7) (462.5) (643.8)
--------------------------------------------------------- ----- ----------- ----------- --------------
Net cash outflow from activities (238.6) (430.2) (130.5)
Effects of exchange rate changes (0.6) 5.0 0.5
Opening net cash 1,067.9 1,197.9 1,197.9
--------------------------------------------------------- ----- ----------- ----------- --------------
Closing net cash 828.7 772.7 1,067.9
--------------------------------------------------------- ----- ----------- ----------- --------------
(1) Last half year includes GBP95.4m (last full year: GBP102.8m) relating to the purchase
of Gist Limited, being consideration of GBP163.2m (last full year: GBP170.6m) net of cash
acquired of GBP67.8m (last full year: GBP67.8m).
(2) Includes interest paid on the partnership liability to the Marks & Spencer UK Pension
Scheme of GBPnil (last half year: GBP5.9m; last full year: GBP5.9m) and interest paid on lease
liabilities of GBP49.1m (last half year: GBP64.1m; last full year: GBP121.9m).
Notes to the financial statements (Unaudited)
1 General information and basis of preparation
General information
This condensed consolidated interim information for the period
does not constitute statutory financial statements within the
meaning of s434 of the Companies Act 2006.
The summary of results for the year ended 1 April 2023 is an
extract from the published Annual Report and Financial Statements
which were approved by the Board of Directors on 23 May 2023, have
been reported on by the Group's auditors and delivered to the
Registrar of Companies. The audit report on the Annual Report and
Financial Statements was unqualified, did not contain an emphasis
of matter paragraph and did not contain any statement under s498
(2) or (3) of the Companies Act 2006.
Basis of preparation
The financial information has been prepared in accordance with
the UK-adopted International Accounting Standard 34 'Interim
Financial Reporting' and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
Going concern basis
The financial statements have been prepared on a going concern
basis. In adopting the going concern basis, the directors have
considered the business activities as set out on pages 1 to 6 and
the principal risks and uncertainties as set out on page 23.
At 30 September 2023, the Group's access to liquidity remained
strong at over GBP1.7bn, comprising cash and cash equivalents of
GBP828.7m, an undrawn committed syndicated bank revolving credit
facility of GBP850.0m (set to mature in June 2026), and undrawn
uncommitted facilities amounting to GBP25.0m.
The forecast cashflows for the 12-month period to November 2024,
used to support the assessment of going concern, incorporate a
latest estimate of the ongoing impact of current market conditions
on the Group and include a number of assumptions, including sales
growth and customer behaviour. In forming their outlook on the
future financial performance, the directors considered a variety of
downsides that the Group might experience, such as cost pressures,
including inflationary headwinds, and any potential impact of a
recession. The downside scenario also assumed that a delay in
transformation benefits resulted in a decline in the incremental
sales expected from these activities.
Based on the forecast cashflows, throughout the next 12-month
period to November 2024, the Group does not anticipate needing to
draw on its available facilities and has adequate headroom to meet
the covenant requirements.
As a result, the directors believe that the Group is well placed
to manage its financing and other principal risks satisfactorily
and that the Group will be able to operate within the level of its
facilities for the foreseeable future, being a period of at least
12 months from the approval of the financial statements. For this
reason, the directors consider it appropriate for the Group to
adopt the going concern basis in preparing its interim financial
statements.
Accounting policies
The results for the first half of the financial year have been
reviewed, not audited and are prepared on the basis of the
accounting policies set out in the Group's 2023 Annual Report and
Financial Statements.
Several amendments apply for the first time during the period
but have not led to any changes to the Group's accounting policies
or have any other material impact on the financial position or
performance of the Group.
Alternative performance measures
In reporting financial information, the Group presents
alternative performance measures ("APMs") which are not defined or
specified under the requirements of IFRS.
The Group believes that these APMs, which are not considered to
be a substitute for, or superior to, IFRS measures, provide
stakeholders with additional helpful information on the performance
of the business. The APMs are consistent with how the business
performance is planned and reported within the internal management
reporting to the Board and Executive Committee. Some of these
measures are also used for the purpose of setting remuneration
targets.
The key APMs that the Group uses include: sales; like-for-like
sales growth; adjusted operating profit; adjusted operating margin;
profit before tax and adjusting items; adjusted basic earnings per
share; net debt; net debt excluding lease liabilities; free cash
flow; free cash flow from operations; and capital expenditure. Each
of these APMs, and others used by the Group, are set out in the
Glossary, including explanations of how they are calculated and how
they can be reconciled to a statutory measure where relevant.
The Group reports some financial measures, primarily
International sales, on both a reported and constant currency
basis. The constant currency basis, which is an APM, retranslates
the previous year revenues at the average actual periodic exchange
rates used in the current financial year. This measure is presented
as a means of eliminating the effects of exchange rate fluctuations
on the year-on-year reported results.
The Group makes certain adjustments to the statutory profit
measures in order to derive many of these APMs. The Group's policy
is to exclude items that are considered significant in nature
and/or quantum over the total expected life of the programme or are
consistent with items that were treated as adjusting in prior
periods. The Group's definition of adjusting items is consistent
with prior periods. Adjusted results are consistent with how
business performance is measured internally and presented to aid
comparability of performance. On this basis, the following items
were included within adjusting items for the 26-week period ended
30 September 2023:
- Net charges associated with the strategic programme in
relation to the review of the UK store estate.
- Significant restructuring costs and other associated costs
arising from strategy or operational changes that are not
considered by the Group to be part of the normal operating costs of
the business.
- Impairment charges and provisions that are significant in
nature and/or value to the trading performance of the business.
- Charges and reversals of previous impairments arising from the
write-off of assets and other property charges that are significant
in nature and/or value. Impairment charges are recognised in
adjusted operating profit where they relate to stores not
previously impaired or do not otherwise meet the Group's adjusting
items policy.
- Adjustments to income from M&S Bank due to a provision
recognised by M&S Bank for the cost of providing redress to
customers in respect of possible mis-selling of M&S Bank
financial products.
- Amortisation of the identified intangible assets arising as
part of the investment in Ocado Retail Limited.
- Remeasurement of Ocado Retail Limited contingent consideration.
- Significant costs relating to the acquisition of Gist Limited.
- Net finance costs incurred in relation to Gist Limited
deferred and contingent consideration.
- (New) Share of net charges associated with Ocado Retail
Limited's UK network capacity review.
Refer to note 3 for a summary of the adjusting items.
Critical accounting judgements and key sources of estimation
uncertainty
The preparation of the consolidated financial statements
requires the Group to make estimates and judgements that affect the
application of policies and reported amounts. The critical
accounting judgements and key sources of estimation uncertainty
remain consistent with those presented in note 1 of the Group's
2023 Annual Report and Financial Statements.
2 Segmental Information
IFRS 8 Operating Segments requires operating segments to be
identified on the basis of internal reporting on components of the
Group that are regularly reviewed by the chief operating
decision-maker to allocate resources to the segments and to assess
their performance.
The chief operating decision-maker has been identified as the
Executive Committee. The Executive Committee reviews the Group's
internal reporting in order to assess performance and allocate
resources across each operating segment.
The Group's reportable operating segments have therefore been
identified as follows:
- UK Clothing & Home - comprises the retailing of
womenswear, menswear, lingerie, kidswear and home products through
UK retail stores and online.
- UK Food - includes the results of the UK retail food business,
UK Food franchise operations and UK supply chain services, with the
following five main categories: protein, deli and dairy; produce;
ambient and in-store bakery; meals, dessert and frozen; and
hospitality and 'Food on the Move'; and direct sales to Ocado
Retail Limited.
- International - consists of Marks and Spencer owned businesses
in Europe and Asia and the international franchise operations.
- Ocado - includes the Group's share of profits or losses from
the investment in Ocado Retail Limited.
Other business activities and operating segments, including
M&S Bank and M&S Energy, are combined and presented in "All
other segments". Finance income and costs are not allocated to
segments as each is managed on a centralised basis.
The Executive Committee assesses the performance of the
operating segments based on a measure of operating profit before
adjusting items. This measurement basis excludes the effects of
adjusting items from the operating segments.
The following is an analysis of the Group's revenue and results
by reportable segment:
26 weeks ended 30 September
2023 (Unaudited)
------------------------------------------------------------------------------------
UK Clothing UK International Ocado All Group
& Home Food other
segments
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- -------------------- ------- ------------- ------ ------------------ ----------
Sales(1) 1,849.5 3,803.6 511.3 - - 6,164.4
-------------------- -------------------- ------- ------------- ------ ------------------ ----------
Revenue 1,819.1 3,803.6 511.3 - - 6,134.0
-------------------- -------------------- ------- ------------- ------ ------------------ ----------
Operating
profit/(loss)
before adjusting
items(2) 223.4 164.9 43.4 (23.4) 2.1 410.4
-------------------- -------------------- ------- ------------- ------ ------------------ ----------
Finance income
before adjusting
items 37.6
-------------------- -------------------- ------- ------------- ------ ------------------ ----------
Finance costs before
adjusting items (87.8)
-------------------- -------------------- ------- ------------- ------ ------------------ ----------
Profit/(loss) before
tax and adjusting
items 223.4 164.9 43.4 (23.4) 2.1 360.2
-------------------- -------------------- ------- ------------- ------ ------------------ ----------
Adjusting items (34.6)
-------------------- -------------------- ------- ------------- ------ ------------------ ----------
Profit/(loss) before
tax 223.4 164.9 43.4 (23.4) 2.1 325.6
-------------------- -------------------- ------- ------------- ------ ------------------ ----------
26 weeks ended 1 October 2022
(Unaudited)
------------------------------------------------------------------------------------
UK Clothing UK International Ocado All Group
& Home Food other
segments
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- -------------------- ------- ------------- ------ ------------------ ----------
Sales(1) 1,749.7 3,317.5 496.4 - - 5,563.6
-------------------- -------------------- ------- ------------- ------ ------------------ ----------
Revenue 1,724.3 3,317.5 496.4 - - 5,538.2
-------------------- -------------------- ------- ------------- ------ ------------------ ----------
Operating
profit/(loss)
before adjusting
items(2) 171.4 71.8 39.0 (0.7) (0.8) 280.7
-------------------- -------------------- ------- ------------- ------ ------------------ ----------
Finance income
before adjusting
items 25.5
-------------------- -------------------- ------- ------------- ------ ------------------ ----------
Finance costs before
adjusting items (100.7)
-------------------- -------------------- ------- ------------- ------ ------------------ ----------
Profit/(loss) before
tax and adjusting
items 171.4 71.8 39.0 (0.7) (0.8) 205.5
-------------------- -------------------- ------- ------------- ------ ------------------ ----------
Adjusting items 3.0
-------------------- -------------------- ------- ------------- ------ ------------------ ----------
Profit/(loss) before
tax 171.4 71.8 39.0 (0.7) (0.8) 208.5
-------------------- -------------------- ------- ------------- ------ ------------------ ----------
52 weeks ended 1 April 2023 (Audited)
----------------------------------------------------------------------------------
UK Clothing & Home UK Food International Ocado All other segments Group
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- -------------------- ------- ------------- ------ ------------------ --------
Sales(1) 3,715.0 7,218.0 1,055.0 - - 11,988.0
-------------------- -------------------- ------- ------------- ------ ------------------ --------
Revenue 3,658.3 7,218.0 1,055.0 - - 11,931.3
-------------------- -------------------- ------- ------------- ------ ------------------ --------
Operating
profit/(loss)
before adjusting
items(2) 323.8 248.0 84.8 (29.5) (0.5) 626.6
-------------------- -------------------- ------- ------------- ------ ------------------ --------
Finance income
before adjusting
items 58.1
-------------------- -------------------- ------- ------------- ------ ------------------ --------
Finance costs before
adjusting items (202.7)
-------------------- -------------------- ------- ------------- ------ ------------------ --------
Profit/(loss) before
tax and adjusting
items 323.8 248.0 84.8 (29.5) (0.5) 482.0
-------------------- -------------------- ------- ------------- ------ ------------------ --------
Adjusting items (6.3)
-------------------- -------------------- ------- ------------- ------ ------------------ --------
Profit/(loss) before
tax 323.8 248.0 84.8 (29.5) (0.5) 475.7
-------------------- -------------------- ------- ------------- ------ ------------------ --------
(1) Sales is revenue stated prior to adjustments for UK Clothing & Home brand consignment
sales of GBP30.4m (last half year: GBP25.4m; last full year GBP56.7m).
(2) Operating profit/(loss) before adjusting items is stated as gross profit less operating
costs prior to adjusting items. At reportable segment level costs are allocated where directly
attributable or based on an appropriate cost driver for the cost.
Segment assets and liabilities, including investments in
associates and joint ventures, are not disclosed because they are
not reported to or reviewed by the Executive Committee.
Other disclosures
26 weeks 26 weeks 52 weeks
ended ended ended
30 September 1 October 1 April
2023 2022 2023
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
--------------------------------- ------------- ------------ ----------
Write-down of inventories to net
realisable value 134.7 117.6 266.0
--------------------------------- ------------- ------------ ----------
3 Adjusting items
The total adjusting items reported for the 26-week period ended
30 September 2023 is a net charge of GBP34.6m. The adjustments made
to reported profit before tax to arrive at adjusted profit are:
26 weeks ended 52 weeks
ended
------------------------
30 Sep 2023 1 Oct 2022 1 Apr 2023
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
----------------------------------------- ----------- ----------- ----------
Included in share of result of associate
- Ocado Retail Limited
Ocado Retail Limited - UK network
capacity review (16.9) - -
----------------------------------------- ----------- ----------- ----------
(16.9) - -
----------------------------------------- ----------- ----------- ----------
Included in operating profit
Strategic programmes - UK store estate (67.1) (26.3) (51.3)
Strategic programmes - Organisation (3.5) (14.6) (10.7)
Strategic programmes - Structural
simplification - - (16.4)
Strategic programmes - UK logistics - - (10.5)
Store impairments, impairment reversals
and other property charges - (36.3) 15.1
Amortisation and fair value adjustments
arising as part of the investment
in Ocado Retail Limited (6.5) (7.0) (14.0)
M&S Bank charges incurred in relation
to the insurance mis-selling provisions (1.0) (1.0) (2.0)
Acquisition of Gist Limited (0.4) (24.4) (22.1)
Franchise restructure - 0.4 0.4
(78.5) (109.2) (111.5)
----------------------------------------- ----------- ----------- ----------
Included in net finance income/(costs)
Remeasurement of Ocado Retail Limited
contingent consideration 64.7 112.2 108.0
Net finance costs incurred in relation
to Gist Limited deferred and contingent
consideration (3.9) - (2.8)
----------------------------------------- ----------- ----------- ----------
60.8 112.2 105.2
----------------------------------------- ----------- ----------- ----------
Adjustment to profit before tax (34.6) 3.0 (6.3)
----------------------------------------- ----------- ----------- ----------
Ocado Retail Limited - UK network capacity review (GBP16.9m)
On 25 April 2023, Ocado Retail Limited announced the plan to
cease operations at its Customer Fulfilment Centre ("CFC") in
Hatfield as part of a wider review of UK network capacity.
As a result, Ocado Retail Limited has recorded provisions for
restructuring costs, onerous contracts, other related costs as well
as impairment charges.
The Group's share of these costs, reported within the Group's
"share of result of associate - Ocado Retail Limited", are
considered to be adjusting items as they are one-off in nature and
significant in value to the results of the Ocado segment and the
Group. No future charges are expected in this programme.
Strategic programmes - UK store estate ( GBP67.1m )
In November 2016, the Group announced a strategic programme to
transform and rotate the UK store estate with the overall objective
to improve our store estate to better meet our customers' needs.
The Group incurred charges of GBP870m up to April 2023 under this
programme primarily relating to closure costs associated with
stores identified as part of the strategic transformation
plans.
The Group has recognised a charge of GBP67.1m in the period in
relation to those stores identified as part of the rotation plans.
The charge primarily reflects the latest view of store closure
plans as disclosed in the 2022/23 financial statements and latest
assumptions for estimated store closure costs, as well as charges
relating to the impairment of buildings and fixtures and fittings,
and depreciation as a result of shortening the useful economic life
of stores based on the most recently approved exit routes.
Further charges relating to the closure and rotation of the UK
store estate are anticipated over the next seven and a half years
as the programme progresses, the quantum of which is subject to
change throughout the programme period as we get greater certainty
of circumstances that need to be in place to make closure
financially viable. Future charges will not include Foodhall
closures at lease event where there is opportunity for a better
location, as this is not in the scope of the programme.
The cash flows used within the impairment models for the UK
store estate programme are based on assumptions which are sources
of estimation uncertainty, and small movements in these assumptions
could lead to further impairments. Management has performed
sensitivity analysis on the key assumptions across the UK store
estate programme.
A delay of 12 months in the probable date of each store exit
would result in a decrease in the impairment charge of GBP19.2m and
would create an impairment reversal of GBP32.1m. A 5% reduction in
planned sales in years 2 and 3 (where relevant) would result in an
increase in the impairment charge of GBP8.6m. Neither a 250 basis
point increase in the discount rate, a 25 basis point reduction in
management gross margin during the period of trading, nor a 2%
increase in the costs associated with exiting a store would result
in a significant increase to the impairment charge, individually or
in combination with the other reasonably possible scenarios
considered.
As at 30 September 2023, the total closure programme now
consists of 208 stores, 115 of which have already closed. Further
charges of c.GBP155m are estimated within the next seven and a half
financial years, bringing anticipated total programme costs since
2016 to c.GBP1.1bn. In addition, where store exit routes in the
next seven and a half years lead to the recognition of gains on
exit, particularly those relating to asset management, these
credits will also be recognised within adjusting items as part of
the programme. The anticipated total programme costs to date does
not include any costs that may arise in relation to a further c.30
stores currently under consideration for closure within the next
seven and a half years. At this stage these c.30 stores remain
commercially supportable and in the event of a decision to close
the store the exit routes are not yet certain.
These costs are reported as adjusting items on the basis that
they are significant in quantum, relate to a strategic initiative
focused on reviewing our store estate and to aid comparability from
one period to the next. The programme includes all stores within
the programme to be closed by 2030/31.
Strategic programmes - Organisation (GBP3.5m)
During 2016/17, the Group announced a wide-ranging strategic
review across a number of areas of the business which included UK
organisation and the programme to centralise our London Head Office
functions into one building. In the period, an impairment charge of
GBP3.5m has been recognised (2022/23 GBP10.7m impairment). This
relates to the updating of assumptions and market fluctuations over
the life of the sub-let of previously closed offices. Total costs
of centralising our London Head Office functions into one building
incurred to date are c.GBP101m. Any future charges/reversals will
relate to the updating of assumptions and market fluctuations over
the life of the sub-let lease to September 2040.
These charges are reported as adjusting items on the basis that
they are consistent with the disclosure of costs previously
recognised.
Amortisation and fair value adjustments arising as part of the
investment in Ocado Retail Limited (GBP6.5m)
Intangible assets of GBP366.0m were acquired as part of the
investment in Ocado Retail Limited in 2019/20 relating to the Ocado
brand and acquired customer relationships. These intangibles are
being amortised over their useful economic lives of 10 - 40 years
with an amortisation charge of GBP8.6m recognised in the period and
a related deferred tax credit of GBP2.1m.
The amortisation charge and changes in the related deferred tax
liability are included within the Group's share result of associate
and are considered to be adjusting items as they are based on
judgements about their value and economic life and are not related
to the Group's underlying trading performance. These charges are
reported as adjusting items on the basis that they are significant
in quantum and to aid comparability from one period to the
next.
M&S Bank charges incurred in relation to insurance
mis-selling provisions ( GBP1.0m )
The Group has an economic interest in Marks and Spencer
Financial Services plc (trading as M&S Bank), a wholly owned
subsidiary of HSBC UK Bank plc, by way of a Relationship Agreement
that entitles the Group to a 50% share of the profits of M&S
Bank after appropriate deductions. The Group does not share in any
losses of M&S Bank and is not obliged to refund any profit
share received from HSBC, although future income may be impacted by
significant one-off deductions.
Since the year ended 31 December 2010, M&S Bank has
recognised in its audited financial statements an estimated
liability for redress to customers in respect of possible
mis-selling of financial products. The Group's profit share and fee
income from M&S Bank has been reduced by the deduction of the
estimated liability in both the current and prior years. In line
with the accounting treatment under the Relationship Agreement,
there is a cap on the amount of charges that can be offset against
the profit share in any one year, whereby excess liabilities
carried forward are deducted from the Group's future profit share
from M&S Bank. The deduction in the period is GBP1.0m.
The treatment of this in adjusting items is in line with
previous charges in relation to settlement of Payment Protection
Insurance (PPI) claims and although it is recurring, it is
significant in quantum in the context of the total charges
recognised for PPI mis-selling to-date and is not considered
representative of the normal operating performance of the Group. As
previously noted, while the August 2019 deadline to raise potential
mis-selling claims has now passed, costs relating to the estimated
liability for redress are expected to continue. The total charges
recognised in adjusting items since September 2012 for PPI is
GBP324.7m which exceeds the total offset against profit share of
GBP254.7m to date and this GBP70.0m deficit will be offset from the
Group's share of future profits from M&S Bank.
Acquisition of Gist Limited ( GBP0.4m)
On 30 September 2022 the Group completed the acquisition of Gist
Limited from Storeshield Limited, a subsidiary of The BOC Group
Limited, as part of M&S's multi-year programme to modernise its
Food supply chain network to support growth. As part of the
transaction the Group has incurred charges of GBP0.4m in the period
relating to retention bonuses and has incurred GBP28.7m of one-off
charges to date that are not considered to be day-to-day
operational costs of our business. Transaction costs of GBP6.8m
have been incurred and GBP3.7m of other costs, mainly retention
bonuses, along with GBP18.2m of charges relating to the settlement
of our pre-existing relationship with Gist Limited. This was offset
by a GBP6.2m gain on bargain purchase.
These costs are adjusting items as they relate to a major
transaction and, but for the transaction, the business would not
have incurred these costs and as a result are not considered to be
normal operating costs of the business. No future charges are
expected in this programme.
Remeasurement of contingent consideration including discount
unwind (GBP64.7m credit )
Contingent consideration, resulting from the investment in Ocado
Retail Limited, is remeasured at fair value at each reporting date
with the changes in fair value recognised in profit or loss. During
2021/22, GBP33.8m of contingent consideration was settled,
following the achievement of the first and second performance
targets. A credit of GBP64.7m has been recognised in the period,
representing the revaluation of the contingent consideration
payable. See note 11 for further details. The change in fair value
is considered to be an adjusting item as it relates to a major
transaction and consequently is not considered representative of
the normal operating performance of the Group.
Net finance costs incurred in relation to Gist Limited deferred
and contingent consideration (GBP3.9m)
Deferred consideration, resulting from the acquisition of Gist
Limited, is held at amortised cost, whilst the contingent
consideration is remeasured at fair value at each reporting date
with the changes in fair value recognised in profit or loss. A
charge of GBP3.9m has been recognised in the period, representing
the discount unwind of the deferred consideration and revaluation
of the contingent consideration payable. The discount unwind and
change in fair value is considered to be an adjusting item as it
relates to a major transaction and consequently is not considered
representative of the normal operating performance of the Group.
The discount unwind and remeasurement will be recognised in
adjusting items until the final payments are made in 2025/26.
4 Finance income/(costs)
26 weeks ended 52 weeks
ended
------------------------
30 Sep 2023 1 Oct 2022 1 April
2023
(Unaudited) (Unaudited) (Audited)
Notes GBPm GBPm GBPm
-------------------------------------- ----- ----------- ----------- ---------
Bank and other interest receivable 22.7 6.5 22.9
Pension net finance income 9 12.1 14.2 28.7
Other finance income - 2.0 0.9
Interest income on subleases 2.8 2.8 5.6
-------------------------------------- ----- ----------- ----------- ---------
Finance income before adjusting
items 37.6 25.5 58.1
-------------------------------------- ----- ----------- ----------- ---------
Finance income in adjusting items 3 64.7 112.2 108.0
-------------------------------------- ----- ----------- ----------- ---------
Finance income 102.3 137.7 166.1
-------------------------------------- ----- ----------- ----------- ---------
Other finance costs (4.4) (2.3) (6.4)
Interest payable on syndicated
bank facility (2.4) (2.2) (4.5)
Interest payable on Medium Term
Notes (17.9) (33.4) (65.4)
Interest payable on lease liabilities (57.5) (58.5) (116.7)
Unwinding of discount on partnership
liability to the Marks and Spencer
UK Pension Scheme 10 (2.3) (2.4) (4.3)
Unwind of discount on provisions (3.3) (1.9) (5.4)
-------------------------------------- ----- ----------- ----------- ---------
Finance costs before adjusting
items (87.8) (100.7) (202.7)
-------------------------------------- ----- ----------- ----------- ---------
Finance costs in adjusting items 3 (3.9) - (2.8)
-------------------------------------- ----- ----------- ----------- ---------
Finance costs (91.7) (100.7) (205.5)
-------------------------------------- ----- ----------- ----------- ---------
Net finance income/(costs) 10.6 37.0 (39.4)
-------------------------------------- ----- ----------- ----------- ---------
5 Taxation
Taxes on income in the interim period are accrued using the tax
rate that would be applicable to expected total annual earnings,
adjusted for actual tax on adjusting items.
The taxation charge in the income statement for the half year is
based on the forecast full year tax rate on profit before adjusting
items of 31.2% (last half year 24.8%; last full year 25.9%). This
is higher than the UK statutory rate primarily due to the impact of
the recapture of tax relief on SLP distributions and non-taxable
Ocado losses.
The effective tax rate on profit before taxation is 36.5% (last
half year: 20.0%; last full year: 23.4%).
On 20 June 2023, the UK Government substantively enacted
legislation introducing a global minimum corporate income tax rate,
to have effect from 2024 in line with the OECD's Pillar Two model
framework. The rules will apply to the Group's accounting period
ending March 2025 onwards and are not expected to have a material
impact on the Group's tax rate or tax payments. In May 2023, the
International Accounting Standards Board issued amendments to IAS
12 Income Taxes which provide for a mandatory temporary exception
to the normal requirement to account for deferred tax insofar as
the tax concerned arises under the Pillar Two Rules. The Group has
applied this exception in calculating its half year results.
6 Earnings per share
The calculation of earnings per ordinary share is based on
earnings after tax and the weighted average number of ordinary
shares in issue during the period.
The adjusted earnings per share figures have also been
calculated based on earnings before adjusting items that are
significant in nature and/or quantum and are considered to be
distortive (see note 3). These have been presented to provide
shareholders with an additional measure of the Group's year-on-year
performance.
For diluted earnings per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares. The Group has four types of
dilutive potential ordinary shares being: those share options
granted to employees where the exercise price is less than the
average market price of the Company's ordinary shares during the
period; unvested shares granted under the Deferred Share Bonus
Plan; unvested shares granted under the Restricted Share Plan; and
unvested shares within the Performance Share Plan that have met the
relevant performance conditions at the end of the reporting
period.
Details of the adjusted earnings per share are set out
below:
26 weeks ended 52 weeks
ended
------------------------
30 Sep 1 Oct 2022 1 April
2023 2023
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
------------------------------------------- ----------- ----------- ---------
Profit attributable to equity shareholders
of the Company 208.0 166.1 363.4
------------------------------------------- ----------- ----------- ---------
Add/(less):
Adjusting items (see note 3) 34.6 (3.0) 6.3
Tax on adjusting items 6.4 (9.1) (13.7)
------------------------------------------- ----------- ----------- ---------
Profit before adjusting items attributable
to equity shareholders of the Company 249.0 154.0 356.0
------------------------------------------- ----------- ----------- ---------
Million Million Million
------------------------------------------- ----------- ----------- ---------
Weighted average number of ordinary
shares in issue 1,967.0 1,962.4 1,963.5
Potentially dilutive share options under
the Group's share option schemes 113.6 44.2 70.4
------------------------------------------- ----------- ----------- ---------
Weighted average number of diluted
ordinary shares 2,080.6 2,006.6 2,033.9
------------------------------------------- ----------- ----------- ---------
Pence Pence Pence
------------------------------------------- ----------- ----------- ---------
Basic earnings per share 10.6 8.5 18.5
Diluted earnings per share 10.0 8.3 17.9
Adjusted basic earnings per share 12.7 7.8 18.1
Adjusted diluted earnings per share 12.0 7.7 17.5
------------------------------------------- ----------- ----------- ---------
7 Dividends
With the Group generating a further improvement in operating
performance, balance sheet and credit metrics, the Board is
restoring a dividend to shareholders, starting with an interim
dividend of 1p per share. In line with the requirements of IAS 10
Events after the Reporting Period, this has not been recognised
within these results. This interim dividend will be paid on 12
January 2024 to shareholders whose names are on the Register of
Members at the close of business on 17 November 2023. The ordinary
shares will be quoted ex dividend on 16 November 2023.
A dividend reinvestment plan (DRIP) is available to shareholders
who would prefer to invest their dividends in the shares of the
Company. For those shareholders electing to receive the DRIP, the
last date for receipt of a new election is 19 December 2023.
8 Investments in Joint Ventures
and Associates
The Group holds a 50% interest in Ocado Retail Limited, a
company incorporated in the UK. The remaining 50% interest
is held by Ocado Group Plc. Ocado Retail Limited is an online
grocery retailer, operating through the ocado.com and ocadozoom.com
websites.
Ocado Retail Limited is considered an associate of the Group
as certain rights are conferred on Ocado Group Plc for an
initial period of at least five years from acquisition in
August 2019, giving Ocado Group Plc control of the company.
Following this initial period, a reassessment of control will
be required as the Group will have an option to obtain more
power over Ocado Retail Limited if certain conditions are
met. If the Group is deemed to have obtained control, Ocado
Retail Limited will then be consolidated as a subsidiary of
the Group. Through Board representation and shareholder voting
rights, the Group is currently considered to have significant
influence, therefore the investment in Ocado Retail Limited
is treated as an associate and applies the equity method of
accounting.
Ocado Retail Limited has a financial year end date of 3 December
2023, aligning with its parent company, Ocado Group Plc. For
the Group's purpose of applying the equity method of accounting,
Ocado Retail Limited has prepared financial information to
the nearest quarter-end date of its financial year end, as
to do otherwise would be impracticable. The results of Ocado
Retail Limited are incorporated in these financial statements
from 27 February 2023 to 27 August 2023. There were no significant
events or transactions in the period from 28 August 2023 to
30 September 2023.
The carrying amount of the Group's interest in Ocado Retail
Limited is GBP710.1m (last half year: GBP792.7m; last full
year: GBP756.9m). The Group's share of Ocado Retail Limited
losses of GBP46.8m (last half year: loss of GBP7.7m; last
full year: loss of GBP43.5m) includes the Group's share of
underlying losses of GBP23.4m (last half year: loss of GBP0.7m;
last full year: loss of GBP29.5m), the Group's share of exceptional
items of GBP16.9m (last half year: GBPnil; last full year:
GBPnil) and adjusting item charges of GBP6.5m (last half year:
GBP7.0m; last full year: GBP14.0m) (see note 3).
Summarised financial information in respect of Ocado Retail
Limited (the Group's only material associate) is set out below
and represents amounts in the Ocado Retail Limited financial
statements prepared in accordance with IFRS, adjusted by the
Group for equity accounting purposes.
As at 27 As at 28 As at 26
August 2023 August February
2022 2023
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
---------------------------------------- --------------- ------------ ------------ -----------------
Ocado Retail Limited
Current assets 266.7 213.4 220.0
Non-current assets 565.8 582.5 618.7
Current liabilities (287.1) (227.7) (267.7)
Non-current liabilities (476.7) (361.1) (421.7)
----------------------------------------- -------------- ------------ ------------ -----------------
Net assets 68.7 207.1 149.3
----------------------------------------- -------------- ------------ ------------ -----------------
27 Feb 2023 28 Feb 28 Feb 2022
to 27 Aug 2022 to to 26 Feb
2023 28 Aug 2023
2022
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
---------------------------------------- --------------- ------------ ------------ -----------------
Revenue 1,164.4 1,089.0 2,222.0
Loss for the period (80.6) (1.3) (59.0)
Other comprehensive income - - -
---------------------------------------- --------------- ------------ ------------ -----------------
Total comprehensive income (80.6) (1.3) (59.0)
----------------------------------------- -------------- ------------ ------------ -----------------
In addition, the Group holds investments in joint ventures
totalling GBP11.2m (last half year: GBP11.3m; last full year:
GBP11.0m). The Group's share of profits totalled GBP0.2m (last
half year: GBP0.8m; last full year: GBP0.5m).
9 Retirement benefits
26 weeks ended 52 weeks
ended
----------------------------
30 Sep 2023 1 Oct 2022 1 April 2023
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
----------------------------------------- -------------- ------------ -------------------------------
Opening net retirement benefit
surplus 477.4 1,038.2 1,038.2
Current service cost (0.1) (0.1) (0.1)
Administration cost (2.7) (2.4) (4.8)
Net interest income 12.1 14.2 28.7
Employer contributions 0.5 38.2 38.1
Remeasurements (307.5) (247.7) (622.8)
Exchange movement - (0.4) 0.1
----------------------------------------- -------------- ------------ -------------------------------
Closing net retirement benefit
surplus 179.7 840.0 477.4
----------------------------------------- -------------- ------------ -------------------------------
Total market value of assets 5,861.5 7,137.1 6,781.9
Present value of scheme liabilities (5,677.3) (6,292.1) (6,299.9)
----------------------------------------- -------------- ------------ -------------------------------
Net funded pension plan asset 184.2 845.0 482.0
Unfunded retirement benefits (2.2) (2.7) (2.2)
Post-retirement healthcare (2.3) (2.3) (2.4)
----------------------------------------- -------------- ------------ -------------------------------
Net retirement benefit surplus 179.7 840.0 477.4
----------------------------------------- -------------- ------------ -------------------------------
Analysed in the Statement of
Financial Position as:
Retirement benefit asset 184.2 845.0 482.0
Retirement benefit deficit (4.5) (5.0) (4.6)
----------------------------------------- -------------- ------------ -------------------------------
Net retirement benefit surplus 179.7 840.0 477.4
----------------------------------------- -------------- ------------ -------------------------------
The main financial assumptions for the UK scheme and the most
recent actuarial valuations of the other post-retirement schemes
have been updated by independent qualified actuaries to take
account of the requirements of IAS 19 Employee Benefits in
order to assess the liabilities of the schemes.
The most significant of these are the discount rate and the
inflation rate which are 5.50% (last half year: 5.15%; last
full year: 4.75%) and 3.25% (last half year: 3.60%; last full
year: 3.25%) respectively. The inflation rate of 3.25% reflects
the Retail Price Index (RPI) rate. Certain benefits have been
calculated with reference to the Consumer Price Index (CPI)
as the inflationary measure and in these instances a rate of
2.60% (last half year: 2.95%; last full year: 2.60%) has been
used.
The amount of the surplus varies if the main financial assumptions
change. If the discount rate decreased by 0.50%, the surplus
would decrease by GBP50m (last half year: increase by GBP10m;
last full year: decrease by GBP45m). If the discount rate decreased
by 2.50%, the surplus would decrease by GBP240m (last half
year: increase by GBP30m; last full year: decrease by GBP235m).
If the discount rate increased by 2.50%, the surplus would
increase by GBP205m (last half year: decrease by GBP40m; last
full year: increase by GBP200m). The pension scheme is hedged
against movements in gilt yields.
If the inflation rate decreased by 0.25%, the surplus would
decrease by GBP20m (last half year: decrease by GBP50m; last
full year: decrease by GBP30m). If the inflation rate decreased
by 0.50%, the surplus would decrease by GBP40m (last half year:
decrease by GBP90m; last full year: decrease by GBP60m). A
one year decrease in life expectancy would increase the scheme's
surplus by GBP120m (last half year: increase by GBP120m; last
full year: increase by GBP130m).
The sensitivity analysis above is based on a change in one
assumption while holding all others constant. Therefore interdependencies
between the assumptions have not been taken into account within
the analysis.
The most recent actuarial valuation of the Marks & Spencer
UK Pension Scheme was carried out as at 31 March 2021 and showed
a funding surplus of GBP687m. This is an improvement on the
previous position at 31 March 2018 (funding surplus of GBP652m),
primarily due to lower assumed life expectancy. The Company
and Trustees have confirmed, in line with the current funding
arrangement, that no further contributions will be required
to fund past service as a result of this valuation (other than
those already contractually committed under the existing Marks
and Spencer Scottish Limited Partnership arrangements - see
note 10).
With the pensioner buy-in policies purchased in September 2020,
April 2019 and March 2018, the Scheme has now, in total, insured
around 73% of the pensioner cash flow liabilities for pensions
in payment. The buy-in policies cover specific pensioner liabilities
and pass all risks to an insurer in exchange for a fixed premium
payment, thus reducing the Group's exposure to changes in longevity,
interest rates, inflation and other factors.
Recent increases in long-term interest rates, market inflation
assumptions and the discount rate have resulted in a significant
reduction in the value of both the UK Defined Benefit pension
scheme's assets and liabilities. However, there has been no
material worsening of the scheme's overall funding position.
The scheme has maintained its longstanding policy of substantially
hedging its exposure to inflation and interest rate movements
including through the use of derivatives. This is colloquially
known as an LDI strategy. The scheme continues to manage its
liquidity and collateral to meet its obligations as they fall
due and was able to meet all its cash needs from its own resources.
10 Marks and Spencer Scottish
Limited Partnership
Marks and Spencer plc is a general partner and the Marks &
Spencer UK Pension Scheme is a limited partner of the Marks
and Spencer Scottish Limited Partnership (the "Partnership").
Under the Partnership agreement, the limited partners have
no involvement in the management of the business and shall
not take any part in the control of the Partnership. The general
partner is responsible for the management and control of the
Partnership and as such, the Partnership is consolidated into
the results of the Group.
The Partnership holds GBP1.3bn (last half year: GBP1.3bn and
last full year: GBP1.3bn) of properties at book value which
have been leased back to Marks and Spencer plc. The Group
retains control over these properties, including the flexibility
to substitute alternative properties into the Partnership.
The first limited Partnership interest (held by the Marks
& Spencer UK Pension Scheme), previously entitled the Pension
Scheme to receive GBP73.0m in 2023 and GBP54.4m in 2024. During
the period, the Group and the Pension Scheme Trustees agreed
to amend the distribution dates so that the Pension Scheme
is entitled to receive GBP40.0m in October 2023, GBP34.9m
in March 2024 and GBP54.4m in June 2024.
The second Partnership interest (also held by the Marks &
Spencer UK Pension Scheme), previously entitled the Pension
Scheme to receive a further annual distribution of GBP36.4m
from June 2017 until June 2031. During the period, the Group
and the Pension Scheme Trustees agreed to amend the distribution
dates so that the Pension Scheme is entitled to GBP37.8m in
March 2024 and then an annual distribution of GBP36.4m from
June 2024 to June 2031. All profits generated by the Partnership
in excess of these amounts are distributable to Marks and
Spencer plc.
The Partnership liability in relation to the first interest
of GBP127.1m (last half year: GBP122.9m and last full year:
GBP124.8m) is included as a financial liability in the Group's
financial statements as it is a transferable financial instrument
and measured at amortised cost, being the net present value
of the future expected distributions from the Partnership.
During the period to 30 September 2023 an interest charge
of GBP2.3m (last half year: GBP2.4m and last full year: GBP4.3m)
was recognised in the income statement representing the unwinding
of the discount included in this obligation. The first limited
Partnership interest of the Pension Scheme is included within
the UK DB Pension Scheme assets, valued at GBP125.9m (last
half year: GBP119.5m and last full year: GBP122.8m).
The second Partnership interest is not a transferable financial
instrument as the Scheme Trustee does not have the right to
transfer it to any party other than a successor Trustee. It
is therefore not included as a plan asset within the UK DB
pension scheme surplus reported in accordance with IAS 19.
Similarly, the associated liability is not included on the
Group's statement of financial position, rather the annual
distribution is recognised as a contribution to the scheme
each year.
11 Financial Instruments
Fair value hierarchy
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique:
- Level 1: quoted (unadjusted) prices in active markets for
identical assets and liabilities. The Group had no level 1
investments or financial instruments.
- Level 2: not traded in an active market, but the fair values
are based on quoted market prices or alternative pricing sources
with reasonable levels of price transparency. The Group's level 2
financial instruments include interest rate and foreign exchange
derivatives. Fair value is calculated using discounted cash flow
methodology, future cash flows are estimated based on forward
exchange rates and interest rates (from observable market curves)
and contract rates, discounted at a rate that reflects the credit
risk of the various counterparties for those with a long
maturity.
- Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable
market data.
At the end of the reporting period, the Group held the following
financial instruments at fair value:
(Unaudited) (Audited)
As at As
at
30 Sep 2023 1 April 2023
Level Level Level Total Level Level Level Total
1 2 3 1 2 3
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Assets measured at
fair value
Financial assets at
fair value through profit
or loss ("FVTPL")
- derivatives held at
FVTPL - 1.5 - 1.5 - - - -
- other investments(1) - 9.0 12.5 21.5 - 12.3 8.6 20.9
Derivatives used for
hedging - 29.9 - 29.9 - 22.7 - 22.7
Liabilities measured
at fair value
Financial liabilities
at fair value through
profit and loss ("FVTPL")
- derivatives held at
FVTPL - - - - - (2.1) - (2.1)
- Ocado contingent consideration(2) - - - - - - (64.7) (64.7)
- Gist contingent consideration(3) - - (24.5) (24.5) - - (25.0) (25.0)
Derivatives used for
hedging - (26.4) - (26.4) - (63.1) - (63.1)
There were no transfers between the levels of the fair value
hierarchy during the period. There were also no changes made
to any of the valuation techniques during the period.
(1) Within Level 3 other investments, the Group holds GBP9.3m
of venture capital investments, managed by True Capital Limited,
measured at FVTPL (last half year: GBP6.5m; last full year:
GBP7.3m) which are Level 3 instruments. The fair value of these
investments has been determined in accordance with the International
Private Equity and Venture Capital ("IPEV") Valuation Guidelines.
Where investments are either recently acquired or there have
been recent funding rounds with third parties, the primary input
when determining the valuation is the latest transaction price.
(2) As part of the investment in Ocado Retail Limited, a contingent
consideration arrangement was agreed. The arrangement comprises
three separate elements which only become payable on the achievement
of three separate financial and operational performance targets.
In 2021/22, GBP33.8m was settled, relating to the first two
targets. The final target relates to Ocado Retail Limited achieving
a specified target level of earnings in the financial year ending
November 2023, with any resulting payment due in 2024 following
completion of the Ocado Retail Limited audited FY23 statutory
accounts. The performance target is binary, meaning that a payment
of GBP156.3m plus interest will be made if the performance target
is met. Should the target not be met, no consideration would
be payable.
A range of scenarios have been considered in determining the
fair value of the contingent consideration at H1 2023/24. Taking
into account Ocado Retail Limited's current and forecast trading
performance and the fact that less than two months of the relevant
target year remain, it is not expected that Ocado Retail Limited
will achieve target performance as there is a material gap between
the performance target and current expected outturn. However,
there is a mechanism for reasonable adjustments to be made to
the performance target by either shareholder to reflect certain
events, if applicable. No adjustments have been made at this
point in time.
In these circumstances, the fair value of the liability has
been determined to be nil.
(3) As part of the investment in Gist Limited, the Group has
agreed to pay the former owners of Gist Limited additional consideration
of up to GBP25.0m plus interest when freehold properties are
disposed of under certain conditions. There is no minimum amount
payable. The Group has the ability to retain the properties
should it wish to do so, in which case the full amount of GBP25.0m
plus interest will be payable on the third anniversary of completion.
The fair value of the contingent consideration arrangement of
GBP24.5m was estimated by calculating the present value of the
future expected cashflows. The estimates are based on a discount
rate of 6.1%. A 2.5% change in the discount rate would result
in a change in fair value of GBP1.1m.
Fair value of financial instruments
With the exception of the Group's fixed rate bond debt and the
Partnership liability to the Marks & Spencer UK Pension Scheme,
there were no material differences between the carrying value of
non -- derivative financial assets and financial liabilities and
their fair values as at the balance sheet date.
The carrying value of the Group's fixed rate bond debt (Level 1
equivalent) was GBP1,047.9m (last half year: GBP1,399.8m; last full
year: GBP1,346.4m); the fair value of this debt was GBP1,001.5m
(last half year: GBP1,217.8m; last full year: GBP1,264.3m) which
has been calculated using quoted market prices and includes accrued
interest.
The carrying value of the Partnership liability to the Marks
& Spencer UK Pension Scheme (Level 2 equivalent) is GBP127.1m
(last half year: GBP122.9m; last full year: GBP124.8m) and the fair
value of this liability is GBP121.9m (last half year: GBP116.0m;
last full year: GBP121.9m).
Lease liabilities
Future cash outflows related to the post break clause period
included in the lease liability
The Group holds certain leases that contain break clause options
to provide operational flexibility. In accordance with IFRS 16, the
Group has calculated the full lease term, beyond break, to
represent the reasonably certain lease term (except for those
stores identified as part of the UK store estate programme) within
the total GBP2,244.1m of lease liabilities held on the balance
sheet.
Total undiscounted lease payments of GBP720.8m (last half year:
GBP773.3m; last year end: GBP750.6m) relating to the period post
break clause, and the earliest contractual lease exit point, are
included in lease liabilities. These undiscounted lease payments
should be excluded when determining the Group's contractual
indebtedness under these leases, where there is a contractual right
to break.
Cash flow hedge accounting
The Group hedges its exposure to foreign currency risk using
forward foreign exchange contracts and hedge accounting is applied
when the requirements of IFRS 9 are met, including that forecast
transactions are "highly probable". The Group has continued to
apply judgment in assessing whether forecast purchases remain
"highly probable". In making this assessment, the Group has
considered the most recent budgets and plans. As a result of the
Group's "layered" hedging strategy, a reduction in the supply
pipeline of inventory does not immediately lead to over-hedging and
the disqualification of "highly probable". If the forecast
transactions were no longer expected to occur, any accumulated gain
or loss on the hedging instruments would be immediately
reclassified to profit or loss.
Movements in derivatives since last half year reflect the
significant volatility seen in foreign exchange rates seen over the
last 24 months.
Trade receivables
Included within trade and other receivables is GBP7.2m (last
half year: GBP3.5m; last year end: GBP0.4m) which, due to
non-recourse factoring arrangements in place, are held within a
'hold to collect and sell' business model and are measured at fair
value through other comprehensive income ("FVOCI").
12 Contingencies and commitments
Capital expenditure
Additions to the cost of property, plant and equipment and
intangible assets (excluding goodwill and right of use assets)
are GBP180.6m (last half year: GBP155.5m) and for the year
ended 1 April 2023 were GBP421.4m. Disposals in net book value
of property, plant and equipment, investment property and
intangible assets, excluding right of use assets are GBPnil
(last half year: GBPnil) and for the year ended 1 April 2023
were GBP4.4m.
Capital commitments As at As at As at
30 Sep 1 Oct 1 Apr
2023 2022 2023
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
Commitments in respect of properties
in the course of construction 81.1 86.5 100.8
IT capital commitments 9.0 14.4 6.1
90.1 100.9 106.9
During 2021/22, the Group committed to invest up to GBP25.0m,
over a three-year period to 2024/25, in an innovation and
consumer growth fund managed by True Capital Limited. The
fund can drawdown amounts at any time over the three-year
period to make specific investments. As at 30 September 2023,
the Group had invested GBP9.6m (last half year: GBP6.8m; last
full year: GBP7.5m) of this commitment, which is held as an
non-current other investment and measured at fair value through
profit or loss (see note 11).
13 Analysis of cash flows given
in the statement of cash flows
26 weeks ended 52 weeks
ended
30 Sep 2023 1 Oct 2022 1 April
2023
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
Profit on ordinary activities after
taxation 206.9 166.7 364.5
Income tax expense 118.7 41.8 111.2
Finance costs 91.7 100.7 205.5
Finance income (102.3) (137.7) (166.1)
Operating profit 315.0 171.5 515.1
Share of results of Ocado Retail
Limited 23.4 0.7 29.5
Share of results in other joint
ventures (0.2) - -
Increase in inventories (249.2) (373.7) (58.5)
Increase in receivables (25.1) (36.3) (33.7)
Increase in payables 139.1 261.2 82.1
Depreciation, amortisation and write-offs 258.5 250.6 523.2
Non-cash share-based payment expense 25.1 15.0 38.0
Non-cash pension expense 2.6 - -
Defined benefit pension funding (0.5) (36.9) (36.8)
Adjusting items net cash outflows(1,2) (27.1) (34.1) (67.9)
Adjusting items M&S Bank(3) (1.0) (1.0) (2.0)
Adjusting operating profit items 95.4 109.2 111.5
Cash generated from operations 556.0 326.2 1,100.5
---------------------------------------------------------
(1) Excludes GBP8.9m (last half year: GBP2.2m; last year end:
GBP11.5m) of surrender payments included within repayment of
lease liabilities in the consolidated statement of cashflows
relating to leases within the UK store estate programme.
(2) Adjusting items net cash outflows relate to strategic
programme costs associated with the UK store estate, UK logistics,
UK structural simplification programme and interest payments
relating to the deferred and contingent consideration for the
acquisition of Gist Limited.
(3) Adjusting items M&S Bank relates to M&S Bank income recognised
in operating profit offset by charges incurred in relation
to the insurance mis-selling provision, which is a non-cash
item.
14 Analysis of net debt
Reconciliation of net cash flow to movement in net debt
26 weeks ended 52 weeks
ended
30 Sep 2023 1 Oct 2022 1 April
2023
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
Opening net debt (2,637.2) (2,698.8) (2,698.8)
Net cash outflow from activities (238.6) (430.2) (130.5)
Decrease in current financial assets (3.2) (7.8) (5.3)
Decrease in debt financing 382.8 332.4 487.7
New lease commitments (67.3) (141.6) (270.7)
Exchange and other non-cash movements (0.5) 17.3 (19.6)
Movement in net debt 73.2 (229.9) 61.6
Closing net debt (2,564.0) (2,928.7) (2,637.2)
Reconciliation of net debt to statement
of financial position
As at As at As at
30 Sep 2023 1 Oct 2022 1 April
2023
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
Statement of financial position
and related notes
Cash and cash equivalents 828.7 772.7 1,067.9
Current other financial assets 9.0 10.5 13.0
Medium Term Notes - net of foreign
exchange revaluation (1,055.0) (1,318.4) (1,356.6)
Lease liabilities (2,244.1) (2,300.3) (2,281.6)
Partnership liability to the Marks
& Spencer UK Pension Scheme (note
10) (127.1) (122.9) (124.8)
(2,588.5) (2,958.4) (2,682.1)
Interest payable included within
related borrowing and the partnership
liability to the Marks & Spencer
UK Pension Scheme 24.5 29.7 44.9
Total net debt (2,564.0) (2,928.7) (2,637.2)
----------- ----------- ---------
15 Business combination
On 30 September 2022, the Group acquired 100% of the issued
share capital of Gist Limited. Details of this business combination
were disclosed in note 31 of the Group's 2023 Annual Report and
Financial Statements.
16 Related party transactions
The Group's related party transactions are disclosed in the
Group's 2023 Annual Report. There have been no material changes in
the related party transactions described in the last annual
report.
Joint Ventures and Associates
Ocado Retail Limited
The following transactions were carried out with Ocado Retail
Limited, an associate of the Group:
Loan to Ocado Retail Limited
26 weeks ended 52 weeks ended
30 Sep 2023 1 Oct 2022 1 April 2023
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
Opening balance 30.9 - -
Loans advanced 45.0 - 30.0
Interest charged 2.0 - 0.9
Interest repaid (1.2) - -
Closing balance 76.7 - 30.9
The loan matures during 2039/40 and accrues interest at Sterling
Overnight Index Average ("SONIA") plus an applicable margin.
Sales and purchases of goods and services:
26 weeks ended 52 weeks ended
30 Sep 2023 1 Oct 2022 1 April 2023
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
Sales of goods and services 17.8 17.0 35.7
Purchases of goods and services 0.1 0.1 0.1
Included within trade and other receivables is a balance of
GBP3.3m (last half year: GBP3.2m; last full year: GBP2.9m) owed by
Ocado Retail Limited.
Nobody's Child Limited
Nobody's Child Limited became an associate of the Group in
November 2021.
In the half year ended 30 September 2023, the Group made
purchases of goods amounting to GBP3.5m (last half year: GBP3.9m;
last full year: GBP6.3m).
At 30 September 2023, included within trade and other payables
is a balance of GBP0.2m owed to Nobody's Child Limited (last half
year: GBPnil; last full year: GBPnil) and included within other
financial assets is a balance of GBP2.7m owed from Nobody's Child
Limited (last half year: GBP0.7m; last full year: GBP0.7m).
Key management compensation
Transactions between the Group and key management personnel in
the period relate only to remuneration consistent with the policy
set out in the Directors' Remuneration Report within the Group's
2023 Annual Report.
There have been no other material changes to the arrangements
between the Group and key management personnel in the period.
17 Contingent assets
The Group is currently seeking damages from an independent third
party following their involvement in anti-competitive behaviour
that adversely impacted the Group. The Group expects to receive an
amount from the claim (either in settlement or from the legal
proceedings), a position reinforced by recent court judgments in
similar claims. The value of the claim is confidential and is
therefore not disclosed.
18 Subsequent events
Subsequent to the balance sheet date, the Group has monitored
trade performance, internal actions, as well as other relevant
external factors. No material changes in key estimates and
judgements have been identified as adjusting post balance sheet
events. There have been no material non-adjusting events since 30
September 2023.
Glossary
Alternative Closest Reconciling Definition and purpose
performance equivalent items to
measure statutory statutory
measure measure
Income Statement Measures
Sales Revenue Consignment Sales includes the gross value
sales of consignment sales (excluding
VAT). Where third-party branded
goods are sold on a consignment
basis, only the commission
receivable is included in
statutory revenue. This measure
has been introduced given
the Group's focus on launching
and growing third-party brands
and is consistent with how
the business performance is
reported and assessed by the
Board and the Executive Committee.
Clothing None Not applicable The growth in sales on a year-on-year
& Home store basis is a good indicator
/ Clothing of the performance of the
& Home online stores and online channels. HY 23/24 HY 22/23 %
sales GBPm GBPm
UK Clothing & Home
Store sales(1) 1,270.1 1,195.6 6.2
Consignment sales (9.1) (9.7)
Store revenue 1,261.0 1,185.9 6.3
Online sales(1) 579.4 554.1 4.6
Consignment sales (21.3) (15.7)
Online revenue 558.1 538.4 3.7
UK Clothing & Home sales(1) 1,849.5 1,749.7 5.7
Consignment sales (30.4) (25.4)
Total UK Clothing & Home revenue 1,819.1 1,724.3 5.5
(1) UK Clothing & Home store sales excludes revenue from 'shop your way' and Click &
Collect,
which are included in UK Clothing & Home online sales.
There is no material difference between sales and revenue for UK Food and International.
Like-for-like Movement Revenue from The period-on-period change
sales growth in revenue non in sales (excluding VAT) from
per the like-for-like stores which have been trading
income stores and where there has been no
statement Consignment significant change (greater
sales than 10%) in footage for at
least 52 weeks and online
sales. The measure is used
widely in the retail industry
as an indicator of sales performance.
It excludes the impact of
new stores, closed stores
or stores with significant
footage change. HY 23/24 HY 22/23 %
GBPm GBPm
UK Food
Like-for-like 3,640.2 3,258.1 11.7
Net new space(1) 163.4 59.4
Total UK Food revenue 3,803.6 3,317.5 14.7
UK Clothing & Home
Like-for-like 1,814.4 1,720.0 5.5
Net new space 35.1 29.7
Total UK Clothing & Home sales 1,849.5 1,749.7 5.7
(1) UK Food net new space includes Gist third party revenue.
M&S.com sales None Not applicable Total sales through the Group's
/ Online online platforms. These sales
sales are reported within the relevant
UK Clothing & Home, UK Food
and International segment
results. The growth in sales
on a year-on-year basis is
a good indicator of the performance
of the online channel and
is a measure used within the
Group's incentive plans. Refer
to the Remuneration Report
in the FY22/23 annual report
for explanation of why this
measure is used within incentive
plans.
International None Not applicable International sales through
online International online platforms.
These sales are reported within
the International segment
results. The growth in sales
on a year-on-year basis is
a good indicator of the performance
of the online channel. This
measure has been introduced
given the Group's focus on
online sales. HY 23/24 HY 22/23 %
GBPm GBPm
International Sales
Stores 427.7 413.4 3.5
Online 83.6 83.0 0.7
At reported currency 511.3 496.4 3.0
Sales growth None Not applicable The period-on-period change
at constant in sales retranslating the
currency previous year sales at the
average actual periodic exchange
rates used in the current
financial year. This measure
is presented as a means of
eliminating the effects of
exchange rate fluctuations
on the period-on-period reported
results. HY 23/24 HY 22/23 %
GBPm GBPm
International Sales
At constant currency 511.3 492.3 3.9
Impact of FX retranslation - 4.1
At reported currency 511.3 496.4 3.0
Adjusting None Not applicable Those items which the Group
items excludes from its adjusted
profit metrics in order to
present a further measure
of the Group's performance.
Each of these items, costs
or incomes, is considered
to be significant in nature
and/or quantum or are consistent
with items treated as adjusting
in prior periods. Excluding
these items from profit metrics
provides readers with helpful
additional information on
the performance of the business
across periods because it
is consistent with how the
business performance is planned
by, and reported to, the Board
and the Executive Committee.
Adjusted Operating Adjusting Operating profit before the
operating profit items impact of adjusting items.
profit (See note The Group considers this to
Operating 3) be an important measure of
profit before Group performance and is consistent
adjusting with how the business performance
items is reported and assessed by
the Board and the Executive
Committee.
Adjusted None Not applicable Adjusted operating profit
operating as a percentage of sales.
margin
Operating
margin before
adjusting
items
Finance Finance Adjusting Finance income before the
income income items impact of adjusting items.
before (See note The Group considers this to
adjusting 3) be an important measure of
items Group performance and is consistent
with how the business performance
is reported and assessed by
the Board and the Executive
Committee.
Finance costs Finance Adjusting Finance costs before the impact
before costs items of adjusting items. The Group
adjusting (See note considers this to be an important
items 3) measure of Group performance
and is consistent with how
the business performance is
reported and assessed by the
Board and the Executive Committee.
Net interest Finance Finance The net of interest income
payable on income/costs income/ on subleases and interest
leases costs payable on lease liabilities.
(See note The measure allows the Board
4) and Executive Committee to
assess the impact of IFRS
16 Leases.
Net financial Finance Finance Calculated as net finance
interest income/costs income/ costs, excluding interest
costs on leases and adjusting items.
(See note The Group considers this to
4) be an important measure of
Group performance and is consistent
with how the business performance
is reported and assessed by
the Board and the Executive
Committee.
EBIT before EBIT(1) Adjusting Calculated as profit before
adjusting items the impact of adjusting items,
items (See note net finance costs and tax
3) as disclosed on the face of
the consolidated income statement.
This measure is used in calculating
the return on capital employed
for the Group.
Ocado Retail EBIT(1) Not applicable Calculated as Ocado Retail
Limited Limited earnings before interest,
EBITDA tax, depreciation, amortisation,
impairment and exceptional
items.
Profit before Profit Adjusting Profit before the impact of
tax and before items adjusting items and tax. The
adjusting tax (See note Group considers this to be
items 3) an important measure of Group
performance and is consistent
with how the business performance
is reported and assessed by
the Board and the Executive
Committee.
This is a measure used within
the Group's incentive plans.
Refer to the Remuneration
Report in the FY22/23 annual
report for explanation of
why this measure is used within
incentive plans.
Adjusted Earnings Adjusting Profit after tax attributable
basic per share items to owners of the parent and
earnings (See note before the impact of adjusting
per share 3) items, divided by the weighted
average number of ordinary
shares in issue during the
financial year.
This is a measure used within
the Group's incentive plans.
Refer to the Remuneration
Report in the FY22/23 annual
report for explanation of
why this measure is used.
Adjusted Diluted Adjusting Profit after tax attributable
diluted earnings items to owners of the parent and
earnings per share (See note before the impact of adjusting
per share 3) items, divided by the weighted
average number of ordinary
shares in issue during the
financial year adjusted for
the effects of any potentially
dilutive options.
Effective Effective Adjusting Total income tax charge for
tax rate tax rate items and the Group excluding the tax
before their tax impact of adjusting items
adjusting impact divided by the profit before
items (See note tax and adjusting items. This
3) measure is an indicator of
the ongoing tax rate for the
Group.
Bought-in None Not applicable Difference between landed
margin cost of stock and selling
value, expressed as a percentage
of total exc VAT sales.
Balance Sheet Measures
Net debt None Reconciliation Net debt comprises total borrowings
of net debt (bank and bonds net of accrued
(see note interest and lease liabilities),
14) net derivative financial instruments
that hedge the debt and the
Scottish Limited Partnership
liability to the Marks and
Spencer UK Pension Scheme
less cash, cash equivalents
and unlisted and short-term
investments. Net debt does
not include contingent consideration
as it is conditional upon
future events which are not
yet certain at the balance
sheet date.
This measure is a good indication
of the strength of the Group's
balance sheet position and
is widely used by credit rating
agencies.
Net debt None Reconciliation Calculated as net debt less
excluding of net debt lease liabilities. This measure
lease (see note is a good indication of the
liabilities 14) strength of the Group's balance
sheet position and is widely
used by credit rating agencies.
Cash Flow Measures
Free cash Operating See Financial Calculated as operating profit
flow from profit Review less adjusting items within
operations operating profit, depreciation
and amortisation before adjusting
items, cash lease payments,
working capital, defined benefit
scheme pension funding, capex
and disposals, financial interest,
taxation, employee-related
share transactions, share
of (profit)/loss from associate,
adjusting items in cashflow
and loans to associates.
Free cash Net cash See Financial Calculated as free cash flow
flow inflow from Review from operations less acquisitions,
operating investments and divestments.
activities This measure shows the cash
generated by the Group during
the year that is available
for returning to shareholders
and is used within the Group's
incentive plans.
Free cash Net cash See Financial Calculated as free cash flow
flow after inflow from Review less dividends paid.
shareholder operating This measure shows the cash
returns activities retained by the Group in the
year.
Other Measures
Capital None Not applicable Calculated as the purchase
expenditure of property, plant and equipment,
investment property and intangible
assets during the year less
proceeds of asset disposals
excluding any assets acquired
as part of a business combination
or through an investment in
an associate.
Active None Not applicable A customer who has shopped
customer at Ocado.com within the previous
12 weeks.
(1) EBIT is not defined within IFRS but is a widely accepted
profit measure being earnings before interest and tax.
INDEPENT REVIEW REPORT TO MARKS AND SPENCER GROUP PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
26-week period ended 30 September 2023 which comprises the
condensed consolidated income statement, the condensed consolidated
statement of comprehensive income, the condensed consolidated
statement of financial position, the condensed consolidated
statement of changes in equity, the condensed consolidated
statement of cash flows and related notes 1 to 18.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the 26-week period ended 30
September 2023 is not prepared, in all material respects, in
accordance with United Kingdom adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council for use in the
United Kingdom (ISRE (UK) 2410). A review of interim financial
information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with United Kingdom adopted
international accounting standards. The condensed set of financial
statements included in this half-yearly financial report has been
prepared in accordance with United Kingdom adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410; however future events or conditions
may cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the group's ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly financial report, we are
responsible for expressing to the company a conclusion on the
condensed set of financial statements in the half-yearly financial
report. Our Conclusion, including our Conclusion Relating to Going
Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
ISRE (UK) 2410. Our work has been undertaken so that we might state
to the company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
7 November 2023
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR DXBDBXSGDGXR
(END) Dow Jones Newswires
November 08, 2023 02:00 ET (07:00 GMT)
Marks And Spencer (LSE:MKS)
Historical Stock Chart
From Apr 2024 to May 2024
Marks And Spencer (LSE:MKS)
Historical Stock Chart
From May 2023 to May 2024
