Final Results - Replacement.
Marks & Spencer PLC
23 May 2000
The Issuer has advised that the amendment shown below has been made to the
'Final Results' announcement released at 7:01am under RNS Number 0197L and RNS
No 0256L.
PLEASE NOTE THE FOLLOWING TEXT IS BEING RE-ISSUED WITH ONE AMENDMENT AS
FOLLOWS:
POINT 11 - CONSOLIDATED BALANCE SHEET
CURRENT ASSETS TOTAL SHOULD READ 3717.1 (NOT 3717.7)
The announcement has been reissued in one part. No other amendments have been
made.
The full corrected version is shown below.
MARKS AND SPENCER PLC
PRELIMINARY RESULTS ANNOUNCEMENT
FINANCIAL YEAR ENDED 31 MARCH 2000
Group sales £8.2 billion (last year: £8.2 billion)
£557.2 million profit before tax and exceptional items
(last year: £628.4 million).
The 52-week equivalent profit is estimated at £517.2 million.
Full year dividend of 9.0p proposed (last year: 14.4p)
Commenting on these results, Peter Salsbury, Chief Executive, said:
'Last year I said we needed to reshape our business.
Twelve months on there are few people within this
organisation whose jobs have not changed.
We have radically refocused the Company towards our
customers, who are noticing a difference in our stores and
products. We have slowed the sales decline and current
trading continues to improve.
I am confident that the changes we have made to
reposition Marks & Spencer as a modern, customer-facing
business will achieve a sustainable recovery.'
Luc Vandevelde, Chairman, said:
'I took on the role of Chairman at the end of February this year. After
three months in the job, I am convinced that M&S will have a future as
successful as its past.
The Company is going through a period of significant change. We are being
transformed from a traditional retailer with unique supply side strengths
into a multi-channel retailer with unique customer understanding.
We are building the capabilities to satisfy customers needs across a wider
range of goods and services, first in the UK as we recover, then
internationally.
We have embarked upon a profound transformation that will take time and
require difficult but necessary decisions.
I would ask shareholders to accept our current financial performance and
recognise that this affects our dividend payout. I am not ignoring the
past but we need to be realistic about today.
We cannot compromise our future investment capacity. Consequently, we are
proposing a final dividend of 5.3p, a total dividend of 9.0p per share for
the year (versus 14.4p for last year). The extent of our confidence in
the future is indicated by the fact that the dividend represents a payout
of 100% of net profit.
The establishment of strong Operating Divisions and consequent changes to
the structure and processes in marketing, buying and selling, allow the
Marks and Spencer Board to concentrate on matters of strategic direction
and corporate governance. This has further reduced the need for
functional representation on the Board, as reflected in changes announced
today.'
FINANCIAL RESULTS
Group
Group sales at £8,195 million are similar to last year
(£8,224 million).
The full year Group profit before tax and exceptional
items is £557.2 million, with the value of the 53rd week
estimated at £40 million.
Exceptional charges of £139.7 million include an
additional £47.3 million of restructuring costs in stores
and Head Office incurred since the half year.
The results are analysed by Operating Division in more
detail below:
UK Retail
Turnover for the 52 weeks is £6,351 million (last year
£6,601 million) and operating profit before exceptional
items £386.8 million (last year £478.9 million). The
effect of the 53rd week is to add £132 million to sales
(giving £6,483 million) and an estimated £33.3 million to
operating profit (to £420.1 million).
A sales analysis, broken down by trading periods, is
given below. Like-for-like sales are now estimated by
comparing total sales with new and developed stores
excluded without any adjustment for deflection.
Sales Performance
Q1 Q2 15 wks 11 wks Total 8 wks
to to 52 wks to
8/1 25/3 20/5
% v LY % v LY % v LY % v LY % v LY % v LY
General -9.2 -10.4 -6.0 -2.4 -7.2 +3.8
Foods -1.2 +0.4 +3.2 +1.8 +1.2 +4.7
Total -6.1 -6.2 -2.8 -0.5 -4.0 +4.2
Like- -10.3 -9.9 -5.6 -3.3 -7.2 +2.1
for-
like
At the year-end, total UK selling space is 12.3m sq ft,
compared to opening footage of 12.0m sq ft. The weighted-
average selling space has increased by 6.1%.
We opened two major stores during the year, in Braehead,
Glasgow (91,000 sq ft) and Manchester (198,400 sq ft,
replacing temporary footage of 98,800 sq ft).
UK General - Sales and Margin
Sales Performance
Q1 Q2 15 wks 11 wks Total 8 wks
to to 52 wks to
8/1 25/3 20/5
% v LY % v LY % v LY % v LY % v LY % v LY
Clothing, -9.8 -10.3 -6.7 -3.6 -7.8 +1.5
Footwear
and Gifts
Home -1.6 -11.6 +6.0 +11.7 +1.0 +35.6
Furn-
ishings
Total -9.2 -10.4 -6.0 -2.4 -7.2 +3.8
General
Like- -14.6 -15.1 -9.2 -6.0 -11.1 +1.3
for-
like
We reduced the like-for-like sales decline in Clothing as
the year progressed.
We improved the gross margin, with the first effects from
new buying methods and better stock management over the
Christmas period. Year-end stock levels in all main
product areas are below last year's and forward cover
positions have improved.
The rate of increase in Home Furnishing sales has
accelerated, with a particularly strong performance in
Furniture.
UK Foods - Sales and Margin
Sales Performance
Q1 Q2 15 wks 11 wks Total 8 wks
to to 52 wks to
8/1 25/3 20/5
% v LY % v LY % v LY % v LY % v LY % v LY
Total -1.2 +0.4 +3.2 +1.8 +1.2 +4.7
Foods
Like- -4.2 -2.5 +0.8 -0.1 -1.3 +3.2
for-
like
Our constant innovation and the marketing of new products
(for example, Organics, Count on Us) have helped food
sales. We were the first retailer to guarantee all the
food products sold in our stores were made without
genetically modified ingredients and derivatives.
There was no price inflation. We have delivered an
improvement in gross margin through better buying
practices, and the benefits from the planned supply chain
efficiencies have still to come.
UK - Operating Costs
Operating costs have increased by 3.0% on a 52-week
basis.
We have invested an additional £39 million in marketing,
customer analysis and visual merchandising in stores, as
an essential part of our programme to become a customer-
led business. Within this total, we spent £13 million
more on television, radio and print advertising.
We have held personnel costs broadly level on the year.
The expenses of an additional 1400 sales staff have been
offset by a reduction in Head Office personnel and store
management.
International Retail
All sales and profit comparatives are given on a 52-week
basis at constant exchange rates.
In our International Retail Division we increased sales
by 5.9% and made an operating profit of £0.3 million,
before exceptional items (last year, loss of £9.9 million
on a comparable basis). The effect of the 53rd week is
to increase full year profits to £7.0 million.
In Europe, the second half performance was considerably
better than the comparable period last year, helped by the
closure of seven under-performing stores (three in France
and four in Germany) and the improved performance of our
franchises, particularly in Greece and Turkey. There has
been a small improvement in the European bought in margin,
partly due to better buying practices. We opened new
stores in Barcelona and Frankfurt, but overall footage has
reduced by 129,000 sq.ft.
Sales in the Far East have improved by 7%, helped by an
improving economy and significantly increased local
production. Costs have been well controlled and we have
reduced operating losses from £14 million to £4 million.
Although sales for Brooks Brothers show an 8% increase,
higher mark-downs and additional costs arising from US
expansion have impacted trading profits. Following a
first half where operating losses were £5 million
compared to a £1 million profit in the previous year,
second half operating profits of £11 million are in line
with last year.
Kings Super Markets has performed well, increasing sales
by 7% and operating profit by 5%. Three new stores were
opened in the second half-year.
Financial Services
We have increased pre-tax profits by 5% to £115.9 million.
Within our Financial Services retailing activities (that
is, excluding our captive insurance company) pre-tax
profits increased by 15% to £106.6 million.
We increased new personal loan advances by 13% to £905
million, broadening the range of customers. Growth has
been achieved by better analysis of the customer base and
the use of better-targeted selling methods. This has
allowed us to grow scale at acceptable risk and cost while
also making our rates more competitive.
We have re-priced our pension product to a new stakeholder
friendly charging structure. A further reduction in term
assurance rates and the launch of an over 50s Guaranteed
Protection Plan reinforce our position as one of the most
competitively priced providers of life and pensions
products. We increased new life and pensions policies by
28,000 to 58,000.
Unit trust funds under management have increased by 6% to
£1,166 million, despite lower sales of tax-sheltered
products.
Account Card profits increased by 9%.
Ventures
We had invested or committed some £16 million in ventures
by the end of the financial year, the potentially
significant investments being Talkcast Corporation,
Temposoft and Splendour.com.
Exceptional Items
The closure of our Canadian business was completed at a
cost of £21 million compared to an estimated £25 million.
Goodwill previously written off to reserves of £24.4
million increases the total exceptional charge to £45.4
million.
Total European restructuring costs of £17.0 million are
made up of £8.7 million of redundancy and related costs
and £8.3 million of losses on store disposals.
The exceptional charge for UK restructuring is £63.3
million. Of this, £16.0 million of redundancy costs were
reported at the half year following the rationalisation of
UK store management structures and the closure of a
distribution centre (Tyneside). The additional £47.3
million now provided for includes:
* Head Office costs of £18.5 million resulting mainly
from restructuring of UK Retail into Customer Business Units.
* £28.8 million that relates mainly to the cost of
restructuring store roles to refocus staff activities towards the
customer.
The net loss on property disposals (excluding European
stores noted above) is £14.0 million, of which a £17.2
million accounting loss relates to the disposal of The
Gyle. The actual profit realised from the sale was £53.4
million, but cumulative revaluations since acquisition
have been recognised through reserves and are not written
back to the profit and loss account, in line with the
Accounting Standard for investment properties.
Balance Sheet and Property
Of the intended £400 million to be raised through the sale
or re-financing of non-operational properties, to date
approximately £240 million has been realised from
disposals, the largest of which were The Gyle Shopping
Centre and an investment property in Newcastle.
Group capital expenditure was £451 million in the year
just ended. We expect the figure to fall in the current
year, with a further reduction in new store openings and
footage developments.
Dividend
We are proposing a final dividend of 5.3p per share,
making a total of 9.0p for the year (last year 14.4p),
equivalent to 100% of net earnings.
This will re-base the dividend to a level from which
appropriate earnings cover can be re-established more
quickly, improving our ability to invest in the Company's
future growth.
Current UK Trading
In the last 8 weeks, total sales rose by 4.2% or 2.1% on a
like-for-like basis. The aggregates were helped by strong
sales in Home (+36%). Cold and wet weather in April was
balanced by a warm May. Both 8 week periods include an Easter week.
Credit card sales now represent 11% of the total.
PROGRESS
In May 1999 we set out four priorities designed to
transform the business and move closer to the customer.
They were:
(1) Create clear profit centres.
(2) Change our business to be more customer-facing.
(3) Restore profitability overseas.
(4) Build the Financial Services business.
We identified these objectives as essential priorities to
enable us to deliver sustained recovery and build a
platform for long-term growth.
Organisation
The first step was to create clear profit centres to
structure our business to meet customer needs. To achieve
this, we:
* Established 5 Operating Divisions - UK Retail;
International Retail, Financial Services, Property and
Ventures. Each Operating Division is accountable for
delivering profit and value created targets.
* Created within UK Retail 7 Customer Business Units:
Womenswear, Menswear, Lingerie, Childrenswear, Home, Beauty
and Food. Each unit has integrated buying and selling teams
dedicated to their customer groups.
Creating a customer-facing business
We have focused on, first, the brand, and next, buying in
response to customer needs.
Brand
We undertook a fundamental review of the Marks & Spencer
brand and what it means to our customers. Consequently,
we have:
* Designed and launched an updated look for our brand.
* Established a Customer Insight Unit to understand the
shopping habits and demographics of our customers.
* Developed local store cataloguing to tailor our products
and store layouts to meet customer needs.
* Introduced clearly differentiated ranges that broaden and
build upon traditional markets such as our Autograph designer
collections, Salon Rose lingerie, and Count on Us calorie and
fat reduced foods.
* Created new product areas such as nursery and maternity
wear, mobile telephones.
* Largely achieved the restructuring to put 4000 customer-
facing advisors on the sales floor to deliver better customer
service. This will be completed by the autumn.
* Completed a transitional modernisation of 178 stores.
* Opened the first of three prototype stores in Sutton, to
be followed by Fosse Park (June) and Kensington (July). Here,
we will evaluate new customer facing initiatives and test new
concepts. These stores illustrate our progress to date in
better understanding and applying our knowledge of customers'
needs.
Buying and Logistics
The changes to our supply chain, and their resulting
impact, are of great significance to us. We have
fundamentally changed the way we source, buy and
distribute our products. This has been a difficult
process not only for our own people but also for our
suppliers. However, these changes are necessary to
improve our competitive position and could not have been
achieved without their co-operation.
We have reshaped our supply base to deliver economies of
scale and to reduce our overheads. We are increasing the
effectiveness of our buying and logistics by:
* Focusing our production volumes on a smaller number of
suppliers in each product area.
* Increasing the proportion of goods sourced overseas from
50% to 70% by the autumn season.
* Leveraging economies of scale to gain logistics cost
advantages.
At our Interim results, we identified £450 million in
annualised cost savings, of which £400 million would come
from general merchandise and £50 million from foods, by
2002/03. We have taken the first steps and will achieve
over £80 million of cost savings during the second half of
2000/01.
To drive further supply chain efficiencies, we have joined
the Worldwide Retail Exchange, a collaborative partnership
with 16 other retailers, as a founding member.
Other Channels
E-commerce - Our retail offer on the Marks & Spencer
website was piloted in the pre-Christmas season, building
on our established retail infrastructure. Over the next
few days, we will enhance the website to incorporate
increased functionality, simpler navigation and a broader
product offer. Approximately 1200 products will be
available by the end of this month, rising to 3000 by
Christmas.
Future developments will include a new ordering point
which allows customers to order from our web site in-
store, as well as access through new mobile and static
devices such WAP and DiTV.
Direct - We have expanded and improved our catalogues
following customer feedback and both sales and average
transaction values are up.
Restore profitability overseas
Marks & Spencer Stores
We have closed our Canadian operation and seven under-
performing stores in Europe. By the end of 2001, 35% of
European sales will be managed by our European Buying
Office, of which half will be unique products targeted at
local customers. In the Far East, over 50% of our clothing
is already sourced regionally and there is scope to take
this further.
Brooks Brothers
Brooks Brothers is a high quality brand with international
potential. We already have operations in Japan, Hong Kong
and Taiwan, and have announced a franchising move into
Italy, Austria and Switzerland with the Della Valle Group.
We will continue to seek opportunities where we can build
the brand internationally.
Our Brooks Brothers merchandise is already sold through
direct mail and on the internet, and we have put a
franchising arrangement in place to sell merchandise at
US airports.
Kings Super Markets
Kings Super Markets is a profitable, well-managed
operation but we were unable to achieve a price that reflected
the value of the business. We will continue to grow our business
in New Jersey and surrounding areas. This year we will be
opening the first stores on Long Island, New York.
Build our Financial Services business
Changes to the Account Card - we have recently announced a
substantial reduction in APR to 18.9%, making the M&S card
rate competitive with the more widely used credit cards
and 7.5% lower than the average store card.
The acceptance of other credit cards will inevitably have
an effect on full year profits in this Division, with some
reduction in the number of active M&S card users. We have
and will continue to develop incentives targeted at
specific customer groups which will generate loyalty to
the M&S card.
New product development - we have recently announced a
move into general insurance to increase the range of high
value products we offer. A home and contents policy will
be offered initially and other services will be launched
thereafter. Additionally, commission-free foreign exchange
delivered direct to customers' homes is now available to
all account card holders.
New distribution channels - we are piloting a new
Financial Services centre within three stores for face-to-
face selling and servicing of products, with two more
stores added over the coming months. We have also seen a
significant increase in sales volumes through our website
and we will continue to develop this channel of
distribution.
FUTURE
We are very aware that our shareholders, customers, employees
and business partners have all shared the burden of our
ambitious change programme, and we are grateful for their
support.
We have reorganised the Company to be more responsive to our
customers. We are now organised to understand them better and
to apply this knowledge to the entire range of our products
and services, with a greatly increased ability to tailor our
offer to their individual needs. By simplifying and improving
our processes, we are making the cost savings necessary for
this to happen. Moreover, our supply chain improvements are
making us more competitive, and there is a great deal more to come.
We are now using these skills to work across categories and
business areas, to stretch our brand in order to meet
customers' lifestyle needs with a variety of formats, selling
channels and new product areas.
Restoring the performance of our UK retail business must be
our first priority. Once that recovery is secure, we will
have a more effective foundation on which to build our
international strategy.
We have identified the priority actions which will lead to
sustainable recovery and an improvement in shareholder value,
and we are confident of our ability to achieve this goal.
Consolidated profit and loss account
53 weeks ended 52 weeks ended
1 April 2000 27 March 1999
(1) (2) (3) (1) (2) (3)
£m £m £m £m £m £m
Turnover
(see note 2) 8,195.5 - 8,195.5 8,224.0 - 8,224.0
Operating
profit (see
note 3) 543.0 (72.0) 471.0 600.5 (88.5) 512.0
Loss on termination of Canadian operation(see note6):
Losses arising on
closure - (21.0) (21.0) - - -
Goodwill
previously written
off to reserves - (24.4) (24.4) - - -
- (45.4) (45.4) - - -
(Loss)/profit on
sale of fixed assets
(see note 7) - (22.3) (22.3) - 6.2 6.2
Net interest income
(see note 4) 14.2 - 14.2 27.9 - 27.9
Profit on ordinary
activities before
taxation 557.2 (139.7) 417.5 628.4 (82.3) 546.1
Taxation on
ordinary
activities (177.2) 19.0 (158.2) (183.7) 7.6 (176.1)
Profit on
ordinary
activities
after taxation 380.0 (120.7) 259.3 444.7 (74.7) 370.0
Minority
interests
(all equity) (0.6) - (0.6) 2.1 - 2.1
Profit
attributable to
shareholders 379.4 (120.7) 258.7 446.8 (74.7) 372.1
Dividends
(see note 10) (258.6) - (258.6) (413.3) - (413.3)
Retained
profit/(loss)
for the year 120.8 (120.7) 0.1 33.5 (74.7) (41.2)
Earnings per share
(see note 9) 9.0p 13.0p
Fully diluted earnings
per share
(see note 9) 9.0p 12.9p
Adjusted earnings
per share
(see note 9) 13.2p 15.6p
Fully diluted adjusted
earnings per share
(see note 9) 13.2p 15.5p
Dividend per share
(see note 10) 9.0p 14.4p
(1) Before exceptional items
(2) Exceptional items
(3) After exceptional items
Consolidated statement of total recognised gains and losses
53 weeks 52 weeks
ended ended
1 April 27 March
2000 1999
£m £m
Profit attributable to
shareholders 258.7 372.1
Exchange differences on
foreign currency translation (16.8) 15.0
Unrealised surpluses on
revaluation of investment 3.0 34.1
properties
Total recognised gains and
losses relating to the year 244.9 421.2
Notes
1. Basis of preparation
The results comprise those of Marks and Spencer p.l.c. and its UK and
international subsidiaries for the year ended 31 March 2000 and have been
prepared using accounting policies consistent with those adopted last year.
The results for the year comprise stores sales and related costs for the 53
weeks to 1 April 2000 (last year 52 weeks to 27 March 1999). All other
activities are for the year to 31 March 2000. This summary of results does
not constitute the full Financial Statements within the meaning of s240 of the
Companies Act 1985. The full Financial Statements have been reported on by
the Company's auditors, but have not yet been delivered to the Registrar of
Companies. The audit report was unqualified and did not contain a Statement
under s237(2) or s237(3) of the Companies Act 1985.
2. Turnover
Turnover (excluding sales taxes for international operations) is analysed as
follows:-
53 52 weeks ended
weeks
ended
1 27 Inc/
April March (Dec)
2000 1999
£m £m %
UK Retail (incl. VAT)
Clothing, Footwear and Gifts 3,948.7 4,196.0 (5.9)
Home Furnishings 319.1 308.0 3.6
Foods 2,880.4 2,787.6 3.3
7,148.2 7,291.6 (2.0)
Less: United Kingdom VAT (665.5) (690.5) (3.6)
6,482.7 6,601.1 (1.8)
International Retail
Europe (excl. UK) 555.6 554.0 0.3
The Americas
Brooks Brothers (incl. Japan) 395.5 345.9 14.3
Kings Super Markets 273.7 245.5 11.5
669.2 591.4 13.2
M&S Canada (see note 6) 22.2 38.1 (41.7)
691.4 629.5 9.8
Far East 101.2 90.8 11.5
Total International (see note 8) 1,348.2 1,274.3 5.8
Financial Services (UK) 364.6 348.6 4.6
Total turnover 8,195.5 8,224.0 (0.3)
Turnover is analysed as follows:-
United Kingdom 6,847.3 6,949.7 (1.5)
International 1,348.2 1,274.3 5.8
8,195.5 8,224.0 (0.3)
The value of goods exported from the UK, including shipments to international
subsidiaries, amounted to £460.2m(last year £440.2m).
3. Operating profit
Operating profit arises as follows:-
53 52
weeks weeks
ended ended
1 April 27March
2000 1999
£m £m
UK Retail
Before exceptional operating charges 420.1 478.9
Less: exceptional operating charges
(see note 5) (63.3) (24.5)
356.8 454.4
Financial Services 115.9 110.7
International Retail
Europe (excl. UK) (4.1) (12.4)
Less: pre-opening costs (2.0) (14.4)
(6.1) (26.8)
Less: exceptional operating charges
(see note 5) (8.7) (64.0)
(14.8) (90.8)
The Americas
Brooks Brothers (incl. Japan) 7.9 12.4
Kings Super Markets 11.1 10.0
Corporate Expenses (2.6) (2.0)
16.4 20.4
M&S Canada (see note 6) - (4.7)
16.4 15.7
Far East (3.2) (14.4)
Less: pre-opening costs - (0.1)
(3.2) (14.5)
Other (0.1) 11.0
(3.3) (3.5)
Total International - analysed between:
Profit before exceptional operating
charges 7.0 (14.6)
Exceptional operating charges
(see note 5) (8.7) (64.0)
(1.7) (78.6)
Total segmental operating profit 471.0 486.5
Add: excess interest charged to cost
of sales of Financial Services (see - 25.5
note 4)
Total operating profit 471.0 512.0
Analysis of operating profit
Total segmental operating profit
before exceptional items 543.0 575.0
Exceptional operating charges (72.0) (88.5)
Excess interest charged to cost of
sales of Financial Services - 25.5
471.0 512.0
Retailing before exceptional items 427.1 464.3
Exceptional operating charges (72.0) (88.5)
Retailing after exceptional items 355.1 375.8
Financial Services 115.9 110.7
Excess interest charged to cost of
sales of Financial Services - 25.5
471.0 512.0
The geographical segments disclose turnover and operating profit by
destination and reflect management responsibility. Following the closure of
the Canadian operations and a realignment of management responsibility,
franchise turnover and operating profits previously included within The
Americas are now included within Europe. Comparatives have been restated
accordingly.
The profits generated from sourcing merchandise and technological services in
Hong Kong, together with the costs of research into new markets in the region,
are grouped within Far East under 'Other'. Due to change affecting sourcing
from the Far East, sourcing income for the year has fallen by £12.7m, with a
corresponding reduction in UK retail operating costs.
4. Interest charged to cost of sales
Financial Services operating profit is stated after charging £105.5m
(last year £102.3m) of interest to cost of sales. This interest represents
the cost of funding the Financial Services business as a separate segment,
including both intra group interest and third party funding. The amount of
third party interest payable by the Group during the year was £107.4m (last
year £76.8m). Intra group interest of £nil (last year £25.5m), being the
excess over third party interest payable, has been added back in the
segmental analysis to arrive at total operating profit.
5. Exceptional operating charges
53 52
weeks weeks
ended ended
1 April 27 March
2000 1999
£m £m
UK redundancy costs (i) 63.3 24.5
European restructuring costs (ii) 8.7 -
Provision for impairment (iii) - 64.0
Total exceptional operating charges 72.0 88.5
(i) The £63.3m charge for the year (of which £16m was reported at the half
year) is in respect of the restructuring of UK Retail into
customer business units, the rationalisation of store management and the
re-focussing of existing store roles to customer facing activities, and the
closure of two distribution centres. The £24.5m charge last year represents
the cost of rationalising the Group's head office functions.
(ii) The European restructuring costs are in respect of store closures in
France and Germany announced during the year.
(iii) The £64m charge last year was in respect of the provision made to
adjust the carrying value of our European fixed assets in accordance with FRS
11 'Impairment of Fixed Assets and Goodwill'.
6. Loss on termination of Canadian operation
On 28 April 1999, the Group announced the closure of its Canadian operations.
As a consequence, its subsidiary, Marks and Spencer Canada Inc., ceased to
trade during the year. The loss on closure of operations of £45.4m
arises as follows:
£m
Trading losses since 28 April 1999 0.6
Net closure costs 20.4
Loss before goodwill previously
written off to reserves 21.0
Goodwill previously written off to
reserves 24.4
Total loss on termination of
Canadian operation 45.4
In the period prior to closure, Marks and Spencer Canada contributed
£22.2m to turnover (last year £38.1m) and £nil to operating profit (last year
£4.7m loss).
7. (Loss)/profit on sale of fixed assets
53 52
weeks weeks
ended ended
1 April 27 March
2000 1999
£m £m
Loss on sale of UK investment
properties (i) (16.1) -
Loss on sale of European stores (ii) (8.3) -
Profit on other asset disposals 2.1 6.2
Total (loss)/profit on sale of other
fixed assets (22.3) 6.2
(i) The loss on sale of investment properties is in respect of the disposal of
The Gyle shopping centre and a property in Newcastle. Overall, the Group has
realised a profit of £58.1m based on the original purchase cost which has not
been reflected in the profit and loss account. The properties have been
revalued annually since their acquisition and the cumulative revaluation
surplus of £74.2m has been recognised through the Statement of Total
Recognised Gains and Losses in previous years.
(ii) The loss on sale of European properties of £8.3m relates to store
closures in Europe. After including the restructuring costs of £8.7m
disclosed in note 5 (ii) above, the total closure cost is £17m.
8. Foreign Currencies
The results of international subsidiaries have been translated using average
rates of exchange ruling during the period. The movements in exchange
rates used for translation, compared to the same period last year, have
reduced international sales from (excluding Canada) by £5.7m. The effect on
the results of international operations is not significant. When expressed at
constant rates for translation, turnover increases on last year become:
Turnover increase %
As At
reported constant
rates
Europe 0.3 6.1
The Americas
Brooks Brothers (incl.Japan) 14.3 9.4
Kings Super Markets 11.5 8.9
Far East 11.5 9.6
Total International Retail 7.3 7.7
9. Earnings per share
The calculation of earnings per ordinary share is based on earnings after tax
and minority interests of £258.7m (last year £372.1m), and on 2,872,055,200
ordinary shares (last year 2,864,724,900), being the weighted average number
of ordinary shares in issue during the year ended 31 March 2000. The weighted
average number of ordinary shares used in the calculation of fully diluted
earnings per ordinary share is 2,885,697,100 ordinary shares(last year
2,883,306,200).
An adjusted earnings per share figure has been calculated in addition to the
earnings per share required by FRS 14 and is based on earnings excluding the
effect of the exceptional items. It has been calculated to allow the
shareholders to gain a clearer understanding of the trading performance of the
Group. Details of the adjusted earnings per share are set out below:
53 52
weeks weeks
ended ended
1 April 27 March
2000 1999
Earnings per share 9.0p 13.0p
Exceptional operating costs (net of tax) 1.8p 2.8p
Loss on termination of Canadian
operation (net of tax) 1.6p -
Loss/(profit) on sale of fixed
assets 0.8p (0.2)p
Adjusted earnings per share 13.2p 15.6p
The IIMR earnings per share is 11.4p(last year 15.0p). Under this measure
standard earnings are adjusted to eliminate certain capital items.
10. Dividend
The directors have proposed a final dividend of 5.3p per share (last year
10.7p). This makes a total ordinary dividend for the year of 9.0p (last year
14.4p). The total cost of dividends is £258.6m (last year £413.3m). The
ordinary shares will be quoted ex dividend on 30 May 2000. The final dividend
will be paid on 28 July 2000 to shareholders whose names are on the Register
of Members at the close of business on 5 June 2000. Shareholders may choose
to take this dividend in shares or in cash.
11. Date of approval
The financial statements for the year ended 31 March 2000 were approved by the
Directors on 22 May 2000.
Consolidated balance sheet
As at As at
31 March 31 March
2000 1999
£m £m
Fixed assets
Goodwill 1.3 -
Tangible assets 4,242.1 4,387.5
Investments 55.0 61.2
4,298.4 4,448.7
Current assets
Stocks 474.4 514.7
Debtors 2,555.2 2,355.7
Cash and investments 687.5 485.5
3,717.1 3,355.9
Current liabilities
Creditors: amounts falling due
within one year 2,162.8 2,029.8
Net current assets 1,554.3 1,326.1
Total assets less current
liabilities 5,852.7 5,774.8
Creditors: amounts falling due after
more than one year 804.3 772.6
Provisions for liabilities and
charges 126.6 105.0
Net assets 4,921.8 4,897.2
Capital and reserves
Called up share capital 718.6 717.7
Share premium account 369.4 358.5
Revaluation reserve 457.9 531.0
Profit and loss account 3,359.4 3,276.7
Shareholders' funds (all equity) 4,905.3 4,883.9
Minority interests (all equity) 16.5 13.3
Total capital employed 4,921.8 4,897.2
Reconciliation of movements in shareholders' funds
As at As at
31 March 31 March
2000 1999
£m £m
Profit attributable to shareholders 258.7 372.1
Dividends (258.6) (413.3)
0.1 (41.2)
Other recognised gains and losses
relating to the period (13.8) 49.1
New share capital subscribed 11.8 34.9
Amounts deducted from profit and
loss account reserve in respect of
shares issued to QUEST (1.1) (12.6)
Goodwill transferred to the profit
and loss account in respect of the
closure of Canada 24.4 -
Net addition to
shareholders' funds 21.4 30.2
Shareholders' funds at 1 April 4,883.9 4,853.7
Shareholders' funds at 31 March 4,905.3 4,883.9
Consolidated cash flow statement
53 weeks 52 weeks
ended ended
1 April 27 March
2000 1999
£m £m
Operating activities
Operating profit 471.0 512.0
Exceptional operating items 72.0 88.5
Operating profit before exceptional
items 543.0 600.5
Depreciation 261.6 236.4
Increase in working capital (i) (113.9) (364.0)
Net cash inflow before exceptional
items 690.7 472.9
Exceptional operating cash outflow (49.2) (0.6)
Cash inflow from operating
activities 641.5 472.3
Returns on investments and servicing
of finance 15.2 29.0
Taxation (145.7) (345.9)
Capital expenditure and financial
investment (see note (ii)) (167.0) (628.1)
Acquisitions and disposals (see note
(iii)) (21.1) 1.0
Equity dividends paid (413.5) (412.6)
Cash outflow before management of liquid
resources and financing (90.6) (884.3)
Management of liquid resources (162.5) 180.6
Financing (see note (iv)) 260.3 505.0
Increase/ (decrease) in cash 7.2 (198.7)
Notes
53 weeks 52 weeks
ended ended
1 April 27 March
2000 1999
£m £m
(i) Increase in working capital
Decrease/(Increase) in stocks 40.3 (7.6)
Increase in customer advances (206.2) (363.0)
Increase in creditors 51.1 14.6
Other working capital movements 0.9 (8.0)
(113.9) (364.0)
(ii) Capital expenditure and financial investment
Purchase of tangible fixed assets (447.5) (663.0)
Sale of tangible fixed assets 266.0 25.5
Net sale of fixed asset investments 14.5 9.4
(167.0) (628.1)
(iii) Acquisitions and disposals
Closure of Canadian operations (15.4) -
Repayment of loan by joint venture 0.5 1.0
Acquisition of minority interest (6.2) -
(21.1) 1.0
(iv) Financing
Debt financing as shown in movement
of net debt 250.9 482.8
Shares issued under employees' share
schemes 9.4 22.2
260.3 505.0
Reconciliation of net cash flow to movement in net debt
53 weeks 52 weeks
ended ended
1 April 27 March
2000 1999
£m £m
Increase/ (decrease) in cash 7.2 (198.7)
Cash outflow/ (inflow) from decrease
in liquid resources 162.5 (180.6)
Cash inflow from increase in debt
financing (see note (iv)) (250.9) (482.8)
Exchange movements 11.4 (0.2)
Movement in net debt (69.8) (862.3)
Net debt at beginning of the period (1,181.6) (319.3)
Net debt at end of the period (1,251.4) (1,181.6)
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