Interim Results - Part 2

Marks & Spencer PLC
6 November 2001

PART 2


Consolidated profit and loss account
                                                   26 weeks ended          Year
                                                                          ended
                                                             30 Sept   31 March
                                                   29 Sept      2000       2001
                                                      2001        As         As
                                                            restated   restated
                                           Notes        £m        £m         £m
Turnover
Retained businesses                                3,222.0   3,232.7    6,948.1
Operations to be discontinued                        516.2     523.1    1,127.6
Total turnover                               2     3,738.2   3,755.8    8,075.7
Operating profit
Retained businesses before exceptional               206.8     184.3      465.7
operating charges
Exceptional operating charges                6           -         -     (26.5)
                                                     206.8     184.3      439.2
Operations to be discontinued
Continental European operations                     (26.4)    (19.4)     (34.0)
Less release of provision made last year              26.4         -          -
Other operations to be discontinued                    9.1       8.4       35.3
Total operating profit                       3       215.9     173.3      440.5
Loss on sale of property and other fixed    7A       (7.0)     (3.7)     (83.2)
assets
Provision for loss on operations to be      7B           -         -    (224.0)
discontinued
Loss on sale / termination of operations    7C       (3.1)         -      (1.7)
Less release of provision made last year               3.1         -          -
Net interest income                                    4.4      10.1       13.9
Profit on ordinary activities before                 213.3     179.7      145.5
taxation
Analysed between
Profit before tax and exceptional charges            220.3     183.4      480.9
Exceptional charges                                  (7.0)     (3.7)    (335.4)
Taxation on ordinary activities              8      (67.5)    (59.3)    (149.5)
Profit on ordinary activities after                  145.8     120.4      (4.0)
taxation
Minority interests (all equity)                      (1.6)     (0.4)      (1.5)
Profit attributable to shareholders                  144.2     120.0      (5.5)
Dividends                                   10     (105.2)   (106.3)    (258.3)
Retained profit/(loss) for the period                 39.0      13.7    (263.8)
All results in both the current and preceding periods are derived
from continuing operations
Earnings per share                           9        5.0p      4.2p     (0.2)p
Fully diluted earnings per share             9        5.0p      4.2p     (0.2)p
Adjusted earnings per share                  9        5.3p      4.3p      11.2p
Fully diluted adjusted earnings per share    9        5.3p      4.3p      11.2p
Dividend per share                          10        3.7p      3.7p       9.0p

Consolidated statement of total recognised gains and losses

                                                      26 weeks ended       Year
                                                                          ended
                                                             30 Sept   31 March
                                                   29 Sept      2000       2001
                                                      2001        As         As
                                                            restated   restated
                                                        £m        £m         £m
Profit attributable to shareholders                  144.2     120.0      (5.5)
Exchange differences on foreign currency             (1.2)       3.7       13.3
translation
Unrealised surpluses on revaluation of                   -         -      (1.7)
investment properties*
Total recognised gains and losses relating           143.0     123.7        6.1
to the period
Prior year adjustment                        8      (79.6)
Total recognised gains and losses since               63.4
last annual report
* revalued annually in March.


Consolidated balance sheet
                                                               As at      As at
                                                     As at   30 Sept   31 March
                                                   29 Sept      2000       2001
                                                      2001        As         As
                                                            restated   restated
                                                        £m        £m         £m
Fixed assets
Goodwill                                                 -       1.2          -
Tangible assets                                    4,016.1   4,281.5    4,118.9
Investments                                           59.6      66.9       58.3
                                                   4,075.7   4,349.6    4,177.2
Current assets
Stocks                                               462.8     493.9      472.5
Debtors                                            2,642.1   2,620.7    2,629.3
Cash and investments                                 605.6     419.1      414.4
                                                   3,710.5   3,533.7    3,516.2
Current liabilities                              (1,930.7) (2,012.0)  (1,981.6)

Net current assets                                 1,779.8   1,521.7    1,534.6
Total assets less current liabilities              5,855.5   5,871.3    5,711.8

Creditors: amounts falling due after more          (932.4)   (820.4)    (735.1)
than one year
Provisions for liabilities and charges             (351.9)   (178.5)    (395.3)

Net assets                                         4,571.2   4,872.4    4,581.4

Capital and reserves
Called up share capital                              711.9     719.3      716.9
Share premium account                                378.1     374.3      375.6
Revaluation reserve                                  453.3     457.9      455.6
Capital redemption reserve                             8.0         -        2.6
Profit and loss account                            3,003.2   3,304.0    3,015.1
Shareholders' funds (all equity)                   4,554.5   4,855.5    4,565.8
Minority interests (all equity)                       16.7      16.9       15.6
Total capital employed                             4,571.2   4,872.4    4,581.4


Reconciliation of movements in shareholders' funds
                                                               As at      As at
                                                     As at   30 Sept   31 March
                                                   29 Sept      2000       2001
                                                      2001        As         As
                                                            restated   restated
                                                        £m        £m         £m
Profit attributable to shareholders                  144.2     120.0      (5.5)
Dividends                                          (105.2)   (106.3)    (258.3)
                                                      39.0      13.7    (263.8)
Other recognised gains and losses relating           (1.2)       3.7       11.6
to the period
New share capital subscribed                           2.9       5.6        7.1
Purchase of own shares                              (52.0)         -     (20.3)
Goodwill transferred to the profit and                   -         -      (1.3)
loss account in respect of the closure of
businesses
Net movement in shareholders' funds                 (11.3)      23.0    (266.7)
Shareholders' funds at 1 April as                  4,645.4   4,905.3    4,905.3
previously stated
Prior year adjustment                        8      (79.6)    (72.8)     (72.8)
Shareholders' funds at 1 April as restated         4,565.8   4,832.5    4,832.5
Shareholders' funds at end of period               4,554.5   4,855.5    4,565.8


Consolidated cash flow statement
                                                      26 weeks ended       Year
                                                                          ended
                                                   29 Sept   30 Sept   31 March
                                                      2001      2000       2001
                                           Notes        £m        £m         £m
Operating activities
Operating profit                                     215.9     173.3      440.5
Exceptional operating items                              -         -       26.5
Operating profit before exceptional items            215.9     173.3      467.0
Release of provision against European               (26.4)         -          -
trading losses
Depreciation                                         133.7     132.5      275.9
Decrease / (increase) in working capital    11A       89.5    (85.9)     (36.2)
Net cash inflow before exceptional items             412.7     219.9      706.7
Exceptional operating cash outflow                  (15.5)    (23.8)     (30.3)
Cash inflow from operating activities                397.2     196.1      676.4
Returns on investments and servicing of                6.9      11.7       12.6
finance
Taxation                                            (56.2)    (50.1)    (164.6)
Capital expenditure and financial           11B     (24.6)   (122.2)    (258.2)
investment
Acquisitions and disposals                  11C       11.5     (0.4)        5.9
Equity dividends paid                              (152.0)   (152.3)    (258.6)
Cash inflow/(outflow) before management of           182.8   (117.2)       13.5
liquid resources and financing
Management of liquid resources                     (271.1)     225.2      263.7
Financing                                   11D       55.1   (127.2)    (265.4)
(Decrease) / increase in cash                       (33.2)    (19.2)       11.8


Reconciliation of net cash flow to movement in net debt

                                                      26 weeks ended       Year
                                                                          ended
                                                   29 Sept   30 Sept   31 March
                                                      2001      2000       2001
                                                        £m        £m         £m
(Decrease) / increase in cash                       (33.2)    (19.2)       11.8
Cash outflow / (inflow) from increase /              271.1   (225.2)    (263.7)
(decrease) in liquid resources
Cash (inflow) / outflow from (increase) /          (101.7)     127.2      245.9
decrease in debt financing
Exchange movements                                   (0.7)       2.8     (20.4)
Movement in net debt                                 135.5   (114.4)     (26.4)
Net debt at beginning of the period              (1,277.8) (1,251.4)  (1,251.4)
Net debt at end of the period                    (1,142.3) (1,365.8)  (1,277.8)
Notes to the interim statement

1. Basis of preparation
The results for the first half of the financial year have not been audited and
are prepared on the basis of the accounting policies set out in the Group's
2001 Annual Report and Financial Statements with the exception of the adoption
of the new accounting standard on deferred tax. Detail of this change in
accounting policy are set out in Note 8.

The summary of results for the year ended 31 March 2001 does not constitute
full financial statements within the meaning of s240 of the Companies Act 1985.
The full financial statements for that year have been reported on by the
Group's auditors and 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:-
                                                     26 weeks ended        Year
                                                                          ended
                                                    29 Sept   30 Sept  31 March
                                                       2001      2000      2001
                                                         £m        £m        £m
Retained businesses:-
UK Retail (incl. VAT)
Clothing, Footwear and Gifts                        1,619.5   1,701.5   3,649.5
Home                                                  163.5     160.3     355.8
Foods                                               1,417.3   1,344.2   2,925.9
                                                    3,200.3   3,206.0   6,931.2
Less: United Kingdom VAT                            (284.0)   (290.1)   (638.2)
                                                    2,916.3   2,915.9   6,293.0
Financial Services (UK)                               174.8     180.6     363.1
International Retail (1)                              130.9     136.2     292.0
Total retained businesses                           3,222.0   3,232.7   6,948.1
Operations to be discontinued:-
Continental European operations                       116.0     130.9     285.0
The Americas
Brooks Brothers (incl. Japan)                         199.5     204.0     448.1
Kings Super Markets                                   164.0     147.9     313.1
                                                     363.5      351.9     761.2
Hong Kong                                              36.7      40.3      81.4
Total operations to be discontinued                   516.2     523.1   1,127.6
Total turnover                                      3,738.2   3,755.8   8,075.7
Turnover is analysed as follows:-
United Kingdom                                      3,091.1   3,096.5   6,656.1
International                                         647.1     659.3   1,419.6
                                                    3,738.2   3,755.8   8,075.7

(1) International Retail consists of the Republic of Ireland and Franchises.

The value of goods exported from the UK, including shipments to international
subsidiaries, amounted to £170.6m (last half year £208.5m).

3. Operating profit
Operating profit arises as follows:-
                                                     26 weeks ended        Year
                                                                          ended
                                                    29 Sept   30 Sept  31 March
                                                       2001      2000      2001
                                                         £m        £m        £m
Retained businesses:-
UK Retail
Before exceptional operating charges                  147.4     124.7     334.8
Less: exceptional operating charges (see note 6)          -         -    (26.5)
                                                      147.4     124.7     308.3
Financial Services                                     44.0      48.9      96.3
International Retail                                    9.1      10.7      26.7
Segmental operating profit from retained              200.5     184.3     431.3
businesses
Add: excess interest charged to cost of sales of        6.3         -       7.9
Financial Services (see note 4)
Operating profit from retained businesses             206.8     184.3     439.2
Operations to be discontinued:-
Continental European operations                      (26.4)    (19.4)    (34.0)
Less: release of provision made last year              26.4         -         -
                                                          -    (19.4)    (34.0)
The Americas
Brooks Brothers (incl. Japan)                         (0.8)       2.5      20.2
Kings Super Markets                                     5.9       4.9      11.9
Corporate Expenses                                        -         -     (0.1)
                                                        5.1       7.4      32.0
Hong Kong                                               4.0       1.0       3.3
Operating profit/(loss) from operations to be           9.1    (11.0)       1.3
discontinued
Total operating profit                                215.9     173.3     440.5
Analysis of segmental operating profit from
retained businesses
Segmental operating profit before exceptional         200.5     184.3     457.8
operating charges
Exceptional operating charges                             -         -    (26.5)
Total segmental operating profit                      200.5     184.3     431.3
Retailing before exceptional items                    156.5     135.4     361.5
Exceptional operating charges                             -         -    (26.5)
Retailing after exceptional items                     156.5     135.4     335.0
Financial Services                                     44.0      48.9      96.3
Total segmental operating profit                      200.5     184.3     431.3

4. Interest charged to cost of sales
Financial Services operating profit is stated after charging £53.9m (last half
year £57.3m) 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 half year was £47.6m (last half year £
57.3m). Intra group interest of £6.3m (last half year £nil), being the excess
over third party interest payable, has been added back in the segmental
analysis to arrive at total operating profit.

5. Pensions
An actuarial valuation of the UK pension scheme as at 31 March 2001 has
recently been completed. The results of this valuation have been incorporated

into the results for the first half of this year on a SSAP24 basis.
A market value basis was used for the valuation of the Scheme and has been
adopted for SSAP24 purposes. The assets of the Scheme were valued at their
market value and the liabilities were valued using a projected unit method and
discounted at a rate of return in line with market conditions at the valuation
date. The valuation revealed a funding position (i.e. liabilities compared to
assets), broadly in line with expectations, of 96%, representing a shortfall of
£134m.

The deficit of £134m is being recognised in accordance with SSAP24 over a
period of 12 years, being the estimated remaining service lives of the current
scheme members. The amortisation of the deficit, together with the increase in
the regular cost for future service has led to an increase in the UK annual
pension cost of approximately £13m at the half year (an estimated annual
increase of £29m).

6. Exceptional operating charges
                                                     26 weeks ended        Year
                                                                          ended
                                                    29 Sept   30 Sept  31 March
                                                       2001      2000      2001
                                                         £m        £m        £m
UK restructuring costs                                    -         -    (26.5)
Total exceptional operating charges                       -         -    (26.5)

The £26.5m was in respect of the closure of the 'Direct' catalogue business (£
16.5m) and the reduction of roles at the Group's head office (£10.0m).

7. Non-operating exceptional charges

7A Loss on sale of property and other fixed assets
                                                     26 weeks ended        Year
                                                                          ended
                                                    29 Sept   30 Sept  31 March
                                                       2001      2000      2001
                                                         £m        £m        £m
Provision for loss on 'Direct' assets (1)                 -         -    (19.0)
Other asset disposals (2)                             (7.0)     (3.7)    (64.2)
Loss on sale of property and other fixed assets       (7.0)     (3.7)    (83.2)

(1) Including the restructuring cost of £16.5m disclosed in note 6 above, this
gave rise to total closure costs for the 'Direct' catalogue business of £35.5m
last year.

(2) Other asset disposals last year relates to the closure of UK stores, £40.2m
of which is in respect of satellite store closures.
7B Provision for loss on operations to be discontinued

                                                     26 weeks ended        Year
                                                                          ended
                                                    29 Sept   30 Sept  31 March
                                                       2001      2000      2001
                                                         £m        £m        £m
Net closure costs                                         -         -   (225.3)
Goodwill previously credited to reserves                  -         -       1.3
Provision for loss on operations to be                    -         -   (224.0)
discontinued

The provision for loss on operations to be discontinued last year represents
the estimated cost of the intended closure of the Group's Continental European
subsidiaries. Net closure costs include future trading losses, losses on
disposal of fixed assets, property exit costs and redundancy costs.
7C Loss on sale / termination of operations
                                                     26 weeks ended        Year
                                                                          ended
                                                    29 Sept   30 Sept  31 March
                                                       2001      2000      2001
                                                         £m        £m        £m
Loss on sale of Splendour.com Ltd                         -         -     (1.7)
Losses on closure of Continental European             (3.1)         -         -
operations
Loss on sale / termination of operations              (3.1)         -     (1.7)

The loss on sale / termination of operations for the year ended 31 March 2001
is stated after charging £1.0m of goodwill.

8. Taxation
The taxation charge for the 26 weeks ended 30 September 2001 is based on an
estimated effective tax rate of 31.6% for the full year. Included in the charge
for the year ended 31 March 2001 is a credit of £8.5m which is attributable to
exceptional charges.

Financial Reporting Standard (FRS) 19 'Accounting for deferred tax' has been
adopted with effect from 2 April 2000. FRS 19 requires that deferred tax be
recognised in respect of all timing differences that have originated but not
reversed by the balance sheet date. The Group's previous accounting policy in
respect of deferred tax was to recognise deferred tax to the extent that a
liability or asset was likely to be payable or recoverable.

The effect is to reduce profit after tax by £3.5m (last half year £3.6m) from £
149.3m to £145.8m and to reduce opening net assets by £79.6m from £4,661m to £
4,581.4m. Earnings per share for last half year have been restated from 4.3p to
4.2p and adjusted earnings per share from 4.3p to 4.2p. Prior year comparatives
have been restated accordingly.

9. Earnings per share
The calculation of earnings per ordinary share is based on earnings after tax
and minority interests of £144.2m (last half year £120.0m), and on
2,865,234,000 ordinary shares (last half year 2,874,622,000), being the
weighted average number of ordinary shares in issue during the period ended 29
September 2001. The weighted average number of ordinary shares used in the
calculation of fully diluted earnings per ordinary share is 2,880,103,000
ordinary shares (last half year 2,874,622,000).

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:

                                                    26 weeks ended         Year
                                                                          ended
                                                     29 Sept  30 Sept  31 March
                                                        2001     2000      2001
                                                                   As        As
                                                             restated  restated
Earnings per share                                      5.0p     4.2p    (0.2)p
Exceptional operating charges                              -        -      0.7p
Loss on sale of property and other fixed assets         0.3p     0.1p      2.9p
Loss on sale / termination of operations                   -        -      0.1p
Provision for loss on operations to be                     -        -      7.7p
discontinued
Adjusted earnings per share                             5.3p     4.3p     11.2p

10. Dividend
The Directors have proposed an interim dividend of 3.7p per share (last year
3.7p). This results in an interim dividend of £105.2m (last half year £106.3m)
which will be paid on 11th January 2002 to shareholders whose names are on the
Register of Members at the close of business on 16th November 2001. The
ordinary shares will be quoted ex dividend on 14th November 2001. Shareholders
may choose to take this dividend in shares or in cash.

11. Analysis of cash flows given in the cash flow statement
                                                     26 weeks ended        Year
                                                                          ended
                                                     29 Sept  30 Sept  31 March
                                                        2001     2000      2001
                                                          £m       £m        £m
A Decrease / (increase) in working capital
Decrease / (increase) in stocks                          6.5    (9.5)      14.7
Decrease / (increase) in customer advances              21.3   (57.7)   (117.8)
Increase / (decrease) in creditors                      56.1   (15.7)      23.1
Other working capital movements                          5.6    (3.0)      43.8
                                                        89.5   (85.9)    (36.2)
B Capital expenditure and financial investment
Purchase of tangible fixed assets                     (75.1)  (114.8)   (269.8)
Sale of tangible fixed assets                           51.7      0.2      18.9
Net purchase of fixed asset investments                (1.2)    (7.6)     (7.3)
                                                      (24.6)  (122.2)   (258.2)
C Acquisitions and disposals
Closure of Canadian operations                         (0.4)    (0.4)     (0.9)
Closure of European operations                          11.9        -         -
Sale of Splendour.com Ltd                                  -        -     (0.8)
Repayment of loan by joint venture                         -        -       7.6
                                                        11.5    (0.4)       5.9
D Financing
Debt financing as shown in movement of net debt        101.7  (127.2)   (245.9)
Purchase of own shares                                (49.3)        -    (20.3)
Shares issued under employees' share schemes             2.7        -       0.8
                                                        55.1  (127.2)   (265.4)
12. Date of approval
The interim financial statements for the 26 weeks ended 29 September 2001 were
approved by the Directors on 5 November 2001.