Half Yearly Report

RNS Number : 9035B

Marks & Spencer Group PLC

04 November 2009

 

Issued: Wednesday 4 November 2009

Marks and Spencer Group plc

Half Year Results 2009/10

26 weeks ended 26 September 2009

Half-year Results: 

• Sales up 2.8% at £4.3bn: UK +1.8%; International +12.2%

• UK like-for-like sales -0.9%: General Merchandise -1.4%; Food -0.3%

• Operating profit1  £365.0m (last year £372.4m)

• Adjusted profit before tax1 £298.3m (last year £297.8m)

• Profit before tax £306.7m (last year £307.8m)

• Adjusted basic earnings per share 13.7p1 (last year 13.7p)

• Basic earnings per share 14.3p (last year 14.2p)

• Interim dividend 5.5p per share (last year 8.3p)

• Net cash inflow £69.7m

• Net debt £2.4bn (29 March 2009 £2.5bn) 

1 Before property disposals

Sir Stuart Rose, Chairman, said:

"We are pleased with our first half performance. Our strong customer offer, together with tight management of costs and margin, has allowed us to report a profit slightly ahead of last year, despite a challenging economic environment. We increased our share of the clothing market over the period, and our performance in Food has also improved. 

"We continue to focus on providing better than ever value for our customers, for the all important Christmas period and into 2010. In the longer term we have clear plans to deliver sustainable growth by driving international and multi-channel, supported by the roll out of new supply chain and systems platforms. Our positive cash flow and financial position gives us the capacity to implement our plans.

"We have had a good start to the third quarter. However, the market remains competitive and, as we come up against volatile trading conditions last year, we remain cautious about the outlook for Christmas and the year ahead. We are increasingly confident that customers recognise and trust our outstanding quality, value and ethical stance."

We will update on our third quarter sales on 6 January 2010.

Chairman's review:

Over the last five years we have built strong foundations: introduced new products, better values and increased innovation. We have also improved service, broadened our multi-channel offer, expanded our international presence and strengthened our property portfolio. We have made good progress in all areas to ensure the business comes out of the downturn in the best possible shape. 

The actions we have taken in the business over the last year to respond to the challenging economic environment and the changing needs of our customers have resulted in improved performance. Over the period we invested in margin, controlled our costs and took steps to protect the strength of our balance sheet. Group sales grew 2.8% to £4.3 billion.  Adjusted profit before tax was slightly ahead of last year at £298.3m. We generated net cash of £69.7m.

While the actions we have taken are right for the current environment, we continue to invest for the future. Following a review of our strategy we announced the launch of Project 2020 in May this year. The key objective of the project is to create long-term sustainable growth in shareholder value by putting the customer at the heart of everything we do and by accelerating Multi-Channel and International. 

This will build on the substantial investment made over the last three years in our supply chain, information systems and improved operational execution.  Over the next 12 to 18 months this investment will start delivering the following benefits:

• Cost efficiencies;

• Sales growth; and

• A new platform for growth in multi-channel and International. 

We expect the work on cost efficiencies to deliver cash benefits of £250m per annum by 2015/16, £175m of which will be delivered over the next three years. In addition there is a big opportunity to drive sales through improved operational execution, better availability, ranging and cataloguing. 

General Merchandise 

General Merchandise sales were up 1.7% and we maintained our position as the UK's leading clothing retailer by value and volume. We increased our value market share by 10 basis points to 10.1% and volume share was level at 10.5%. (TNS: 24 weeks ended 13 September 2009). Gross margin was down 30 basis points with better sourcing and tight controls over stock and markdown helping to mitigate adverse currency pressures. 

We continued to provide our customers with strong fashion trends and great value, further developing our brands to deliver more clarity and newness across our ranges. 

Clearer brand segmentation has been a key area of focus. In Womenswear the launch of 'Portfolio' and 'Indigo', complemented our existing offer and broadened our customer base. In Menswear we launched a new designer collaboration with Jsen Wintle in 'Autograph' and the demand for his £199 wool coat has led us to double our initial order. 

  We made progress in areas of low market share. The launch of 'Indigo' in Womenswear and the re-launched 'North Coast' in Menswear, have improved our casualwear offer helping match our strength in formalwear. We are broadening our footwear and accessories ranges to help customers refresh their wardrobe more economically. This Autumn/Winter season has been our best ever season for boots selling over 330,000 pairs to date. Market share in Kidswear has continued to grow and we strengthened our number one position in schoolwear despite aggressive discounting by the value retailers. Our sales in furniture and home furnishings have held up well as we take share from specialist retailers in this category. We opened two new standalone home stores. 

We have made good progress with the younger customer. We have grown market share in the '35 and under' segment, and attracted new customers with 'Limited Collection' being an important driver.  In Menswear new lines such as slimfit shirts are proving popular with our younger customers.

Our values remain strong. Our price architecture has allowed customers to trade up or down within our ranges, for example, from a £35 mac to a £199 100% cashmere coat. The growth in our Lingerie market share is a good example of excellent values across all price points allowing us to compete with both the value retailers as well as upmarket brands. 

Removing duplication and delivering better ranging to the customer remains a priority. We have better integrated 'per una', and continue to work on refreshing the designs and eliminating any duplication with our other brands. We are targeting a 10% reduction in the number of ways across General Merchandise, and providing our customers with real choice. 

Food

Food sales were up 1.8%. We have now delivered four consecutive quarters of improved like-for-like sales. Market share declined from 3.7% to 3.5% (TNS Food & Drink: 24 weeks ended 9 October 2009). Food gross margin was down 65 basis points reflecting planned investment in prices and increased promotional activity, offset by better buying and a reduction in food waste.

We have been building on the progress made last year in offering our customers better value by re-aligning our prices through margin investment and the introduction of Wise Buy products. We are now cheaper than Waitrose on a basket of 1,200 like products (source: MySupermarket 30 October 2009), and have narrowed the gap between us and the rest of the market. 

Promotions remain a key tool in ensuring our customers recognise our great values and in driving additional footfall into the store. Our 'Dine in for two for £10' promotion sold 4.5m meals in the half and we are now complementing this success with more everyday dining deals for £5 such as the 'Pizza Meal Deal'.  We have been able to target our promotions better to the different customer types - our regular customers have responded well to multi-buy meal deals, such as the '3 for £10' on Meat and Fish, while our occasional customers have reacted better to price reductions such as selected desserts for £1.

We have increased the level of innovation. During the half we extended our successful 'Cook 1234 Asian' concept to Indian food. Together with our new 'One pot casserole' range, and a re-launched 'Cook Menu', we are strengthening our position as a market leader in home cooking solutions. We re-launched our confectionary shop with 40 new lines giving us more authority in this category. Going forward we are targeting 25% newness each year, and will have over 1,000 new lines in store this Christmas. We have a strong pipeline of exciting new products launching in the New Year.

We continued to fill the gaps in our existing ranges, such as the introduction of Danish bacon to complement our existing British bacon offer, and new cuts of meat such as lamb shoulder and pork belly. 

Introducing key brands is another important part of filling these gaps, and following a trial over the last year we have announced a rollout of branded offer to all stores. These 400 branded products complement our own label and are primarily focussed on low market share areas such as laundry, personal care, beer and pet food. They will allow us to meet more of our customers' regular shopping needs. We will intensify the existing store space to accommodate the additional line, without losing any of the existing M&S ranges. Prices will be matched against the competition, highlighting to our customers that we can deliver branded products at competitive prices, as well as demonstrating the fantastic value of M&S own label products. 

We have implemented a number of initiatives to deliver improved product availability and reduce waste. The implementation of a new planning and ranging system over the next two years will drive further improvements.   

Multi-channel

Sales from our website were up 29%, outperforming the on-line clothing market. Our on-line clothing market share increased to 4.8% from 4.2% (Fashiontrak). The traffic to the site grew by 30% over the half. 

We recently completed a full refresh of our website. We have improved the user experience through added functionality, enhanced the look and feel of the pages, improved ease of navigation and clarity of our on-line offer. We are using more inspirational and educational video formats, such as M&S TV, which are becoming increasingly important in customer purchasing decisions. The new site has been ranked the most user friendly retail website according to a recent Webcredible annual study (last year 8th). Our customers have reacted positively to the new design and features and conversion has increased since the re-launch.

Our product availability and order fulfilment continue to improve. In July we replaced our old in-store ordering system, with a new click and collect service called 'Shop your Way'. The new service allows customers to order either at home or in store and have merchandise delivered to any location. It is now available in 166 stores, and a full roll out to all stores is planned after Christmas. The new service is proving very popular with customers - last week alone over £1m of GM orders were placed using the system.

International

Our International business had a strong first half with revenues up 12.2%, and profits up 21.1% to £65.9m. Driving our international business remains a key part of our strategy and we now have 315 stores in 41 territories.

In Ireland we responded to the continued weakness in the local economy by reducing our selling prices in General Merchandise by 12% on average in July, which has driven volumes up. We continue to grow our Central and Eastern European ventures with seven new store openings across Estonia, Greece, Poland, Slovakia and Serbia.  

In India, we opened a further two stores with Reliance Retail. We remain on track to open over 10 stores, representing around 200,000 sq ft, within the next two years. Our first store in mainland China, in Shanghai, has been trading for a year, and is now performing in line with our plans. 

Our franchise business performed well and remains an integral part of driving our International growth. We opened 12 new stores in Russia, Cyprus, Turkey, UAE and Qatar.  

Supply Chain and IT

We have moved forward with our plans to restructure our supply chain and implement new IT systems. In supply chain we have now closed 21 warehouses as part of our longer term plan to consolidate our GM operations into four large warehouses within the UK. The first of these four warehouses, in Bradford, is under construction and is on schedule to open in 2010. 

We have restructured arrangements with several third party logistics operators. In GM we changed our furniture delivery provider to Wincanton. In Food our new contract with GIST is on track to deliver the anticipated £20m full year savings by 2011/2012. In total, distribution costs in the first half were £13m lower than last year, ahead of our full year target of £30m of underlying savings. 

We have also moved forward with direct sourcing and distribution in International, whereby product is sourced and distributed in region rather than via the UK. In total 16% of product is now distributed directly with particular focus on territories such as India. 

The overhaul of our IT systems increased in pace over the half year and is entering a critical period of step change over the next two years. We are making good progress in replacing Point of Sale system within stores; the pilot in Maidenhead is performing well and we will roll out to all stores from early 2010. Following its successful implementation in finance, non-merchandise procurement and within International, we will begin implementation of SAP within our core commercial systems in the UK in early 2010, with a phased roll out through to 2012. In HR we have outsourced our payroll and will implement new time and attendance and labour scheduling systems over the next couple of years. 

Plan A

We launched Plan A, our £200m 100 point eco-plan in January 2007. Nearly three years later Plan A is profit positive and 53 of our 100 commitments are ahead of plan. Despite the global economic uncertainty, the business case for Plan A continues to strengthen. As well as delivering significant benefits for our business, stakeholders and the environment, Plan A is changing consumer behaviour. 

We continue to make significant progress on the commitments set out in the plan. Highlights over the past six months include M&S becoming the world's first retailer to purchase Green Palm certificates to cover its entire palm oil usage; store and head office staff raising £2.5million for hundreds of local charities, and food waste being returned for processing into energy at three of our seven food depots.

We now have over 175,000 customers benefiting from saving energy with M&S Energy, we're saving hundreds of millions of carrier bags every year as our food customers turn to re-usable bags, and over a million people have received money-off vouchers in return for recycling clothes at Oxfam. 

Current trading and outlook

We have had a good start to the third quarter. However, the market remains competitive and, as we come up against volatile trading conditions last year, we remain cautious about the outlook for Christmas and the year ahead. We are increasingly confident that customers recognise and trust our outstanding quality, value and ethical stance.

  Financial Review            

Summary of Results:	26 weeks ended
	26 Sept 09 £m	27 Sept 08 £m	% inc
Group revenue	4,335.8	4,219.6	+2.8
UK	3,890.6	3,822.9	+1.8
International	445.2	396.7	+12.2
Operating profit before property disposals	365.0	372.4	-2.0
UK	299.1	318.0	-5.9
International	65.9	54.4	+21.1
Profit before tax and property disposals	298.3	297.8	+0.2
Profit on property disposals	8.4	10.0	-16.0
Profit before tax	306.7	307.8	-0.4
Adjusted EPS	13.7p	13.7p	-
Dividend per share (declared)	5.5p	8.3p	-33.7

Group revenue

Revenue growth by area, by period in the UK was:

Total revenue	Q1%	Q2%	H1%
Clothing	1.4	2.7	2.1
Home	0.1	-1.8	-0.6
General Merchandise	1.2	2.2	1.7
Food	2.0	1.7	1.8
Total	1.7	1.9	1.8

Like-for-like revenue
General Merchandise	-2.4	-0.8	-1.4
Food	-0.5	0.0	-0.3
Total	-1.4	-0.5	-0.9

UK revenues were up 1.8%, with a like-for-like decline of 0.9%. During the half, we added 3.9% of space, on a weighted average basis: 4.5% in General Merchandise and 2.8% in Food.  

International revenues were up 12.2%. This performance reflected new store openings within our owned businesses and the continued growth of our franchise business. 

  Operating profit

Operating profit before property disposals was £365.0m, down 2.0%.

In the UK, operating profit before property disposals was down 5.9% at £299.1m. Gross margin was 50 basis points down on the year at 41.7%. General Merchandise gross margin was down 30 basis points at 53.1%. Better sourcing and supply chain management, as well as tight control over stock and markdowns, has enabled us to mitigate pressure from the weakness of sterling. Food gross margin was 65 basis points lower than last year at 31.4%, reflecting investment in prices and increased promotional activity, partly offset by better buying and a reduction in food waste.

UK operating costs before bonus were up 0.4% to £1,311.7m:

	26 weeks ended
	26 Sept 09 £m	27 Sept 08 £m	% inc
Retail staffing	406.8	400.1	+1.7
Retail occupancy	469.6	449.2	+4.5
Distribution	186.9	199.9	-6.5
Marketing and related	57.5	66.0	-12.9
Support	190.9	191.4	-0.3
Total before bonus	1,311.7	1,306.6	+0.4
Bonus	30.0	2.7
Total including bonus	1,341.7	1,309.3	+2.5

Retail staffing costs were up only 1.7%, despite space growth of 3.9% and inflation. Occupancy cost growth reflects increases in space, rents and depreciation from store modernisations. The savings in distribution costs have been generated through contract renegotiation, supply chain consolidation and continued efficiency drive. Marketing expenditure was down 12.9%, and support costs have been tightly controlled. 

As a result of the performance in the first half being better than planned, a bonus of £30m has been accrued (last year £2.7m). The level of full year bonus will depend on the Group's full year trading performance.

The UK operating profit includes a contribution of £17.5m (last year £13.8m) from the Group's continuing economic interest in M&S Money. 

International operating profit before property disposals was £65.9m, up 21.1%, reflecting strong growth in our franchise business, as well as a positive currency impact. Offsetting the growth, we have experienced some tough market conditions and have incurred start up losses in China and India. 

  Profit on property disposals

Profit on property disposals was £8.4m (last year £10.0m). This mainly relates to the sale of retail space adjacent to our store in Dublin Grafton Street. 

Net finance costs

	26 weeks ended
	26 Sept 09 £m	27 Sept 08 £m
Interest payable	(71.0)	(83.2)
Interest income	0.7	12.0
Net interest payable	(70.3)	(71.2)
Unwinding of discount on partnership liability to the Marks and Spencer UK Pension Scheme	(2.0)	(19.3)
Pension finance income (net)	5.6	15.9
Net finance costs	(66.7)	(74.6)

Net finance costs were down £7.9m. Net interest payable was down 1.3% at £70.3m reflecting a decrease in average net debt and lower average interest rates over the half year. The Group's average cost of funding was 5.6% (last year 6.1%). The discount unwinding on the partnership liability to the pension scheme reduced to £2.0m (last year £19.3m) as a result of the changes made to the terms of the Partnership agreement in March 2009. Net pension finance income is in line with the full year guidance of c. £12m.

Taxation

The taxation charge is based on an estimated full year effective tax rate of 28.0% (last year 28.0%). This is consistent with the UK corporation taxation rate.

Earnings per share

Adjusted earnings per share, which excludes the effect of property disposals, was level at 13.7p per share. The weighted average number of shares in issue during the period was 1,571.7m (last year 1,573.5m). 

Dividends

In May 2009 the Board took the decision to rebase the Group's dividend payment for 2009/10 to 15p per share. In line with this decision an interim dividend of 5.5p per share (last year 8.3p) has been approved. The Board's policy regarding future dividends is to re-build cover towards two times and, thereafter, to grow dividends in line with adjusted earning per share.

  Capital expenditure

	26 weeks ended
	26 Sept 09 £m	27 Sept 08 £m
Modernisation programme	25.6	144.2
New stores	16.3	68.1
International	12.9	26.4
Supply chain and technology	84.9	84.4
Maintenance	5.8	13.4
Total capital expenditure	145.5	336.5

Capital expenditure was £145.5m (last year £336.5m). The focus of our capex plans is investing in our supply chain and information technology to build an infrastructure fit to support the future growth of the business.  

We have added 3.9% of trading space in the UK, on a weighted average basis, representing over 370,000 square feet. We opened three new out-of-town stores, two outlet stores and 12 simply food stores, including nine BP franchises.

Cash flow and net debt 

	26 weeks ended
	26 Sept 09 £m	27 Sept 08 £m
Cash flow from operations	518.2	722.0
Capex and disposals	(176.9)	(353.0)
Interest and taxation	(100.7)	(107.1)
Dividends and share issues	(146.5)	(221.4)
Share buyback	-	(40.9)
Other movements	(24.4)	(4.8)
Net cash flow	69.7	(5.2)
Opening net debt	(2,490.8)	(3,077.7)
Exchange and other non-cash movements	2.5	(23.5)
Closing net debt	(2,418.6)	(3,106.4)

The Group reported a net cash inflow of £69.7m (last year outflow £5.2m). Cash flow from operations of £518.2m includes a working capital outflow of £68.9m due to increased inventories, reflecting an increase in the proportion of direct sourcing and the growth of our international business. The reduction in net debt since last half year also reflects the changes made to the property partnership with the pension fund in March 2009 which led to the reclassification of £571.7m of future discretionary distributions to equity. Net debt at 28 March 2009 was £2,490.8m. 

Pensions 

At 26 September 2009 the IAS 19 net retirement benefit deficit was £521.1m (28 March 2009 £152.2m). The change is predominantly due to a decrease in the discount rate used to calculate the liability at the year end. The half year discount rate was 5.5% (year end 6.8%), reflecting the corporate bond rates at the half year end, and has led to an increase of £1bn in the IAS 19 calculation of the pension liability for accounting purposes at 26 September 2009. The increase in the deficit has been offset in part by an increase of £0.7bn in the market value of the assets arising from a combination of increased equity prices and a tightening of corporate bonds yields as reflected in the discount rate.

2009/10 full year guidance: 

• The planned opening of new footage in the UK will add around 3% to total space, representing a c. 3% increase in General Merchandise and c. 2% increase in Food, on a weighted average basis. Total square footage at 26 September 2009 was 15.1m square feet. 

• UK gross margin is expected to reduce by around 50-100 bps. 

• UK operating costs are expected to increase by 0% to 1%. 

• Capital expenditure is expected to be around £400m.

• The planned opening of new footage in our International business will add around 15% to total space. Total square footage at 26 September 2009 was 3.5 million square feet.

• Pension finance income, based on the 28 March 2009 accounting of the pension fund, is expected to be c. £12m (2008/09: £35m).

• The effective tax rate is expected to be 28% (2008/09: 28%).

For further information, please contact:

Investor Relations:                

Majda Rainer: [phone]    

Media enquiries:

Corporate Press Office: [phone]

Investor & Analyst webcast: 

Investor and analyst presentation will be held at 09.30 on 4 November 2009. This presentation can be viewed live on the Marks and Spencer Group plc website on: www.marksandspencer.com/thecompany. 

Video interviews with Stuart Rose, Chairman and Ian Dyson, Group Finance and Operations Director will be available on the above website. The interviews are also available in audio and transcript. 

Fixed Income Investor Conference Call:

This will be hosted by Ian Dyson at 14.30 on Wednesday 4 November 2009:

Dial in number:    [phone]

A recording of this call will be available until Wednesday 11 November 2009:

Dial in number:     [phone]  Access Code: 142384#

Statements made in this announcement that look forward in time or that express management's beliefs, expectations or estimates regarding future occurrences and prospects are "forward-looking statements" within the meaning of the United States federal securities laws. These forward-looking statements reflect Marks & Spencer's current expectations concerning future events and actual results may differ materially from current expectations or historical results. Any such forward-looking statements are subject to various risks and uncertainties, including failure by Marks & Spencer to predict accurately customer preferences; decline in the demand for products offered by Marks & Spencer; competitive influences; changes in levels of store traffic or consumer spending habits; effectiveness of Marks & Spencer's brand awareness and marketing programmes; general economic conditions or a downturn in the retail or financial services industries; acts of war or terrorism worldwide; work stoppages, slowdowns or strikes; and changes in financial and equity markets.

Principal risks and uncertainties
The principal risks and uncertainties which could impact the Group's long-term performance remain those detailed on pages 56 - 57 of the Group's 2009 Annual Report and Financial Statements. Information on financial risk management is also set out on pages 102 - 106 of the Annual Report, a copy of which is available on the Group's website www.marksandspencer.com. The key risks and mitigating activities have not changed from these:
- Business strategy
- Financial strategy, including treasury risks, counterparty failure and pension funding
- People development and retention
- Operational threats, including competition, product standards, and customer service in-store and on-line
- Reputational risk, including environmental risks, ethical standards, health and safety and business continuity.
Statement of Directors' responsibilities
The directors' confirm that this condensed consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
- 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.
The directors of Marks and Spencer Group plc are listed in the Group's 2009 Annual Report and financial statements, with the exception of the appointment of John Dixon to the Board on 9 September 2009. A list of current Directors is maintained on the Group's website: www.marksandspencer.com.
By order of the Board
Stuart Rose
Chairman
Ian Dyson
Group Finance and Operations Director
Consolidated income statement
					26 weeks ended				Year ended
					26 Sept 2009		27 Sept 2008		28 March 2009
				Notes	£m		£m		£m
Revenue				2	4,335.8		4,219.6		9,062.1
Operating profit				2	373.4		382.4		870.7
Finance income				3	6.3		27.9		50.0
Finance costs				3	(73.0)		(102.5)		(214.5)
Profit on ordinary activities before taxation					306.7		307.8		706.2
Analysed between:
Before property disposals and exceptional items					298.3		297.8		604.4
Profit on property disposals					8.4		10.0		6.4
Exceptional costs					-		-		(135.9)
Exceptional pension credit				2,7	-		-		231.3
Income tax expense				4	(85.9)		(86.1)		(199.4)
Profit for the period					220.8		221.7		506.8
Attributable to:
Equity shareholders of the Company					224.3		223.2		508.0
Minority interests					(3.5)		(1.5)		(1.2)
					220.8		221.7		506.8
Basic earnings per share				5A	14.3p		14.2p		32.3p
Diluted earnings per share				5B	14.2p		14.2p		32.3p
Non-GAAP measure:
Adjusted profit before taxation (£m)				1	298.3		297.8		604.4
Adjusted basic earnings per share				5A	13.7p		13.7p		28.0p
Adjusted diluted earnings per share				5B	13.6p		13.7p		28.0p
Consolidated statement of comprehensive income
						26 weeks ended			Year ended
					26 Sept 2009		27 Sept 2008		28 March 2009
					£m		£m		£m
Profit for the period					220.8		221.7		506.8
Other comprehensive income
Foreign currency translation differences					(17.2)		(1.3)		33.1
Actuarial losses on retirement benefit schemes					(388.0)		(233.2)		(927.1)
Cash flow and net investment hedges
- fair value movements in equity					(2.3)		65.3		304.8
- recycled and reported in net profit					(83.4)		(41.6)		(206.8)
- amount recognised in inventories					(12.0)		(3.9)		(8.6)
Tax on items taken directly to equity					141.6		70.6		225.6
Other comprehensive income for the period, net of tax					(361.3)		(144.1)		(579.0)
Total comprehensive (loss)/income for the period					(140.5)		77.6		(72.2)
Attributable to:
Equity shareholders of the Company					(137.0)		79.1		(71.0)
Minority interests					(3.5)		(1.5)		(1.2)
					(140.5)		77.6		(72.2)
The notes on pages 18 to 23 form an integral part of this condensed consolidated interim financial information.
Consolidated statement of financial position
					As at		As at		As at
					26 Sept 2009		27 Sept 2008		28 March 2009
				Notes	£m		£m		£m
ASSETS
Non-current assets
Intangible assets					422.3		343.0		400.3
Property, plant and equipment					4,735.4		4,771.5		4,834.0
Investment property					22.3		24.9		24.8
Investment in joint venture					11.7		14.0		13.8
Other financial assets					4.2		3.4		3.0
Retirement benefit asset				7	-		297.0		-
Trade and other receivables					311.5		358.4		336.8
Derivative financial instruments					132.1		51.0		254.0
Deferred tax assets					-		-		1.6
					5,639.5		5,863.2		5,868.3
Current assets
Inventories					660.6		588.5		536.0
Other financial assets					89.5		47.6		53.1
Trade and other receivables					307.0		320.1		285.2
Derivative financial instruments					27.0		38.3		92.6
Cash and cash equivalents					296.5		353.2		422.9
					1,380.6		1,347.7		1,389.8
Total assets					7,020.1		7,210.9		7,258.1
LIABILITIES
Current liabilities
Trade and other payables					1,111.6		1,107.2		1,073.5
Borrowings and other financial liabilities					835.4		934.2		942.8
Partnership liability to the Marks & Spencer UK Pension Scheme					70.0		71.9		71.9
Derivative financial instruments					70.7		26.5		76.2
Provisions					32.3		10.9		63.6
Current tax liabilities					114.1		93.2		78.9
					2,234.1		2,243.9		2,306.9
Non-current liabilities
Retirement benefit deficit				7	521.1		20.6		152.2
Trade and other payables					242.0		202.0		243.8
Borrowings and other financial liabilities					2,077.7		2,005.7		2,117.9
Partnership liability to the Marks & Spencer UK Pension Scheme					-		620.7		68.0
Derivative financial instruments					1.4		0.2		3.0
Provisions					45.1		11.3		40.2
Deferred tax liabilities					86.4		312.4		225.5
					2,973.7		3,172.9		2,850.6
Total liabilities					5,207.8		5,416.8		5,157.5
Net assets					1,812.3		1,794.1		2,100.6
EQUITY
Called-up share capital - equity					394.7		394.2		394.4
Share premium account					239.0		233.9		236.2
Capital redemption reserve					2,202.6		2,202.6		2,202.6
Hedging reserve					(8.9)		15.5		62.6
Other reserve					(6,542.2)		(6,542.2)		(6,542.2)
Retained earnings					5,511.0		5,480.1		5,728.1
Total shareholders' equity					1,796.2		1,784.1		2,081.7
Minority interests in equity					16.1		10.0		18.9
Total equity					1,812.3		1,794.1		2,100.6
The notes on pages 18 to 23 form an integral part of this condensed consolidated interim financial information.
Statement of changes in equity
		Ordinary share capital	Share premium account	Capital redemption reserve	Hedging reserve	Other reserve	Retained earnings	Total	Minority interest	Total equity
		£m	£m	£m	£m	£m	£m	£m	£m	£m
As at 29 March 2009		394.4	236.2	2,202.6	62.6	(6,542.2)	5,728.1	2,081.7	18.9	2,100.6
Profit/(loss) for the period		-	-	-	-	-	224.3	224.3	(3.5)	220.8
Other comprehensive income:
Foreign currency translation		-	-	-	1.6	-	(18.8)	(17.2)	-	(17.2)
Actuarial losses on retirement benefit schemes		-	-	-	-	-	(388.0)	(388.0)	-	(388.0)
Cash flow and net investment hedges
- fair value movements in equity		-	-	-	(10.7)	-	8.4	(2.3)	-	(2.3)
- recycled and reported in net profit		-	-	-	(83.4)	-	-	(83.4)	-	(83.4)
- amount recognised in inventories		-	-	-	(12.0)	-	-	(12.0)	-	(12.0)
Tax on items taken directly to equity		-	-	-	33.0	-	108.6	141.6	-	141.6
Total comprehensive income		-	-	-	(71.5)	-	(65.5)	(137.0)	(3.5)	(140.5)
Transactions with owners:
Dividends		-	-	-	-	-	(149.6)	(149.6)	-	(149.6)
Transactions with minority shareholders		-	-	-	-	-	-	-	0.7	0.7
Shares issued on exercise of employee share options		0.3	2.8	-	-	-	-	3.1	-	3.1
Purchase of own shares held by employee trusts		-	-	-	-	-	(19.0)	(19.0)	-	(19.0)
Charge for share-based payments		-	-	-	-	-	11.2	11.2	-	11.2
Deferred tax on share schemes		-	-	-	-	-	5.8	5.8	-	5.8
As at 26 September 2009		394.7	239.0	2,202.6	(8.9)	(6,542.2)	5,511.0	1,796.2	16.1	1,812.3
		Ordinary share capital	Share premium account	Capital redemption reserve	Hedging reserve	Other reserve	Retained earnings	Total	Minority interest	Total equity
		£m	£m	£m	£m	£m	£m	£m	£m	£m
As at 30 March 2008		396.6	231.4	2,199.9	(36.9)	(6,542.2)	5,707.9	1,956.7	7.3	1,964.0
Profit/(loss) for the period		-	-	-	-	-	223.2	223.2	(1.5)	221.7
Other comprehensive income:
Foreign currency translation		-	-	-	-	-	(1.3)	(1.3)	-	(1.3)
Actuarial losses on retirement benefit schemes		-	-	-	-	-	(233.2)	(233.2)	-	(233.2)
Cash flow and net investment hedges		-	-	-	-	-	-	-	-	-
- fair value movements in equity		-	-	-	65.3	-	-	65.3	-	65.3
- recycled and reported in net profit		-	-	-	(41.6)	-	-	(41.6)	-	(41.6)
- amount recognised in inventories		-	-	-	(3.9)	-	-	(3.9)	-	(3.9)
Tax on items taken directly to equity		-	-	-	5.3	-	65.3	70.6	-	70.6
Total comprehensive income		-	-	-	25.1	-	54.0	79.1	(1.5)	77.6
Transactions with owners:
Dividends		-	-	-	-	-	(224.1)	(224.1)	-	(224.1)
Transactions with minority shareholders		-	-	-	-	-	-	-	4.2	4.2
Transfer of exchange on net investment hedges		-	-	-	27.3	-	(27.3)	-	-	-
Shares issued on exercise of employee share options		0.3	2.4	-	-	-	-	2.7	-	2.7
Shares purchased in buy-back		(2.7)	-	2.7	-	-	(40.9)	(40.9)	-	(40.9)
Charge for share-based payments		-	-	-	-	-	11.6	11.6	-	11.6
Deferred tax on share schemes		-	-	-	-	-	(1.0)	(1.0)	-	(1.0)
As at 27 September 2008		394.2	233.8	2,202.6	15.5	(6,542.2)	5,480.2	1,784.1	10.0	1,794.1
		Ordinary share capital	Share premium account	Capital redemption reserve	Hedging reserve	Other reserve	Retained earnings	Total	Minority interest	Total equity
		£m	£m	£m	£m	£m	£m	£m	£m	£m
As at 30 March 2008		396.6	231.4	2,199.9	(36.9)	(6,542.2)	5,707.9	1,956.7	7.3	1,964.0
Profit/(loss) for the period		-	-	-	-	-	508.0	508.0	(1.2)	506.8
Other comprehensive income:
Foreign currency translation		-	-	-	(0.8)	-	33.9	33.1	-	33.1
Actuarial losses on retirement benefit schemes		-	-	-	-	-	(927.1)	(927.1)	-	(927.1)
Cash flow and net investment hedges		-	-	-	-	-	-	-	-	-
- fair value movements in equity		-	-	-	317.2	-	(12.4)	304.8	-	304.8
- recycled and reported in net profit		-	-	-	(206.8)	-	-	(206.8)	-	(206.8)
- amount recognised in inventories		-	-	-	(8.6)	-	-	(8.6)	-	(8.6)
Tax on items taken directly to equity		-	-	-	(29.3)	-	254.9	225.6	-	225.6
Total comprehensive income		-	-	-	71.7	-	(142.7)	(71.0)	(1.2)	(72.2)
Transactions with owners:
Dividends		-	-	-	-	-	(354.6)	(354.6)	(0.2)	(354.8)
Derecognition of financial liability		-	-	-	-	-	571.7	571.7	-	571.7
Transactions with minority shareholders		-	-	-	-	-	-	-	13.0	13.0
Transfer of exchange on net investment hedges		-	-	-	27.8	-	(27.8)	-	-	-
Shares issued on exercise of employee share options		0.5	4.8	-	-	-	-	5.3	-	5.3
Shares purchased in buy-back		(2.7)	-	2.7	-	-	(40.9)	(40.9)	-	(40.9)
Charge for share-based payments		-	-	-	-	-	14.3	14.3	-	14.3
Deferred tax on share schemes		-	-	-	-	-	0.2	0.2	-	0.2
As at 28 March 2009		394.4	236.2	2,202.6	62.6	(6,542.2)	5,728.1	2,081.7	18.9	2,100.6
The notes on pages 18 to 23 form an integral part of this condensed consolidated interim financial information.
Consolidated cash flow information
STATEMENT OF CASH FLOWS
						26 weeks ended			Year ended
					26 Sept 2009		27 Sept 2008		28 March 2009
				Notes	£m		£m		£m
Cash flows from operating activities
Cash generated from operations				9	518.2		722.0		1,371.9
Tax paid					(38.0)		(20.8)		(81.3)
Net cash inflow from operating activities					480.2		701.2		1,290.6
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired					(5.4)		-		-
Purchase of property, plant and equipment					(171.3)		(375.5)		(540.8)
Proceeds from sale of property, plant and equipment					20.8		62.4		58.3
Purchase of intangible assets					(26.4)		(39.9)		(121.6)
Sale/(purchase) of financial assets					(36.9)		(3.6)		(5.5)
Interest received					0.1		10.0		12.7
Net cash outflow from investing activities					(219.1)		(346.6)		(596.9)
Cash flows from financing activities
Interest paid					(62.8)		(96.3)		(197.1)
Cash inflow/(outflow) from borrowings					13.6		(25.8)		(25.8)
(Repayment)/drawdown of syndicated bank facility					(121.6)		106.9		108.1
Payment of liability to the Marks & Spencer UK Pension Scheme					(71.9)		(15.1)		(15.1)
Decrease in obligations under finance leases					(4.2)		-		(1.0)
Equity dividends paid					(149.6)		(224.1)		(354.6)
Shares issued on exercise of employee share options					3.1		2.7		5.3
Shares purchased in buy back					-		(40.9)		(40.9)
Purchase of own shares held in employee trust					(19.0)		-		-
Net cash outflow from financing activities					(412.4)		(292.6)		(521.1)
Net cash (outflow)/inflow from activities					(151.3)		62.0		172.6
Effects of exchange rate changes					(2.2)		1.0		7.8
Opening net cash					298.3		117.9		117.9
Closing net cash					144.8		180.9		298.3
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
					26 weeks ended				Year ended
					26 Sept 2009		27 Sept 2008		28 March 2009
					£m		£m		£m
Opening net debt					(2,490.8)		(3,077.7)		(3,077.7)
Net cash (outflow)/inflow from activities					(151.3)		62.0		172.6
Increase/(decrease) in current financial assets					36.9		(1.2)		1.1
Decrease/(increase) in debt financing					184.1		(66.0)		(66.2)
Partnership liability to the Marks & Spencer UK Pension Scheme (non-cash)					-		-		539.6
Exchange and other non-cash movements					2.5		(23.5)		(60.2)
Movement in net debt					72.2		(28.7)		586.9
Closing net debt				10	(2,418.6)		(3,106.4)		(2,490.8)
The notes on pages 18 to 23 form an integral part of this condensed consolidated interim financial information.
1 General information and 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 2009 Annual Report and Financial Statements, other than set out below. The financial information has been prepared in accordance with the Disclosure and Transparency rules of the Financial Services Authority and with International Accounting Standard (IAS) 34 - 'Interim Financial Reporting' as endorsed by the European Union. This condensed consolidated interim information for the period does not constitute statutory financial statements within the meaning of s434 of the Companies Act 2006.
Taxes on income in the interim period are accrued using the tax rate that would be applicable to expected total annual earnings.
IFRS 8 'Operating Segments' was issued in November 2006. It replaces IAS 14 'Segmental Reporting' and requires operating segments to be disclosed on the same basis as that used for internal reporting. It has been adopted by the Group from 29 March 2009. The implementation has had no impact on the results or net assets of the Group, but has resulted in revised disclosures. See Note 2 for further details.
IAS 1 (Revised) 'Presentation of Financial Statements' was issued in January 2008 and has been adopted by the Group from 29 March 2009. It has resulted in revised disclosures in the primary statements.
Amendment to IAS 23 'Borrowing Costs' was issued in March 2007. It removes the option of immediately expensing borrowing costs that are directly attributable to a qualifying asset and requires such costs to be capitalised. It has been adopted by the Group from 29 March 2009 and has had no impact on the results or net assets of the Group.
The summary of results for the year ended 28 March 2009 is an extract from the published Annual Report and Financial Statements which 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 s498 of the Companies Act 2006.
The Directors believe that the adjusted profit and earnings per share measures provide additional useful information for shareholders on the underlying performance of the business. These measures are consistent with how underlying business performance is measured internally. The adjusted profit before tax measure is not a recognised profit measure under IFRS and may not be directly comparable with adjusted profit measures used by other companies. The adjustments made to reported profit before tax are to exclude the following: - exceptional income and charges - these are largely one-off in nature and therefore create significant volatility in reported earnings; and - profits and losses on the disposal of properties - these can vary significantly from year to year, again creating volatility in reported earnings.
2 Segmental Information
Adoption of IFRS 8, Operating Segments The Group has adopted IFRS 8 Operating Segments with effect from 29 March 2009. IFRS 8 requires operating segments to be identified on the basis of internal reporting about 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. In contrast, the predecessor Standard (IAS 14 Segment Reporting) required the Group to identify two sets of segments (business and geographical), using a risks and rewards approach, with the Group's system of internal financial reporting to key management personnel serving only as the starting point for the identification of such segments.  The chief operating decision maker has been identified as the Executive Directors. The Executive Directors review the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports. The Executive Directors consider the business from an organisational perspective. The reported segments are UK and International.
The Executive Directors assess the performance of the operating segments based on a measure of operating profit. This measurement basis excludes the effects of exceptional items from the operating segments as well as gains or losses on the disposal of assets. Central costs are all classified as UK costs and presented within UK Operating profit.  The Executive Directors also monitor revenue within the segments. To increase transparency, the Group has decided to include an additional voluntary disclosure analysing revenue within the reportable segments.
The following is an analysis of the Group's revenue and results by reportable segment:
							26 weeks ended 26 September 2009
					Management		Adjustment2		Statutory
					£m		£m		£m
General Merchandise					1,874.4		(24.6)		1,849.8
Food					2,059.1		(18.3)		2,040.8
UK retail revenue					3,933.5		(42.9)		3,890.6
Wholesale					144.0		-		144.0
Retail					302.3		(1.1)		301.2
International revenue					446.3		(1.1)		445.2
Group revenue					4,379.8		(44.0)		4,335.8
UK operating profit 1					299.1		-		299.1
International operating profit					65.9		-		65.9
Group operating profit (adjusted)					365.0		-		365.0
Profit on property disposals									8.4
Group operating profit									373.4
Finance income									6.3
Finance costs									(73.0)
Profit before tax									306.7
1 UK operating profit includes a contribution of £17.5m (last half year £13.8m and last year end £24.8m) from M&S Money under the terms of our arrangement with HSBC.
2 Adjustments relate to revenue items recognised in cost of sales for management accounting purposes.
Sales of General Merchandise and Foods are subject to seasonality due to higher demand during the Christmas period which falls in the second half of the financial year.
							26 weeks ended 27 September 2008
					Management		Adjustment		Statutory
					£m		£m		£m
General Merchandise					1,828.6		(10.4)		1,818.2
Food					2,020.4		(15.7)		2,004.7
UK retail revenue					3,849.0		(26.1)		3,822.9
Wholesale					125.1		-		125.1
Retail					271.6		-		271.6
International revenue					396.7		-		396.7
Group revenue					4,245.7		(26.1)		4,219.6
UK operating profit					318.0		-		318.0
International operating profit					54.4		-		54.4
Group operating profit (adjusted)					372.4		-		372.4
Profit on property disposals									10.0
Group operating profit									382.4
Finance income									27.9
Finance costs									(102.5)
Profit before tax									307.8
2 Segmental Information continued
							52 weeks ended 28 March 2009
					Management		Adjustment		Statutory
					£m		£m		£m
General Merchandise					3,944.4		(26.1)		3,918.3
Food					4,282.3		(36.3)		4,246.0
UK retail revenue					8,226.7		(62.4)		8,164.3
Wholesale					272.3		-		272.3
Retail					627.2		(1.7)		625.5
International revenue					899.5		(1.7)		897.8
Group revenue					9,126.2		(64.1)		9,062.1
UK operating profit					652.8		-		652.8
International operating profit					116.1		-		116.1
Group operating profit (adjusted)					768.9		-		768.9
Profit on property disposals									6.4
Exceptional costs									(135.9)
Exceptional pension credit									231.3
Group operating profit									870.7
Finance income										50.0
Finance costs										(214.5)
Profit before tax									706.2
Reportable segments' assets are reconciled to total assets as follows:
					26 weeks ended				Year ended
					26 Sept 2009		27 Sept 2008		28 March 2009
					£m		£m		£m
UK assets					6,166.1		6,645.1		6,530.8
International assets					854.0		565.8		727.3
Total assets					7,020.1		7,210.9		7,258.1
3 Finance income/(costs)
					26 weeks ended				Year ended
					26 Sept 2009		27 Sept 2008		28 March 2009
					£m		£m		£m
Finance income
Bank and other interest receivable					0.7		12.0		14.6
Pension finance income (net)					5.6		15.9		35.4
Finance income					6.3		27.9		50.0
Finance costs
Interest on bank borrowings					(3.5)		(3.2)		(6.2)
Interest payable on syndicated bank facility					(4.3)		(18.2)		(41.0)
Interest payable on medium-term notes					(56.9)		(56.9)		(113.9)
Interest payable on finance leases					(2.8)		(2.5)		(4.9)
Fair value movements on financial instruments					(3.5)		(2.4)		(10.5)
Unwinding of discount on partnership liability to the Marks & Spencer UK  Pension Scheme					(2.0)		(19.3)		(38.0)
Finance costs					(73.0)		(102.5)		(214.5)
Net finance costs					(66.7)		(74.6)		(164.5)
4 Taxation
The taxation charge for the 26 weeks ended 26 September 2009 is based on an estimated full year effective tax rate of 28.0% (last full year 28.2%).
5 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 been calculated in addition to the earnings per share required by IAS 33 - 'Earnings per Share' and are based on earnings excluding the effect of property disposals and exceptional items. These have been calculated to allow the shareholders to gain an understanding of the underlying trading performance of the Group.
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 only one class 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.
Details of the adjusted earnings per share are set out below:
						26 weeks ended			Year ended
						26 Sept 2009		27 Sept 2008	28 March 2009
						£m		£m	£m
Earnings after tax						224.3		223.2	508.0
Property disposals (net of tax)						(8.4)		(8.2)	(6.4)
Exceptional costs (net of tax)						-		-	105.7
Exceptional pension credit (net of tax)						-		-	(166.6)
Adjusted earnings after tax						215.9		215.0	440.7
						million		million	million
Weighted average number of ordinary shares in issue						1,571.7		1,573.5	1,573.2
Potentially dilutive share options under Group's share option schemes						12.7		1.4	0.8
Weighted average number of diluted ordinary shares						1,584.4		1,574.9	1,574.0
A Basic earnings per share
						pence		pence	pence
Basic earnings per share						14.3		14.2	32.3
Property disposals per share						(0.6)		(0.5)	(0.4)
Exceptional costs per share						-		-	6.7
Exceptional pension credit per share						-		-	(10.6)
Adjusted basic earnings per share						13.7		13.7	28.0
B Diluted earnings per share
						pence		pence	pence
Diluted earnings per share						14.2		14.2	32.3
Property disposals per share						(0.6)		(0.5)	(0.4)
Exceptional costs per share						-		-	6.7
Exceptional pension credit per share						-		-	(10.6)
Adjusted diluted earnings per share						13.6		13.7	28.0
6 Dividends
					26 weeks ended				Year ended
					26 Sept 2009		27 Sept 2008		28 March 2009
					£m		£m		£m
Final dividend of 9.5p per share (last year 14.2p per share)					149.6		224.1		224.1
Prior period interim dividend of 8.3p per share					-		-		130.5
					149.6		224.1		354.6
The Directors have approved an interim dividend of 5.5p per share (last half year 8.3p per share) which, in line with the requirements of IAS 10 - 'Events after the Balance Sheet Date', has not been recognised within these results. This results in an interim dividend of £86.9m (last half year £130.5m) which will be paid on 8 January 2010 to shareholders whose names are on the Register of Members at the close of business on 13 November 2009. The ordinary shares will be quoted ex dividend on 11 November 2009. Shareholders may choose to take this dividend in shares or in cash.
7 Retirement benefits
					26 weeks ended				Year ended
					26 Sept 2009		27 Sept 2008		28 March 2009
					£m		£m		£m
Opening net retirement benefit (deficit)/asset					(152.2)		483.5		483.5
Current service cost					(28.1)		(37.1)		(72.2)
Exceptional pension credit					-		-		231.3
Curtailment gain					-		4.0		5.0
Interest cost					(133.5)		(149.6)		(299.2)
Expected return on scheme assets					139.1		165.5		334.6
Employer contributions					41.2		43.3		92.1
Actuarial losses					(388.0)		(233.2)		(927.1)
Exchange movement					0.4		-		(0.2)
Closing net retirement benefit (deficit)/asset					(521.1)		276.4		(152.2)
Analysed on the balance sheet as:
Retirement benefit asset					-		297.0		-
Retirement benefit deficit					(521.1)		(20.6)		(152.2)
Closing net retirement benefit (deficit)/asset					(521.1)		276.4		(152.2)
Total market value of assets					4,643.2		4,796.8		3,977.0
Present value of scheme liabilities					(5,147.6)		(4,500.6)		(4,112.4)
Net funded pension plan (deficit)/asset					(504.4)		296.2		(135.4)
Unfunded retirement benefits					(0.9)		(1.1)		(1.0)
Post-retirement healthcare					(15.8)		(18.7)		(15.8)
Net retirement benefit (deficit)/asset					(521.1)		276.4		(152.2)
The main financial assumptions used to assess the liabilities of the scheme have been updated by independent qualified actuaries to assess the liabilities of the scheme. The most significant of these are the discount rate and the inflation rate which are 5.5% (last full year 6.8%) and 3.0% (last full year 2.9%) respectively.
The amount of the deficit varies if the main financial assumptions change, particularly the discount rate. If the discount rate increased/decreased by 0.1% the IAS 19 deficit would decrease/increase by c.£110m.
8 Capital expenditure and contingencies
A Capital expenditure
Additions to the cost of property, plant and equipment, investment property and intangible assets are £145.5m (last half year £336.5m) and for the year ended 28 March 2009 were £652.0m. Disposals in net book value of property, plant and equipment, investment property and intangible assets are £12.4m (last half year £34.3m) and for the year ended 28 March 2009 were £75.7m.
B Capital commitments
					26 weeks ended				Year ended
					26 Sept 2009		27 Sept 2008		28 March 2009
					£m		£m		£m
Commitments in respect of properties in the course of construction					32.4		72.5		52.1
C Other material contracts
In the event of a material change in the trading arrangements with certain warehouse operators, the Group has a commitment to purchase property, plant and equipment, at values ranging from historical net book value to market value, which are currently owned and operated by them on the Group's behalf.
9 Cash flow analysis
					26 weeks ended				Year ended
					26 Sept 2009		27 Sept 2008		28 March 2009
					£m		£m		£m
Cash flows from operating activities
Profit on ordinary activities after taxation					220.8		221.7		506.8
Income tax expense					85.9		86.1		199.4
Interest payable and similar charges					73.0		102.5		214.5
Interest receivable					(6.3)		(27.9)		(50.0)
Operating profit					373.4		382.4		870.7
Increase in inventories					(121.7)		(99.6)		(46.0)
(Increase)/decrease in receivables					(10.4)		16.5		55.0
Payments to acquire leasehold properties					-		-		(14.1)
Increase in payables					83.4		220.7		212.2
Exceptional operating cash (outflow)/inflow					(23.0)		1.0		(27.4)
Depreciation and amortisation					213.7		199.4		409.0
Share-based payments					11.2		11.6		14.3
Profit on property disposals					(8.4)		(10.0)		(6.4)
Exceptional costs					-		-		135.9
Exceptional pension credit					-		-		(231.3)
Cash generated from operations					518.2		722.0		1,371.9
10 Reconciliation of net debt to balance sheet
					26 weeks ended				Year ended
					26 Sept 2009		27 Sept 2008		28 March 2009
					£m		£m		£m
Balance sheet and related notes
Cash and cash equivalents					296.5		353.2		422.9
Current financial assets					89.5		47.6		53.1
Bank loans and overdrafts					(199.4)		(203.9)		(159.1)
Syndicated bank facility					(634.3)		(722.3)		(781.2)
Medium term notes					(1,867.6)		(1,864.7)		(1,848.1)
Finance lease liabilities					(100.4)		(102.0)		(101.9)
Partnership liability to the Marks & Spencer UK Pension Scheme					(70.0)		(692.6)		(139.9)
					(2,485.7)		(3,184.7)		(2,554.2)
Interest payable included within related borrowings					67.1		78.3		63.4
Total net debt					(2,418.6)		(3,106.4)		(2,490.8)
11 Acquisitions
										£m
Net liabilities at fair value (100%)										(2.4)
Net liabilities acquired										(1.2)
Cash consideration										6.1
Transaction costs										0.8
Total consideration										6.9
Goodwill arising on acquisition										8.1
On 31 March 2009, Marks and Spencer Reliance India Pvt Limited, a 51% subsidiary of the Group, completed the acquisition of 100% of the issued share capital of Supreme Tradelinks Private Limited, which up until this date was the Group's franchisee in India, for cash consideration of £6.1m and transaction costs of £0.8m.
The acquisition has contributed £2.9m to sales and a £1.0m loss to operating profit in the period since acquisition, which is the same contribution had the acquisition taken place on the first day of the financial period.
Goodwill has arisen on the acquisition due to the opportunities to facilitate a faster rate of growth and greater operating efficiency that do not meet the criteria for recognition as an intangible asset at the date of acquisition.
12 Related party transactions
Supplier transactions occurred during the period between the Group and a company controlled by a close family member of Kate Bostock, an executive director of the Group. These transactions amounted to £3.4m during the period (last half year £2.7m) with an outstanding trade payable of £0.5m at 26 September 2009 (last half year £0.2m). The company was a supplier prior to Kate's employment by the Group.
Supplier transactions occurred during the period between the Group and a company controlled by Martha Lane Fox's partner. Martha is a non-executive director of the Group. These transactions amount to £0.6m during the period (last half year £nil) with an outstanding trade payable of £0.1m at 26 September 2009 (last half year £nil).

  Independent review report to Marks and Spencer Group Plc

Introduction

We have been engaged by the company to review the condensed consolidated interim financial information in the half-yearly financial report for the 26 weeks ended 26 September 2009, which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of financial position, statement of changes in equity, consolidated cash flow statement, comparative figures and associated notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated interim financial information.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed consolidated interim financial information included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed consolidated interim financial information in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, 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 Ireland) 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.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial information in the half-yearly financial report for the 26 weeks period 26 September 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP

London

3 November 2009

 

END

 

 

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