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2015 Share Buy Back

Questions

  • What has the Company announced?

    The Company has announced that it is to engage in an ongoing and sustainable programme of returns of capital to shareholders. This year, the Board has decided that the Company will spend up to £150m buying back its shares during the next year, initially using shareholder authority given at the AGM.
  • What is a share buy-back?

    The Company instructs its Stockbrokers to purchase the Company’s own shares in the market, which are then cancelled. This reduces the number of shares the Company has in issue and, as a result, existing shareholders will own a larger percentage of the company than they did before. The objective is to maintain our commitment to strong capital management disciplines and a strong balance sheet position whilst ensuring that shareholders are able to share in the surplus cash generated by the Company.
  • Why is the Company doing this now?

    M&S is currently a cash generative business. In recent years much of the cash generated by the Company has been invested in upgrading our store portfolio and infrastructure. In the last 2 years the surplus cash we have generated has enabled us to reduce our net debt by almost £400m. Now that we have largely completed our capital investment programme, we are well placed to share the surplus cash we generate with our shareholders.
  • How does a share buy-back work?

    The objective is to create shareholder value by improving the balance sheet efficiency (debt/equity ratio) and reducing the overall weighted average cost of capital. It also increases the earnings per share and indirectly creates value for existing shareholders by increasing the percentage of the company that they own, through there being fewer shares in issue.
  • I’ve heard you’re returning £150m to shareholders?

    We intend to return up to £150m to our shareholders by buying back a quantity of our shares in the market and cancelling them. At the current share price (£570p as at 15 May 2015), the number of shares bought back would be approximately 26 million (around 1.6% of our issued share capital). Shareholders will not receive any money directly. However, they will own a larger portion of the Company than they did before.
  • When do I get my money?

    The buyback is an operation that the Company undertakes through its Brokers, who repurchase its shares in the open market. As such, no cash is paid directly by the Company to specific shareholders. The repurchase and cancellation of the Company’s shares reduces its total issued share capital, which in turn increases the percentage of the Company owned by individual shareholders. No money is paid to shareholders.
  • Why didn’t you issue a special dividend?

    We are committed to maintaining a disciplined approach to capital management and, while we are keen for our shareholders to share in our success, we must ensure that our programme of returns of capital to shareholders is sustainable. We consider that an increase in the dividend of 7.4% to 11.6p in conjunction with the share buy-back is in line with this approach, balancing the interests of our various stakeholders whilst allowing the Company to retain the flexibility to continue to invest in the business.
  • What effect will the buy-back have on the share price?

    We are not able to comment on how the share price will be affected by the share buy-back as there are many other factors that contribute to fluctuations in the share price each day. However, we would not be undertaking the buy-back if we did not feel that it would create value for shareholders.
  • How is the buy-back being financed / where is the £150m coming from?

    The buy-back programme is being financed by the Company’s cash surplus. It is intended that this share buy-back will be the first step in an ongoing programme of returns of capital to shareholders.
  • Will M&S be taking on more debt to pay for the buy-back?

    The buy-back will be financed using the cash surplus generated by increased profitability and decreased capital expenditure.
  • Doesn’t the company have anything better to use this money for?

    Following the recent programme of investment, we now have a stronger, more capable business. There is still more to do and we will continue to invest in the business alongside the buy-back as a key part of our three year plan.

    The ability to return this capital to shareholders is driven in part by the strong cash generation of the business that has resulted from the significant investment undertaken in recent years. The buy-back will enhance the Company’s balance sheet efficiency without constraining its future investment plans.
  • Is there a meeting of shareholders that I need to attend?

    No. A buy-back of anything up to 10% of our shares in one year is within the routine authority sought from our shareholders annually at the AGM.
  • Don’t shareholders have to approve this?

    Shareholders passed a resolution at the AGM in July 2014[15] approving a share buy back of up to 164.8m shares (10% of issued share capital).
  • How much will be paid for these shares?

    The Company will pay the market price for the shares. However, regulations state that the Company is not permitted to pay more than 105% of the average price calculated over the last five days preceding each purchase.
  • Will the EPS targets for the executive long-term share incentives be adjusted to take these events into consideration?

    The Remuneration Committee will consider at each potential vesting of shares under the Performance Share Plan (PSP) whether there have been any events that give rise to a need to adjust performance conditions. These would include events that had a negative or positive impact on EPS. If alterations are fairly and reasonably required, the Committee can amend the performance conditions upwards or downwards. It is not possible to say in advance that a share buy-back programme will have a material impact on achievement of PSP performance conditions as it would need to be considered :
    (i) in the context of other events;
    (ii) against the extent of buy-back achieved in any period.
  • How will the buy-back be conducted?

    A broker will be authorised to buy back shares in the market on the Company’s behalf.
  • Can I sell you my shares?

    There is no mechanism in place for you to sell your shares directly back to the Company. Shareholders wishing to sell their shares will need do so through the usual channels.
  • What happens to the shares that are bought back?

    It is our current intention to cancel shares that are bought in the market by our brokers.
  • Will shares be held in Treasury?

    It is the current intention to cancel the shares bought back under the programme. Companies often hold shares in treasury to use for future obligations for company share schemes. M&S has sufficient arrangements in place to meet these obligations.
  • Will you be buying back shares during close periods?

    If it is decided that the buy-back will continue during a close period we will make the necessary announcement via the London Stock Exchange (as required by Listing Rule 12.2.1R).
  • What is a close period?

    This is a period when certain people (e.g. Directors and the company itself) are not permitted to trade in the Company’s shares.
  • When are your close periods?

    - Q1 (AGM) Monday, at least 2 weeks before AGM, the day of the Q1 announcement
    - Q2 + Half year : Monday following relevant half year end to announcement date.
    - Q3 (Christmas) Monday, at least 2 weeks before Christmas, some 4 weeks before Q3 announcement
    - Full year : following relevant year end to announcement date.

    Actual Dates
    Monday, 22 June to Monday, 6 July 2015 (inclusive)
    Monday, 28 September to Tuesday, 3 November 2015 (inclusive)
    Monday, 7 December to Wednesday, 6 January 2016 (inclusive)
    Thursday, 17 March to Tuesday, 17 May (inclusive)
  • How will shareholders be affected?

    By reducing the number of shares in issue, shareholders who retain their shares will own a larger percentage of the company than they did before.
  • Why isn’t the money being returned straight to shareholders?

    We consider that the combination of a significant increase in the dividend and share buy-back achieves the restructuring of the balance sheet and capital efficiency that is optimum for the group and balances the interests of our various stakeholders.
  • Were any alternatives to the buy-back discussed?

    We consider that an increase in the dividend of 7.4% to 11.6p in conjunction with the share buy-back is in line with our commitment to maintain a disciplined approach to capital management, balancing the interests of our various stakeholders whilst allowing the Company to retain the flexibility to continue to invest in the business.
    It is very common for companies to obtain from their shareholders the authority to buy-back shares in this way annually and to make use of such authority.
  • I am an M&S employee. Will I be affected by the buy-back?

    The Company’s SAYE Schemes are not affected by the buy back.
  • How does this compare with previous corporate actions?

    The company regularly reviews its capital structure to ensure efficient use of the balance sheet. Recent corporate actions were:

    2007 - £593m returned through a share buy-back programme, utilising the authority granted by shareholders at the AGM in July 2007.

    2004 - £2.3bn returned through a Tender offer. Some 28% of shares were bought and cancelled – the majority of participants would have been institutional investors.

    2002 - £2bn returned by issuing B Shares to all shareholders valued at 70p each and consolidating the ordinary shares on a 17 for 21 basis. This reduced the share capital by 19%. The remaining B shares were redeemed in May 2006.
  • When did M&S last buy back shares?

  • Will there be further buy-backs after this?

    The Company intends to operate a sustainable programme of returns of capital to shareholders. Though this is to be achieved through a share buy back this year, the Company will retain the flexibility to keep the methods to be used in future years under review.
  • I am unhappy about the buy-back, who do I complain to?

    Please write to Marks and Spencer Group plc, Waterside House, 35 North Wharf Road, London, W2 1NW

    Please mark your letter for the attention of the Group Secretary.