M&S Group’s funding strategy is to ensure a mix of funding sources offering flexibility and cost effectiveness to match the requirements of the Group. Operating subsidiaries are financed by a combination of retained profits, bank borrowings, medium -term notes, leases and committed bank facilities.
The objective is to ensure that the Group has appropriate funds to manage its financial obligations and to achieve its business objectives. In addition, it is to ensure that the Group has a reasonable level of funding diversity in terms of investors and maturity.
The Group has a committed syndicated bank revolving credit facility of £850m set to mature on 13 June 2027.
This facility contains only one financial covenant being the ratio of earnings before interest, tax, depreciation, and amortisation to consolidated net interest plus IFRS16 depreciation. The Group also has a number of uncommitted facilities available to it.
The Group operates a centralised Group treasury function to manage the Group’s funding requirements and financial risks in line with the Board approved treasury policies and procedures, and their delegated authorities.
Treasury policy and financial risk management
The Group’s financial instruments, other than derivatives, comprise borrowings, cash and liquid resources and various items, such as trade debtors and trade creditors, that arise directly from its operations.
The main purpose of these financial instruments is to raise finance for the Group’s operations. Group treasury also enters into derivative transactions, principally interest rate and currency swaps and forward currency contracts. The purpose of these transactions is to manage the interest rate and currency risks arising from the Group’s operations and financing.
It remains the Group’s policy not to hold or issue financial instruments for trading purposes, except where financial constraints necessitate the liquidation of any outstanding investments. The treasury function is managed as a cost centre and does not engage in speculative trading.
The principal financial risks faced by the Group are liquidity/funding, interest rate, foreign currency, and counterparty risks. The policies and strategies for managing these risks are summarised as follows:
Liquidity/funding risk
The Group’s funding strategy is to ensure a mix of funding sources offering flexibility and cost effectiveness to match the requirements of the Group. Operating subsidiaries are financed by a combination of retained profits, bank borrowings, medium term notes, leases and committed syndicated bank facilities.
Interest rate risk
The Group is exposed to interest rate risk in relation to its variable rate financial assets and liabilities. The Group’s policy is to use derivative contracts where necessary to maintain a mix of fixed and floating rate borrowings to manage this risk. The structure and maturity of these derivatives correspond to the underlying borrowings and are accounted for as fair value or cash flow hedges as appropriate.
Foreign currency risk
Transactional foreign currency exposures arise both from the export of goods from the UK to overseas subsidiaries, and from the import of materials and goods directly sourced from overseas suppliers. Group treasury hedge these exposures principally using forward foreign exchange contracts progressively covering up to 100% out to 18 months. Where appropriate hedge cover can be taken out longer than 18 months with Board approval. The Group is primarily exposed to foreign exchange in relation to sterling against movements in the US dollar and the euro.
Forward foreign exchange contracts in relation to the Group’s forecast currency requirements are designated as cash flow hedges with fair value movements recognised directly in equity. To the extent that these hedges cover actual currency payables or receivables then associated fair value movements previously recognised in equity are recorded in the income statement in conjunction with the corresponding asset or liability. The Group also hedges foreign currency intercompany loans where these exist. Forward foreign exchange contracts in relation to the hedging of the Group’s foreign currency intercompany loans are designated as held for trading with fair value movements being recognised in the income statement.
Counterparty risk
Counterparty risk exists where the Group can suffer financial loss through default or non-performance by financial institutions. Exposures are managed through the Group treasury policy which limits the value that can be placed with each approved counterparty to minimise the risk of loss. The counterparties are limited to the approved institutions with secure long-term credit ratings of A-/A3 or better assigned by Moody’s and Standard & Poor’s respectively. Limits are reviewed regularly by senior management. The counterparty credit risk of these financial instruments is estimated as the fair value of the assets resulting from the contracts.
The Group has very low retail credit risk due to transactions being principally of a high volume, low value, and short maturity. The Group does not have any material exposures to concentrations of credit risk with any one counterparty.
Credit rating
The Group is rated by both S&P Global and Moody’s and has the following credit rating:
|
Long Term Rating Outlook Lead Analysts
|
S&P Global BBB- Stable Raam Ratnam, CFA, CPA Abigail Klimovich, CFA |
Moody's Baa3 Roberto Pozzi Alberto Bossini |
Marks and Spencer has issued Medium Term Notes (MTN) as follows:
| Maturity Date |
Issued Amount |
Outstanding Amount |
Coupon | Interest Paid |
Interest Payment Date |
Minimum Denominations |
|---|---|---|---|---|---|---|
| 20251 | £400m | £105.503m | 4.750%3 | Annually | 12 June | £100,000 and increments of £1,000 |
| 20261 | £300m | £109.379m | 3.750% | Annually | 19 May | £100,000 and increments of £1,000 |
| 20271 | £250m | £250m | 3.25%4 | Annually | 10 July | £100,000 and increments of £1,000 |
| 20372 | US$300m | US$300m | 7.125% | Semi-annually | 1 June / 1 December |
$100,000 and increments of $1,000 |
1 These notes are issued under Marks and Spencer plc’s £3bn European Medium Term Note Programme and all pay interest annually.
2 Issued under rule 144A of the US Securities Act.
3 Coupon includes 1.25% rating step up
4 4.5% coupon payable in July 2025 which includes 1.25% rating step up
Current Offering Circular
- Download Offering Circular Dated 06 November 2020 (PDF)
Historic Offering Circulars
- Download Offering Circular Dated 11 December 2019 (PDF)
- Download Offering Circular Dated 14 November 2018 (PDF)
- Download Offering Circular Dated 14 November 2016 (PDF)
- Download Offering Circular Dated 9 November 2012 (PDF)
- Download Offering Circular Dated 11 November 2011 (PDF)
- Download Offering Circular Dated 11 November 2009 (PDF)
Issuer Financial Statements
- Download Marks and Spencer plc Financial Statements 2020 (PDF)
- Download Marks and Spencer plc Financial Statements 2019 (PDF)
- Download Marks and Spencer plc Financial Statements 2018 (PDF)
Trust Deed
- Third Supplemental Trust Deed 2012 including the amended and restated Trust Deed (PDF)
- Fourth Supplemental Trust Deed 2013 (PDF)
- Fifth Supplemental Trust Deed 2016 (PDF)
Agency Agreement
- M&S Agency Agreement (PDF)
Memorandum and Articles of Association
- Marks and Spencer plc Memorandum and Articles of Association (PDF)
- Download PDF