MARKS AND SPENCER GROUP PLC
FULL YEAR RESULTS FOR 52 WEEK ENDED 28 MARCH 2015
“M&S Grows Full Year Margin and Profit”
Improved full year results
- Group sales up 0.4% 1 to £10.3bn
- Underlying profit before tax2 up 6.1% to £661.2m
- Statutory profit before tax up 3.4% to £600.0m
Food business outperforms in a very competitive market
- Specialist positioning differentiates us from the competition
- 62 new Simply Food stores opened, with performance ahead of expectations
- Gross margin up 30bps
General Merchandise gross margin up strongly
- Gross margin up 190bps
- Significant sourcing gains and slightly lower discounting
General Merchandise sales performance challenging
- Full year performance did not meet expectations, positive LFL growth in the final quarter
- Continued improvement in product quality and style
- M&S.com sales back in growth in the final quarter, following disruption earlier in the year
International business impacted by macro-economic issues
- Operating profit down 24.8% to £92m
Tight control of costs and capex
- Operating costs up 1.5%
- Capex down £183m to £526.6m
Strong cash generation
- EBITDA £1,312.6m, up £92.9m
- Free cash flow before dividend £524.2m, up £96.3m
- Final dividend up 7.4% to 11.6p; full year dividend up 5.9% to 18p
- Share buyback programme of £150m announced for 2015/16
Marc Bolland, Chief Executive, said:
“We made good progress in three of our four key priorities for the year. In Food, we had an outstanding year in a difficult market. In GM, we significantly increased the gross margin, and, while sales performance was below our expectations, we returned to growth in the fourth quarter.
We continued to control costs and capital expenditure tightly, resulting in significantly improved free cash flow.
“We are transforming M&S into a stronger, more agile business – putting the right infrastructure, capabilities and talent in place to drive our strategic priorities.”
Robert Swannell, Chairman, said:
"We are a more capable business following a sustained period of investment in our infrastructure and in our people. Our focus continues to be on delivery of the strategy and improvement in shareholder returns.
“In line with our policy, the Board is recommending a final dividend of 11.6p per share, resulting in a full year dividend of 18p, 5.9% up on last year. In the context of continuing increased free cash flow in the business we are also pleased to announce the start of an ongoing programme of enhanced returns for shareholders with a share buyback programme of £150 million in the current year."
Guidance for financial year 2015/16:
- General Merchandise gross margin is expected to grow by 150bps to 200bps as a result of ongoing sourcing benefits.
- Food gross margin is expected to grow by 0 to 10bps due to further operational efficiencies.
- Operating costs are expected to increase by c. 4% primarily as a result of inflation and new Food space.
- Group capital expenditure is expected to be c. £500m to £550m.
- In Food, the planned opening of new stores will add c. 4.5% of space. We have a strong pipeline of new Simply Food stores and are increasing the planned number of new stores from 200 to 250 in the three years to March 2017. In GM there will be no new net space increase. International space is expected to grow by c. 5%.
- Underlying effective tax rate is expected to be c. 20%.
Looking ahead
With our new infrastructure largely in place, we are focused on delivery. Looking ahead we will continue to work on completing the final part of the single tier logistics network and GM4 systems, which will bring us closer to achieving our target of becoming a leading international, multichannel retailer. Our short term priorities remain the same: Food sales growth, GM gross margin improvement, improved GM performance and strong cash generation.
In our Food business, we see strong sales growth and modest gross margin opportunity. We expect the UK food market to remain challenging but we are well positioned with a differentiated product offer and a store format that caters for the changes in customer shopping habits. Delivery of our new stores will help drive sales growth over the coming year.
In General Merchandise we see significant gross margin improvement opportunity, with modest sales growth. In the year ahead we will continue to deliver gross margin benefits through a combination of a more direct approach to sourcing and improved trading capabilities. We expect a further step up with the completion of the single tier logistics network and GM4 systems implementation. Whilst we expect the Clothing and Home markets to remain highly competitive, we will continue to focus on stylish design, quality and newness, with better availability and more choice. Our M&S.com website and e-commerce distribution centre will help us drive online sales growth and improve our profitability.
We anticipate that in the short term our International business will be impacted by the weaker Euro and challenging macro-economic backdrop, particularly in our Middle East region and in the first half of the financial year. However, we still see a long term growth opportunity for the brand across a number of international markets.
Shareholder returns
Following the recent programme of investment, we now have a stronger, more capable business. While there is still more to do, the reduction in capital investment and the improving business performance will lead to strong cash generation.
The Board has set out clear capital allocation priorities:
-Commitment to a strong balance sheet and investment grade credit rating;
-Continuing to invest in the business for growth, underpinned by strong investment disciplines;
-Progressive dividend policy, broadly twice covered by earnings; and
-Returning excess cash to shareholders on a regular basis.
Consistent with this approach, M&S is today announcing an ongoing programme of returns of capital to shareholders, with the quantum and method determined by the Board each year based on the performance and the needs of the business.
This year we expect to return £150m of cash to shareholders by way of a share buyback programme.
We will update on our first quarter sales on 7 July 2015.
download full press release (PDF)
Notes:
1 On constant currency basis.
2 Underlying results are consistent with how the business is measured internally. Adjustments to derive underlying profit in the current period include net M&S Bank Charges incurred in relation to the insurance mis-selling provision, restructuring costs, IAS 39 fair value movement of embedded derivative, loss on disposal and impairment once commitment to closure and International store reviews.
For further information, please contact:
Investor Relations:
Majda Rainer:+44 (0)20 8718 1563
Helen Cox: +44 (0)20 8718 8491
Media enquiries:
Corporate Press Office:+44 (0)20 8718 1919
Investor & Analyst webcast:
Investor and analyst presentation will be held at 9am on 20 May 2015. This presentation can be viewed live on the Marks and Spencer Group plc website on:
www.marksandspencer.com/investors
Fixed Income Investor Conference Call:
This will be hosted by Helen Weir, Chief Finance Officer at 2pm on 20 May 2015:
Dial in number: +44 (0)20 3427 1913 Access code: 1609026
A recording of this call will be available until 29 May 2015:
Dial in number: +44 (0)20 3427 0598 Access code: 1609026
2015 Corporate