Interim Results 7 November 2006
Interim Results Lord Burns Chairman
Interim Results Stuart Rose Chief Executive
Interim Results Ian Dyson Group Finance Director
Group financial highlights Sales 3.9bn, +11% Operating profit* 447.4m, +22% Profit before tax* 405.1m, +32% Adjusted earnings per share* 16.6p, +31% Net cash outflow 33.5m *From continuing operations before asset disposals
Group profit before tax 500 400 62.5 9.8 9.0 17.3 405.1 m 300 306.5 200 2005/06 ACTUAL UK INTERNATIONAL M&S MONEY INTEREST 2006/07 ACTUAL
Sales General Merchandise Foods 12% 10% 11.7% 10.5% 10.0% 10.9% 9.2% 12% 10% 9.2% 10.9% 10.1% 8% 7.9% 8% 6% 6% 5.8% 4.7% 5.3% 4% 4% 2% 2% 0% 0% Q1 Q2 H1 Q1 Q2 H1 Total Like for like
Gross profit TY % LY % Var % Gross profit margin 43.6 42.6 +100bps GM gross margin 53.2 51.5 +170 bps Foods gross margin 34.3 34.0 + 30 bps Full year margin guidance in line with H1
Operating costs TY m LY m Var % Retail staffing costs 389.6 327.7 +18.9 Retail occupancy costs 350.7 321.7 +9.0 Distribution costs 150.7 140.0 +7.6 Marketing & related costs 59.6 47.6 +25.2 Support costs 210.7 206.7 +1.9 Total before bonus 1,161.3 1,043.7 +11.3 Bonus 33.1 29.7 +11.4 Total including bonus 1,194.4 1,073.4 +11.3 Full year operating costs guidance c.9%
International TY m LY m Var % Turnover 281.5 239.2 +17.7 Owned stores 169.8 148.0 +14.7 Franchised stores 111.7 91.2 +22.5 Operating profit 40.0 30.2 +32.5 Owned stores 20.9 15.2 +37.5 Franchised stores 19.1 15.0 +27.3
Cash flow 600 589.8 (94.4) 500 (301.3) 400 300 200 (99.1) 100 (142.1) 0 13.6 (33.5) -100 EBITDA Working capital & similar movements Capex and disposals Interest & Taxation Dividends and share issues Other movements Net Cash Flow
Store modernisations Sales and ROI metrics remain strong 4 trial stores continue to materially outperform 2005 openings have gained momentum in H1 2006 openings performing strongly to date Cost per sq ft guidance remains 80-90
Store modernisations 2005 2006 2007 Modernised space 10% 35% c70% Work on 2007 stores to commence in January Development of a number of key stores Programme closely linked with property strategy
Full year capex m Previous guidance 520-570 2007 modernisation programme 120 Major store developments 50 Acquisition of Simply Foods 60 Updated guidance 750-800 At least the same level anticipated for 2007/08
Capital structure 30 Sept 06 m 1 April 06 m 1 Oct 05 m Net debt 1,745.6 1,729.3 2,025.5 Pension deficit* 1,051.4 794.9 778.4 Making progress on pension deficit No change to property position Dividend growth * IAS 19
Summary Positive sales momentum Further progress on margin Strong profit performance Store modernisation programme delivering Increased focus on investing in the future
Interim Results Stuart Rose Chief Executive
Same plan Focus/ Drive Product Service Environment Broaden: Stretching the brand e-commerce Overseas Driving our brand and broadening its reach remains our plan
Progress continues now driving conversion 2005/06 2006/07 Q1 Q2 Q3 Q4 Q1 Q2 FOOTFALL CONVERSION TRANSACTIONS BASKET SIZE BASKET VALUE SOURCE: Footfall, Internal sales
Clothing progress in market share 2 Value Share 1 % pt change 0-1 -2 Q1 Q2 Q3 Q4 Q1 Q2 2005/06 2006/07 SOURCE: FashionTrak
Share gain in all Business Units Value % 2005 2006 Volume % Change % 2005 2006 Change % Total Clothing & Footwear 9.2 10.1 9.8 9.0 9.8 8.9 Womens 9.4 10.5 11.7 7.9 9.4 19.0 Lingerie 24.1 25.6 6.2 16.7 18.1 8.4 Mens 8.3 9.0 8.4 9.5 9.7 2.1 Kids 4.0 4.4 10.0 4.1 5.0 22.0 Food 3.8 4.0 5.3 SOURCE: Clothing: TNS Worldpanel Fashion: 24 w/e 17 th Sept 2006; Food: Superpanel, Food & Drink: 24 w/e 8 th Oct 2006
Driven by Better product Better service Better environment
Product Values Architecture Better buying Newness Stock control Listening to our customers
Womens
Lingerie
Mens
Childrens
Childrens - starting to make progress Sales progress 10 5 0 Sep 04 Nov 04 Dec 04 Jan 05 Mar 05 Apr 05 Jun 05 Jul 05 Aug 05 Oct 05 Nov 05 Dec 05 Feb 06 Mar 06 May 06 Jun 06 % on Year Jul 06 Sep 06-5 -10 M&S BRC ex M&S SOURCE: Internal Analysis - 2 year rolling 52 w/e
Home
Long term growth in Home continues Sep 04 Nov 04 Jan 05 Mar 05 May 05 Jul 05 Sep 05 Nov 05 Jan 06 Mar 06 May 06 Jul 06 % on Year Sep 06 50 Sales progress 40 30 20 10 0-10 -20-30 -40 M&S BRC ex M&S SOURCE: M&S and BRC 2 year rolling 52 w/e
Technology
Food
Food continues to outperform Sales progress 10% 8% 6% 4% 2% 0% Sep 04 Nov 04 Dec 04 Jan 05 Mar 05 Apr 05 Jun 05 Jul 05 Aug 05 Oct 05 Nov 05 Dec 05 Feb 06 Mar 06 May 06 Jun 06 Jul 06 Sep 06 % on Yr M&S IGD SOURCE: Internal Analysis - 2 year rolling 52 w/e
Food initiatives - revitalising existing space
Service Improving store standards Improving availability RFID Mystery shopping Special service areas: Footwear, technology, lingerie
Special service areas
Property strategy
Property strategy Enhance presence in major city centres Extend and add major out of town stores Build presence in retail parks Develop our high street portfolio Accelerate growth of Simply Foods
Enhance major city centres
Extend and add major Out of Town
Build retail park presence
Develop high streets
Develop Simply Foods
Moving ahead on BP
What will this mean Net space will grow over the next five years September 06 (million sq ft) 5 Years GM 9.3 +15-20% Food 4.0* +20-25% Total 13.3 +15-20% * Excludes BP, Compass & Moto
Environment store modernisation
e-commerce
International
Summary Good half year; current trading going well Lots more to do: Delivering better product Delivering better service Pushing ahead on modernisations Executing property strategy Stretching the brand Developing on-line Growing International
Interim Results 7 November 2006
Contacts Media enquiries: Marks & Spencer Corporate Press Office 020 8718 1919 Clair Foster 020 8718 8323 Olivia Ross 020 8718 1618 Katy Pratt 020 8718 8132 Clare Wilkes 020 8718 8642 Vanessa Rhodes 020 8718 6603 Claire Hoyle 020 8718 6320 Helen Ruby 020 8718 8928 Out of hours number 020 8718 2000 Analyst enquiries: Amanda Mellor: 020 8718 6304 Majda Rainer: 020 8718 1563