Marks and Spencer 2011 Annual Report Download

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Table of contents

  • Page 1
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  • Page 7
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  • Page 8
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  • Page 9
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  • Page 10
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  • Page 11
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  • Page 12
    ... Customer visits to our stores were broadly stable in 2010/11. Concerns about rising petrol prices meant footfall slowed slightly in the second half of the year. However, we remained ahead of the overall market figure of -1.4%. Marks and Spencer Group plc Annual report and financial statements...

  • Page 13
    ...energy efficiency in kWh per sq ft of salesï¬,oor 2006/07 2010/11 Improvement 2012 target 93% Analysis Under our space growth programme, our aim is for 95% of the population to be within a 30 minute drive of a full line store by 2015. This will help to ensure we can deliver a leading multi-channel...

  • Page 14
    ...'t kill Our Insolia® footwear technology helps you to dance the night away by reducing the pressure on your feet. Our latest advertising campaign highlighted this M&S point of difference and sales of Insolia® increased 186%. Marks and Spencer Group plc Annual report and financial statements 2011

  • Page 15
    ... used bigger promotions, such as our 'Roast Dinner for £5', to help our customers get more of the food they love at great value. Multi-channel The market expanded rapidly this year, with new transactional websites appearing through media such as Facebook and new players entering the online market...

  • Page 16
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  • Page 17
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  • Page 18
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  • Page 19
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  • Page 20
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  • Page 21
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  • Page 27
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  • Page 30
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  • Page 31
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  • Page 32
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  • Page 34
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  • Page 35
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  • Page 36
    ... our return on capital employed over time. All of the additional expenditure required to deliver our plan is funded through our existing cash ï¬,ows, supporting our commitment to maintaining an investment grade credit rating. Two years ago we launched a programme to restructure the M&S supply chain...

  • Page 37
    ... price investment. Underlying UK operating costs were up 3.5% to £2,951.3m. A breakdown of the costs is shown below: 52 weeks ended 2 Apr 11 £m 27 Mar 10 £m % inc Operating review Financial review UK Clothing Home General Merchandise Food Total UK International Total Group Like-for-like revenue...

  • Page 38
    ... pension credit of £10.7m is due to changes in the Republic of Ireland pension scheme capping employees' future annual increases in pensionable pay to 4%. The value of an investment property has been impaired by £6.3m to reï¬,ect its recoverable value, in line with its current market value. Net...

  • Page 39
    ... opened 20 stores during the year, including 17 Simply Foods. In our International business we added c.15% of space, trading from 4.2m sq ft. We opened 49 new stores and closed 15. Underlying EBITDA Working capital Pension funding Capex and disposals Interest and taxation Dividends and share issues...

  • Page 40
    ... leasing company, where he was Chief Financial Officer. Alan worked for HSBC Investment Bank for ten years before joining Thomas Cook in 1996, where he held a number of senior roles, including Chief Executive of Thomas Cook UK, before joining WH Smith plc in 2005 as Group Finance Director. Alan...

  • Page 41
    ... asset management company. David is also Deputy Chairman of easyJet plc and a non-executive director of Strategic Hotels & Resorts and Jumeirah Group, Dubai. He was previously Senior Independent Director of The British Land Company plc, a non-executive director of Arcadia Group and Chief Executive...

  • Page 42
    ...are developing the right management team for the future. The non-executives provide independent challenge and review, bringing wide experience, specific expertise and a fresh, objective perspective. As members of the Board Committees, they play a crucial role in undertaking detailed governance work...

  • Page 43
    ... the practical application of our governance, showing how it works to support and protect the M&S business. You will find our approach to Leadership on page 42, Effectiveness on 44, Accountability on 45, Engagement and Relations with Shareholders on page 48, and the governance of our pension scheme...

  • Page 44
    ... plan ahead. The Board was engaged in signing off some significant strategic developments during the year, including our return to continental Europe with the opening of a store in Paris and the launch of our first international website in France. It also approved significant IT and supply chain...

  • Page 45
    ... from Top 100 management team to develop future strategy - Held two Board away-days to support new strategy and review immediate and three-year plans 'JOBODJBMSFWJFX M s & Spenc ark - Approved key decisions including: development of new M&S multi-channel platform; return to continental Europe...

  • Page 46
    ... employees, customers, suppliers, service providers, opinion leaders, an overview of our remuneration policy and pensions. His programme was supported by one-on-one meetings with management from General Merchandise, Food , Multi-channel, International, Retail, Finance, Property, Plan A, Marketing...

  • Page 47
    ... / known Governance Supply chain management Corporate reputation IT security Stock management M&S Direct Programme and workstream management Store environment Food safety Our customers Our people International Core operations Internal Business change Financial statements & other information...

  • Page 48
    ... business Our aim is to increase our international presence and to build a leadership position in priority markets. To deliver this, it is crucial that we adopt an organisation structure that is supported with robust systems and supply chain capability. Marks and Spencer Group plc Annual report...

  • Page 49
    ...principles of Quality, Value, Service, Innovation and Trust continue to inï¬,uence how we do business and our reputation for being one of the UK's most trusted brands. Operating review Corporate reputation External expectations relating to our Plan A, ethical or corporate governance commitments are...

  • Page 50
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  • Page 51
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  • Page 52
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  • Page 53
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  • Page 54
    ... significant changes at Marks & Spencer during the financial year which are reviewed in this report. Marc Bolland's appointment as Chief Executive Officer has led to a full strategic review of the Company's business plan, with the evolution of our corporate strategy communicated to investors as...

  • Page 55
    ... 2011/12 Annual Bonus Scheme, including sign off of individual objectives for executive directors; - consideration of the performance measures and targets to be applied to the 2011/12 Performance Share Plan awards; - review of Committee performance during the period; and - review of Committee terms...

  • Page 56
    ...review of the current senior remuneration strategy and incentive arrangements and the design and development of a new remuneration package for all executives for 2011/12, as described in the introduction to this report; and - review of pension arrangements for executive directors and senior managers...

  • Page 57
    ...stated strategic objectives. - targets based on cumulative adjusted (underlying basic) earnings per share (EPS), Return On Capital Employed (ROCE) and Revenue growth across UK, International and Multi-channel business segments Financial review Governance Financial statements & other information To...

  • Page 58
    ... committee roles and are not performance related or pensionable. The Chairman is entitled to the use of a car and driver, provided by the Company. He may benefit from employee product discount on the same terms as other employees. Marks and Spencer Group plc Annual report and financial statements...

  • Page 59
    ... across the senior management group. For 2011/12, these shared objectives will relate to: - delivery against UK operating plan cost targets; and - progression in implementing 'Plan A' commitments. Our strategy Our performance & marketplace Operating review Financial review Committee Chairman: £15...

  • Page 60
    ... for executive directors and senior managers in the Company. As described in the introduction to this report, shareholder approval is being sought at the AGM for a number of changes as part of the review of our Senior remuneration framework: - the exceptional award limit of 400% of salary is...

  • Page 61
    ... on page 65. All-Employee Share Schemes - long-term incentive Executive directors can participate in Sharesave, the Company's Save As You Earn (SAYE) scheme which is open to all employees. The current scheme was approved by shareholders for a ten-year period at the 2007 AGM. The scheme is subject to...

  • Page 62
    ... six months' notice by either party. Non-executive directors Non-executive directors have agreements for service with the Company for an initial three-year term, which can be terminated on three months' notice by either party. Marks and Spencer Group plc Annual report and financial statements 2011

  • Page 63
    ...Further information regarding employee share option schemes is given in note 13 to the financial statements on page 91 of the Annual Report. There have been no changes in the directors' interests in shares or options granted by the Company and its subsidiaries between the end of the financial year...

  • Page 64
    .... Total shareholder return 300 280 260 240 220 200 180 160 140 120 100 80 60 40 20 0 1 April 2006 Marks and Spencer Group plc FTSE 100 Index Source: Thomson Reuters 31 March 2007 29 March 2008 28 March 2009 3 April 2010 29 March 2011 Marks and Spencer Group plc Annual report and financial...

  • Page 65
    ... Working Time Directive relating to holidays and salary changes). His bonus earned in 2011 is fully paid in cash as described on page 60. The dividend equivalents paid were accrued between the date of grant and leaving date on his 2009 Performance Share Plan (PSP) and 2010 Deferred Share Bonus Plan...

  • Page 66
    ... 2007 Deferred Share Bonus Plan over the award's vesting period. All other awards made under these plans were restructured as nil cost options on 1 November 2010 and are therefore shown in the Share Option Schemes table on page 65. Marks and Spencer Group plc Annual report and financial statements...

  • Page 67
    ... the year Maximum options receivable at 2 April 2011 or on date of leaving Share price on date of award (p) Our strategy Date of grant Option price (p) Option period Chief Executive Officer Marc Bolland Performance Share Plan1,2 Restricted Share Plan1,4 SAYE Total Executive directors Kate...

  • Page 68
    ... the financial year were 427.5p and 326.4p respectively. The explanation of the performance criteria attached to the Performance Share Plan and the Executive Share Option Scheme is set out under Long-Term Incentive Schemes on page 59 have been audited. Marks and Spencer Group plc Annual report and...

  • Page 69
    ... meaningfully to annual remuneration. The increase in transfer value is the increase in the transfer value of the accrued benefits during the year. No other executive director participates in the scheme. Instead they receive a salary supplement in lieu of membership of the Group Pension Scheme as...

  • Page 70
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  • Page 71
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  • Page 72
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  • Page 73
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  • Page 74
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  • Page 75
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  • Page 76
    ... income 52 weeks ended 2 April 2011 £m 53 weeks ended 3 April 2010 £m Profit for the year Other comprehensive income: Foreign currency translation differences Actuarial gains/(losses) on retirement benefit schemes Tax on retirement benefit schemes Cash flow and net investment hedges - fair value...

  • Page 77
    75 Consolidated statement of financial position Notes As at 2 April 2011 £m As at 3 April 2010 £m Strategy Assets Non-current assets Intangible assets Property, plant and equipment Investment property Investment in joint ventures Other financial assets Retirement benefit asset Trade and ...

  • Page 78
    ... shareholders Shares issued on exercise of employee share options Purchase of own shares held by employee trusts Charge for share-based payments Deferred tax on share schemes At 3 April 2010 At 4 April 2010 Profit/(loss) for the year Other comprehensive income: Foreign currency translation...

  • Page 79
    ... Payment of liability to the Marks & Spencer UK Pension Scheme Equity dividends paid Shares issued on exercise of employee share options Purchase of own shares by employee trust Net cash used in financing activities Net cash inflow/(outflow) from activities Effects of exchange rate changes Opening...

  • Page 80
    ...benefit schemes using the projected unit credit method. These determine the level of contribution required to fund the benefits set out in the rules of the plans and allow for the periodic increase of pensions in payment. The service cost of providing retirement benefits to employees during the year...

  • Page 81
    ... the transaction. Foreign currency monetary assets and liabilities held at the end of the reporting period are translated at the closing balance sheet rate. The resulting exchange gain or loss is recognised within the income statement. Taxation Tax expense comprises current and deferred tax. Tax is...

  • Page 82
    ...by the Company are recorded at the consideration received, net of direct issue costs. Derivative financial instruments and hedging activities The Group primarily uses interest rate swaps and forward foreign currency contracts to manage its exposures to fluctuating interest and foreign exchange rates...

  • Page 83
    ... operating costs of the underlying business; - one-off pension credits arising on changes of the defined benefit pension schemes; and - non-cash fair value movements in financial instruments. Strategy Performance & Marketplace Operating review Financial review Governance Financial statements...

  • Page 84
    ...accounting purposes. In addition, underlying profit excludes profits and losses on the disposal of properties, impairment charges, pension credits arising on changes of the defined benefit pension schemes, non-cash fair value movements in financial instruments and costs relating to strategic changes...

  • Page 85
    ... profit before taxation: 2011 £m 2010 £m Net foreign exchange gains Cost of inventories recognised as an expense Depreciation of property, plant, and equipment - owned assets - under finance leases Amortisation of intangibles Profit on property disposals Operating lease rentals payable - property...

  • Page 86
    ... volatility in reported earnings; - IAS 19 credit arising from changes to the Marks and Spencer Ireland defined benefit pension scheme whereby members' future pensionable pay increases have been capped at 4%; - IAS 36 impairment of investment property - the value of an investment property has been...

  • Page 87
    ... 2011 £m 2010 £m Profit before tax Tax at the standard UK corporation tax rate of 28% (last year 28%) Depreciation, charges and other amounts on non-qualifying fixed assets Other income and expenses not taxable or deductible Deferred tax rate change benefit Overseas profits taxed at rates...

  • Page 88
    ... also been calculated based on earnings before profits and losses on the disposal of properties, impairment charges, pension credits arising on changes of the defined benefit pension schemes, and non-cash fair value movements in financial instruments, and costs relating to strategic changes that are...

  • Page 89
    ... 67. 2011 £m 2010 £m Aggregate emoluments The emoluments exclude payments to former directors of £nil (last year £187,000). 11 Retirement benefits 11,618 8,380 The Group provides pension arrangements for the benefit of its UK employees through the Marks & Spencer UK Pension Scheme. This has...

  • Page 90
    ...'Employee Benefits' in order to assess the liabilities of the schemes: 2011 % 2010 % Rate of increase in salaries Rate of increase in pensions in payment for service - pre-April 1997 - between April 1997 and July 2005 - post-July 2005 Discount rate Inflation rate Long-term healthcare cost increases...

  • Page 91
    ... profits 2011 £m 2010 £m Financial review Operating cost Current service cost Curtailment charge One-off pension credit (see note 5) Finance cost Expected return on plan assets Interest on scheme liabilities Net finance income Total F. Scheme assets Changes in the fair value of the scheme assets...

  • Page 92
    ... value of retirement benefit obligations are as follows: 2011 £m 2010 £m Present value of obligation at start of year Current service cost Curtailment charge One-off pension credit (see note 5) Interest cost Contributions from scheme members Benefits paid Actuarial (gain)/loss Exchange movement...

  • Page 93
    ..., receiver or similar officer in respect of Marks and Spencer plc or Marks and Spencer Group plc) or on a relevant change of law, the net present value of the outstanding distributions becomes payable to the Pension Scheme by the Scottish Limited Partnership at the option of the Pension Scheme...

  • Page 94
    ... a market value of £29.8m (last year £27.1m). These shares were acquired by the Trust in the market and are shown as a reduction in retained earnings in the consolidated statement of financial position. The Trust used funds provided by Marks and Spencer plc to meet the Group's obligations. Awards...

  • Page 95
    ...not reflect long-term planning assumptions used by the Group for investment proposals or for any other assessments. The discount rate is based on the Group's weighted average cost of capital, taking into account the cost of capital and borrowings, to which specific market-related premium adjustments...

  • Page 96
    ... Reclassification from investment property Transfers Disposals Depreciation charge Exchange difference Closing net book value At 3 April 2010 Cost Accumulated depreciation Net book value Year ended 2 April 2011 Opening net book value Additions Transfers Disposals Asset write-off Depreciation...

  • Page 97
    ... Limited Partnership and Marks and Spencer plc respectively. Governance Non-current unlisted investments are carried as available-for-sale assets. Other financial assets are measured at fair value with changes in their value taken to the income statement. Financial statements & other information...

  • Page 98
    ... these assets approximates their fair value. The effective interest rate on short-term bank deposits is 0.40% (last year 0.29%); these deposits have an average maturity of nine days (last year five days). 21 Trade and other payables 2011 £m 2010 £m Current Trade and other payables Social security...

  • Page 99
    ...as trade receivables and trade payables, that arise directly from its operations. The main purpose of these financial instruments is to finance the Group's operations. Group treasury also enters into derivative transactions, principally interest rate and currency swaps and forward currency contracts...

  • Page 100
    ... approved on an exception basis by a Board director. Limits are reviewed regularly by senior management. The credit risk of these financial instruments is estimated as the fair value of the assets resulting from the contracts. Marks and Spencer Group plc Annual report and financial statements 2011

  • Page 101
    ...excluding short-term payables, the liability to the Marks & Spencer UK Pension Scheme and the Marks and Spencer Czech Republic a.s. put option: Fixed rate £m Floating rate £m 2011 Total £m Fixed rate £m Floating rate £m 2010 Total £m Financial statements & other information Currency Sterling...

  • Page 102
    ... flow hedges - fair value hedge During the year the cross currency swaps held to redesignate the Group's fixed rate US dollar debt to fixed rate sterling debt were reset to market values, transferring the asset value of the swaps to the Marks & Spencer UK Pension Scheme as part of the funding plan...

  • Page 103
    ... Level 3 £m 2011 Total £m Level 1 £m Level 2 £m Level 3 £m 2010 Total £m Financial review Assets measured at fair value Financial assets at fair value through profit and loss - Trading derivatives Derivatives used for hedging Embedded derivatives (note 5) Available-for-sale financial assets...

  • Page 104
    ... the capital structure, the Group may adjust the number of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. 24 Provisions 2011 £m 2010 £m At start of year Provided in the year Released in the year Utilised during the year Exchange...

  • Page 105
    ...662) ordinary shares having a nominal value of £0.7m (last year £1.1m) were allotted during the year under the terms of the Company's schemes which are described in note 13. The aggregate consideration received was £8.4m (last year £12.4m). Governance Financial statements & other information To...

  • Page 106
    ... net book value to market value, which are currently owned and operated by them on the Group's behalf. See note 12 for details on the partnership arrangement with the Marks & Spencer UK Pension Scheme. C. Commitments under operating leases The Group leases various stores, offices, warehouses and...

  • Page 107
    ... equivalents Current financial assets (see note 18) Bank loans and overdrafts (see note 22) Syndicated bank facility (see note 22) Medium-term notes (see note 22) - net of hedging derivatives Finance lease liabilities (see note 22) Partnership liability to the Marks & Spencer UK Pension Scheme (see...

  • Page 108
    ... information about the remuneration of individual directors is provided in the Remuneration report. During the year, key management have purchased goods at the Group's usual prices less a 20% discount. This discount is available to all staff employed directly by the Group in the UK. F. Other related...

  • Page 109
    ... issue on 23 May 2011. The financial statements also comprise the notes on pages 108 and 109. Marc Bolland Chief Executive Officer Alan Stewart Chief Finance Officer Operating review Company statement of changes in shareholders' equity Ordinary share capital £m Share premium account £m Capital...

  • Page 110
    ...of the year Additional investment in subsidiary relating to share-based payments End of year Shares in Group undertakings represent the Company's investment in Marks and Spencer plc. 9,168.6 11.2 9,179.8 9,158.5 10.1 9,168.6 Marks and Spencer Group plc Annual report and financial statements 2011

  • Page 111
    ...una Group Limited Marks and Spencer Scottish Limited Partnership 1 Marks and Spencer plc is the general partner. Retailing Holding company Holding company Holding company Retailing Retailing Retailing Retailing Retailing Financial services Procurement Procurement Property investment Great Britain...

  • Page 112
    ...average ordinary shares in issue 8.6% 8.5% 38.8p 8.9% 8.8% 33.5p 9.6% 8.5% 32.3p 13.4% 12.1% 49.2p 12.2% 12.2% 39.1p Underlying basic earnings per share¹ Dividend per share declared in respect of the year Dividend cover Profit attributable to shareholders/ Dividend payable Retail fixed charge...

  • Page 113
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  • Page 114
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  • Page 115
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  • Page 116
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