Marks and Spencer 2011 Annual Report Download - page 36

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Alan Stewart Chief Finance Officer
We have a clear plan to build on this
success, as set out in detail by Marc
Bolland on page 4. Over the next three
years our aim is to grow the business to
revenues of £11.5bn to £12.5bn. By
2013/14, our focus on the UK will deliver an
additional £1.0bn to £1.5bn in sales; we
will become a leading multi-channel
retailer growing sales by £300m to £500m;
and we will increase International sales by
£300m and £500m.
To deliver our plan we must invest in the
business. We plan to increase our capital
investment by some £300m per annum
over the next three years, giving a total
additional investment of £850m to £900m
over this period.
The majority (£600m) of the additional
capital expenditure will be invested in
our UK business – improving our stores,
systems and operations. The remainder
will be invested in building our multi-
channel capabilities and supporting our
international growth ambitions. We are
confident that this investment will deliver
benefits and are targeting an internal
rate of return of between 12% and 15%.
We also intend to improve our return on
capital employed over time.
All of the additional expenditure required
to deliver our plan is funded through our
existing cash flows, supporting our
commitment to maintaining an investment
grade credit rating.
Two years ago we launched a programme
to restructure the M&S supply chain –
implementing new information systems
and improving our operational execution.
We are now accelerating this programme
to deliver bigger, better benefits. This year
we made significant progress, increasing
our original cost savings target from
£250m to £300m and bringing forward
our delivery date to 2015.
As we grow we remain focused on building
an efficient business – with prudent
operating cost management. This is not
simply about cost cutting. We want to
challenge the business to think differently
and find new, more efficient ways of doing
things.
By reducing our dependency on full
service vendor suppliers we are gaining
greater control of our supply chain.
By2015 we aim to have a supply base
splitof 35% full service vendor suppliers
and 65% direct.
These actions will deliver a 5%
improvement in Food availability by
2013/14 and a 9% improvement in
Clothing and Home by 2015.
We have a strong balance sheet, with net
debt down again this year to £1.9bn.
Thisis of course underpinned by a strong
property portfolio – an important asset for
the business. With the pension funding
now agreed and in place, we are in a
strong financial position.
Looking ahead
We remain cautious about the year ahead.
However, our business is in good shape
andwe have a clear plan for the future.
Wewillinvest in our business to deliver our
plan, creating an efficient platform from
which to grow.
* The underlying profit measures are consistent with how the business is measured internally.
Marks and Spencer Group plc Annual report and financial statements 2011
34
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Marks & Spencer has delivered a good set of results this year, with sales
up 4.2% despite challenging trading conditions. Underlying profit before
tax was £714.3m, 12.9%* ahead of last year, with underlying earnings
per share at 34.8p, 16.0%* up on last year. This performance reflects the
good work of our teams across the business, as we continued to build
momentum in both Food and General Merchandise, as well as our growing
International business.