Marks and Spencer 2016 Annual Report Download - page 25

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23
ANNUAL REPORT AND FINANCIAL STATEMENTS 2016
GOVERNANCEFINANCIAL STATEMENTS OUR BUSINESSOUR PERFORMANCE
Continuing to invest in the business growth, underpinned
by strong investment disciplines:
> Reduced net capital expenditure excluding acquisitions
of £468.9m, down by £57.7m;
> Ongoing investment in multi-year infrastructure projects
in IT and logistics to make M&S a more fl exible organisation
that can move with speed and agility this year;
> Strong returns from new space openings.
Progressive dividend policy, broadly twice covered by earnings:
> Full year dividend at 18.7p, up 3.9% on last year in line with our
progressive policy.
Returning any surplus cash generated to shareholders on
a regular basis:
> Share buyback programme returned £150m to shareholders
through purchasing 31.6m shares;
> Announced a special dividend amounting to 4.6p per share
(c.£75m) for the fi rst half of the 2016/17 fi nancial year.
SUSTAINABLE REPORTING
This year, we have set out to produce an Annual Report that meets
the guiding principles of integrated reporting by demonstrating
the long-term sustainable value we create for our shareholders.
This report therefore includes further clarity to our business
model to better show the e ective use of the resources and
relationships relevant to our business and the new connected
value spread on page 12. We have provided greater detail on the
interdependencies in our business and how Plan A creates value.
We have also mapped our principal risks against our business
model to demonstrate the connectivity between the two.
We take our responsibility to pay our fair share of tax seriously
and our approach is in keeping with our longstanding values and
aligned to our shareholders’ interests. There is detailed information
on our tax contribution on page 24.
GROUP REVENUE
Group revenues were up 0.8% (up 1.1% on a constant currency basis).
UK revenues were up 1.1% in total with a like-for-like decrease of
1.1%. International revenues were down 2.0% (up 1.3% on constant
currency basis).
GROSS MARGIN
UK gross margin was up 75bps at 42.1% as a result of the strong
improvement in Clothing & Home.
Clothing & Home gross margin was up 245bps at 55.1%, driven
by improvement in the buying margin as we continue to make
progress in our sourcing initiatives and implement a more fl exible
and direct sourcing operation, and our dollar hedging approach.
This has unlocked further benefi ts including better buying leverage
and migration. Some of the buying margin gains were eroded by
higher markdown costs due to more stock into sale and higher
promotional costs, resulting from sales underperformance.
Food gross margin was level on the year at 32.8%. Investment
in price and an increase in waste costs put pressure on margin.
However, these were mitigated through benefi ts realised from
volume growth and ongoing operational e ciencies from
streamlining our supply chain processes.
OPERATING COSTS
52 weeks ended
26 Mar 16
£m
28 Mar 15
£m % var
Retail sta ng 974.0 954.5 +2.0
Other retail costs 1,088.5 1,116.4 -2.5
Distribution 419.0 408.7 +2.5
Marketing and related 169.4 167.6 +1.1
Central costs 615.2 560.2 +9.8
Total 3,266.1 3,207.4 +1.8
FIND OUT MORE
SUMMARY OF RESULTS
53 weeks ended 52 weeks ended
2 Apr 16
£m % var 26 Mar 16
£m
28 Mar 15
£m % var
Group revenue110,555.4 +2.4 10,391.0 10,311.4 +0.8
UK 9,470.8 +2.7 9,324.8 9,223.1 +1.1
International11,084.6 -0.3 1,066.2 1,088.3 -2.0
Underlying operating profi t784.9+2.9 777.6 762.5 +2.0
UK 726.7 +8.4 721.8 670.2 +7.7
International 58.2 -36.9 55.8 92.3 -39.6
Underlying profi t before tax 689.6 +4.3 684.1 661.2 +3.5
Non-underlying items (200.8) n/a (200.8) (61.2) n/a
Profi t before tax 488.8 -18.5 483.3 600.0 -19.5
Underlying basic earnings per share 35.0p +5.7 34.8p 33.1p +5.1
Basic earnings per share 24.9p -16.2 24.6p 29.7p -17.2
Dividend per share (declared)218.7p +3.9 18.7p 18.0p +3.9
1. On reported currency basis.
2. Excluding special dividend.
See our KPIs on p18-21 See our Strategic Update on p06-08
Read about our operating performance on p15-17 See how performance links to Remuneration on p58