Marks and Spencer 1999 Annual Report Download - page 3

ANNUAL REPORT AND FIN ANCIAL STATEMENTS 1999
FIN AN CIAL REVIEW
The business has been restructured around three major profit centres:
UKRetail
O verseas Retail
Financial Services
For the purposes of internal assessment and performance
measurement, a separate property division is being established to
allow the rent or own decisions to be evaluated separately from
the retailing result.
For this purpose, internal charges will be made on the profit
centres to reflect market rental values.W here held, investment
properties will continue to be evaluated by reference to their open
market value.
The contribution which the profit centres make to the Group
return will be based on the Value Created over the Group’s weighted
average cost of capital (W ACC). For the purposes of assessing
performance in 2000/2001, the Group’s W ACC will be taken as • %.
GROUP SUMMARY
2000 1999
As restated
Summary of results £m £m
Turnover (ex VAT) 8,224.0
O perating profit (before exceptional items) 600.5
Exceptional operating (charges)/income (88.5)
O perating profit (after exceptional items) 512.0
Profit on ordinary activities before tax 546.1
Basic earnings per share 13.0p
Adjusted earnings per share (see below) 15.8p
D ividend per share 14.4p
2000 1999
Group turnover £m £m
UK Retail 6,601.1
O verseas Retail 1,274.3
Financial Services 348.6
Total 8,224.0
O perating profit (before exceptional items) has fallen to £• m. It
can be analysed as follows:
2000 1999
Operating profit As restated
(before exceptional items) £m £m
UK Retail 478.9
O verseas Retail (14.6)
Financial Services 110.7
Excess interest (see below) 25.5
Total 600.5
Profit on ordinary activities before tax is shown after charging £• m for
exceptional items (last year, income of £88.5m) and a net additional
cost of £• m (last year, £21.1m) following the early adoption of FRS15,
‘Tangible Fixed Assets’. Adjusting for this additional charge gives a profit
before tax and exceptional items of £• m (last year £655.7m) which
compares to the forecast range of £• m-£• m set out in the Trading
Statement published in January.
REVIEW OF PERFORMANCE BY BUSINESS SEGMENT
– UK RETAIL
Sales
An analysis of the • % fall in UK retail sales (including VAT) for the year
is given below, divided between the three product groups and the
four reporting periods for the year:
15 weeks 11 weeks
First Second to to
quarter quarter • Jan • March Total
Inc % Inc % Inc % Inc % Inc %
Clothing, footwear
& gifts
Home furnishings
Foods
Total
Like for like sales
Expressed on a like-for-like basis, total sales are • % below last year,
representing a • % decrease in clothing and home furnishings and
a • % decrease in foods. (Like-for-like sales have been calculated by
comparing total sales with new and developed stores excluded, and
sales deflected from existing stores added back.)
Cost of sales
A significant shortfall from expected sales, and the subsequent margin
impact to clear the goods, led to a contribution £• m below
last year.
Operating expenses
(i) Investment programme
The net adverse impact on profits of the investment
programme announced in 1997/98 has been estimated as
£• m (last year £90m).This comprises:
• £• m (net of additional revenues generated) relating to
the redevelopment of the Littlewoods stores acquired in
February 1998 and the accompanying modernisation of the
existing Marks & Spencer stores in the same locations.
• £• m loss of interest income.
• £• m on the development of the clothing mail order
business net of revenues generated.
• £• m on the installation of Point-of-Sale equipment in UK
and European stores.
The new Point-of-Sale tills are Year 2000 compliant and have
the facility to allow transactions in multiple currencies, including
the euro.
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MARKS AN D SPEN CER p.l.c.