Marks and Spencer 2001 Annual Report Download - page 5

The credit activities are carried out within Marks and Spencer
Financial Services Limited, an institution authorised under the
Banking Act 1987. The Unit Trust, Life Assurance and Corporate
PEP/ISA businesses are carried out by companies regulated by
IMRO, PIA and the FSA.
Exceptional charges
Total exceptional charges of £335.4m have been provided for.
Details are noted below.
(a) Continental Europe
The Group has announced its intention to close loss-making
businesses in Continental Europe, subject to the full consultation
which the Board recognised would need to take place. The
decision to carry out any such plan would only be taken after
this consultation had been completed with the competent
employee representative bodies and if no other solution has
been found during the consultation.
Net closure costs of £224.0m have been provided,
covering future trading losses, losses on disposal of assets
and redundancy costs.
(b) Direct
A provision of £35.5m has been made, consisting of £16.5m
closure costs charged against operating profit and a £19.0m
loss on asset disposals.
(c) Properties
The closure of six satellite stores and footage reduction in a
further two stores (totalling 170k sq ft) gave rise to a charge
of £40.2m.
In addition, further charges have been made to provide for
the disposal of approximately half of the Manchester store,
and the closure of stores in Salford, West Ealing and Torquay.
The total provision for UK store closures and footage
reductions, including the satellites, is £64.2m.
(d) Other
Exceptional charges have been made for the elimination of roles
at the Group’s head office (£10.0m) and the loss incurred on the
sale of the Group’s 65% interest in Splendour.com Ltd (£1.7m).
Interest
Net interest income decreased to £13.9m from £14.2m last year.
Average sterling borrowings were at 6.5% (last year 6%) and
although average sterling cash balances (including interest-
bearing investments) were £544m (last year £422m), a greater
proportion was used for internal Group funding.
Interest payments on intra-group and external borrowings for
the Financial Services business are charged to that business as
cost of sales. The operating profit for Financial Services is shown
in the segmental analysis (see note 2, page 24). The total interest
cost incurred by Financial Services was £115.3m (last year
£105.5m). In the consolidated accounts, the excess of intra-
group interest over third-party interest payable, has been added
back in the segmental analysis to arrive at total operating profit.
Taxation
The pre-exceptional tax charge for the year was £151.2m, giving
an effective rate of 31.4% (last year 31.8%).
After exceptional charges, the tax charge for the year was
£142.7m, a rate of 98.1%. This is due to the value of exceptional
items which will not attract tax relief.
Earnings per share
An adjusted earnings per share figure of 11.4p (last year
52 weeks 12.2p; 53 weeks 13.2p) has been calculated
excluding the effect of the exceptional items noted above.
Details of the calculation are given in note 9, page 27.
Dividend
A final dividend of 5.3p (last year 5.3p) is proposed, making
the total dividend for the year 9.0p (last year 9.0p).
Cash flow
The analysis of the increase in net debt, which follows, shows
the operating cash flows within Retailing and Financial Services
activities. The cash inflow from Financial Services operating
activities is stated after a £117.8m increase in loans and
advances to customers.
Total net debt of £1,277.8m, is after higher borrowings
(£1,647.2m) relating to Financial Services. Net cash in the
other operating divisions totals £369.4m. (See balance sheet
commentary that follows):
Cash flow analysis £m
Net debt at 31 March 2000 (1,251.4)
Cash inflow from Retail operating activities 654.2
Cash inflow from Financial Services
operating activities 22.2
Capital expenditure (net of disposals) (258.2)
Dividends (258.6)
Tax (164.6)
Other (21.4)
Increase in net debt (26.4)
Net debt at 31 March 2001 (1,277.8)
Capital expenditure
Capital expenditure (gross) during the year totalled £255.7m
(last year £450.6m). Capital expenditure is expected to be
broadly level in the financial year 2001/2002.
Financing
The £2.0bn Medium Term Note (‘MTN’) programme continues
to be used as a flexible and cost effective source of funds.
Nine MTNs were issued during the year in various currencies
with a sterling equivalent of £391.6m. Maturities ranged from
six months to 12 months and proceeds were swapped into
operating currencies. The Group’s total outstandings within
this programme at the end of the financial year were equivalent
to £1,085.1m.
During the year the Group established a global commercial
paper programme with a maximum amount of £1bn which
absorbed the existing US dollar commercial paper programme.
This provides a flexible and cost effective source of short-term
funds, to complement the MTN programme. The commercial
paper programme will be used in conjunction with existing
uncommitted bank facilities of £590.0m.
To support the commercial paper programme, committed
banking facilities have also been arranged totalling £425.0m
with a small group of relationship banks.
Details of the maturity profile of borrowings are given in
note 21B, page 36.
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