Marks and Spencer 2008 Annual Report Download - page 66

64 MARKS AND SPENCER GROUP PLC
Notes to the financial statements
continued
1 Accounting policies continued
E Refunds and loyalty scheme accruals
Accruals for sales returns and loyalty scheme redemption are estimated on the basis of historical returns and redemptions and
these are recorded so as to allocate them to the same period as the original revenue is recorded. These provisions are reviewed
regularly and updated to reflect management’s latest best estimates, however, actual returns and redemptions could vary from
these estimates.
Non-GAAP performance measures
The directors believe that the adjusted profit and earnings per share measures provide additional useful information for shareholders
on the underlying performance of the business. These measures are consistent with how business performance is measured internally.
The adjusted profit before tax measure is not a recognised profit measure under IFRS and may not be directly comparable with adjusted
profit measures used by other companies. The adjustments made to reported profit before tax are to exclude the following:
• exceptional income and charges – These are largely one-off in nature and therefore create significant volatility in reported
earnings; and
• profits and losses on the disposal of properties – These can vary significantly from year to year, again creating volatility in
reported earnings.
2 Segmental information
The Group’s primary reporting segments are geographic, with the Group operating in two geographic areas being the UK and
International. The International segment consists of the Marks & Spencer owned businesses in the Republic of Ireland, Hong Kong,
Taiwan, Greece, a number of other Balkan states, Switzerland, the Czech Republic, Slovakia, Latvia and Lithuania, together with
franchised operations. The geographic segments disclose revenue, operating profit and segment assets and liabilities by destination
and reflect management responsibility. Within each geographic segment the Group sells both food and general merchandise
and secondary segment disclosure is given for revenue. Given that both food and general merchandise are sold from the same
locations it is not practical to provide segmental information on operating assets and capital expenditure at this level.
The geographic segment results are as follows:
Revenue Operating profit Segment assets Segment liabilities
2008 2007 2008 2007 2008 2007 2008 2007
£m £m £m £m £m £m £m £m
UK Retail
Before property disposals and
exceptional items 8,309.1 7,977.5 972.9 956.5
Profit on property disposals ––28.0 0.2
Exceptional pension credit1––95.0 –
8,309.1 7,977.5 1,095.9 956.7 6,514.4 4,988.4 (1,928.0) (1,811.4)
International Retail
Owned stores2426.7 369.5 44.5 45.4
Franchised stores 286.2 241.1 71.9 42.1
Before property disposals 712.9 610.6 116.4 87.5
(Loss)/profit on property disposals ––(1.0) 1.7
712.9 610.6 115.4 89.2 397.1 295.7 (77.7) (61.7)
Total 9,022.0 8,588.1 1,211.3 1,045.9 6,911.5 5,284.1 (2,005.7) (1,873.1)
Total non-operating assets/(liabilities)3249.5 96.9 (3,191.3) (1,859.7)
Total assets/(liabilities) 7,161.0 5,381.0 (5,197.0) (3,732.8)
1 The exceptional pension credit has arisen due to changes in the UK defined benefit plan relating to how members’ benefits build up from 1 October 2007. To the extent that
members have chosen the option to limit their future pensionable salary increases to inflation there is a past service credit to reflect the impact of adjusting their projected final
pensionable salaries.
2 Owned stores consist of the Marks & Spencer owned businesses in the Republic of Ireland, Hong Kong, Taiwan and, since 29 February 2008, Greece, a number of other Balkan
states and Switzerland, and since 20 March 2008, the Czech Republic, Slovakia, Latvia and Lithuania, which were included in franchised stores up to that date (see note 25).
3 Non-operating assets and liabilities include balances in respect of financing and taxation.
Revenue originates in the following geographical segments: United Kingdom £8,595.3m (last year £8,218.6m) and International
£426.7m (last year £369.5m). The value of goods exported from the UK, including shipments to international subsidiaries,
amounted to £499.7m (last year £438.0m).
Included within UK Retail is an operating profit of £28.3m (last year £19.5m) in respect of fees received from HSBC in relation
to M&S Money.