Marks and Spencer 2008 Annual Report Download - page 83

21 Borrowings and other financial liabilities continued
Partnership liability to the Marks & Spencer UK Pension Scheme
The partnership liability to the Marks & Spencer UK Pension Scheme of £723.2m (last year £496.9m) relates to the amortising liability
in respect of the obligations of the Marks and Spencer Scottish Limited Partnership to the Marks & Spencer UK Pension Scheme.
Last year the Group agreed a plan with the Pension Scheme Trustee to address the majority of the deficit by transferring properties with
a current market value of £1.1bn into a partnership established by the Group. A limited interest in this partnership was contributed
to the pension scheme on 13 March 2007. The Group retains control over these properties, including the flexibility to substitute
alternative properties. The properties held in the partnership have been leased back to Marks and Spencer plc. The pension scheme
is entitled to a distribution from the profits of the partnership of £50m per annum for 15 years from July 2008. The Group has the
right to buy out the Trustee’s partnership interest at any point for an amount equal to the net present value of the remaining annual
distributions due to the pension scheme.
This year the Group has agreed to pre-fund £200.0m of its annual contribution to the Marks & Spencer UK Pension Scheme for
the next three years by increasing the value of the Scheme’s interest in the property partnership. To meet this £200.0m contribution
of value, the Group has placed additional properties into the partnership with a current market value of approximately £400.0m.
These properties have been leased back to Marks and Spencer plc and the fixed annual distribution made out of partnership
profits to the pension scheme will be increased by approximately £21.9m for the remaining 14 year period.
Each year the total obligation will reduce as payments are made to the pension scheme by the partnership and an interest charge
will be taken to the income statement representing the unwinding of the discounted obligation at an implied average interest rate
of 5.7% (last year 5.3%). The fair value of this liability was £706.6m (last year £495.3m).
Maturity of borrowings and other financial liabilities
The contractual maturity of the Group’s non-derivative financial liabilities and derivatives is as follows:
Partnership
Bank loans, liability to
overdrafts and Finance the M&S UK
commercial Syndicated Medium term lease Pension Derivative Derivative
paper bank facility notes liabilities Scheme Total assets liabilities Total
£m £m £m £m £m £m £m £m £m
Timing of cash flows
Within one year (159.7) (296.9) (69.9) (7.1) – (533.6) 558.5 (564.6) (6.1)
Between one and two years – – (69.9) (8.2) (50.0) (128.1) 18.5 (18.6) (0.1)
Between two and five years – – (584.7) (11.3) (200.0) (796.0) – – –
More than five years – – (868.5) (196.0) (500.0) (1,564.5) – – –
(159.7) (296.9) (1,593.0) (222.6) (750.0) (3,022.2) 577.0 (583.2) (6.2)
Effect of discounting – – 415.7 161.0 253.1 829.8
At 31 March 2007 (159.7) (296.9) (1,177.3) (61.6) (496.9) (2,192.4)
Timing of cash flows
Within one year (257.4) (615.0) (112.6) (11.6) (50.0) (1,046.6) 643.4 (663.7) (20.3)
Between one and two years – – (112.6) (19.2) (71.9) (203.7) 90.7 (90.9) (0.2)
Between two and five years – – (1,088.9) (26.2) (215.7) (1,330.8) 84.8 (83.0) 1.8
More than five years – – (1,866.5) (214.9) (719.0) (2,800.4) 747.3 (736.4) 10.9
(257.4) (615.0) (3,180.6) (271.9) (1,056.6) (5,381.5) 1,566.2 (1,574.0) (7.8)
Effect of discounting – – 1,321.4 188.4 333.4 1,843.2
At 29 March 2008 (257.4) (615.0) (1,859.2) (83.5) (723.2) (3,538.3)
This table does not include trade and other payables (see note 20).
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