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Marks and Spencer Group plc Annual report and financial statements 2010 Directors’ report 42
Financial review*
Summary of results
2009/10
£m
(53 wks)
2009/10
£m
(52 wks)
2008/09
£m
(52 wks)
change
%
(52 wks)
Group revenue 9,536.6 9,347.6 9,0 62.1 +3.2
Operating profit before
property disposals 843.9 779.3 768.9 +1.4
Profit before tax and
property disposals 694.6 632.5 604.4 +4.6
Profit before tax 702.7 640.6 706.2 –9.3
Adjusted EPS 33.0p 30.0p 28.0p +7.1
Dividend per share
(declared) 15.0p 15.0p 17. 8 p –15.7
2009/10 was a 53 week reporting period. In order to make a
comparison to last year, all reported income statement numbers in
the Financial Review are stated on a 52 week basis unless specified
otherwise. The 52 week results exclude UK revenue of £169.7m
(£76.6m General Merchandise and £93.1m Food) and UK variable
operating costs of £13.4m, that relate only to the 53rd week, as well
as International operating profits of £7.4m and a net interest charge
of £2.5m. The 52 week UK operating costs stated include annual
costs on the same basis as reported in any 52 week reporting period.
Revenues
Total revenues were up 3.2% driven by an improvement in like-for-
like sales as well as the addition of new space in the UK and a
strong performance in our International business.
UK revenues were up 2.9% in total with a like-for-like increase of
0.9%, reflecting both the actions we have taken over the last year to
manage the business through the downturn and an improvement in
market conditions and consumer spending. During the year, we
added c. 3.2% of space, representing 1.9% in Food and 3.9% in
General Merchandise.
International revenues were up 5.7%, with a 2.7% positive
impact from the movement in the exchange rates. Whilst some of
our overseas businesses were impacted by the continued global
economic downturn, particularly in the Republic of Ireland and
Greece, many delivered good growth in the year, with areas such
as India, Hong Kong and the Czech Republic particularly strong.
Our franchise business also continued to perform well despite the
slowdown in the Middle East, with countries including Turkey and
Russia growing strongly.
Operating profit
Operating profit before property disposals and exceptional items
was £779.3m, up 1.4%.
In the UK, operating profit before property disposals was down
1.3% at £644.0m. Gross margin was down 5 basis points at 41.2%.
General merchandise gross margin was up 70 basis points at 52.5%,
with better sourcing and tight control over stock and markdowns,
mitigating the adverse currency pressures. Food gross margin was
down 95 basis points at 30.6% reflecting further investment in price
and increased promotional activity, offset by better buying and a
reduction in food waste.
UK operating costs before bonus were up 1.0% to £2,769.3m.
A breakdown of UK operating costs is shown below:
52 weeks ended
27 March
2010
£m
28 March
2009
£m
% increase/
decrease
Retail staffing 858.4 863.3 –0.6
Retail occupancy 972.7 948.0 +2.6
Distribution 394.4 410.3 –3.9
Marketing and related 122.9 127. 4 –3.5
Support 420.9 391.6 +7. 5
Total before bonus 2,769.3 2,740.6 +1.0
Bonus 80.9 2.8 –
Total including bonus 2,850.2 2,743.4 +3.9
Retail staffing costs were tightly managed, with improved
productivity offsetting the impact of space growth and the annual
pay review. The increase in occupancy costs reflects an increase
in both the depreciation charge and space growth. Despite the
increase in volumes and space, and strong growth in Direct,
distribution costs were down 3.9% as a result of ongoing initiatives
under Project 2020 to make our warehousing and distribution
network more cost efficient. We generated underlying savings of
£35m in this area in 2009/10. Marketing spend was down due to a
reduced number of external marketing campaigns. Support costs,
which include non-store related overheads, increased due to
depreciation related to the ongoing overhaul of our IT systems.
The bonus payment of £80.9m (last year £2.8m) reflects the
outperformance of the business against our operating plan.
The UK operating profit includes a contribution of £30.4m
(last year £24.8m) from the Group’s continuing economic interest
in M&S Money.
International operating profit before property disposals was
up 16.5% at £135.3m (last year £116.1m). Owned store operating
profits were £57.7m, up 26.0%, reflecting profits in Ireland and
Hong Kong, offset by small losses in China, India and Greece.
Franchise operating profits were up 10.4% to £77.6m due to
continuing strong sales performance.
Profit on property disposals
Profit on property disposals was £8.1m (last year £6.4m). This mainly
relates to the sale of retail space adjacent to our store in Grafton
Street, Dublin.