Marks and Spencer 2010 Annual Report Download - page 47

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Operating & financial review
Governance p50
Financial statements p78
43To find out more, visit marksandspencer.com/annualreport2010
Brand & marketplace p20
Performance & KPIs p14
Overview p01
Group capital expenditure for the year was £389m. We continued to
invest in our supply chain and technology in line with our strategy to
build an infrastructure fit to support the future growth of the business.
We added 3.2% of trading space in the UK, trading from
15.4m sq ft at the end of March 2010. We opened 24 stores during
the year, including 16 Simply Foods, mainly franchises.
Cash flow and net debt
Year ended
3 April
2010
£m
28 March
2009
£m
Cash flow from operations 1,349.7 1,371.9
Capex and disposals (408.6) (604.1)
Interest and taxation (281.4) (265.7)
Dividends and share issues (223.6) (349.3)
Share buyback –(40.9)
Other movements (24.4) (4.4)
Net cash flow 411.7 107.5
Opening net debt (2,490.8) ( 3 , 07 7.7 )
Partnership liability to the UK Pension Scheme –539.6
Exchange and other non-cash movements 10.7 (60.2)
Closing net debt (2,068.4) (2,490.8)
The Group reported a net cash inflow of £411.7m (last year – inflow
£107.5m). Cash inflow from operations decreased by £22.2m,
reflecting growth in profits offset by a working capital inflow of
£77.9m compared with a £194.0m inflow last year. Inventory levels
were higher due to a further increase in direct buying, as well as an
improved sales performance. Capital expenditure, net of disposals,
was £408.6m (last year – £604.1m) reflecting further investment in
our supply chain and IT as well as new space growth. Net debt was
£2,068.4m, down £422.4m on last year.
Pensions
At 3 April 2010 the IAS 19 net retirement benefit deficit was
£366.5m (28 March 2009 £152.2m). The increase is due to a
decrease in the discount rate from 6.75% to 5.5%, as well as the
increase in the inflation rate from 2.9% to 3.6%, which have
increased the pension liability by c. £1.2bn. This increase has been
offset in part by a c. £1.0bn increase in the market value of the UK
scheme’s assets.
On 12 May 2010 the Group announced the outcome of its
triennial actuarial valuation which showed a deficit of £1.3bn at
31 March 2009. The details of the funding plan are explained in
the performance overview on page 9.
Net finance costs
52 weeks ended
27 March
2010
£m
28 March
2009
£m
Interest payable (133.7) (166.0)
Interest income 2.1 14.6
Net interest payable (131.6) (151.4)
Unwinding of discount on partnership liability
to the Marks and Spencer UK Pension Scheme (4.0) (38.0)
One-off premium on repurchase of debt (13.5) –
Pension finance income (net) 10.8 35.4
Fair value movement on financial instruments (8.5) (10.5)
Net finance costs (146.8) (164.5)
Net interest payable was down 13.1% at £131.6m reflecting a
decrease in the average net debt over the year, offset by a £13.5m
one-off premium on repurchase of debt. Net finance costs were
down £17.7m after pension finance income of £10.8m (last year
£35.4m), and the unwinding of the discount on the partnership
liability to the pension scheme. The Group’s average cost of funding
was down to 5.9% (last year 6.5%).
Taxation
The taxation charge is based on a full year pre-exceptional effective
tax rate of 25.6% (last year 27.0%).
Earnings per share
Adjusted earnings per share from continuing operations, which
excludes the effect of property disposals, increased by 17.9% to
33.0p per share. The weighted average number of shares in issue
during the period was 1,572.2m (last year 1,573.2m).
Dividend
In May 2009 the Board took the decision to rebase the Group’s
dividend payment for 2009/10 to 15p per share. In line with this
decision a final dividend of 9.5p per share (last year 9.5p) has been
approved. Having rebuilt cover to two times, the Board’s policy is to
grow dividends in line with adjusted earnings per share.
Capital expenditure
Year ended
3 April
2010
£m
28 March
2009
£m
Store modernisation programme 75 216
New stores 50 150
International 29 40
Supply chain and technology 194 188
Maintenance 41 58
Total capital expenditure 389 652