Marks and Spencer 2012 Annual Report Download - page 36

Marks and Spencer Group plc Annual report and financial statements 2012 34Financial review
Financial review
“ We will manage
our business
prudently;
navigating the
short-term
challenges to
ensure long
term sustainable
growth.”
Alan Stewart
Chief Finance Officer
Despite a challenging trading environment, M&S has performed well in
2011/12. Sales were 2.0% ahead of last year and underlying profit before
tax was £705.9m (last year £714.3m). Underlying earnings per share were
up to 34.9p.
and have taken the decision to reduce
our capital investments in UK space by
£200m. We will continue to develop our
space especially through our successful
Simply Food format.
This time last year, I was clear that
running an efficient business is not
simply about cost cutting; it’s about
continual improvement, encouraging
the business to find new and better
ways of working. This approach is
supported by our ongoing programme
to restructure our supply chain,
implement new information systems
and improve our operational execution.
As we accelerate this activity we
continue to see bigger and better
benefits.
Funding
We advised last year that the additional
investment required for the execution of
our plans would be funded by our
existing cash flows, supporting our
commitment to maintaining an
investment grade credit rating and a
progressive dividend policy.
Our position is underpinned by a strong
balance sheet and net debt decreased
this year to £1.86bn. Our working
capital was well managed with a
£161.9m inflow.
During the year we renewed our
revolving credit facility, which was due
to expire in March 2013, at a £1.3bn
level, on a new five-year term with an
option to extend for a further two years.
We also took advantage of market
conditions to issue a new £300m bond
in December, having repaid another that
was due for maturity.
Whilst we continued to drive the delivery
of our long term plans, we took decisive
action to manage the business through
the short term. We have been
responsive to the increasingly
promotional marketplace and invested
in giving our customers even better
value. Alongside this, we focused on
managing our costs tightly to mitigate
the impact on our profitability. This
prudent cost management supports
our investment in our future plans –
helping us build a stronger platform
from which to grow.
In November 2010 we shared our
plans to become an international,
multi-channel retailer and set out a
target to grow our revenues by £1.5bn
to £2.5bn over the next three years.
As a result of the deterioration in the
economic environment since we set out
our plan, we now expect to achieve a
£1.1bn to £1.7bn increase in revenues.
The execution of our plan moved apace
this year and we are making good
progress; enhancing our UK position
and strengthening our international and
multi-channel capabilities. We are
managing the roll-out of our new store
format appropriately and are pleased to
have identified £100m of savings,
reducing the total cost from £600m to
£500m over the three years of the plan.
This will be delivered with no reduction
to the scope and we remain on target to
complete the activity by mid 2013.
As with operating costs, we manage all
our expenditure carefully, ensuring we
are being as efficient as possible and
spending every penny wisely. In light of
increased growth in e-commerce we
have reviewed our space requirements
Looking ahead
We remain cautious
about the outlook and
believe there is another
challenging year ahead.
Against this backdrop, we
will continue to operate
an efficient business;
managing our costs
tightly and building a
platform for long-term
sustainable growth.
Plan A: Innovation Fund
This fund provides additional
support to innovate
sustainability projects that
help improve how we do
business. This year, the fund
provided £9m to support
large-scale projects and a
further £1m for smaller
initiatives such as low carbon
food products and hydrogen
fuel cell powered fork lift
truck trials.