Marks and Spencer 2012 Annual Report Download - page 38

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Marks and Spencer Group plc Annual report and financial statements 2012 36Financial review
Financial review continued
Underlying international operating profit was down 9.3% at
£133.4m (last year £147.0m). Franchise operating profits were
up 19.9% to £110.7m due to continuing strong sales
performance. Owned store operating profits were £22.7m,
down 58.5%, with trading in our European businesses
impacted by macro-economic pressures.
Non-underlying profit items
52 weeks ended
31 March
2012
£m
2 April
2011
£m
Profit on property disposals –2.9
One-off pension credit –10.7
Impairment of assets (44.9) (6.3)
Fair value movement on financial instrument 15.6 54.3
Fair value movement of embedded
derivative (0.2) 20.3
Strategic programme costs (18.4) (15.6)
Total non-underlying profit items (47.9) 66.3
The impairment of assets includes the full write-off of the
Greece Group goodwill (£34.4m), and the impairment of some
store assets in the Greece Group (£10.5m). Last year the
amount represented the impairment of an investment property.
The liability for the put option over the non-controlling interest
in the Czech Group is carried at fair value and has been
revalued in line with the latest business plan. The resulting
non-cash credit of £15.6m has been recognised within
finance costs.
The fair value movement on the embedded derivative is
driven by a reduction in the expected RPI rate.
As a result of the strategic programmes we incurred £18.4m
of costs in the year which are not part of the normal operating
costs of the business. These include non-cash costs of
accelerated depreciation and equipment write-offs as well as
costs associated with the relocation of the per una business
to London. The cumulative strategic programme costs
incurred since the strategy was announced are now £34m.
Net finance costs
52 weeks ended
31 March
2012
£m
2 April
2011
£m
Interest payable (135.6) (140.6)
Interest income 7.1 4.7
Net interest payable (128.5) (135.9)
Pension finance income (net) 25.6 37.6
Fees payable –(8.5)
Unwinding of discounts on financial
instruments (1.2) (3.8)
Underlying net finance costs (104.1) (110.6)
Fair value movement on financial
instruments 15.6 54.3
Net finance costs (88.5) (56.3)
Net interest payable was down 5.4% at £128.5m reflecting a
reduction in average net debt over the year. The Group’s
average cost of funding was 6.5% (last year 6.4%). Underlying
net finance costs were down £6.5m to £104.1m reflecting the
lower interest payable and fees paid in the prior year, partially
offset by a lower pension finance income of £25.6m (last year
£37.6m). The non-cash fair value gain on financial instruments
of £15.6m represents a change in the valuation of the put
option over the non-controlling interest in our Czech
business.
Taxation
The full year effective tax rate on underlying profit before tax
was 24.5% (last year 25.1%), reflecting the benefit of
announced changes to the corporation tax rate. Full year
effective tax rate was 25.6% (last year 23.3%).
Underlying earnings per share
Underlying earnings per share increased by 0.3% to 34.9p
per share. The weighted average number of shares in issue
during the period was 1,579.3m (last year 1,577.1m).
Dividend
The Board is recommending a final dividend of 10.8p per
share. This will result in a total dividend of 17.0p, in line with
last year. This reflects the Board’s commitment to a progressive
dividend policy broadly twice covered by earnings.
Capital expenditure
52 weeks ended
31 March
2012
£m
2 April
2011
£m
Focus on the UK 71.6 –
Multi-channel 42.8 –
New stores 170.4 151.2
Store modernisation programme 73.6 38.1
International 61.9 29.6
Supply chain and technology 212.7 191.4
Maintenance 104.5 81.2
Total capital expenditure 737.5 491.5
Year ended
31 March
2012
£m
2 April
2011
£m
Store modernisation programme 73.6 38.1
New stores 170.4 151.2
International 5.2 29.6
Supply chain and technology 212.7 191.4
Maintenance 104.5 81.2
Run capital 566.4 491.5
Strategic capital 171.1 0.0
Total capital expenditure 737.5 491.5
As previously announced we commenced our investment in
UK stores in order to create a more inspiring environment and
trial a new approach to segmentation and in-store navigation.
We have also commenced our investment in improved multi-
channel capabilities with the launch of our French website in
October 2011 and Irish site in April 2012 and continue progress
on the plan to build our own multi-channel platform.