Marks and Spencer 2013 Annual Report Download - page 39

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Financial review Marks and Spencer Group plc Annual report and financial statements 2013 37
Overview Strategic review Financial review Governance Financial statements and other information
We continued to invest in our UK stores in order to create a
more inspiring environment. The new concept had been rolled
out to 337 stores at the year end. Our programme set out in
November 2010 will complete during the current financial year.
Our commitment to improving multi-channel capabilities
remains a priority with the development of our new multi-
channel platform and the launch of five new in-country
websites, and a dotcom presence in China. We now trade
online locally in 10 countries.
We added 2.8% of selling space in the UK (on a weighted
average basis), trading from 16.4m square feet at the end of
March 2013. We opened a net 35 new stores during the year,
including our flagship store in Cheshire Oaks. In our
International business, space increased by c.16%,
predominantly in our key strategic territories of India, China, the
Middle East and Russia.
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.
Cash flow and net debt
52 weeks ended
30 March
2013
£m
31 March
2012
£m
Underlying EBITDA 1,244.8 1,280.1
Working capital 72.3 161.9
Pension funding (70.9) (89.9)
Capex net of disposals (829.7) (720.7)
Interest and taxation (235.3) (277.3)
Dividends and share issues/purchases (248.4) (236.7)
Net cash (outflow)/inflow (67.2) 117.4
Opening net debt (1,857.1) (1,900.9)
Exchange and other movements (84.0) (1.7)
Property partnership liability (606.0) (71.9)
Closing net debt (2,614.3) (1,857.1)
Property partnership liability pro-forma
adjustment1
–(603.1)
Closing adjusted net debt1(2,614.3) (2,460.2)
1 The property partnership liability pro-forma adjustment to net debt in the prior year
reflects the calculated fair value of the property partnership liability using a consistent
interest rate in the discounted cash flow model with that as at 21 May 2012 when the
terms of the property partnership were changed.
The Group reported a net cash outflow of £67.2m (last year
inflow £117.4m). This outflow reflects a 3% decline in underlying
EBITDA, a lower working capital inflow and higher capital
expenditure.
Net debt was £2,614.3m, an increase of £757.2m on last year
as a result of the change in terms of the property partnership
with the pension fund. Adjusting for this, net debt was £154.1m
higher than last year.
The May 2012 bond matured in the period, and was refinanced
from existing facilities and operating cash. Our funding strategy
continues to ensure a mix of funding sources and tenor of
maturity to provide cost effectiveness and flexibility to match
the requirements of the business.
Pensions
At 30 March 2013 the IAS 19 net retirement benefit surplus was
£193.0m (last year £78.0m). The market value of scheme
assets increased by £743.6m, due to improved asset
performance and company contributions. The present value of
the scheme liabilities has increased by £628.8m due to a
reduction in the discount rate. Our hedging strategy adopted
since 2010 continued to reduce significant fluctuations
between scheme liabilities and assets.
A full actuarial valuation of the UK Defined Benefit Pension
Scheme was carried out at 31 March 2012 and showed a
deficit of £290m. A funding plan of £112m was agreed with the
Trustees. The difference between the valuation and the funding
plan is expected to be met by investment returns on the
existing assets of the pension scheme.