Marks and Spencer 2016 Annual Report Download - page 27

25
ANNUAL REPORT AND FINANCIAL STATEMENTS 2016
GOVERNANCEFINANCIAL STATEMENTS OUR BUSINESSOUR PERFORMANCE
In 2016 our total cash tax contribution to the UK Exchequer was
£857m (2015: £767m); split between taxes ultimately borne by
the company of £419m (2015: £388m) (i.e. corporation tax, customs
duties, employer’s NIC, business rates and sundry taxes) and taxes
attributable to the Company’s economic activity collected on
behalf of the government of £438m (2015: £379m) (i.e. PAYE,
employees’ NIC, value added tax, excise duties and sundry taxes).
UNDERLYING EARNINGS PER SHARE
Underlying basic earnings per share increased by 5.1% to 34.8p
per share (increased 5.7% to 35.0p on a 53 week basis). The weighted
average number of shares in issue during the period was 1,635.9m
(last year 1,635.6m).
CAPITAL EXPENDITURE
53 weeks
ended
2 Apr 16
£m
52 weeks
ended
28 Mar 15
£m
UK store environment 36.9 92.7
New UK stores 106.4 63.5
International 26.4 37.5
Supply chain 89.1 117. 6
IT 161.1 156.2
Maintenance 79.6 94.5
Proceeds from property disposals (30.6) (35.4)
Total capital expenditure
excluding acquisition 468.9 526.6
Bradford warehouse 56.2 –
Total capital expenditure 525.1 526.6
Total capital expenditure was level versus last year, however this
includes £56.2m relating to the acquisition of the remaining 50%
of the JV which owned the freehold of our Bradford warehouse.
Excluding this, capital expenditure was down, refl ecting a trend
towards a lower level of capex going forward.
Spend on the UK store environment has reduced due to the
completion of many of our in-store initiatives to create a more
inspiring environment for our customers. Key projects this year
include the new Lingerie and Kidswear schemes and investment
in Food, including our hospitality o er.
As at the year end, we traded from 17.0m square feet of selling
space, an increase of c.1.6% (on a weighted average basis) as we
opened 82 new stores and closed 20 stores. Within this, Food space
grew by 3.9%, with 25 new owned Simply Food stores, 50 franchise
and seven full line stores. Of the 20 closures, four were relocations
to better sites as we improved the quality of the store estate for our
customers. Clothing & Home space increased by 0.4% as the full line
store openings more than o set the closures. International space
increased by c. 1.4%, a reduction on previous years.
We continued to invest in supply chain and technology. In April
2016, we completed another milestone in the development of the
strategic warehouse network with the opening of our repurposed
Bradford warehouse as an automated store NDC for our Clothing
& Home business. Completion of the strategic network remains on
track and is expected to be fully implemented by the end of 2017/18.
In IT, we continued to make progress on our GM4 Clothing &
Home buying and merchandising systems with three of the four
systems now operational within the business. As highlighted above,
following a review of the Clothing & Home business, we will not
implement the fi nal component, Assortment Planning. The
proceeds from property disposals mainly relate to the deferred
consideration from the sale of the White City warehouse which
is being received over three years until 2016/17.
The Group purchased the remaining 50% share of the Lima
(Bradford) S.à r.l. joint venture for cash consideration of £56.2m.
The company owned the automated distribution centre in Bradford
which was previously leased to the Group. As a result, the Bradford
automated distribution centre is now completely owned and
controlled by the Group.
CASH FLOW AND NET DEBT
53 weeks
ended
2 Apr 16
£m
52 weeks
ended
28 Mar 15
£m
Underlying Profi t Before Tax 689.6 661.2
Finance costs 116 . 4 116 . 8
Finance income (21.1) (15.5)
Depreciation and amortisation 576.8 550.1
Underlying EBITDA 1,361.7 1,312.6
Non cash pension and share charges 118. 0 84.3
Non underlying items (63.2) (25.1)
Working capital 13.2 120.3
Pension funding (118.4) (143.0)
Capex and disposals (519.5) (664.4)
Acquisition of subsidiary (56.2) –
Interest and taxation (206.0) (177.1)
Share transactions 9.7 16.6
Free cash fl ow pre shareholder returns 539.3 524.2
Dividends paid (301.7) (280.7)
Share buyback (150.7) –
Free cash fl ow 86.9 243.5
Opening net debt (2,223.2) (2,463.6)
Exchange and other non-cash
movements (2.0) (3.1)
Closing net debt (2,138.3) (2,223.2)
The business delivered strong free cash fl ow pre shareholder
returns of £539.3m. After the completion of the share buyback
programme and payment of dividends to shareholders, the overall
net debt was down by £84.9m. The improved free cash fl ow refl ects
stronger business performance, with underlying EBITDA of
£1,361.7m, an increase of £49.1m (3.7%) on last year. Working capital
was broadly fl at in the year. These movements are partially o set
by pension funding of £118.4m and capital expenditure cash
payments of £519.5m which include the payment of prior year
capital accruals.
The Strategic Report, including pages 26 to 29, was approved by
a duly authorised Committee of the Board of the Directors on
24 May 2016, and signed on its behalf by
Helen Weir Chief Finance O cer
24 May 2016