Half Year Results for 26 Weeks Ended 30 September 2023
Marks and Spencer Group PlcHalf Year Results for 26 Weeks Ended 30 September 2023“RESHAPING M&S” STRATEGY DELIVERS STRONG RESULTS Strong first half results· Profit before tax and adjusting items of £360.2m (2022/23: £205.5m)· Statutory profit before tax of £325.6m (2022/23: £208.5m)· Food sales up 14.7%; adjusted operating profit £164.9m (2022/23: £71.8m) and margin of 4.3%· Clothing & Home sales1 up 5.7%; adjusted operating profit £223.4m (2022/23: £171.4m) and margin of 12.1%· Ocado Retail share of adjusted loss £23.4m (2022/23: share of loss £0.7m)· International constant currency sales up 3.9%; adjusted operating profit £43.4m (2022/23: £39.0m)· Stronger balance sheet: free cash flow reducing net debt and interest costs. Restoration of dividend of 1p per share. Strategy to reshape M&S is delivering· Food driving volume and share reflecting value investment, product innovation and quality upgrades· Clothing & Home building improved style and value perceptions and increasing full price sales mix· Ocado Retail reset progress; early stages of investment in value, service and increased M&S range· Structural cost reduction programme on track with savings of over £100m delivered in the first half· Accelerating store rotation; new full line stores and renewals performing ahead of plan· Progress on supply chain modernisation; Gist benefits on track; C&H early savings from network plan· More to do to drive online growth and improve returns on data, digital and technology investment· Reshaping with a clearer vision, purpose and performance-driven culture to drive execution and pace Stuart Machin, Chief Executive said:“Our strategy to reshape M&S for growth has delivered strong results in the first half. We have maintained our relentless focus on trusted value, giving our customers exceptional quality product at the best possible price. In Food, we delivered over 500 quality upgrades and invested over £30m in price, lowering the price of 200 products and locking prices on 150 customer favourites. Our lead on quality perception widened and value perception continued to improve. In Clothing & Home we backed lines with authority across core and seasonal product, maintaining our lead on quality and value perception and improving our style credentials. As a result, we’ve sold more product and served more customers across Food and Clothing & Home, with both businesses outperforming the market.Sales growth was supported by our investment in store rotation, which continued at pace. Three full line stores opened and six were renewed, all attracting new customers and performing ahead of plan. Our cost reduction programme is on track with over £100m savings delivered in the half and investment in supply chain modernisation driving efficiencies, translating volume growth to improved margin and profitability.I am clear that if we serve our customers well, we serve our shareholders well, and our unrelenting focus on trusted value is matched by disciplined capital allocation. We have further strengthened our balance sheet and net debt position, with an interim dividend payment being made to shareholders for the first time in four years.Looking ahead, trading momentum has been maintained through October, with customers responding positively to our Christmas ranges. There will be challenges and headwinds in the year ahead and progress won’t be linear, but we are ambitious for future growth and are driving what is in our control.Everyone at M&S makes change happen and I want to thank my colleagues for their contribution to these results. I also want to thank them in advance for what they are about to do. All of us will be sleeves rolled up, out in stores and distribution centres, bringing the magic of M&S alive for our customers this Christmas. In summary – we’re only just beginning. Lots done, lots to do, lots of opportunity.”
Group Results (26 weeks ended)30 September 231 October 22Change (%/£)Statutory revenue£6,134.0m£5,538.2m10.8%Sales1£6,164.4m£5,563.6m10.8%Operating profit£315.0m£171.5m83.7%Operating profit before adjusting items£410.4m£280.7m46.2%Profit before tax and adjusting items£360.2m£205.5m75.3%Adjusting items£(34.6)m£3.0mn/aProfit before tax£325.6m£208.5m56.2%Profit after tax£206.9m£166.7m24.1%Basic earnings per share10.6p8.5p24.7%Adjusted basic earnings per share12.7p7.8p62.8%Dividend per share1.0p–-Free cash flow from operations £27.7m£(116.8)m£144.5mNet debt£(2.56)bn£(2.93)bn£0.37bnNet debt excluding lease liabilities£(0.32)bn£(0.63)bn£0.31bn |
Non-GAAP measures and alternative profit measures (APMs) are discussed within this release. A glossary and reconciliation to statutory measures is provided at the end. Adjusted results are consistent with how business performance is measured internally and presented to aid comparability. Refer to adjusting items table below for further details. 1References to ‘sales’ throughout this announcement are statutory revenue plus the gross value of consignment sales ex. VAT. STRONG FIRST HALF RESULTSM&S’s first half results showed a good year on year improvement in almost all businesses. Favourable market conditions, surprisingly resilient consumer demand and the effect of competitor exits from the market provided a solid backdrop. In this environment, the strategy to reshape for growth has enabled M&S to increase customer numbers and market share in both businesses, with healthy volume growth and reduced promotions in Food, higher than expected full price sales in Clothing & Home and structural cost reduction supporting robust margins. Profit before tax and adjusting items for the period was £360.2m (2022/23: £205.5m). Adjusting items of £34.6m (2022/23: £3.0m) included a credit due to the remeasurement of contingent consideration for Ocado Retail. Statutory profit before tax was £325.6m (2022/23: £208.5m). · Food sales grew 14.7% with LFL sales up 11.7%, outperforming all mainline grocers on volume as customer numbers increased. Growth was underpinned by further investment in trusted value, category resets in basket building areas such as grocery and homecare, and on-going quality upgrades of products in key customer missions including ‘Dinner for tonight’ and ‘Events’. Adjusted operating margin recovered to 4.3% from 2.2% last year, (2021/22: 4.6%). This was driven by growth in volume and market share, manufacturing efficiencies and the benefits of the Gist acquisition completed last year of over £30m.· Clothing & Home sales grew 5.7% with LFL sales up 5.5%, supported by more confident buying and further improvements in style perceptions, driving sales with notable highlights in areas such as holiday and denim. Customer numbers increased, and sales grew across channels, with stores outperforming online. Adjusted operating margin increased to 12.1% from 9.8% last year (2021/22: 10.2%), supported by a modest increase in full price sales mix to 82%, cost reduction in the logistics network and better currency and freight rates than anticipated. Online sales grew 4.6%, and online adjusted operating profit margin increased to 9.0% from 6.9% as a result of robust full price sales and growth of click and collect, which helped to reduce fulfilment costs.· International sales increased 3.9% at constant currency, with more modest partner demand following restocking last year. Adjusted operating profit increased 11.3% to £43.4m supported by structural cost reduction savings. · Ocado Retail sales increased 6.9%. The recovery strategy at Ocado Retail started to have some impact. Active customers increased, supported by the ‘Big Price Drop’ campaign and an increase in the M&S range available on Ocado.com. The M&S share of Ocado Retail net loss increased to £23.4m from £0.7m driven by the continued effect of costs related to new and excess capacity, plus the one-off accrual release in the prior year result. OUTLOOK AND GUIDANCETrading momentum has been maintained through October and we are planning for a good Christmas, with customers already responding positively to our ranges. However, as we enter 2024, we are not relying on the favourable recent market conditions persisting. The outlook remains uncertain with the probable impact on the consumer of the highest interest rates in 20 years, deflation, geopolitical events, and erratic weather. Notwithstanding this backdrop, we will continue to invest in trusted value for our customers and we are increasing our investment in the reshaping of M&S in the second half. Therefore, against more challenging comparatives, we expect profit before tax and adjusting items to be weighted towards the first half, as we remain laser-focused on our long-term ambition to reshape M&S for future growth.DIVIDENDThe board remains committed to sustaining a strong balance sheet and investing for growth as well as restoring an investment grade credit rating. However, with M&S generating a further improvement in operating performance, balance sheet and credit metrics, we are restoring a modest dividend to shareholders, starting with an interim dividend of 1p per share. This will be paid on 12 January 2024 to shareholders on the register of members as at close of business on 17 November 2023.