30th Apr 2007 17:05
Lewis(John) PLC30 April 2007 John Lewis plc Preliminary Results for the Year to 27 January 2007 This confirms the unaudited results released to the Stock Exchange on 8 March2007 Statement by the Chairman, Charlie Mayfield Profits stride forward The Partnership has been widely recognised as the retail pace-setter over thelast year, and this has been borne out by an excellent set of financial resultsand a major stride forward in the Partnership's profits. Consistently strong trading throughout 2006/07 saw sales increase by 10.6%,£611.8m, to £6.4bn, and good cost management translated this into a final figurefor profit before Partnership Bonus and tax of £319.3m - an increase of 26.8% onlast year. For the second year running we have been able to match these powerful financialresults with two impressive votes of confidence from shoppers, as the Verdictand Which? customer surveys again rated John Lewis and Waitrose as the UK's twofavourite retailers. We were also voted Retailer of the Year by a Retail Weekpanel of our High Street competitors. It is through the power of Partners working together that we've been able tokeep up this pace and make so many improvements in every part of the business,and all our Partners are to be congratulated on this fine performance. The Board has decided that £155.2m should be distributed as Partnership Bonus ata rate of 18%. This, together with the £85.1m charge for our pension fund andother Partner benefits of around £60m (discount in the shops, dining roomsubsidy, residential clubs and leisure activities), brings the total sum sharedby Partners this year to some £300m. These results show how our Partnership model can provide the profitability tocreate a sustainable and ambitiously expanding business, can win the approvaland loyalty of our customers and can reward the achievement of our Partnersthrough provision for a good pension in retirement and a Bonus worth over 9weeks' pay. John Lewis John Lewis has had a simply stunning year, with retail sales up by £256.1m,10.6%, to £2.7bn and most categories gaining market share. The star performer isagain Electrical and Home Technology, which achieved sales growth of 22.8%, butthere were also excellent performances in the homeware and clothingdirectorates. There were no new branch openings this year and like-for-likesales growth was more than 10.3%. All branches played a part in the year-on-yearimprovement, with particularly strong growth from Solihull, Edinburgh, PeterJones and Southampton. Our sales performance was mainly driven by the substantial investments we havemade over recent years in line with a clear strategic direction, together withsignificant operational improvements in 2006. These included call-centreproductivity gains, better stock availability and supply chain efficiency andimprovements to our delivery proposition. Further margin improvements were secured over the year, and in the branchesoperating costs were well controlled, compensating for a £3.6m increase in thedivision's utility costs. John Lewis Direct achieved a 64.0% increase in sales, and it's now a wellestablished, integral and profitable part of our business. Despite the large number of initiatives and projects underway and the growth intrade this year, central divisional costs were held to last year's level, withpay increases and other inflation covered by savings elsewhere. Following significant restructuring within the manufacturing operations, theyhave managed, despite a £1.1m, 6.9%, fall in external sales, to generate a smallnet profit of £1.4m, compared with a loss of £5.7m last year. Property profits amounted to £8.8m compared with £1.7m last year, with most ofthis year's gain relating to the disposal of Caleys in August. Divisional profit has increased by £71.9m, 37.5%, from £191.6m to £263.5m, anoutstanding result. Waitrose It's been another year of successful growth for Waitrose with branches beingacquired from both Somerfield and Morrisons, including two in Scotland, and theadditional purchase of a new distribution centre at Aylesford. At the end of theyear we had 183 branches compared with 173 in January 2006. The last three yearshave seen a net increase of 40 branches and 43% in selling space. The maturingeffect of this investment will continue to accelerate our sales line for sometime to come as new customers test out our offer and like what they find. Sales for Waitrose rose by £357.0m, 10.7%, to £3.7bn, fuelled significantly bylike-for-like sales growth in excess of 5% - ahead of the overall marketperformance of 4% and a credit both to the standards of presentation andcustomer service achieved in our shops and also to the ongoing innovation anddiligence in our buying teams. We again achieved recognition for thesesuccesses, gaining a large number of prestigious awards for our customerservice, our food and wine and for our sourcing policies. Alongside this core growth we benefited from maturing sales at the ex-Safewaybranches acquired in 2004 and 2005 and from acquisitions and relocations duringthe year at Biggin Hill, Balham, Barbican, Buxton, Comely Bank, Morningside,Southampton, Formby, Eastbourne, Parkstone, Hexham and Lymington. We alsodeveloped new branches at Bloomsbury and Ampthill. The performance of our newshops has been a very positive sign of the customer appeal of the Waitrose offerin all parts of England and for the first time in Scotland. Our greater scale continued to deliver advantages in buying terms and in centralcosts, and the information provided by our new stock system combined withexcellent stock management in the branches delivered a significant reduction inwastage costs. Property profits of £3.1m were realised, compared with £1.9m lastyear. The level of change in the business drove some significant additionalcosts, including reorganisation costs of £6.7m and an increase of £9.6m inutilities, largely driven by the doubling of electricity rates in October 2005. Overall divisional profit increased by £12.3m, 5.3%, to £243.7m - a strongresult and one in which all Waitrose Partners can take great pride. Ocado Ocado has continued to grow its sales and develop its business during the year.It had a good Christmas, with sales up 60% in the final week. We have recorded a book profit on our shareholding in Ocado of £18.0m, comparedwith £10.8m last year, reflecting the fund-raising early in the year. This gainis entirely offset by our share of Ocado's trading losses, £9.5m for this yearand £8.5m brought forward from last year. Capital expenditure Capital spending in 2006/07 was £393.4m compared with £287.6m in the previousyear - of which £105m related to new stores acquired by Waitrose. Thisdemonstrates the significant investments we are making to expand and develop thePartnership. Cash flow and net debt We reduced our net debt by £16.2m to £307.7m due to the strong sales performanceand tighter management of our cash and assets, in particular as a result of bothdivisions reducing their working capital. The Partnership generated over £520min operating cash flow for the year. Partnership Bonus We have more Partners in the business now, particularly in Waitrose, and this,together with higher pay rates, has moved the cost of each 1% of Bonus 7.5%higher. The Board's decision on the bonus raises the total distributed to £155.2m. Outlook for 2007/08 Both divisions have made an encouraging start to what is expected to be a morechallenging new trading year. At John Lewis 13 week sales are currently showing5% growth, while at Waitrose the increase is 9%, with like-for-like salescontinuing to advance by 4%. We have an ambitious development programme for the year, with John Lewis OxfordStreet completing its major refurbishment, Cambridge targeting an opening intime for Christmas trading, a pressing pace of openings scheduled for 2008 inLiverpool and Leicester, and progressively greater physical evidence of thebranches which will follow on after that. Waitrose will add three new branchesin Cheadle Hulme, Windsor and Rickmansworth, with major extensions beingcompleted in Maidenhead, and John Barnes and numerous other extension andrefurbishment projects. Greenbee is poised to add life cover to its range ofproducts from April, with other new services in prospect. All this is evidenceof the progress towards the doubling in size of our business in the next tenyears which is now embedded in our Business Plan. Charlie Mayfield, Chairman John Lewis plc Preliminary Results for the Year to 27 January 2007 Consolidated income statement for the year ended 27 January 2007 ---------------------------- ---------- ---------- Year to Year to 27 January 28 January 2007 2006 Restated* £m £m---------------------------- ---------- ----------Gross sales 6,376.2 5,764.4---------------------------- ---------- ----------Revenue 5,698.4 5,149.3Cost of sales (3,794.1) (3,438.4)---------------------------- ---------- ----------Gross profit 1,904.3 1,710.9Other operating income 36.6 33.0---------------------------- ---------- ----------Operating expenses before pension costs (1,501.5) (1,376.8)Pension costs (85.1) (85.5)---------------------------- ---------- ----------Total operating expenses (1,586.6) (1,462.3)---------------------------- ---------- ----------Operating profit 354.3 281.6Finance costs (42.7) (45.4)Finance income 7.7 10.5---------------------------- ---------- ----------Share of post tax operating loss of (18.0) (5.6)associateExceptional gain on dilution of interest inassociate 18.0 10.8---------------------------- ---------- ----------Net gain in respect of associate - 5.2---------------------------- ---------- ----------Profit before Partnership bonus and tax 319.3 251.9Partnership bonus (155.2) (120.3)---------------------------- ---------- ----------Profit before tax 164.1 131.6Taxation (55.6) (42.5)---------------------------- ---------- ----------Profit for the year 108.5 89.1---------------------------- ---------- ---------- * Prior year results have been restated in respect of deferred tax Consolidated statement of recognised income and expenses for the year ended 27 January 2007 ---------------------------- ---------- ---------- Year to Year to 27 January 28 January 2007 2006 Restated* £m £m---------------------------- ---------- ----------Actuarial gains on defined benefit pension 42.2 11.7schemesMovement on deferred tax on pension scheme (12.7) (3.4)Net loss on cash flow hedges (0.2) ----------------------------- ---------- ----------Net gain not recognised in the income 29.3 8.3statementProfit for the period 108.5 89.1---------------------------- ---------- ----------Total recognised income and expenses for 137.8 97.4the year ---------- -------------------------------------- Effect of change in accounting policy 111.7---------------------------- ---------- ---------- * Prior year results have been restated in respect of deferred tax Consolidated balance sheet as at 27 January 2007 ---------------------------- ---------- ---------- 2007 2006 Restated* £m £m---------------------------- ---------- ----------Non-current assetsIntangible assets 61.3 52.2Property, plant and equipment 2,869.2 2,682.5Trade and other receivables 19.7 20.4---------------------------- ---------- ---------- 2,950.2 2,755.1---------------------------- ---------- ----------Current assetsInventories 349.6 324.3Trade and other receivables 134.5 121.2Derivative financial instruments 1.5 4.1Cash and cash equivalents 248.0 282.8---------------------------- ---------- ---------- 733.6 732.4---------------------------- ---------- ----------Total assets 3,683.8 3,487.5---------------------------- ---------- ---------- Current liabilitiesBorrowings and overdrafts (151.9) (100.3)Trade and other payables (763.7) (660.8)Current tax payable (18.9) (23.4)Finance lease liabilities (1.3) (0.8)Provisions (52.2) (44.5)Derivative financial instruments (1.1) (0.1)---------------------------- ---------- ---------- (989.1) (829.9)---------------------------- ---------- ----------Non-current liabilitiesBorrowings (403.8) (506.4)Trade and other payables (37.0) (29.0)Finance lease liabilities (30.3) (31.9)Provisions (90.8) (76.7)Deferred tax liabilities (41.7) (22.0)Retirement benefit obligations (441.0) (479.0)---------------------------- ---------- ---------- (1,044.6) (1,145.0)---------------------------- ---------- ----------Total liabilities (2,033.7) (1,974.9)---------------------------- ---------- ----------Net assets 1,650.1 1,512.6---------------------------- ---------- ---------- EquityShare capital 6.7 6.7Share premium 0.6 0.9Other reserves 1.2 1.4Retained earnings 1,641.6 1,503.6---------------------------- ---------- ----------Total equity 1,650.1 1,512.6---------------------------- ---------- ---------- * Prior year results have been restated in respect of deferred tax Consolidated cash flow statement for the year ended 27 January 2007 ---------------------------- ---------- ---------- Year to Year to 27 January 28 January 2007 2006 £m £m---------------------------- ---------- ----------Cash generated from operations 587.9 483.7Taxation paid (53.1) (32.5)Partnership bonus paid (120.3) (105.8)Finance costs paid (11.1) (11.9)---------------------------- ---------- ----------Net cash generated from operatingactivities 403.4 333.5---------------------------- ---------- ----------Cash flows from investing activitiesPurchase of property, plant andequipment (364.4) (255.7)Purchase of intangible assets (23.7) (27.9)Proceeds from sale of property, plantand equipment 26.4 14.6Loans repaid by associate - 16.2Finance income received 7.9 12.7---------------------------- ---------- ----------Net cash used in investing activities (353.8) (240.1)---------------------------- ---------- ----------Cash flows from financing activitiesFinance costs in respect of bonds (34.8) (34.8)Payment of capital element of financeleases (1.1) (0.5)Payments to preference shareholders (0.1) (0.1)Cash inflow/(outflow) from borrowings (50.0) 20.0---------------------------- ---------- ----------Net cash used in financing activities (86.0) (15.4)---------------------------- ---------- ----------Increase/(decrease) in net cash and cashequivalents (36.4) 78.0Net cash and cash equivalents atbeginning of period 232.5 154.5---------------------------- ---------- ----------Net cash and cash equivalents at end ofperiod 196.1 232.5---------------------------- ---------- ----------Net cash and cash equivalents comprise:Cash 77.6 71.9Short term deposits 170.4 210.9Bank overdraft (51.9) (50.3)---------------------------- ---------- ---------- 196.1 232.5---------------------------- ---------- ---------- Accounting convention and basis of consolidation The accounts are prepared under the historical cost convention, with theexception of certain land and buildings which are included at their revaluedamounts and financial instruments not designated as hedging instruments whichare carried at fair value, and in accordance with International FinancialReporting Standards (IFRSs) as adopted by the European Union and with thoseparts of the Companies Act 1985 applicable to companies reporting under IFRS.The consolidated income statement and balance sheet include the accounts of thecompany and all its subsidiary and associated undertakings. The group's share ofthe profit or loss of associated undertakings is included in the consolidatedincome statement, and the share of net assets is included in the consolidatedbalance sheet, using the equity accounting method. The results included arebased on the latest audited accounts, or management accounts where theiraccounting date is not co-terminous with the group's year end. The financial information set out in this statement does not constitute thecompany's statutory accounts for the year ended 27 January 2007 or 28 January2006. Statutory accounts for 2005/06, have been delivered to the registrar ofcompanies, and those for 2006/07, were approved on by the Board on 26 April 2007and will be delivered in due course. The auditors have reported on thoseaccounts; their reports were unqualified, did not include references to anymatters to which the auditors drew attention by way of emphasis withoutqualifying their reports and did not contain statements under section 237(2) or(3) of the Companies Act 1985. The financial information for the year ended 28January 2006 is derived from the statutory accounts for that year except for therestatement in respect of deferred tax. Deferred tax is an accounting entry based on the differences between thecarrying amount of an asset in the accounts and its tax value ("tax base"), andis in principle intended to reflect the future tax consequences of recovery ofthe carrying amount. In accordance with advice from our auditors as to what wasconsidered best practice for the financial statements for the year ended 28January 2006, the group determined the deferred tax on buildings on the basisthat the expected manner of recovery was primarily through use. In the financialstatements for the year ended 27 January 2007, in light of evolvinginterpretation of IAS 12 by the auditing profession we have been advised this"single use" basis is no longer considered appropriate and, accordingly, thegroup has revisited the expected manner of recovery and adopted a basis wherebythe recovery of the depreciable amount through use, followed by the recovery ofthe residual value through disposal is used. Accordingly, the group has changed its accounting policy to apply this "dualrecovery" basis for the determination of deferred tax on buildings, which hasbeen effected retrospectively. This change in accounting policy has no impact on the cash flow statement nor onprofit before tax, which is the income statement line after Partnership bonus,for the year ended 27 January 2007 and the year ended 28 January 2006. For thegroup, this change has increased taxation in the income statement by £1.6m forthe year ended 27 January 2007 and increased taxation in the income statement by35.8m for the year ended 28 January 2006. The change in accounting policyreduces non-current deferred tax liabilities and increased net assets by £105.9mat 28 January 2006 and by £111.7m at 29 January 2005. Segmental reporting The Partnership is organised in three main business segments. John Lewis Retail,John Lewis Other and Waitrose. Corporate and other costs are allocated to thebusiness segments based on the use they make of corporate facilities andservices. The business is carried on in the United Kingdom and gross salesderive almost entirely from that source. Accordingly, the group had presented nosecondary segmental analysis. Gross sales and operating profit derive fromcontinuing operations, there having been no discontinued operations oracquisitions in the year. -------------- -------- -------- -------- -------- -------- John Lewis John John Waitrose Group Retail Lewis Lewis Other Total27 January 2007 £m £m £m £m £m-------------- -------- -------- -------- -------- --------Gross Sales 2,663.1 14.6 2,677.7 3,698.5 6,376.2-------------- -------- -------- -------- -------- -------- Revenue 2,188.3 12.8 2,201.1 3,497.3 5,698.4 Divisionalprofit 262.1 1.4 263.5 243.7 507.2Corporate andother costs (35.6) - (35.6) (32.2) (67.8)Pension costs (49.3) (1.2) (50.5) (34.6) (85.1)-------------- -------- -------- -------- -------- --------OperatingProfit 177.2 0.2 177.4 176.9 354.3-------------- -------- -------- -------- -------- -------- 28 January 2006-------------- -------- -------- -------- -------- --------Gross Sales 2,407.0 15.9 2,422.9 3,341.5 5,764.4-------------- -------- -------- -------- -------- -------- Revenue 1,976.4 14.0 1,990.4 3,158.9 5,149.3 Divisionalprofit 197.6 (6.0) 191.6 231.4 423.0Corporate andother costs (29.6) - (29.6) (26.3) (55.9)Pension costs (49.5) (1.3) (50.8) (34.7) (85.5)-------------- -------- -------- -------- -------- --------Operatingprofit 118.5 (7.3) 111.2 170.4 281.6-------------- -------- -------- -------- -------- -------- Reconciliation of profit before tax to cash generated from operations ---------------------------- ---------- ---------- Year to Year to 27 January 28 January 2007 2006 £m £m---------------------------- ---------- ----------Profit before tax 164.1 131.6Amortisation of intangible assets 14.6 10.7Depreciation 165.2 142.3Net finance costs 35.0 34.9Net gain in respect of associate - (5.2)Partnership bonus provision 155.2 120.3(Profit)/loss on disposal of property,plant and equipment (8.6) (2.9)(Increase)/decrease in inventories (25.3) 15.0(Increase)/decrease in receivables (12.7) (21.3)Increase/(decrease) in payables 74.4 27.9Increase/(decrease) in retirement benefitobligations 4.2 5.7Increase/(decrease) in provisions 21.8 24.7---------------------------- ---------- ----------Cash generated from operations 587.9 483.7---------------------------- ---------- ---------- Reconciliation of net cash flow to net debt ---------------------------- ---------- ---------- Year to Year to 27 January 28 January 2007 2006 £m £m---------------------------- ---------- ----------Increase/(decrease) in cash in the year 4.1 (17.9)Cash (inflow)/outflow from debt and leasefinancing 50.0 (20.0)Cash (inflow)/outflow from liquidresources (40.5) 95.9---------------------------- ---------- ----------Movement in debt for the year 13.6 58.0Opening net debt (323.9) (381.9)Non cash movements 2.6 ----------------------------- ---------- ----------Closing net debt (307.7) (323.9)---------------------------- ---------- ---------- Reconciliation of changes in equity --------------- ------- ------- -------- ------- ------- ------ Share Share Capital Hedging Retained Total capital premium reserve reserve earnings equity £m £m £m £m £m £m--------------- ------- ------- -------- ------- ------- ------Balance at 29January 2005,as reported 6.7 1.1 1.4 - 1,294.4 1,303.6Deferred taxrestatement - - - - 111.7 111.7--------------- ------- ------- -------- ------- ------- ------Balance at 29January 2005,as restated 6.7 1.1 1.4 - 1,406.1 1,415.3Profit for theyear - - - - 89.1 89.1Transfers - (0.2) - - 0.2 -Actuarial gains - - - - 11.7 11.7Tax on itemsrecognised inequity - - - - (3.4) (3.4)Dividends - - - - (0.1) (0.1)--------------- ------- ------- -------- ------- ------- ------Balance as at28 January2006 6.7 0.9 1.4 - 1,503.6 1,512.6--------------- ------- ------- -------- ------- ------- ------Profit for theyear - - - - 108.5 108.5Transfers - (0.3) - - 0.3 -Actuarial gains - - - - 42.2 42.2Tax on itemsrecognised inequity - - - - (12.7) (12.7)Net loss oncash flowhedges - - - (0.2) - (0.2)Dividends - - - - (0.3) (0.3)--------------- ------- ------- -------- ------- ------- ------Balance at 27January 2007 6.7 0.6 1.4 (0.2) 1,641.6 1,650.1--------------- ------- ------- -------- ------- ------- ------ This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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